Colliers International Group Inc (CIGI) 2016 Q4 法說會逐字稿

Welcome to the fourth-quarter investors 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 US Securities and Exchange Commission.

As a reminder today's call is being recorded. Today is February 15, 2017. This time for opening remarks and introductions I would like to turn the call over to Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead sir.

Think you operator. Good morning and thanks for joining us for the fourth-quarter and year-end conference call. I'm Jay Hennick, as the operator said, Chairman and Chief Executive Officer of the Company and with me today is John Friedrichsen, Chief Financial Officer.

This conference call is being webcast and is available in the Investor Relations section of our website. A presentation slide deck is also available to accompany today's call.

Earlier today, Colliers reported record quarterly and year-end results and for the first time in our history revenues generated in the Americas topped $1 billion mark. In terms of our results for the quarter, revenues were $576 million, up 5%, EBITDA was $90 million, up 14%, and earnings per share came in at $1.22, up 15%, all comparing favorably to a very strong fourth quarter last year.

For the year revenues were $1.9 billion, up 10%, EBITDA was $203 million, up 12%, and earnings per share was $2.44 per share, up 7%, over the prior year. These results demonstrate excellent year-over-year growth and take us one step further in our ambitious plan to double the size of our company by 2020. John will have more to say about the quarter and the year-end results in just a few minutes.

Let me touch on some of the highlights though. Despite a softer than expected third quarter we rebounded nicely in the fourth. Not only did we make up the difference, we soundly exceeded our year-end outlook.

Once again this demonstrates our business should not necessarily be evaluated on a quarter-for-quarter basis. The commercial real estate industry is not predictable and quarterly results can be impacted by a number of factors including unusually strong prior periods, the timing of transactions, or external events like we had with Brexit last quarter.

During the year we made further progress diversifying our revenue streams. Revenues from outsourcing and advisory increased 38% with 32% coming from leasing and 30% from sales brokerage. About 70% of our revenues now come from outsourcing and advisory in leasing both largely recurring.

We also further diversified our revenue streams by geography. 54% now come from the Americas with the balance split between the EMEA at 25% and Asia-Pacific at 21%. Having a well-balanced company underpins our already strong foundation and helps to smooth revenues especially in challenging markets.

Operationally we continue to win accolades as one of the best places to work, one of which was the recent recognition from Aon Hewitt in Canada appointing us the gold level best employer award. The growth plan includes retaining top professionals to continue accelerating the success of our clients and our employees, but we always also look to increase our ranks especially in key markets or where we have the opportunity to expand our services or our capabilities. During 2016 we were successful in making several top-flight recruits in key global markets, including of course New York and London.

During the year we took steps to strengthen our Board with the appointment of Right Honourable Stephen Harper, Canada's former Prime Minister. Mr. Harper brings unique geopolitical insights and high-level relationships to our governments. The Collier's proven growth strategy, focused on growing internally, at faster than the overall market, and then augmenting that growth with prudent acquisitions, proved out again. During 2016, we completed a total of 10 acquisitions, six in the Americas and four in the EMEA, and so far in 2017 we've completed another three.

In the US we significantly increased our scale and coverage in Northern California and Nevada, adding Collier's Parrish to Company owned operations. With nine offices, 400 professionals, and market-leading positions in Las Vegas, San Jose, and Silicon Valley, this move expanded our operations in the West and aligned them with our Company-owned offices in contiguous markets. In the UK we added to our hotel and hospitality practice group with the acquisition of one of Europe's leading hospitality asset management businesses.

The combined operations now offer a full suite of services including hotel hospitality investment agency consulting and now asset management services. And in Europe we added Colliers Denmark, with its five offices and more than 100 professionals opening up an entirely new [privilege] for us in the Nordic regions.

One of the cornerstones of our enterprise 2020 plan is having the most technologically advanced capabilities in the industry. We continue to invest in technology. Just after year-end, Colliers introduced a new fully integrated industrial and logistics site selection and incentive negotiation technology called Colliers Indsite. Along with industry-leading Colliers 360 for corporate users and Colliers Office Expert for office users, Colliers Indsite is another example of how we differentiate.

