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, 2021

Page 2 of 20 

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

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

		Three months
		ended March 31
		2021				2020
Revenues (note 18)		$	774,914			$	630,628
Cost of revenues (exclusive of depreciation and amortization shown below)			467,731				416,358
Selling, general and administrative expenses			210,603				168,092
Depreciation			10,439				8,878
Amortization of intangible assets			27,338				16,013
Acquisition-related items (note 5)			18,847				2,750
Operating earnings			39,956				18,537
Interest expense, net			8,284				7,585
Equity earnings from unconsolidated investments			(1,406	)			(555	)
Other income, net			(576	)			(149	)
Earnings before income tax			33,654				11,656
Income tax expense (note 15)			8,847				5,198
Net earnings			24,807				6,458
Non-controlling interest share of earnings			7,780				3,377
Non-controlling interest redemption increment (note 12)			12,540				(1,505	)
Net earnings attributable to Company		$	4,487			$	4,586
Net earnings per common share (note 13)
Basic		$	0.11			$	0.12
Diluted		$	0.11			$	0.11

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

Page 3 of 20 

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(Unaudited)

(in thousands of US dollars)

		Three months
		ended March 31
		2021				2020
Net earnings		$	24,807			$	6,458
Foreign currency translation loss			(1,875	)			(16,389	)
Unrealized gain (loss) on interest rate swaps, net of tax			929				(4,225	)
Comprehensive earnings (loss)			23,861				(14,156	)
Less: Comprehensive earnings attributable to non-
controlling interests			22,482				6,805
Comprehensive earnings (loss) attributable to Company		$	1,379			$	(20,961	)

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

Page 4 of 20 

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands of US dollars)

		March 31, 2021				December 31, 2020
Assets
Current assets
Cash and cash equivalents		$	118,470			$	156,614
Restricted cash			27,646				20,919
Accounts receivable, net of allowance of $21,927 (December 31, 2020 - $25,632) (note 10)			362,904				372,149
Contract assets (note 18)			73,873				61,101
Warehouse receivables (note 16)			115,854				232,207
Income tax recoverable			9,739				15,041
Prepaid expenses and other current assets			180,372				177,780
			888,858				1,035,811
Other receivables			15,185				14,989
Contract assets (note 18)			8,606				5,335
Other assets			79,726				74,355
Fixed assets			140,249				129,221
Operating lease right-of-use assets			330,118				288,134
Deferred tax assets, net			48,252				45,008
Intangible assets (note 6)			593,424				610,330
Goodwill			1,081,864				1,088,984
			2,297,424				2,256,356
		$	3,186,282			$	3,292,167
Liabilities and shareholders' equity
Current liabilities
Accounts payable and accrued expenses		$	273,168			$	297,766
Accrued compensation			364,593				450,894
Income tax payable			29,565				26,783
Contract liabilities (note 18)			17,707				21,076
Long-term debt - current (note 7)			9,445				9,024
Contingent acquisition consideration - current (note 16)			79,505				5,802
Warehouse credit facilities (note 9)			105,937				218,018
Operating lease liabilities			80,687				78,923
			960,607				1,108,286
Long-term debt - non-current (note 7)			513,955				470,871
Contingent acquisition consideration (note 16)			49,466				109,841
Operating lease liabilities			309,961				251,680
Other liabilities			44,878				48,525
Deferred tax liabilities, net			44,404				50,523
Convertible notes (note 8)			224,266				223,957
			1,186,930				1,155,397
Redeemable non-controlling interests (note 12)			440,000				442,375
Shareholders' equity
Common shares			468,145				457,993
Contributed surplus			67,689				66,971
Retained earnings			123,908				119,421
Accumulated other comprehensive loss			(65,087	)			(61,979	)
Total Company shareholders' equity			594,655				582,406
Non-controlling interests			4,090				3,703
Total shareholders' equity			598,745				586,109
		$	3,186,282			$	3,292,167
Commitments and subsequent events (note 17 and note 20)

