EX-99.1 2 exh_991.htm EXHIBIT 99.1

Exhibit 99.1

COLLIERS INTERNATIONAL

GROUP INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

First Quarter

March 31, 2019

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

(in thousands of US dollars, except per share amounts)

	Three months
	ended March 31
	2019			2018

Revenues	$	635,123		$	552,473

Cost of revenues (exclusive of depreciation and amortization shown below)		421,349			362,300
Selling, general and administrative expenses		173,073			156,317
Depreciation		7,948			7,270
Amortization of intangible assets		14,720			8,588
Acquisition-related items (note 5)		4,635			2,253
Operating earnings		13,398			15,745

Interest expense, net		7,221			2,915
Other income, net (note 6)		(501	)		(427	)
Earnings before income tax		6,678			13,257
Income tax expense (note 7)		1,215			4,716
Net earnings		5,463			8,541

Non-controlling interest share of earnings		1,244			670
Non-controlling interest redemption increment (note 11)		2,757			2,905
Net earnings attributable to Company	$	1,462		$	4,966

Net earnings per common share (note 12)

Basic	$	0.04		$	0.13
Diluted	$	0.04		$	0.13

The accompanying notes are an integral part of these interim consolidated financial statements.

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

(in thousands of US dollars)

	Three months
	ended March 31
	2019			2018

Net earnings	$	5,463		$	8,541

Foreign currency translation gain		1,892			3,116
Unrealized gain (loss) on interest swaps, net of tax		(942	)		1,064
Pension liability adjustments, net of tax		(25	)		-
Comprehensive earnings		6,388			12,721

Less: Comprehensive earnings attributable to non-controlling shareholders		5,396			2,789

Comprehensive earnings attributable to Company	$	992		$	9,932

The accompanying notes are an integral part of these interim consolidated financial statements.

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of US dollars)

	March 31, 2019			December 31, 2018
Assets
Current Assets
Cash and cash equivalents	$	117,347		$	127,032
Accounts receivable, net of allowance of $31,250 (December 31, 2018 - $30,789)		419,470			455,232
Contract assets		98,311			99,468
Income tax recoverable		10,460			13,090
Prepaid expenses and other current assets		76,645			65,491
		722,233			760,313

Other receivables		15,524			12,088
Contract assets		10,549			10,964
Other assets		60,072			60,713
Fixed assets		96,781			93,483
Operating lease right-of-use assets (note 8)		278,689			-
Deferred income tax, net		36,952			34,195
Intangible assets		490,966			497,930
Goodwill		895,100			887,894
		1,884,633			1,597,267
	$	2,606,866		$	2,357,580

Liabilities and shareholders' equity
Current Liabilities
Accounts payable and accrued expenses	$	211,141		$	251,375
Accrued compensation		338,842			469,563
Income tax payable		16,995			30,034
Contract liabilities		31,867			28,773
Long-term debt - current (note 9)		1,045			1,834
Contingent acquisition consideration - current (note 10)		27,419			17,122
Operating lease liabilities (note 8)		70,898			-
		698,207			798,701

Long-term debt - non-current (note 9)		802,453			670,289
Contingent acquisition consideration (note 10)		62,697			76,743
Deferred rent		-			27,137
Operating lease liabilities		245,961			-
Other liabilities		21,979			21,826
Deferred income tax, net		25,570			27,550
		1,158,660			823,545
Redeemable non-controlling interests (note 11)		345,453			343,361

Shareholders' equity
Common shares		426,456			415,805
Contributed surplus		56,266			54,717
Deficit		(20,289	)		(21,751	)
Accumulated other comprehensive loss		(61,688	)		(61,218	)
Total Company shareholders' equity		400,745			387,553
Non-controlling interests		3,801			4,420
Total shareholders' equity		404,546			391,973
	$	2,606,866		$	2,357,580

Contingencies (note 14) and subsequent events (note 17)

The accompanying notes are an integral part of these interim consolidated financial statements.

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Unaudited)

(in thousands of US dollars, except share information)

	Common shares										Accumulated
	Issued and										other			Non-			Total
	outstanding				Contributed						comprehensive			controlling			shareholders'
	shares		Amount		surplus			Deficit			loss			interests			equity

Balance, December 31, 2018		39,213,136	$	415,805	$	54,717		$	(21,751	)	$	(61,218	)	$	4,420		$	391,973

Net earnings		-		-		-			5,463			-			-			5,463
Pension liability adjustment,
net of tax		-		-		-			-			(25	)		-			(25	)
Foreign currency translation gain		-		-		-			-			1,892			-			1,892
Unrealized loss on interest rate
swaps, net of tax		-		-		-			-			(942	)		-			(942	)
Other comprehensive earnings
attributable to NCI		-		-		-			-			(1,395	)		58			(1,337	)
NCI share of earnings		-		-		-			(1,244	)		-			478			(766	)
NCI redemption increment		-		-		-			(2,757	)		-			-			(2,757	)
Distributions to NCI		-		-		-			-			-			(979	)		(979	)
Acquisition of businesses, net		-		-		-			-			-			(176	)		(176	)

Subsidiaries’ equity transactions		-		-		390			-			-			-			390

Subordinate Voting Shares:
Stock option expense		-		-		2,831			-			-			-			2,831
Stock options exercised		269,675		10,651		(1,672	)		-			-			-			8,979
Balance, March 31, 2019		39,482,811	$	426,456	$	56,266		$	(20,289	)	$	(61,688	)	$	3,801		$	404,546


	Common shares										Accumulated
	Issued and										other			Non-			Total
	outstanding				Contributed						comprehensive			controlling			shareholders'
	shares		Amount		surplus			Deficit			loss			interests			equity

Balance, December 31, 2017		38,934,161	$	406,984	$	50,219		$	(115,489	)	$	(43,157	)	$	4,457		$	303,014

Net earnings		-		-		-			8,541			-			-			8,541
Foreign currency translation gain		-		-		-			-			3,116			-			3,116
Unrealized gain on interest rate
swaps, net of tax		-		-		-			-			1,064			-			1,064
Other comprehensive earnings
attributable to NCI		-		-		-			-			786			284			1,070
NCI share of earnings		-		-		-			(670	)		-			378			(292	)
NCI redemption increment		-		-		-			(2,905	)		-			-			(2,905	)
Distributions to NCI		-		-		-			-			-			(133	)		(133	)
Acquisition of businesses, net		-		-		-			-			-			(220	)		(220	)

Subsidiaries’ equity transactions		-		-		(23	)		-			-			-			(23	)

Subordinate Voting Shares:
Stock option expense		-		-		2,214			-			-			-			2,214
Stock options exercised		209,500		6,121		(1,033	)		-			-			-			5,088
Balance, March 31, 2018		39,143,661	$	413,105	$	51,377		$	(110,523	)	$	(38,191	)	$	4,766		$	320,534

The accompanying notes are an integral part of these interim consolidated financial statements.

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of US dollars)

	Three months ended
	March 31
	2019			2018
Cash provided by (used in)

Operating activities
Net earnings	$	5,463		$	8,541

Items not affecting cash:
Depreciation and amortization		22,668			15,858
Deferred income tax		(4,019	)		(393	)
Earnings from equity method investments		(366	)		(327	)
Stock option expense		2,831			2,214
Allowance for uncollectible accounts receivable		1,106			1,437
Amortization of advisor loans		5,032			3,881
Other		6,325			621

Net changes from operating assets / liabilities
Accounts receivable		43,336			51,265
Contract assets		5,070			9,654
Prepaid expenses and other current assets		(8,258	)		(4,798	)
Accounts payable and accrued expenses		(43,982	)		(51,841	)
Accrued compensation		(137,590	)		(112,708	)
Contract liabilities		(8,146	)		(1,284	)
Other liabilities		4,447			546
Contingent acquisition consideration paid		(112	)		(2,856	)
Net cash used in operating activities		(106,195	)		(80,190	)

Investing activities
Acquisitions of businesses, net of cash acquired (note 4)		(13,244	)		(79,732	)
Purchases of fixed assets		(10,379	)		(6,209	)
Advisor loans issued		(4,906	)		(2,793	)
Other investing activities		(4,293	)		(1,669	)
Net cash used in investing activities		(32,822	)		(90,403	)

Financing activities
Increase in long-term debt		218,481			233,873
Repayment of long-term debt		(83,587	)		(47,040	)
Purchase of non-controlling interests, net		(2,704	)		(73	)
Contingent acquisition consideration paid		(4,015	)		(7,606	)
Proceeds received on exercise of options		8,979			5,087
Dividends paid to common shareholders		(1,961	)		(1,947	)
Distributions paid to non-controlling interests		(6,194	)		(5,204	)
Financing fees paid		(20	)		-
Net cash provided by financing activities		128,979			177,090

Effect of exchange rate changes on cash		353			(3,371	)

Increase (decrease) in cash and cash equivalents		(9,685	)		3,126

Cash and cash equivalents, beginning of period		127,032			108,523

Cash and cash equivalents, end of period	$	117,347		$	111,649

The accompanying notes are an integral part of these interim consolidated financial statements.

