Jay Hennick - Founder and Chief Executive Officer Scott Patterson - President and Chief Operating Officer John Friedrichsen - Senior Vice President and Chief Financial Officer.

Anthony Zicha - Scotia Bank Anthony Jin - RBC Capital David Gold - Sidoti & Co. Brandon Dobell - William Blair Stephanie Price - CIBC Stephen MacLeod - BMO Capital Markets.

Good day, ladies and gentlemen. Welcome to the first quarter investor's conference call. Today's call is being recorded. Legal counsel requires us to advice that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties.

Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements.

Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's Annual Report on Form 40-F as filed with the U.S.

Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Tuesday, April 28, 2015. At this time, for opening remarks and introductions, I'd like to turn the call over to the Founder and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir..

Thank you, operator, and welcome, everyone. With me today is Scott Patterson, President and Chief Operating Officer; and John Friedrichsen, Senior Vice President and Chief Financial Officer.

Today, we will discuss our record results for the seasonally slow first quarter as well as provide an update on our plan to separate FirstService into two publicly traded companies. Let me first deal with our results.

For the quarter, revenues were $608 million, up 17%; EBITDA $24 million, up 7%; and earnings per share came in at $0.11 per share, up 38% over the prior year. In a few minutes, John, will provide more details on our financials and discuss the results from Colliers.

Then Scott will provide his overview of FirstService Residential and FirstService Brands. Overall, each of our service lines generated solid revenue growth, continuing on the strong momentum coming out of last year and despite currency headwinds.

Each one of our divisions is well-positioned to continue delivering strong growth in revenue, EBITDA and earnings per share for the balance of the year. In terms of acquisitions, we began the year with the addition Strategic Building Solutions, one of the leading project management firms in the northeast.

Founded in 1996, SBS, who will rebrand its Colliers International, currently manages more than $1 billion in construction projects and more than 10 million square feet of lead registered real estate in their energy services group.

With more than 70 professionals operating from three offices, SBS will build on the strength of the Colliers' global project and sustainability management capabilities, adding depth across multiple industry sectors. Together, Colliers has about 1,000 project and sustainability management professionals operating on a global basis.

Let me now turn quickly to the proposed spin-out. Last week, our shareholders overwhelmingly approved a plan to separate FirstService into two independent public companies, Colliers International, a global leader in commercial real estate; and new FirstService Corporation, comprised of FirstService Residential and FirstService Brands business units.

This was the next step in our spin-out process. Subject to final regulatory and court approval, we anticipate being in a position to complete the tax free distribution of shares to our shareholders on or about June 1. We are extremely excited about the prospects for both Colliers and new FirstService.

Standalone, each will have sharper focus, more flexibility, and being able to deliver better value to shareholders in the years to come. Now, let me turn things over to John. Scott will pick things up from there, and then we'll open things up for questions.

John?.

Thank you, Jay. As announced in our press release earlier this morning and cover by Jay in his opening remarks, FirstService reported very strong first quarter financial results that included contributions from all three of our service platforms.

I will address our overall consolidate financial results for the quarter as well as our capital usage and balance sheet, followed by an overview of Colliers first quarter results.

For the first quarter of fiscal 2015, consolidated revenues increased to $608 million, up 17% in local currencies from $545 million in the first quarter of 2014, with 10% of our growth generated internally and the balance from acquisitions. Revenue growth in U.S. dollars, our reporting currency, came in at 12%.

Adjusted EBITDA came in at $23.9 million, up from $22.3 million reported in Q1 last year. And adjusted earnings per share came in at $0.11 compared to $0.08 per share reported for the first quarter last year.

Our adjustments to GAAP EPS and arriving at adjusted EPS are outline in our press release issued this morning, and are consistent with those outlined in past quarters. Turning to our cash flow and investing activities.

During the first quarter, cash flow from operations, before working capital changes, was down slightly to $16.9 million from $17.3 million in the Q1 of last year.

Inclusive of working capital changes, cash flow from operations improved from a negative $86.9 million to negative $73.7 million in Q1, despite the heavy cash usage, as broker commissions and variable compensation-related accruals from yearend were settled as usual during the first three months of the year.