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

Page 5 of 20 

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				Retained				comprehensive				controlling				shareholders'
		shares				Amount				surplus				earnings				loss				interests				equity
Balance, December 31, 2020			40,189,436			$	457,993			$	66,971			$	119,421			$	(61,979	)		$	3,703			$	586,109
Net earnings			-				-				-				24,807				-				-				24,807
Foreign currency translation loss			-				-				-				-				(1,875	)			-				(1,875	)
Unrealized gain on interest rate
swaps, net of tax			-				-				-				-				929				-				929
Other comprehensive earnings
attributable to NCI			-				-				-				-				(2,162	)			(137	)			(2,299	)
NCI share of earnings			-				-				-				(7,780	)			-				862				(6,918	)
NCI redemption increment			-				-				-				(12,540	)			-				-				(12,540	)
Distributions to NCI			-				-				-				-				-				(311	)			(311	)
Acquisition of businesses, net			-				-				-				-				-				(27	)			(27	)
Subordinate Voting Shares:
Stock option expense			-				-				2,925				-				-				-				2,925
Stock options exercised			169,200				10,152				(2,207	)			-				-				-				7,945
Balance, March 31, 2021			40,358,636			$	468,145			$	67,689			$	123,908			$	(65,087	)		$	4,090			$	598,745

		Common shares																Accumulated
		Issued and																other				Non-				Total
		outstanding								Contributed								comprehensive				controlling				shareholders'
		shares				Amount				surplus				Deficit				loss				interests				equity
Balance, December 31, 2019			39,845,211			$	442,153			$	60,706			$	77,181			$	(67,164	)		$	4,423			$	517,299
Cumulative effect adjustment:
Current expected credit
losses, net of tax			-				-				-				(2,824	)			-				-				(2,824	)
Net earnings			-				-				-				6,458				-				-				6,458
Foreign currency translation loss			-				-				-				-				(16,389	)			-				(16,389	)
Unrealized loss on interest rate
swaps, net of tax			-				-				-				-				(4,225	)			-				(4,225	)
Other comprehensive earnings
attributable to NCI			-				-				-				-				(4,933	)			(571	)			(5,504	)
NCI share of earnings			-				-				-				(3,377	)			-				157				(3,220	)
NCI redemption increment			-				-				-				1,505				-				-				1,505
Distributions to NCI			-				-				-				-				-				(834	)			(834	)
Acquisition of businesses, net			-				-				-				-				-				(52	)			(52	)
Subsidiaries’ equity transactions			-				-				(333	)			-				-				-				(333	)
Subordinate Voting Shares:
Stock option expense			-				-				2,253				-				-				-				2,253
Stock options exercised			56,350				2,805				(534	)			-				-				-				2,271
Balance, March 31, 2020			39,901,561			$	444,958			$	62,092			$	78,943			$	(92,711	)		$	3,123			$	496,405

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

Page 6 of 20 

COLLIERS INTERNATIONAL GROUP INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(in thousands of US dollars)

		Three months
		ended March 31
		2021				2020
Cash provided by (used in)
Operating activities
Net earnings		$	24,807			$	6,458
Items not affecting cash:
Depreciation and amortization			37,777				24,891
Gains attributable to mortgage servicing rights			(9,075	)			-
Gains attributable to the fair value of mortgage
premiums and origination fees			(11,578	)			-
Deferred tax			(9,431	)			(7,158	)
Earnings from equity method investments			(1,406	)			(555	)
Stock option expense (note 14)			2,925				2,253
Non-cash lease expense			18,058				1,382
Allowance for credit losses			315				3,619
Amortization of advisor loans			5,505				5,001
Contingent consideration (note 5)			16,378				1,002
Other			116				738
(Increase) decrease in accounts receivable, prepaid expenses and other assets			(23,787	)			59,837
Decrease in accounts payable, accrued expenses and other liabilities			(12,552	)			(28,759	)
Decrease in accrued compensation			(84,476	)			(163,406	)
Contingent acquisition consideration paid			(7,475	)			(14,330	)
Proceeds from sale of mortgage loans			837,917				-
Origination of mortgage loans			(706,785	)			-
Increase in warehouse credit facilities			(112,081	)			-
Repurchases from AR Facility, net of sales (note 10)			(3,291	)			(11,009	)
Net cash used by operating activities			(38,139	)			(120,036	)
Investing activities
Acquisitions of businesses, net of cash acquired (note 4)			(3,841	)			(3,101	)
Purchases of fixed assets			(22,093	)			(8,739	)
Advisor loans issued			(11,081	)			(3,590	)
Collections of AR facility deferred purchase price (note 10)			10,908				11,390
Other investing activities			(12	)			5,498
Net cash (used in) / provided by investing activities			(26,119	)			1,458
Financing activities
Increase in long-term debt			203,522				240,409
Repayment of long-term debt			(149,730	)			(97,263	)
Purchases of non-controlling interests' subsidiary shares, net			(8,133	)			(4,676	)
Contingent acquisition consideration paid			(2,977	)			(10,743	)
Proceeds received on exercise of stock options			7,945				2,270
Dividends paid to common shareholders			(2,009	)			(1,992	)
Distributions paid to non-controlling interests			(13,923	)			(7,693	)
Net cash provided by financing activities			34,695				120,312
Effect of exchange rate changes on cash			(1,854	)			(13,637	)
Net change in cash, cash equivalents and restricted cash			(31,417	)			(11,903	)
Cash, cash equivalents and restricted cash, beginning of period			177,533				114,993
Cash, cash equivalents and restricted cash, end of period		$	146,116			$	103,090

