EX-99.1 2 exh_991.htm EXHIBIT 99.1

Exhibit 99.1

 

 

 

 

Page 2 of 22

 

Colliers International Group Inc.

Consolidated Statements of Earnings (Loss)

(Unaudited)

(in thousands of US dollars, except per share amounts)

 

   Three months   Six months 
   ended June 30   ended June 30 
   2024   2023   2024   2023 
Revenues (note 18)  $1,139,368   $1,078,038   $2,141,348   $2,043,941 
Cost of revenues (exclusive of depreciation and                    
amortization shown below)   687,062    640,650    1,293,307    1,226,910 
Selling, general and administrative expenses   302,934    297,382    602,894    578,921 
Depreciation   15,460    13,464    30,882    26,113 
Amortization of intangible assets   34,385    37,330    69,471    74,173 
Acquisition-related items (note 6)   (15,221)   11,668    (13,281)   38,136 
Loss on disposal of operations   -    2,282    -    2,282 
Operating earnings   114,748    75,262    158,075    97,406 
                     
Interest expense, net   19,376    24,670    39,248    47,502 
Equity earnings from non-consolidated investments   (796)   (532)   (1,232)   (3,686)
Other income   (136)   (354)   (351)   (520)
Earnings before income tax   96,304    51,478    120,410    54,110 
Income tax expense (note 15)   24,377    16,477    34,347    20,016 
Net earnings   71,927    35,001    86,063    34,094 
                     
Non-controlling interest share of earnings   11,224    13,816    20,145    24,757 
Non-controlling interest redemption increment (note 12)   23,979    28,036    16,537    36,340 
                     
Net earnings (loss) attributable to Company  $36,724   $(6,851)  $49,381   $(27,003)
                     
Net earnings (loss) per common share (note 13)                    
Basic  $0.73   $(0.15)  $1.00   $(0.61)
Diluted  $0.73   $(0.16)  $0.99   $(0.61)

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

 

Page 3 of 22

 

Colliers International Group Inc.

Consolidated Statements of Comprehensive Earnings (Loss)

(Unaudited)

(in thousands of US dollars)

 

   Three months   Six months 
   ended June 30   ended June 30 
   2024   2023   2024   2023 
Net earnings  $71,927   $35,001   $86,063   $34,094 
Other comprehensive earnings (loss), net of tax:                    
Change in foreign currency translation   (294)   (2,831)   (7,723)   (2,834)
Reclassification of accumulated foreign currency translation                    
  on disposal of operations   -    541    -    541 
Unrealized gain on interest rate swaps   449    8,419    7,519    4,535 
Unrealized gain on available for sale securities   14    -    14    - 
Pension liability adjustments   -    -    -    (257)
Total other comprehensive gain (loss), net of tax   169    6,129    (190)   1,985 
Comprehensive earnings   72,096    41,130    85,873    36,079 
Less: Comprehensive earnings attributable to non-controlling interests   35,035    42,970    43,299    60,514 
Comprehensive earnings (loss) attributable to Company  $37,061   $(1,840)  $42,574   $(24,435)

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

 

Page 4 of 22

 

Colliers International Group Inc.

Consolidated Balance Sheets

(Unaudited)

(in thousands of US dollars)

 

   June 30, 2024   December 31, 2023 
Assets          
Current assets          
Cash and cash equivalents  $162,625   $181,134 
Restricted cash   78,060    37,941 
Accounts receivable, net of allowance of $28,919 (December 31, 2023 - $36,382)   585,671    643,375 
Contract assets (note 18)   137,860    83,389 
Mortgage warehouse receivables (note 16)   140,974    177,104 
Income tax recoverable   26,939    48,104 
Prepaid expenses and other current assets (note 16)   302,777    258,725 
Warehouse fund assets (note 5)   49,285    44,492 
    1,484,191    1,474,264 
Other receivables   11,719    11,857 
Contract assets (note 18)   20,306    19,691 
Other assets   180,276    157,197 
Warehouse fund assets (note 5)   286,171    47,536 
Fixed assets   201,315    202,837 
Operating lease right-of-use assets   380,699    390,565 
Deferred tax assets, net   58,902    59,468 
Intangible assets (note 7)   1,019,955    1,080,471 
Goodwill   2,028,232    2,038,240 
    4,187,575    4,007,862 
   $5,671,766   $5,482,126 
Liabilities and shareholders' equity          
Current liabilities          
Accounts payable and accrued expenses  $486,538   $535,769 
Accrued compensation   480,440    569,166 
Income tax payable   13,514    16,527 
Contract liabilities (note 18)   51,332    45,293 
Long-term debt - current (note 8)   9,618    1,796 
Contingent acquisition consideration - current (note 16)   33,016    13,944 
Mortgage warehouse credit facilities (note 9)   132,869    168,780 
Operating lease liabilities   87,350    89,938 
Liabilities related to warehouse fund assets (note 5)   146,636    - 
    1,441,313    1,441,213 
Long-term debt (note 8)   1,354,241    1,500,843 
Contingent acquisition consideration (note 16)   9,616    30,768 
Operating lease liabilities   371,618    375,454 
Other liabilities   114,075    120,565 
Deferred tax liabilities, net   37,635    43,191 
Liabilities related to warehouse fund assets (note 5)   43,000    47,536 
    1,930,185    2,118,357 
Redeemable non-controlling interests (note 12)   1,105,008    1,072,066 
Shareholders' equity          
Common shares   1,436,285    1,127,034 
Contributed surplus   125,442    123,394 
Deficit   (291,027)   (332,866)
Accumulated other comprehensive loss   (76,378)   (69,571)
Total Company shareholders' equity   1,194,322    847,991 
Non-controlling interests   938    2,499 
Total shareholders' equity   1,195,260    850,490 
   $5,671,766   $5,482,126 
Commitments and contingencies and subsequent events (note 17 and note 20)          

 

The accompanying notes are an integral part of these interim consolidated financial statements.      

 

 

Page 5 of 22

 

Colliers International Group Inc.

Consolidated Statements of Shareholders' Equity

(Unaudited)

(in thousands of US dollars, except share information)

 

Six months ended June 30, 2024
   Common shares           Accumulated         
   Issued and               other   Non-   Total 
   outstanding       Contributed       comprehensive   controlling   shareholders' 
   shares   Amount   surplus   Deficit   loss   interests   equity 
Balance, December 31, 2023   47,549,376   $1,127,034   $123,394   $(332,866)  $(69,571)  $2,499   $850,490 
Net earnings   -    -    -    86,063    -    -    86,063 
Unrealized gain on investments   -    -    -    -    14    -    14 
Foreign currency translation loss   -    -    -    -    (7,723)   -    (7,723)
Unrealized gain on interest rate                                   
swaps, net of tax   -    -    -    -    7,519    -    7,519 
Other comprehensive earnings                                   
attributable to NCI   -    -    -    -    (6,617)   51    (6,566)
NCI share of earnings   -    -    -    (20,145)   -    125    (20,020)
NCI redemption increment   -    -    -    (16,537)   -    -    (16,537)
Distributions to NCI   -    -    -    -    -    (14)   (14)
Subsidiaries’ equity transactions   -    -    (7,154)   -    -    (1,723)   (8,877)
Subordinate Voting Shares:                                   
Stock option expense   -    -    14,134    -    -    -    14,134 
Stock options exercised   248,000    22,327    (4,932)   -    -    -    17,395 
Dividends   -    -    -    (7,542)   -    -    (7,542)
Issuance of Subordinate                                   
Voting Shares (note 13)   2,479,500    286,924    -    -    -    -    286,924 
Balance, June 30, 2024   50,276,876   $1,436,285   $125,442   $(291,027)  $(76,378)  $938   $1,195,260 

 