COLLIERS INTERNATIONAL GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2019

(Unaudited)

(in thousands of US dollars, except per share amounts)

1. DESCRIPTION OF THE BUSINESS – Colliers International Group Inc. (“Colliers” or the “Company”) provides commercial real estate services to corporate and institutional clients in 35 countries around the world (68 countries including affiliates and franchisees). Colliers’ primary services are outsourcing and advisory services, lease brokerage, sales brokerage and investment management. Operationally, Colliers is organized into four distinct segments: Americas; Europe, Middle East and Africa (“EMEA”); Asia and Australasia (“Asia Pacific”) and Investment Management.

2. SUMMARY OF PRESENTATION – These unaudited interim consolidated financial statements (the “Financial Statements”) have been prepared by the Company in accordance with disclosure requirements for the presentation of interim financial information. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States of America have been condensed or omitted in accordance with such disclosure requirements, although the Company believes that the disclosures are adequate to make the information not misleading. These Financial Statements should be read in conjunction with the audited consolidated financial statements of Colliers for the year ended December 31, 2018.

In the opinion of management, these Financial Statements contain all adjustments necessary for a fair statement of financial position of the Company as at March 31, 2019 and the results of operations and its cash flows for the three month periods ended March 31, 2019 and 2018. All such adjustments are of a normal recurring nature. The results of operations for the three month period ended March 31, 2019 are not necessarily indicative of the results to be expected for the year ending December 31, 2019

Prior year comparatives in relation to Accounts payable and accrued expenses, Accrued compensation and Contract liabilities on the consolidated balance sheets and consolidated statements of cash flows have been restated to better reflect the classification of certain liabilities and to improve comparability with 2019. The amounts have no net impact on current liabilities or operating cash flows.

These Financial Statements follow the same accounting policies as the most recent audited consolidated financial statements of Colliers, except as noted in Note 3. The accounting policy for leases is shown below.

Leases

The Company is (i) a lessee in relation to premises and equipment and (ii) acts as a lessor in relation to certain premises that it owns or leases from third parties.

(a) As a lessee

The Company recognizes an operating lease right-of-use (“ROU”) asset and a lease liability on the consolidated balance sheet at the lease commencement date. Operating lease ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term adjusted for lease pre-payments and lease incentives. As most of the Company’s leases do not provide an implicit rate, the incremental borrowing rate based on the information available at commencement date is used to determine the present value of lease payments. The Company uses the implicit rate when readily determinable. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating leases ROU assets are amortized to selling, general and administrative expenses (“SG&A”) straight-line over the lease term.

Finance leases are included in fixed assets and long-term debt on the consolidated balance sheet. Finance lease assets are depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of lease term.

Variable lease payments and variable payments related to non-lease components are recorded to SG&A as incurred. Variable lease payments include amounts related to changes in payments associated with changes in an index or rate but which are not also associated with a remeasurement of the lease liability.

The Company has operating lease agreements with lease and non-lease components, and the Company has elected to apply the practical expedient to not separate lease and nonlease components and therefore the ROU assets and lease liabilities include payments related to services included in the lease agreement. Additionally, for certain leases the Company has elected to group leases that commence at the same time and where accounting does not materially differ from accounting for the leases individually as a portfolio of leases.

The Company has elected not to recognize ROU assets and lease liabilities for leases that have a term of twelve months or less. Similarly, the Company will be applying the practical expedient to not recognize assets or liabilities related to a business combination when the acquired lease has a remaining term of twelve months or less at the acquisition date. The payments associated with these leases are recorded to SG&A on a straight-line basis over the remaining lease term.

(b) As a lessor

When the Company acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease. To classify each lease the Company makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. All of the Company’s lessor arrangements are classified as operating leases.

When the Company is a sublessor, it accounts for its interests in the head lease and the sublease separately. It assesses the lessor classification of a sublease with reference to the underlying asset rather than with reference to the right-of-use asset. The Company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term as other revenue.

3. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

Recently adopted accounting guidance

Leases

The Financial Accounting Standards Board (“FASB”) has issued two Accounting Standards Updates (“ASU”) related to leases (collectively, “ASC 842”). In February 2016, the FASB issued ASU No. 2016-02, Leases. This ASU affects all aspects of lease accounting and has a significant impact to lessees as it requires the recognition of a right-of use asset and a lease liability for virtually all leases including operating leases. In addition to balance sheet recognition, additional quantitative and qualitative disclosures is required.

In July 2018, the FASB issued ASU No. 2018-11, Codification Improvements to Topic 842, Leases. This ASU affects narrow aspects of the guidance issued in ASU 2016-02 providing an additional (and optional) alternative transition method to adopt the new leases standard. Under this transition method, an entity initially applies ASC 842 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company has adopted ASC 842 effective January 1, 2019, with the election of the new optional transition method offered under ASU 2018-11 to apply the new lease standard at the adoption date without restating comparative figures. Therefore, the comparative information has not been restated and continues to be reported under previous GAAP. In transitioning to ASC 842, the Company has also elected to apply the practical expedient package which permits the Company to (i) not reassess whether expired or existing contracts are or contain leases, (ii) not reassess the lease classification between operating and finance leases for any expired or existing leases and (iii) not reassess initial direct costs for any existing leases.

The most significant impact is the increase in operating lease right-of-use assets and operating lease liabilities as presented in the March 31, 2019 consolidated balance sheet. A summary of the adjustments to the Company’s consolidated balance sheet as at adoption on January 1, 2019 were as follows:

	December 31, 2018		ASC 842 adjustment			January 1, 2019
Balance sheet

Accounts receivable, net of allowance	$	455,232	$	1,174		$	456,406
Prepaid expenses and other current assets		65,491		(1,662	)		63,829
Operating lease right-of-use assets		-		278,668			278,668
Accounts payable and accrued expenses		251,375		(4,591	)		246,784
Operating lease liabilities (current)				67,594			67,594
Deferred rent		27,137		(27,137	)		-
Operating lease liabilities (non-current)		-		242,314			242,314

Related balance sheet ratios were also impacted; however, covenant ratio calculations under the Company’s Revolving Credit Facility and Senior Notes were not impacted, as the underlying debt agreements contain provisions that nullify the impact of changes in accounting standards. See Notes 2 and 8 for further details on leases.

Hedging activities

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which increases the scope of hedge accounting for both financial and nonfinancial strategies. The Company adopted the new standard effective January 1, 2019 with no material impact on the Financial Statements. The Company’s interest rate swaps are accounted for as cash flow hedges, are deemed to be effective as hedges and are reported in other comprehensive income.

Recently issued accounting guidance, not yet adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. This ASU creates a new framework to evaluate financial instruments, such as trade receivables, for expected credit losses. This new framework replaces the existing incurred loss approach and is expected to result in more timely recognition of credit losses. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other: Simplifying the Accounting for Goodwill Impairment to remove Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. Under this guidance, a goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the US federal corporate income tax rate (or portion thereof) is recorded. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use software (Subtopic 350-40). This ASU aligns the capitalizing of implementation costs incurred in relation to a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. It also requires these capitalized costs to be expensed over the term of the hosting arrangement and to the same line as the hosting arrangement. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

4. ACQUISITIONS – During the three months ended March 31, 2019, the Company acquired a controlling interest in one business, operating in the Americas (Virginia). The acquisition date fair value of consideration transferred consisted of $12,746 in cash (net of cash acquired of $3,158). The Company acquired $1,722 of net assets, excluding cash, and recognized goodwill of $8,914, intangible assets of $8,914 and redeemable non-controlling interest of $6,804 in its preliminary purchase price allocation.

The primary factors contributing to goodwill are assembled workforces, synergies with existing operations and future growth prospects. Acquired intangible assets consist of customer relationships, revenue backlog and property management contracts with estimated useful lives ranging from 3 months to 15 years. The acquisition was accounted for by the acquisition method of accounting for business combinations.