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

Page 7 of 20 

COLLIERS INTERNATIONAL GROUP INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

1. Description of the business

Colliers International Group Inc. (“Colliers” or the “Company”) provides commercial real estate oriented professional services and investment management to corporate and institutional clients in 36 countries around the world (67 countries including affiliates and franchisees). Colliers’ primary services are Outsourcing & Advisory services, Leasing, Capital Markets 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 management 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, 2020.

These Financial Statements follow the same accounting policies as the most recent audited consolidated financial statements of Colliers, except as noted in Note 3. In the opinion of management, the Financial Statements contain all adjustments necessary to a fair statement of the financial position of the Company as at March 31, 2021 and the results of operations and its cash flows for the three months ended March 31, 2021 and 2020. All such adjustments are of a normal recurring nature. The results of operations for the three-month period ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021.

Government assistance related to the COVID-19 pandemic

The Company received $2,472 of wage subsidies from governments in several countries around the world during the three-month period ended March 31, 2021 (2020 - nil). In the three-month period ending March 31, 2021, $1,650 of the wage subsidies were recorded as reduction to cost of revenues (2020 - $nil) and $822 were recorded as a reduction to selling, general and administrative expenses (2020 - $nil) in the Consolidated Statements of Earnings.

3. Impact of recently issued accounting standards

Recently adopted accounting guidance

Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in step-up in tax basis of goodwill. The Company adopted the guidance effective January 1, 2021. The Company’s processes and disclosures have been updated to incorporate the new standard. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Recently issued accounting guidance, not yet adopted

Reference Rate Reform

The FASB has issued two ASU related to reference rate reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. With reference rates like the London Interbank Offered Rates (“LIBOR”) expecting to be discontinued at the end of 2021, a significant volume of contracts and other arrangements will be impacted by the transition required to alternative reference rates. This ASU provides optional expedients and exceptions to reduce the costs and complexity of applying existing GAAP to contract modifications and hedge accounting if certain criteria are met. The standard is effective for a limited time for all entities through December 31, 2022. The Company has certain debt and hedging arrangements which may qualify for use of the practical expedients permitted under the guidance. The Company has evaluated and will continue to evaluate arrangements subject to rate reform and the options under the ASU to facilitate an orderly transition to alternative reference rates and their potential impacts on its consolidated financial statements and disclosures.

Page 8 of 20 

Debt with Conversion Options

In August 2020, the FASB issued ASU No. 2020-06, Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contract in an Entity’s Own Equity. The ASU simplifies the accounting for convertible instruments and reduces the number of embedded conversion features being separately recognized from the host contract as compared to current GAAP. The ASU also enhances information transparency through targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance. The standard is effective for fiscal years beginning after December 15, 2021. The standard can be applied using the modified retrospective method of transition or a fully retrospective method of transition. The Company is currently assessing the options available under this ASU and their potential impacts on its consolidated financial statements. 

