Welcome to the first quarter year-end investors' conference call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance, or achievements contemplated in the forward-looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F, as filed with the U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Tuesday, May 1st, 2018. At this time, for opening remarks and introductions, I would like to turn the call over to the Chairman and Chief Executive Officer, Mr. Jay Hennick.
Please go ahead, sir.
Thank you, operator. Good morning, everyone, and thanks for joining us for today's first quarter conference call. As the operator mentioned, I am Jay Hennick, Chairman and Chief Executive Officer, with me today is John Friedrichsen, our Chief Financial Officer. This conference call is being webcast and is available on our investor relations section of our website, and a presentation slide deck is also available to accompany the call. Earlier today, Colliers reported very strong first quarter results with balanced revenue growth, both internally and from acquisitions. Revenues were $552 million, up 18%, EBITDA was $36 million, up 16%, and earnings per share came in at $0.45, up 25% over the prior year. Revenue pipelines continue to indicate sustained activity across all of our service lines, with generally stable to positive market conditions in most of our major markets around the world.
John will have more to say about these and our other financial results in just a few minutes. With our operating momentum to date, a total of five acquisitions completed already this year, and the growth opportunities we continue to see, we have every reason to expect 2018 to be another very successful year for Colliers. Just in April, we expanded our revolving credit facility to $1 billion, improving our pricing and extending the term until 2023, providing us with additional capacity to grow our business. As you know, our current five-year growth plan is to double the size of our company by the year 2020. We are now in the third year of our plan, and I am pleased to say that we are on track. If our plan is successful as it has been in the past, we expect this to translate into significant incremental value for our shareholders.
Given the amount of equity our leadership team and directors hold in Colliers, more than any of our peers by a country mile, we have every incentive to create value for our shareholders for many years to come. Now let me turn things over to John for his review of the financial results, then we'll open things up to questions. John?
Thank you, Jay. As announced in our press release earlier this morning, and Jay in his opening remarks, Colliers International Group reported strong consolidated financial results for our first quarter, with solid contributions from most of our operations across our global platform, highlighting the benefits of our service line and geographic diversification. I will address our overall consolidated financial results for the quarter, our operating results by reporting region, as well as our capital usage and financial position. Please note that both our first quarter 2018 and comparative first quarter 2017 results reflect the adoption of the new revenue recognition standards under US GAAP. For our first quarter of fiscal 2018, consolidated revenues increased to $552 million, up 14% in local currencies from $466 million in the first quarter of 2017, with 6% of our growth generated internally and the balance from acquisitions.
Total revenue growth for the quarter in our U.S. dollar reporting currency was 18%. Adjusted EBITDA for the quarter totaled $36.1 million, up from $31.3 million in Q1 of last year, an increase of 14% in local currency and 16% in U.S. dollars, with our margin coming in at 6.5%, comparable to 6.7% reported last year. Adjusted earnings per share came in at $0.45 compared to $0.36 per share reported for the first quarter of last year, up 25% in U.S. dollars with a $0.01 favorable impact from FX on adjusted earnings per share in the quarter. Our adjustments to GAAP EPS in arriving at adjusted EPS are outlined in our press release issued this morning and are composed primarily of non-cash charges that we view as largely unrelated to our operating results and are consistent with those presented historically.
Turning to our operating results, I will now provide a review by major service line and by region, with all percentage changes in revenues based on local currencies. Our $552 million in revenues for the quarter was comprised of $143 million in sales brokerage, up 13%, while lease brokerage came in at $168 million, up 12% over Q1 in 2017. Revenues from outsourcing and advisory services totaled $242 million, up 15%, distributed relatively evenly across project management, property management, and valuation and consulting services. Revenues generated by our outsourcing and advisory services segment represented 44% of our overall revenues in the quarter, up slightly from 43% in Q1 of last year.
Geographically, 59% of our revenues and 71% of our adjusted EBITDA was generated in the Americas in our first quarter, with strong contributions to revenue and adjusted EBITDA from our Americas operations relative to EMEA to start the year compared to Q1 2017. In our first quarter, revenues in the Americas totaled $329 million, up 15%, with 7% internal revenue growth and 8% from acquisitions. Lease brokerage revenues were up 14% versus last year, with Sales brokerage revenues up 15%, led by mid-teens % growth in Canada and mid-single % growth in the U.S. Outsourcing and Advisory revenues were up 14%, led by strong growth in Canadian Valuations as well as Property Management and Project Management in both Canada and the U.S. Adjusted EBITDA came in at $26.5 million, up 18%, versus $22.4 million last year, and a margin of 8.1% versus 7.9% last year. Turning to EMEA.
