Colliers International Group, Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Overall: Operating results for the quarter met expectations and keep the company on track for full-year targets. Significant growth across business segments and geographies, with expectations of continued growth in the second half of the year.
• Engineering: Newly established segment had strong internal growth, combined with acquisitions. Focus on public sector clients in property, infrastructure, water, and environmental sectors. With over 9,000 professionals and ~$1.5 billion in annualized revenue, it's a top global player.
• Investment Management: AUM exceeded $100 billion for the first time, fundraising gaining momentum with new vintages and investment strategies. Leveraging scale, expertise, proprietary data, and relationships to deliver strong performance for investors.
• Real Estate Services: Global leader with a balanced, diversified platform and recurring revenues. Capital markets activity up, sales brokerage and debt finance strong, but leasing down due to tough comparables from large specialty transactions in prior years.
• Acquisitions: Advanced growth strategy with acquisitions of Ethos Urban, Triovest, and Terra Consulting to strengthen urban planning, high-value recurring real estate services, and infrastructure capabilities.

Segment Performance

• Real Estate Services: Net revenue grew modestly. Capital markets activity was up 10% globally, sales brokerage rose in all geographic regions and asset classes, debt finance activity increased (especially US multifamily refinancing), while leasing revenues were down 5% due to tough comparables from large specialty transactions in prior years. Net margin was 6.6% for the quarter, primarily due to investments in recruiting and revenue mix.
• Engineering: Net revenue grew 63% in Q1, driven by recent acquisitions and low teens percentage internal growth. Net margin was 8.4%, up 110 basis points from the prior year due to improved staff utilization and operating leverage. With over 9,000 professionals and ~$1.5 billion in annualized revenue, it's a top global player.
• Investment Management: Net revenues (excluding pass-through fees) were flat, but net margin was 46.2% (up from 44.2% prior year) due to lower incentive compensation partially offset by higher headcount. AUM exceeded $100 billion for the first time, with $1.2 billion in new capital commitments raised in Q1 (double prior year), 3/4 of which were in traditional real estate strategies.

Guidance

• Financial Outlook: Full-year financial outlook unchanged. Expect transactional revenue choppiness in Q2, but improvement in operating conditions in the back half of the year. Leverage expected to be ~2 times in Q2, then decline to ~1.5 times by year-end assuming no material acquisitions.
• Investment Management: Fundraising expected to accelerate in Q2 with new vintages and investment strategies.
• Leasing: Expect mid-single digit top line revenue growth for the full year, with leasing revenues returning to year-over-year growth after tough comparables in Q1.

Risks

• Macroeconomic/Political Uncertainty: Tariffs and trade tensions could impact clients' decision-making and construction costs, though currently no material impact seen.
• Market Volatility: Continued uncertainty may affect transaction volumes and profitability in some segments.

Question and Answer

Q: What's been seen in the market recently and impact by region/property type/business line?

A: Better results in Asia and some Europe, but uncertainty preventing long-term decisions in non-key markets; tariff issues causing transaction delays. Engineering activity robust, investment management fundraising proceeding.

Q: Investment management fundraising, what do LPs want?

A: Pent-up demand, people wanting to complete transactions; fundraising forecast to be more than double last year, started strong in Q1.

Q: Engineering platform centralization and cross-selling?

A: Country-level centralized operations; cross-selling within engineering (internal and with real estate services), with opportunities for growth in Europe.

Q: Real estate services margins, net hires?

A: Margins lighter due to talent acquisition; targeting 4%-5% annual net growth in producers' numbers, focusing on productivity via training, tech, tools.

Q: Engineering growth sustainability, cross-selling?

A: Low teens internal growth in Q1, mid-high single digits expected full year; cross-selling internally and with real estate services, early stages but exciting.

Q: Leasing tough comps, reacceleration, office vs industrial?

A: Tough comps due to lack of large specialty transactions; office leasing strong in many markets, industrial leasing impacted by tariffs but expected mid-single digit growth full year.

Q: US engineering strengths, regional growth opportunities?

A: US engineering diversified, strong in infrastructure, transportation; multiple growth opportunities via M&A and organic growth in various regions.

Q: Tariffs impacting clients, M&A opportunities?

A: Tariffs indirectly impact costs but no material impact seen; M&A opportunities in engineering, project management, and expanding real estate services to include fundraising for infrastructure/data centers.