What you won't see from Colliers is an aggressive move to invest in different types of technology solutions. We believe careful and strategic investments in technology at a measured pace is what is really required. When considering technology spend, we concentrate our efforts on tools that add tangible and differentiated value to our clients, while helping our professionals become more effective at what they do.

Looking ahead we have every reason to be optimistic. As one of the leading global players in commercial real estate, with a highly recognized global brand and proven Management Team, with a significant vested interest in our Company, Colliers is in an excellent position to continue to generate exceptional value for our shareholders.

Famed NFL coach Bill Parcells said -- you are what your record says you are. Over the last 20 years this Colliers Management Team has delivered 20% annualized returns for shareholders. This record of performance is unique in this industry and speaks volumes about our ability to execute over the long term. With record results in 2016, the momentum we have achieved so far this year, and the opportunities we continue to see, we expect 2017 to result in another significant step forward in our achieving our ambitious global plan.

If we continue on this path, our employees will be rewarded for their dedication, our clients will be rewarded for their trust, and our shareholders will be especially rewarded for their investment in shares of Colliers International.

Now let me turn things over to John and then we can open things up for questions. John?

Thank you, Jay. As announced in our press release earlier this morning and a highlight of Jay's opening remarks, Colliers International Group reported all-time highs in our quarterly and annual reported revenues and earnings, strong consolidated financial results, and substantial contributions from all of our operations across our global platform, besting a record performance in Q4 of 2015.

I will address our overall consolidated financial results for the quarter and for the full year, our (technical difficulty). Unless otherwise indicated, all growth references are for results in global currencies.

So for our fourth quarter FY16, consolidated revenues increased to $576 million, up 5%, and $556 million in fourth-quarter 2015, with a 2% internal deployment revenues and a 7% increase attributable to acquisitions.

Total revenue growth for the fourth quarter in our US dollar reporting currency was 4%. Adjusted EBITDA for the quarter totaled $90 million, up from $79 million in Q4 of last year, an increase of 17%, and our margins grew 15.7%, compared to 14.2% last year.

Adjusted earnings per share came in at $1.22 compared to $1.06 per share last year, up 15% in US dollars, with net tax negatively impacting adjusted earnings per share in the quarter of $0.03. For the full-year of 2016, consolidated revenues increased to $1.9 billion and $1.72 billion in 2015, an increase of 13%. 4% internal growth in the balance from acquisitions. Full revenue growth for the year in US dollar reporting currency was 10%.

Adjusted EBITDA for the year totaled $203 million, up from $181 million in 2015, an increase of 15%, while our margins grew 10.7%, we were at a 10.5% last year. Adjusted earnings per share came in at 2.4 compared to 2.29 per share in 2015, up 7% in US dollars, net tax negatively impacting our adjusted earnings per share for the full year by $0.07.

Our adjustments to arrive at adjusted EBITDA and adjusted EPS, are outlined in our press release issued this morning and in the appendix of the presentation accompanying this call. They are composed primarily of non-cash charges that we view as largely unrelated to our operating results and performance, consistent with those outlined historically.

Turning to our operating results, I will focus my comments on our fourth-quarter, where there is additional full-year information contained in the appendix to our presentation slides that accompany this call. Our $576 million in revenue for the quarter are comprised of $198 million from Outsourcing & Advisory services, up 6%; $186 million in sales brokerage, up 5%; and $192 million in lease brokerage, also up 5%, for total increase in revenues of 5%.

Geographically revenues remain well balanced, with about half of our revenues generated in the Americas. This service line in geographical diversification remains an important part of our growth strategy. We feel that our global platforms deliver our services across the global markets.

Turning to regions, in the Americas revenues were $291 million, up 5%, with a 3% internal decline offset by 8% from acquisitions. Outsourcing & Advisory services were up 12%, led by strong internal growth in project and property management across the region, and in consulting and appraisal in the US, as well as the incremental impact of recent acquisitions.