Revenues of $116 million in the quarter increased 11%, with an internal decline of 2% offset by 13% growth from acquisitions relative to Q1 last year. Reported revenue growth in our U.S. dollar reporting currency was 27%, based on the appreciation of both the EUR and GBP currencies. Both Lease brokerage and Sales brokerage revenues were up 1% over a strong comparative quarter last year, which saw a rebound in activity, particularly in the U.K., arising from the temporary Brexit-related slowdown in the latter part of 2016. Revenues from Outsourcing and Advisory Services increased 20%, led by revenues generated from our Finnish acquisition completed in January, accompanied by strong increases in Valuations and Project Management revenues in the U.K. and Netherlands.
Adjusted EBITDA increased to a loss of $400,000 from a positive $3.7 million in Q1 2017, impacted by planned investment in professional staff to drive new service line growth as well as revenue mix. Despite the lower revenue growth and Adjusted EBITDA performance to start the year, our pipeline of transactions revenue remains strong. We expect solid growth in revenue and EBITDA for the balance of the year. Finally, in our Asia Pacific region, revenues came in at $108 million, up 14% in local currencies and 18% in U.S. dollar terms, with 12% growth in local currencies revenue generated internally and with balanced growth across service lines, including robust growth in Sales brokerage revenues, primarily in Hong Kong and China, and Lease brokerage revenues across the entire region.
Growth in Outsourcing and Advisory revenues were led by Project Management revenues increases across the region, including the favorable impact of two small acquisitions made in Australia in late 2017 and in China earlier this year. Adjusted EBITDA was $11.2 million, up sharply from $6.9 million last year, with our margin at 10.4% versus 7.6% as we benefited from greater scale and operating leverage. Moving to our capital deployment and balance sheet. In our first quarter 2018, Capital expenditures totaled $6.2 million, largely in line with the $6.7 million last year. Our estimated range of CapEx spend for 2018 is $40 million-$42 million. We invested $88 million in acquisition activities during the quarter, up significantly from $56 million in Q1 last year. Turning to our balance sheet.
Our net debt position stood at $325 million at the end of the quarter, compared to $141 million at year-end, which is typically the seasonal low point in terms of our debt level, and $307 million at the end of Q1 last year. Our leverage ratio expressed as net debt to adjusted EBITDA stood at 1.3 times versus 1.4 times at the end of Q1 2017, despite the robust acquisition-related investment to start the year. As already mentioned by Jay, after the end of the quarter, we increased our committed availability under our revolver to $1 billion and extended our maturity to 2023, while improving pricing and providing greater flexibility to achieve our targets under our Enterprise 2020 plan. Looking across our global operations, our pipelines in most markets continue to reflect solid commercial real estate activity, comparing favorably to levels at this time last year.
We continue to believe that modestly rising but still low interest rates, successful debt financing, and general stability in supply and demand for commercial real estate in most markets remains supportive of steady activity in sales, leasing, and other commercial real estate-related services for the balance of 2018. Therefore, our outlook for the year remains largely unchanged, adjusted only for the impact of acquisitions completed to date. That concludes our prepared remarks, and I would now like to ask our operator to open the call to questions.
Certainly. At this time, if you'd like to ask a question, press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Stephen Sheldon of William Blair. Your line is open.
Hey, good morning. Thanks for taking my questions. I guess first here, can you talk some about expectations in EMEA over the remainder of the year? You saw a modest decline in the first quarter, but it also sounds like there were some timing issues. Can you provide some more detail on those issues? Does the push out of some activity in the solid pipeline, with that, could EMEA be an above average grower, I guess, over the remainder of the year?
Yeah. A couple of things impacting EMEA in terms of overall growth and performance. A little bit lower level of transaction-related revenues but as I indicated in my prepared comments, pipelines are strong across most markets, particularly the major markets in Europe. We expect to see a reversal certainly going into the next quarter. Beyond that, every indication is that stable to up supportive of growth in that region. We also continue to invest in Europe in particular around additional professional staff, which came on board late last year and early this year and has impacted our costs, and we expect revenue related to that investment to start occurring in the back half of the year. Overall, we feel very good about where Europe is notwithstanding a little bit of a slower start to the year.
Okay. Very helpful. Then wanted to ask about growth within your multinational client base and maybe how conversations there are going. Are those conversations getting progressively easier as you continue to scale your business? Could growth there become, I guess, an even more important overall growth driver over the next few years?