Three months ended June 30, 2024
   Common shares           Accumulated         
   Issued and               other   Non-   Total 
   outstanding       Contributed       comprehensive   controlling   shareholders' 
   shares   Amount   surplus   Deficit   loss   interests   equity 
Balance, March 31, 2024   50,231,376   $1,432,085   $126,084   $(320,209)  $(76,715)  $2,857   $1,164,102 
Net earnings   -    -    -    71,927    -    -    71,927 
Unrealized gain on investments   -    -    -    -    14    -    14 
Foreign currency translation loss   -    -    -    -    (294)   -    (294)
Unrealized gain on interest rate                                   
swaps, net of tax   -    -    -    -    449    -    449 
Other comprehensive earnings                                   
attributable to NCI   -    -    -    -    168    1    169 
NCI share of earnings   -    -    -    (11,224)   -    (183)   (11,407)
NCI redemption increment   -    -    -    (23,979)   -    -    (23,979)
Distributions to NCI   -    -    -    -    -    (14)   (14)
Subsidiaries’ equity transactions   -    -    (7,154)   -    -    (1,723)   (8,877)
Subordinate Voting Shares:                                   
Stock option expense   -    -    7,446    -    -    -    7,446 
Stock options exercised   45,500    4,200    (934)   -    -    -    3,266 
Dividends   -    -    -    (7,542)   -    -    (7,542)
Balance, June 30, 2024   50,276,876   $1,436,285   $125,442   $(291,027)  $(76,378)  $938   $1,195,260 

 

 

 

 

Page 6 of 22

 

Colliers International Group Inc.

Consolidated Statements of Shareholders' Equity

(Unaudited)

(in thousands of US dollars, except share information)

 

Six months ended June 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   -    -    -    34,094    -    -    34,094 
Pension liability adjustment,                                   
net of tax   -    -    -    -    (257)   -    (257)
Foreign currency translation loss   -    -    -    -    (2,834)   -    (2,834)
Unrealized gain on interest rate                                   
swaps, net of tax   -    -    -    -    4,535    -    4,535 
Other comprehensive earnings                                   
attributable to NCI   -    -    -    -    583    277    860 
NCI share of earnings   -    -    -    (24,757)   -    1,666    (23,091)
NCI redemption increment   -    -    -    (36,340)   -    -    (36,340)
Distributions to NCI   -    -    -    -    -    (993)   (993)
Disposal of businesses, net   -    -    -    -    -    (32)   (32)
Reclass to net earnings on disposal                                   
of operations   -    -    -    -    541    (1,210)   (669)
Subsidiaries’ equity transactions   -    -    1,481    -    -    -    1,481 
Subordinate Voting Shares:                                   
Convertible Notes redemption   4,015,720    227,101    -    -    -    -    227,101 
Stock option expense   -    -    11,213    -    -    -    11,213 
Stock options exercised   230,500    20,062    (4,491)   -    -    -    15,571 
Dividends   -    -    -    (7,077)   -    -    (7,077)
Balance, June 30, 2023   47,179,376   $1,092,843   $112,707   $(418,279)  $(73,720)  $3,385   $716,936 

 

Three months ended June 30, 2023
   Common shares           Accumulated         
   Issued and               other   Non-   Total 
   outstanding       Contributed       comprehensive   controlling   shareholders' 
   shares   Amount   surplus   Deficit   loss   interests   equity 
Balance, March 31, 2023   43,163,656   $865,742   $106,008   $(404,351)  $(78,731)  $4,603   $493,271 
Net earnings   -    -    -    35,001    -    -    35,001 
Foreign currency translation loss   -    -    -    -    (2,831)   -    (2,831)
Unrealized gain on interest rate                                   
swaps, net of tax   -    -    -    -    8,419    -    8,419 
Other comprehensive earnings                                   
attributable to NCI   -    -    -    -    (1,118)   100    (1,018)
NCI share of earnings   -    -    -    (13,816)   -    739    (13,077)
NCI redemption increment   -    -    -    (28,036)   -    -    (28,036)
Distributions to NCI   -    -    -    -    -    (847)   (847)
Reclass to net earnings on disposal                                   
of operations   -    -    -    -    541    (1,210)   (669)
Subsidiaries’ equity transactions   -    -    1,143    -    -    -    1,143 
Subordinate Voting Shares:                                   
Convertible Notes redemption   4,015,720    227,101    -    -    -    -    227,101 
Stock option expense   -    -    5,556    -    -    -    5,556 
Dividends   -    -    -    (7,077)   -    -    (7,077)
Balance, June 30, 2023   47,179,376   $1,092,843   $112,707   $(418,279)  $(73,720)  $3,385   $716,936 

 

 

Page 7 of 22

 

Colliers International Group Inc.

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands of US dollars)

 

   Three months ended June 30   Six months ended June 30 
   2024   2023   2024   2023 
                 
Cash provided by (used in)                    
Operating activities                    
Net earnings  $71,927   $35,001   $86,063   $34,094 
                     
Items not affecting cash:                    
Depreciation and amortization   49,845    50,794    100,353    100,286 
Loss on disposal of operations   -    2,282    -    2,282 
Gains attributable to mortgage servicing rights   (3,712)   (6,052)   (5,027)   (9,087)
Gains attributable to the fair value of mortgage                    
  premiums and origination fees   (3,424)   (4,009)   (5,623)   (8,026)
Deferred tax   (3,406)   (10,915)   (7,395)   (21,904)
Equity earnings from non-consolidated investments   (796)   (532)   (1,232)   (3,686)
Stock option expense (note 14)   7,446    5,556    14,134    11,213 
Amortization of advisor loans   9,196    8,274    20,094    15,884 
Contingent consideration (note 6)   (21,257)   8,037    (24,925)   32,249 
Other   7,097    9,877    7,077    10,861 
Increase in accounts receivable, prepaid expenses and other assets   (98,930)   (26,970)   (94,289)   (56,725)
Increase (decrease) in accounts payable, accrued expenses and other liabilities   43,740    (2,654)   (2,902)   457 
Increase (decrease) in accrued compensation   59,914    26,678    (87,018)   (153,630)
Contingent acquisition consideration paid   (300)   (2,719)   (3,038)   (2,991)
Proceeds received on sale of mortgage loans   161,159    504,824    460,560    604,072 
Principal funded on originated mortgage loans   (268,931)   (456,216)   (417,457)   (640,724)
Increase (decrease) in mortgage warehouse credit facilities   111,466    (42,323)   (35,911)   45,722 
Sales to AR Facility, net (note 10)   20,155    40    110    6,058 
Net cash provided by (used in) operating activities   141,189    98,973    3,574    (33,595)
                     
Investing activities                    
Acquisitions of businesses, net of cash acquired (note 4)   (17,772)   (59,698)   (17,772)   (59,698)
Purchases of fixed assets   (12,480)   (22,179)   (29,353)   (41,062)
Advisor loans issued   (23,507)   (14,787)   (39,895)   (35,558)
Purchases of warehouse fund assets   (220,917)   (2,580)   (257,343)   (40,576)
Proceeds from disposal of warehouse fund assets   71,494    -    76,438    44,000 
Collections of AR facility deferred purchase price (note 10)   34,930    28,539    68,848    59,311 
Other investing activities   789    6,311    (18,238)   6,015 
Net cash used in investing activities   (167,463)   (64,394)   (217,315)   (67,568)
                     
Financing activities                    
Increase in long-term debt   314,021    222,698    640,696    579,782 
Repayment of long-term debt   (207,493)   (175,450)   (639,220)   (360,114)
Issuance of subordinate voting shares (note 13)   -    -    286,924    - 
Purchases of non-controlling interests' subsidiary shares, net   (7,083)   (3,789)   (9,737)   (16,333)
Contingent acquisition consideration paid   -    (547)   -    (1,082)
Proceeds received on exercise of stock options   3,267    -    17,396    15,571 
Dividends paid to common shareholders   -    -    (7,132)   (6,440)
Distributions paid to non-controlling interests   (38,521)   (40,059)   (48,827)   (51,120)
Other financing activities   (303)   (803)   (303)   (852)
Net cash provided by financing activities   63,888    2,050    239,797    159,412 
                     
Effect of exchange rate changes on cash, cash equivalents and restricted cash   (2,386)   (1,704)   (4,446)   287 
                     
Net change in cash, cash equivalents and restricted cash   35,228    34,925    21,610    58,536 
                     
Cash, cash equivalents and restricted cash, beginning of period   205,457    222,653    219,075    199,042 
Cash, cash equivalents and restricted cash, end of period  $240,685   $257,578   $240,685   $257,578 

 

The accompanying notes are an integral part of these interim consolidated financial statements.