Sales brokerage revenues were up 5% versus last year and an increase in the US driven by growth in broker headcount and recent acquisitions, offset by slight decline in Canada. Lease brokerage revenues were up 2% versus last year with our Canadian operations up strongly, while our US leasing was essentially flat relative to a very strong finish in, 2015. Adjusted EBITDA came in at $34.1 million versus $35.2 million last year, a margin of 11.7% versus 12.8% last year, the declined due primarily to revenue mix.

Turning to EMEA revenues were $152 million in the quarter increased 7%. Revenues declining internally by 4% but offset by 11% contribution from acquisitions.

Outsourcing & Advisory revenues declined 1% from a very strong fourth-quarter last year, while we saw solid growth in transaction revenues. Lease Brokerage revenue was up 22% over last year led by robust increases in Germany Poland and Russia, as well as recent acquisitions.

Finally sales brokerage revenue was up 10%. Strength in Germany, offset by a decline in the UK, which was impacted by generally lower market volumes and is strong compared to the fourth-quarter of 2015. Meanwhile adjusted EBITDA increased 37% in our US dollar reporting currency, $34.9 million compared to $25.5 million in 2015, with our margin increasing 22.9% versus 16.8% last year, due to a change in revenue mix and contribution from recently completed acquisitions.

Finally, in our Asia-Pac region, revenues came in at $132 million, up 2% and all generated internally, attributable to gains in Outsourcing & Advisory services spread broadly across all markets in the region. Adjusted EBITDA was $24.5 million, up from $21.1 million last year, with our margin at 18.5% versus 16.5%, benefiting from operational improvements made over the last year.

Moving to our capital deployment and balance sheet, in our fourth-quarter, capital expenditures totaled $8.8 million up from $6.7 million last year, bringing our year-to-date CapEx for 2016, to $25 million and below our previously estimated range of spend for the year of $29 million to $32 million. A lower investment last year will be made up in 2017 with planned CapEx investment in the $34 million to $38 million range, including workplace enhancements in several offices to support our growth and productivity, along with additional funding for technology investment to support our IT infrastructure and application tools.

Turning to acquisitions, we invested $10.3 million during the fourth quarter, compared to $17.5 million last year, bringing our year-to-date investment in acquisitions to $98.2 million versus $59.2 million last year. All of this was funded by strong cash flow from operations which totaled $156 million for the year, up 23% versus 2015, another all-time high for Colliers.

Our net debt position stood at $149 million at the end of the quarter and our leverage ratio expressed as net debt to adjusted EBITDA, stood at 0.7 times compared to 0.8 times at the end of 2015 making our balance sheet and financial position amongst the strongest in our industry. As we recently announced, subsequent to year-end, Colliers completed an increase in its revolving credit facility of $525 million to $700 million with the option of an additional $150 million uncommitted [coureatage].

We extended our maturity to January 2022. With cash on hand we committed availability under our revolver, pro forma for the increased commitment. We had over $500 million of liquidity to start the year, a level more than ample to fund operations and our capital investments including acquisitions needed to execute growth strategy.

Looking across our global operations, our pipelines, in most markets, continue to reflect solid, commercial real estate activity, comparing favorably to levels at the beginning of 2016 with some elevated geopolitical and economic uncertainty in the UK, and other major markets in Europe facing elections in 2017.

Notwithstanding this uncertainty, the fundamentals supporting sustained activity levels in the commercial real estate remain intact. We believe that low, but slightly rising interest rates, accessible financing and the general stability in the supply and demand for commercial real estate in most markets, bodes well for continued solid activity, sales, leasing, other commercial real estate services, as does the more secular trend with greater outsourcing by owners and occupiers.

With these factors in mind, we have the following comments regarding our outlook for 2017, which is prefaced on there being no material changes to market conditions compared to 2016, while acknowledging geopolitical risks will remain elevated. Our best estimate for revenues is high single-digit and low double digit percentage growth in local currencies, including the impact of acquisitions completed to date in 2017, while without considering further acquisitions.

We expect low single-digit percentage internal growth revenues in local currencies, EBITDA margin consistent with 2016, based on additional operating leverage balanced against selected investmentings strength in operations, with high single to low double digit percentage growth for adjusted EPS.