Absolutely. I think that this is somewhat of an incremental, but in other outcome of what we have been building within Colliers over the last several years. It's still relatively early days certainly compared to many of our competitors around our capabilities, around our corporate services offerings. We've gained significant momentum, have captured some significant business with major multinationals around the world, we're going to continue to pursue that, and we believe that we're really well positioned to execute in virtually every major market around the world. I think we are a compelling alternative to companies that I think historically have been used to dealing with only a couple of providers.
Yeah, just to augment that. We see it as a big opportunity for us for the point that John made just near the end. This business was primarily dominated by one or two players on a global basis, and then some regional players there for the first time in the past two years. We've been invited to the party many times and have been very successful winning some very important mandates. We don't really announce those mandates as some of our peers do. If you follow the growth in that segment of the business, you'll see that a lot of that growth is coming from winning business that's global in nature and of the highest quality. We're quite excited about it, and it gives us an opportunity to offer something different than the others.
Okay. Very helpful. I guess the last one for me. Within the sales brokerage business in the Americas, you put up good growth in the quarter. Did you see any delays or timing shifts, particularly in larger transactions closing in the U.S.?
Nothing, Stephen, of note. It would be the usual, you get the odd transaction that you expect to close in the quarter, and for whatever reason, circumstances arise that it gets pushed into a quarter. Nothing that worthy of commenting on in our case.
Got it. All right. Thanks.
Your next question comes from the line of Stephen MacLeod of BMO. Your line is open.
Thank you. Good morning, guys.
Morning.
Morning.
Just wanted to follow up on the Americas. Obviously, some very good growth in sales and lease brokerage as well as outsourcing advisory, so pretty broad-based. In terms of the operating leverage, the Americas has had sort of a lower margin base. Would you expect that through the year you would continue to see ongoing incremental operating leverage in the Americas?
Absolutely. It's something that we're focused on, as we have continued to build, it's been part of, I guess, a longer term story, particularly around our U.S. operation. We're getting incremental gains in Canada, which does operate a higher margin business. The outcomes in the U.S. around our continued investment in building of scale is going to pay off, is paying off, and we expect that to continue through the balance of this year and right through the 2020 plan that J. referenced earlier on
Okay. That's great. Is that predicated on significant investment in new hires over the next several years? Do you feel that you have a pretty good plan in place to build off of?
Well, a key part of our strategy is to hug our A players and to continue to recruit market for market. Recruiting is, in fact, a small percentage of our movement on an annual basis, where we've been very selective, as you've seen, in terms of recruiting around gaps that we might have in any particular geographic region. If we want to build up our Capital Markets in Chicago, we'll focus specifically on Capital Markets in Chicago. We've been very specific about recruiting. The other area that we have spent a lot of time on, and we think it's going to pay off in heavy dividends over the years, is on our senior leadership team at all levels, particularly in the U.S. As you know, Stephen, we've worked very hard at bringing together that platform, streamlining, trying to build leverage wherever we can.
Our revenues have gone through the roof. The accelerated growth in that business has been really exceptional. With that exceptional growth, you need better leadership, stronger leadership for the future. We've made some significant hires, many of whom we've announced, some of whom we have not because they happen to be in smaller, not major markets. Based on the momentum that we have and the culture that we have at Colliers, we've been a very attractive place for the most professional advisors and the business leaders that want to make a difference in growing a business. We're very excited about the new additions. As I remind everybody here, the most important thing is to hug our key people every single day because they've been with us and continue to grow their own practices and deserve our support as well.
Right. Okay. That's great. Thank you. Just finally, in Asia Pacific, we talked a little bit about Japan, and I know Japan was a negative contributor in 2017. I think for 2018, you were expecting it to be a positive contributor. Can you just talk a little bit about how that market is going and how your recent investment in that market is evolving?
Yes. Japan was a new story for us in 2017. It actually was a small positive contributor. We'd expected it to be a bit of a drag, but it was actually a small positive contributor to the year. We have continued to focus on building it organically, and it's really through headcount and attracting people that want to be part of, I think, a new story in Japan. As we've talked about, I think on the previous call, the fourth quarter call, it is a big opportunity for us, one that we're going to pursue vigorously through trying to attract top-notch professionals that can join our business. Acquisitions are always an option, but that may not be until a little bit later. It's a key component of our Asia strategy. I think you're not really seeing much of an impact of that operation in our results.
