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Colliers International Group Inc. Subordinate Voting Shares

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Colliers International Reports Third Quarter Results

Solid operating results with higher margins

Operating highlights:

 Three months ended Nine months ended
 September 30 September 30
(in millions of US$, except EPS)2019 2018 2019 2018
            
Revenues$736.9 $715.7 $2,117.5 $1,935.5
Adjusted EBITDA (note 1) 84.3  72.7  215.2  178.2
Adjusted EPS (note 2) 1.04  0.92  2.65  2.32
            
GAAP operating earnings 48.2  42.0  118.8  103.3
GAAP EPS 0.74  0.41  1.37  1.13

TORONTO, Oct. 29, 2019 (GLOBE NEWSWIRE) -- Colliers International Group Inc. (NASDAQ: CIGI) (TSX: CIGI) today reported operating and financial results for its third quarter ended September 30, 2019. All amounts are in US dollars.

Revenues for the third quarter were $736.9 million, a 3% increase (5% in local currency) relative to the same quarter in the prior year, adjusted EBITDA (note 1) was $84.3 million, up 16% (18% in local currency) and adjusted EPS (note 2) was $1.04, a 13% increase versus the prior year quarter. Third quarter adjusted EPS would have been approximately $0.03 higher excluding foreign exchange impacts. GAAP operating earnings were $48.2 million, relative to $42.0 million in the prior year period. GAAP diluted net earnings per common share was $0.74 in the quarter, up 80% versus $0.41 per share for the same quarter a year ago with the increase impacted by a reduction in non-controlling interest redemption increment stemming from translation of Euro-denominated non-controlling interests. Third quarter GAAP EPS would have been approximately $0.03 higher excluding changes in foreign exchange rates.

For the nine months ended September 30, 2019, revenues were $2.1 billion, a 9% increase (12% in local currency) relative to the comparable prior year period, adjusted EBITDA was $215.2 million, up 21% (23% in local currency) and adjusted EPS was $2.65, a 14% increase versus the prior year period. Year-to-date adjusted EPS would have been approximately $0.08 higher excluding foreign exchange impacts. GAAP operating earnings were $118.8 million, relative to $103.3 million in the prior year period. GAAP diluted net earnings per common share for the nine month period was $1.37, compared to $1.13 per share in the prior year period. Year-to-date GAAP EPS would have been approximately $0.08 higher excluding changes in foreign exchange rates.

“Colliers delivered solid operating results with higher margins for the third quarter. Year-to-date internal revenue growth was 4%, in line with our full-year expectations. Given our performance over the first nine months and our current outlook, we expect to finish the year strongly,” said Jay S. Hennick, Chairman and CEO of Colliers International. “Earlier this month, we completed the strategic acquisition of Synergy Property Development Services, the leader in project management services in India. Synergy will merge with our existing operations in India under the Colliers International brand and will take its place as one of the top players in one of the world’s fastest growing economies. So far this year we have completed four acquisitions which, together with internal growth, puts us on-track to meet or exceed our five year target to double our size by the end of 2020,” he concluded.

About Colliers International Group Inc.
Colliers International (NASDAQ, TSX: CIGI) is a leading global real estate services and investment management company. With operations in 68 countries, our 14,000 enterprising people work collaboratively to provide expert advice and services to maximize the value of property for real estate occupiers, owners and investors. For more than 20 years, our experienced leadership team, owning approximately 40% of our equity, have delivered industry-leading investment returns for shareholders. In 2018, corporate revenues were $2.8 billion ($3.3 billion including affiliates), with more than $26 billion of assets under management.

Learn more about how we accelerate success at corporate.colliers.com, Twitter @Colliers or LinkedIn.