 

Page 8 of 22

 

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 (68 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 Company’s audited consolidated financial statements for the year ended December 31, 2023.

 

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 June 30, 2024 and the results of operations and its cash flows for the three and six months ended June 30, 2024 and 2023. All such adjustments are of a normal recurring nature. The results of operations for the six-month period ended June 30, 2024, are not necessarily indicative of the results to be expected for the year ending December 31, 2024.

 

3.Impact of recently issued accounting standards

 

Recently adopted accounting guidance

 

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

 

Improvements to Reportable Segment Disclosures

In November 2023, FASB issued ASU No. 2023-07 Improvements to Reportable Segment Disclosures. The amendments in this update improve financial reporting by requiring disclosure of incremental segment information on an interim and annual basis, primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted with retrospective application to all prior periods presented in the financial statements. The Company is currently assessing the impacts of this ASU on its disclosures for the year ended December 31, 2024.

 

 

Page 9 of 22

 

Improvements to Income Tax Disclosures

In December 2023, FASB issued ASU No. 2023-09 Improvements to Income Tax Disclosures. The amendments in this update encourage transparency in income tax disclosures by requiring consistent categories and greater disaggregation of information in the rate reconciliation and income taxes paid disclosures. The amendments are effective for annual periods beginning after December 15, 2024 with early adoption permitted and should be applied on a prospective basis, however, retrospective application is permitted. The Company is currently assessing the impacts of this ASU on its disclosures.

 

4.Acquisitions

 

During the six months ended June 30, 2024, the Company acquired a controlling interest in one business in the Americas, Lanard & Axilbund, LLC (“Philadelphia”), a commercial real estate services firm in the United States.

 

As of June 30, 2024, the Company has not completed its analysis to assign fair values to all identifiable tangible and intangible assets acquired in 2024 and, therefore, the purchase price allocation for the acquired business is preliminary and subject to change within the respective measurement period which will not extend beyond one year from the acquisition date. The acquisition date fair value of consideration transferred and the preliminary purchase price allocation are summarized as follows:

 

Current assets, excluding cash  $11,118 
Non-current assets   4,446 
Current liabilities   5,717 
Long-term liabilities   584 
   $9,263 
      
Cash consideration, net of cash acquired of $1,397  $17,772 
Acquisition date fair value of contingent consideration   4,753 
Total purchase consideration  $22,525 
      
Acquired intangible assets (note 7)     
Finite life  $6,631 
Goodwill  $6,631 

 

During the six months ended June 30, 2024, the Company made no significant adjustments to its purchase consideration for acquisitions completed in 2023.

 

The purchase price allocation of acquisitions result in the recognition of goodwill. The primary factors contributing to goodwill acquired in the six months ended June 30, 2024 are assembled workforces, synergies with existing operations and future growth prospects. Specifically, the synergies in the Company’s acquisitions primarily relate to diversifying the Company’s client base and service offerings, cross-sell opportunities, increasing market share, and geographic expansion. Future growth prospects in the acquired businesses are consistent with long-term growth trends in the commercial real estate services and asset management industries. For acquisitions completed during the six months ended June 30, 2024, goodwill in the amount of $6,631 is deductible for income tax purposes (December 31, 2023 - $22,168).

 

2023 acquisitions

During the six months ended June 30, 2023, the Company acquired controlling interests in three businesses operating in the Americas and Asia Pacific. The acquisition date fair value of consideration transferred consisted of $59,698 in cash (net of cash acquired of $7,274).

 

 

 

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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 June 30, 2024, was $42,632 (December 31, 2023 - $44,712). See note 16 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 June 30, 2024, was $68,561 (December 31, 2023 - $90,480). 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 $332,122 to a maximum of $411,392. These contingencies will expire during the period extending to March 2029.

 

5.Warehouse fund assets

 

During the six months ended June 30, 2024, the Company acquired two land assets in the US and infrastructure debt and equity securities in relation to seeding new funds. In addition, the Company divested itself of two assets which were held at December 31, 2023. There were no significant earnings recognized in the three or six months ended June 30, 2024 related to warehouse fund assets.

 

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 warehouse fund assets in the three and six months ended June 30, 2024, or 2023.

 

The following table summarizes the warehouse fund assets:

 

   June 30,   December 31, 
   2024   2023 
Warehouse fund assets          
Warehouse fund assets  $49,285   $44,492 
Warehouse fund assets - non-current  $286,171   $47,536 
Total warehouse fund assets  $335,456   $92,028 
Liabilities related to warehouse fund assets          
Liabilities related to warehouse fund assets  $146,636   $- 
Liabilities related to warehouse fund assets - non-current  $43,000   $47,536 
Total liabilities related to warehouse fund assets  $189,636   $47,536 
Net warehouse fund assets  $145,820   $44,492 

 

6.Acquisition-related items

 

   Three months ended   Six months ended 
   June 30   June 30 
   2024   2023   2024   2023 
Transaction costs  $6,037   $3,631   $11,645   $5,887 
Contingent consideration fair value adjustments (note 16)   (2,810)   473    (6,063)   2,684 
Contingent consideration compensation expense (note 4)   (18,448)   7,564    (18,863)   29,565 
   $(15,221)  $11,668   $(13,281)  $38,136 

 

 

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7.Intangible assets

 

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     
June 30, 2024  amount   amortization   Net 
Indefinite life intangible assets:               
Licenses  $29,200   $-   $29,200 
Trademarks and trade names   23,282    -    23,282 
   $52,482   $-   $52,482 
Finite life intangible assets:               
Customer lists and relationships  $706,459   $244,700   $461,759 
Investment management contracts   589,975    208,608    381,367 
Mortgage servicing rights ("MSRs")   196,448    92,882    103,566 
Trademarks and trade names   27,519    9,116    18,403 
Management contracts and other   12,282    9,904    2,378 
   $1,532,683   $565,210   $967,473 
   $1,585,165   $565,210   $1,019,955 

 

   Gross         
   carrying   Accumulated     
December 31, 2023  amount   amortization   Net 
Indefinite life intangible assets:               
Licenses  $29,200   $-   $29,200 
Trademarks and trade names   23,408    -    23,408 
   $52,608   $-   $52,608 
Finite life intangible assets:               
Customer lists and relationships  $707,355   $218,435   $488,920 
Investment management contracts   591,826    181,653    410,173 
Mortgage servicing rights ("MSRs")   188,489    84,058    104,431 
Trademarks and trade names   27,563    7,486    20,077 
Management contracts and other   13,893    10,547    3,346 
Backlog   6,349    5,433    916 
   $1,535,475   $507,612   $1,027,863 
   $1,588,083   $507,612   $1,080,471 

 

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 six-month period ended June 30, 2024, or 2023.