4. Acquisitions

During the three months ended March 31, 2021, the Company acquired a controlling interest in one business operating in the Americas (Miami, Florida). The acquisition date fair value of consideration transferred consisted of $3,841 in cash (net of cash acquired of $387). The Company acquired $929 of net assets, excluding cash, and recognized goodwill of $2,595 and intangible assets of $2,595 in its preliminary purchase price allocation.

During the three months ended March 31, 2020, the Company acquired a controlling interest in one business for cash consideration of $3,101 (net of cash acquired of $754).

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 earnings level and (iii) the actual earnings for the contingency period. If the acquired business does not achieve the specified 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 each reporting period. The fair value recorded on the consolidated balance sheet as at March 31, 2021 was $128,971 (December 31, 2020 - $115,643). See note 16 for discussion on the fair value of contingent consideration. Contingent consideration with a compensatory element is revalued at each reporting period and recognized on a straight-line basis over the term of the contingent consideration arrangement. The liability recorded on the balance sheet for the compensatory element of contingent consideration arrangements as at March 31, 2021 was $11,654 (December 31, 2020 - $17,646). The estimated range of outcomes (undiscounted) for all contingent consideration arrangements, including those with an element of compensation is determined based on the formula price and the likelihood of achieving specified earnings levels over the contingency period, and ranges from $172,550 to a maximum of $193,869. These contingencies will expire during the period extending to February 2025. 

Page 9 of 20 

5. Acquisition-related items

		Three months ended
		March 31
		2021				2020
Transaction costs		$	2,469			$	1,748
Contingent consideration fair value adjustments			14,787				(509	)
Contingent consideration compensation expense			1,591				1,511
		$	18,847			$	2,750

6. Intangible assets

The following table summarizes the gross value, accumulated amortization and net carrying value of the Company’s indefinite life and finite life intangible assets:

March 31, 2021		Gross
		carrying				Accumulated
		amount				amortization				Net
Indefinite life intangible assets:
Licenses		$	29,200			$	-			$	29,200
Trademarks and trade names			23,930				-				23,930
		$	53,130			$	-			$	53,130
Finite life intangible assets:
Customer lists and relationships		$	342,894			$	129,581			$	213,313
Investment management contracts			270,600				66,795				203,805
Mortgage servicing rights ("MSRs")			125,812				20,126				105,686
Franchise rights			5,565				5,360				205
Trademarks and trade names			14,787				5,265				9,522
Management contracts and other			20,639				12,918				7,721
Backlog			16,289				16,247				42
		$	796,586			$	256,292			$	540,294
		$	849,716			$	256,292			$	593,424

		Gross
December 31, 2020		carrying				Accumulated
		amount				amortization				Net
Indefinite life intangible assets:
Licenses		$	29,200			$	-			$	29,200
Trademarks and trade names			24,096				-				24,096
		$	53,296			$	-			$	53,296
Finite life intangible assets:
Customer lists and relationships		$	345,511			$	123,368			$	222,143
Investment management contracts			270,600				60,723				209,877
Mortgage servicing rights ("MSRs")			114,909				13,121				101,788
Franchise rights			5,630				5,322				308
Trademarks and trade names			14,803				4,355				10,448
Management contracts and other			20,813				12,406				8,407
Backlog			16,307				12,244				4,063
		$	788,573			$	231,539			$	557,034
		$	841,869			$	231,539			$	610,330

Page 10 of 20 

In May 2020, the Company acquired MSR intangible assets in its acquisition of Colliers Mortgage. MSR intangible assets represent the carrying value of servicing assets in the Americas segment. The MSR asset is being amortized over the estimated period that the net servicing income is expected to be received.

The MSR assets are evaluated quarterly for impairment by stratifying the servicing portfolio according to predominant risk characteristics, primarily investor type and interest rate. An impairment is recorded if the carrying value of an individual stratum exceeds its estimated fair value. Based upon the impairment analysis for the period ended March 31, 2021, the Company recorded a valuation allowance of $804. The associated impairment expense was recorded to amortization of intangible assets on the consolidated statement of earnings.

