Welcome to the Colliers International First Quarter Investor Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties.

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

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

Securities and Exchange Commission..

Thank you, Operator. Good morning and thanks for joining us for this first quarter conference call. As the operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer. And with me today is Christian Mayer, Chief Financial Officer.

As you know we recently announced that John Friedrichsen, one of my closest allies has decided to retire after 23 years of service. For most of those years, John has been right here by my side during these conference calls. Today will be different.

I want to take this opportunity to thank John once again for his tireless efforts, his dedication, and his support in helping us build the company and his predecessor company, FirstService and to the operations; they are today true market leaders in their respective industries.

John played a critical role and helping us to create massive shareholder value. He has always been a pillar of strength, the ultimate culture career. Thank you, John, for all you have done for us. Now let's get on to business. As always, this conference call is being webcast live and is available in the Investor Relations section of our website.

A presentation slide deck is also available to accompany this call. Let me begin today by saying how pleased we are with the first quarter results and the encouraging signs of momentum for the balance of the year.

Strength in recurring services, stabilizing transaction revenue, and our highly diversified business model continue to transform Colliers into a more balanced and resilient professional services and investment management company.

Although pandemic uncertainty remains, we're increasing our outlook for the balance of the year, as you will hear from Christian in just a few minutes. Today, I'd like to touch on four highlights from the quarter.

First, as you know, we recently published our Global Impact Report, highlighting our commitment to embedding environmental, social and governance or ESG strategies across our company. This report can also be downloaded from our website. As leaders in our industry, building a better future for our stakeholders has never been more important.

In the coming months, we will complete a materiality assessment to better understand our greatest opportunities. Then we'll publish a responsible ESG strategy with measurable goals to ensure that ESG continues to be an important part of how we do business in the future..

Thank you, Jay. As announced earlier today, Colliers reported the strong financial results for the first quarter. My comments follow the flow of the slides posted on the Investor Relations section of Colliers.com to accompany this call. Please note that the non-GAAP measures referenced on this call are as defined in the press release issued today.

All references to revenue growth are expressed in local currency..

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Yes, good morning, guys. Congrats on a really strong quarter..

Thanks, George..

We saw an exceptional 47% growth in the capital market side. I understand this might be a difficult question to answer.

But how much of those volumes might have trickled in from the kind of the seasonally stronger last quarter? And are you seeing maybe a trend in deferrals materializing as you continue into Q2?.

George there is certainly an aspect of capital markets transactions that have been developing in our pipelines. And certainly some from Q4 would have tripled, tripled into Q1. I think we feel very comfortable and confident in our certain aspects of capital markets.

Industrial is an area where we're strong and we have seen strong activity in the fourth quarter and in the first quarter. And if trends continue that may continue into future quarters..

George, it happens every year, there's always deals that didn't get closed by December 31 that leak into the following year is I don't think Christian you can correct me if I'm wrong. There wasn't there any unusual amount of that happening this year versus previous years..

Great..

Okay. And given the larger part of the revenue growth for this year is considering the higher margin transactional business. But it seems like our guidance implies flat margins at the midpoint.

So kind of just wondering what you guys are thinking?.

Yes. Certainly George, on a full-year basis, the margin we expect to be around 13%. Last year, we had the benefit of very significant cost reductions in the business. But $145 million of variable cost reductions and salary reductions and bonuses that weren't paid because of the performance.

Some of those costs, many of those costs are going to return in 2021 and that's part of our thinking as we look ahead and provide this outlook..

Okay. And just one off, maybe for Jay, kind of moving over the leasing. It seems like one of our competitors said that they expected 10% to 15% reduction in demand for office space because of the pandemic.

I'm just wondering, do you echo that and what are your thoughts there?.

Well, I think we generally agree that the demand for office will be -- will fall off, let's call it 10% to 15% because I think that seems to be sort of a common view; there's a lot of reasons for that. There was an abundance of office in the marketplace, through operations like we work and many others.

So there's a lot of activity or a lot of space that has to be brought back to market. But fortunately, for Colliers, our office, our leasing practice is spread amongst office. And I would say we're typically stronger in industrial, and in other areas that have actually done very well over the past 12 months, you'll see it for sure in the quarter.

