UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of: November 2023
Commission file number 001-36898
COLLIERS INTERNATIONAL GROUP INC.
(Translation of registrant’s name into English)
1140 Bay Street, Suite 4000
Toronto, Ontario, Canada
M5S 2B4
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover
of Form 20-F or Form 40-F:
Form 20-F [ ] Form 40-F [X]
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.
| |
COLLIERS INTERNATIONAL GROUP INC. |
| |
|
| |
|
| |
|
Date: November 8, 2023 | |
/s/ Christian Mayer |
| |
Name: Christian Mayer |
| |
Title: Chief Financial Officer |
EXHIBIT INDEX
Exhibit 99.1
Colliers International Group Inc.
Consolidated Statements of Earnings (Loss)
(Unaudited)
(in thousands of US dollars,
except per share amounts)
| |
Three months | | |
Nine months | |
| |
ended September 30 | | |
ended September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenues (note 20) | |
$ | 1,056,032 | | |
$ | 1,108,324 | | |
$ | 3,099,973 | | |
$ | 3,237,082 | |
Cost of revenues (exclusive of depreciation and | |
| | | |
| | | |
| | | |
| | |
amortization shown below) | |
| 638,659 | | |
| 682,585 | | |
| 1,865,569 | | |
| 2,017,440 | |
Selling, general and administrative expenses | |
| 279,945 | | |
| 269,959 | | |
| 858,866 | | |
| 786,953 | |
Depreciation | |
| 13,677 | | |
| 12,382 | | |
| 39,790 | | |
| 36,249 | |
Amortization of intangible assets | |
| 37,486 | | |
| 32,760 | | |
| 111,659 | | |
| 89,630 | |
Acquisition-related items (note 7) | |
| 15,366 | | |
| 26,290 | | |
| 53,502 | | |
| 50,738 | |
Loss on disposal of operations (note 5) | |
| - | | |
| 318 | | |
| 2,282 | | |
| 27,358 | |
Operating earnings | |
| 70,899 | | |
| 84,030 | | |
| 168,305 | | |
| 228,714 | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense, net | |
| 24,228 | | |
| 13,535 | | |
| 71,730 | | |
| 29,424 | |
Earnings from equity accounted investments | |
| (685 | ) | |
| (755 | ) | |
| (4,371 | ) | |
| (4,821 | ) |
Other (income) expense | |
| (116 | ) | |
| 1,629 | | |
| (636 | ) | |
| 1,505 | |
Earnings before income tax | |
| 47,472 | | |
| 69,621 | | |
| 101,582 | | |
| 202,606 | |
Income tax expense (note 17) | |
| 18,096 | | |
| 25,097 | | |
| 38,112 | | |
| 70,034 | |
Net earnings | |
| 29,376 | | |
| 44,524 | | |
| 63,470 | | |
| 132,572 | |
| |
| | | |
| | | |
| | | |
| | |
Non-controlling interest share of earnings | |
| 14,210 | | |
| 17,375 | | |
| 38,967 | | |
| 37,697 | |
Non-controlling interest redemption increment (note 14) | |
| (9,947 | ) | |
| 15,121 | | |
| 26,393 | | |
| 71,126 | |
| |
| | | |
| | | |
| | | |
| | |
Net earnings (loss) attributable to Company | |
$ | 25,113 | | |
$ | 12,028 | | |
$ | (1,890 | ) | |
$ | 23,749 | |
| |
| | | |
| | | |
| | | |
| | |
Net earnings (loss) per common share (note 15) | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | 0.53 | | |
$ | 0.28 | | |
$ | (0.04 | ) | |
$ | 0.55 | |
Diluted | |
$ | 0.53 | | |
$ | 0.27 | | |
$ | (0.04 | ) | |
$ | 0.54 | |
The accompanying notes are an integral part of these interim consolidated financial statements.
Colliers International Group Inc.
Consolidated Statements of Comprehensive Earnings (Loss)
(Unaudited)
(in thousands of US dollars)
| |
Three months | | |
Nine months | |
| |
ended September 30 | | |
ended September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net earnings | |
$ | 29,376 | | |
$ | 44,524 | | |
$ | 63,470 | | |
$ | 132,572 | |
Other comprehensive earnings (loss), net of tax: | |
| | | |
| | | |
| | | |
| | |
Change in foreign currency translation | |
| (3,056 | ) | |
| (13,570 | ) | |
| (5,890 | ) | |
| (28,390 | ) |
Reclassification of accumulated foreign currency translation | |
| | | |
| | | |
| | | |
| | |
on disposal of operations (note 5) | |
| - | | |
| 820 | | |
| 541 | | |
| 19,092 | |
Unrealized gain on interest rate swaps, net of tax | |
| 4,103 | | |
| 5,087 | | |
| 8,638 | | |
| 6,011 | |
Pension liability adjustments, net of tax | |
| (26 | ) | |
| - | | |
| (283 | ) | |
| 9 | |
Total other comprehensive earnings (loss), net | |
| 1,021 | | |
| (7,663 | ) | |
| 3,006 | | |
| (3,278 | ) |
Comprehensive earnings | |
| 30,397 | | |
| 36,861 | | |
| 66,476 | | |
| 129,294 | |
Less: Comprehensive earnings attributable to non-controlling interests | |
| 8,635 | | |
| 42,226 | | |
| 69,149 | | |
| 127,603 | |
Comprehensive earnings (loss) attributable to Company | |
$ | 21,762 | | |
$ | (5,365 | ) | |
$ | (2,673 | ) | |
$ | 1,691 | |
The accompanying notes are an integral part of these interim consolidated financial statements.
Colliers International Group Inc.
Consolidated Balance Sheets
(Unaudited)
(in thousands of US dollars)
| |
September 30, 2023 | | |
December 31, 2022 | |
Assets | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 168,600 | | |
$ | 173,661 | |
Restricted cash | |
| 69,991 | | |
| 25,381 | |
Accounts receivable, net of allowance of $28,956 (December 31, 2022 - $25,332) | |
| 604,541 | | |
| 577,879 | |
Contract assets (note 20) | |
| 83,765 | | |
| 91,924 | |
Warehouse receivables (note 18) | |
| 54,957 | | |
| 29,623 | |
Income tax recoverable | |
| 49,320 | | |
| 21,970 | |
Prepaid expenses and other current assets | |
| 245,311 | | |
| 247,635 | |
Real estate held for sale (note 6) | |
| 42,081 | | |
| 45,353 | |
| |
| 1,318,566 | | |
| 1,213,426 | |
Other receivables | |
| 11,231 | | |
| 12,461 | |
Contract assets (note 20) | |
| 17,139 | | |
| 15,755 | |
Other assets | |
| 168,299 | | |
| 138,510 | |
Fixed assets | |
| 186,346 | | |
| 164,493 | |
Operating lease right-of-use assets | |
| 361,408 | | |
| 341,623 | |
Deferred tax assets, net | |
| 62,781 | | |
| 63,460 | |
Intangible assets (note 8) | |
| 1,103,004 | | |
| 1,159,910 | |
Goodwill | |
| 2,011,116 | | |
| 1,988,539 | |
| |
| 3,921,324 | | |
| 3,884,751 | |
| |
$ | 5,239,890 | | |
$ | 5,098,177 | |
Liabilities and shareholders' equity | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 507,627 | | |
$ | 503,189 | |
Accrued compensation | |
| 501,799 | | |
| 625,565 | |
Income tax payable | |
| 13,847 | | |
| 32,282 | |
Contract liabilities (note 20) | |
| 57,413 | | |
| 25,616 | |
Long-term debt - current (note 9) | |
| 3,976 | | |
| 1,360 | |
Contingent acquisition consideration - current (note 18) | |
| 16,961 | | |
| 42,942 | |
Warehouse credit facilities (note 11) | |
| 48,309 | | |
| 24,286 | |
Operating lease liabilities | |
| 88,568 | | |
| 84,989 | |
Liabilities related to real estate held for sale (note 6) | |
| - | | |
| 1,353 | |
| |
| 1,238,500 | | |
| 1,341,582 | |
Long-term debt (note 9) | |
| 1,638,650 | | |
| 1,437,739 | |
Contingent acquisition consideration (note 18) | |
| 43,038 | | |
| 48,287 | |
Operating lease liabilities | |
| 343,790 | | |
| 322,496 | |
Other liabilities | |
| 108,612 | | |
| 91,105 | |
Deferred tax liabilities, net | |
| 40,334 | | |
| 57,754 | |
Convertible notes (note 10) | |
| - | | |
| 226,534 | |
| |
| 2,174,424 | | |
| 2,183,915 | |
Redeemable non-controlling interests (note 14) | |
| 1,073,379 | | |
| 1,079,306 | |
Shareholders' equity | |
| | | |
| | |
Common shares | |
| 1,102,449 | | |
| 845,680 | |
Contributed surplus | |
| 117,694 | | |
| 104,504 | |
Deficit | |
| (393,166 | ) | |
| (384,199 | ) |
Accumulated other comprehensive loss | |
| (77,071 | ) | |
| (76,288 | ) |
Total Company shareholders' equity | |
| 749,906 | | |
| 489,697 | |
Non-controlling interests | |
| 3,681 | | |
| 3,677 | |
Total shareholders' equity | |
| 753,587 | | |
| 493,374 | |
| |
$ | 5,239,890 | | |
$ | 5,098,177 | |
Commitments and contingencies (note 19) | |
| | | |
| | |
The accompanying notes are an integral part of these interim consolidated financial statements.
Colliers International Group Inc.
Consolidated Statements of Shareholders' Equity
(Unaudited)
(in thousands of US
dollars, except share information)
Nine months ended September 30, 2023 | |
| |
Common shares | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Issued and | | |
| | |
| | |
| | |
other | | |
Non- | | |
Total | |
| |
outstanding | | |
| | |
Contributed | | |
| | |
comprehensive | | |
controlling | | |
shareholders' | |
| |
shares | | |
Amount | | |
surplus | | |
Deficit | | |
loss | | |
interests | | |
equity | |
Balance, December 31, 2022 | |
| 42,933,156 | | |
$ | 845,680 | | |
$ | 104,504 | | |
$ | (384,199 | ) | |
$ | (76,288 | ) | |
$ | 3,677 | | |
$ | 493,374 | |
Net earnings | |
| - | | |
| - | | |
| - | | |
| 63,470 | | |
| - | | |
| - | | |
| 63,470 | |
Pension liability adjustment, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| (283 | ) | |
| - | | |
| (283 | ) |
Foreign currency translation loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (5,890 | ) | |
| - | | |
| (5,890 | ) |
Unrealized gain on interest rate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
swaps, net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 8,638 | | |
| - | | |
| 8,638 | |
Other comprehensive earnings | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
attributable to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,789 | ) | |
| (16 | ) | |
| (3,805 | ) |
NCI share of earnings | |
| - | | |
| - | | |
| - | | |
| (38,967 | ) | |
| - | | |
| 2,381 | | |
| (36,586 | ) |
NCI redemption increment | |
| - | | |
| - | | |
| - | | |
| (26,393 | ) | |
| - | | |
| - | | |
| (26,393 | ) |
Distributions to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,107 | ) | |
| (1,107 | ) |
Disposal of businesses, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (44 | ) | |
| (44 | ) |
Reclass to net earnings on disposal | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
of operations (note 5) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 541 | | |
| (1,210 | ) | |
| (669 | ) |
Subsidiaries’ equity transactions | |
| - | | |
| - | | |
| 3,129 | | |
| - | | |
| - | | |
| - | | |
| 3,129 | |
Subordinate Voting Shares: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Redemption of Convertible | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Notes (note 10) | |
| 4,015,720 | | |
| 227,101 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 227,101 | |
Stock option expense | |
| - | | |
| - | | |
| 16,726 | | |
| - | | |
| - | | |
| - | | |
| 16,726 | |
Stock options exercised | |
| 338,875 | | |
| 29,668 | | |
| (6,665 | ) | |
| - | | |
| - | | |
| - | | |
| 23,003 | |
Dividends | |
| - | | |
| - | | |
| - | | |
| (7,077 | ) | |
| - | | |
| - | | |
| (7,077 | ) |
Balance, September 30, 2023 | |
| 47,287,751 | | |
$ | 1,102,449 | | |
$ | 117,694 | | |
$ | (393,166 | ) | |
$ | (77,071 | ) | |
$ | 3,681 | | |
$ | 753,587 | |
Three months ended September 30, 2023 | |
| |
Common shares | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Issued and | | |
| | |
| | |
| | |
other | | |
Non- | | |
Total | |
| |
outstanding | | |
| | |
Contributed | | |
| | |
comprehensive | | |
controlling | | |
shareholders' | |
| |
shares | | |
Amount | | |
surplus | | |
Deficit | | |
loss | | |
interests | | |
equity | |
Balance, June 30, 2023 | |
| 47,179,376 | | |
$ | 1,092,843 | | |
$ | 112,707 | | |
$ | (418,279 | ) | |
$ | (73,720 | ) | |
$ | 3,385 | | |
$ | 716,936 | |
Net earnings | |
| - | | |
| - | | |
| - | | |
| 29,376 | | |
| - | | |
| - | | |
| 29,376 | |
Pension liability adjustment, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| (26 | ) | |
| - | | |
| (26 | ) |
Foreign currency translation loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (3,056 | ) | |
| - | | |
| (3,056 | ) |
Unrealized gain on interest rate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
swaps, net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,103 | | |
| - | | |
| 4,103 | |
Other comprehensive earnings | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
attributable to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| (4,372 | ) | |
| (293 | ) | |
| (4,665 | ) |
NCI share of earnings | |
| - | | |
| - | | |
| - | | |
| (14,210 | ) | |
| - | | |
| 715 | | |
| (13,495 | ) |
NCI redemption increment | |
| - | | |
| - | | |
| - | | |
| 9,947 | | |
| - | | |
| - | | |
| 9,947 | |
Distributions to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (114 | ) | |
| (114 | ) |
Disposal of businesses, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (12 | ) | |
| (12 | ) |
Subsidiaries’ equity transactions | |
| - | | |
| - | | |
| 1,648 | | |
| - | | |
| - | | |
| - | | |
| 1,648 | |
Subordinate Voting Shares: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock option expense | |
| - | | |
| - | | |
| 5,513 | | |
| - | | |
| - | | |
| - | | |
| 5,513 | |
Stock options exercised | |
| 108,375 | | |
| 9,606 | | |
| (2,174 | ) | |
| - | | |
| - | | |
| - | | |
| 7,432 | |
Balance, September 30, 2023 | |
| 47,287,751 | | |
$ | 1,102,449 | | |
$ | 117,694 | | |
$ | (393,166 | ) | |
$ | (77,071 | ) | |
$ | 3,681 | | |
$ | 753,587 | |
Colliers International Group Inc.