The following table summarizes activity related to the Company’s mortgage servicing rights for the quarter ending March 31, 2021.

		2021
Balance, January 1		$	101,788
Additions, following the sale of loan			10,903
Amortization			(4,150	)
Prepayments and write-offs			(2,051	)
Total			106,490
Increase in valuation allowance			(804	)
Balance, March 31		$	105,686

The following is the estimated future expense for amortization of the recorded MSRs and other intangible assets for each of the next five years and thereafter:

For the year ended December 31,		MSRs				Other Intangibles				Total
2021 (remaining nine months)		$	11,018				48,235			$	59,253
2022			13,428				61,797				75,225
2023			12,255				58,171				70,426
2024			11,254				50,229				61,483
2025			10,205				41,465				51,670
2026			8,974				40,062				49,036
Thereafter			38,552				134,649				173,201
		$	105,686				434,608			$	540,294

7. Long-term debt

The Company has 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, 2024 and bears interest at an applicable margin of 1.25% to 3.0% over floating reference rates, depending on financial leverage ratios. The weighted average interest rate at March 31, 2021 was 3.5% (2020 – 3.0%). The Revolving Credit Facility had $723,576 of available undrawn credit as at March 31, 2021 ($777,322 as at December 31, 2020). As of March 31, 2021, letters of credit in the amount of $17,967 were outstanding ($15,663 as at December 31, 2020). The Revolving Credit Facility requires a commitment fee of 0.25% to 0.6% 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, 2021. The Company is limited from undertaking certain mergers, acquisitions and dispositions without prior approval.

Page 11 of 20

8. Convertible notes

In May 2020, the Company issued $230,000 aggregate principal of 4.0% Convertible Senior Subordinated Notes (the “Convertible Notes”) at par value. The Convertible Notes will mature on June 1, 2025 and bear interest of 4.0% per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2020. The Convertible Notes are accounted for entirely as debt as no portion of the proceeds is required to be accounted for as attributable to the conversion feature. The Convertible Notes are unsecured and subordinated to all of the Company’s existing and future secured indebtedness, and are treated as equity for financial leverage calculations under the Company’s Revolving Credit Facility and Senior Notes.

At the holder’s option, the Convertible Notes may be converted at any time prior to maturity into Subordinate Voting Shares based on an initial conversion rate of approximately 17.2507 Subordinate Voting Shares per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of $57.97 per Subordinate Voting Share.

The Company, at its option, may also redeem the Convertible Notes, in whole or in part, on or after June 1, 2023 at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed, plus accrued and unpaid interest, provided that the last reported trading price of the Subordinate Voting Shares for any 20 trading days in a consecutive 30 trading day period preceding the date of the notice of redemption is not less than 130% of the conversion price.

Subject to specified conditions, the Company may elect to repay some or all of the outstanding principal amount of the Convertible Notes, on maturity or redemption, through the issuance of Subordinate Voting Shares.

In connection with the issuance of the Convertible Notes, at the time, the Company incurred financing costs of $6,795 which are being amortized over five years using the effective interest rate method. For the quarter ended March 31, 2021 there was $309 of financing fee amortization included in interest expense within the accompanying Consolidated Statements of Earnings. The effective interest rate on the Convertible Notes is approximately 4.7%.

9. Warehouse credit facilities

The following table summarizes the Company’s mortgage warehouse credit facilities as at March 31, 2021:

				March 31, 2021								December 31, 2020
		Current		Maximum				Carrying				Maximum				Carrying
		Maturity		Capacity				Value				Capacity				Value
Facility A - LIBOR plus 1.60%		October 20, 2021		$	175,000			$	82,784			$	275,000			$	167,004
Facility B - SOFR plus 1.70%		On demand			125,000				23,153				125,000				51,014
				$	300,000			$	105,937			$	400,000			$	218,018

Colliers Mortgage Holdings LLC (“Colliers Mortgage”) has warehouse credit facilities which are used exclusively for the purpose of funding warehouse mortgages receivable. The warehouse credit facilities are recourse only to Colliers Mortgage, are revolving and are secured by warehouse mortgages financed on the facilities, if any.