Offices is always the largest fee paying portion of leasing. So obviously, if offices are down, it does impact the overall number but we've enjoyed some very strong performance in industrial office, and a variety of other non-CBD or high-end office in suburban areas..

Our next question comes from Stephen MacLeod with BMO Capital..

Good morning. I just had a couple of questions about the outlook. You talked about the margin expectation for the full-year; I'm understanding that you have some costs coming back in 2021.

Can you talk a little bit about sort of what you view the long-term margin outlook to be? I mean, you finished the year 2020 at a 13% margin exceeding higher on a year-over-year basis, could you talk a little bit about where that can get to over time?.

Yes, I mean over time, we would expect to have modest increases in our margins. We think that brokerage obviously, there's operating leverage opportunities there in future years, given the rebound we expect to occur in areas like office leasing, I just talked about.

So certainly operating leverage in our leasing business, and in our aftermarkets business. Our investment management operations have the opportunity for margin enhancement. We're investing heavily in people and in growth at the moment. And we'll continue to do that. But there is operating leverage in that service line over time..

Great. Okay. Thank you. And I just wanted to talk a little bit about the outsourcing advisory, investment management, recurring revenue base versus the transaction revenues. And as we went through the pandemic, the recurring business was quite stable, and certainly did a very good job of offsetting some of the weakness in transaction.

Do you expect as now you get into 2021, will the outsourcing and advisory and investment management businesses sort of return to or begin to take on a growth bias into 2021 and 2022?.

Yes. I mean the first thing is first that we -- as we return to whatever the new normal is, you should see transaction services move up in terms of activity, whether capital markets or leasing. So I think the tailwinds there are very interesting for us. But outsourcing and advisory and investment management are exciting growth areas for us.

And also and our growth in those two areas, has made a real difference in transforming our business to one that I think is frankly, different than some of our peers. And I think that that transformation is going to continue, so that we have a different balance. We already have a different balance.

60% of our EBITDA seems to consistently now come from these areas. Over time, we're hoping that that will continue to grow as we add activity in those other areas. So, yes, I think we're going to see growth there, both internally as you can see this quarter, but also through acquisition opportunities.

And there's a lot of leverage that we haven't even included in our future thinking around the ability to sell and cross-sell many of these services to the same client base.

So for example, Harrison Street can use Colliers Engineering & Design in all of the infrastructure work that they do for clients for Harrison Street Investments, because Colliers Engineering & Design has an expertise in hospitals and education and some of the other areas that work with Harrison Street clients.

All of my comments really didn't take into consideration any assumptions relating to the leverage we can get between those areas. And the same applies in Colliers Mortgage. Colliers Mortgage as you know is focused on multifamily seniors, student financing. That's the work we specialize in with agency lenders.

Needless to say, Harrison Street is a leader in that area. We've just scratched the surface of the opportunities to cross-sell that service. And again, it creates another great opportunity for us to enhance the overall Colliers proposition globally, actually..

Yes, that's very interesting.

Is that something that you would expect maybe like -- is that more of a medium-term opportunity from where you sit today those cross-selling opportunities?.

I think so, Stephen, I didn't even mention project management, which is another, as we have curated our business, we've done this for many years, curated a business of market leading professional service companies that have leveraged between them. And project management is just another example.

When a construction site, whether it's a hospital or whether it's a seniors or whether it's an academic facility, they need somebody to manage the construction project, which may take three years or five years, and it's a great opportunity for our project management people.

We're seeing that in Asia, in several markets, we're starting to see it in North America, all of those, I would say are near-term operation -- opportunities. Our people are actively working together.

We have gone through the laborious task of rebranding in a bunch of areas, as you know, all of that just strengthens the possibility of cross-selling these services.

So we're excited about it and think over the next 12 to 18 months, we're going to see more of those synergistic opportunities start to translate into greater revenue streams and higher margins..

That's great color. Thanks, Jay.

And then maybe just one final one, with respect to might be too soon to think about, but with respect to the dividend, is it possible to expect a return to growth on the dividend as you sort of exit the pandemic? Or is it maybe too soon to talk about right now?.