Consolidated Statements of Shareholders' Equity
(Unaudited)
(in thousands of US dollars,
except share information)
Nine months ended September 30, 2022 | |
| |
Common shares | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Issued and | | |
| | |
| | |
| | |
other | | |
Non- | | |
Total | |
| |
outstanding | | |
| | |
Contributed | | |
| | |
comprehensive | | |
controlling | | |
shareholders' | |
| |
shares | | |
Amount | | |
surplus | | |
Deficit | | |
loss | | |
interests | | |
equity | |
Balance, December 31, 2021 | |
| 44,054,744 | | |
$ | 852,167 | | |
$ | 79,407 | | |
$ | (279,724 | ) | |
$ | (70,251 | ) | |
$ | 3,670 | | |
$ | 585,269 | |
Net earnings | |
| - | | |
| - | | |
| - | | |
| 132,572 | | |
| - | | |
| - | | |
| 132,572 | |
Pension liability adjustment, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9 | | |
| - | | |
| 9 | |
Foreign currency translation loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (28,390 | ) | |
| - | | |
| (28,390 | ) |
Unrealized gain on interest rate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
swaps, net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 6,011 | | |
| - | | |
| 6,011 | |
Other comprehensive earnings | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
attributable to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| (18,780 | ) | |
| (73 | ) | |
| (18,853 | ) |
NCI share of earnings | |
| - | | |
| - | | |
| - | | |
| (37,697 | ) | |
| - | | |
| 2,023 | | |
| (35,674 | ) |
NCI redemption increment | |
| - | | |
| - | | |
| - | | |
| (71,126 | ) | |
| - | | |
| - | | |
| (71,126 | ) |
Distributions to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (964 | ) | |
| (964 | ) |
Reclass to net earnings on disposal | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
of operations (note 5) | |
| - | | |
| - | | |
| (93 | ) | |
| - | | |
| 19,092 | | |
| (419 | ) | |
| 18,580 | |
Subsidiaries’ equity transactions | |
| - | | |
| - | | |
| 8,417 | | |
| - | | |
| - | | |
| - | | |
| 8,417 | |
Subordinate Voting Shares: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock option expense | |
| - | | |
| - | | |
| 14,081 | | |
| - | | |
| - | | |
| - | | |
| 14,081 | |
Stock options exercised | |
| 240,625 | | |
| 15,754 | | |
| (3,391 | ) | |
| - | | |
| - | | |
| - | | |
| 12,363 | |
Dividends | |
| - | | |
| - | | |
| - | | |
| (6,493 | ) | |
| - | | |
| - | | |
| (6,493 | ) |
Purchased for cancellation | |
| (1,087,839 | ) | |
| (21,287 | ) | |
| - | | |
| (113,217 | ) | |
| - | | |
| - | | |
| (134,504 | ) |
Balance, September 30, 2022 | |
| 43,207,530 | | |
$ | 846,634 | | |
$ | 98,421 | | |
$ | (375,685 | ) | |
$ | (92,309 | ) | |
$ | 4,237 | | |
$ | 481,298 | |
Three months ended September 30, 2022 | |
| |
Common shares | | |
| | |
| | |
Accumulated | | |
| | |
| |
| |
Issued and | | |
| | |
| | |
| | |
other | | |
Non- | | |
Total | |
| |
outstanding | | |
| | |
Contributed | | |
| | |
comprehensive | | |
controlling | | |
shareholders' | |
| |
shares | | |
Amount | | |
surplus | | |
Deficit | | |
loss | | |
interests | | |
equity | |
Balance, June 30, 2022 | |
| 43,276,930 | | |
$ | 846,953 | | |
$ | 94,060 | | |
$ | (381,307 | ) | |
$ | (74,916 | ) | |
$ | 4,165 | | |
$ | 488,955 | |
Net earnings | |
| - | | |
| - | | |
| - | | |
| 44,524 | | |
| - | | |
| - | | |
| 44,524 | |
Foreign currency translation loss | |
| - | | |
| - | | |
| - | | |
| - | | |
| (13,570 | ) | |
| - | | |
| (13,570 | ) |
Unrealized gain on interest rate | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
swaps, net of tax | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,087 | | |
| - | | |
| 5,087 | |
Other comprehensive earnings | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
attributable to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,730 | ) | |
| (96 | ) | |
| (9,826 | ) |
NCI share of earnings | |
| - | | |
| - | | |
| - | | |
| (17,375 | ) | |
| - | | |
| 675 | | |
| (16,700 | ) |
NCI redemption increment | |
| - | | |
| - | | |
| - | | |
| (15,121 | ) | |
| - | | |
| - | | |
| (15,121 | ) |
Distributions to NCI | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (355 | ) | |
| (355 | ) |
Reclass to net earnings on disposal | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
of operations (note 5) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 820 | | |
| (152 | ) | |
| 668 | |
Subsidiaries’ equity transactions | |
| - | | |
| - | | |
| (63 | ) | |
| - | | |
| - | | |
| - | | |
| (63 | ) |
Subordinate Voting Shares: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Stock option expense | |
| - | | |
| - | | |
| 4,730 | | |
| - | | |
| - | | |
| - | | |
| 4,730 | |
Stock options exercised | |
| 19,000 | | |
| 1,413 | | |
| (306 | ) | |
| - | | |
| - | | |
| - | | |
| 1,107 | |
Purchased for cancellation | |
| (88,400 | ) | |
| (1,732 | ) | |
| - | | |
| (6,406 | ) | |
| - | | |
| - | | |
| (8,138 | ) |
Balance, September 30, 2022 | |
| 43,207,530 | | |
$ | 846,634 | | |
$ | 98,421 | | |
$ | (375,685 | ) | |
$ | (92,309 | ) | |
$ | 4,237 | | |
$ | 481,298 | |
The accompanying notes
are an integral part of these interim consolidated financial statements.
Colliers International Group Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of US dollars)
| |
Three months | | |
Nine months | |
| |
ended September 30 | | |
ended September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Cash provided by (used in) | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Operating activities | |
| | | |
| | | |
| | | |
| | |
Net earnings | |
$ | 29,376 | | |
$ | 44,524 | | |
$ | 63,470 | | |
$ | 132,572 | |
| |
| | | |
| | | |
| | | |
| | |
Items not affecting cash: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 51,163 | | |
| 45,142 | | |
| 151,449 | | |
| 125,879 | |
Loss on disposal of operations (note 5) | |
| - | | |
| 318 | | |
| 2,282 | | |
| 27,358 | |
Gains attributable to mortgage servicing rights | |
| (3,199 | ) | |
| (16,391 | ) | |
| (12,286 | ) | |
| (24,214 | ) |
Gains attributable to the fair value of mortgage | |
| | | |
| | | |
| | | |
| | |
premiums and origination fees | |
| (2,887 | ) | |
| (3,264 | ) | |
| (10,913 | ) | |
| (14,818 | ) |
Deferred tax | |
| 1,458 | | |
| (5,005 | ) | |
| (20,446 | ) | |
| (16,198 | ) |
Earnings from equity accounted investments | |
| (685 | ) | |
| (755 | ) | |
| (4,371 | ) | |
| (4,821 | ) |
Stock option expense (note 16) | |
| 5,513 | | |
| 4,730 | | |
| 16,726 | | |
| 14,081 | |
Amortization of advisor loans | |
| 8,384 | | |
| 7,683 | | |
| 24,268 | | |
| 20,464 | |
Contingent consideration (note 7) | |
| 11,202 | | |
| 20,746 | | |
| 43,451 | | |
| 35,741 | |
Other | |
| 4,141 | | |
| 10,009 | | |
| 15,002 | | |
| 17,577 | |
Increase in accounts receivable, prepaid expenses and other assets | |
| (76,551 | ) | |
| (78,228 | ) | |
| (133,276 | ) | |
| (416,155 | ) |
Increase (decrease) in accounts payable, accrued expenses and other liabilities | |
| (6,539 | ) | |
| 857 | | |
| (6,082 | ) | |
| (8,489 | ) |
Increase (decrease) in accrued compensation | |
| 28,442 | | |
| 44,593 | | |
| (125,188 | ) | |
| (163,642 | ) |
Contingent acquisition consideration paid | |
| (35,655 | ) | |
| (8,129 | ) | |
| (38,646 | ) | |
| (68,939 | ) |
Proceeds received on sale of mortgage loans | |
| 235,197 | | |
| 175,903 | | |
| 839,269 | | |
| 842,427 | |
Principal funded on originated mortgage loans | |
| (208,533 | ) | |
| (240,470 | ) | |
| (849,257 | ) | |
| (755,019 | ) |
Increase (decrease) in warehouse credit facilities | |
| (21,700 | ) | |
| 69,213 | | |
| 24,022 | | |
| (66,491 | ) |
Sales to AR Facility, net (note 12) | |
| 23,026 | | |
| 5,364 | | |
| 29,084 | | |
| 151,217 | |
Net cash provided by (used in) operating activities | |
| 42,153 | | |
| 76,840 | | |
| 8,558 | | |
| (171,470 | ) |
| |
| | | |
| | | |
| | | |
| | |
Investing activities | |
| | | |
| | | |
| | | |
| | |
Acquisitions of businesses, net of cash acquired (note 4) | |
| (1,597 | ) | |
| (213,491 | ) | |
| (61,295 | ) | |
| (594,089 | ) |
Purchases of fixed assets | |
| (19,349 | ) | |
| (18,391 | ) | |
| (60,411 | ) | |
| (41,807 | ) |
Advisor loans issued | |
| (23,389 | ) | |
| (12,479 | ) | |
| (58,947 | ) | |
| (35,378 | ) |
Purchase of held for sale real estate assets | |
| (8,989 | ) | |
| - | | |
| (49,565 | ) | |
| (117,042 | ) |
Proceeds from sale of held for sale real estate assets | |
| 6,369 | | |
| - | | |
| 50,369 | | |
| 48,505 | |
Collections of AR facility deferred purchase price (note 12) | |
| 31,896 | | |
| 88,627 | | |
| 91,207 | | |
| 345,056 | |
Other investing activities | |
| 5,136 | | |
| 57 | | |
| 11,151 | | |
| (8,691 | ) |
Net cash used in investing activities | |
| (9,923 | ) | |
| (155,677 | ) | |
| (77,491 | ) | |
| (403,446 | ) |
| |
| | | |
| | | |
| | | |
| | |
Financing activities | |
| | | |
| | | |
| | | |
| | |
Increase in long-term debt | |
| 144,953 | | |
| 315,277 | | |
| 724,735 | | |
| 990,143 | |
Repayment of long-term debt | |
| (154,796 | ) | |
| (177,642 | ) | |
| (514,910 | ) | |
| (315,102 | ) |
Purchases of non-controlling interests' subsidiary shares, net | |
| (8,256 | ) | |
| 2,124 | | |
| (24,589 | ) | |
| (31,433 | ) |
Contingent acquisition consideration paid | |
| (13,274 | ) | |
| (13,412 | ) | |
| (14,356 | ) | |
| (55,623 | ) |
Proceeds received on exercise of stock options | |
| 7,432 | | |
| 1,108 | | |
| 23,003 | | |
| 12,364 | |
Dividends paid to common shareholders | |
| (7,077 | ) | |
| (6,492 | ) | |
| (13,517 | ) | |
| (13,100 | ) |
Distributions paid to non-controlling interests | |
| (16,702 | ) | |
| (13,179 | ) | |
| (67,822 | ) | |
| (54,733 | ) |
Repurchases of Subordinate Voting Shares | |
| - | | |
| - | | |
| - | | |
| (126,366 | ) |
Other financing activities | |
| (50 | ) | |
| (8 | ) | |
| (902 | ) | |
| (3,106 | ) |
Net cash provided by (used in) financing activities | |
| (47,770 | ) | |
| 107,776 | | |
| 111,642 | | |
| 403,044 | |
| |
| | | |
| | | |
| | | |
| | |
Effect of exchange rate changes on cash | |
| (3,447 | ) | |
| (19,953 | ) | |
| (3,160 | ) | |
| (37,959 | ) |
Colliers International Group Inc.
Consolidated Statements of Cash Flows
(Unaudited)
(in thousands of US dollars)
| |
Three months | | |
Nine months | |
| |
ended September 30 | | |
ended September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net change in cash, cash equivalents and restricted cash | |
| (18,987 | ) | |
| 8,986 | | |
| 39,549 | | |
| (209,831 | ) |
| |
| | | |
| | | |
| | | |
| | |
Cash, cash equivalents and restricted cash, beginning of period | |
| 257,578 | | |
| 206,454 | | |
| 199,042 | | |
| 425,271 | |
Cash, cash equivalents and restricted cash, end of period | |
$ | 238,591 | | |
$ | 215,440 | | |
$ | 238,591 | | |
$ | 215,440 | |
The accompanying notes are an integral part of these interim consolidated financial statements.
Colliers International Group Inc.
Notes to Consolidated Financial Statements
(Unaudited)
(in thousands of US dollars, except share and per share
amounts)
1. | Description of the business |
Colliers International Group Inc. (“Colliers”
or the “Company”) provides commercial real estate professional services and investment management to corporate and institutional
clients in 34 countries around the world (66 countries including affiliates and franchisees). Colliers’ primary service lines are
Outsourcing & Advisory, Investment Management (“IM”), Leasing and Capital Markets. Operationally, Colliers is organized
into four distinct segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia and Australasia (“Asia Pacific”)
and Investment Management.
2. | Summary of presentation |
These unaudited Interim Consolidated Financial
Statements (the “Financial Statements”) have been prepared by the Company in accordance with disclosure requirements for the
presentation of interim financial information. Certain information and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America have been condensed
or omitted in accordance with such disclosure requirements. These Financial Statements should be read in conjunction with the audited
consolidated financial statements of Colliers for the year ended December 31, 2022.
These Financial Statements follow the same accounting
policies as the most recent audited consolidated financial statements, except as noted in Note 3. In the opinion of management, the Financial
Statements contain all adjustments necessary to a fair statement of the financial position of the Company as at September 30, 2023 and
the results of operations and its cash flows for the three and nine months ended September 30, 2023 and 2022. All such adjustments are
of a normal recurring nature. The results of operations for the nine-month period ended September 30, 2023, are not necessarily indicative
of the results to be expected for the year ending December 31, 2023.
3. | Impact of recently issued accounting standards |
Recently adopted accounting guidance
Contract Assets and Contract Liabilities
from Contracts with Customers – Business Combinations
In October 2021, the FASB issued ASU No. 2021-08,
Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Subtopic 805-10: Business Combinations).
The ASU requires that recognition and measurement principles of ASC 606 Revenue Recognition be applied for contract assets and contract
liabilities acquired in a business combination. The guidance in ASC 805 listing exceptions to recognition principle was amended to include
contract assets and contract liabilities. The Company adopted the guidance effective January 1, 2023. The adoption of the standard did
not have a material impact on the Company’s consolidated financial statements.
Reference Rate Reform
The FASB has issued three ASUs related to reference
rate reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting and in January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope.
With reference rates like the various tenors of the London Interbank Offered Rates (“LIBOR”) being discontinued between December
31, 2021 and June 30, 2023, a significant volume of contracts and other arrangements will be impacted by the transition required to alternative
reference rates. The ASUs provides optional expedients and exceptions to reduce the costs and complexity of applying existing GAAP to
contract modifications and hedge accounting if certain criteria are met. The standard is effective for a limited time for all entities
through December 31, 2022. In December 2022, FASB issued ASU No. 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset
Date of Topic 848, with immediate effect, to defer the sunset date from December 31, 2022 to December 31, 2024, after which the entities
will no longer be permitted to apply the relief in Topic 848. The Company has certain debt arrangements which may qualify for use of the
practical expedients permitted under the guidance. The Company has evaluated and will continue to evaluate arrangements subject to rate
reform and the options under the ASUs to facilitate an orderly transition to alternative reference rates and their potential impacts on
its consolidated financial statements and disclosures.
Recently issued accounting guidance, not yet
adopted
Management has reviewed the recently issued accounting
guidance and there are no standards that have not yet been adopted that are expected to have a material impact on the Company’s
consolidated financial statements.
2023 Acquisitions
During the nine months ended
September 30, 2023, the Company acquired controlling interests in three engineering and design (“E&D”) businesses. Two
in Asia Pacific, Greenstone Group Ltd., a project management and property advisory firm in New Zealand and Craig & Rhodes Pty Limited,
an engineering design and survey firm in Australia, and one in the Americas HILGARTWILSON, LLC, an engineering, planning and survey firm
in the United States.
The acquisition date fair value
of consideration transferred and the purchase price allocations are summarized as follows:
| |
Aggregate | |
| |
Acquisitions | |
| |
| |
Current assets, excluding cash | |
$ | 16,159 | |
Non-current assets | |
| 8,936 | |
Current liabilities | |
| 6,594 | |
Long-term liabilities | |
| 8,313 | |
| |
$ | 10,188 | |
| |
| | |
Cash consideration, net of cash acquired of $7,268 | |
$ | 61,295 | |
Acquisition date fair value of contingent consideration | |
| 3,962 | |
Total purchase consideration | |
$ | 65,257 | |
| |
| | |
Acquired intangible assets (note 8) | |
| | |
Finite life | |
$ | 45,323 | |
Goodwill | |
$ | 33,937 | |
Redeemable non-controlling interest (note 14) | |
$ | 24,191 | |
The purchase price allocations
of acquisitions resulted in the recognition of goodwill. The primary factors contributing to goodwill are future growth prospects, assembled
workforces and synergies with existing operations. For acquisitions completed during the nine months ended September 30, 2023, goodwill
in the amount of $20,739 is deductible for income tax purposes (December 31, 2022 - $483,159).
2022 acquisitions
During the nine months ended
September 30, 2022, the Company acquired controlling interests in eight businesses operating in the Americas, EMEA, Asia Pacific, and
Investment Management. The acquisition date fair value of consideration transferred consisted of $594,089 in cash (net of cash acquired
of $82,606).
Contingent acquisition consideration
The Company typically structures
its business acquisitions to include contingent consideration. Certain vendors, at the time of acquisition, are entitled to receive a
contingent consideration payment if the acquired businesses achieve specified earnings levels during the one- to five-year periods following
the dates of acquisition. The ultimate amount of payment is determined based on a formula, the key inputs to which are (i) a contractually
agreed maximum payment; (ii) a contractually specified earnings level and (iii) the actual earnings for the contingency period. If the
acquired business does not achieve the specified earnings level, the maximum payment is reduced for any shortfall, potentially to nil.
Unless it contains an element of compensation,
contingent consideration is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as
at September 30, 2023, was $59,999 (December 31, 2022 - $91,229). See note 18 for discussion on the fair value of contingent consideration.
