Colliers International Group Inc. (NASDAQ:CIGI) Q1 2024 Earnings Call Transcript May 4, 2024
Colliers International Group Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Welcome to the Colliers International First Quarter Investors Conference Call. Today’s call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company’s annual information form as filed with the Canadian Securities Administrators and in the company’s annual report on Form 40-F as filed with the US Securities and Exchange Commission.
As a reminder, today’s call is being recorded. Today’s Thursday, May 2, 2024, and at this time, for opening remarks and introductions, I would like to turn the call over to Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.
Jay Hennick: Thank you, operator. Good morning, and thanks for joining us on our first quarter conference call. As the operator mentioned, I’m Jay Hennick, Chairman and Chief Executive Officer of the company. And with me today is Chris McLernon, Chief Executive Officer of our Real Estate Services business; and Christian Mayer, our Chief Financial Officer. As always, this call is being webcast and is available in the Investor Relations section of our Web site, along with a presentation slide deck. During the quarter, revenue, EBITDA, outsourcing and advisory, investment management and leasing all demonstrated improvement over the prior year. Despite ongoing interest rate uncertainty and geopolitical tensions that are affecting everyone, it also affected our capital markets.
Our strategic focus, however, being on expanding high-value, recurring service lines that continue to yield positive results for us, positioning us extremely well for the future. We remain committed to the Colliers way, emphasizing solid internal growth and strategic acquisitions that enhance our business and create value for our shareholders. In the most recent quarter, we successfully added $300 million in new equity to support our further expansion. Furthermore, our acquisition of Colliers Philadelphia has expanded our presence in the Mid-Atlantic region, solidifying our position as a key player in the United States. Over the years, Colliers has established a highly respected global brand and growth platform with broad diversification across revenue sources, service lines and geography.
With more than 70% of our earnings generated from recurring revenue streams, we have a very robust business model with 3 distinct growth engines that can continue to allow us to capitalize on growth opportunities while maintaining resilience in the face of economic fluctuations. Most importantly, Colliers has a seasoned leadership team with a substantial equity stake in our company and an impressive 29-year record of delivering nearly 20% compound annual returns for shareholders. And now let me ask Chris McLernon to discuss some highlights from our service business and once he’s completed, Christian will provide his usual financial report. Then, we’ll open things up for questions. Chris?
Chris McLernon: Thank you, Jay, and good morning, everyone. Colliers first quarter 2024 results reflect the strength of our resilient and highly diversified professional services platform. Our Outsourcing & Advisory business delivered robust revenue growth with broad-based increases across all services, led by engineering and project management. We expect this momentum to continue through the remainder of the year, providing growth, balance and stability to our platform. This growth helped offset expected soft transaction volumes in capital markets, which, although down were above market activity levels. We remain cautiously optimistic about improving transaction velocity in the late second half of 2024, contingent on softening interest rates, the narrowing of the price gap between buyers and sellers and improved lending availability.
Leasing globally achieved modest growth year-over-year with several markets increasing activity in the office sector as occupiers make longer-term lease commitments, coupled with the return to office continuing the trend upwards. Shortly after the quarter end, we completed the acquisition of our affiliate in Philadelphia. From its five offices, the company’s 130 professionals provide leasing and sales brokerage and property management services. As a vibrant and influential market, our ownership now allows us to significantly increase our presence in the Mid-Atlantic and expand our capabilities in the eighth largest metropolitan area in the US. Among our many accolades in February, we were named to the IAOPs list of top 100 global professional services firms.
A testament to our track record of success in delivering exceptional results for our clients wherever they do business. We have also been recognized as one of the best workplaces in Canada this year out of more than 900 companies competing for a spot. The steps we are taking to strategically invest in our people and business, fill gaps and take market share will continue to strengthen our platform and drive long-term shareholder value. Now I’ll turn things over to Christian who will provide more details on our financials.
Christian Mayer: Thank you, Chris, and good morning. As usual, I’ll provide some additional commentary on our consolidated results, our financial outlook and our balance sheet. Note that all references to revenue growth made on this call are expressed in local currency, and that the non-GAAP measures discussed here today are as defined in the materials accompanying this call. For the seasonally slow first quarter, revenues were $1 billion, up 4% relative to Q1 2023. Internal growth was 2% with strength in our diversified recurring services outpacing a decline in capital markets activity. Our Outsourcing & Advisory service line generated strong 9% revenue growth, mostly from internal sources. Investment Management excluding pass-through period interest was essentially flat with the prior year.
Leasing revenues were up 2% for the quarter, led by modest growth in office leasing. First quarter consolidated adjusted EBITDA was $109 million, up 4% relative to the prior year with margins holding flat at 10.8%. We continue to closely manage our cost to match the expected pace of revenues, especially in our Capital Markets business. We also remain focused on improving productivity and on selective strategic recruiting. In our Investment Management segment, AUM declined modestly during the quarter, mostly attributable to unrealized market value adjustments and our alternative and traditional real estate funds despite growing net operating income at the asset level. These adjustments totaled 1.5%, which outperformed the benchmark Odyssey Index.
In addition, some funds disposed of long-held assets during the quarter, realizing gains and recycling the proceeds back to investors. This positions us well for future fundraising. Our first quarter fundraising totaled $450 million. We continue to see strong interest in our alternative, infrastructure and credit strategies and we anticipate an acceleration in fundraising momentum as we progress through the year. We are maintaining our financial outlook for 2024. While interest rate volatility and geopolitical tensions continue to weigh on transaction volumes, we expect a rebound in activity in the third and fourth quarters. Although there is a risk that this could be delayed to later in the year or to early 2025. In our recurring service lines, both outsourcing and advisory and investment management, we continue to expect mid- to high single-digit revenue growth for the balance of the year.
Turning to our balance sheet. Our financial leverage ratio, defined as net debt to pro forma adjusted EBITDA was 2 times at March 31. We expect leverage to rise modestly in Q2 due to seasonal working capital usage then to decline to approximately 1.5 times by the end of the year, assuming no significant acquisitions. With the $300 million equity offering we completed during the first quarter we are well positioned with more than $1 billion in available liquidity to execute on acquisition opportunities as the year unfolds. This concludes my prepared remarks. I’d now like to open the call for questions. Operator, can you please open the line?
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