It's an interesting question, Steve. We -- we've been talking about just that. And I'm probably getting ahead of myself here a little bit, but as a more recurring and resilient company, one might think that a small and any dividend as you know, that we would pay would be a modest dividend. But we've had the same dividend for the past five years.

And should we consider increasing that dividend, it's something that I think our board has already begun discussing, and something that we'll look at later in the year as we progress, but it is very much on our radar..

Our next question comes from Frederic Bastien with Raymond James..

Hi, good morning, guys. First question, probably for Christian, just wondering if you could provide the organic growth that was achieved in the Americas for the quarter, you use to break down what was acquired and what was organic. So I was wondering if you could provide that amount of color..

In the Americas?.

Yes..

Around -- around 3%..

Okay. That's good.

With respect to Colliers Mortgage, I think one of the opportunity we're targeting was increased share of Fannie Mae business down the road; can you maybe discuss how that initiative is growing?.

Yes, I mean Colliers Mortgage had a very strong first quarter. Total volumes were up 40% and that includes Fannie Mae volumes. Colliers Mortgage, we've been a very small player in the Fannie Mae space. There's 26 Fannie Mae delegated underwriter servicer partners in the U.S. and Colliers Mortgage is one of the smaller ones.

So it's trying to subside for us in terms of being able to leverage the scale of the Colliers platform, the multifamily field professionals that we have in Colliers to cross-sell debt services, and then we're working on that, we've been successful on a few cases already.

So I think, in terms of your original questions, increasing our market share, certainly something we're focused on, and I think we're moving the needle already, although it is early days on that.

I'd also add that we've been successful in having some cross-sell with Harrison Street and Harrison Street source some debt financing through Colliers Mortgage. So again, early days on that, but we're pursuing that and excited about the possibilities for future growth through that channel as well..

Okay. And just for context, you mentioned 40% growth.

Do you have stats for the industry as a whole or is this too broad of a sector to track?.

I don't have stats at this time for Q1..

Last one for me, I mean, you bought a small engineering design business in the South, based on my math, and my knowledge of the sector feels like it's a $5 million business annually.

I mean, what sort of potential do you see for Colliers E&D on a go-forward basis? Are we going to see more of those little tuck-ins or should we think about something larger down the road?.

I think that there's going to be, it's a mixed bag, there's some very large ones, there's some, they're all over the map. We're interested in smaller ones that can really augment our operations or give us additional scale in a market. But Fred, I know you cover the industry, any good ideas that you have, you know my phone number.

So we'd be active and we would look at it very closely..

All right, noted. Thank you. And best of luck to John, hopefully, I mean, he's not in the call but please pass on my best wishes..

Okay. We'll do..

Our next question comes from Stephen Sheldon with William Blair..

Hi, thanks. First wanted to pass along my appreciation to John for all his time over the years and well wishes on his retirement. I guess going back over the last four years, for adjusted EBITDA and kind of a normal seasonality.

You see the first quarter I think it typically represented on average 13% of the full-year number, go back to last year, I think it was 15% of first quarter representing the full-year 2020 adjusted EBITDA, even when activity fell off drastically over the rest of the year.

If I look even at the high-end of your guidance for 30% adjusted EBITDA growth, your first quarter adjusted EBITDA that you just reported would represent almost 20%, the full-year estimate.

So I guess, are there one-time items that may have boosted profit in the quarter or return of some costs that will have a bigger impact over the remainder of the year? And just generally, I guess how conservative have you been in the profit guidance?.

Stephen, great question. There isn't one item that not -- there's no one non-recurring or unusual item. The only thing I would tell you is that we have two significant acquisitions, Colliers Engineering and Colliers Mortgage that we're not going in Q1 of last year. So that is a significant fact.

And those were acquired in June of last year and July of last year. So you guys got to keep that in mind when you look at the seasonality of the business because those are more recurring in nature. The Engineering business has long-term contracts.

The mortgage business has loan servicing activities that are recurring in nature and of course, as we talked about the origination volumes at Colliers Mortgage have been strong as well. So those are impacting the results..