Contingent consideration where the seller is required to remain employed to be entitled to payment is considered to have a compensatory
element and is revalued at each reporting period and recognized on a straight-line basis over the term of the contingent consideration
arrangement. The liability recorded on the balance sheet for the compensatory element of contingent consideration arrangements as at September
30, 2023, was $87,849 (December 31, 2022 - $61,870). The estimated range of outcomes (undiscounted) for all contingent consideration arrangements,
including those with an element of compensation is determined based on the likelihood of achieving specified earnings levels over the
contingency period, and ranges from $353,083 to a maximum of $410,547. These contingencies will expire during the period extending to
September 2028.
In June 2023, the Company exited
part of its operations in Peru. In relation to exiting these operations, $9,739 of assets and $6,788 of liabilities, which largely consisted
of working capital, were derecognized from the Company’s consolidated balance sheets. The proceeds received from the disposals were
de minimus and in the three and nine-month periods ended September 30, 2023 the Company recognized a loss on disposal in the amount of
$2,282.
In 2022, the Company discontinued
its businesses in Russia, by way of a sale of its controlling interests to local management. The Company also sold four individually insignificant
operations (EMEA – Morocco and Americas – Panama, Colombia and Costa Rica). The proceeds received from disposals were de minimus.
During the three and nine-month periods end September 30, 2022, the Company recognized an aggregated loss on disposal of operations in
the amount of $318 and $27,358 respectively.
6. | Real estate held for sale |
From time to time, the Company’s Investment
Management segment purchases real estate for placement into a fund. This typically occurs in the early stages of fundraising where temporary
liquidity is needed to fund investment opportunities that arise prior to the availability of fund capital. The purchased assets are recorded
as real estate held for sale prior to the ultimate sale to the identified fund. The transactions are not intended as an alternative source
of operating earnings and the arrangements to sell the assets to a fund are generally structured not to generate any gain or loss.
In February 2023, the Company sold the portfolio
of real estate held for sale as at December 31, 2022 to a newly established closed-end fund which is managed by the Company, without gain
or loss.
In March 2023, the Company acquired controlling
interests in two portfolios of land and buildings located in Europe (the “March 2023 RE Assets”). The Company expects to sell
these portfolios, which are classified as held for sale, to a newly established closed-end fund which is managed by the Company, without
gain or loss, before the end of 2023.
In July 2023, the Company acquired a controlling
interest in a portfolio of land and buildings located in Europe (the “July 2023 RE Assets”). The Company sold the July 2023
RE Assets to a newly established closed-end fund which is managed by the Company, without gain or loss, during the third quarter of 2023.
As is customary for closed-end funds, the Company
typically holds an equity interest of between 1% and 2% in these funds. There was no significant impact on net earnings related to real
estate held for sale in the three months ended September 30, 2023, or 2022.
The following table summarizes the real estate
held for sale.
| |
September 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
| |
| | |
| |
Real estate held for sale | |
| | | |
| | |
Real estate held for sale - current | |
$ | 42,081 | | |
$ | 45,353 | |
Liabilities related to real estate held for sale - current | |
$ | - | | |
$ | 1,353 | |
| |
| | | |
| | |
Net real estate held for sale | |
$ | 42,081 | | |
$ | 44,000 | |
7. | Acquisition-related items |
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Transaction costs | |
$ | 4,164 | | |
$ | 5,544 | | |
$ | 10,050 | | |
$ | 14,997 | |
Contingent consideration fair value adjustments (note 18) | |
| (7,023 | ) | |
| 16 | | |
| (4,339 | ) | |
| 4,902 | |
Contingent consideration compensation expense (note 4) | |
| 18,225 | | |
| 20,730 | | |
| 47,791 | | |
| 30,839 | |
| |
$ | 15,366 | | |
$ | 26,290 | | |
$ | 53,502 | | |
$ | 50,738 | |
The following table summarizes the gross value,
accumulated amortization and net carrying value of the Company’s indefinite life and finite life intangible assets:
| |
Gross | | |
| | |
| |
| |
carrying | | |
Accumulated | | |
| |
September 30, 2023 | |
amount | | |
amortization | | |
Net | |
Indefinite life intangible assets: | |
| | | |
| | | |
| | |
Licenses | |
$ | 29,200 | | |
$ | - | | |
$ | 29,200 | |
Trademarks and trade names | |
| 23,239 | | |
| - | | |
| 23,239 | |
| |
$ | 52,439 | | |
$ | - | | |
$ | 52,439 | |
Finite life intangible assets: | |
| | | |
| | | |
| | |
Customer lists and relationships | |
$ | 728,389 | | |
$ | 230,587 | | |
$ | 497,802 | |
Investment management contracts | |
| 589,302 | | |
| 167,681 | | |
| 421,621 | |
Mortgage servicing rights ("MSRs") | |
| 184,100 | | |
| 79,727 | | |
| 104,373 | |
Trademarks and trade names | |
| 28,132 | | |
| 7,191 | | |
| 20,941 | |
Management contracts and other | |
| 15,441 | | |
| 12,085 | | |
| 3,356 | |
Backlog | |
| 9,248 | | |
| 6,776 | | |
| 2,472 | |
| |
$ | 1,554,612 | | |
$ | 504,047 | | |
$ | 1,050,565 | |
| |
$ | 1,607,051 | | |
$ | 504,047 | | |
$ | 1,103,004 | |
| |
Gross | | |
| | |
| |
| |
carrying | | |
Accumulated | | |
| |
December 31, 2022 | |
amount | | |
amortization | | |
Net | |
Indefinite life intangible assets: | |
| | | |
| | | |
| | |
Licenses | |
$ | 29,200 | | |
$ | - | | |
$ | 29,200 | |
Trademarks and trade names | |
| 23,285 | | |
| - | | |
| 23,285 | |
| |
$ | 52,485 | | |
$ | - | | |
$ | 52,485 | |
Finite life intangible assets: | |
| | | |
| | | |
| | |
Customer lists and relationships | |
$ | 695,007 | | |
$ | 187,743 | | |
$ | 507,264 | |
Investment management contracts | |
| 589,885 | | |
| 126,904 | | |
| 462,981 | |
Mortgage servicing rights ("MSRs") | |
| 170,213 | | |
| 65,771 | | |
| 104,442 | |
Trademarks and trade names | |
| 27,702 | | |
| 4,389 | | |
| 23,313 | |
Management contracts and other | |
| 15,426 | | |
| 10,635 | | |
| 4,791 | |
Backlog | |
| 8,299 | | |
| 3,665 | | |
| 4,634 | |
| |
$ | 1,506,532 | | |
$ | 399,107 | | |
$ | 1,107,425 | |
| |
$ | 1,559,017 | | |
$ | 399,107 | | |
$ | 1,159,910 | |
The MSR assets are evaluated
quarterly for impairment by stratifying the servicing portfolio according to predominant risk characteristics, primarily investor type
and interest rate. An impairment is recorded if the carrying value of an individual stratum exceeds its estimated fair value. There was
no impairment recorded for the nine-month period ended September 30, 2023, or 2022.
The following table summarizes
activity related to the Company’s mortgage servicing rights for the nine months ended September 30, 2023:
| |
2023 | |
Balance, January 1 | |
$ | 104,442 | |
Additions, following the sale of loan | |
| 13,887 | |
Amortization | |
| (11,032 | ) |
Prepayments and write-offs | |
| (2,924 | ) |
Balance, September 30 | |
$ | 104,373 | |
The following is the estimated
future expense for amortization of the recorded MSRs and other intangible assets for each of the next five years and thereafter:
For the year ended December 31, | |
MSRs | | |
Other
Intangibles | | |
Total | |
2023 (remaining three months) | |
$ | 3,345 | | |
$ | 31,601 | | |
$ | 34,946 | |
2024 | |
| 11,990 | | |
| 112,392 | | |
| 124,382 | |
2025 | |
| 11,022 | | |
| 102,576 | | |
| 113,598 | |
2026 | |
| 10,356 | | |
| 98,721 | | |
| 109,077 | |
2027 | |
| 9,651 | | |
| 92,913 | | |
| 102,564 | |
Thereafter | |
| 58,009 | | |
| 507,989 | | |
| 565,998 | |
| |
$ | 104,373 | | |
$ | 946,192 | | |
$ | 1,050,565 | |
On May 27, 2022, the Company amended and extended
the multi-currency, sustainability-linked senior unsecured revolving credit facility (the “Revolving Credit Facility”) of
$1,500,000. On April 28, 2023, the Company increased the Revolving Credit Facility by $250,000 to $1,750,000 as per the terms of the agreement.
The Revolving Credit Facility has a 5-year term ending May 27, 2027, and bears interest at an applicable margin of 1.125% to 2.5% over
floating reference rates, depending on financial leverage ratios. The applicable margin may be adjusted, annually, plus or minus 0.05%
subject to achieving certain sustainability metrics. The weighted average interest rate on borrowings under the Revolving Credit Facility
for the three months ended September 30, 2023 was 6.9% (2022 – 3.5%). The Revolving Credit Facility had $602,986 of available undrawn
credit as at September 30, 2023 ($557,594 as at December 31, 2022). As at September 30, 2023, letters of credit in the amount of $12,525
were outstanding against the Revolving Credit Facility ($12,365 as at December 31, 2022). The Revolving Credit Facility requires a commitment
fee of 0.11% to 0.35% of the unused portion, depending on financial leverage ratios.
The Company has outstanding €210,000 of
senior unsecured notes with a fixed interest rate of 2.23% (the “Senior Notes due 2028”), which are held by a group of institutional
investors. The Senior Notes due 2028 have a 10-year term ending May 30, 2028.
The Company also has outstanding €125,000
and $150,000 of senior unsecured notes with fixed interest rates of 1.52% and 3.02%, respectively (the “Senior Notes due 2031”),
which are held by a group of institutional investors. The Senior Notes due 2031 have a 10-year term ending October 7, 2031.
The Revolving Credit Facility, Senior Notes due
2028, and Senior Notes due 2031 rank equally in terms of seniority and have similar financial covenants, including leverage and interest
coverage. The Company was in compliance with all covenants as of September 30, 2023. The Company is limited from undertaking certain mergers,
acquisitions and dispositions without prior approval.
On April 4, 2023, the Company issued a notice
of redemption to all holders of its 4.0% Convertible Senior Subordinated Notes (the “Convertible Notes”). Prior to June 30,
2023, $230,000 of Convertible Notes were converted and redeemed into 4,015,720 Subordinate Voting Shares. Accrued and unpaid interest
for the period from December 1, 2022 to the redemption date of June 1, 2023 was paid.
Upon the conversion and redemption of Convertible
Notes, the unamortized financing cost of $2,899 was settled as part of the Convertible Notes, in exchange for equity.
11. | Warehouse credit facilities |
The following table summarizes the Company’s
mortgage warehouse credit facilities:
| |
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
Current | |
Maximum | | |
Carrying | | |
Maximum | | |
Carrying | |
| |
Maturity | |
Capacity | | |
Value | | |
Capacity | | |
Value | |
Facility A - SOFR plus 1.40% | |
October 17, 2024 | |
$ | 275,000 | | |
$ | 48,309 | | |
$ | 125,000 | | |
$ | 1,924 | |
Facility B - SOFR plus 1.70% | |
On demand | |
| 125,000 | | |
| - | | |
| 125,000 | | |
| 7,619 | |
Facility C - SOFR plus 1.60% | |
N/A | |
| - | | |
| - | | |
| 150,000 | | |
| 14,743 | |
| |
| |
$ | 400,000 | | |
$ | 48,309 | | |
$ | 400,000 | | |
$ | 24,286 | |
Colliers Mortgage LLC (“Colliers Mortgage”)
has warehouse credit facilities which are used exclusively for the purpose of funding warehouse mortgages receivable. The warehouse credit
facilities are recourse only to Colliers Mortgage, are revolving and are secured by any warehouse mortgages financed on the facilities.
On April 17, 2023, the Company terminated Facility
C and amended Facility A to increase the borrowing capacity to $275,000 with the right to increase its borrowing capacity up to an additional
$150,000. The amendment also modified the interest rate to SOFR plus 1.40% without any change in the maturity.
On October 17, 2023, the Company amended the
financing agreement for Facility A to extend the maturity date to October 19, 2024.
In April 2019, the Company entered into a structured
accounts receivable facility (the “AR Facility”). Under the AR Facility, certain of the Company's subsidiaries continuously
sell trade accounts receivable and contract assets (the “Receivables”) to wholly owned special purpose entities at fair market
value. The special purpose entities in turn sell the Receivables to a third-party financial institution (the “Purchaser”).
On September 28, 2023, the Company expanded the
committed availability of its AR Facility with two third-party financial institutions to $200,000, from $175,000, with the term expiring
on October 24, 2024. As of September 30, 2023, the Company’s draw under the AR Facility was $197,977.
All transactions under the AR Facility are
accounted for as a true sale in accordance with ASC 860, Transfers and Servicing (“ASC
860”). Following the sale of the Receivables to the Purchaser, the Receivables are legally isolated from the Company and
its wholly owned special purpose entities. The AR Facility is recorded as a sale of accounts receivable, and accordingly sold receivables
are derecognized from the consolidated balance sheet. The Company continues to service, administer and collect the Receivables on behalf
of the Purchaser, and recognizes a servicing liability in accordance with ASC 860. The Company
has elected the amortization method for subsequent measurement of the servicing liability, which
is assessed for changes in the obligation at each reporting date. As of September 30, 2023, the servicing liability was nil.
Under the AR Facility, the Company receives
a cash payment and a deferred purchase price (“Deferred Purchase Price” or “DPP”) for sold Receivables. The DPP
is paid to the Company in cash on behalf of the Purchaser as the Receivables are collected; however, due to the revolving nature of the
AR Facility, cash collected from the Company's customers is reinvested by the Purchaser monthly in new Receivable purchases under the
AR Facility. As at September 30, 2023, the DPP was $89,404 (December 31, 2022 - $92,278) and was included in Prepaid expenses and other
current assets on the Consolidated Balance Sheets. For the nine months ending September 30, 2023, Receivables sold under the AR Facility
were $1,217,910 and cash collections from customers on Receivables sold were $1,188,312, all of which were reinvested in new Receivables
purchases and are included in cash flows from operating activities in the consolidated statement of cash flows. As of September 30, 2023,
the outstanding principal on trade accounts receivable, net of expected credit losses, sold under the AR Facility was $183,294; and the
outstanding principal on contract assets, current and non-current, sold under the AR Facility was $128,880. See note 18 for fair value
information on the DPP.
For the nine months ended September 30, 2023,
the Company recognized a gain related to Receivables sold of $33 (2022 - $205 loss) that was recorded in other expense in the consolidated
statement of earnings. Based on the Company’s collection history, the fair value of the Receivables sold subsequent to the initial
sale approximates carrying value.
The non-cash investing activities associated
with the DPP for the nine months ended September 30, 2023, were $88,224.
13. | Variable interest entities |
The Company holds variable interests in certain
Variable Interest Entities (“VIE”) in its Investment Management segment which are not consolidated as it was determined that
the Company is not the primary beneficiary. The Company’s involvement with these entities is in the form of advisory fee arrangements
and equity co-investments (typically 1%-2%). Equity co-investments are included in Other non-current assets on the Consolidated Balance
Sheets.
The following table provides
the maximum exposure to loss related to these non-consolidated VIEs:
| |
September 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
Equity accounted investments | |
$ | 26,792 | | |
$ | 22,361 | |
Co-investment commitments | |
| 45,253 | | |
| 18,588 | |
Maximum exposure to loss | |
$ | 72,045 | | |
$ | 40,949 | |
14. | Redeemable non-controlling interests |
The minority equity positions in the Company’s
subsidiaries are referred to as redeemable non-controlling interests (“RNCI”). The RNCI are considered to be redeemable securities.
Accordingly, the RNCI is recorded at the greater of (i) the redemption amount or (ii) the amount initially recorded as RNCI at the date
of inception of the minority equity position. This amount is recorded in the “mezzanine” section of the balance sheet, outside
of shareholders’ equity. Changes in the RNCI amount are recognized immediately as they occur. The following table provides a reconciliation
of the beginning and ending RNCI amounts:
| |
2023 | |
Balance, January 1 | |
$ | 1,079,306 | |
RNCI share of earnings | |
| 36,586 | |
RNCI redemption increment | |
| 26,393 | |
Distributions paid to RNCI | |
| (67,197 | ) |
Purchase of interests from RNCI | |
| (27,897 | ) |
Sale of interests to RNCI | |
| 1,997 | |
RNCI recognized on business acquisitions | |
| 24,191 | |
Balance, September 30 | |
$ | 1,073,379 | |
The Company has shareholders’ agreements
in place at each of its non-wholly owned subsidiaries. These agreements allow the Company to “call” the RNCI at a price determined
with the use of a formula price, which is usually equal to a fixed multiple of average annual net earnings before income taxes, interest,
depreciation, and amortization. The agreements also have redemption features which allow the owners of the RNCI to “put” their
equity to the Company at the same price subject to certain limitations. The formula price is referred to as the redemption amount and
may be paid in cash or in Subordinate Voting Shares. The redemption amount as of September 30, 2023, was $969,859 (December 31, 2022 -
$1,027,124). The redemption amount is lower than that recorded on the balance sheet as the formula price of certain RNCI are lower than
the amount initially recorded at the inception of the minority equity position. If all put or call options were settled with Subordinate
Voting Shares as at September 30, 2023, approximately 8,890,000 such shares would be issued.