Our long-term growth strategy and building strengthening Colliers global platform remains intact and focused on: one, selectively recruiting key markets to full service line gaps; two, investments to an infrastructure geared toward supporting productivity and client service delivery; and three, strategic acquisitions to add services and build our capabilities in major markets. That concludes our prepared remarks. I would now like to ask our operator to open up the call to questions.

(Operator Instructions)

Anthony Zicha, Scotiabank.

Hi good morning, gentlemen. Jay. John.

Good morning.

Jay in light of the current market conditions and geopolitical risk, do see any change around your five-year plan? And also if you can comment on Yellen's remarks yesterday, that the CRE market is somewhat overheated. Are you seeing any increase in speculative lending and do you believe the market is healthy?

So first of all the answer on our 2020 plan is, no. As you know, Tony, you've been with us a lot of years, we are in an industry, we think, has tremendous opportunity and the market is bigger in this business perhaps than in any other business we have been involved in over many years. So, 2020 plan is intact.

Internal growth, as you can see with all of the peers, is below what it has been historically but that is -- we are right on track ahead of them in some cases, behind them in others. But we believe 2020 is on track and we are excited about hopefully doubling the size of our business by then.

In terms of the Yellin's comments, I have to tell you I sort of smile when I hear comments by major players in some cases. When I read her comments I thought it was entirely relating to the heat in the condo markets and other multi-family markets across the US. But it really, I think, is relating to the higher prices in condos taking a paternalistic view of the marketplace as the Canadian government has done and other countries -- China has done the same thing. So, I wasn't troubled by that at all.

The message that she is sending, in part, is directed at the banks and with a potential increase in interest rates which I think will be modest, if at all and not really impact our industry in any major way if modest. I think it's really just her saying to the banks be careful in your lending practices. And I think from our experience, the banks have been very cautious around the lending.

And so, I think it's a good directional signal but I don't see it impacting us. In fact, in some respects, softness in the market, as you have seen in the past, has been a positive for us and we've used it as an opportunity to capitalize on a coveted addition that we might not have otherwise been able to get in a very strong market. And we are seeing a little bit of that in our acquisition pipeline.

Okay great. And a quick question for John. When we look at the guidance we're looking at low single percentage of internal growth. So where is this growth going to come from? And with reference to Q4 this week it was negative 3%, so do we also expect to rebound here?

I think, again as Jay alluded to and I have tried to as well, made it to through the [quarter]. So, we were coming off an exceptionally strong finish to 2015. So, looking at 2016 (inaudible) internal growth was a little bit off. But our outlook around internal growth is really driven off of our expected level of activity.

Obviously on the transaction side, which is indicative by the level of pipeline's that we have, it is early in the year, but given where we are relative to 2016 and certainly our internal growth last year for the year was quite good coming in at mid-single digits, we expect perhaps to be at a slightly less level, but still very supportive of low single-digit growth the entire year this year. That would obviously extend to our Outsourcing & Advisory services which are not transactions. Revenues (inaudible).

Okay thank you very much for that.

Frederic Bastien, Raymond James.

Good morning guys.

Good morning, Fred.

You are still significantly under levered pro forma, the acquisition of Colliers Parrish and you increased your credit facility. Based on that, just wondering how you are looking at acquisitions this year? Are you expecting an equally active year as you experienced last year? Are we to expect large acquisitions or more of the same going forward?

Good question. We have a lot of potential acquisition opportunities in the pipeline whether we get them completed is always an issue, but we like our pipeline. There is a lot to do.

This is a global opportunity so it's more about strengthening individual markets although there are some new market additions. But having the additional capacity doesn't really change -- our free cash flow is becoming so strong that we could fund virtually all of our 2020 initiatives from internal cash flow. We increased the line because we are seeing some new opportunities that could be considered larger.

You have followed us long enough to know that we would be extremely cautious about those types of things. We are seeing some very interesting ideas and our way is to plant a lot of seeds and take a look at where we're going to be in 2020 and beyond.