During the three months ended March 31, 2018, the Company acquired controlling interests in three businesses for cash consideration of $79,654 (net of cash acquired of $12,990) and contingent consideration of $5,742.

The Company typically structures its business acquisitions to include contingent consideration. Certain vendors, at the time of acquisition, are entitled to receive a contingent consideration payment if the acquired businesses achieve specified earnings levels during the one to five-year periods following the dates of acquisition. The ultimate amount of payment is determined based on a formula, the key inputs to which are (i) a contractually agreed maximum payment; (ii) a contractually specified revenue or earnings level and (iii) the actual revenue or earnings for the contingency period. If the acquired business does not achieve the specified revenue or earnings level, the maximum payment is reduced for any shortfall, potentially to nil.

Unless it contains an element of compensation, contingent consideration is recorded at fair value on the acquisition date and is re-measured to fair value each subsequent reporting period. The fair value recorded on the consolidated balance sheet as at March 31, 2019 was $90,117 (see note 10). The liability recorded on the balance sheet for the compensatory element of contingent consideration arrangements as of March 31, 2019 was $18,255. The estimated range of outcomes (undiscounted) for all contingent consideration arrangements, including those with an element of compensation, is $181,580 to a maximum of $213,624. The contingencies will expire during the period extending to March 2023.

5. ACQUISITION-RELATED ITEMS - Acquisition-related expense is comprised of the following:

	Three months ended
	March 31
	2019		2018

Transaction costs	$	1,123	$	1,714
Contingent consideration fair value adjustments		428		(948	)
Contingent consideration compensation expense		3,084		1,487
	$	4,635	$	2,253

6. OTHER INCOME - Other (income) expense is comprised of the following:

	Three months ended
	March 31
	2019			2018

Gain on investments	$	(176	)	$	(90	)
Equity earnings from non-consolidated investments		(366	)		(327	)
Other		41			(10	)
	$	(501	)	$	(427	)

7. INCOME TAX – The provision for income tax for the three months ended March 31, 2019 reflected an effective tax rate of 18.2% (2018 - 35.6%) relative to the combined statutory rate of approximately 26.5% (2018 - 26.5%), with the current year rate impacted by an increase in earnings before income tax in certain low tax rate jurisdictions.

8. LEASES – The Company enters into premise leases and equipment leases as a lessee.

a) Premise leases

The Company leases office space for terms ranging from less than one year to eleven years. Leases generally include an initial contract term but some leases include an option to renew the lease for additional period at the end of this initial term. These renewal periods range in length up to a period equivalent to the initial term of the lease. All of the Company’s premise leases are classified as operating leases.

b) Equipment leases

The Company leases certain equipment in its operations, including furniture and equipment, computer equipment and vehicles. Equipment leases may consist of operating leases or finance leases based upon the assessment of the facts at the commencement date of the lease. Equipment leases have lease terms of one year to six years. Certain leases may have the option to extend the leases for a short period or to purchase the asset at the end of the lease term.

The components of lease expense were as follows:

	Three months ended
	March 31
	2019

Operating lease cost	$	18,688

Finance lease cost
Amortization of right-of-use assets		220
Interest on lease liabilities		16

Variable lease cost		7,693

Short term lease cost		1,033

Total lease expense	$	27,650


Sublease revenues		(555	)
Total lease cost, net of sublease revenues	$	27,095

Supplemental information related to leases was as follows:

	Three months ended
	March 31
	2019

Right-of-use assets obtained in exchange for lease obligations:
Operating leases recognized on transition to ASC 842		278,668
Operating leases commencing in 2019		15,990
Finance leases		9

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(18,956	)
Operating cash flows from finance leases		(16	)
Financing cash flows from finance leases		(384	)

Supplemental balance sheet information related to leases was as follows:

	Three months ended
	March 31
	2019

Operating leases
Operating lease right-of-use assets	$	278,689

Operating lease liabilities - current	$	(70,898	)
Operating lease liabilities - non-current		(245,961	)
Total operating lease liabilities	$	(316,859	)

Finance leases
Fixed assets, gross	$	5,403
Accumulated depreciation		(4,510	)
Fixed assets, net	$	893

Long-term debt - current	$	(588	)
Long-term debt - non-current		(382	)
Total finance lease liabilities	$	(970	)

Maturities of lease liabilities were as follows:

	One year		Two years		Three years		Four years		Five years		Thereafter		Total

Operating leases	$	77,773	$	68,180	$	56,578	$	43,605	$	34,849	$	68,970	$	349,955

Present value of operating lease liabilities													$	316,859
Difference between undiscounted cash flows and discounted cash flows													$	33,096

Finance leases	$	646	$	318	$	23	$	-	$	-	$	-	$	987

Present value of finance lease liabilities													$	970
Difference between undiscounted cash flows and discounted cash flows													$	17

	March 31
	2019

Weighted average remaining lease term
Operating leases		5.8 years
Finance leases		1.8 years

Weighted average discount rate
Operating leases		3.3	%
Finance leases		1.9	%

As of March 31, 2019, the Company has additional operating leases, primarily for premises, that have not yet commenced of $8,187. These operating leases will commence within the next twelve months and have lease terms ranging from one to seven years.

9. LONG-TERM DEBT – The Company has an amended and restated credit agreement with a syndicate of banks to provide a multi-currency senior unsecured revolving credit facility (the “Revolving Credit Facility”) of $1,000,000. The Revolving Credit Facility has a 5-year term ending April 30, 2023 and bears interest at an applicable margin of 1.25% to 2.50% over floating reference rates, depending on financial leverage ratios. The weighted average interest rate at March 31, 2019 was 3.7% (2018 - 3.1%). The Revolving Credit Facility had $423,291 of available un-drawn credit as at March 31, 2019. As of March 31, 2019, letters of credit in the amount of $7,689 were outstanding ($7,624 as at December 31, 2018). The Revolving Credit Facility requires a commitment fee of 0.25% to 0.5% of the unused portion, depending on certain leverage ratios. At any time during the term, the Company has the right to increase the Revolving Credit Facility by up to $250,000 on the same terms and conditions.

The Company has outstanding €210,000 of senior unsecured notes with a fixed interest rate of 2.23% (the “Senior Notes”), which are held by a group of institutional investors. The Senior Notes have a 10-year term ending May 30, 2028.

The Revolving Credit Facility and the Senior Notes rank equally in terms of seniority and have similar financial covenants. The Company is required to maintain financial covenants including leverage and interest coverage. The Company was in compliance with these covenants as of March 31, 2019. The Company is limited from undertaking certain mergers, acquisitions and dispositions without prior approval.

See Note 17 for subsequent events related to long-term debt.

10. FAIR VALUE MEASUREMENTS – The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2019:

	Carrying value at		Fair value measurements
	March 31, 2019		Level 1		Level 2		Level 3

Assets
Investments
Equity securities	$	7,937	$	3,939	$	3,998	$	-
Debt securities	$	150	$	-	$	-	$	150


Liabilities
Contingent consideration liability	$	90,117	$	-	$	-	$	90,117
Interest rate swap liability		355		-		355		-

The inputs to the measurement of the fair value of contingent consideration related to acquisitions are Level 3 inputs. The fair value measurements were made using a discounted cash flow model; significant model inputs were (i) expected future operating cash flows (determined with reference to each specific acquired business) and (ii) discount rates (which range from 3% to 9.1%, with a weighted average of 6.3%). The wide range of discount rates is attributable to level of risk related to economic growth factors combined with the length of the contingent payment periods; and the dispersion was driven by unique characteristics of the businesses acquired and the respective terms for these contingent payments. Within the range of discount rates, there is data point concentration at the 3.8% and 8.7% levels. A 2% increase in the weighted average discount rate would reduce the fair value of contingent consideration by $4,400.

Changes in the fair value of the contingent consideration liability are comprised of the following:

	2019
Balance, January 1	$	93,865
Fair value adjustments		428
Resolved and settled in cash		(4,127	)
Other		(51	)
Balance, March 31	$	90,116

Less: Current portion		27,419
Non-current portion	$	62,696

The carrying amounts for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair values due to the short maturity of these instruments, unless otherwise indicated. The inputs to the measurement of the fair value of the Senior Notes are Level 3 inputs. The fair value measurements were made using a net present value approach; significant model inputs were expected future cash outflows and discount rates.