Got it.

So as those continue to scale, it might influence the normal seasonality that you've seen at least historically, is that kind of --?.

Yes, I think so. So as we add businesses like that, the Student Housing business overall, I think will diminish because we've got a larger base of recurring revenues and recurring cash flows..

Got it, okay, makes sense. If we think about AUM and investment management in the second quarter, you might have said something about this.

I missed exactly what you said, but what a lot of the benefit from the record fundraising in the first quarter spill over into the second quarter? And I guess, just asked another way, should we be expecting another strong sequential uptick in AUM in the second quarter?.

Yes, I think the fundraising activity comes first. And then the fee revenue comes second as that capital is deployed into active and working investments.

So we definitely expect a strong second quarter in terms of our management fee revenues and also our EBITDA in that segment, based on our success, raising capital and increasing AUM over the past 12 months..

But what I would add to that is that the momentum fundraising momentum, has continued at Harrison Street post the end of the quarter..

Our next question comes from Rick Skidmore with Goldman Sachs..

Thank you. Good morning. Just a follow-up on the leasing question around office.

We've been hearing from office landlords that activities picked up significantly over the last couple of months to specifically in urban markets, like New York City? Are you hearing, seeing the same thing and is that showing up in your leasing pipeline as you go-forward? Thanks..

Well, I'm not sure, we're seeing that. It's interesting data, though, and I'd love to hear it. But there is a lot of uncertainty still. Now it's market for market, it's industry for industry, there's people in the marketplace that are looking at opportunities to secure low renewals at current rates. There's other people are just sitting on their hands.

So it'll be interesting to see what happens to leasing for us in the second quarter. But as you can see in the first quarter it’s still relatively flat, or it's up -- it’s up but it's not where it should be. And better, but not where it should be.

So I think with leasing, I'm not sure I'm ready to make the prediction that you're hearing from some of the office landlords..

All right, thanks. It's helpful. One other question circling back on the Engineering & Design business believes that you talked about in a prior-call that business could scale from $100 million to something much more meaningful than that.

And under the Biden plan, stimulus dollars, infrastructure spending, how are you seeing that business sort of the pipeline build in that business as you look forward? Thanks..

So that business today is circa $300 million in revenue on a run rate basis. The pipeline is very strong and everybody's talking about the increased allocation to the infrastructure around the Biden plan. And what they're also talking about, and this is impacting acquisitions everywhere is the capital gains, rate changes.

And that's encouraging many to that had discussed things with us historically to come back and talk seriously. So we're actually very busy in our M&A area, and expect to be so for the balance of the year. And that's coming from virtually all segments of our business and this is a perfect time for us and for engineering and project management.

The Biden plan is a great benefit. And the capital gains rate changes are encouraging those people and others to really take another look at crystallizing a transaction earlier than normal..

Great, thank you for those comments. And then one last question for Christian, you mentioned the $145 million of costs that were reduced in 2020. How much of that do you think could be permanently removed or does that $100 million -- entire $145 million come back? Thanks..

Yes, I mean our expectation is that we're not going to return all those costs of the business. That is something that I think I mentioned before was a goal of ours. If we can be successful in returning 80% of those costs, not returning 20%, more importantly, not returning those 20% that would be our objective..

Our next question comes from Daryl Young with TD Securities..

Good morning, guys. Just two quick questions for me. The first would be I'm not sure if you can answer this. But you've done a lot of people moves in the last year and some high quality hires.

Just wondering, are you changing at all the strategy for how the various regions, operators are more decentralized going forward with more levels of management? Or maybe you could just provide a little bit of color there?.

Yes, so decentralization has been a core of ours forever. So the decentralization aspect to your question isn't going to change.

The -- one of the silver linings of the pandemic has been the opportunity to top grade some of our key leadership unfortunately, we had a great guy pass away from cancer in Asia, it gave us a great opportunity to merge our Asia-Pacific operations under an incredible leader and 30-year player with Colliers, a guy by the name of John Kenny, and we're seeing tremendous enhancements and top grades with people in Asia-Pacific.

