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No. of Recommendations: 1

The quarters at Colliers International (NYSE: CIGI) are starting to sound like a broken record: strong sales gains, increasing EBITDA, and more roll-ups of small regional rivals. And it was the same in the second quarter for this provider of commercial real-estate services. I expect this broken record to continue breaking records year after year, as it pursues its roll-up strategy across the globe.
Second-quarter revenue grew 18% (or 21% currency neutral), and adjusted EBITDA climbed a similar 18% (or 23% currency neutral). With more than 61% of sales outside the U.S., the company is hurt by a stronger dollar. Adjusted EBITDA margin held up well, staying flat at 10.9%. Across regions, performance was markedly different, with the Americas’ strong performance offsetting weak showings elsewhere.
In the Americas, revenue grew a stunning 28%, with internal growth at 14%. Adjusted EBITDA soared 63%. In Europe, Middle East, and Africa (EMEA) sales climbed 11% (6% internal growth), while adjusted EBITDA slipped 4%. It was a similar story in Asia Pacific. Sales there climbed 3% (9% internally, due to currency moves), while adjusted EBITDA fell 13%.
By service line, Colliers’ figures look robust. Outsourcing & advisory saw revenue climb 14%, while sales brokerage and lease brokerage were up 32% and 11%, respectively. Over time, Colliers has been moving more business to its outsourcing unit, because that offers more possibilities for recurring revenue, and execs see that as a “foot in the door” strategy. This quarter outsourcing comprised 37.3% of sales, down from 38.6% year over year. However, the long-term trend is clearly toward the outsourcing unit.
Colliers continues to acquire rivals, and recorded 16 acquisitions for $84 million since being spun off a year ago. That strategy will continue, with the company augmenting its capacity around globe, particularly in Asia Pacific and EMEA. As I detailed in a recent briefing, Colliers is one of the five stocks that Special Ops should own more of, and it’s one of the best-positioned companies for a couple decades of growth, and I expect plenty more broken records. Colliers remains a Buy First.
From the call. Hennick getting fired up.
Brandon Burke Dobell, William Blair
The first, I want to, I guess, get some color on the interplay between the Leasing business and some of the outsourcing or advisory contracts. What do you guys do to incent, I don't know, let's call it cross-sell behavior, kind of more team play as opposed to silo play either from an organizational structure or from a compensation perspective to make sure that you're capturing as much wallet share as you can between outsourcing and leasing there kind of high-end service offerings?

Jay Steward Hennick, Founder, Executive Chairman and Chief Executive Officer
Well, let me begin by saying we're not doing a good-enough job. We've got a lot of work to do there. And it pisses us off, to be honest, because there's so much more work we can do. But it's clearly in our sights and increasing the cross-referral of opportunity, not just in leasing to outsourcing but outsourcing to leasing in capital markets and vice versa. We're looking at this very closely, and it's one of our strategic initiatives, frankly, for the next -- the next year is to find additional ways to create -- I want to use the word flow -- better flow between our different service lines, but we're not doing a good enough job there.

Brandon Burke Dobell
My guess is somehow you're not going to be satisfied no matter what happens, but that make sense. I'd rather have that than the opposite, I guess. Within the Americas business in particular, what are you guys, I guess, seeing from a customer or inbound customer interest perspective in terms of service offerings or services that people are looking to you for that you either can't or don't have enough of, don't -- aren't broad enough, aren't deep enough. I'm trying to figure out where we should expect the -- let's call it the noncapital markets business in the U.S. to focus on in terms of growth the next couple of years?

Jay Steward Hennick
Well, that's the first question and it actually relates to the second. We're seeing a lot of interest from foreign investors investing in the U.S. for obvious reasons. And capital markets is a wide description of the sale of real estate whether as big real estate; big, medium size or small real estate. And as you can see, our lease -- our Sales Brokerage business has been very strong. And I think part of that is foreign clients coming to the U.S. wanting to buy property there. It's happening in Canada as well, by the way because these are 2 stable markets and are seemingly not as impacted by what's going on in Western Europe and in Asia. So we are -- our professionals in Asia are primarily are introducing clients to North America in greater amounts. It's also interestingly happening in the U.K. There's a lot of interest now among Asian investors to buy real estate in the U.K. for 2 reasons. One is the obvious weakness there, but second is the currency impact. So there is a lot of cross-selling flow getting created, and I think that that's why you're seeing our Sales Brokerage up as much as it is.

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