We invested $11 million in acquisition activities during our first quarter, of which $5 million was for new acquisitions and the balance for increased stakes in existing subsidiaries. Meanwhile, our capital expenditures amounted to $5.1 million, down from $7.7 million last year. Turning to our balance sheet.

Our net debt positions stood at about $435 million at the end of the quarter compared to $337 million at our December 31 yearend and $366 million at the end of our first quarter last year, with the increase from yearend attributable mainly to working capital usage and capital investment noted previously.

Our leverage ratio, expressed as net debt to EBITDA, stood at 1.9x, up from just over 1.4x at yearend, and up slightly from our leverage of 1.8x at the end of our first quarter last year.

As spin-out of new FirstService occurred at the end of Q1, pro forma leverage for Colliers and new FirstService would have been 1.5x and 2.5x, respectively, and in line with the expected leverage levels for these businesses on a standalone basis.

In terms of our financial capacity, with cash on hand and committed availability under our revolver, we had over $200 million of liquidity at quarter end, a level ample to fund operations and other capital investments, including acquisitions needed to execute our growth strategy. Turning to our commercial real estate division.

Colliers International generated revenues of $335.7 million in the quarter compared to $299.5 million last year, an increase of 22% on a local currency basis, split evenly between internal growth and contributions from acquisitions.

Revenue growth was led by a 30% increase in leasing-related revenues and a 173% increase in project management revenues with a substantial portion of the latter increase contributed by Colliers France, acquired in the fourth quarter of 2014.

Meanwhile, capital markets related revenues were up 1% versus last year, with our growth rate moderated by tough comparables in Q1 of 2014. Adjusted EBITDA for Colliers was $16.3 million for the quarter compared to $15.8 million, with our EBITDA margin at 4.8% versus 5.3% in the prior-year quarter.

The decline in margin was primarily attributable to the increase in project management revenues previously noted that include a significant component of low margin pass-through revenues and which will have a lower drag on margins, as we progress through the balance of the year.

Revenues in the Americas came in at $183.7 million, up 15% on a local currency basis, led by a strong performance in our U.S. business, with revenues up 25% over Q1 of 2014, and dominated by a 45% increase in leasing-related revenues.

Revenues in our Canadian and LATAM operations were approximately flat with prior year on a local currency basis, with out Canadian business having a particularly tough comp due to a very strong first quarter in 2014. Moving to Europe, revenues were $81.7 million, an increase of 63% on a local currency basis.

Overall, revenues were up over 30% in the U.K. and down 6% in Germany, primarily due to a tough Q1 comp, which saw an exceptionally strong start in capital markets revenue in our German operations last year. Our overall increase in Europe revenues was led by a 36% increase in leasing-related revenues, with strong increases in our U.K.

and Germany operations, and a sizable increase in project management revenues contributed primarily by newly acquired Colliers France, as previously mentioned.

And finally, in our Asia-Pacific region, revenues were $70.1 million, up 4% in local currencies compared to Q1 2014, and were led by 11% increase in China and Hong Kong, where leasing revenues were up 17%.

Revenues in our Australian operation were up 4%, led by increases in capital markets and property management revenues, with leasing revenues flat with last year.

Looking across our global operations, both our pipelines in most markets in which we operate continue to reflect solid commercial real estate activity, which we expect to continue for the balance of the year. And combined with Colliers strengthening global platform, supportive of achieving our growth objectives for 2015.

Now, over to Scott, for the FirstService Residential and FirstService Brands operational highlights.

Scott?.

Thank you, John, and good morning, everyone. As you have seen and heard, the new FirstService divisions, FirstService Residential and FirstService Brands, reported solid results in the first quarter. Let me walk you through each.

Starting with FirstService Residential, where we reported revenues of $225.8 million, up 10.3%, 8% organically, as we continue to win new contracts across North America. Growth was particularly strong in Toronto, the Mid-Atlantic regions and Florida, and was driven primarily by market share gains.

That is wins from competitors, but also fueled by new development and self-managed communities transitioning to professional management.