 

The following table summarizes activity related to the Company’s mortgage servicing rights for the year ended June 30, 2024:

 

   2024 
Balance, January 1  $104,431 
Additions, following the sale of loan   7,958 
Amortization   (7,652)
Prepayments and write-offs   (1,171)
Balance, June 30  $103,566 

 

 

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The following is the estimated future expense for amortization of the finite life intangible assets for each of the next five years and thereafter:

 

For the year ended December 31,  MSRs   Other
Intangibles
   Total 
2024 (remaining six months)  $6,596   $53,235   $59,831 
2025   11,936    103,773    115,709 
2026   11,256    101,937    113,193 
2027   10,475    93,835    104,310 
2028   9,742    87,898    97,640 
Thereafter   53,561    423,229    476,790 
   $103,566   $863,907   $967,473 

 

8.Long-term debt

 

On April 28, 2023, the Company increased the multi-currency, sustainability-linked senior unsecured revolving credit facility (the “Revolving Credit Facility”) by $250,000 from $1,500,000 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. For the three-month period ended June 30, 2024, the weighted average interest rate on borrowings under the Revolving Credit Facility was 6.9% (2023 – 6.5%). The Revolving Credit Facility had $891,175 of available undrawn credit as at June 30, 2024 ($759,358 as at December 31, 2023). As at June 30, 2024, letters of credit in the amount of $17,504 were outstanding against the Revolving Credit Facility ($13,532 as at December 31, 2023). 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 senior unsecured notes with a carrying value of $507,450. A summary of the unsecured senior notes is provided in the table below:

 

      Maturity      Interest 
   Term  Date  Carrying Value   Rate 
Senior Notes due 2028 - €210,000   10-year  May 30, 2028  $224,442    2.23%
Senior Notes due 2031 - €125,000   10-year  October 7, 2031   133,589    1.52%
Senior Notes due 2031 - $150,000   10-year  October 7, 2031   149,419    3.02%
         $507,450      

 

The Senior Notes due 2028 and the Senior Notes due 2031 are each held by a group of institutional investors.

 

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 June 30, 2024. The Company is limited from undertaking certain mergers, acquisitions and dispositions without prior approval.

 

9.Mortgage warehouse credit facilities

 

The following table summarizes the Company’s mortgage warehouse credit facilities:

 

      June 30, 2024   December 31, 2023 
   Current  Maximum   Carrying   Maximum   Carrying 
   Maturity  Capacity   Value   Capacity   Value 
Facility A - SOFR plus 1.40%  October 17, 2024  $275,000   $132,869   $275,000   $168,780 
Facility B - SOFR plus 1.45%  On demand   125,000    -    125,000    - 
      $400,000   $132,869   $400,000   $168,780 

 

 

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Colliers Mortgage LLC (“Colliers Mortgage”) has warehouse credit facilities which are used exclusively for the purpose of funding warehouse mortgages receivable. The mortgage warehouse credit facilities are recourse only to Colliers Mortgage, are revolving and are secured by warehouse mortgages financed on the facilities.

 

10.AR Facility

 

In 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 June 26, 2024, the Company renewed its AR Facility with two third-party financial institutions, with a term extending to December 29, 2025 and a capacity of $200,000. As of June 30, 2024, the Company’s draw under the AR Facility was $199,973.

 

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 June 30, 2024, 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 June 30, 2024, the DPP was $114,905 (December 31, 2023 - $107,743) and was included in Prepaid expenses and other current assets on the Consolidated Balance Sheets. For the six months ending June 30, 2024, Receivables sold under the AR Facility were $828,572 and cash collections from customers on Receivables sold were $825,701, 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 June 30, 2024, the outstanding principal on trade accounts receivable, net of expected credit losses, sold under the AR Facility was $222,049; and the outstanding principal on contract assets, current and non-current, sold under the AR Facility was $122,072. See note 16 for fair value information on the DPP.

 

For the six months ended June 30, 2024, the Company recognized a loss related to Receivables sold of $71 (2023 - $108 gain) that was recorded in other income 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 six months ended June 30, 2024, were $76,874.

 

11.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:

 

   June 30,   December 31, 
   2024   2023 
Non-consolidated investments  $31,824   $29,631 
Co-investment commitments   62,307    42,395 
Maximum exposure to loss  $94,131   $72,026 

 

 

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12.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:

 

   2024 
Balance, January 1  $1,072,066 
RNCI share of earnings   20,020 
RNCI redemption increment   16,537 
Distributions paid to RNCI   (51,598)
Purchase of interests from RNCI   (2,446)
Sale of interests to RNCI   1,552 
RNCI recognized on warehouse fund assets (note 5)   48,877 
Balance, June 30  $1,105,008 

 

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 June 30, 2024, was $937,390 (December 31, 2023 - $943,235). 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 June 30, 2024, approximately 8,470,000 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.

 

13.Net earnings per common share

 

The stock options were anti-dilutive for the three and six-month period ended June 30, 2023 and dilutive for the three and six-month period ended June 30, 2024.

 

For the three and six-month period ended June 30, 2023, diluted EPS is calculated using the “if-converted” method of calculating earnings per share in relation to the Company’s 4.0% Convertible Senior Subordinated Notes due 2025 (the “Convertible Notes”) which were fully converted or redeemed by June 1, 2023. 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 dilutive for the three month period ended June 30, 2023 and anti-dilutive for the six-month period ended June 30, 2023.

 

 

 

Page 15 of 22

The following table reconciles the basic and diluted common shares outstanding:

 

   Three months ended   Six months ended 
   June 30   June 30 
(in thousands)  2024   2023   2024   2023 
Net earnings (loss) attributable to Company  $36,724   $(6,851)  $49,381   $(27,003)
After-tax interest on Convertible Notes   -    (476)   -    - 
Adjusted numerator considering the If-Converted Method  $36,724   $(7,327)  $49,381   $(27,003)
                     
Weighted average common shares - Basic   50,239    45,069    49,374    44,064 
Exercise of stock options   240    -    297    - 
Conversion of Convertible Notes   -    293    -    - 
Weighted average common shares - Diluted   50,479    45,362    49,671    44,064 

 

On April 4, 2023, the Company issued a notice of redemption to all holders of the Convertible Notes. During the period leading up to the redemption date of June 1, 2023, $230,000 of Convertible Notes were converted or redeemed resulting in the issuance of 4,015,720 Subordinate Voting Shares.

 

On February 28, 2024, the Company issued 2,479,500 Subordinate Voting Shares for gross proceeds of $300,019. The total proceeds, net of commissions and fees, were recorded in common shares. The net proceeds were used to repay balances outstanding on the Revolving Credit Facility.

 

14.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 June 30, 2024, there were 1,597,300 options available for future grants.

 

Grants under the Company’s stock option plan are equity-classified awards.

 

Stock option activity for the six months ended June 30, 2024 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, 2023   3,242,250   $101.73           
Granted   5,000    112.94           
Exercised   (248,000)   70.14           
Shares issuable under options -                    
June 30, 2024   2,999,250   $104.36    2.9   $38,958 
Options exercisable - June 30, 2024   1,155,477   $99.72    2.0   $21,467 

 

The amount of compensation expense recorded in the statement of earnings for the three and six months ended June 30, 2024 was $7,446 and $14,134 (2023 - $5,556 and $11,213). As of June 30, 2024, there was $38,106 of unrecognized compensation cost related to non-vested awards which is expected to be recognized over the next 4 years. During the six-month period ended June 30, 2024, the fair value of options vested was $759 (2023 - $3,067).

 

 

 

Page 16 of 22

 

15.Income tax

 

Income tax expense for the six months ended June 30, 2024, reflected an effective tax rate of 28.5% (2023 - 37.0%) relative to the combined statutory rate of approximately 26.5% (2023 - 26.5%). The current period’s tax rate was reduced by the recovery of contingent acquisition consideration associated with an investment in a UK flowthrough entity, on which no tax expense was recognizable. The tax rates of both the current period and prior period were impacted by valuation allowances on losses incurred by certain subsidiaries and permanent non-deductible expenses.

