Colliers International Group Inc. Q2 FY2025 earnings call

• Rebranded Investment Management division to Harrison Street Asset Management and expanded leadership team.
• Launched Harrison Street Private Wealth by rebranding Versus Capital.
• Completed acquisition of RoundShield Partners, enhancing credit, student housing, and hospitality capabilities.
• AUM increased to $103 billion during the quarter, with over $108 billion pro forma for RoundShield acquisition.
• Raised $1 billion in new capital commitments in Q2, with total year-to-date fundraising at $2.7 billion.
• Completed 4 tuck-under acquisitions in Engineering and 2 in Real Estate Services since the start of the quarter.

Real Estate Services: Revenue grew 4%. Recurring outsourcing revenues rose 6% across property management, valuation, and loan servicing. Capital markets revenues were up 16%, while leasing revenues declined 5% globally due to weaker industrial volumes offsetting strong office leasing. Segment net margin was 11.9%. Engineering: Net revenue jumped 70% fueled by acquisitions and internal growth of 8%, with a net margin of 13.7%. Investment Management: Net revenues declined 7% as expected, but net margin improved to 42% due to disciplined cost control and lower incentive compensation. Assets under management stood at $103.3 billion, up 3% from March 31 and 7% from a year ago.

• Raised full-year outlook due to strong year-to-date performance and recent acquisitions. Half of the outlook increase comes from completed acquisitions, and half from increasing organic growth expectations.
• Leverage ratio expected to decline to just under 2x by year-end assuming no additional major acquisitions.
• Remain on track to achieve $5 billion to $8 billion full-year fundraising target, with Harrison Street Fund X and other funds driving fundraising.
• Free cash flow remains strong, converting 98% of adjusted net earnings into free cash flow on a trailing 12-month basis.

• Macroeconomic uncertainties.
• Global trade tensions and interest rate volatility, though no significant impact on engineering backlogs to date.
• Fundraising still below historical levels despite improvement.

Q: Relates to leasing industrial weakness and rebound?

A: Expected leasing softness in Q2, but July showing more positive trajectory. Industrial leasing activity trending positively.

Q: On guidance raise, driver of organic vs M&A?

A: Half of outlook increase from partial year effect of completed acquisitions, half from increased organic growth expectations in core operations.

Q: IM branding consolidation and spin-off potential?

A: Steps taken are part of normal progression, fundraising picking up now, teams collaborating well.

Q: Engineering backlog and future?

A: Strive to maintain backlog over 12 months of revenue, confident in pipeline with wins in infrastructure projects.

Q: Harrison Street fundraising back half?

A: Another significant closed-end fund launching in Q4, with other products in market adding to fundraising.

Q: Engineering margin drivers?

A: Margin expansion from acquisitions and organic productivity improvements, expecting continued margin tick up.

Q: RoundShield acquisition multiple and capital allocation?

A: RoundShield acquisition done in low teens range, balanced capital allocation across segments.

Q: Leasing weakness explanation?

A: Larger exposure to markets like Canada, Australia, and Western Europe with tariff impacts.

Q: Englobe acquisition performance?

A: Been a pleasure, integrated well, business performing well with strong backlogs.

Q: Engineering organic growth in second half?

A: Mid- to high single-digit organic growth expected.

Q: Investment Management Q2 EBITDA trend?

A: Timing of expenses, co-investment income, and catch-up fees contributing to Q2 weakness