Potentially take some steps now to position us well for beyond enterprise 2020. We just want to have the availability. It's there. I believe more is there if we want it.

We've never had any issues in terms of access to capital except in the early days when we just started (laughter). But I think for anything that is proven to make sense, and is along the lines of what we do and leveraging our now global platform boots on the ground all around the world, I think almost anything is open to us in terms of new opportunities.

We are looking, Fred, there is nothing pressing. I don't want to mislead you that way, but we are doing a lot of looking and doing a lot of talking.

Thanks for that. I appreciate you gave guidance on the margins for this year but just wanted to look back at your full-year results in 2016. Your margins held relatively steady across regions despite all the uncertainty you experience and some generally more challenging conditions.

What do you attribute this to? Is it just your scale now allows you to have a more stable business performance? Just curious as to -- if you could give some color on that.

A lot of it is about scale. The other day, we had benefited, over time, from focusing on increasing our size, focusing on productivity around our people, and we're also going to get impacted by acquisition related impact on mix. I think over time, as we continue to invest in the business, we should, absent any dramatic change in our mix, which we are not focused on, we're maintaining the current mix, there will be additional operating leverage over time.

But at the same time, we're not going to be overly focused on the margin and it's our [hope] is for stable margins this year notwithstanding our growth. And part of that's mix related and part of it is just continuing to focus on investing in our business for the long term. We are trying to balance those two things and still maintain a healthy margin.

All right, thanks. I'll turn it over.

Brandon Dobell, William Blair & Company.

Thanks good morning, guys.

Good morning.

You've taken the margin question a little further as well. As you think about the opportunities for investments, as well as the mix shift dynamics going on in different geographies, and I know you talked about overall stable margins, but should we expect any real trajectory change within the different geographies i.e., is the US seeing more investments or fewer headwinds from the Outsourcing & Advisory businesses? Or maybe vice versa in EMEA for example?

I don't think there's anything dramatic there. A couple of things about margins. The US has still got some significant upset opportunity for us. So we are very focused on that and will continue to focus our efforts around scale and broker productivity and things like that, that will allow us ultimately to improve our margins in the US.

The reality is that notwithstanding a very solid business in the US, our margins outside the US were higher and when you consider the whole picture, have been negatively impacted by even FX, as they translate into fewer US dollars. At some point we think that will reverse. But we are pretty comfortable where we are with respect to margins but again focused in certain areas particularly the US and improving and we think we have the ability to do that.

Okay and maybe, JF, you think about the M&A environment but more about from a 2020 plan what you expect the business mix to look like looking out that far. I know it's a bit of a crystal ball here. But if you had a preference for allocating capital into different service areas, how would you rank where you would like to put the bigger chunks of capital in the business by service line?

So, if I look out to 2020, Brandon, I see our mix, diversification of both revenues and geography or services and geography is pretty good right now. We are circa 40% outsourcing, leasing is quite recurring as well, so give or take 70% of our business is repeat, recurring, revenue which is a pretty good mix for and advisory business.

And if we just execute on 2020, I think we are double the size with give or take the same kind of mix, outsourcing an advisory might go up another 4% or 5% just because we're seeing some interesting ideas there. I know that's only part of your question but the consolation prize for us is 2020. What do we look like in 2020 and I think we look, give or take, the same as we do today only double what we were in 2015 when we split the company.

In terms of allocating capital, our view, and you and I have discussed this several times in our meetings and telephone conversations, we believe as an organization we want to stay as close to the C-suite and to the intellectual component of real estate decision-making. So that weighs very heavily on our decisions around larger acquisitions.

Although we have experienced providing FM-like services and other repairs and things like that, that some of the others are doing, we believe that there are other risks associated with that, that at this point in our development we don't have to pursue. So, I hope that helps give you some directional thought processes around this and we think there is a lot of that potential in the marketplace.

Okay and then final one for me maybe for -- actually for either one because given the cadence of the acquisitions you have made over the past 12 to 18 months and the number of them, do you feel like you've got, let's call it the cost side, the expense side, of all of that M&A rung out of those transactions? Or is there still more, I hate to even use the word synergies, but office consolidations, technology, back office consolidation's, those kinds of things, to drive the operating expenses from those acquired entities down towards a level you feel is more comparable to how you guys run the internal businesses?