On January 11, 2021 Colliers Mortgage entered into an amendment to the financing agreement for Facility A modifying the borrowing capacity to $175,000 and extending the maturity date to October 20, 2021. On January 15, 2021 Colliers Mortgage entered into an additional amendment for Facility A temporarily increasing the borrowing capacity to $250,000 through March 31, 2021; The borrowing capacity will decrease to $125,000 on October 20, 2021. (See note 20 for subsequent events related to warehouse facilities.)

Page 12 of 20 

10. AR Facility

In April 2019, the Company established a structured accounts receivable facility (the “AR Facility”) with committed availability of $125,000 and an initial term of 364 days, unless extended or an earlier termination event occurs. On April 27, 2020, the Company extended the term of AR Facility for another 364 days. (See note 20 for subsequent events related to the AR Facility.) Under the AR Facility, certain of the Company's subsidiaries continuously sell trade accounts receivable and contract assets (the “Receivables”) to wholly owned special purpose entities at fair market value. The special purpose entities then sell 100% of the Receivables to a third-party financial institution (the “Purchaser”). Although the special purpose entities are wholly owned subsidiaries of the Company, they are separate legal entities with their own separate creditors who will be entitled, upon their liquidation, to be satisfied out of their assets prior to any assets or value in such special purpose entities becoming available to their equity holders and their assets are not available to pay other creditors of the Company. As of March 31, 2021, the Company had drawn $95,126 under the AR Facility.

All transactions under the AR Facility are accounted for as a true sale in accordance with ASC 860, Transfers and Servicing (“ASC 860”). Following the sale and transfer of the Receivables to the Purchaser, the Receivables are legally isolated from the Company and its subsidiaries, and the Company sells, conveys, transfers and assigns to the Purchaser all its rights, title and interest in the Receivables. Receivables sold are derecognized from the consolidated balance sheet. The Company continues to service, administer and collect the Receivables on behalf of the Purchaser, and recognizes a servicing liability in accordance with ASC 860. The Company has elected the amortization method for subsequent measurement of the servicing liability, which is assessed for changes in the obligation at each reporting date. As of March 31, 2021, the servicing liability was nil.

Under the AR Facility, the Company receives a cash payment and a deferred purchase price (“Deferred Purchase Price” or “DPP”) for sold Receivables. The DPP is paid to the Company in cash on behalf of the Purchaser as the Receivables are collected; however, due to the revolving nature of the AR Facility, cash collected from the Company's customers is reinvested by the Purchaser monthly in new Receivable purchases under the AR Facility. For the three months ending March 31, 2021, Receivables sold under the AR Facility were $310,510 and cash collections from customers on Receivables sold were $326,949, all of which were reinvested in new Receivables purchases and are included in cash flows from operating activities in the consolidated statement of cash flows. As of March 31, 2021, the outstanding principal on trade accounts receivable, net of Allowance for Doubtful Accounts, sold under the AR Facility was $113,491; and the outstanding principal on contract assets, current and non-current, sold under the AR Facility was $61,522. See note 16 for fair value information on the DPP.

For the three months ended March 31, 2021, the Company recognized a loss related to Receivables sold of $4 (2020 - $8 loss) that was recorded in other expense in the consolidated statement of earnings. Based on the Company’s collection history, the fair value of the Receivables sold subsequent to the initial sale approximates carrying value.

The non-cash investing activities associated with the DPP for the three months ended March 31, 2021 were $1,984.

11. Variable interest entities

The Company holds variable interests in certain Variable Interest Entities (“VIE”) in its Investment Management segment which are not consolidated as it was determined that the Company is not the primary beneficiary. The Company’s involvement with these entities is in the form of advisory fee arrangements and equity co-investments (typically 1%-2%).

The following table provides the maximum exposure to loss related to these non-consolidated VIEs:

		March 31, 2021				December 31, 2020
Investments		$	7,292			$	6,158
Co-investment commitments			25,809				14,345
Maximum exposure to loss		$	33,101			$	20,503

Page 13 of 20 

12. 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:

		2021
Balance, January 1		$	442,375
RNCI share of earnings			6,919
RNCI redemption increment			12,540
Distributions paid to RNCI			(13,729	)
Purchase of interests from RNCI, net			(8,105	)
Balance, March 31		$	440,000

The Company has shareholders’ agreements in place at each of its non-wholly owned subsidiaries. These agreements allow the Company to “call” the RNCI 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 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, 2021 was $413,264 (2020 - $415,141). The redemption amount is lower than that recorded on the balance sheet as the formula price 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, 2021, approximately 4,000,000 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.