Consolidated Revenues by Line of Service

         
  Three months ended   Nine months ended  
 (in thousands of US$)September 30GrowthGrowth September 30GrowthGrowth
 (LC = local currency)2019 2018in US$ %in LC % 2019 2018in US$ %in LC %
                 
 Outsourcing & Advisory$277,741 $258,6737%10% $817,763 $755,8828%12%
 Lease Brokerage 218,754  229,294-5%-3%  653,912  618,6926%8%
 Sales Brokerage 200,515  195,9252%4%  515,983  523,872-2%1%
 Investment Management 39,873  31,82925%26%  129,865  37,098NMNM
                 
 Total revenues$736,883 $715,7213%5% $2,117,523 $1,935,5449%12%
                 

Consolidated revenues for the third quarter grew 5% on a local currency basis, with significant contributions from Outsourcing & Advisory and Investment Management. Consolidated internal revenue growth in local currencies was 2% (note 3), led by Outsourcing & Advisory as well as Investment Management, offset by modest declines in Lease Brokerage against a strong prior year quarter.

For the nine months ended September 30, 2019, consolidated revenues grew 12% on a local currency basis, with significant contributions from Investment Management and Outsourcing & Advisory. Year-to-date consolidated internal revenue growth in local currencies was 4%, led by Outsourcing & Advisory and Lease Brokerage.

Segmented Third Quarter Results
The Americas region’s revenues totalled $424.3 million for the third quarter compared to $404.6 million in the prior year quarter, up 5% (5% in local currency). Local currency revenue growth was 5% all from acquisitions, with 8% internal growth in Outsourcing & Advisory offset by a decline in Lease Brokerage. In the comparative prior year quarter, internal revenue growth was a very strong 9% balanced among service lines. Adjusted EBITDA was $38.8 million, versus $33.3 million in the prior year quarter, with margins higher due to service mix and lower discretionary expenses. GAAP operating earnings were $26.5 million, versus $24.4 million in the prior year period.

EMEA region revenues totalled $138.8 million for the third quarter, down 5% (-1% in local currency) compared to $146.3 million in the prior year quarter, comprised of a local currency internal decline of 3% offset by 2% growth from acquisitions. Internal revenues were impacted by a decline in Lease Brokerage for the quarter mostly due to timing, with a significant number of transactions expected to be recorded in the fourth quarter. Adjusted EBITDA was $12.6 million, versus $17.3 million in the prior year quarter, with the decline attributable to lower revenues and service mix. GAAP operating earnings were $5.1 million, versus $9.4 million in the prior year quarter.

Asia Pacific region revenues totalled $133.5 million for the third quarter compared to $132.5 million in the prior year quarter, up 1% (5% in local currency). Local currency internal revenue growth was 4%, led by Outsourcing & Advisory, with 1% growth from acquisitions. Adjusted EBITDA was $18.6 million, relative to $17.8 million in the prior year quarter. GAAP operating earnings were $17.2 million, versus $16.2 million in the prior year quarter.

Investment Management revenues for the third quarter were $39.9 million compared to $31.8 million in the prior year quarter, up 25%. Local currency revenue growth of 26% was all internally generated and reflected incremental management fees from new capital commitments completed year to date. Pass-through revenue from historical carried interest represented $0.5 million for the third quarter versus $2.1 million in the prior year quarter. Adjusted EBITDA was $15.9 million relative to $9.6 million in the prior year quarter. Operating earnings, which are impacted by acquisition-related intangible asset amortization, were $9.3 million in the quarter, versus $2.4 million in the prior year quarter. Assets under management stood at $30.6 billion as of September 30, 2019, up 18% from $25.9 billion in the third quarter of 2018.

Unallocated global corporate costs as reported in adjusted EBITDA were $1.7 million in the third quarter, relative to $5.3 million in the prior year period. The corporate GAAP operating loss for the third quarter was $10.0 million, relative to $10.4 million in the prior period.

Conference Call
Colliers will be holding a conference call on Tuesday, October 29, 2019 at 11:00 a.m. Eastern Time to discuss the quarter’s results. The call, as well as a supplemental slide presentation, will be simultaneously web cast and can be accessed live or after the call at corporate.colliers.com in the Events section.

Adoption of New Lease Accounting Standard
On January 1, 2019, the Company adopted FASB Accounting Standard Codification Topic 842, Leases (“ASC 842”). ASC 842 requires the recognition of operating lease right-of-use assets and lease liabilities for virtually all premise and equipment leases on the consolidated balance sheet, with no impact on earnings. The Company adopted ASC 842 effective January 1, 2019 without adjusting comparative periods and recorded a $261.3 million right-of-use asset and corresponding $294.6 million lease liability as of September 30, 2019.