Well, John will give you a more elegant answer but I say absolutely not (laughter). Absolutely not. There are some pretty interesting opportunities to streamline overlaps and one of the reasons -- and the US is a great example, our margins in the US are pretty respectable but we think that we can move them up maybe 200 basis points.

That's all going to be around becoming more efficient, getting rid of duplication, and we consider ourselves to be pretty good at integrating acquisitions, isolating where there's overlaps. In many ways it simplifies our business proposition or business model, allows our now new branches offices to operate more effectively, deliver better value to the clients, look better to their clients, offer better advice to their clients, without having a channel conflict between their own marketing department that they used to have and our national, or international or global marketing department, to just use one example. So I think that there is still lots to do.

It's also -- we're also a service business, so the reality is there always should be lots to do. As we always reevaluate how we do business and refresh it every couple of years, something that we did two years ago that doesn't work anymore, it may work again, And we shouldn't say -- well geez, we tried it two years ago let's not try it again because it wasn't successful. I think our way would be to reintroduce ideas that have great prospects for enhancing margin and seeing if we can ring the bell a second time. But John maybe you can offer -- .

I think there is some overlap in some of the costs we incur when we do these acquisitions, and they may have even been in new geographies and new service lines but outside of back office and support functions, there isn't really a lot of overlap. But there is some and we'll get at those.

You'll know that most of our acquisitions tend to have earnouts. So we tend to immediately try and evaluate what opportunities there are -- generally believe there operations are more or less intact, at least through the earnout period and then accelerate integration beyond that. We think that that's a good way to go about structuring acquisitions and to ultimately realize on synergies. May not be a right away but it certainly is -- as apparently within a two-year timeframe. So we see opportunity to [approach that] for sure.

Okay great. Thanks guys.

Stephen MacLeod, BMO Capital.

Thank you good morning guys.

Good morning, Stephen.

I just wanted to circle around on EMEA margins

Can you speak up a little Steve, we can't hear you.

Okay, I just wanted to circle around on the EMEA margins in the quarter. They were quite strong. Is there anything one-time in nature, either in this period or the prior year period, that drove those margins higher?

Well, it was a mix, Steve, the mix was slanted more towards transactions. We spoke a little bit about very strong transaction related revenues, very profitable actually in Germany and some of the other Central and Eastern European operations. So, I would say that certainly had an influence on the margins. Some of that I don't think we will realize again going forward or at least we wouldn't be counting on it.

Okay, that's great. And when you put together your guidance or targets for 2017 and you are looking for flat adjusted EBITDA margin essentially, can you talk a little bit about where the potential areas are for exceeding the 2016 margin? And vice versa potentially being below the 2016 margin? Like what levers do you have to pull in 2017?

I guess mix can have an impact depending on our expected growth in transactions versus non-transactions revenues. We are expecting that the balance to be relatively close, obviously we did a larger acquisition earlier in the year here, which has a bigger proportion of transaction [employers] revenues and that's employers in the northern California business.

So that will increase the proportion of transaction for revenues but outside of mix, like I said and our outlook, we are balancing operating leverage which we will get from increasing our business and hopefully continue to work very closely with our people around productivity and making investments in our people and some of the technology related things we've mentioned. And we're always trying to strive and look to the long-term. So near-term margins are important but, at the end of the day, our sites are set further down the field and making the right kind of decisions and investments around the business.

Great. Okay. Thank you and just finally on acquisitions, you talk about services and increasing capabilities and existing markets. How do you view your service offering by market? Where do you view yourselves as having holes that you need to fill, whether it's by geography or by service line?

Okay, so that's a loaded question because the reality is in the most mature markets we have, we still have service line gaps and we can add capabilities. That's the beauty of this business.

So, there are market-for-market, and we are focused on major markets, but market-for-market, even though we do exceedingly well in a particular market let's take London as an example. We have a very strong and very high quality group of professionals there but there is a segment within the London, greater London market, that we really don't serve very well.