13. Net earnings per common share

Diluted EPS is calculated using the “if-converted” method of calculating earnings per share in relation to the Convertible Notes, which were issued on May 19, 2020. As such, the interest (net of income tax) on the Convertible Notes is added to the numerator and the additional shares issuable on conversion of the Convertible Notes are added to the denominator of the earnings per share calculation to determine if an assumed conversion is more dilutive than no assumption of conversion. The “if-converted” method is used if the impact of the assumed conversion is dilutive. The “if-converted” method is anti-dilutive for the three months ended March 31, 2021.

The following table reconciles the basic and diluted common shares outstanding:

		Three months ended
(in thousands)		March 31
		2021				2020
Net earnings (loss) attributable to Company		$	4,487			$	4,586
After-tax interest on Convertible Notes			-				-
Adjusted numerator under the If-Converted Method		$	4,487			$	4,586
Weighted average common shares - Basic			40,257				39,874
Exercise of stock options			513				293
Conversion of Convertible Notes			-				-
Weighted average common shares - Diluted			40,770				40,167

Page 14 of 20 

14. Stock-based compensation

The Company has a stock option plan for certain officers, key full-time employees and directors of the Company and its subsidiaries. Options are granted at the market price for the underlying shares on the day immediately prior to 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, 2021, there were 344,800 options available for future grants.

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

There were 10,000 stock options granted during the three months ended March 31, 2021 (2020 - 10,000). Stock option activity for the three months ended March 31, 2021 was as follows:

										Weighted average
						Weighted				remaining				Aggregate
		Number of				average				contractual life				intrinsic
		options				exercise price				(years)				value
Shares issuable under options -
December 31, 2020			2,190,125			$	69.22
Granted			10,000				103.90
Exercised			(169,200	)			46.95
Forfeited			(2,300	)			85.82
Shares issuable under options -
March 31, 2021			2,028,625			$	71.23				3.1			$	54,852
Options exercisable - March 31,2021			836,650			$	63.10				2.2			$	29,398

The amount of compensation expense recorded in the statement of earnings for the three months ended March 31, 2021 was $2,925 (2020 - $2,253). As of March 31, 2021, there was $16,488 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, 2021, the fair value of options vested was $4,422 (2020 - $4,202).

15. Income tax

The provision for income tax for the three months ended March 31, 2021 reflected an effective tax rate of 26.3% (2020 - 44.6%) relative to the combined statutory rate of approximately 26.5% (2020 - 26.5%). The prior year’s rate was impacted by the reversal of a $2,030 tax benefit related to a cross-border financing structure pursuant to a change in tax law applied retroactively to 2019. 

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16. Financial instruments

Fair values of financial instruments

The following table provides the financial assets and liabilities carried at fair value measured on a recurring basis as of March 31, 2021:

		Carrying value at				Fair value measurements
		March 31, 2021				Level 1				Level 2				Level 3
Assets
Cash equivalents		$	12,196			$	12,196			$	-			$	-
Equity securities			4,126				3,990				136				-
Debt securities			9,255				-				9,255				-
Mortgage derivative assets			16,280				-				16,280				-
Warehouse receivables			115,854				-				115,854				-
Deferred Purchase Price on AR Facility			79,033				-				-				79,033
Total assets		$	236,744			$	16,186			$	141,525			$	79,033
Liabilities
Mortgage derivative liability		$	7,447			$	-			$	7,447			$	-
Interest rate swap liability			6,681								6,681
Contingent consideration liability			128,971				-				-				128,971
Total liabilities		$	143,099			$	-			$	14,128			$	128,971

There were no significant non-recurring fair value measurements recorded during the quarter ended March 31, 2021.

Cash equivalents

Cash equivalents include highly liquid investments with original maturities of less than three months. Actively traded cash equivalents where a quoted price is readily available are classified as Level 1 in the fair value hierarchy.