The results really in Asia for us in the first quarter were due in large part to the hard work that David Hand and his team have done over the last two to three years, and it's really a rebirth for Colliers. We've been there for a long time. We've got a lot of great new people that now generate a lot of momentum. With a very small but interesting acquisition recently, we think that there's a new era for our Asia business, and we're excited about it, and that does include Japan.
Okay. That's great color. Thank you very much.
Your next question comes from the line of Frederic Bastien of Raymond James. Your line is open.
Thanks, and good morning. You already invested more than $100 million in M&A so far this year. Now, I know you can't time acquisitions, but how are you feeling about the rest of the year? Do you think you can meet or perhaps even exceed what you've achieved already this year?
Well, I don't know about that, but I'm cautiously optimistic. Last year was a record year in acquisitions for us, so I'm cautiously optimistic we'll do better than last year in acquisitions. We had a great start to the year, and we have some interesting opportunities in the pipeline. As you know, there's always issues. They're strategic. Sometimes they happen. Sometimes it's too early for the target. There's all kinds of reasons why an acquisition might or might not be completed. We do have a nice pipeline, and we're hoping to at least do as well as we did last year.
Well, it certainly seems that with the beginning of the year you've had in terms of organic growth and what you're seeing right now and what you've already accomplished on the M&A front, you should be able to exceed the EBITDA growth that you achieved in 2017. That wasn't a question.
We're surely budgeting that's for sure.
All right. Awesome. That's all I have. Thank you.
Thanks, Chris.
Your next question comes from the line of Marc Riddick of Sidoti. Your line is open.
Hi, good morning.
Good morning, Marc.
I wanted to maybe follow up a little bit on the acquisition type question. I was curious about whether if you could sort of give a sense of, granted there's always different types of things going on, but I wanted to get a general sense of maybe what bid-ask spreads look like vis-à-vis a year or so ago. Maybe if you give maybe a little greater color as to if there's any differences as to some of the things that are driving what you're seeing in the pipeline. Is it any different than what you've seen historically? Thanks.
We've talked about this on previous calls. I think that the bid-ask spreads for, I'd say, third-party companies, not companies that are part of Colliers, which is a little higher than it has been historically. We try and compensate for that in many ways because, given a variety of factors, it allows us to perhaps build an earn-out structure that might be a year longer than we would otherwise expect. For that, we're prepared to pay a quarter point, a quarter turn of EBITDA higher on average or something like that. As you can see, most of the acquisitions now have been more significant in size. There's a lot of people that you're bringing over at one given time. Having a clawback over a longer period of time gives us lots of downside protection around the acquisitions that we complete.
In a long way, I would say yes, there is a push up in expected value. We do try and compensate in deal structure. I would also say that more often this year than last year and in subsequent years, the targets want to be part of Colliers. They're coming to us because they believe they need to be part of a global platform. They're coming to us because they believe they want to be in an entrepreneurial environment where we focus on adding value to clients rather than building infrastructure and bureaucracy and things like that. Our business is conducive to an entrepreneurial environment. We have been finding that the targets are more keen to join us today than ever before, and it just seems to have gotten easier and easier over the past three years.
All of that to say, we've got lots of room to grow here.
Okay. Excellent. Then one last follow-up from me. You talked about earlier, being able to compete for wider ranging and deeper assignments. I was wondering if you could touch a little bit on where you feel you are. I know we've seen some of the announcements made with the additions of leadership and the commentary earlier in the call about additional personnel. I wanted to get a sense specifically around those type of opportunities where you can have broader and deeper relationships, how you feel about your current level of staffing to take advantage specifically of those type of opportunities and where you may need to go vis-à-vis maybe where you would like to be. Thank you.
Well, if you're talking about our Corporate Solutions business in particular, I would say that if you're asking where do we stand versus CB and Jones Lang, we are well behind them. They've been around 100 years, both of them, and they've been in the business 100 years. We're the Johnny-come-lately and 20-odd years of trying. I would say that again, our momentum is picking up. Our percentage growth in that segment of our business is about the highest of any other internal, is about the highest of any other segment in our business. Obviously, when you win that business, these are big contracts and they're global contracts, and there's multiple services to be provided all over the place. The segment itself is growing, so there's a greater push to outsourcing today than there was five years ago.
It's a big part of our business. Candidly, we could really dedicate more time, effort, and energy to that segment of our business if we wanted. It's something that we'd like to do. There's only so much growth you can take on at any given time. You don't want to screw up the new relationship that you form with a major corporate. Once you win one of these mandates, the good news is you celebrate for five minutes, and the bad news is it's a year and a half of implementation. That implementation has to be done flawlessly or as flawlessly as possible, and it takes a lot of people, it takes a lot of time, and frankly, in the first year or year and a half, it's probably not profitable.