Somebody said -- how are you doing in London? We would say exceptional. How do you rate relative to your peers? We'd say right up there. We are invited to every single bench of any significance. But in reality there is a whole segment of the city that becomes open to us if we're able to fill that gap.

And the same thing applies in retail, in tenant rep, in a whole variety -- in project management, in property management and that is the beauty. It's so hard to articulate but this industry is so -- I'm going to use the word ginormous, and it's market-for-market.

And you've got a great position and, pick your mature market or so you think, but when you analyze your business, you realize your strength in industrial could be better, your strength in downtown office could be better, your strength in suburban office could be better, and that gives us the opportunity to recruit for additional -- a depth in services or capabilities, to look for tuck-in acquisitions that will augment that particular market or region.

And so we believe that 2020 may just be round one of the same story for another five years after 2020, because it's just everywhere. With the globalization and allocation of real estate amongst major institutions all around the world, it means secondary markets that would not otherwise be on the top of mind, have become very lucrative to do business in. And so we would like to make sure that we have sound operations in some of those regions so that we can capitalize as the capital flows go to real estate in different geographic regions where they could generate higher yields.

Okay that's great. Thank you, Jay, I appreciate the color.

(Operator Instructions)

Michael Smith, RBC.

Thank you and good morning. With your increased credit facility and your comments about potentially larger transactions, just wondering could any of those larger transactions be in a new line of business?

Yes, for sure.

And do you have any in your pipeline now?

(Laughter) You are good for a reason. Yes, I wouldn't call them in the pipeline. Pipeline are actionable transactions in [various] stages of discussion and I would say that we have spent a lot of time around a number of different add-on opportunities that are significant in size, that have leverage points between them close to the C-suite et cetera, and so we continue to plant seeds, but I don't think there is anything that I would say is near term.

And those, as you know, tend to -- let's call a spade a spade, those tend to be in higher valuations. And, I don't know, we've always been a Company that focuses on generating incremental earnings per share over the long-term and if we can execute on our strategy of buying assets at realistic valuations on realistic terms, it's a good gig and we should continue to do it as rapidly, but yet orderly, as we can.

The larger transactions -- public companies that ought not be public or lengthy great additions to this platform, would come at a much higher price and could create delusion among other things.

Okay and just switching gears. In your regular acquisitions, sales leasing, advisory outsourcing, are you seeing any pricing pressure?

Yes there is always pricing pressure but we have a way of doing transactions that has stood the test of time, which gives the target an opportunity to deliver what they think they can deliver and [call] your shareholders pay for what they get. And I think that resonates beautifully to potential targets and I think it also ensures that Colliers shareholders get what they pay for and so therefore the returns we expect on an acquisition 50-plus IRRs we generate one way or the other.

Great. Thank you.

Marc Riddick, Sidoti & Company.

Hi, good morning.

Good morning.

I was wondering if we could spend a little time on your current views on outsourcing. And maybe if you could spend a little time on where we are with some of the trends and some of the dynamics that are driving that. It seemed as though some of the prior comments that you had there seemed to be fairly -- it seems as though you're fairly positive on where that's going. But I was wondering if you could share some thoughts as to the differences and maybe some of the trend dynamics that we're seeing today versus maybe a year or two ago.

There's a loaded one again (laughter). Outsourcing is a wonderful thing. There will be more outsourcing in the future. We continue to focus on it. It does not occupy a disproportionate amount of our efforts.

We're looking for a great opportunities that we can add cost-effectively from the operations standpoint, we are investing quite a bit in more recurring-like services, which I would call outsourcing, corporate services, property management, multi-market transactions, things along those lines, that are -- I would say defined as outsourcing.

I think that as the markets, particularly the less mature markets, become more mature, we are seeing more activity in Latin America as an example, where the market, which was very -- I guess the answer is less mature, is becoming more mature.

Larger owners of real estate, some of whom are US and other buyers buying product in Latin America or in Eastern Europe, want to run their businesses and the real estate in a mature manner using high quality real estate professionals to make lease decisions rather than global providers that don't have the level of sophistication. So, I think looking forward in the next two, three years, we're just going to have a continued maturation of the market.