Forward-looking Statements
This press release includes or may include forward-looking statements. Forward-looking statements include the Company’s financial performance outlook and statements regarding goals, beliefs, strategies, objectives, plans or current expectations. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results to be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Such factors include: economic conditions, especially as they relate to commercial and consumer credit conditions and business spending; commercial real estate property values, vacancy rates and general conditions of financial liquidity for real estate transactions; the effects of changes in foreign exchange rates in relation to the US dollar on Canadian dollar, Euro, Australian dollar and UK pound sterling denominated revenues and expenses; competition in markets served by the Company; labor shortages or increases in commission, wage and benefit costs; disruptions or security failures in information technology systems; and political conditions or events, including elections, referenda, changes to international trade and immigration policies, and any outbreak or escalation of terrorism or hostilities.

Additional factors and explanatory information are identified in the Company’s Annual Information Form for the year ended December 31, 2018 under the heading “Risk Factors” (which factors are adopted herein and a copy of which can be obtained at www.sedar.com) and other periodic filings with Canadian and US securities regulators. Forward looking statements contained in this press release are made as of the date hereof and are subject to change. All forward-looking statements in this press release are qualified by these cautionary statements. Except as required by applicable law, Colliers undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Summary financial information is provided in this press release. This press release should be read in conjunction with the Company's quarterly financial statements and MD&A to be made available on SEDAR at www.sedar.com.

Notes
1. Reconciliation of net earnings to adjusted EBITDA:

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) restructuring costs and (vii) 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
(in thousands of US$)September 30 September 30
 2019  2018  2019  2018 
            
Net earnings$28,673  $25,384  $69,711  $62,727 
Income tax 12,868   10,257   27,270   27,832 
Other income, net (663)  (581)  (985)  (1,041)
Interest expense, net 7,298   6,896   22,775   13,753 
Operating earnings 48,176   41,956   118,771   103,271 
Depreciation and amortization 22,835   23,161   69,281   55,303 
Acquisition-related items 8,867   6,271   18,765   14,265 
Restructuring costs 2,826   -   3,141   416 
Stock-based compensation expense 1,558   1,277   5,199   4,978 
Adjusted EBITDA$84,262  $72,665  $215,157  $178,233 
                

2. Reconciliation of net earnings and diluted net earnings per common share to adjusted net earnings and adjusted earnings per share:

Adjusted earnings per share is defined as diluted net earnings per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) acquisition-related items; (iv) restructuring costs and (v) 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 earnings per share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, 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 earnings per share appears below.

    
 Three months ended Nine months ended
(in thousands of US$)September 30 September 30
 2019  2018  2019  2018 
            
Net earnings$28,673  $25,384  $69,711  $62,727 
Non-controlling interest share of earnings (6,069)  (4,073)  (13,900)  (8,290)
Amortization of intangible assets 14,878   15,255   44,835   32,624 
Acquisition-related items 8,867   6,271   18,765   14,265 
Restructuring costs 2,826   -   3,141   416 
Stock-based compensation expense 1,558   1,277   5,199   4,978 
Income tax on adjustments (6,524)  (5,440)  (14,740)  (10,413)
Non-controlling interest on adjustments (2,507)  (1,929)  (7,099)  (3,979)
Adjusted net earnings$41,702  $36,745  $105,912  $92,328 
            
 Three months ended Nine months ended
(in US$)September 30 September 30
 2019  2018  2019  2018 
            
Diluted net earnings per common share$0.74  $0.41  $1.37  $1.13 
Non-controlling interest redemption increment (0.18)  0.13   0.02   0.24 
Amortization of intangible assets, net of tax 0.23   0.23   0.69   0.52 
Acquisition-related items 0.16   0.12   0.38   0.30 
Restructuring costs, net of tax 0.05   -   0.06   0.01 
Stock-based compensation expense, net of tax 0.04   0.03   0.13   0.12 
Adjusted earnings per share$1.04  $0.92  $2.65  $2.32 
                

3. Local currency revenue growth rate and internal revenue growth

Percentage revenue 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.