Increases or decreases to the formula price of
the underlying shares are recognized in the statement of earnings as the NCI redemption increment.
15. | Net earnings (loss) per common share |
The earnings per share calculation cannot be
anti-dilutive. The impact of stock options for the nine-month period ended September 30, 2023, which was calculated using the ‘treasury
stock method’, is anti-dilutive as the numerator is in a loss position.
Diluted EPS is calculated using the “if-converted”
method of calculating earnings per share in relation to the Convertible Notes. The Convertible Notes were issued on May 19, 2020 and were
fully converted or redeemed by June 1, 2023. (See note 10) The “if-converted” method is used if the impact of the assumed
conversion is dilutive. When dilutive, the interest charges (net of income tax) recorded in relation to the Convertible Notes prior to
conversion or redemption is adjusted from the numerator and the additional shares issuable on conversion of the Convertible Notes for
the portion of the period while they were outstanding are added to the denominator of the earnings per share calculation. The “if-converted”
method was anti-dilutive for the three-month and nine-month periods ended September 30, 2022.
The following table reconciles the basic and
diluted common shares outstanding:
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
(in thousands) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net earnings (loss) attributable to Company | |
$ | 25,113 | | |
$ | 12,028 | | |
$ | (1,890 | ) | |
$ | 23,749 | |
After-tax interest on Convertible Notes | |
| - | | |
| - | | |
| (119 | ) | |
| - | |
Adjusted numerator considering the If-Converted Method | |
$ | 25,113 | | |
$ | 12,028 | | |
$ | (2,009 | ) | |
$ | 23,749 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares - Basic | |
| 47,206 | | |
| 43,283 | | |
| 45,122 | | |
| 43,558 | |
Exercise of stock options | |
| 343 | | |
| 487 | | |
| - | | |
| 589 | |
Conversion of Convertible Notes | |
| - | | |
| - | | |
| 382 | | |
| - | |
Weighted average common shares - Diluted | |
| 47,549 | | |
| 43,770 | | |
| 45,504 | | |
| 44,147 | |
16. | Stock-based compensation |
The Company has a stock option
plan for certain officers, key full-time employees and directors of the Company and its subsidiaries. Options are granted at the market
price for the underlying shares on the day immediately prior to the date of grant. Each option vests over a four-year term, expires five
years from the date granted and allows for the purchase of one Subordinate Voting Share. All Subordinate Voting Shares issued are new
shares. As at September 30, 2023, there were 883,550 options available for future grants.
Grants under the Company’s stock option
plan are equity-classified awards.
Stock option activity for the nine months ended
September 30, 2023 was as follows:
| |
| | |
| | |
Weighted average | | |
| |
| |
| | |
Weighted | | |
remaining | | |
Aggregate | |
| |
Number of | | |
average | | |
contractual life | | |
intrinsic | |
| |
options | | |
exercise price | | |
(years) | | |
value | |
Shares issuable under options - | |
| | | |
| | | |
| | | |
| | |
December 31, 2022 | |
| 3,053,000 | | |
$ | 94.30 | | |
| | | |
| | |
Granted | |
| 23,750 | | |
| 99.18 | | |
| | | |
| | |
Exercised | |
| (338,875 | ) | |
| 67.88 | | |
| | | |
| | |
Forfeited | |
| (15,250 | ) | |
| 123.91 | | |
| | | |
| | |
Shares issuable under options - | |
| | | |
| | | |
| | | |
| | |
September 30, 2023 | |
| 2,722,625 | | |
$ | 97.47 | | |
| 2.7 | | |
$ | 23,024 | |
Options exercisable - September 30, 2023 | |
| 1,090,283 | | |
$ | 86.70 | | |
| 1.8 | | |
$ | 16,755 | |
The amount of compensation expense recorded in
the statement of earnings for the three and nine months ended September 30, 2023 was $5,513 and $16,726, respectively (2022 - $4,730 and
$14,081). As of September 30, 2023, there was $25,724 of unrecognized compensation cost related to non-vested awards which is expected
to be recognized over the next 4 years. During the nine-month period ended September 30, 2023, the fair value of options vested was $3,670
(2022 - $4,892).
The provision for income tax
for the nine months ended September 30, 2023, reflected an effective tax rate of 37.5% (2022 - 34.6%) relative to the combined statutory
rate of approximately 26.5% (2022 - 26.5%). The current year’s rate was impacted by the amortization of intangible assets and contingent
acquisition consideration associated with an investment in a UK flowthrough entity, on which no tax benefit was recognizable.
Fair values
of financial instruments
The following table provides the financial assets
and liabilities carried at fair value measured on a recurring basis as of September 30, 2023:
| |
Level 1 | | |
Level 2 | | |
Level 3 | |
Assets | |
| | | |
| | | |
| | |
Cash equivalents | |
$ | 3,933 | | |
$ | - | | |
$ | - | |
Equity securities | |
| 5,882 | | |
| 5 | | |
| - | |
Debt securities | |
| - | | |
| 17,077 | | |
| - | |
Mortgage derivative assets | |
| - | | |
| - | | |
| 17,171 | |
Warehouse receivables | |
| - | | |
| 54,957 | | |
| - | |
Interest rate swap assets | |
| - | | |
| 17,867 | | |
| - | |
Deferred Purchase Price on AR Facility | |
| - | | |
| - | | |
| 89,404 | |
Total assets | |
$ | 9,815 | | |
$ | 89,906 | | |
$ | 106,575 | |
| |
| | | |
| | | |
| | |
Liabilities | |
| | | |
| | | |
| | |
Mortgage derivative liabilities | |
$ | - | | |
$ | - | | |
$ | 12,704 | |
Contingent consideration liabilities | |
| - | | |
| - | | |
| 59,999 | |
Total liabilities | |
$ | - | | |
$ | - | | |
$ | 72,703 | |
Other than the assets and liabilities acquired
in relation to business combinations (see note 4), there were no significant non-recurring fair value measurements recorded during the
nine months ended September 30, 2023.
Cash equivalents
Cash equivalents include highly
liquid investments with original maturities of less than three months. Actively traded cash equivalents where a quoted price is readily
available are classified as Level 1 in the fair value hierarchy.
Debt and equity securities
The Company records debt and
equity securities at fair value on the Consolidated Balance Sheets. These financial instruments are valued based on observable market
data that may include quoted market prices dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market
consensus prepayment speeds, credit information and the instruments’ terms and conditions and are classified as Level 2 of the fair
value hierarchy.
Certain investments in equity
securities where quoted prices are readily available are classified as Level 1 in the fair value hierarchy. The Company increases or decreases
its investment each reporting period by the change in the fair value of the investment reported in net earnings on the Consolidated Statements
of Earnings.
Mortgage-related derivatives
Interest rate lock commitments and forward sale
commitments are derivative instruments which use a discounted cash flow model and consider observable market data in determining their
fair values, particularly changes in interest rates. In the case of interest rate lock commitments, the fair value measurement also considers
the expected net cash flows associated with the servicing of the loans. The Company also considers the impact of unobservable inputs related
to counterparty non-performance risk when measuring the fair value of these derivatives. Therefore, these mortgage-related derivatives
are categorized as Level 3. The mortgage-related derivative assets and liabilities are included in Prepaid expenses and other current
assets and Accounts payable and accrued expenses, respectively, on the consolidated balance sheets.
Given the credit quality of the Company’s
counterparties, the short duration of interest rate lock commitments and forward sale commitments and the Company’s historical experience,
management does not believe the risk of non-performance is significant. An increase in counterparty non-performance risk assumptions would
result in a lower fair value measurement.
Changes in the fair value of the net mortgage
derivative assets and liabilities comprises the following:
| |
2023 | |
Balance, January 1 | |
$ | 6,949 | |
Settlements | |
| (35,667 | ) |
Realized gains recorded in earnings | |
| 17,266 | |
Unrealized gains recorded in earnings | |
| 15,919 | |
Balance, September 30 | |
$ | 4,467 | |
Warehouse receivables
Warehouse receivables represent
mortgage loans originated by the Company with commitments to sell to third party investors. Principal funded on mortgage loans plus gains
attributable to the fair value of mortgage premiums and origination fees increase warehouse receivables and proceeds received from the
sale of mortgage loans to third party investors reduce warehouse receivables. As at September 30, 2023, all warehouse facility liabilities
are supported by mortgage warehouse receivables which are under commitment to be purchased by a qualifying investor. These assets are
classified as Level 2 in the fair value hierarchy as a substantial majority of the inputs are readily observable.
AR Facility deferred purchase price (“DPP”)
The Company recorded a DPP under its AR Facility.
The DPP represents the difference between the fair value of the Receivables sold and the cash purchase price and is recognized at fair
value as part of the sale transaction. The DPP is remeasured each reporting period in order to account for activity during the period,
including the seller’s interest in any newly transferred Receivables, collections on previously transferred Receivables attributable
to the DPP and changes in estimates for credit losses. Changes in the DPP attributed to changes in estimates for credit losses are expected
to be immaterial, as the underlying Receivables are short-term and of high credit quality. The DPP is valued using Level 3 inputs, primarily
discounted cash flows, with the significant inputs being discount rates ranging from 2.5% to 5.0% depending upon the aging of the Receivables.
See note 12 for information on the AR Facility.
Changes in the fair value of the DPP comprises
the following:
| |
2023 | |
Balance, January 1 | |
$ | 92,278 | |
Additions to DPP | |
| 88,224 | |
Collections on DPP | |
| (91,207 | ) |
Fair value adjustment | |
| 33 | |
Foreign exchange and other | |
| 76 | |
Balance, September 30 | |
$ | 89,404 | |
Interest rate swaps
The Company has entered into interest rate swap
agreements (“IRS”) to convert floating interest on US dollar denominated debt to fixed interest rates. The interest rate swaps
are measured at fair value and are included in Other assets on the consolidated balance sheets. The table below summarizes the details
of the interest rate swaps in place as at September 30, 2023.
| |
Effective | |
Maturity | |
Notional Amount | | |
Interest rates |
| |
Date | |
Date | |
of US dollar debt | | |
Floating | |
Fixed |
2022 IRS A | |
July 15, 2022 | |
May 27, 2027 | |
$ | 150,000 | | |
SOFR | |
2.8020% |
2022 IRS B | |
December 21, 2022 | |
May 27, 2027 | |
$ | 250,000 | | |
SOFR | |
3.5920% |
2023 IRS | |
April 28, 2023 | |
May 27, 2027 | |
$ | 100,000 | | |
SOFR | |
3.7250% |
2022 IRS A, 2022 IRS B and 2023 IRS (collectively
the “Designated IRSs”) are being accounted for as cash flow hedges and are measured at fair value on the consolidated balance
sheets. Gains or losses on the Designated IRSs, which are determined to be effective as hedges, are reported in accumulated other comprehensive
income (“AOCI”).
In the three months and nine months ended September
30, 2023, nil and $825 of the AOCI, respectively, was included in interest expense on the consolidated statements of earnings (2022 -
$644 and $1,889) associated with an IRS that was entered into in December 2018 and which was dedesignated as a hedging relationship on
July 1, 2021. This IRS matured on April 30, 2023.
Contingent acquisition consideration
The inputs to the measurement of the fair value
of contingent consideration related to acquisitions are Level 3 inputs. The fair value measurements were made using a discounted cash
flow model; significant model inputs were expected future operating cash flows (determined with reference to each specific acquired business)
and discount rates (which range from 3.5% to 10.3%, with a weighted average of 5.6%). The wide range of discount rates is attributable
to the level of risk related to economic growth factors combined with the length of the contingent payment periods; and the dispersion
was driven by unique characteristics of the businesses acquired and the respective terms for these contingent payments. A 2% increase
in the weighted average discount rate would reduce the fair value of contingent consideration by $1,900. See note 4 for discussion on
contingent acquisition consideration.
Changes in the fair value of the contingent consideration
liability comprises the following:
| |
2023 | |
Balance, January 1 | |
$ | 91,229 | |
Amounts recognized on acquisitions | |
| 3,962 | |
Fair value adjustments (note 7) | |
| (4,339 | ) |
Resolved and settled in cash | |
| (31,197 | ) |
Other | |
| 344 | |
Balance, September 30 | |
$ | 59,999 | |
| |
| | |
Less: current portion | |
$ | 16,961 | |
Non-current portion | |
$ | 43,038 | |
The carrying amounts for cash,
restricted cash, accounts receivable, accounts payable, advisor loans, other receivables and accrued liabilities approximate their estimated
fair values due to the short-term nature of these instruments, unless otherwise indicated. The carrying value of the Company’s Revolving
Credit Facility and other short-term borrowings approximate their estimated fair value due to their short-term nature and variable interest
rate terms. These fair value measurements use a net present value approach; significant model inputs were expected future cash outflows
and discount rates which are Level 3 inputs within the fair value hierarchy.
The carrying amount and the
estimated fair value of Senior Notes and Convertible Notes are presented in the table below. Interest rate yield curves, interest rate
indices and market prices (Level 2 inputs within the fair value hierarchy) are used in determining the fair value of the Senior Notes
and Convertible Notes.
| |
September 30, 2023 | | |
December 31, 2022 | |
| |
Carrying | | |
Fair | | |
Carrying | | |
Fair | |
| |
amount | | |
value | | |
amount | | |
value | |
Senior Notes | |
$ | 503,036 | | |
$ | 406,698 | | |
$ | 506,533 | | |
$ | 414,195 | |
Convertible Notes (note 10) | |
| - | | |
| - | | |
| 226,534 | | |
| 366,183 | |
19. | Commitments and Contingencies |
Claims and Litigation
In the normal course of operations, the Company
is subject to routine claims and litigation incidental to its business. Litigation currently pending or threatened against the Company
includes disputes with former employees and commercial liability claims related to services provided by the Company. The Company believes
resolution of such proceedings, combined with amounts accrued, will not have a material impact on the Company’s financial condition
or the results of operations.
Contingencies associated
with US government sponsored enterprises
Colliers Mortgage is a lender
in the Fannie Mae Delegated Underwriting & Servicing Program (the “DUS Program”). Commitments for the origination and
subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest
rate and scheduled closing and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed
in note 18, the Company accounts for these commitments as derivatives recorded at fair value.
Colliers Mortgage is obligated
to share in losses, if any, related to mortgages originated under the DUS Program. These obligations expose the Company to credit risk
on mortgage loans for which the Company is providing underwriting, servicing, or other services under the DUS Program. Net losses on defaulted
loans are shared with Fannie Mae based upon established loss-sharing ratios, and typically, the Company is subject to sharing up to one-third
of incurred losses on loans originated under the DUS Program. As of September 30, 2023, the Company has funded and sold loans subject
to such loss sharing obligations with an aggregate unpaid principal balance of approximately $4,854,000. As at September 30, 2023, the
loss reserve was $13,694 (December 31, 2022 - $14,470) and was included within Other liabilities on the Consolidated Balance Sheets.
Pursuant to its licenses with
Fannie Mae, Ginnie Mae and HUD, Colliers Mortgage is required to maintain certain standards for capital adequacy which include minimum
net worth and liquidity requirements. If it is determined at any time that Colliers Mortgage fails to maintain appropriate capital adequacy,
the licensor reserves the right to terminate the Company’s servicing authority for all or some of the portfolio. At September 30,
2023, Colliers Mortgage was in compliance with all such requirements.
Disaggregated revenue
Colliers has disaggregated its revenue from contracts
with customers by type of service and operating segment as presented in the following table.