We're also seeing it in, interestingly, in Africa. Our business in Morocco has doubled over the past year and Morocco is the gateway to some other initiatives we are looking at in Africa. These are small in the overall scheme of things but just indicative of a maturing marketplace around real estate and where funds are allocated to the purchase of real estate.

Great and maybe as a bit of a follow-up on that, it seems as though then that maybe these are some of the areas that you might be looking at as far as increasing recruitment efforts and personnel in the next couple of years. So are those toward the top of the list as far as targets?

Well, I wouldn't say they are at the top of the list in terms of targets but I would say that we're looking at them more deeply. We are looking at our Latin American operations, which frankly, is smaller than we would like it to be and trying to determine how we could double or triple the size of that business over the next number of years.

We do have some affiliates in some markets that run decent businesses but based on the size of the market they could be running businesses of significantly larger size and how can we help facilitate that? So, (inaudible) it comes back to the vast opportunities available in the space and why we're so excited about the next few years here.

Excellent. And you've spent a lot of time already going over what you are seeing with the acquisition pipeline. So, just generally to summarize, is it a fair thing to characterize that you are more bullish about the acquisition pipeline today than you were a year or two ago?

I'm not sure I would say that. I would say we're equally bullish. I think it's really opportunistic at the end of the day. If the markets are right and the markets sometimes being down are when the markets are right, it's an appropriate time to capitalize.

I think the softness that some people are seeing in real estate and maybe it's not softness -- it's actually not softness actually what it is, is stable, flat, real estate activity which I don't consider to be bad at all. But stable real estate activity means that people that are in the business are saying, my business is stable, I can't figure out how to grow it, I'm ABC commercial real estate firm perhaps if I was part of the Colliers Global real estate organization, I could have access to greater clients, better technology, better tools (technical difficulty) my professionals and therefore drive my revenues to a different level.

And all of those things I think help us make a cost-effective addition to our business. So I would say pipelines might be a little bit better this year than they were in 2017 at this time than they were last year, but remember we've had a great start to 2017 already with a couple of acquisitions. So, will we finish 2017 where we did in 2016? Maybe a little bit better (technical difficulty).

Okay, excellent. As always I appreciate all the color that you are providing. So thank you very much for that.

Mitch Germain, JMP Group.

Thank you. Jay, just curious you made some fairly high-profile hires in New York. Curious if there were any other markets that you are looking to upgrade personnel going forward?

We look to upgrade, as we mentioned, every single market. We're very aggressive there, but prudent in the decision-making and New York was particularly interesting because of two very high profile teams as you know about were in discussions with us for a long period of time and it seemed to culminate really at the same time. Both of them felt that by coming together with our existing team in New York, we could really move up the ranks and have a seat at the table (technical difficulty) them are market those transactions to them (technical difficulty) the largest cities.

But we're doing that in London, we're doing it in LA, given that maybe we'd see we were (technical difficulty) rooted in and capital markets across the West Coast -- just phenomenal. We have great connections to Western Europe, a big capital markets group in Florida that join us from another prominent firm and helps our debt capital raise capabilities. They were the leader for that other firm and so the whole team came over including all of the servicing capabilities.

Colliers is the place where enterprising people want to be. And that's just not a saying. We are very entrepreneurial, more entrepreneurial than others, less bureaucracy, less noise around where the platform is going, how they're spending, things like that.

And if I was a high profile recruit and wanted to have clarity and a seat at the table, I would be calling Colliers all day long versus some of the competition. I think we're in a great position. We have surely demonstrated terrific growth over a long period of time. We have done this before, as you know, for 20 years. We delivered exceptional value to shareholders, we built an incredible business, and really it hasn't started yet, so I think you haven't seen anything yet.

Great. Good way to end it. I appreciate it.

There are no other questions at this point in time, sir.

Okay thanks ladies and gentlemen for joining us. Went on a little bit longer than we expected but we appreciate your participating and look forward to the next quarter's results. Thank you again.

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