	March 31, 2019				December 31, 2018
	Carrying		Fair		Carrying		Fair
	amount		value		amount		value

Other receivables	$	15,524	$	15,524	$	12,088	$	12,088
Advisor loans receivable (non-current)		45,513		45,513		46,661		46,661
Long-term debt, excluding Senior Notes (non-current)		567,207		567,207		430,712		430,712
Senior Notes		234,863		279,627		239,577		268,838

11. REDEEMABLE NON-CONTROLLING INTERESTS – The minority equity positions in the Company’s subsidiaries are referred to as redeemable non-controlling interests (“RNCI”). The RNCI are considered to be redeemable securities. Accordingly, the RNCI is recorded at the greater of (i) the redemption amount or (ii) the amount initially recorded as RNCI at the date of inception of the minority equity position. This amount is recorded in the “mezzanine” section of the balance sheet, outside of shareholders’ equity. Changes in the RNCI amount are recognized immediately as they occur. The following table provides a reconciliation of the beginning and ending RNCI amounts:

	2019

Balance, January 1	$	343,361
RNCI share of earnings		765
RNCI redemption increment		2,757
Distributions paid to RNCI		(5,215	)
Purchase of interests from RNCI, net		(3,019	)
RNCI recognized on business acquisitions		6,804
Balance, March 31	$	345,453

The Company has shareholders’ agreements in place at each of its non-wholly owned subsidiaries. These agreements allow the Company to “call” the non-controlling interest at a price determined with the use of a formula price, which is usually equal to a fixed multiple of average annual net earnings before extraordinary items, income taxes, interest, depreciation, and amortization. The agreements also have redemption features which allow the owners of the RNCI to “put” their equity to the Company at the same price subject to certain limitations. The formula price is referred to as the redemption amount and may be paid in cash or in Subordinate Voting Shares. The redemption amount as of March 31, 2019 was $309,979 (March 31, 2018 - $131,258). The redemption amount is lower than that recorded on the balance sheet as the formula prices of certain RNCI are lower than the amount initially recorded at the inception of the minority equity position. If all put or call options were settled with Subordinate Voting Shares as at March 31, 2019, approximately 4,600,000 such shares would be issued.

Increases or decreases to the formula price of the underlying shares are recognized in the statement of earnings as the NCI redemption increment.

12. NET EARNINGS PER COMMON SHARE – Earnings per share calculations cannot be anti-dilutive, therefore diluted shares are not used in the denominator when the numerator is in a loss position. The following table reconciles the weighted average basic and diluted common shares outstanding:

	Three months ended
(in thousands)	March 31
	2019		2018

Basic shares		39,298		39,048
Assumed exercise of Company stock options		517		605
Diluted shares		39,815		39,653

13. STOCK-BASED COMPENSATION – The Company has a stock option plan for certain directors, officers and key full-time employees of the Company and its subsidiaries, other than its Chairman & CEO who has a Long Term Arrangement as described in note 14. Options are granted at the market price for the underlying shares on the date of grant. Each option vests over a four-year term, expires five years from the date granted and allows for the purchase of one Subordinate Voting Share. All Subordinate Voting Shares issued are new shares. As at March 31, 2019, there were 1,141,500 options available for future grants.

Grants under the Company’s stock option plan are equity-classified awards.

There were 490,000 stock options granted during the three months ended March 31, 2019 (2018 - 470,000). Stock option activity for the three months ended March 31, 2019 was as follows:

						Weighted average
				Weighted		remaining
	Number of			average		contractual life		Aggregate
	options			exercise price		(years)		intrinsic value

Shares issuable under options -
Beginning of period		1,897,425		$	45.08
Granted		490,000			68.65
Exercised		(269,675	)		33.30
Forfeited		(10,000	)		67.98
Shares issuable under options -
End of period		2,107,750		$	51.96		3.04	$	32,369
Options exercisable - End of period		724,500		$	36.96		1.62	$	21,590

The amount of compensation expense recorded in the statement of earnings for the three months ended March 31, 2019 was $2,831 (2018 - $2,214). As of March 31, 2019, there was $12,881 of unrecognized compensation cost related to non-vested awards which is expected to be recognized over the next 4 years. During the three month period ended March 31, 2019, the fair value of options vested was $4,541 (2018 - $2,687).

14. CONTINGENCIES – In the normal course of operations, the Company is subject to routine claims and litigation incidental to its business. Litigation currently pending or threatened against the Company includes disputes with former employees and commercial liability claims related to services provided by the Company. The Company believes resolution of such proceedings, combined with amounts set aside, will not have a material impact on the Company’s financial condition or the results of operations.

Pursuant to an agreement approved in February 2004 and restated on June 1, 2015, the Company agreed that it will make payments to Jay S. Hennick, its Chairman & Chief Executive Officer (“CEO”), that are contingent upon the arm’s length acquisition of control of the Company or upon a distribution of the Company’s assets to shareholders. The payment amounts will be determined with reference to the price per Subordinate Voting Share received by shareholders upon an arm’s length sale or upon a distribution of assets. The right to receive the payments may be transferred among members of the CEO’s family, their holding companies and trusts. The agreement provides for the CEO to receive each of the following two payments. The first payment is an amount equal to 5% of the product of: (i) the total number of Subordinate and Multiple Voting Shares outstanding on a fully diluted basis at the time of the sale and (ii) the per share consideration received by holders of Subordinate and Multiple Voting Shares minus a base price of C$3.324. The second payment is an amount equal to 5% of the product of (i) the total number of shares outstanding on a fully diluted basis at the time of the sale and (ii) the per share consideration received by holders of Subordinate Voting Shares minus a base price of C$6.472. Assuming an arm’s length acquisition of control of the Company took place on March 31, 2019, the amount required to be paid to the Chairman & CEO, based on a market price of C$89.27 per Subordinate Voting Share, would be US$256,714.

15. REVENUE FROM CONTRACTS WITH CUSTOMERS

Disaggregated revenue

Colliers has disaggregated its revenue from contracts with customers by type of service and region as presented in the following table.

OPERATING SEGMENT REVENUES
					Asia		Investment
	Americas		EMEA		Pacific		Management		Corporate		Consolidated

Three months ended March 31

2019
Lease brokerage	$	139,788	$	21,704	$	20,291	$	-	$	-	$	181,783
Sales brokerage		86,603		32,225		33,037		-		-		151,865
Property management		63,796		19,149		35,005		-		-		117,950
Valuation and advisory		35,752		19,055		13,839		-		-		68,646
Project management		28,409		27,111		8,379		-		-		63,899
IM - Management Fees		-		-		-		31,430		-		31,430
IM - Incentive Fees		-		-		-		11,187		-		11,187
IM - Transaction and Other		-		-		-		474		-		474
Other		4,477		1,220		1,766		-		426		7,889
Total Revenue	$	358,825	$	120,464	$	112,317	$	43,091	$	426	$	635,123

2018
Lease brokerage	$	120,374	$	23,840	$	23,477	$	-	$	-	$	167,691
Sales brokerage		88,603		22,857		30,817		-		-		142,277
Property management		55,291		23,075		32,674		-		-		111,040
Valuation and advisory		32,793		21,203		11,281		-		-		65,277
Project management		26,012		21,273		6,858		-		-		54,143
IM - Management Fees		-		-		-		1,877		-		1,877
IM - Transaction and Other		-		-		-		857		-		857
Other		5,429		735		2,728		-		419		9,311
Total Revenue	$	328,502	$	112,983	$	107,835	$	2,734	$	419	$	552,473

Contract balances

As at March 31, 2019, the Company had contract assets totaling $108,860 of which $98,311 was current (as at December 31, 2018 - $111,432 of which $99,468 was current). During the three months ended March 31, 2019, approximately 50% of the current contract assets were moved to accounts receivable.

As at March 31, 2019, the Company had contract liabilities (all current) totaling $31,867 (As at December 31, 2018 - $28,773). Revenue recognized for the three months ended March 31, 2019 totaled $23,046 (2018 - $12,158) that was included in the contract liability balance at the beginning of the year.

Certain constrained brokerage fees, outsourcing and advisory fees and investment management fees may arise from services that began in a prior reporting period. Consequently, a portion of the fees the Company recognizes in the current period may be partially related to the services performed in prior periods. In particular, generally less than 5% of brokerage revenue recognized in a period had previously been constrained and substantially all investment management incentive fees, including carried interest, recognized in the period were previously constrained.