 

16.Financial instruments

 

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 June 30, 2024:

 

   Level 1   Level 2   Level 3 
Assets               
   Cash equivalents  $3,839   $-   $- 
   Equity securities   8,685    12    - 
   Debt securities   -    45,560    - 
   Mortgage derivative assets   -    -    6,915 
   Mortgage warehouse receivables   -    140,974    - 
   Interest rate swap assets   -    13,035    - 
   Deferred Purchase Price on AR Facility   -    -    114,905 
Total assets  $12,524   $199,581   $121,820 
                
Liabilities               
   Mortgage derivative liabilities  $-   $-   $4,641 
   Contingent consideration liabilities   -    -    42,632 
Total liabilities  $-   $-   $47,273 

 

Equity securities, debt securities, mortgage derivative assets, interest rate swap assets and the deferred purchase price on the AR Facility were included in prepaid expenses and other current assets on the consolidated balance sheets. 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 six months ended June 30, 2024.

 

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 US 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.

 

 

Page 17 of 22

 

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 comprise the following:

 

   2024 
Balance, January 1  $3,677 
Settlements   (10,065)
Realized gains recorded in earnings   6,388 
Unrealized gains recorded in earnings   2,274 
Balance, June 30  $2,274 

 

Mortgage warehouse receivables

Mortgage 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 mortgage warehouse receivables and proceeds received from the sale of mortgage loans to third party investors reduce mortgage warehouse receivables. As at June 30, 2024, 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 5.0% to 7.0% depending upon the aging of the Receivables. See note 10 for information on the AR Facility.

 

Changes in the fair value of the DPP comprises the following:

 

   2024 
Balance, January 1  $107,743 
Additions to DPP   76,874 
Collections on DPP   (68,848)
Fair value adjustment   (71)
Foreign exchange and other   (793)
Balance, June 30  $114,905 

 

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 June 30, 2024.

 

 

Page 18 of 22

 

   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 A  April 28, 2023  May 27, 2027  $100,000   SOFR   3.7250%
2023 IRS B  December 5, 2023  May 27, 2027  $100,000   SOFR   4.0000%

 

2022 IRS A, 2022 IRS B, 2023 IRS A and 2023 IRS B (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”). As at June 30, 2024, unrealized gains of $13,035 (December 31, 2023 - $2,805) on the Designated IRSs were included in AOCI.

 

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 6.6%). 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 $1,000. See note 4 for discussion on contingent acquisition consideration.

 

Changes in the fair value of the contingent consideration liability comprises the following:

 

   2024 
Balance, January 1  $44,712 
Amounts recognized on acquisitions   4,753 
Fair value adjustments (note 6)   (6,063)
Other   (770)
Balance, June 30  $42,632 
      
Less: current portion  $33,016 
Non-current portion  $9,616 

 

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.

 

The carrying amount and the estimated fair value of Senior Notes is 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.

 

 

   June 30, 2024   December 31, 2023 
   Carrying   Fair   Carrying   Fair 
   amount   value   amount   value 
Senior Notes  $507,450   $434,603   $518,982   $458,377 

 

 

 

Page 19 of 22

 

17.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 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 16, 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 June 30, 2024, the Company has funded and sold loans subject to such loss sharing obligations with an aggregate unpaid principal balance of approximately $5,303,000. As at June 30, 2024, the loss reserve was $13,169 (December 31, 2023 - $12,837) and was included within Other liabilities on the consolidated balance sheets.

 

Pursuant to its licenses with Fannie Mae, Ginnie Mae and the Department of Housing and Urban Development, 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. As at June 30, 2024, Colliers Mortgage was in compliance with all such requirements.

 

 

 

 

 

Page 20 of 22

 

18.Revenue

 

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 June 30,                    
2024                        
Leasing  $223,260   $34,231   $31,427   $-   $-   $288,918 
Capital Markets   127,529    23,151    32,116    -    -    182,796 
E&D and Project management   174,689    58,523    32,767    -    -    265,979 
Property management   83,053    22,021    29,222    -    -    134,296 
Valuation and advisory   48,181    38,295    22,366    -    -    108,842 
IM - Advisory and other   -    -    -    126,051    -    126,051 
IM - Incentive Fees   -    -    -    -    -    - 
Other   25,967    2,429    3,986    -    104    32,486 
Total Revenue  $682,679   $178,650   $151,884   $126,051   $104   $1,139,368 
2023                              
Leasing  $194,246   $30,333   $32,105   $-   $-   $256,684 
Capital Markets   125,390    23,436    34,090    -    -    182,916 
E&D and Project management   165,652    63,406    29,211    -    -    258,269 
Property management   78,505    20,954    28,602    -    -    128,061 
Valuation and advisory   44,135    34,451    27,106    -    -    105,692 
IM - Advisory and other   -    -    -    118,860    -    118,860 
IM - Incentive Fees   -    -    -    -    -    - 
Other   23,404    1,238    2,801    -    113    27,556 
Total Revenue  $631,332   $173,818   $153,915   $118,860   $113   $1,078,038 
                               
Six months ended June 30,                              
2024                              
Leasing  $419,407   $58,377   $54,371   $-   $-   $532,155 
Capital Markets   226,674    39,231    55,624    -    -    321,529 
E&D and Project management   338,796    108,382    58,847    -    -    506,025 
Property management   165,380    43,248    58,379    -    -    267,007 
Valuation and advisory   91,705    70,534    45,119    -    -    207,358 
IM - Advisory and other   -    -    -    245,572    -    245,572 
IM - Incentive Fees   -    -    -    3,000    -    3,000 
Other   47,128    5,446    5,901    -    227    58,702 
Total Revenue  $1,289,090   $325,218   $278,241   $248,572   $227   $2,141,348 
                               
2023                              
Leasing  $382,666   $55,969   $56,436   $-   $-   $495,071 
Capital Markets   238,182    41,749    54,825    -    -    334,756 
E&D and Project management   306,270    112,986    53,655    -    -    472,911 
Property management   157,873    39,720    56,789    -    -    254,382 
Valuation and advisory   85,483    63,875    46,556    -    -    195,914 
IM - Advisory and other   -    -    -    239,606    -    239,606 
IM - Incentive Fees   -    -    -    -    -    - 
Other   42,409    2,890    5,747    -    255    51,301 
Total Revenue  $1,212,883   $317,189   $274,008   $239,606   $255   $2,043,941 

 

 

Page 21 of 22

 

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”). During the three and six months ended June 30, 2024 - $8,648 and $13,097 of Capital Markets revenue (2023 - $11,696 and $21,489) and $12,414 and $23,814 of Other Revenue (2023 - $10,870 and $21,729) respectively, was excluded from the scope of ASC 606. Substantially all of these revenues were included within the Americas segment.

 

Contract balances

As at June 30, 2024, the Company had contract assets totaling $158,166 of which $137,860 was current ($103,080 as at December 31, 2023 - of which $83,389 was current). During the six months ended June 30, 2024, approximately 68% of the current contract assets were moved to accounts receivable or sold under the AR Facility (see note 10).

 

As at June 30, 2024, the Company had contract liabilities (all current) totaling $51,332 ($45,293 as at December 31, 2023). $3,520 and $41,710 of the contract liability balance at the beginning of the year was recognized to revenue in the three and six months ended June 30, 2024, respectively (2023 - $1,220 and $18,572)

 

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.

 

19.Segmented information

 

Operating segments

Colliers has identified four reportable operating segments. Three segments are grouped geographically into Americas, Asia Pacific and EMEA. The IM 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 costs of global administrative functions and the corporate head office.