Ancillary revenues from property services and transaction services, including transfer and disclosure fees, insurance and banking, were also up year-over-year, and supported the strong internal growth experienced during the quarter.

EBITDA for the quarter was $9.3 million or 4.1%, up 30 basis points from the prior year and in line with expectation for the seasonally weak quarter. The margin reflects continuing investment in our operating infrastructure, as we move to a more centralized shared services platform.

As I have indicated in prior calls, we expect this investment to continue into next year with efficiencies from the investment anticipated later in 2016 and beyond. Last year, our margin was negatively impacted by escalated employee health cost.

We can say after Q1 that we are comfortable that redesigned medical plans and increased sharing with associates and customers has reset the cost that we will bear this year, and we are on track to increase our emergence to the 6.5% to 7% range for the full year.

In summary, we posted a solid first quarter at FirstService Residential with continuing strong organic growth and a margin that is tracking to expectation. Let me now turn to FirstService Brands, which generated revenue of $46.4 million for the quarter, up 14% from the prior year, 10% organically.

Organic growth was driven by very strong momentum at California Closets, CertaPro Painters, Pillar To Post Home Inspection and Floor Coverings International. California Closets and CertaPro, each grew at greater than 20% for the quarter relative to year ago.

Organic growth for the division was tampered by a 9% year-over-year revenue decline at Paul Davis, up a record Q1 in 2014. Ice storms and harsh winter conditions in late 2013 and early '14 resulted in significant damage and record claims last year.

Weather conditions in February and March of this year have led to a significant backlog at quarter end, and we expect an improved year-over-year comparison at Paul Davis for Q2. EBITDA for the seasonally weak first quarter was $1.3 million compared to $1.5 million in the prior year.

EBITDA in the quarter reflects an investment in our California Closets company-owned operations in preparation for expansion of the portfolio. The investment versus the prior year includes the recruitment of a centralized team, plus the set up of our new west region production facility that will serve six of our 11 company-owned operations.

Currently, each of our operations produces, assembles, and stages their own custom closet solutions prior to installation. Consolidating production in the new facility will result in significant economies of scale, while improving quality and turnaround times. The facility will be fully operational in June.

Looking forward to Q2, we expect continued strong year-over-year organic growth at FirstService brands, with margins that are comparable to or slightly better than prior year. That now concludes our prepared comments. And I would ask the operator to open up the call to questions..

[Operator Instructions] And our first question comes from Anthony Zicha of Scotia Bank..

With reference to Colliers, you had mentioned that positive trends continue in the marketplace.

Could you remind us, if the margin would be better this year than last year?.

I don't know that. Necessarily, it will be better than last year. We finished very strong. And the headwind that we have this year is primarily FX. So FX or our non-U.S. operations tend to generate higher margin. So with translation of those currencies into fewer U.S.

dollars as a result of the foreign exchange changes, we would expect that to have a bit of a dampening effect on the margin, at least on a same-store basis..

And John, in terms of acquisitions what's the pipeline looking like? And where do you see the best prospects?.

It's Jay here Anthony. Acquisitions continue virtually across the board.

Our pipelines are solid, both at Colliers and new FirstService and we believe that we can continue to generate some excellent tuck-in acquisitions for the balance of the year, pretty much on line with what we did last year is our expectation, but of course with acquisitions you never know..

And then would you have a priority, Jay, in terms of Europe or U.S. just considering, your main acquisitions are in U.K. and Germany and finally in France.

So they're all equally distributed?.

Well, acquisition priorities are going to change effective June 1. So we probably two priorities, one of which I can speak to with Colliers, and Scott may want to chime in as it relates to new FirstService. But in terms of Colliers, there is no priority for us. We have established a fantastic platform. It is now global with most major markets covered.

And so our focus is strengthening the core in virtually every market in which we operate, so there is no particular priorities other than perhaps focusing on some recurring revenue streams in a couple of markets where we're a little lighter than most. But in terms of Colliers, that would be my view..