4. Assets under management

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 properties 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.

 
COLLIERS INTERNATIONAL GROUP INC.
Condensed Consolidated Statements of Earnings
(in thousands of US dollars, except per share amounts)
  Three months  Nine months
  ended September 30  ended September 30
(unaudited) 2019   2018   2019   2018 
            
Revenues$736,883  $715,721  $2,117,523  $1,935,544 
            
Cost of revenues 477,365   472,079   1,382,933   1,265,104 
Selling, general and administrative expenses 179,640   172,254   527,773   497,601 
Depreciation 7,957   7,906   24,446   22,679 
Amortization of intangible assets 14,878   15,255   44,835   32,624 
Acquisition-related items (1) 8,867   6,271   18,765   14,265 
Operating earnings 48,176   41,956   118,771   103,271 
Interest expense, net 7,298   6,896   22,775   13,753 
Other income (663)  (581)  (985)  (1,041)
Earnings before income tax 41,541   35,641   96,981   90,559 
Income tax expense 12,868   10,257   27,270   27,832 
Net earnings 28,673   25,384   69,711   62,727 
Non-controlling interest share of earnings 6,069   4,073   13,900   8,290 
Non-controlling interest redemption increment (7,043)  5,125   919   9,439 
Net earnings attributable to Company $29,647  $16,186  $54,892  $44,998 
            
Net earnings per common share            
 Basic$0.75  $0.41  $1.39  $1.15 
 Diluted$0.74  $0.41  $1.37  $1.13 
              
Adjusted earnings per share (2)$1.04  $0.92  $2.65  $2.32 
              
Weighted average common shares (thousands)           
 Basic 39,608   39,198   39,481   39,139 
 Diluted 40,029   39,934   39,938   39,821 
                

Notes to Condensed Consolidated Statements of Earnings
(1) Acquisition-related items include transaction costs, contingent acquisition consideration fair value adjustments, and contingent acquisition consideration-related compensation expense.
(2) See definition and reconciliation above.


         
Condensed Consolidated Balance Sheets        
(in thousands of US dollars)   
         
          
(unaudited)September 30, 2019 December 31, 2018 September 30, 2018
          
Assets        
Cash and cash equivalents$101,676 $127,032 $114,737
Accounts receivable and contract assets 352,574  554,700  495,255
Prepaids and other assets 150,309  78,581  80,710
 Current assets 604,559  760,313  690,702
Other non-current assets 81,267  83,765  86,616
Fixed assets 101,392  93,483  89,234
Operating lease right-of-use assets 261,277  -  -
Deferred income tax 40,084  34,195  38,631
Goodwill and intangible assets 1,351,336  1,385,824  1,398,056
 Total assets$2,439,915 $2,357,580 $2,303,239
          
          
Liabilities and shareholders' equity        
Accounts payable and accrued liabilities$578,591 $720,938 $584,331
Other current liabilities 61,542  75,929  66,597
Long-term debt - current 6,507  1,834  2,415
Operating lease liabilities - current 69,551  -  -
 Current liabilities 716,191  798,701  653,343
Long-term debt - non-current 604,361  670,289  818,113
Operating lease liabilities - non-current 225,060  -  -
Other liabilities 92,743  125,706  125,211
Deferred income tax 21,118  27,550  28,042
Redeemable non-controlling interests 323,362  343,361  334,910
Shareholders' equity 457,080  391,973  343,620
 Total liabilities and equity$2,439,915 $2,357,580 $2,303,239
          
          
Supplemental balance sheet information        
Total debt$610,868 $672,123 $820,528
Total debt, net of cash 509,192  545,091  705,791
Net debt / pro forma adjusted EBITDA ratio 1.5  1.6  2.2
         


Consolidated Statements of Cash Flows       
(in thousands of US dollars)
   Three months ended  Nine months ended
   September 30  September 30
(unaudited) 2019   2018   2019   2018 
             