The same holds true in EMEA, market-for-market, we've used the opportunity to reevaluate our people and elevate some internally in Europe and bring in other proven leaders to help drive our business to the next level. And so I would say that top grading leadership is a current and ongoing role and responsibility that we have.

But COVID created an accelerated opportunity to talk great people were really reevaluating their life, they were reevaluating their current employer, they wanted to come to an organization that was entrepreneurial and enterprising and less bureaucratic, and probably most importantly as you started with decentralized, so great leaders could make decisions on the frontline every day.

And that's been the core of the Colliers way of building our business. So we think that we're coming out of this pandemic, stronger than ever in terms of our leadership teams, and excited about the next round of growth and getting back to normal..

Excellent. And in the past, I think on the broker side, specifically, you've mentioned there can be a bit of a lag from the time that you bring over top talent until when it turns into transactions.

Would we expect sort of a similar in this environment? Or would that have changed or it would be maybe more rapid?.

Well, yes, I mean typically it's mostly in North America phenomena, little bit in EMEA, but typically, when you bring over a producer, it does -- there is a lag of having them generate revenue streams, they would have come from an environment where there was a lag already, given the pandemic.

We've took -- we've taken that as an opportunity to restructure our recruiting deals to smooth it out over a longer period of time.

But yes, I mean whenever you're bringing in proven performers, there is a drag, which is an expense to our current results, but an expense that we think warrants the high return we get on bringing in some of these great people..

Our next question comes from Matt Logan with RBC..

Christian, the midpoint of your 2021 guidance calls for revenue growth of about 23%.

Can you talk a little bit about the split between the organic and the acquisition components?.

Yes, yes, Matt I think in rough terms one-third to one quarter will be acquired and then the balance will be organic growth. When you look at it, that's the midpoint..

And if we bifurcate that a little bit further, how should we think about the organic growth, claim recurring services and the brokerage businesses?.

Yes, I mean, the brokerage services obviously they're going to have higher rates of growth as they recover from last year. And the recurring services are, I would expect, low to mid-single-digits from those in a full-year basis..

And when we kind of look at your -- when we look at your leading indicators, such as confidentiality agreements, letters of intent, would you say those leading indicators are up relative to Q4 or holding more or less steady?.

Are you talking about acquisition pipeline?.

For brokerage?.

Brokerage. I don't think we track NDAs in our brokerage operations centrally; obviously, they're in place on every transaction. But I don't think we track -- we've ever tracked that..

No, not like that. I mean, certainly our pipelines that we have some visibility to in the short-term and that is factored in to our forecast and outlook for the year.

At the same time, at the further out you go to looking at the transactional pipeline, the less certainty the risk and there's still a great degree of uncertainty out there in various parts of the world. So I know that's what leads to this relatively broad range of revenue expectations that we have in the outlook that we published this morning..

Understood.

But suffice it to say the pipeline that you have remains more or less unchanged since Q4?.

No, I think it's more powerful today than it was at the end of Q4, which is natural, given that we hope especially in markets like the U.S. and some of the others that we're coming back to more of a business environment that's conducive to more capital markets and more leasing transaction. So our pipelines are much better actually..

Appreciate that.

And maybe just changing gears, you'd talked about the growth and the run rate revenues for your Engineering & Design business? How would that compare for your mortgage business relative to when you acquired it?.

The mortgage business had significant growth since we acquired it. We have benefited from as I mentioned cross-selling to our Colliers multifamily sales professionals to Harrison Street in the funds where they would need debt financing on assets. So those things have helped. The economic environment has helped us well.

In the last quarter of 2020, Colliers Mortgage had record activity levels because of the refinancing activity that was occurring because of low interest rates. So, the run rate revenue activity in mortgage has increased materially, since we bought that business on June 1, 2020..

And I'm not showing any further questions at this time. I’d like to turn the call back over to Jay Hennick for any closing remarks..

Thank you, operator and thanks everyone for participating in today's call. And we look forward to having a positive result in the second quarter as well. Thank you for participating..

Ladies and gentlemen, this concludes the conference call. Thank you for your participation and have a nice day..