And in respect to new FirstService, the FirstService Residential, it's really the focus is to continue the activity that has been ongoing for 20 years. We have nurtured relationships with local management companies. As you know that's a very fragmented market.

We are always in discussions with a handful of management companies that fill out our footprint to add to our service capability, so that will continue.

And then as it relates to FirstService brands, we have a strategy that I talked about in the last couple of calls to expand our company-owned portfolio at California Closets and also at Paul Davis Restoration..

And, Scott, just one more question.

What are the fastest three growing franchises that we have? And in terms of prospects or geographic locations, where would be the most active areas?.

California Closets and CertaPro Painters are the fastest growing systems and then a couple of our smaller systems, Pillar to Post and Floor Coverings International are both fast growing, and we expect them to become bigger systems to us over the years. These are all systems that have a footprint across North America.

So in terms of geography, there is no particular focus area or area that is growing more quickly..

Our next question comes from Anthony Jin of RBC Capital..

Just want to start with FirstService Residential. In your recent investor presentation you had provided a goal for FirstService Residential margins was about 8% by 2018. I believe previously it was 10%.

Could you help me reconcile the differences?.

Anthony, I missed to adapt your previously..

It was 10% previously, like 10% margins for 2018 last year.

I was looking for a reconciliation in terms of what happens to those 200 basis points?.

I think that there is a -- we won't get to 10% by '18. I think there is still a possibility we can get to 10%. We have clear line of sight to 8% by 2018, and that will increase from current levels, primarily as a result of the efficiencies from our ongoing investment in our operating platform.

Thereafter, it's going to be through operating leverage, and focusing on growing our ancillary revenues at a quicker pace, but that will be slower incoming..

Are you seeing any pricing pressures on contract renewals?.

No, we're seeing the pricing pressure ease from what we've experienced over the last few years in most regions..

And I just want to understand your in-depth, again, in sort of the outlook.

Are your expectations of what will be a higher or lower housing turnover and new development wins?.

Anthony, I'm going to have to ask you to repeat that..

I was just want to understand your guidance a little bit more, and I want to get a framework for what you're expecting in terms of the housing turnover, like existing home sales.

How do you expect it to trend over the next little while? Do you expect them pretty good recovery or pretty much status quo is okay?.

Well, our market is growing at 2% or 3% in terms of new communities being developed. New development for us accounts for about 20% of our organic growth. Sale of existing homes really doesn't impact our business significantly, except as it relates to transaction fees as homes are sold in and out of our communities.

So I mean development is a component of our growth. And we see it continuing. We've grown through new development every year through the last five, even through the period eight, nine, 10.

Does that answer your question?.

Yes, it does. John, if I can touch on a modeling question.

Just as a go forward basis, what should we look at in terms of the NCI interest of earnings and the redemption increment post-split?.

Are you talking about, like across the board?.

Yes.

Well, I guess, understanding what happened with Colliers specifically given that there is a subsidiary that's been consolidated for 2 million shares there?.

Yes, well, you can look at probably in, say, 25% range for Colliers and probably closer to 20% for new FirstService. I think those are fair numbers at this point. Again, a lot of this depends on the mix and where earnings come from, that'd be our best estimate..

And just, touch on the corporate expenses.

Is this a good runway to go with or is it going to touch up a little bit higher going forward?.

It shouldn't be materially higher..

Our next question comes from David Gold of Sidoti & Co..

Just wanted to get a little bit of color on capital markets and leasing, sort of post the tougher comp at least on the cap market side in the first quarter.

How you think about the balance of the year in those business lines for Colliers?.

Based on our best estimate of visibility, and considering sort of our comps from last year, we're looking at sort of low-to-mid teens in terms of percentage increases, would be where we would expect those to come in. So obviously, leasing was extremely strong beginning of the year. That will probably moderate on a percentage basis.

And then capital markets, again, we came off some great tough comps. And I think markets in our pipelines are conducive to growth in the low-teens, would be our best guess now, but again, assuming that market conditions remain pretty much consistent with where they are now..

So on the cap rate side, low-teens for the balance of the year or for the year in aggregate?.

For the year in the aggregate..