 

OPERATING SEGMENTS

 

           Asia             
   Americas   EMEA   Pacific   IM   Corporate   Consolidated 
                         
Three months ended June 30                    
2024                              
Revenues  $682,679   $178,650   $151,884   $126,051   $104   $1,139,368 
Depreciation and amortization   21,181    7,017    2,963    18,023    661    49,845 
Operating earnings (loss)   53,001    (661)   21,567    55,032    (14,191)   114,748 
                               
2023                              
Revenues  $631,332   $173,818   $153,915   $118,860   $113   $1,078,038 
Depreciation and amortization   21,293    8,269    2,771    17,813    648    50,794 
Operating earnings (loss)   46,450    (5,053)   19,554    26,407    (12,096)   75,262 
                               

 

 

 

Page 22 of 22

 

           Asia             
   Americas   EMEA   Pacific   IM   Corporate   Consolidated 
                         
Six months ended June 30                              
2024                              
Revenues  $1,289,090   $325,218   $278,241   $248,572   $227   $2,141,348 
Depreciation and amortization   42,738    14,247    5,991    36,061    1,316    100,353 
Operating earnings (loss)   82,038    (21,122)   33,107    93,912    (29,860)   158,075 
                               
2023                              
Revenues  $1,212,883   $317,189   $274,008   $239,606   $255   $2,043,941 
Depreciation and amortization   39,762    17,776    5,781    35,689    1,278    100,286 
Operating earnings (loss)   79,321    (30,087)   24,593    41,211    (17,632)   97,406 

 

Geographic information

Revenues in each geographic region are reported by customer locations except for IM where revenues are reported by the location of the fund management.

 

GEOGRAPHIC INFORMATION  

 

   Three months ended   Six months ended 
   June 30   June 30 
   2024   2023   2024   2023 
United States                    
Revenues  $633,544   $589,427   $1,214,050   $1,157,642 
Total long-lived assets             2,262,149    2,328,498 
                     
Canada                    
Revenues  $124,738   $111,626   $226,278   $207,542 
Total long-lived assets             108,599    78,730 
                     
Euro currency countries                    
Revenues  $98,036   $98,033   $179,947   $184,428 
Total long-lived assets             360,535    370,821 
                     
Australia                    
Revenues  $71,145   $75,062   $122,762   $127,662 
Total long-lived assets             109,139    114,890 
                     
United Kingdom                    
Revenues  $70,699   $61,821   $133,389   $116,332 
Total long-lived assets             511,120    527,512 
                     
China                    
Revenues  $19,895   $18,867   $39,262   $39,107 
Total long-lived assets             6,649    9,113 
                     
Other                    
Revenues  $121,311   $123,202   $225,660   $211,228 
Total long-lived assets             272,010    285,641 
                     
Consolidated                    
Revenues  $1,139,368   $1,078,038   $2,141,348   $2,043,941 
Total long-lived assets             3,630,201    3,715,205 

 

20.Subsequent event

 

Acquisitions

On July 29, 2024, the Company completed the acquisition of an 89.2% equity interest in Englobe Corporation, a Canadian multi-discipline engineering, environmental and inspection services firm, for a cash purchase price of $474,700. The acquisition will be accounted for using the acquisition method for business combinations.

 

 

 

 

 

 

Page 2 of 16

 

COLLIERS INTERNATIONAL GROUP INC.

Management’s discussion and analysis

For the six months ended June 30, 2024

(in US dollars)

August 7, 2024

 

The following management’s discussion and analysis (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes of Colliers International Group Inc. (“we,” “us,” “our,” the “Company” or “Colliers”) for the three and six months ended June 30, 2024 and the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2023. 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 six months ended June 30, 2024 and up to and including August 7, 2024.

 

Additional information about the Company can be found on SEDAR+ at www.sedarplus.ca and on EDGAR at www.sec.gov.

 

This MD&A includes references to “internal revenue growth rate”, “Adjusted EBITDA”, “local currency revenue and Adjusted EBITDA growth rate”, “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 June 30, 2024 were $1.14 billion, an increase of 6% versus the prior year (6% in local currency). The increase was attributable to growth across all service lines and segments, led by Leasing. GAAP diluted net earnings per share were $0.73 as compared to a loss of $0.16 in the prior year quarter. Adjusted earnings per share (see “Reconciliation of non-GAAP financial measures” below) were $1.36 relative to $1.31 in the prior year quarter. The increase was attributable to (i) higher operating earnings; (ii) lower interest expense attributable to debt paydown with proceeds from the $300 million bought deal public offering of 2,479,500 subordinate voting shares in February 2024 (the “Offering”) and (iii) lower income tax rate partly offset by (i) higher depreciation expense and (ii) the dilutive impact of the Offering. GAAP diluted net earnings per share and adjusted earnings per share for the three months ended June 30, 2024 would have been higher by approximately $0.01 and $0.01, respectively, excluding foreign exchange impacts.

 

In April 2024, the Company acquired its affiliate in Philadelphia, a commercial real estate services firm with 130 professionals in the US mid-Atlantic region providing landlord agency, tenant representation, investment sales brokerage and property management services.

 

Subsequent to quarter end, in July 2024, the Company acquired 89.2% equity interest in Englobe Corporation (“Englobe”), a Canadian multi-discipline engineering, environmental and inspection services firm for a cash purchase price of $474.7 million. Headquartered in Quebec, Englobe’s 2,800 professionals provide civil, buildings, geotechnical, and environmental engineering, material testing and related consulting services to public and private sector clients primarily in the transportation, water, buildings, and power end markets. Englobe will be rebranded as Colliers in 2025.

 

 

Page 3 of 16

 

Consolidated revenues by line of service

 

   Three months ended   Change  Change  Six months ended   Change  Change
(in thousands of US$)  June 30   in US$  in LC  June 30   in US$  in LC
(LC = local currency)  2024   2023   %  %  2024   2023   %  %
                             
Outsourcing & Advisory  $541,603    519,578   4%  5%  $1,039,092    974,508   7%  7%
Investment Management (1)   126,051    118,860   6%  6%   248,572    239,606   4%  4%
Leasing   288,918    256,684   13%  13%   532,155    495,071   7%  8%
Capital Markets   182,796    182,916   0%  1%   321,529    334,756   -4%  -3%
Total revenues  $1,139,368    1,078,038   6%  6%  $2,141,348    2,043,941   5%  5%

(1) Investment Management local currency revenues, excluding pass-through carried interest, were up 6% and 3% for the three and six-month periods ended June 30, 2024, respectively.

 

Results of operations – three months ended June 30, 2024

For the three months ended June 30, 2024, revenues were $1.14 billion, up 6% relative to the prior year quarter (6% in local currency) on growth across all service lines, led by Leasing. Internally generated revenues were up 5% while acquisitions contributed 1% to local currency revenue growth.

 

The GAAP operating earnings for the second quarter were $114.7 million versus $75.3 million in the prior year quarter. The operating earnings margin was 10.1% as compared to 7.0% in the prior year quarter, primarily attributable to (i) higher revenues across all service lines, especially Leasing; (ii) favourable service mix; (iii) the favourable impact of recent acquisitions; and (iv) downward contingent acquisition consideration fair value adjustments related to recent acquisitions. Adjusted EBITDA (see “Reconciliation of non-GAAP financial measures” below) of $155.6 million was up 6% versus $147.1 million reported in the prior year quarter primarily attributable to the first three factors noted above. The Adjusted EBITDA margin was 13.7% in the quarter, up 10 basis points compared to the prior year quarter.

 

Depreciation expense was $15.5 million relative to $13.5 million in the prior year quarter with the increase attributable to increased investments in software and the impact of recent business acquisitions.

 

Amortization expense was $34.4 million, versus $37.3 million recorded in the prior year quarter.

 

Net interest expense was $19.4 million, versus $24.7 million recorded in the prior year quarter with the proceeds from the Offering used to pay down floating rate debt in our $1.75 billion multi-currency Revolving Credit Facility (“Revolving Credit Facility”). The average interest rate on debt during the period was 4.7%, relative to 4.6% in the prior year quarter.

 

Consolidated income tax expense for the quarter was $24.4 million, relative to $16.5 million in the prior year quarter. The current quarter’s effective tax rate of 25.3% versus 32.0% in the prior year quarter. The current quarter’s tax rate was reduced by the recovery of contingent acquisition consideration associated with an investment in a UK flowthrough entity, on which no tax expense was recognizable.

 

Net earnings for the quarter were $71.9 million versus a $35.0 million in the prior year quarter.