OPERATING SEGMENT REVENUES | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
Asia | | |
| | |
| | |
| |
| |
Americas | | |
EMEA | | |
Pacific | | |
IM | | |
Corporate | | |
Consolidated | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Three months ended September 30, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Leasing | |
$ | 184,754 | | |
$ | 32,062 | | |
$ | 32,965 | | |
$ | - | | |
$ | - | | |
$ | 249,781 | |
Capital Markets | |
| 109,801 | | |
| 23,177 | | |
| 27,315 | | |
| - | | |
| - | | |
| 160,293 | |
E&D and Project management | |
| 169,158 | | |
| 62,739 | | |
| 31,069 | | |
| - | | |
| - | | |
| 262,966 | |
Property management | |
| 82,266 | | |
| 20,094 | | |
| 29,328 | | |
| - | | |
| - | | |
| 131,688 | |
Valuation and advisory | |
| 47,510 | | |
| 33,718 | | |
| 21,682 | | |
| - | | |
| - | | |
| 102,910 | |
IM - Advisory and other | |
| - | | |
| - | | |
| - | | |
| 118,117 | | |
| - | | |
| 118,117 | |
IM - Incentive Fees | |
| - | | |
| - | | |
| - | | |
| 600 | | |
| - | | |
| 600 | |
Other | |
| 25,776 | | |
| 2,222 | | |
| 1,567 | | |
| - | | |
| 112 | | |
| 29,677 | |
Total Revenue | |
$ | 619,265 | | |
$ | 174,012 | | |
$ | 143,926 | | |
$ | 118,717 | | |
$ | 112 | | |
$ | 1,056,032 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Leasing | |
$ | 210,551 | | |
$ | 32,065 | | |
$ | 31,098 | | |
$ | - | | |
$ | - | | |
$ | 273,714 | |
Capital Markets | |
| 194,687 | | |
| 38,378 | | |
| 42,641 | | |
| - | | |
| - | | |
| 275,706 | |
E&D and Project management | |
| 133,629 | | |
| 46,580 | | |
| 22,956 | | |
| - | | |
| - | | |
| 203,165 | |
Property management | |
| 74,292 | | |
| 15,979 | | |
| 30,809 | | |
| - | | |
| - | | |
| 121,080 | |
Valuation and advisory | |
| 60,634 | | |
| 30,256 | | |
| 22,120 | | |
| - | | |
| - | | |
| 113,010 | |
IM - Advisory and other | |
| - | | |
| - | | |
| - | | |
| 96,070 | | |
| - | | |
| 96,070 | |
IM - Incentive Fees | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Other | |
| 21,265 | | |
| 940 | | |
| 3,221 | | |
| - | | |
| 153 | | |
| 25,579 | |
Total Revenue | |
$ | 695,058 | | |
$ | 164,198 | | |
$ | 152,845 | | |
$ | 96,070 | | |
$ | 153 | | |
$ | 1,108,324 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Nine months ended September 30, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Leasing | |
$ | 567,420 | | |
$ | 88,031 | | |
$ | 89,401 | | |
$ | - | | |
$ | - | | |
$ | 744,852 | |
Capital Markets | |
| 347,983 | | |
| 64,926 | | |
| 82,140 | | |
| - | | |
| - | | |
| 495,049 | |
E&D and Project management | |
| 475,428 | | |
| 175,725 | | |
| 84,724 | | |
| - | | |
| - | | |
| 735,877 | |
Property management | |
| 240,139 | | |
| 59,814 | | |
| 86,117 | | |
| - | | |
| - | | |
| 386,070 | |
Valuation and advisory | |
| 132,993 | | |
| 97,593 | | |
| 68,238 | | |
| - | | |
| - | | |
| 298,824 | |
IM - Advisory and other | |
| - | | |
| - | | |
| - | | |
| 357,723 | | |
| - | | |
| 357,723 | |
IM - Incentive Fees | |
| - | | |
| - | | |
| - | | |
| 600 | | |
| - | | |
| 600 | |
Other | |
| 68,185 | | |
| 5,112 | | |
| 7,314 | | |
| - | | |
| 367 | | |
| 80,978 | |
Total Revenue | |
$ | 1,832,148 | | |
$ | 491,201 | | |
$ | 417,934 | | |
$ | 358,323 | | |
$ | 367 | | |
$ | 3,099,973 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Leasing | |
$ | 613,746 | | |
$ | 97,975 | | |
$ | 76,661 | | |
$ | - | | |
$ | - | | |
$ | 788,382 | |
Capital Markets | |
| 610,929 | | |
| 117,451 | | |
| 109,502 | | |
| - | | |
| - | | |
| 837,882 | |
E&D and Project management | |
| 385,797 | | |
| 127,918 | | |
| 55,462 | | |
| - | | |
| - | | |
| 569,177 | |
Property management | |
| 217,583 | | |
| 49,816 | | |
| 98,347 | | |
| - | | |
| - | | |
| 365,746 | |
Valuation and advisory | |
| 184,774 | | |
| 90,412 | | |
| 64,936 | | |
| - | | |
| - | | |
| 340,122 | |
IM - Advisory and other | |
| - | | |
| - | | |
| - | | |
| 230,944 | | |
| - | | |
| 230,944 | |
IM - Incentive Fees | |
| - | | |
| - | | |
| - | | |
| 26,630 | | |
| - | | |
| 26,630 | |
Other | |
| 64,638 | | |
| 3,222 | | |
| 9,921 | | |
| 21 | | |
| 397 | | |
| 78,199 | |
Total Revenue | |
$ | 2,077,467 | | |
$ | 486,794 | | |
$ | 414,829 | | |
$ | 257,595 | | |
$ | 397 | | |
$ | 3,237,082 | |
Revenue associated with the Company’s debt
finance and loan servicing operations are outside the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”).
In the three months and nine months ended September 30, 2023, $7,909 and $29,398 of Capital Markets revenue (2022 - $22,998 and $49,594)
and $11,784 and $33,513 of Other Revenue (2022 - $14,176 and $42,053) respectively, was excluded from the scope of ASC 606. Substantially
all of these revenues were included within the Americas segment.
Contract balances
As at September 30, 2023, the Company had contract
assets totaling $100,904 of which $83,765 was current ($107,679 as at December 31, 2022 - of which $91,924 was current). During the nine
months ended September 30, 2023, approximately 85% of the current contract assets were moved to accounts receivable or sold under the
AR Facility (Note 12).
As at September 30, 2023, the Company had contract
liabilities (all current) totaling $57,413 ($25,616 as at December 31, 2022). $1,119 and $19,771 of the contract liability balance at
the beginning of the year was recognized to revenue in the three and nine months ended September 30, 2023, respectively (2022 - $793 and
$25,960).
Certain constrained revenues may arise from services
that began in a prior reporting period. Consequently, a portion of the revenues the Company recognizes in the current period may be partially
related to the services performed in prior periods. Typically, less than 5% of Leasing and Capital Markets revenue recognized in a period
had previously been constrained and substantially all investment management incentive fees recognized in the period were previously constrained.
Operating segments
Colliers has identified four reportable operating
segments. Three segments are grouped geographically into Americas, Asia Pacific and EMEA. The Investment Management segment operates in
the Americas and EMEA. The groupings are based on the manner in which the segments are managed. Management assesses each segment’s
performance based on operating earnings or operating earnings before depreciation and amortization. Corporate includes the unallocated
costs of global administrative functions and the corporate head office. Operating earnings (loss) for the three and nine month periods
ended September 30, 2023, include losses on disposal of the Company’s operations of nil and $2,282, respectively (2022 - $318 and
27,358). The losses on disposal in 2023 are all in the Americas and substantially all of the losses in 2022 were in EMEA (see note 5).
OPERATING SEGMENTS | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
Asia | | |
| | |
| | |
| |
| |
Americas | | |
EMEA | | |
Pacific | | |
IM | | |
Corporate | | |
Consolidated | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Three months ended September 30 | |
| | |
| | |
| | |
| | |
| |
| |
| | |
| | |
| | |
| | |
| | |
| |
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 619,265 | | |
$ | 174,012 | | |
$ | 143,926 | | |
$ | 118,717 | | |
$ | 112 | | |
$ | 1,056,032 | |
Depreciation and amortization | |
| 22,996 | | |
| 6,819 | | |
| 2,937 | | |
| 17,823 | | |
| 588 | | |
| 51,163 | |
Operating earnings (loss) | |
| 42,021 | | |
| 6,676 | | |
| 12,134 | | |
| 20,388 | | |
| (10,320 | ) | |
| 70,899 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 695,058 | | |
$ | 164,198 | | |
$ | 152,845 | | |
$ | 96,070 | | |
$ | 153 | | |
$ | 1,108,324 | |
Depreciation and amortization | |
| 21,274 | | |
| 6,527 | | |
| 2,361 | | |
| 14,161 | | |
| 819 | | |
| 45,142 | |
Operating earnings (loss) | |
| 59,945 | | |
| 6,098 | | |
| 17,451 | | |
| 19,515 | | |
| (18,979 | ) | |
| 84,030 | |
| |
| | |
| | |
Asia | | |
| | |
| | |
| |
| |
Americas | | |
EMEA | | |
Pacific | | |
IM | | |
Corporate | | |
Consolidated | |
| |
| | |
| | |
| | |
| | |
| | |
| |
Nine months ended September 30 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2023 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 1,832,148 | | |
$ | 491,201 | | |
$ | 417,934 | | |
$ | 358,323 | | |
$ | 367 | | |
$ | 3,099,973 | |
Depreciation and amortization | |
| 62,758 | | |
| 24,595 | | |
| 8,718 | | |
| 53,512 | | |
| 1,866 | | |
| 151,449 | |
Operating earnings (loss) | |
| 121,342 | | |
| (23,411 | ) | |
| 36,727 | | |
| 61,599 | | |
| (27,952 | ) | |
| 168,305 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
2022 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 2,077,467 | | |
$ | 486,794 | | |
$ | 414,829 | | |
$ | 257,595 | | |
$ | 397 | | |
$ | 3,237,082 | |
Depreciation and amortization | |
| 66,949 | | |
| 19,989 | | |
| 6,217 | | |
| 30,346 | | |
| 2,378 | | |
| 125,879 | |
Operating earnings (loss) | |
| 202,360 | | |
| (20,473 | ) | |
| 43,234 | | |
| 55,886 | | |
| (52,293 | ) | |
| 228,714 | |
Geographic information
Revenues in each geographic region are reported
by customer locations except for Investment Management where revenues are reported by the location of the fund management.
GEOGRAPHIC INFORMATION | |
| | |
| | |
| |
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
United States | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 571,354 | | |
$ | 652,370 | | |
$ | 1,728,995 | | |
$ | 1,902,830 | |
Total long-lived assets | |
| | | |
| | | |
| 2,308,705 | | |
| 1,787,694 | |
| |
| | | |
| | | |
| | | |
| | |
Canada | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 110,211 | | |
$ | 104,051 | | |
$ | 317,753 | | |
$ | 350,320 | |
Total long-lived assets | |
| | | |
| | | |
| 80,238 | | |
| 76,170 | |
| |
| | | |
| | | |
| | | |
| | |
Euro currency countries | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 89,509 | | |
$ | 95,430 | | |
$ | 273,937 | | |
$ | 283,392 | |
Total long-lived assets | |
| | | |
| | | |
| 355,774 | | |
| 334,633 | |
| |
| | | |
| | | |
| | | |
| | |
Australia | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 67,443 | | |
$ | 70,210 | | |
$ | 195,105 | | |
$ | 185,682 | |
Total long-lived assets | |
| | | |
| | | |
| 111,720 | | |
| 109,133 | |
| |
| | | |
| | | |
| | | |
| | |
United Kingdom | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 68,024 | | |
$ | 59,599 | | |
$ | 184,356 | | |
$ | 144,809 | |
Total long-lived assets | |
| | | |
| | | |
| 520,920 | | |
| 523,486 | |
| |
| | | |
| | | |
| | | |
| | |
China | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 18,847 | | |
$ | 21,957 | | |
$ | 57,954 | | |
$ | 67,497 | |
Total long-lived assets | |
| | | |
| | | |
| 8,552 | | |
| 7,835 | |
| |
| | | |
| | | |
| | | |
| | |
Other | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 130,644 | | |
$ | 104,707 | | |
$ | 341,873 | | |
$ | 302,552 | |
Total long-lived assets | |
| | | |
| | | |
| 275,965 | | |
| 136,126 | |
| |
| | | |
| | | |
| | | |
| | |
Consolidated | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 1,056,032 | | |
$ | 1,108,324 | | |
$ | 3,099,973 | | |
$ | 3,237,082 | |
Total long-lived assets | |
| | | |
| | | |
| 3,661,874 | | |
| 2,975,077 | |
COLLIERS INTERNATIONAL GROUP INC.
Management’s discussion and analysis
For the nine months ended September 30, 2023
(in US dollars)
November 8, 2023
The following management’s discussion and analysis
(“MD&A”) should be read together with the unaudited consolidated financial statements and the accompanying notes (the
“Consolidated Financial Statements”) of Colliers International Group Inc. (“we,” “us,” “our,”
the “Company” or “Colliers”) for the three and nine months ended September 30, 2023 and the Company’s audited
consolidated financial statements and MD&A for the year ended December 31, 2022. The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United States (“GAAP”). All financial information herein
is presented in United States dollars.
The Company has prepared this MD&A with reference
to National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators (the “CSA”).
Under the U.S./Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordance with the
disclosure requirements of Canada, which requirements are different from those of the United States. This MD&A provides information
for the three and nine months ended September 30, 2023 and up to and including November 8, 2023.
Additional information about the Company can be found
on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
This MD&A includes references to “local currency
revenue growth rate”, “internal revenue growth rate”, “adjusted EBITDA”, “adjusted EPS”, “free
cash flow” and “assets under management (“AUM”)”, which are financial measures that are not calculated in
accordance with GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures, see “Reconciliation
of non-GAAP financial measures”.
Consolidated review
Our consolidated revenues for the three months ended September
30, 2023 were $1.06 billion, a decrease of 5% versus the prior year quarter (6% in local currency). The decline was attributable to lower
market driven activity in Capital Markets and, to a lesser extent, Leasing partly offset by robust growth in Investment Management and
Outsourcing & Advisory revenues. The GAAP diluted earnings per share were $0.53 as compared to $0.27 in the prior year quarter. Adjusted
earnings per share, which exclude acquisition-related costs, non-controlling interest redemption increment, loss on disposal of operations
and amortization of intangible assets (see “Reconciliation of non-GAAP financial measures” below) were $1.19 relative to $1.41
in the prior year quarter. The decrease was attributable to (i) lower revenues; (ii) higher interest expense from increased debt levels
resulting from recent acquisition activity and higher floating interest rates as well as (iii) higher non-controlling interest share of
earnings of acquired businesses. GAAP diluted net earnings per share and adjusted net earnings per share for the three months ended September
30, 2023 were favourably impacted approximately $0.02 and $0.02, respectively, by changes in foreign exchange rates.
In April 2023, the Company acquired Greenstone Group Limited,
a project management and property advisory firm in New Zealand. The business rebranded as “Colliers Project Leaders” and will
integrate into our New Zealand operations.
In May 2023, the Company acquired Craig & Rhodes Pty
Limited, a multi-discipline engineering, design and survey firm in Australia. The business rebranded as “Colliers Engineering &
Design” and will integrate into our existing operations in Australia.
In May 2023, the Company also acquired HILGARTWILSON, LLC,
an Arizona-based engineering, planning and survey firm. The business will rebrand and be integrated into our US Colliers Engineering &
Design operations.
| |
Three months ended | |
Change | |
Change | |
Nine months ended | |
Change | |
Change |
(in thousands of US$) | |
September 30 | |
in US$ | |
in LC | |
September 30 | |
in US$ | |
in LC |
(LC = local currency) | |
2023 | |
2022 | |
% | |
% | |
2023 | |
2022 | |
% | |
% |
| |
| |
| |
| |
| |
| |
| |
| |
|
Outsourcing & Advisory | |
$ | 527,241 | | |
| 462,834 | | |
| 14 | % | |
| 12 | % | |
$ | 1,501,749 | | |
| 1,353,244 | | |
| 11 | % | |
| 12 | % |
Investment Management (1) | |
| 118,717 | | |
| 96,070 | | |
| 24 | % | |
| 23 | % | |
| 358,323 | | |
| 257,574 | | |
| 39 | % | |
| 39 | % |
Leasing | |
| 249,781 | | |
| 273,714 | | |
| -9 | % | |
| -9 | % | |
| 744,852 | | |
| 788,382 | | |
| -6 | % | |
| -5 | % |
Capital Markets | |
| 160,293 | | |
| 275,706 | | |
| -42 | % | |
| -42 | % | |
| 495,049 | | |
| 837,882 | | |
| -41 | % | |
| -40 | % |
Total revenues | |
$ | 1,056,032 | | |
| 1,108,324 | | |
| -5 | % | |
| -6 | % | |
$ | 3,099,973 | | |
| 3,237,082 | | |
| -4 | % | |
| -4 | % |
(1) Investment Management local currency revenues, excluding pass-through carried interest, were up 22% and 55% for the three and nine months ended September 30, 2023, respectively.