16. SEGMENTED INFORMATION – Colliers has identified four reportable operating segments. Three segments are grouped geographically into Americas, Asia Pacific and EMEA. The Investment Management segment includes Harrison Street Real Estate Capital, LLC (“Harrison Street”) and the Company’s existing European investment management business which was reported in EMEA prior to the acquisition of Harrison Street in July 2018. The groupings are based on the manner in which the segments are managed. Management assesses each segment’s performance based on operating earnings or operating earnings before depreciation and amortization. Corporate includes the costs of global administrative functions and the corporate head office.

OPERATING SEGMENTS
						Asia		Investment
	Americas		EMEA			Pacific		Management			Corporate			Consolidated

Three months ended March 31

2019
Revenues	$	358,825	$	120,464		$	112,317	$	43,091		$	426		$	635,123
Depreciation and amortization		8,260		5,582			1,458		6,610			758			22,668
Operating earnings (loss)		16,169		(10,146	)		9,216		3,637			(5,478	)		13,398

2018
Revenues	$	328,502	$	112,983		$	107,835	$	2,734		$	419		$	552,473
Depreciation and amortization		7,023		6,642			1,557		12			624			15,858
Operating earnings (loss)		20,006		(9,146	)		9,374		(425	)		(4,064	)		15,745

GEOGRAPHIC INFORMATION

	Three months ended
	March 31
	2019		2018



United States
Revenues	$	312,042	$	240,758
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		953,471		278,858
Operating lease right-of-use assets		133,295		-

Canada
Revenues	$	74,148	$	74,681
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		65,943		60,187
Operating lease right-of-use assets		23,018		-

Euro currency countries
Revenues	$	72,155	$	68,253
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		259,579		299,018
Operating lease right-of-use assets		40,286		-

Australia
Revenues	$	43,405	$	45,828
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		47,519		49,235
Operating lease right-of-use assets		37,341		-

United Kingdom
Revenues	$	31,521	$	31,428
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		70,020		77,492
Operating lease right-of-use assets		18,009		-

Other
Revenues	$	101,852	$	91,525
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		86,315		62,849
Operating lease right-of-use assets		26,740		-

Consolidated
Revenues	$	635,123	$	552,473
Total long-lived assets
Long-lived assets excluding operating lease right-of-use assets		1,482,847		827,639
Operating lease right-of-use assets		278,689		-

17. SUBSEQUENT EVENTS – On April 4, 2019, the Company amended the credit agreement for its Revolving Credit Facility. The Revolving Credit Facility’s maturity date was extended to April 30, 2024 (from April 30, 2023) and certain amendments were made to increase the flexibility of the Company’s debt capital structure. Other material terms and conditions, including the Revolving Credit Facility’s capacity and pricing, were unchanged.

On April 4, 2019, the Company also amended the note purchase agreement for its Senior Notes to make certain amendments to increase the flexibility of the Company’s debt capital structure. These amendments were similar to the amendments made to the Revolving Credit Facility, which ranks equal in seniority to the Senior Notes.

On April 12, 2019, the Company completed a structured accounts receivable facility (the “AR Facility”) with a third-party financial institution. The AR Facility has committed availability of $125,000 with an initial term of 364 days and includes selected US and Canadian trade accounts receivable. The Company acts as servicer under the AR Facility. Proceeds from the AR Facility in the amount of $117,200 were used to repay outstanding indebtedness under the Revolving Credit Facility.

COLLIERS INTERNATIONAL GROUP INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR THE three MONTH PERIOD ENDED March 31, 2019

(in US dollars)

May 3, 2019

The following Management’s Discussion and Analysis (“MD&A”) should be read together with the unaudited interim consolidated financial statements of Colliers International Group Inc. (the “Company” or “Colliers”) for the three month period ended March 31, 2019 and the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2018. The interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). All financial information herein is presented in United States dollars.

The Company has prepared this MD&A with reference to National Instrument 51-102 – Continuous Disclosure Obligations of the Canadian Securities Administrators (the "CSA"). Under the US/Canada Multijurisdictional Disclosure System, the Company is permitted to prepare this MD&A in accordance with the disclosure requirements of Canada, which requirements are different from those of the United States. This MD&A provides information for the three month period ended March 31, 2019 and up to and including May 3, 2019.

Additional information about the Company can be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.

This MD&A includes references to “adjusted EBITDA” and “adjusted EPS”, which are financial measures that are not calculated in accordance with GAAP. For a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures, see “Reconciliation of non-GAAP financial measures”.

Consolidated review

We reported solid revenue growth for the seasonally slow first quarter ended March 31, 2019 due to a combination of recent acquisitions and internal growth. Consolidated revenue growth was 15% relative to the same quarter in the prior year (19% measured in local currencies). Diluted net earnings per common share was $0.04, relative to $0.13 in the prior year quarter. Adjusted earnings per share (see “Reconciliation of non-GAAP measures” below) for the first quarter was $0.51, up 13% from $0.45 in the prior year quarter, largely attributable to increased contributions from our Investment Management segment and a lower effective tax rate. Both GAAP earnings per share and adjusted earnings per share for the first quarter of 2019 would have been $0.01 higher excluding foreign exchange impacts.

During the first quarter of 2019, the Company acquired a majority interest in a commercial real estate services firm operating in central and southeast Virginia. The total initial cash consideration for this acquisition, net of cash acquired, was $12.7 million.

On April 4, 2019, we extended the credit agreement for our multi-currency revolving credit facility (the “Revolving Credit Facility”) with a new 5-year term maturing in April 2024. The prior agreement had a maturity of April 2023 (see “Liquidity and capital resources” below).

On April 12, 2019, we established a structured accounts receivable facility (the “AR Facility”) to further diversify our capital structure and reduce borrowing costs. The AR Facility has committed availability of $125 million and includes selected US and Canadian trade accounts receivable, with an initial term of 364 days. Proceeds from the AR Facility in the amount of $117.2 million were used to repay outstanding indebtedness under our Revolving Credit Facility (see “Liquidity and capital resources” below).

Also during April 2019, we acquired two Colliers International affiliates, one operating in Charlotte, North Carolina and one operating in Sweden.

For the quarter ended March 31, 2019, revenue growth was led by our Investment Management segment, with a significant contribution from Harrison Street Real Estate Capital, LLC (“Harrison Street”), acquired in July 2018, as well as Outsourcing and Advisory services in in the EMEA and Asia Pacific regions.

	Three months ended
(in thousands of US$)	March 31				Growth		Growth
(LC = local currency)	2019		2018		in US$ %		in LC %

Outsourcing & Advisory	$	258,384	$	239,771		8%		13%
Lease Brokerage		181,783		167,691		8%		11%
Sales Brokerage		151,865		142,277		7%		10%
Investment Management		43,091		2,734		NM		NM

Total revenues	$	635,123	$	552,473		15%		19%

Results of operations - three months ended March 31, 2019

Revenues for our first quarter were $635.1 million, 15% higher than the comparable prior year quarter (19% measured in local currencies). Recent acquisitions, including Harrison Street, contributed 10% to revenue growth. Internally generated revenues measured in local currencies were 8%, led by strong growth in Outsourcing and Advisory in the EMEA and Asia Pacific regions.

The operating earnings for the quarter were $13.4 million, versus operating earnings of $15.7 million in the prior year period. The operating earnings margin was 2.1% versus 2.8% in the prior year quarter. The decline in margins was attributable to (i) investments in incremental revenue producers in several markets in the Americas and EMEA; (ii) amortization of intangible assets related to the acquisition of Harrison Street; (iii) partially offset by incremental earnings from Harrison Street and other recent acquisitions. Adjusted EBITDA (see “Reconciliation of non-GAAP measures” below) for the first quarter was $43.6 million versus $36.1 million reported in the prior year quarter. Our Adjusted EBITDA margin was 6.9% of revenues versus 6.5% of revenues in the prior year quarter.

Depreciation expense was $7.9 million, versus $7.3 million recorded in the prior year quarter, with the increase largely attributable to increased investments in office leaseholds and the impact of recent business acquisitions.

Amortization expense was $14.7 million, versus $8.6 million recorded in the prior year quarter, with the increase primarily attributable to the acquisition of Harrison Street.

Net interest expense was $7.2 million, versus $2.9 million recorded in the prior year quarter, attributable to increased borrowings over the past year to fund business acquisitions, in particular Harrison Street and an increase in floating reference rates. The average interest rate on debt during the quarter was 3.8%, relative to 3.1% in the prior year quarter.