 

Revenues in the Americas region totalled $682.7 million, up 8% (8% in local currency) versus $631.3 million in the prior year quarter, primarily attributable to higher Leasing activity as well as robust broad-based growth in Outsourcing & Advisory. Capital Markets revenues were up 2%. Adjusted EBITDA was $75.7 million, up 9% (9% in local currency) relative to the prior year quarter on higher revenues. The GAAP operating earnings were $53.0 million, relative to $46.5 million in the prior year quarter.

 

Revenues in the EMEA region totalled $178.7 million, up 3% (3% in local currency) compared to $173.8 million in the prior year quarter, attributable to higher Leasing activity and modest growth in Outsourcing & Advisory revenues, while Capital Markets revenues were essentially flat. Adjusted EBITDA was $6.8 million, up 7% (6% in local currency) compared to $6.3 million in the prior year quarter on a lower cost base. The GAAP operating loss was $0.7 million compared to a loss of $5.1 million in the prior year quarter.

 

 

Page 4 of 16

 

Revenues in the Asia Pacific region totalled $151.9 million, down 1% (up 1% in local currency), compared to $153.9 million in the prior year quarter. Foreign exchange headwinds impacted revenues by 2%. Adjusted EBITDA was $24.6 million, up 7% (9% in local currency) primarily on lower operating costs. The GAAP operating earnings were $21.6 million, versus $19.6 million in the prior year quarter.

 

Investment Management revenues were $126.1 million relative to $118.9 million in the prior year quarter, up 6% (6% in local currency) on incremental revenues from new investor capital commitments. No passthrough revenues from historical carried interest were recognized in the current and prior year quarters. Adjusted EBITDA was $50.5 million, up 1% (1% in local currency) compared to the prior year quarter on higher revenues, partly offset by increased investments in new products, strategies and fundraising capabilities. The GAAP operating earnings were $55.0 million in the quarter versus $26.4 million in the prior year quarter. AUM was $96.4 billion as of June 30, 2024 compared to $96.3 billion as of March 31, 2024.

 

Unallocated global corporate costs as reported in Adjusted EBITDA were $1.9 million in the second quarter, flat relative to the prior year quarter. The corporate GAAP operating loss for the quarter was $14.2 million, versus $12.1 million in the second quarter of 2023.

 

Results of operations – six months ended June 30, 2024

For the six months ended June 30, 2024, revenues were $2.14 billion, up 5% compared to the prior year period (5% in local currency). Internally generated revenues were up 4% on robust growth in Leasing and Outsourcing & Advisory, partly offset by a market-driven slowdown in Capital Markets activity. Acquisitions contributed 1% to local currency revenue growth versus the prior year period.

 

Operating earnings for the six months ended June 30, 2024 were $158.1 million relative to $97.4 million in the prior year period. The operating earnings margin was 7.4% versus 4.8% in the prior year period. The increase in margin was attributable to (i) operating leverage from higher revenues; (ii) the favourable impact of recent acquisitions; and (iii) downward contingent acquisition consideration fair value adjustments related to recent acquisitions. Adjusted EBITDA (see “Reconciliation of non-GAAP financial measures” below) was $264.3 million, up 5% versus $251.7 million in the prior year period. The Adjusted EBITDA margin was 12.3%, flat compared to the prior year period.

 

Depreciation expense was $30.9 million relative to $26.1 million in the prior year period, with the increase attributable to the impact of recent business acquisitions and increased investments in office leaseholds.

 

Amortization expense was $69.5 million relative to $74.2 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 $39.2 million compared to $47.5 million in the prior year period with the decrease attributable to lower floating rate debt in our Revolving Credit Facility as a result of paydown from the proceeds from the Offering. The average interest rate on our debt during the period was 4.8%, versus 4.4% in the prior year period.

 

Consolidated income tax expense for the six months ended June 30, 2024 was $34.3 million, relative to $20.0 million in the prior year period. The effective tax rate was 28.5% compared to 37.0% in the prior year period. The current period’s tax rate was reduced by the recovery of contingent acquisition consideration associated with an investment in a UK flowthrough entity, on which no tax expense was recognizable.

 

Net earnings for the six months ended June 30, 2024 were $86.1 million compared to $34.1 million in the prior year period.

 

Revenues in the Americas region totalled $1.29 billion for the six months ended June 30, 2024 compared to $1.21 billion in the prior year period, up 6% (6% in local currency). The increase was attributable to higher Leasing and Outsourcing & Advisory revenues as well as the favourable impact of recent acquisitions, partly offset by lower Capital Markets activity. Adjusted EBITDA was $130.6 million, up 6% (6% in local currency) from $123.5 million in the prior year period, on higher revenues as well as lower operating costs. The GAAP operating earnings were $82.0 million, versus $79.3 million in the prior year period.

 

 

Page 5 of 16

 

EMEA region revenues were $325.2 million for the six months ended June 30, 2024 compared to $317.2 million in the prior year period, up 3% (1% in local currency). The increase was attributable to solid growth in Leasing and Outsourcing & Advisory. Capital Markets revenues were impacted by ongoing interest rate uncertainty. Foreign exchange tailwinds favourably impacted revenues by 2%. Adjusted EBITDA was a loss of $5.2 million, down 5% (8% in local currency) versus a loss of $4.9 million in the prior year period on lower higher-margin Capital Markets revenues. The GAAP operating loss was $21.1 million as compared to a loss of $30.1 million in the prior year period.

 

Asia Pacific region generated revenues of $278.2 million for the six months ended June 30, 2024, which were up 2% (up 4% in local currency) compared to $274.0 million in the prior year period. Revenue growth was driven by recent acquisitions and improved Capital Markets activity in several markets in Asia, especially Japan. Foreign exchange headwinds impacted revenues by 2%. Adjusted EBITDA was $39.1 million, up 26% (30% in local currency) versus $31.1 million in the prior year period, primarily on changes in service mix and a lower cost base. GAAP operating earnings were $33.1 million, versus $24.6 million in the prior year period.

 

Investment Management revenues were $248.6 million compared to $239.6 million in the prior year period, up 4% (4% in local currency). Pass-through revenue from historical carried interest was $3.0 million in the current year period, relative to nil in the prior year period. Excluding the impact of pass-through revenue, revenues were up 2% (2% in local currency) and were positively impacted by new investor capital commitments. Adjusted EBITDA was $103.3 million, down 2% (2% in local currency), relative to $104.9 million in the prior year period. GAAP operating earnings were $93.9 million, versus $41.2 million in the prior year period.

 

Unallocated global corporate costs as reported in Adjusted EBITDA were $3.5 million in the six months ended June 30, 2024, relative to $2.8 million in the prior year period. The corporate GAAP operating loss was $29.9 million, relative to $17.6 million in the prior year period.

 

 

 

 

 

 

 

 

 

 

 

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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 unaudited 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, 2024, 2023 and 2022   
(in thousands of US$, except per share amounts)   
             
    Q1    Q2    Q3    Q4 
                     
Year ended December 31, 2024                    
Revenues  $1,001,980   $1,139,368           
Operating earnings   43,327    114,748           
Net earnings   14,136    71,927           
Basic net earnings per common share   0.26    0.73           
Diluted net earnings per common share   0.26    0.73           
                     
Year ended December 31, 2023                    
Revenues  $965,903   $1,078,038   $1,056,032   $1,235,168 
Operating earnings   22,144    75,262    70,899    132,630 
Net earnings (loss)   (907)   35,001    29,376    81,221 
Basic net earnings (loss) per common share   (0.47)   (0.15)   0.53    1.42 
Diluted net earnings (loss) per common share   (0.47)   (0.16)   0.53    1.42 
                     
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 
                     
Other data 1                    
Adjusted EBITDA - 2024  $108,695   $155,626           
Adjusted EBITDA - 2023   104,623    147,080   $144,912   $198,378 
Adjusted EBITDA - 2022   121,461    161,313    145,065    202,686 
Adjusted EPS - 2024   0.77    1.36           
Adjusted EPS - 2023   0.86    1.31    1.19    2.00 
Adjusted EPS - 2022   1.44    1.84    1.41    2.31 
1 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 16% of consolidated annual revenues for 2023. Variations can be caused by business acquisitions which alter the consolidated service mix.