Results of operations – three
months ended September 30, 2023
For the three months ended September 30, 2023, revenues
were $1.06 billion, 5% lower than the comparable prior year quarter (6% in local currency) on a market driven decline in Capital Markets
and, to a lesser extent, Leasing, partly offset by robust growth in Investment Management and Outsourcing & Advisory. Internally generated
revenues declined 10% while acquisitions contributed 4% to local currency revenue growth.
Operating earnings for the third quarter were $70.9 million
versus $84.0 million in the prior year quarter. The operating earnings margin was 6.7% as compared to 7.6% in the prior year quarter,
primarily attributable to a decline in higher margin transactional revenues as well as higher amortization expense related to recent acquisitions.
Adjusted EBITDA (see “Reconciliation of non-GAAP financial measures” below) of $144.9 million was flat versus $145.1 million
reported in the prior year quarter with the decline in transactional revenues offset by (i) higher Investment Management and Outsourcing
& Advisory revenues as well as (ii) the favourable impact of recent acquisitions. The Adjusted EBITDA margin was 13.7% in the quarter
as compared to 13.1% in the prior year quarter.
Depreciation expense was $13.7 million relative to $12.4
million in the prior year quarter with the increase attributable to increased investments in office leaseholds and the impact of recent
business acquisitions.
Amortization expense was $37.5 million, versus $32.8 million
recorded in the prior year quarter with the increase attributable mainly to intangible assets acquired with recent business acquisitions.
Net interest expense was $24.2 million, versus $13.5 million
recorded in the prior year quarter. The increase in interest expense was attributable to higher usage of the Revolving Credit Facility
and higher reference rates relative to the prior year quarter on our floating rate debt. The average interest rate on debt during the
period was 5.1%, relative to 3.8% in the prior year quarter.
Consolidated income tax expense for the quarter was $18.1
million, relative to $25.1 million in the prior year quarter. The current quarter’s effective tax rate of 38.1% versus 36.0% in
the prior year quarter. Both the current and prior year period tax rate was impacted by the outside basis difference in an investment
in the United Kingdom on which a deferred tax benefit could not be recognized.
Net earnings for the quarter were $29.4 million versus
$44.5 million in the prior year quarter.
Revenues in the Americas region totalled $619.3 million
down 11% (11% in local currency) versus $695.1 million in the comparative prior year quarter. The decline was attributable to lower market
driven transaction activity, primarily in Capital Markets and, to a lesser extent, Leasing. Outsourcing & Advisory revenues were up,
driven by internal growth in Engineering & Design, Project Management and Property Management as well as the favourable impact of
recent acquisitions. Adjusted EBITDA was $68.6 million, up 3% (2% in local currency) relative to the prior year quarter based upon service
mix, cost controls and the favourable impact from recent acquisitions. GAAP operating earnings were $42.0 million, relative to $59.9 million
in the prior year quarter and were primarily impacted by changes in non-cash gains attributable to mortgage servicing rights.
Revenues in the EMEA region totalled $174.0 million, up
6% (down 2% in local currency) compared to $164.2 million in the prior year quarter. The local currency decline was primarily attributable
to a significantly lower Capital Markets activity, particularly in Germany and the Nordics, mostly offset by higher Outsourcing &
Advisory revenues (including recent acquisitions). Foreign exchange tailwinds favourably impacted revenues by 8%. Adjusted EBITDA was
$7.6 million, down 43% (51% in local currency) compared to $13.3 million in the prior year quarter, attributable to the reduction in higher-margin
Capital Markets revenues across the region. The GAAP operating earnings were $6.7 million compared to $6.1 million in the prior year quarter.
Revenues in the Asia Pacific region totalled $143.9 million
compared to $152.8 million in the prior year quarter, down 6% (3% in local currency), driven by lower Capital Markets activity, partly
offset by recent acquisitions. Foreign exchange headwinds impacted revenues by 3%. Adjusted EBITDA was $15.8 million, down 25% (22% in
local currency) primarily on changes in service mix. GAAP operating earnings were $12.1 million, versus $17.5 million in the prior year
quarter.
Investment Management revenues were $118.7 million compared
to $96.1 million in the prior year quarter, up 24% (23% in local currency). Passthrough revenues (from historical carried interest) were
$0.6 million versus nil in the prior year quarter. Excluding the impact of carried interest, revenue was up 23% (22% in local currency)
driven by both acquisitions and management fee growth from increased assets under management (“AUM”). Adjusted EBITDA was
$55.2 million, up 50% (49% in local currency) compared to the prior year quarter. GAAP operating earnings were $20.4 million in the quarter,
versus $19.5 million in the prior year quarter. AUM were $98.5 billion as of September 30, 2023 compared to $97.7 billion as of December
31, 2022.
Unallocated global corporate costs as reported in Adjusted
EBITDA were $2.3 million in the third quarter, relative to earnings of $7.0 million in the prior year quarter, primarily attributable
to foreign exchange gains in the prior year period. The corporate GAAP operating loss for the quarter was $10.3 million relative to $19.0
million in the third quarter of 2022.
Results of operations – nine months
ended September 30, 2023
For the nine months ended September 30, 2023, revenues
were $3.1 billion, down 4% compared to the prior year (4% in local currency). Internally generated revenues were down 10% on significantly
lower Capital Markets activity, consistent with overall market conditions. Investment Management and Outsourcing & Advisory delivered
solid growth. Acquisitions contributed 6% to local currency revenue growth versus the prior year period.
Operating earnings for the nine months ended
September 30, 2023 were $168.3 million relative to $228.7 million in the prior year period. The operating
earnings margin was 5.4% versus 7.1% in the prior year period. The decrease in margin was attributable to (i) service mix, which was impacted
by a lower proportion of higher margin transactional revenues; and (ii) an $11.7 million gain on termination of a lease in the Americas
in the prior year period. Adjusted EBITDA (see “Reconciliation of non-GAAP financial measures”
below) was $396.6 million, down 7% versus $427.8 million in the prior year period. The Adjusted EBITDA margin was 12.8% compared to 13.2%
in the prior year period.
Depreciation expense was $39.8 million relative to $36.2
million in the prior year period, with the increase attributable to the impact of recent acquisitions and increased investments in office
leaseholds.
Amortization expense was $111.7 million relative to $89.6
million in the prior year period, with the increase attributable mainly to intangible assets recognized in connection with recent business
acquisitions.
Net interest expense was $71.7 million compared to $29.4
million in the prior year period. The average interest rate on our debt during the period was 4.7%, versus 3.5% in the prior year period.
Consolidated income tax expense for the nine
months ended September 30, 2023 was $38.1 million, relative to $70.0 million in the prior year period. The
effective tax rate was 37.5% compared to 34.6% in the prior year period. The current period tax rate was impacted by the outside basis
difference in an investment in the United Kingdom on which a deferred tax benefit could not be recognized.
Net earnings for the nine months ended September 30, 2023
were $63.5 million compared to $132.6 million in the prior year period.
Revenues in the Americas region totalled $1.83 billion
for the nine months ended September 30, 2023 compared to $2.08 billion in the prior year period, down 12% (11% in local currency). The
revenue decline was largely driven by a significant market driven decline in Capital Markets revenue, and, to a lesser extent, Leasing.
The decline was partly offset by internal growth in Outsourcing & Advisory revenues, primarily from Engineering & Design and Project
Management and the favourable impact of recent acquisitions. Adjusted EBITDA was $192.1 million, down 23% (23% in local currency) from
$249.4 million in the prior year, impacted by (i) changes in service mix; (ii) benefit from cost control actions, and (iii) an $11.7 million
gain on the termination of a lease which favourably impacted the prior year period. GAAP operating earnings were $121.3 million, versus
$202.4 million in 2022.
EMEA region revenues were $491.2 million for the nine months
ended September 30, 2023 compared to $486.8 million in the prior year period, up 1% (down 1% in local currency). Local currency revenue
mix shifted significantly, with lower Capital Markets and Leasing revenues due to difficult macroeconomic conditions, almost fully offset
by higher Outsourcing & Advisory revenues (including recent acquisitions). Foreign exchange tailwinds positively impacted revenues
by 2%. Adjusted EBITDA was $2.6 million, relative to $32.6 million in the prior year period on significantly lower higher-margin Capital
Markets revenues. The GAAP operating loss was $23.4 million compared to $20.5 million in the prior year period.
The Asia Pacific region generated revenues of $417.9 million
for the nine months ended September 30, 2023 compared to $414.8 million in the prior year period, up 1% (6% in local currency). Both Leasing
and Outsourcing & Advisory revenues (including recent acquisitions) were up, partly offset by continued decline in Capital Markets
activity consistent with the market conditions in the region. Foreign exchange headwinds impacted revenues by 5%. Adjusted EBITDA was
$46.9 million, down 8% (3% in local currency) versus $50.8 million in the prior year period. GAAP operating earnings were $36.7 million,
versus $43.2 million in the prior year period.
Investment Management revenues were $358.3 million compared
to $257.6 million in the prior year period, up 39% (39% in local currency). Pass-through carried interest revenues from historical carried
interest were $0.6 million in the current period, versus $26.6 million in the prior year period. Excluding the impact of pass-through
revenue, revenues were up 55% (55% in local currency) and were positively impacted by (i) acquisitions and (ii) fundraising across all
investment strategies which led to increased management fees. Adjusted EBITDA was $160.1 million, up 72% (72% in local currency), relative
to $92.9 million in the prior year period. GAAP operating earnings were $61.6 million, versus $55.9 million in the prior year period.
Unallocated global corporate costs as reported in Adjusted
EBITDA were $5.1 million relative to earnings of $2.1 million in the prior year period, primarily related to foreign exchange gains in
the prior year period. The corporate GAAP operating loss was $28.0 million, relative to $52.3 million in the prior year period.
Summary of quarterly results
The following table sets forth our quarterly consolidated
results of operations data. The information in the table below has been derived from interim consolidated financial statements that, in
management’s opinion, have been prepared on a consistent basis and include all adjustments necessary for a fair presentation of
information. The information below is not necessarily indicative of results for any future quarter.
Summary of quarterly results - years ended December 31, 2023, 2022 and 2021
(in thousands of US$, except per share
amounts)
| |
| Q1 | | |
| Q2 | | |
| Q3 | | |
| Q4 | |
| |
| | | |
| | | |
| | | |
| | |
Year ended December 31, 2023 | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 965,903 | | |
$ | 1,078,038 | | |
$ | 1,056,032 | | |
| | |
Operating earnings | |
| 22,144 | | |
| 75,262 | | |
| 70,899 | | |
| | |
Net earnings (loss) | |
| (907 | ) | |
| 35,001 | | |
| 29,376 | | |
| | |
Basic net earnings (loss) per common share | |
| (0.47 | ) | |
| (0.15 | ) | |
| 0.53 | | |
| | |
Diluted net earnings (loss) per common share | |
| (0.47 | ) | |
| (0.16 | ) | |
| 0.53 | | |
| | |
| |
| | | |
| | | |
| | | |
| | |
Year ended December 31, 2022 | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 1,000,912 | | |
$ | 1,127,846 | | |
$ | 1,108,324 | | |
$ | 1,222,405 | |
Operating earnings | |
| 40,834 | | |
| 103,850 | | |
| 84,030 | | |
| 103,782 | |
Net earnings | |
| 21,317 | | |
| 66,731 | | |
| 44,524 | | |
| 61,972 | |
Basic net earnings (loss) per common share | |
| (0.42 | ) | |
| 0.70 | | |
| 0.28 | | |
| 0.52 | |
Diluted net earnings (loss) per common share | |
| (0.42 | ) | |
| 0.67 | | |
| 0.27 | | |
| 0.51 | |
| |
| | | |
| | | |
| | | |
| | |
Year ended December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
Revenues | |
$ | 774,914 | | |
$ | 945,994 | | |
$ | 1,022,756 | | |
$ | 1,345,465 | |
Operating earnings (loss) 1 | |
| 39,956 | | |
| (385,777 | ) | |
| 75,966 | | |
| 138,354 | |
Net earnings (loss) | |
| 24,807 | | |
| (412,601 | ) | |
| 50,496 | | |
| 99,741 | |
Basic net earnings (loss) per common share | |
| 0.11 | | |
| (10.53 | ) | |
| 0.41 | | |
| 0.98 | |
Diluted net earnings (loss) per common share | |
| 0.11 | | |
| (10.53 | ) | |
| 0.40 | | |
| 0.92 | |
| |
| | | |
| | | |
| | | |
| | |
Other data 2 | |
| | | |
| | | |
| | | |
| | |
Adjusted EBITDA - 2023 | |
$ | 104,623 | | |
$ | 147,080 | | |
$ | 144,912 | | |
| | |
Adjusted EBITDA - 2022 | |
| 121,461 | | |
| 161,313 | | |
| 145,065 | | |
$ | 202,686 | |
Adjusted EBITDA - 2021 | |
| 92,129 | | |
| 136,558 | | |
| 123,641 | | |
| 192,010 | |
Adjusted EPS - 2023 | |
| 0.86 | | |
| 1.31 | | |
| 1.19 | | |
| | |
Adjusted EPS - 2022 | |
| 1.44 | | |
| 1.84 | | |
| 1.41 | | |
| 2.31 | |
Adjusted EPS - 2021 | |
| 1.04 | | |
| 1.58 | | |
| 1.27 | | |
| 2.25 | |
1 Operating loss for Q2 2021 reflects the settlement of the Long Term Incentive Arrangement with the Company's Chairman and Chief Executive Officer, which resulted in a charge of $471,928
2 See "Reconciliation of non-GAAP financial measures"
Seasonality and quarterly fluctuations
The Company historically generates peak revenues and earnings
in the month of December followed by a low in January and February as a result of the timing of closings on Capital Markets transactions.
Revenues and earnings during the balance of the year are relatively even. Capital Markets operations comprised 24% of consolidated annual
revenues for 2022. Variations can be caused by business acquisitions which alter the consolidated service mix.
Outlook for 2023
Since the Company’s previous report, further declines
in transaction velocity have occurred and accordingly the outlook has been revised to adapt to this more challenging environment. For
the seasonally strongest fourth quarter, the Company now expects Capital Markets and Leasing revenues to be down relative to the prior
year quarter. The Company continues to expect robust growth (including the impact of recent acquisitions) in its high value recurring
service lines, Investment Management and Outsourcing & Advisory. The Investment Management fundraising environment is also expected
to remain challenging through the remainder of the year but should improve in 2024.
The favourable impact of cost control measures across the
Company is expected to continue, mitigating lower transaction activity. Adjusted EPS is expected to be impacted by increased interest
expense as well as a larger proportion of earnings growth generated from non-wholly owned operations.
The outlook for 2023, including the impact of acquisitions
completed to date, is as follows:
| |
| |
Outlook for 2023 |
Measure | |
2022 | |
Revised | |
Prior |
Revenue | |
$4.5 billion | |
$4.3 billion - $4.4 billion | |
$4.4 billion - $4.6 billion |
AEBITDA | |
$630.5 million | |
$580 million - $610 million | |
$670 million - $720 million |
AEPS | |
$6.99 | |
$5.10 - $5.50 | |
$6.70 - $7.50 |
The financial outlook is based on the Company’s best
available information as of the date of this MD&A, and remains subject to change based on, but not limited to, numerous macroeconomic,
health, social, geopolitical and related factors.
Liquidity and capital resources
Net cash provided by operating activities for the nine
months ended September 30, 2023 was $8.6 million, versus usage of $171.5 million used in the prior year period. The increase in cash from
operations was driven primarily by lower working capital usage as well as lower contingent acquisition consideration paid. We believe
that cash from operations and other existing resources, including our $1.75 billion multi-currency Revolving Credit Facility, will continue
to be adequate to satisfy the ongoing working capital needs of the Company.
For the nine months ended September 30, 2023, capital expenditures
were $60.4 million (September 30, 2022 - $41.8 million). Capital expenditures for the year ending December 31, 2023 are expected to be
between $80-$85 million, with the increase primarily attributable to investments in office space in major markets, some of which were
deferred from 2022 and are expected to be funded by cash on hand.
Net indebtedness is considered a supplementary financial
measure and as of September 30, 2023 was $1.47 billion, versus $1.27 billion as of December 31, 2022. Net indebtedness is calculated as
the current and non-current portion of long-term debt (excluding the Convertible Notes and warehouse credit facilities, in accordance
with our debt agreements) less cash and cash equivalents. As of September 30, 2023, the Company’s financial leverage ratio expressed
in terms of net debt to pro forma Adjusted EBITDA, as defined in our debt agreements, was 2.4x (1.8x as of December 31, 2022), relative
to a maximum of 3.5x permitted under our debt agreements. We were in compliance with the covenants contained in our debt agreements as
of September 30, 2023 and, based on our outlook for 2023, we expect to remain in compliance with these covenants.