Consolidated income tax expense for the quarter was $1.2 million, relative to $4.7 million the prior year quarter, reflecting effective tax rates of 18% and 36%, respectively impacted by the earnings mix, with an increase in earnings before income tax in certain low tax rate jurisdictions. The effective tax rate for the full year is expected to be approximately 29% to 30%.

Net earnings for the quarter were $5.5 million, relative to $8.5 million in the prior year quarter.

The Americas region generated $358.8 million of revenues during the first quarter, an increase of 9% from the prior year quarter (11% measured in local currencies). Revenue growth was comprised of 7% contribution from recent acquisitions and 4% internal growth concentrated in the Lease Brokerage and Outsourcing & Advisory service lines. Adjusted EBITDA was $26.2 million, relative to $26.5 million in the prior year quarter, with the margin impacted by investments in recruiting relative to the prior year, as well as revenue mix. GAAP operating earnings were $16.2 million, relative to $20.0 million in the prior year quarter.

The EMEA region generated $120.5 million of revenues during the first quarter, up 7% from the prior year quarter (up 15% measured in local currencies) comprised of 13% growth in internal revenues and 2% from recent acquisitions. Outsourcing & Advisory, especially project management, as well as Sales Brokerage, contributed significantly to internal revenue growth, measured in local currencies. Foreign exchange headwinds negatively impacted revenue growth by 9%. Adjusted EBITDA was a loss of $2.5 million, versus breakeven in the prior year quarter, impacted by incremental planned investments in additional revenue producers. The GAAP operating loss was $10.1 million for the quarter, relative to a loss of $9.1 million in the prior year quarter.

The Asia Pacific region generated $112.3 million of revenues during the first quarter, an increase of 4% from the prior year quarter (an increase of 11% measured in local currencies). Revenue growth was comprised of 9% internal growth primarily in recurring Outsourcing & Advisory services measured in local currencies, and 2% growth from recent acquisitions. Foreign exchange headwinds negatively impacted revenue growth by 7%. Adjusted EBITDA was $10.9 million versus $11.2 million in the prior year quarter, with the margin impacted by revenue mix favouring lower margin recurring services. GAAP operating earnings were $9.2 million for the first quarter, relative to $9.4 million in the prior year quarter.

The Investment Management segment is comprised of Harrison Street which was acquired in July 2018, and the Company’s existing European investment management business which was previously reported within the EMEA segment prior to the Harrison Street acquisition. Investment Management revenues for the first were $43.1 million, of which $11.2 million represented pass-through revenue from historical carried interest. The carried interest recognized during the quarter was payable to former owners of Harrison Street and certain long-serving employees, affecting reported margin but having no impact on earnings. Adjusted EBITDA was $10.2 million. Operating earnings were $3.6 million in the quarter because of the significant increase in acquisition-related intangible asset amortization. Assets under management were $26.7 billion as of March 31, 2019.

The global Corporate operating loss for the first quarter was $5.5 million, relative to $4.1 million in the prior period, primarily on account of higher acquisition costs as well as performance-based incentive compensation accruals. Corporate costs as presented in adjusted EBITDA were $1.3 million for the first quarter, relative to $1.1 million in the comparable prior year period.

Summary of quarterly results (unaudited)

The following table sets forth our unaudited quarterly consolidated results of operations data. The information in the table below has been derived from unaudited interim consolidated financial statements that, in management’s opinion, have been prepared on a consistent basis and include all adjustments necessary for a fair presentation of information. The information below is not necessarily indicative of results for any future quarter.

Quarter	Q1		Q2		Q3		Q4
(in thousands of US$, except per share amounts)

YEAR ENDING DECEMBER 31, 2019
Revenues	$	635,123
Operating earnings		13,398
Net earnings		5,463
Diluted net earnings per common share		0.04

YEAR ENDED DECEMBER 31, 2018
Revenues	$	552,473	$	667,350	$	715,721	$	889,883
Operating earnings		15,745		45,569		41,956		98,128
Net earnings		8,541		28,804		25,382		65,847
Diluted net earnings per common share		0.13		0.60		0.41		1.33

YEAR ENDED DECEMBER 31, 2017
Revenues	$	466,263	$	586,233	$	618,798	$	763,905
Operating earnings		12,840		41,229		34,458		78,849
Net earnings		6,800		25,958		20,361		40,955
Diluted net earnings per common share		0.04		0.29		0.16		0.82

OTHER DATA (see "Reconciliation of non-GAAP measures")
Adjusted EBITDA - 2019	$	43,571
Adjusted EBITDA - 2018		36,140	$	69,427	$	72,665	$	133,203
Adjusted EBITDA - 2017		31,252	$	60,258	$	55,281	$	96,033
Adjusted EPS - 2019		0.51
Adjusted EPS - 2018		0.45		0.95		0.92		1.77
Adjusted EPS - 2017		0.36		0.77		0.66		1.36

Seasonality and quarterly fluctuations

The Company generates peak revenues and earnings in the month of December followed by a low in January and February as a result of the timing of closings on sales brokerage transactions. Revenues and earnings during the balance of the year are relatively even. These sales brokerage operations comprise approximately 30% of our annual consolidated revenues. Variations can also be caused by business acquisitions or dispositions which alter the consolidated service mix.

Reconciliation of non-GAAP measures

In this MD&A, we make reference to “adjusted EBITDA” and “adjusted earnings per share”, which are financial measures that are not calculated in accordance with GAAP.

Adjusted EBITDA is defined as net earnings, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; (v) acquisition-related items; (vi) restructuring costs and (vii) stock-based compensation expense. We use adjusted EBITDA to evaluate our own operating performance and our ability to service debt, as well as an integral part of our planning and reporting systems. Additionally, we use this measure in conjunction with discounted cash flow models to determine the Company’s overall enterprise valuation and to evaluate acquisition targets. We present adjusted EBITDA as a supplemental measure because we believe such measure is useful to investors as a reasonable indicator of operating performance because of the low capital intensity of the Company’s service operations. We believe this measure is a financial metric used by many investors to compare companies, especially in the services industry. This measure is not a recognized measure of financial performance under GAAP in the United States, and should not be considered as a substitute for operating earnings, net earnings or cash flow from operating activities, as determined in accordance with GAAP. Our method of calculating adjusted EBITDA may differ from other issuers and accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted EBITDA appears below.

	Three months ended
(in thousands of US$)	March 31
	2019			2018

Net earnings	$	5,463		$	8,541
Income tax		1,215			4,716
Other income, net		(501	)		(427	)
Interest expense, net		7,221			2,915
Operating earnings		13,398			15,745
Depreciation and amortization		22,668			15,858
Acquisition-related items		4,635			2,253
Restructuring costs		39			70
Stock-based compensation expense		2,831			2,214
Adjusted EBITDA	$	43,571		$	36,140

Adjusted earnings per share is defined as diluted net earnings (loss) per common share, adjusted for the effect, after income tax, of: (i) the non-controlling interest redemption increment; (ii) amortization expense related to intangible assets recognized in connection with acquisitions; (iii) acquisition-related items; (iv) restructuring costs and (v) stock-based compensation expense. We believe this measure is useful to investors because it provides a supplemental way to understand the underlying operating performance of the Company and enhances the comparability of operating results from period to period. Adjusted earnings per share is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share, as determined in accordance with GAAP. Our method of calculating this non-GAAP measure may differ from other issuers and, accordingly, this measure may not be comparable to measures used by other issuers. A reconciliation of net earnings to adjusted net earnings and of diluted net earnings (loss) per share to adjusted earnings per share appears below.

	Three months ended
(in thousands of US$)	March 31
	2019			2018

Net earnings	$	5,463		$	8,541
Non-controlling interest share of earnings		(1,244	)		(670	)
Amortization of intangible assets		14,720			8,588
Acquisition-related items		4,635			2,253
Restructuring costs		39			70
Stock-based compensation expense		2,831			2,214
Income tax on adjustments		(4,004	)		(2,423	)
Non-controlling interest on adjustments		(2,246	)		(844	)
Adjusted net earnings	$	20,194		$	17,729

	Three months ended
(in US$)	March 31
	2019		2018

Diluted net earnings per common share	$	0.04	$	0.13
Non-controlling interest redemption increment		0.07		0.07
Amortization of intangible assets, net of tax		0.23		0.14
Acquisition-related items		0.10		0.05
Restructuring costs, net of tax		-		-
Stock-based compensation expense, net of tax		0.07		0.06
Adjusted earnings per share	$	0.51	$	0.45

We believe that the presentation of adjusted EBITDA and adjusted earnings per share, which are non-GAAP financial measures, provides important supplemental information to management and investors regarding financial and business trends relating to the Company’s financial condition and results of operations. We use these non-GAAP financial measures when evaluating operating performance because we believe that the inclusion or exclusion of the items described above, for which the amounts are non-cash or non-recurring in nature, provides a supplemental measure of our operating results that facilitates comparability of our operating performance from period to period, against our business model objectives, and against other companies in our industry. We have chosen to provide this information to investors so they can analyze our operating results in the same way that management does and use this information in their assessment of our core business and the valuation of the Company. Adjusted EBITDA and adjusted earnings per share are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. Non-GAAP financial measures have limitations in that they do not reflect all of the costs or benefits associated with the operations of our business as determined in accordance with GAAP. As a result, investors should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP.