Cash provided by (used in)           
             
Operating activities           
Net earnings$28,673  $25,384  $69,711  $62,727 
Items not affecting cash:           
 Depreciation and amortization 22,835   23,161   69,281   55,303 
 Deferred income tax (2,941)  1,406   (9,985)  2,805 
 Other 15,935   10,563   46,577   27,106 
   64,502   60,514   175,584   147,941 
             
Net change from assets/liabilities           
 Accounts receivable and contract assets (7,851)  (31,538)  14,217   16,793 
 Prepaids and other assets (6,407)  (2,100)  (16,782)  (7,401)
 Payables and accruals 36,654   74,210   (167,097)  (83,674)
 Other 1,716   (1,380)  5,280   (923)
             
Contingent acquisition consideration paid (499)  (1,509)  (5,712)  (4,365)
Sale proceeds from AR facility, net of repurchases (1,730)  -   117,695   - 
Net cash provided by operating activities 86,385   98,197   123,185   68,371 
             
Investing activities           
Acquisition of businesses, net of cash acquired -   (476,108)  (23,677)  (574,688)
Disposition of business, net of cash disposed -   17,287   -   17,287 
Purchases of fixed assets (7,245)  (7,571)  (31,309)  (21,561)
Cash collections on AR facility deferred purchase price 7,827   -   15,164   - 
Other investing activities (4,311)  (3,913)  (19,913)  (21,873)
Net cash used in investing activities (3,729)  (470,305)  (59,735)  (600,835)
             
Financing activities           
Increase in long-term debt, net (70,124)  401,907   (48,700)  574,268 
Purchases of non-controlling interests, net (4,063)  -   (10,828)  (73)
Dividends paid to common shareholders (1,979)  (1,959)  (3,940)  (3,906)
Distributions paid to non-controlling interests (8,294)  (3,544)  (27,851)  (16,147)
Other financing activities 4,376   (8,805)  6,775   (11,494)
Net cash provided by (used in) financing activities (80,084)  387,599   (84,544)  542,648 
             
Effect of exchange rate changes on cash (2,988)  (5,000)  (4,262)  (3,970)
             
Increase (decrease) in cash and cash equivalents (416)  10,491   (25,356)  6,214 
             
Cash and cash equivalents, beginning of period 102,092   104,246   127,032   108,523 
             
Cash and cash equivalents, end of period$101,676  $114,737  $101,676  $114,737 
             


Segmented Results
(in thousands of US dollars)
                   
      Asia Investment    
(unaudited)Americas EMEA Pacific Management Corporate Consolidated
                   
Three months ended September 30               
                   
2019                 
 Revenues$424,258 $138,819 $133,512 $39,873 $421  $736,883
 Adjusted EBITDA 38,790  12,645  18,606  15,918  (1,696)  84,262
 Operating earnings 26,490  5,132  17,241  9,295  (9,982)  48,176
                   
2018                 
 Revenues$404,607 $146,339 $132,518 $31,829 $428  $715,721
 Adjusted EBITDA 33,279  17,325  17,805  9,580  (5,324)  72,665
 Operating earnings 24,396  9,364  16,201  2,422  (10,427)  41,956
                   
                   
      Asia Investment    
  Americas EMEA Pacific Management Corporate Consolidated
                   
Nine months ended September 30                
                   
2019                 
 Revenues$1,204,472 $410,877 $370,926 $129,865 $1,383  $2,117,523
 Adjusted EBITDA 101,177  29,180  43,714  45,398  (4,312)  215,157
 Operating earnings  68,278  5,828  38,996  25,181  (19,512)  118,771
                   
2018                 
 Revenues$1,121,716 $406,352 $369,149 $37,098 $1,229  $1,935,544
 Adjusted EBITDA 95,911  39,533  44,388  8,399  (9,998)  178,233
 Operating earnings 71,203  14,945  39,046  1,220  (23,143)  103,271
                    


COMPANY CONTACTS:

Jay S. Hennick
Chairman & CEO           

John B. Friedrichsen
CFO 

(416) 960-9500

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