The Company’s Revolving Credit Facility matures in
May 2027. The Revolving Credit Facility is sustainability-linked and includes pricing adjustments tied to achievements of performance
targets over time aligned with Colliers’ Elevate the Built Environment framework available on corporate.colliers.com. These targets
include: i) reducing greenhouse gas emissions consistent with the Science-Based Targets initiative (“SBTi”); ii) increasing
female representation in management roles and iii) ensuring Colliers-occupied offices obtain the WELL Health-Safety certification. We
met our annual sustainability targets for 2022, and as of July 27, 2023, we achieved a full five basis point reduction in the borrowing
cost on our Revolving Credit Facility.
In April 2023 the Company increased its borrowing capacity
under its Revolving Credit Facility by $250 million to $1.75 billion. As of September 30, 2023, the Company had $603.0 million of unused
credit under the Revolving Credit Facility.
On April 4, 2023, the Company issued a notice of redemption
to all holders of its Convertible Notes due 2025 (“Convertible Notes”). The applicable redemption date was June 1, 2023 (the
“Redemption Date”), and the Company, in accordance with the terms and conditions of the indenture governing the Convertible
Notes, satisfied its obligations in connection with any redeemed Convertible Notes by issuing an amount of Subordinate Voting Shares per
US$1,000 of redeemed principal amount that is calculated based on the average of daily volume-weighted average trading prices of the Shares
for the thirty trading day period ending on May 24, 2023. Substantially all of the Convertible Notes were converted into Subordinate Voting
Shares, prior to the Redemption Date, at an average conversion rate of 17.7607 shares per US$1,000 of principal amount, which is equivalent
to a conversion price of approximately $56.30 per share. All remaining Convertible Notes were redeemed on June 1, 2023.
Colliers Mortgage utilizes warehouse credit facilities
for the purpose of funding warehouse receivables. Warehouse receivables represent mortgage loans receivable, the majority of which are
offset by borrowings under warehouse credit facilities which fund loans that financial institutions have committed to purchase. The warehouse
credit facilities are excluded from the financial leverage calculations under our debt agreements.
On September 28, 2023, the Company expanded the committed
availability of its account receivable facility (“AR Facility”) (which includes selected US and Canadian trade accounts receivable)
with two third-party financial institutions to $200 million from $175 million, with a term extending to October 24, 2024. The AR Facility
is recorded as a sale of accounts receivable, and accordingly sold receivables are derecognized from the consolidated balance sheet. The
AR Facility results in a decrease to our borrowing costs. As of September 30, 2023, the Company’s draw under the AR Facility was
$198.0 million.
During 2022, the Company acquired certain real estate assets
in the US in connection with the establishment of new Investment Management funds. The real estate assets, as well as corresponding liabilities,
were transferred to the respective funds during the first quarter of 2023, without gain or loss. Also, in the first and third quarters
of 2023, the Company acquired real estate assets located in Europe. The Company recorded the corresponding assets and liabilities on the
consolidated balance sheet as of September 30, 2023. We expect to enter into similar transactions from time to time in the future to facilitate
the formation of new Investment Management funds.
The Company pays semi-annual dividends in cash after the
end of the second and fourth quarters to shareholders of record on the last business day of the quarter. The Company’s policy is
to pay dividends on its common shares in the future, subject to the discretion of our Board of Directors. On May 16, 2023, the Company’s
Board of Directors declared a semi-annual dividend of $0.15 per share to shareholders of record on June 30, 2023, paid on July 14, 2023.
Total common share dividends paid by the Company during the nine months ended September 30, 2023 were $13.5 million.
During the nine months ended September 30, 2023, the Company
invested cash in acquisitions as follows: $61.3 million in acquisitions, $26.6 million in purchases of redeemable non-controlling interest
and $53.0 million in contingent consideration payments. All acquisitions during the nine-month period were funded from borrowings on the
Revolving Credit Facility and cash on hand (See Note 4 in our consolidated financial statements). The Company expects to fund any future
acquisitions from borrowings on the Revolving Credit Facility and cash on hand.
As at September 30, 2023, in relation to acquisitions completed
during the past three years, we have outstanding contingent consideration, assuming all contingencies are satisfied and payment is due
in full, totalling $410.5 million (December 31, 2022 - $422.0 million). Unless it contains an element of compensation, contingent consideration
is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as at September 30, 2023 was
$60.0 million (December 31, 2022 - $91.2 million). Contingent consideration with a compensatory element is revalued at each reporting
period and recognized on a straight-line basis over the term of the contingent consideration arrangement. The liability recorded on the
consolidated balance sheet for the compensatory element of contingent consideration arrangements as at September 30, 2023 was $87.8 million
(December 31, 2022 - $61.9 million). The contingent consideration is based on achieving specified earnings levels and is paid or payable
after the end of the relevant contingency periods, which extend to September 2028. We estimate that approximately 86% of the contingent
consideration outstanding as of September 30, 2023 will ultimately be paid.
The following table summarizes our contractual obligations
as at September 30, 2023:
Contractual obligations | |
Payments due by period | |
(in thousands of US$) | |
| | |
Less than | | |
| | |
| | |
After | |
| |
Total | | |
1 year | | |
1-3 years | | |
4-5 years | | |
5 years | |
| |
| | |
| | |
| | |
| | |
| |
Long-term debt | |
$ | 1,641,128 | | |
$ | 3,246 | | |
$ | 335 | | |
$ | 1,356,203 | | |
$ | 281,344 | |
Warehouse credit facilities | |
| 48,309 | | |
| 48,309 | | |
| - | | |
| - | | |
| - | |
Interest on long-term debt (1) | |
| 75,830 | | |
| 11,748 | | |
| 23,026 | | |
| 21,326 | | |
| 19,730 | |
Finance lease obligations | |
| 1,498 | | |
| 730 | | |
| 738 | | |
| 30 | | |
| - | |
Contingent acquisition consideration(2) | |
| 59,999 | | |
| 16,961 | | |
| 35,891 | | |
| 7,030 | | |
| 117 | |
Operating leases obligations | |
| 558,735 | | |
| 108,721 | | |
| 169,554 | | |
| 108,623 | | |
| 171,837 | |
Purchase commitments | |
| 67,476 | | |
| 29,975 | | |
| 25,412 | | |
| 2,942 | | |
| 9,147 | |
Co-investment Commitments | |
| 45,253 | | |
| 45,253 | | |
| - | | |
| - | | |
| - | |
Total contractual obligations | |
$ | 2,498,228 | | |
$ | 264,943 | | |
$ | 254,956 | | |
$ | 1,496,154 | | |
$ | 482,175 | |
| (1) | Figures do not include interest payments for borrowings under the Revolving Credit Facility. Assuming the Revolving Credit Facility
is held until maturity, using current interest rate, we estimate that we will make $287.8 million of interest payments, $78.7 million
of which will be made in the next 12 months. |
| (2) | Estimated fair value as at September 30, 2023. |
At September 30, 2023, we had commercial
commitments totaling $12.5 million comprised of letters of credit outstanding due to expire within one year.
Redeemable non-controlling interests
In most operations where managers or
employees are also non-controlling owners, the Company is party to shareholders’ agreements. These agreements allow us to “call”
the redeemable non-controlling interests (“RNCI”) at a value determined with the use of a formula price, which is in most
cases equal to a multiple of trailing two-year average earnings, less debt. Non-controlling owners may also “put” their interest
to the Company at the same price, with certain limitations including (i) the inability to “put” more than 25% to 50% of their
holdings in any twelve-month period and (ii) the inability to “put” any holdings for at least one year after the date of our
initial acquisition of the business or the date the non-controlling shareholder acquired their interest, as the case may be.
The total value of the RNCI (the “redemption
amount”), as calculated in accordance with shareholders’ agreements, was $969.9 million as of September 30, 2023 (December
31, 2022 - $1.03 billion). The amount recorded on our balance sheet under the caption “redeemable non-controlling interests”
is the greater of (i) the redemption amount (as above) or (ii) the amount initially recorded as RNCI at the date of inception of the minority
equity position. As at September 30, 2023, the RNCI recorded on the balance sheet was $1.07 billion (December 31, 2022 - $1.08 billion).
The purchase prices of the RNCI may be paid in cash or in Subordinate Voting Shares of Colliers. If all RNCI were redeemed in cash, the
pro forma estimated accretion to diluted net earnings per share for the nine months ended September 30, 2023 would be $0.91, and the accretion
to adjusted EPS would be $0.32.
Critical accounting estimates
Critical accounting estimates are those
that we deem to be most important to the portrayal of our financial condition and results of operations, and that require management’s
most difficult, subjective or complex judgments due to the need to make estimates about the effects of matters that are inherently uncertain.
We have identified eight critical accounting estimates, which are discussed below.
| 1. | Revenue recognition. We earn revenues from brokerage transaction commissions, advisory fees, debt
finance fees, property management fees, project management fees, engineering and design fees, loan servicing fees and investment management
fees. Some of the contractual terms related to the process of earning revenue from these sources, including potentially contingent events,
can be complex and may require us to make judgments about the timing of when we should recognize revenue and whether revenue should be
reported on a gross basis or net basis. Changes in judgments could result in a change in the period in which revenues are reported, or
in the amounts of revenue and cost of revenue reported. |
| 2. | Goodwill. Goodwill impairment testing involves assessing whether events have occurred that would
indicate potential impairment and making estimates concerning the fair values of reporting units and then comparing the fair value to
the carrying amount of each unit. The determination of what constitutes a reporting unit requires significant management judgment. We
have four reporting units, consistent with our four operating segments. Goodwill is attributed to the reporting units at the time of acquisition.
Estimates of fair value can be impacted by changes in the business environment, prolonged economic downturns or declines in the market
value of the Company’s own shares and therefore require significant management judgment in their determination. When events have
occurred that would suggest a potential decrease in fair value, the determination of fair value is calculated with reference to a discounted
cash flow model which requires management to make certain estimates. The most sensitive estimates are estimated future cash flows and
the discount rate applied to future cash flows. Changes in these assumptions could result in a materially different fair value. |
| 3. | Business combinations. The determination of fair values of assets acquired and liabilities assumed
in business combinations requires the use of estimates and management judgment, particularly in determining fair values of intangible
assets acquired. For example, if different assumptions were used regarding the profitability and expected attrition rates of acquired
customer relationships or forecasted committed capital and assets under management related to asset management contracts, different amounts
of intangible assets and related amortization could be reported. |
| 4. | Contingent acquisition consideration. Contingent consideration is required to be measured at fair
value at the acquisition date and at each balance sheet date until the contingency expires or is settled. The fair value at the acquisition
date is a component of the purchase price; subsequent changes in fair value are reflected in earnings. Most acquisitions made by us have
a contingent consideration feature, which is usually based on the acquired entity’s profitability (measured in terms of adjusted
EBITDA) during a one to five year period after the acquisition date. Significant estimates are required to measure the fair value of contingent
consideration, including forecasting profits for the contingency period and the selection of an appropriate discount rate. |
| 5. | Mortgage servicing rights (“MSRs”). MSRs, or the rights to service mortgage loans for
others, result from the sale or securitization of loans originated by the Company and are recognized as intangible assets on the consolidated
balance sheet. The Company initially recognizes MSRs based on the fair value of these rights on the date the loans are sold. Subsequent
to initial recognition, MSRs are amortized and carried at the lower of amortized cost or fair value. They are amortized in proportion
to and over the estimated period that net servicing income is expected to be received based on projections and timing of estimated future
net cash flows. |
| 6. | Allowance for credit loss reserves. Colliers Mortgage is obligated to share in losses, if any,
related to mortgages originated under the Fannie Mae Delegated Underwriting and Servicing (“DUS”) Program. These obligations
expose the Company to credit risk on mortgage loans for which the Company is providing underwriting, servicing, or other services under
the DUS Program. Net losses on defaulted loans are shared with Fannie Mae based upon established loss-sharing ratios, and typically, the
Company is subject to sharing up to one-third of incurred losses on loans originated under the DUS Program. As of September 30, 2023,
the Company has funded and sold loans subject to such loss sharing obligations with an aggregate unpaid principal balance of approximately
$4.9 billion. As at September 30, 2023, the loss reserve was $13.7 million (December 31, 2022 - $14.5 million) and was included within
Other liabilities on the consolidated balance sheet. |
Reconciliation of non-GAAP financial measures
In this MD&A, we make reference to certain financial
measures that are not calculated in accordance with GAAP.
Adjusted EBITDA is defined as net earnings, adjusted to
exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) loss on disposal of operations; (v) depreciation and
amortization, including amortization of mortgage servicing rights (“MSRs”); (vi) gains attributable to MSRs; (vii) acquisition-related
items (including contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation
expense and transaction costs); (viii) restructuring costs and (ix) stock-based compensation expense. We use Adjusted EBITDA to evaluate
our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally,
we use this measure in conjunction with discounted cash flow models to determine the Company’s overall enterprise valuation and
to evaluate acquisition targets. We present Adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors
as a reasonable indicator of operating performance because of the low capital intensity of the Company’s service operations. We
believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure
is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for
operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating
adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A
reconciliation of net earnings to adjusted EBITDA appears below.
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
(in thousands of US$) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net earnings | |
$ | 29,376 | | |
$ | 44,524 | | |
$ | 63,470 | | |
$ | 132,572 | |
Income tax | |
| 18,096 | | |
| 25,097 | | |
| 38,112 | | |
| 70,034 | |
Other income, including equity earnings from non-consolidated investments | |
| (801 | ) | |
| 874 | | |
| (5,007 | ) | |
| (3,316 | ) |
Interest expense, net | |
| 24,228 | | |
| 13,535 | | |
| 71,730 | | |
| 29,424 | |
Operating earnings | |
| 70,899 | | |
| 84,030 | | |
| 168,305 | | |
| 228,714 | |
Loss on disposal of operations | |
| - | | |
| 318 | | |
| 2,282 | | |
| 27,358 | |
Depreciation and amortization | |
| 51,163 | | |
| 45,142 | | |
| 151,449 | | |
| 125,879 | |
Gains attributable to MSRs | |
| (3,199 | ) | |
| (16,391 | ) | |
| (12,286 | ) | |
| (24,214 | ) |
Equity earnings from non-consolidated investments | |
| 685 | | |
| 755 | | |
| 4,371 | | |
| 4,821 | |
Acquisition-related items | |
| 15,366 | | |
| 26,290 | | |
| 53,502 | | |
| 50,738 | |
Restructuring costs | |
| 4,485 | | |
| 191 | | |
| 12,266 | | |
| 462 | |
Stock-based compensation expense | |
| 5,513 | | |
| 4,730 | | |
| 16,726 | | |
| 14,081 | |
Adjusted EBITDA | |
$ | 144,912 | | |
$ | 145,065 | | |
$ | 396,615 | | |
$ | 427,839 | |
Adjusted EPS is defined as diluted net earnings per share
as calculated under the “if-converted” method, adjusted for the effect, after income tax, of: (i) the non-controlling interest
redemption increment; (ii) loss on disposal of operations; (iii) amortization expense related to intangible assets recognized in connection
with acquisitions and MSRs; (iv) gains attributable to MSRs; (v) acquisition-related items; (vi) restructuring costs and (vii) stock-based
compensation expense. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying
operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted EPS is not a
recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share
from continuing operations, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other
issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted
net earnings and of diluted net earnings per share to adjusted EPS appears below.
Similar to GAAP diluted EPS, Adjusted EPS is calculated
using the “if-converted” method of calculating earnings per share in relation to the Convertible Notes, which were issued
on May 19, 2020 and fully converted or redeemed by June 1, 2023. As such, the interest (net of tax) on the Convertible Notes is added
to the numerator and the additional shares issuable on conversion of the Convertible Notes are added to the denominator of the earnings
per share calculation to determine if an assumed conversion is more dilutive than no assumption of conversion. The “if-converted”
method is used if the impact of the assumed conversion is dilutive. The “if-converted” method is dilutive for the adjusted
EPS calculation for all periods where the Convertible Notes were outstanding.