Percentage revenue variances presented on a local currency basis are calculated by translating the current period results of our non-US dollar denominated operations to US dollars using the foreign currency exchange rates from the periods against which the current period results are being compared. Percentage revenue variances presented on an internal growth basis are calculated assuming acquired entities were owned for the entire current period as well as the entire prior period. Revenue from acquired entities is estimated based on the operating performance of each acquired entity for the year prior to the acquisition date. Revenue from pass-through carried interest is excluded. We believe that these revenue growth rate methodologies provide a framework for assessing the Company’s performance and operations excluding the effects of foreign currency exchange rate fluctuations, acquisitions and pass-through carried interest. The consolidated local currency internal revenue growth rate for the quarter ended March 31, 2019 would have been 9% if carried interest were included. Since these revenue growth rate measures are not calculated under GAAP, they may not be comparable to similar measures used by other issuers.

We use the term assets under management (“AUM”) as a measure of the scale of our Investment Management operations. AUM is defined as the gross assets of the funds, partnerships and accounts to which we provide management and advisory services, including capital that such funds, partnerships and accounts have the right to call from investors pursuant to capital commitments. Our definition of AUM may differ from those used by other issuers and as such may not be directly comparable to similar measures used by other issuers.

Liquidity and capital resources

Net cash used in operating activities for the three month period ended March 31, 2019 was $106.2 million, versus $80.2 million used in the prior year period. Cash from operations in both periods was impacted by significant seasonal working capital usage in our brokerage operations. Cash flow from operating activities is expected to be flat in the second quarter and positive in the third and fourth quarters of the year, consistent with historical patterns. We believe that cash from operations and other existing resources will continue to be adequate to satisfy the ongoing working capital needs of the Company.

For the three months ended March 31, 2019, capital expenditures were $10.4 million. Based on our current operations, capital expenditures for the year ending December 31, 2019 are expected to be $42 - $45 million.

Net indebtedness as at March 31, 2019 was $686.2 million, versus $545.1 million at December 31, 2018. Net indebtedness is calculated as the current and non-current portion of long-term debt less cash and cash equivalents. The change in indebtedness was attributable to seasonal working capital usage, the purchase price for recent acquisitions and capital expenditures. We are in compliance with the covenants contained in our financing agreements as at March 31, 2019 and, based on our outlook for the balance of the year, we expect to remain in compliance with these covenants. We had $423.3 million of available unused credit as of March 31, 2019.

On April 4, 2019, we extended the credit agreement for our Revolving Credit Facility of $1.0 billion with a new 5-year term maturing on April 30, 2024 (from April 30, 2023) and certain amendments were made to increase the flexibility of the Company’s debt capital structure.

On April 4, 2019, we amended our Euro-denominated 2.23% senior unsecured notes due 2028 (the “Senior Notes”) to make certain amendments to increase the flexibility of our debt capital structure. These amendments were similar to the amendments made to our Revolving Credit Facility, which ranks equal in seniority to the Senior Notes.

On April 12, 2019, we established the AR Facility to further diversify our capital structure. The AR Facility has committed availability of $125 million and includes selected US and Canadian trade accounts receivable, with an initial term of 364 days. Initial proceeds from the facility were used to repay outstanding indebtedness under our Revolving Credit Facility.

On December 6, 2018, the Company’s Board of Directors declared a semi-annual dividend of $0.05 per share to shareholders of record on December 31, 2018. This dividend amounting to $2.0 million was paid on January 9, 2019.

In relation to acquisitions completed during the past three years, we have outstanding contingent consideration, assuming all contingencies are satisfied and payment is due in full, totalling $213.6 million as at March 31, 2019 (December 31, 2018 - $206.9 million). The contingent consideration liability is recognized at fair value upon acquisition and is updated to fair value each quarter, unless it contains an element of compensation, in which case such element is treated as compensation expense over the contingency period. The fair value of contingent consideration recorded on the consolidated balance sheet as at March 31, 2019 was $90.1 million (December 31, 2018 - $93.9 million). The contingent consideration is based on achieving specified earnings levels, and is paid or payable after the end of the contingency period, which extends to March 2023. We estimate that approximately 85% of the contingent consideration outstanding as of March 31, 2019 will ultimately be paid.

The following table summarizes our contractual obligations as at March 31, 2019:

Contractual obligations	Payments due by period
(in thousands of US$)			Less than						After
	Total		1 year		1-3 years		4-5 years		5 years

Long-term debt	$	802,527	$	457	$	81	$	567,126	$	234,863
Interest on long-term debt		137,870		27,366		54,701		34,417		21,386
Finance lease obligations		970		588		382		-		-
Contingent acquisition consideration		90,117		27,420		58,903		3,794		-
Operating lease obligations		358,142		79,452		127,896		81,115		69,679
Purchase commitments		16,597		9,933		5,289		1,375		-

Total contractual obligations	$	1,406,224	$	145,217	$	247,252	$	687,827	$	325,929

At March 31, 2019, we had commercial commitments totaling $7.7 million comprised of letters of credit outstanding due to expire within one year.

Redeemable non-controlling interests

In most operations where managers are also minority owners, the Company is party to shareholders’ agreements. These agreements allow us to “call” the minority position at a value determined with the use of a formula price, which is in most cases equal to a multiple of trailing two-year average earnings, less debt. Minority owners may also “put” their interest to the Company at the same price, with certain limitations including (i) the inability to “put” more than 33.3% or 50% of their holdings in any twelve-month period and (ii) the inability to “put” any holdings for at least one year after the date of our initial acquisition of the business or the date the minority shareholder acquired the stock, as the case may be. The total value of the minority shareholders’ interests (the “redemption amount”), as calculated in accordance with the shareholders’ agreements as of March 31, 2019, was $310.0 million (December 31, 2018 - $316.0 million).

The amount recorded on our balance sheet under the caption “Redeemable non-controlling interests” (“RNCI”) is the greater of: (i) the redemption amount (as above) and (ii) the amount initially recorded as RNCI at the date of inception of the minority equity position. As at March 31, 2019, the RNCI recorded on the balance sheet was $345.4 million. The purchase prices of the RNCI may be satisfied in cash or in Subordinate Voting Shares of Colliers. If all RNCI were redeemed with cash on hand and borrowings under the Facility, the estimated accretion to diluted net earnings per share for the three months ended March 31, 2019 would be $0.03 and the dilution to adjusted EPS would be $0.04.

Off-balance sheet arrangements

The Company does not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on the Company’s financial performance or financial condition other than the payments which may be required to be made under the sale of control arrangement contained in the restated management services agreement with Colliers, Jayset Management CIG Inc. and Jay S. Hennick, a description of which is set out in Note 14 to the March 31, 2019 unaudited consolidated financial statements.

Critical accounting estimates

The preparation of consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities. These estimates and assumptions are based upon management’s historical experience and are believed by management to be reasonable under the circumstances. Such estimates and assumptions are evaluated on an ongoing basis and form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ significantly from these estimates. Our critical accounting estimates have been reviewed and discussed with our Audit & Risk Committee. There have been no material changes to our critical accounting estimates from those disclosed in our MD&A for the year ended December 31, 2018.

Quarterly income tax provision

Each quarter, we estimate our income tax on the interim consolidated financial statements using an estimate of the effective tax rate for the full year which is based on forecasted earnings by country, expected enacted statutory tax rates, and estimated tax adjustments. We evaluate our annual effective tax rate estimate on a quarterly basis to reflect changes in forecasted earnings, geographical mix of earnings, and legislative actions on statutory tax rates and other relevant matters effective in the quarter and which legislation is enacted.

The tax effect of discrete items occurring in the quarter also impacts our effective tax rate.