 

 

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Outlook for 2024

The Company’s outlook for 2024 is unchanged, except to reflect the partial year impact of the acquisition of Englobe:

 

    2024 Outlook
Measure Actual 2023 Prior Englobe Revised (with Englobe)
Revenue growth -3% +5% to +10% +3% +8% to +13%
Adjusted EBITDA growth -6% +5% to +15% +3% +8% to +18%
Adjusted EPS growth -23% +10% to +20% +1% +11% to +21%

 

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 numerous macroeconomic, geopolitical, health, social and related factors. Continued interest rate volatility and/or lack of credit availability for commercial real estate transactions could materially impact the outlook.

 

Liquidity and capital resources

Net cash provided by operating activities for the six months ended June 30, 2024 was $3.6 million, versus usage of $33.6 million in the prior year period. The increase in cash from operations was driven primarily by lower working capital usage attributable to timing. We believe that cash from operations and other existing resources, including our Revolving Credit Facility, will continue to be adequate to satisfy the ongoing working capital needs of the Company.

 

For the six months ended June 30, 2024, capital expenditures were $29.4 million (June 30, 2023 - $41.1 million). Capital expenditures for the year ending December 31, 2024 are expected to be between $75-$80 million (December 31, 2023 - $84.5 million) and expected to be funded by cash on hand.

 

Net indebtedness is considered a supplementary financial measure and as of June 30, 2024 was $1.20 billion ($1.32 billion as of December 31, 2023, $1.50 billion as of June 30, 2023). Net indebtedness is calculated as the current and non-current portion of long-term debt (excluding warehouse credit facilities, in accordance with our debt agreements) less cash and cash equivalents. As of June 30, 2024, the Company’s financial leverage ratio expressed in terms of net debt to pro forma Adjusted EBITDA, as defined in our debt agreements, was 2.0x (2.2x as of December 31, 2023, 2.4x as of June 30, 2023), 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 June 30, 2024 and, based on our outlook for 2024, 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. As of July 2024, the Company met a majority of its sustainability targets for 2023 and achieved a three-basis point reduction in the borrowing cost on the Revolving Credit Facility.

 

Proceeds from the Offering in February 2024 were used to pay down outstanding balances under the Revolving Credit Facility. As of June 30, 2024, the Company had $891.2 million of unused credit under the Revolving Credit Facility.

 

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.

 

The Company’s accounts receivable facility (the “AR Facility”) (which includes selected US and Canadian trade accounts receivable) with two third-party financial institutions has committed availability of $200 million. On June 26, 2024, the Company renewed its AR Facility for a term extending to December 29, 2025 (previously: 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 June 30, 2024, the Company’s AR Facility was fully drawn.

 

 

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During 2023, the Company acquired warehouse fund assets located in Europe and the US, some of which were transferred to the respective funds during the year. During the six months ended June 30, 2024, the Company acquired two land assets in the US and infrastructure debt and equity securities in relation to seeding new funds while also divesting two investments from 2023 with a de minimis gain. The Company recorded the corresponding assets and liabilities on the consolidated balance sheet (see note 5 in our interim consolidated financial statements). 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 14, 2024, the Company’s Board of Directors declared a semi-annual dividend of $0.15 per share to shareholders of record on June 28, 2024, paid on July 12, 2024. Total common share dividends paid by the Company during the six months ended June 30, 2024 were $7.1 million.

 

During the six months ended June 30, 2024, the Company invested cash in acquisitions as follows: $17.8 million in acquisition of new businesses, $11.3 million in purchases of redeemable non-controlling interest and $3.0 million in contingent consideration payments. All acquisitions during the year were funded from borrowings on the Revolving Credit Facility and cash on hand (See note 4 in our consolidated financial statements). The acquisition of Englobe was funded with borrowings on the Revolving Credit Facility and cash on hand.

 

As at June 30, 2024, 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 $411.4 million (December 31, 2023 - $404.5 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 June 30, 2024 was $42.6 million (December 31, 2023 - $44.7 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 June 30, 2024 was $68.6 million (December 31, 2023 - $90.5 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 March 2029. We estimate that approximately 81% (December 31, 2023 – 86%) of the contingent consideration outstanding as of June 30, 2024 will ultimately be paid.

 

The following table summarizes our contractual obligations as at June 30, 2024:

 

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  $1,356,811   $7,724   $189   $1,065,890   $283,008 
Mortgage warehouse credit facilities   132,869    132,869    -    -    - 
Liabilities related to warehouse   189,636    146,636    43,000    -    - 
  fund assets                         
Interest on long-term debt (1)   67,977    12,151    23,199    17,734    14,893 
Finance lease obligations   7,048    1,894    3,204    1,950    - 
Contingent acquisition consideration(2)   42,632    33,016    4,635    4,861    120 
Operating leases obligations   686,795    110,498    177,606    134,890    263,801 
Purchase commitments   73,461    37,014    25,724    3,232    7,491 
Co-investment Commitments   62,307    62,307    -    -    - 
Total contractual obligations  $2,619,536   $544,109   $277,557   $1,228,557   $569,313 
 (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 $173.3 million of interest payments, $59.6 million of which will be made in the next 12 months.
 (2)Estimated fair value as at June 30, 2024.

 

 

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As at June 30, 2024, we had commercial commitments totaling $17.5 million comprised of letters of credit outstanding due to expire within one year.

 

Redeemable non-controlling interest

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 $937.4 million as of June 30, 2024 (December 31, 2023 - $943.2 million). 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 June 30, 2024, the RNCI recorded on the balance sheet was $1.11 billion (December 31, 2023 - $1.07 billion). The purchase prices of the RNCI may be paid in cash or in Subordinate Voting Shares of Colliers.

 

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 six critical accounting estimates, which are discussed below.

 

1.Revenue recognition. We earn revenues from Leasing and Capital Markets 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 (including carried interest). 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.

 

 

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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 June 30, 2024, the Company has funded and sold loans subject to such loss sharing obligations with an aggregate unpaid principal balance of approximately $5.3 billion. As at June 30, 2024, the loss reserve was $13.2 million (December 31, 2023 - $12.8 million) and was included within Other liabilities on the consolidated balance sheet.

 

 

 

 

 

 

 

 

 

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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 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   Six months ended 
   June 30   June 30 
(in thousands of US$)  2024   2023   2024   2023 
                 
Net earnings  $71,927   $35,001   $86,063   $34,094 
Income tax   24,377    16,477    34,347    20,016 
Other income, including equity earnings from non-consolidated investments   (932)   (886)   (1,583)   (4,206)
Interest expense, net   19,376    24,670    39,248    47,502 
Operating earnings   114,748    75,262    158,075    97,406 
Loss on disposal of operations   -    2,282    -    2,282 
Depreciation and amortization   49,845    50,794    100,353    100,286 
Gains attributable to MSRs   (3,712)   (6,052)   (5,027)   (9,087)
Equity earnings from non-consolidated investments   796    532    1,232    3,686 
Acquisition-related items   (15,221)   11,668    (13,281)   38,136 
Restructuring costs   1,722    7,038    8,833    7,781 
Stock-based compensation expense   7,446    5,556    14,134    11,213 
Adjusted EBITDA  $155,624   $147,080   $264,319   $251,703 

 

Adjusted EPS is defined as diluted net earnings per share 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 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.

 

 

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   Three months ended   Six months ended 
   June 30   June 30 
(in thousands of US$)  2024   2023   2024   2023 
                 
Net earnings  $71,927   $35,001   $86,063   $34,094 
Non-controlling interest share of earnings   (11,224)   (13,816)   (20,145)   (24,757)
Interest on Convertible Notes   -    561    -    2,861 
Loss on disposal of operations   -    2,282    -    2,282 
Amortization of intangible assets