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
(in thousands of US$) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net earnings | |
$ | 29,376 | | |
$ | 44,524 | | |
$ | 63,470 | | |
$ | 132,572 | |
Non-controlling interest share of earnings | |
| (14,210 | ) | |
| (17,375 | ) | |
| (38,967 | ) | |
| (37,697 | ) |
Interest on Convertible Notes | |
| - | | |
| 2,300 | | |
| 2,861 | | |
| 6,900 | |
Loss on disposal of operations | |
| - | | |
| 318 | | |
| 2,282 | | |
| 27,358 | |
Amortization of intangible assets | |
| 37,486 | | |
| 32,760 | | |
| 111,659 | | |
| 89,630 | |
Gains attributable to MSRs | |
| (3,199 | ) | |
| (16,391 | ) | |
| (12,286 | ) | |
| (24,214 | ) |
Acquisition-related items | |
| 15,366 | | |
| 26,290 | | |
| 53,502 | | |
| 50,738 | |
Restructuring costs | |
| 4,485 | | |
| 191 | | |
| 12,266 | | |
| 462 | |
Stock-based compensation expense | |
| 5,513 | | |
| 4,730 | | |
| 16,726 | | |
| 14,081 | |
Income tax on adjustments | |
| (11,853 | ) | |
| (6,341 | ) | |
| (35,046 | ) | |
| (22,651 | ) |
Non-controlling interest on adjustments | |
| (6,207 | ) | |
| (3,519 | ) | |
| (17,133 | ) | |
| (11,458 | ) |
Adjusted net earnings | |
$ | 56,757 | | |
$ | 67,487 | | |
$ | 159,334 | | |
$ | 225,721 | |
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
(in US$) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Diluted net earnings (loss) per common share(1) | |
$ | 0.53 | | |
$ | 0.25 | | |
$ | (0.04 | ) | |
$ | 0.49 | |
Interest on Convertible Notes, net of tax | |
| - | | |
| 0.04 | | |
| 0.04 | | |
| 0.11 | |
Non-controlling interest redemption increment | |
| (0.21 | ) | |
| 0.32 | | |
| 0.56 | | |
| 1.48 | |
Loss on disposal of operations | |
| - | | |
| - | | |
| 0.05 | | |
| 0.56 | |
Amortization expense, net of tax | |
| 0.49 | | |
| 0.42 | | |
| 1.45 | | |
| 1.13 | |
Gains attributable to MSRs, net of tax | |
| (0.04 | ) | |
| (0.19 | ) | |
| (0.15 | ) | |
| (0.28 | ) |
Acquisition-related items | |
| 0.26 | | |
| 0.49 | | |
| 0.97 | | |
| 0.94 | |
Restructuring costs, net of tax | |
| 0.07 | | |
| - | | |
| 0.19 | | |
| - | |
Stock-based compensation expense, net of tax | |
| 0.09 | | |
| 0.08 | | |
| 0.29 | | |
| 0.26 | |
Adjusted EPS | |
$ | 1.19 | | |
$ | 1.41 | | |
$ | 3.36 | | |
$ | 4.69 | |
| |
| | | |
| | | |
| | | |
| | |
Diluted weighted average shares for Adjusted EPS (thousands) | |
| 47,549 | | |
| 47,743 | | |
| 47,480 | | |
| 48,121 | |
(1)
Amounts shown reflect the "if-converted" method's dilutive impact on the adjusted EPS calculation.
We believe that the presentation of adjusted EBITDA and
adjusted earnings per share, which are non-GAAP financial measures, provides important supplemental information to management and investors
regarding financial and business trends relating to the Company’s financial condition and results of operations. We use these non-GAAP
financial measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described above,
for which the amounts are non-cash or non-recurring in nature, provides a supplemental measure of our operating results that facilitates
comparability of our operating performance from period to period, against our business model objectives, and against other companies in
our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management
does and use this information in their assessment of our core business and the valuation of the Company. Adjusted EBITDA and adjusted
earnings per share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for,
or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not
reflect all of the costs or benefits associated with the operations of our business as determined in accordance with GAAP. As a result,
investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.
Percentage revenue and AEBITDA variances presented on a
local currency basis are calculated by translating the current period results of our non-US dollar denominated operations to US dollars
using the foreign currency exchange rates from the periods against which the current period results are being compared. Percentage revenue
variances presented on an internal growth basis are calculated assuming no impact from acquired entities in the current and prior periods.
Revenue from acquired entities, including any foreign exchange impacts, are treated as acquisition growth until the respective anniversaries
of the acquisitions. We believe that these revenue growth rate methodologies provide a framework for assessing the Company’s performance
and operations excluding the effects of foreign currency exchange rate fluctuations and acquisitions. Since these revenue growth rate
measures are not calculated under GAAP, they may not be comparable to similar measures used by other issuers.
Adjusted EBITDA from recurring revenue percentage is computed
on a trailing twelve-month basis and represents the proportion of adjusted EBITDA that is derived from Outsourcing & Advisory and
Investment Management service lines. Both these service lines represent medium to long-term duration revenue streams that are either contractual
or repeatable in nature. Adjusted EBITDA for this purpose is calculated in the same manner as for our debt agreement covenant calculation
purposes, incorporating the expected full year impact of business acquisitions and dispositions.
Free cash flow is defined as net cash flow from operating
activities plus contingent acquisition consideration paid, less purchases of fixed assets, plus cash collections on AR Facility deferred
purchase price less distributions to non-controlling interests. We use free cash flow as a measure to evaluate and monitor operating performance
as well as our ability to service debt, fund acquisitions and pay of dividends to shareholders. We present free cash flow as a supplemental
measure because we believe this measure is a financial metric used by many investors to compare valuation and liquidity measures across
companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United
States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined
in accordance with GAAP. Our method of calculating free cash flow may differ from other issuers and accordingly, this measure may not
be comparable to measures used by other issuers. A reconciliation of net cash flow from operating activities to free cash flow appears
below.
| |
Three months ended | | |
Nine months ended | |
| |
September 30 | | |
September 30 | |
(in thousands of US$) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Net cash provided by (used in) operating activities | |
$ | 42,153 | | |
$ | 76,840 | | |
$ | 8,558 | | |
$ | (171,470 | ) |
Contingent acquisition consideration paid | |
| 35,655 | | |
| 8,129 | | |
| 38,646 | | |
| 68,939 | |
Purchase of fixed assets | |
| (19,349 | ) | |
| (18,391 | ) | |
| (60,411 | ) | |
| (41,807 | ) |
Cash collections on AR Facility deferred purchase price | |
| 31,896 | | |
| 88,627 | | |
| 91,207 | | |
| 345,056 | |
Distributions paid to non-controlling interests | |
| (16,702 | ) | |
| (13,179 | ) | |
| (67,822 | ) | |
| (54,733 | ) |
Free cash flow | |
$ | 73,653 | | |
$ | 142,026 | | |
$ | 10,178 | | |
$ | 145,985 | |
We use the term assets under management (“AUM”)
as a measure of the scale of our Investment Management operations. AUM is defined as the gross market value of operating assets and the
projected gross cost of development assets of the funds, partnerships and accounts to which we provide management and advisory services,
including capital that such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our
definition of AUM may differ from those used by other issuers and as such may not be directly comparable to similar measures used by other
issuers.
Recently adopted accounting guidance
Contract Assets and Contract Liabilities from Contracts
with Customers – Business Combinations
In October 2021, the FASB issued ASU No. 2021-08, Accounting
for Contract Assets and Contract Liabilities from Contracts with Customers (Subtopic 805-10: Business Combinations). The ASU requires
that recognition and measurement principles of ASC 606 Revenue Recognition be applied for contract assets and contract liabilities acquired
in a business combination. The guidance in ASC 805 listing exceptions to recognition principle was amended to include contract assets
and contract liabilities. The Company adopted the guidance effective January 1, 2023. The adoption of the standard did not have a material
impact on the Company’s consolidated financial statements.
Reference Rate Reform
The FASB has issued three ASUs related to reference rate
reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference
Rate Reform on Financial Reporting and in January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope.
With reference rates like the various tenors of the London Interbank Offered Rates (“LIBOR”) being discontinued between December
31, 2021 and June 30, 2023, a significant volume of contracts and other arrangements will be impacted by the transition required to alternative
reference rates. The ASUs provides optional expedients and exceptions to reduce the costs and complexity of applying existing GAAP to
contract modifications and hedge accounting if certain criteria are met. The standard is effective for a limited time for all entities
through December 31, 2022. In December 2022, FASB issued ASU No. 2022-06 Reference Rate Reform (Topic 848): Deferral of the Sunset
Date of Topic 848, with immediate effect, to defer the sunset date from December 31, 2022 to December 31, 2024, after which the entities
will no longer be permitted to apply the relief in Topic 848. The Company has certain debt arrangements which may qualify for use of the
practical expedients permitted under the guidance. The Company has evaluated and will continue to evaluate arrangements subject to rate
reform and the options under the ASUs to facilitate an orderly transition to alternative reference rates and their potential impacts on
its consolidated financial statements and disclosures.
Financial instruments
We use financial instruments as part of our strategy to
manage the risk associated with interest rates and currency exchange rates. We do not use financial instruments for trading or speculative
purposes. In December 2018 (amended in May 2022), the Company entered into interest rate swap agreements to convert the SOFR floating
interest rate on $100.0 million of US dollar denominated debt into a fixed interest rate of 2.6026% plus the applicable margin. These
swaps matured on April 30, 2023.
In July and December 2022, the Company entered into similar
interest rate swap agreements (the “2022 IRS”) to hedge an additional $150.0 million and $250.0 million of US dollar borrowings
under the Revolving Credit Facility at fixed interest rates of 2.8020% and 3.5920%, respectively. In April 2023, the Company entered into
another similar swap agreement (the “2023 IRS”) to hedge an additional $100.0 million of US dollar borrowings under the Revolving
Credit Facility at a fixed interest rate of 3.7250%. The 2022 IRS and 2023 IRS have a maturity of May 27, 2027. The swaps are measured
at fair value on the balance sheet. Gains or losses on the 2022 IRS and 2023 IRS, which are determined to be effective as hedges, are
reported in other comprehensive income.
Financial instruments involve risks, such as the risk that
counterparties may fail to honor their obligations under these arrangements. If we have financial instruments outstanding and such events
occur, our results of operations and financial position may be adversely affected.
Transactions with related parties
As at September 30, 2023, the Company had $2.2 million
of loans receivable from shareholders of subsidiaries (December 31, 2022 - $3.6 million). The majority of the loans receivable represent
amounts to finance the sale of non-controlling interests in subsidiaries to senior managers. The loans are of varying principal amounts
and interest rates which range from nil to 7.53%. These loans are due on demand or mature on various dates up to 2028 but are open for
repayment without penalty at any time.
Outstanding share data
The authorized capital of the Company consists of an unlimited
number of preference shares, issuable in series, an unlimited number of Subordinate Voting Shares and an unlimited number of Multiple
Voting Shares. The holders of Subordinate Voting Shares are entitled to one vote in respect of each Subordinate Voting Share held at all
meetings of the shareholders of the Company. The holders of Multiple Voting Shares are entitled to twenty votes in respect of each Multiple
Voting Share held at all meetings of the shareholders of the Company. Each Multiple Voting Share is convertible into one Subordinate Voting
Share at any time at the election of the holders thereof.
As of the date hereof, the Company has outstanding 45,962,057
Subordinate Voting Shares and 1,325,694 Multiple Voting Shares. In addition, as at the date hereof 2,722,625 Subordinate Voting Shares
are issuable upon exercise of options granted under the Company’s stock option plan.
On July 17, 2023, the Company announced a Normal Course
Issuer Bid (“NCIB”) effective from July 20, 2023 to July 19, 2024. The Company may repurchase up to 4,000,000 Subordinate
Voting Shares on the open market pursuant to the NCIB.
Canadian tax treatment of common share
dividends
For the purposes of the enhanced dividend
tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all
dividends (and deemed dividends) paid by us to Canadian residents on our Subordinate Voting Shares and Multiple Voting Shares are designated
as “eligible dividends”. Unless stated otherwise, all dividends (and deemed dividends) paid by us hereafter are designated
as “eligible dividends” for the purposes of such rules.
Disclosure controls and procedures
Disclosure controls and procedures are designed to provide
reasonable assurance that information required to be disclosed in reports filed or submitted by us under U.S. and Canadian securities
legislation is recorded, processed, summarized and reported within the time periods specified in those rules, and include controls and
procedures designed to ensure that information required to be disclosed in reports filed or submitted by us under U.S. and Canadian securities
legislation is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate,
to permit timely decisions regarding required disclosure. Management, including the Chief Executive Officer and Chief Financial Officer,
has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in the rules of the
U.S. Securities and Exchange Commission and the Canadian Securities Administrators, as at September 30, 2023. Based on this evaluation,
the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as at
September 30, 2023.
Changes in internal control over financial
reporting
Our management is responsible for establishing and maintaining
adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well-designed,
has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect
to financial statement preparation and presentation. Management has used the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) 2013 framework to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management
has concluded that as at September 30, 2023, our internal control over financial reporting was effective.
During the three months ended September 30, 2023, there
were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial reporting.
Legal proceedings
There are no legal proceedings to which Colliers is a party
to, or in respect of which, any of the property of Colliers is the subject of, which is or was material to Colliers during 2023, and Colliers
is not aware of any such legal proceedings that are contemplated. In the normal course of operations, Colliers is subject to routine immaterial
claims and litigation incidental to its business. Litigation currently pending or threatened against Colliers includes disputes with former
employees and commercial liability claims related to services provided by Colliers. Colliers believes resolution of such proceedings,
combined with amounts set aside, will not have a material impact on the Company’s financial condition or the results of operations.
Forward-looking statements and risks
This MD&A contains forward-looking statements with
respect to expected financial performance, strategy and business conditions. The words “believe,” “anticipate,”
“estimate,” “plan,” “expect,” “intend,” “may,” “project,” “will,”
“would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements
contain these identifying words. These statements reflect management's current beliefs with respect to future events and are based on
information currently available to management. Forward-looking statements involve significant known and unknown risk and uncertainties.
Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance
or achievements that may be expressed or implied by such forward-looking statements. Factors which may cause such differences include,
but are not limited to those set out below and those set out in detail in the “Risk Factors” section of the Company’s
Annual Information Form:
| · | Economic conditions, especially as they relate to rising interest rates, commercial and consumer credit
conditions and business spending, particularly in regions where our operations may be concentrated. |
| · | Rising inflation and its impact on compensation costs, hiring and retention of talent, and the Company’s
ability to recover costs from our clients. |
| · | The continuing impact and aftermath of the global COVID-19 pandemic and its related impact on economic
conditions, and in particular its impact on client demand for our services, our ability to deliver services and ensure the health and
productivity of our employees. |
| · | Commercial real estate and real asset values, vacancy rates and general conditions of financial liquidity
for transactions. |
| · | The effect of significant movements in average capitalization rates across different property types. |
| · | A change in or loss of our relationship with US government agencies. |
| · | Defaults by borrowers on loans originated under the Fannie Mae Delegated Underwriting and Servicing Program. |
| · | A reduction by clients in their reliance on outsourcing for their commercial real estate needs. |
| · | Competition in the markets served by the Company. |
| · | The impact of changes in the market value of assets under management on the performance of our Investment
Management business. |
| · | A decline in our ability to fundraise in our Investment Management operations, or an increase in redemptions
from our perpetual funds and separately managed accounts. |
| · | A decline in our ability to attract, recruit and retain talent. |
| · | A decline in our performance impacting our continued compliance with the financial covenants under our
debt agreements, or our ability to negotiate a waiver of certain covenants with our lenders. |
| · | The effect of increases in interest rates on our cost of borrowing. |
| · | Unexpected increases in operating costs, such as insurance, workers’ compensation and health care. |
| · | Changes in the frequency or severity of insurance incidents relative to our historical experience. |
| · | The effects of changes in foreign exchange rates in relation to the US dollar on the Company’s Canadian
dollar, Euro, Australian dollar and UK pound sterling denominated revenues and expenses. |
| · | A decline in our ability to identify and make acquisitions at reasonable prices and successfully integrate
acquired operations. |
| · | Disruptions, cyber attacks or security failures in our information technology systems, and our ability
to recover from such incidents. |
| · | The ability to comply with laws and regulations related to our global operations, including real estate
and mortgage banking licensure, labour and employment laws and regulations, as well as the anti-corruption laws and trade sanctions. |
| · | Political conditions, including political instability, any outbreak or escalation of hostilities, elections,
referenda, trade policy changes, immigration policy changes and terrorism and the impact thereof on our business. |
| · | Changes in climate and environment-related policies that directly impact our businesses. |
| · | Changes in government laws and policies at the federal, state/provincial or local level that directly
impact our businesses. |
We caution that the foregoing list is not exhaustive of
all possible factors, as other factors could adversely affect our results, performance or achievements. The reader is cautioned against
undue reliance on these forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements
are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated
in such forward-looking statements will be realized. The inclusion of such forward-looking statements should not be regarded as a representation
by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. We note
that past performance in operations and share price are not necessarily predictive of future performance. We disclaim any intention and
assume no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future
events or for any other reason.
Additional information
Additional information about Colliers, including our Annual
Information Form for the year ended December 31, 2022, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Further information
about us can also be obtained at www.colliers.com.
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