So we have a little bit of catch up to do presumably?.

Yes..

And then, also maybe a tougher question to answer, given the seat that you're sitting in a month ago with the spin-off.

But as we think about or look at Colliers, maybe you can speak a little bit as to the market for talent there and maybe a little bit about way of hiring plans?.

As you know, David, there is a lots going on in the industry right now, with lots of movement, consolidation, potential transactions. We love our position within the confines of all of the noise going on.

We built a great business over a long period of time, and I think we're in the catbird seat in terms of recruiting and in terms of developing our young people, which is a big push for us in several markets.

So I think the opportunity in the next year to two years, as some of these transactions either happen or don't, and depending upon who they happen with or don't, all will create opportunities for those that might be uncomfortable to join a firm that's had stability over a long period of time. So we're quite excited about all these moves.

We also have seen our recruiting numbers in the first quarter up materially over the prior year and with higher quality recruits in virtually all markets. And pipelines for additional people, both managerial and production in all aspects of our business, is just a step above what it has been historically..

Our next question comes from Brandon Dobell of William Blair..

First on Colliers, going back to the February, recall you guys laid out some expectations for '15.

Just want to make sure for Colliers that those expectations still make sense in terms of revenue growth and EBITDA margin goals?.

Yes, absolutely, we did. On February 10, when we nationally spin-off, we had indicated our expectations for each of the business. And certainly, for Colliers, our expectations, which were communicated at that time around expected revenue growth and margins is intact and has not changed..

Same thing to be said for new FirstService? And I guess, particularly, for new FirstService, so many investments you guys are making, when should we see that start to make a difference in the growth rate recognize when you guys have given a pretty good outlook for low-double digit revenue growth this year?.

Well, Brandon, we're on track for the low-double digit without ramping up acquisitions. And the other piece of guidance was the high-single digit, which we're on track for us well. The strategy that will tick up growth is the strategy to expand our company-owned operations in California Closets and Paul Davis Restoration.

And I think we'll start to see that impact, our growth rate modestly going into next year..

Turning back to Colliers, what's been the reaction of, I guess of the existing management producers, the guys you count on that carry the brand, how have they thought about the spend? Has it created any issues with retention of key employees?.

It's been the opposite. One of the issues that Colliers has had historically is that its profile as a subsidiary of FirstService was not at the forefront. So as they were looking to recruit or as they were pitching new client business, they were always explaining the fact that they were a subsidiary of FirstService.

Now, as a standalone, they will have their own profile, their own capital structure, and so it makes the story easier for them. I think there is great excitement throughout the organization, virtually across the board, about what this means and the opportunities for growth. Our retention rates for key people has strengthened over the past 12 months.

Haven't really noticed anything since the announcement, but the platform continues, and the operations continue to get stronger and they get stronger one step at a time. And all of that is translating into great momentum amongst our key people globally..

And then final one from me.

Maybe, Scott, if you could size the investments in California Closets for the balance of the year? And how much of a headwind do you think it's going to be on the EBITDA line relative to last year or relative to this quarter, I guess?.

Well, this quarter it is more meaningful, because it's a seasonally weak quarter. So I don't think we'll continue to invest in the second quarter, but it won't have the same impact, which second quarter being a seasonally strong quarter. So it's about $0.50 in the first quarter. It would be about the same in the second..

And then our next question comes from Stephanie Price of CIBC..

Wondering if we could circle back on the June 1 day, and I just wanted to gauge your comfort level with the date.

And maybe walkthrough the approvals that you still need to get before the spin-out?.

Yes, there is several regulatory steps that we still need to overcome. Obviously, the courts won't hear anything until all matters are approved and behind us. We're still waiting for final approval from CRA. U.S. regulatory approvals have been obtained.

And then, of course, there is a banking documentation that needs to be put in place between the two organizations, which is well in hand, but obviously quite complicated, because these are global operations and so on. So we feel pretty confident that June 1 is the date.

We're working towards that and anticipate that and hope that will be the closing date..

And then in terms of acquisitions, some commercial real estates competitors have had some large transactions recently.