Impact of recently adopted accounting standards

On January 1, 2019, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 842, Leases (“ASC 842”). ASC 842 requires the recognition of operating lease right-of-use assets and lease liabilities for virtually all premises and equipment leases on the consolidated balance sheet, with no impact on earnings. The Company adopted ASC 842 effective January 1, 2019 without adjusting comparative periods and recorded a $278.7 million right-of-use asset and corresponding $316.9 million lease liability as of March 31, 2019. The recognition of the lease liability did not impact the Company’s financial covenants under its revolving credit facility or its senior notes, since the underlying debt agreements include provisions that nullify the impact of changes in accounting standards.

On January 1, 2019, the Company adopted Accounting Standards Update (“ASU”) No. 2017-12 Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, with no material impact on its consolidated financial statements.

Impact of recently issued accounting standards

In February 2018, the FASB issued ASU No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in (or portion thereof) is recorded. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles – Goodwill and Other – Internal-Use software (Subtopic 350-40). This ASU aligns the capitalizing of implementation costs incurred in relation to a hosting arrangement with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. It also requires that these capitalized costs are to be expensed over the term of the hosting arrangement and to the same line as the hosting arrangement. The standard is effective for annual and interim periods beginning after December 15, 2019. The Company is currently assessing the impact of this ASU on its consolidated financial statements.

Impact of IFRS

On January 1, 2011, many Canadian companies were required to adopt IFRS. In 2004, in accordance with the rules of the CSA, our predecessor, FirstService Corporation (“Old FSV”), elected to report exclusively using US GAAP and further elected not to adopt IFRS on January 1, 2011. Under the rules of the CSA, we are permitted to continue preparing financial statements in accordance with US GAAP going forward.

Financial instruments

We use financial instruments as part of our strategy to manage the risk associated with interest rates and currency exchange rates. We do not use financial instruments for trading or speculative purposes. On April 11, 2017 we entered into interest rate swap agreements to convert the LIBOR floating interest rate on $100.0 million of US dollar denominated debt into a fixed interest rate of 1.897%. In December 2018, the Company entered into interest rate swap agreements to convert the LIBOR floating interest rate on $100 million of US dollar denominated debt into a fixed interest rate of 2.7205% plus the applicable margin. Hedge accounting is being applied to these interest rate swaps.

Transactions with related parties

As at March 31, 2019, the Company had $5.1 million of loans receivable from non-controlling shareholders (December 31, 2018 - $6.5 million). The majority of the loans receivable represent amounts assumed in connection with acquisitions and amounts issued to non-controlling interests to finance the sale of non-controlling interests in subsidiaries to senior managers. The loans are of varying principal amounts and interest rates which range from nil to 4.0%. These loans are due on demand or mature on various dates up to 2026, but are open for repayment without penalty at any time.

Outstanding share data

The authorized capital of the Company consists of an unlimited number of preference shares, issuable in series, an unlimited number of Subordinate Voting Shares and an unlimited number of Multiple Voting Shares. The holders of Subordinate Voting Shares are entitled to one vote in respect of each Subordinate Voting Share held at all meetings of the shareholders of the Company. The holders of Multiple Voting Shares are entitled to twenty votes in respect of each Multiple Voting Share held at all meetings of the shareholders of the Company. Each Multiple Voting Share is convertible into one Subordinate Voting Share at any time at the election of the holders thereof.

As of the date hereof, the Company has outstanding 38,157,117 Subordinate Voting Shares and 1,325,694 Multiple Voting Shares. In addition, as at the date hereof 2,107,750 Subordinate Voting Shares are issuable upon exercise of options granted under the Company’s stock option plan.

On July 16, 2018, the Company announced a Normal Course Issuer Bid (“NCIB”) effective from July 18, 2018 to July 17, 2019. The Company is entitled to repurchase up to 2,800,000 Subordinate Voting Shares on the open market pursuant to the NCIB. Any shares purchased under the NCIB will be cancelled.

Canadian tax treatment of dividends

For the purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation, all dividends (and deemed dividends) paid by us to Canadian residents on our Subordinate Voting Shares and Multiple Voting Shares are designated as “eligible dividends”. Unless stated otherwise, all dividends (and deemed dividends) paid by us hereafter are designated as “eligible dividends” for the purposes of such rules.

Changes in internal controls over financial reporting

There have been no changes in our internal controls over financial reporting during the three month period ended March 31, 2019 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Legal proceedings

Colliers is involved in various legal claims associated with the normal course of operations and believes it has made adequate provision for such legal claims.

Spin-off risk

On June 1, 2015, the predecessor to our Company, FirstService Corporation (“Old FSV”), completed a plan of arrangement (the “Spin-off”) which separated Old FSV into two independent publicly traded companies – Colliers International Group Inc., a global leader in commercial real estate services and new FirstService Corporation (“FirstService”), a North American leader in residential property management and related services. Under the Spin-off, Old FSV shareholders received one Colliers share and one FirstService share of the same class as each Old FSV share previously held.

Although the Spin-off is complete, the transaction exposes Colliers to certain ongoing risks. The Spin-off was structured to comply with all the requirements of the public company "butterfly rules" in the Income Tax Act (Canada). However, there are certain requirements of these rules that depend on events occurring after the Spin-off is completed or that may not be within the control of Colliers and/or FirstService. If these requirements are not met, Colliers could be exposed to significant tax liabilities which could have a material effect on the financial position of Colliers. In addition, Colliers has agreed to indemnify FirstService for certain liabilities and obligations related to its business at the time of the Spin-off. These indemnification obligations could be significant. These risks are more fully described in the Management Information Circular of Old FSV dated March 16, 2015 which is available under Colliers’ SEDAR profile at www.sedar.com.

Forward-looking statements and risks

This MD&A contains forward-looking statements with respect to expected financial performance, strategy and business conditions. The words “believe,” “anticipate,” “estimate,” “plan,” “expect,” “intend,” “may,” “project,” “will,” “would,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These statements reflect management's current beliefs with respect to future events and are based on information currently available to management. Forward-looking statements involve significant known and unknown risk and uncertainties. Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Factors which may cause such differences include, but are not limited to those set out below, those set out above under “Spin-off risk” and those set out in detail in the “Risk Factors” section of the Company’s Annual Information Form:

Economic conditions, especially as they relate to commercial and consumer credit conditions and business spending, particularly in regions where our operations may be concentrated.

Commercial real estate property values, vacancy rates and general conditions of financial liquidity for real estate transactions.

Trends in pricing and risk assumption for commercial real estate services.

The effect of significant movements in average cap rates across different property types.

The impact of changes in the market value of assets under management on the performance of our Investment Management business.

A reduction by companies in their reliance on outsourcing for their commercial real estate needs, which would affect our revenues and operating performance.

Competition in the markets served by the Company.

Integration of the recently acquired Harrison Street operations and any further Investment Management acquisitions.

The ability to attract new clients and to retain major clients and renew related contracts.

The ability to retain and incentivize advisors.

Increases in wage and benefit costs.

The effects of changes in interest rates on our cost of borrowing.

Unexpected increases in operating costs, such as insurance, workers’ compensation and health care.

Changes in the frequency or severity of insurance incidents relative to our historical experience.

The effects of changes in foreign exchange rates in relation to the US dollar on the Company’s Euro, Canadian dollar, Australian dollar and UK pound sterling denominated revenues and expenses.

Our ability to identify and make acquisitions at reasonable prices and successfully integrate acquired operations.

The ability to execute on, and adapt to, information technology strategies and trends.

The ability to comply with laws and regulations related to our global operations, including real estate licensure, labour and employment laws and regulations, as well as the anti-corruption laws and trade sanctions.

Political conditions, including political instability, elections, referenda, trade policy changes, immigration policy changes and any outbreak or escalation of hostilities or terrorism and the impact thereof on our business.

Changes in government laws and policies at the federal, state/provincial or local level that may adversely impact our businesses.

We caution that the foregoing list is not exhaustive of all possible factors, as other factors could adversely affect our results, performance or achievements. The reader is cautioned against undue reliance on these forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in such forward-looking statements will be realized. The inclusion of such forward-looking statements should not be regarded as a representation by the Company or any other person that the future events, plans or expectations contemplated by the Company will be achieved. We note that past performance in operations and share price are not necessarily predictive of future performance. We disclaim any intention and assume no obligation to update or revise any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.

Additional information

Additional information about Colliers, including our Annual Information Form for the year ended December 31, 2018, is available on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Further information about us can also be obtained at www.colliers.com.