For us, I'm looking at John, it isn't profitable for us. We're trying to take more of a two-step-at-a-time approach on that, and it's been successful for us, and we see it as an opportunity. We're going to continue to pursue that, we're going to do it cautiously.
Okay. Thank you very much, I really appreciate the color on it. Thank you.
Your final question comes from the line of Michael Smith of RBC. Your line is open.
Thank you, and good morning. I just wanted to touch on Europe. Your investments in Europe, I take it they started a couple of quarters ago, and they're ongoing as of Q1. Could you just remind us of how that flows to the revenue stream? You've got some, I guess, expenses that burn off after a period of time and then the revenue starts kicking in?
Yeah. It's really around people and taking on headcount, that where we made financial commitments to help transition people from where they previously were. There's always a ramp-up period, and there are costs associated with that, and we're happy to provide, I guess, effectively a make-whole to the individuals that decide to come on board. We're paying some staff and related compensation costs and not really seeing any revenue being generated currently. Certainly, pipelines are building and opportunities being pursued and secured, but we're not likely to see the positive impact of revenue generation from that until the back end of this year.
Okay. Just switching gears. Jay, can you just highlight some of the reasons or get into some more specifics of why a lot of these smaller shops want to join a global platform, particularly for sales and leasing?
It's actually very basic because a successful professional works with a client, as the client matures, the client wants to do business not just in his home market or her home market, in markets in different parts of the country or North America or around the world. You need fulfillment to execute on those transactions. The client itself, who has built a relationship with our advisor, wants our advisor to ensure that there's a streamlined and consistent approach to looking for leased locations or asset purchases in different geographic regions. What we find is the smaller firms, even if the smaller firm wants to stay smaller, the professionals that want to enhance their practice have to be at one of the global firms in order to be able to deliver on all the things I just said. There's more sophisticated transactions.
The size of the transactions and velocity are bigger and much more lucrative. Ultimately, the best advisors need to be at a global firm. Not to mention all of the other resources and differentiators that large firm can bring to the party. They're different, whether they join one of our peers or ours.
Okay. Thank you. That was helpful. Just lastly, just on Asia. You've already talked about Japan, but you had a very big quarter in Asia. I wonder if you could just give us a little more granularity on it.
Michael, it's John. It's something we have talked about, I guess, for the last couple of years. First of all, we made a pretty significant leadership change there about two and a half years ago. Our regional CEO has, in turn, brought in some senior people, both in Hong Kong and in China in particular. That has generated a fairly significant amount of additional business for us. It's a work in progress. We previously had noted that when we were generating results there that were not in line with where we expected those results to be longer term. We're now seeing some of the positive outcome around that. Market conditions, I think in those regions, have been supportive of activity. We're taking advantage of that.
David Hand himself, who's the leader of our Asia business, got a culture very similar to ours. He's very entrepreneurial. He's aggressive. He's the one that initiated the activity in Japan. This was something, as many of you now know, was a two-year process to make Japan a company-owned operation. He's got his fingers all over the growth in China. Hong Kong has never seen better results. I think David deserves a lot of credit for bringing the entrepreneurial flair to a market that has not historically been entrepreneurial. We hope for more. They did their first acquisition this year. It was in the first quarter.
Quarter,
yep.
In the first quarter or just after. It's a Project Management business that's Shanghai, Beijing, Chengdu, and a little bit in Hong Kong, although there's no people in Hong Kong. It's a great tuck under for David. Our business in China never did Project Management. It was a business that was owned by a British group. We had done lots of business together over many years. When they decided that it was time for a change, we were the natural buyer. It's not a significant business. It's circa $12 million in revenue, USD in revenue. That's fee revenue, so they manage large projects but get paid as the landlord rent on those projects. As you know, we have similar operations in Canada, U.S., Australia, New Zealand in Project Management. It's a good first addition for David.
Obviously we see lots of future opportunity in Asia in the years to come. Again, we're going to take a one step at a time approach and hopefully have a much bigger business there in the years to come.
Great. Thank you. That's it for me.
There are no further questions in the queue.
Okay. Thank you very much, ladies and gentlemen, for joining us on the conference call, and we hope to speak to you again soon.
End of July.
End of July. Okay, thanks again. Have a good day.
Ladies and gentlemen, this concludes the quarterly investors conference call. Thank you for your participation, and have a nice day.