Can talk about post spin-outs Collier's appetite in doing a larger transactions, saying about some management or a property management company?.

One of the beauties of this spin-out is that Colliers will be able, on a standalone basis, to consider any type of acquisition, both, small or large. So I think anything is on the table.

Having said that, we have always operated both of our operations, our FirstService as an amalgamated organization very prudently recognizing the strengths and about operations.

So we will not take any action that does anything to underpin our financial strength, which we think is a competitive advantage in the case of Colliers, as it's always been in the case of FirstService.

So our appetite is wide open, but we are fortunate to be in an industry where there is just so many tuck-in acquisitions on a global basis that we can buy well and on descent terms, and that strengthen our operations in different geographic regions.

And as long as we can continue to buy assets that strengthen our business at attractive multiples and finance them conservatively, we'll continue to grow our business one step at a time, as we have with FirstService..

Our next question comes from Stephen MacLeod of BMO Capital Markets..

Just wanted to circle back around on Colliers, in the past you've that sort of 10% margin goal out there, and I think that was tempered just a little bit in a post spin-off world.

Just wondering how you see the margin profile of Colliers sort of evolving over the next several years?.

Well, first of all, the 10% goal remains unchanged. If anything, perhaps, it gets differed slightly, it's going to be a function -- as I said earlier on, I mean, this year we have some foreign currency headwinds, which are going to I think dampen margin somewhat, but it's also going to get impacted by acquisitions going forward.

So I mean to the extent, obviously, that acquisitions are having margin profile and it will be consistent with our current businesses or perhaps higher, it will positively impact margins. As we continue to grow this business, we are going to see additional operating leverage, particularly from transaction-related revenues.

So those are all margin additives. Having said that, I think there are some interesting recurring revenue opportunities that we may consider down the road, which perhaps would have lower margins. So there is a number of factors, but needless to say, we're still focused on 10%. We think it's achievable and that's what we're driving towards..

And then you've referenced in this call and previous calls, the lower margin profile of the U.S. business.

How do you sort of see that delta moving over time?.

We see that increasing. We're still developing our U.S. business. And for us, it's more of a recent story for the U.S., where we were several years ago and where we are today is quite different. We've got great momentum in the U.S., but margins are lagging.

But each and every year, we've shown our ability to expand those margins, leveraging the investments we've made in the platform, recruiting effectively, and I think there will be some positive contribution from acquisitions going forward that also positively impact that business.

So they are absolutely on target to achieve 10% or better over the next few years. And again, the entire team is driving towards that..

And, John, if I may, I would add, we did just take over the Colliers' U.S. business in 2010, I believe. And we see the U.S. as a huge growth opportunity and it's in our backyard. In many ways we have very strong platforms in different geographic regions and the U.S.

is not as strong, for example, as we might be in or as not as higher market position, for example, as we might be in Canada, Australia and other parts in Western Europe now.

So with the huge market, our position only strengthening there, our multi-market transactions increasing, our corporate services successes that we've been achieving, all create continued opportunity, in addition to the enhanced leverage that John was talking about, market-for-market growth and strength.

So we are quite excited about the U.S., and believe that as we continue to grow the business and we see lots of growth we'll also be moving up the margins at the same time. So accelerated growth and better margins in the near-term in the U.S. is a goal for us for sure..

And then would you characterize your geographic footprint now being complete from a company-owned perspective on Colliers?.

Always open for additions, but we are focused only on additions that are major market additions, geographically around the world with only the exception of Japan, it's the only major market that we don't own at all, we operate through a franchisee. And so with that exception, we are very comfortable with our platform now globally.

And our focus has turned to strengthening the course I mentioned earlier on the call..

So there are no other questions at this time. End of Q&A.

Ladies and gentlemen, thank you for joining us on this conference call. And I would normally say, we look forward to the next conference call, but with a little bit of luck. The next conference call will be two conference calls, one for Colliers and one for new FirstService. So thanks for joining us. And we hope to speak to you soon..

Ladies and gentlemen, this concludes the first quarter investor's conference call. Thank you for your participation. And have a great day..