Financial instruments and other inventory positions owned

The Company records financial instruments and other inventory positions owned at fair value on the Consolidated Balance Sheets. These financial instruments are valued based on observable market data that may include quoted market prices dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instruments’ terms and conditions and are classified as Level 2 of the fair value hierarchy.

Certain investments in equity securities where quoted prices are readily available are classified as Level 1 in the fair value hierarchy. The Company increases or decreases its investment each reporting period by the change in the fair value of the investment reported in net earnings on the Consolidated Statements of Earnings.

Mortgage-related derivatives

The fair value of interest rate lock commitments and forward sale commitments are derivatives and considered Level 2 valuations. Fair value measurements for both interest rate lock commitments and forward sales commitment consider observable market data, particularly changes in interest rates. In the case of interest rate lock commitments, the fair value measurement also considers the expected net cash flows associated with the servicing of the loans or the fair value of MSRs. However, the Company has evaluated the impact of the fair value of the MSRs on the fair value of the derivatives and they do not have a significant impact on the derivative fair values. The Company also considers the impact of counterparty non-performance risk when measuring the fair value of these derivatives. Given the credit quality of the Company’s counterparties, the short duration of interest rate lock commitments and forward sales contracts and the Company’s historical experience, the risk of nonperformance by the counterparties does not have a significant impact on the determination of fair value. 

Page 16 of 20 

Warehouse receivables

As at March 31, 2021, all of the Company’s mortgage warehouse receivables were under commitment to be purchased by a GSE or by a qualifying investor. These assets are classified as Level 2 in the fair value hierarchy as a substantial majority of the inputs are readily observable.

AR Facility deferred purchase price (“DPP”)

The Company recorded a DPP under its AR Facility. The DPP represents the difference between the fair value of the Receivables sold and the cash purchase price and is recognized at fair value as part of the sale transaction. The DPP is remeasured each reporting period in order to account for activity during the period, including the seller’s interest in any newly transferred Receivables, collections on previously transferred Receivables attributable to the DPP and changes in estimates for credit losses. Changes in the DPP attributed to changes in estimates for credit losses are expected to be immaterial, as the underlying Receivables are short-term and of high credit quality. The DPP is valued using Level 3 inputs, primarily discounted cash flows, with the significant inputs being discount rates ranging from 2.5% to 5.0% depending upon the aging of the Receivables. See note 10 for information on the AR Facility.

Changes in the fair value of the DPP comprises the following:

		2021
Balance, January 1		$	87,957
Additions to DPP			3,287
Collections on DPP			(10,908	)
Fair value adjustment			(4	)
Foreign exchange and other			(1,299	)
Balance, March 31		$	79,033

Interest rate swaps

In April 2017, the Company entered into interest rate swap agreements to convert the LIBOR floating interest rate on $100,000 of US dollar denominated debt into a fixed interest rate of 1.897% plus the applicable margin. The swaps have a maturity of January 18, 2022. The swaps are being accounted for as cash flow hedges and are measured at fair value on the balance sheet. Gains or losses on the swaps, which are determined to be effective as hedges, are reported in other comprehensive income.

In December 2018, the Company entered into additional interest rate swap agreements to convert the LIBOR floating interest rate on $100,000 of US dollar denominated debt into a fixed interest rate of 2.7205% plus the applicable margin. The swaps have a maturity of April 30, 2023. The swaps are being accounted for as cash flow hedges and are measured at fair value on the balance sheet. Gains or losses on the swaps, which are determined to be effective as hedges, are reported in other comprehensive income.

Contingent acquisition consideration

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 expected future operating cash flows (determined with reference to each specific acquired business) and discount rates (which range from 2.1% to 9.5%, with a weighted average of 4.5%). 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. A 2% increase in the weighted average discount rate would reduce the fair value of contingent consideration by $3,300. 

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Changes in the fair value of the contingent consideration liability comprises the following:

		2021
Balance, January 1		$	115,643
Amounts recognized on acquisitions			1,891
Fair value adjustments (note 5)			14,787
Resolved and settled in cash			(3,095	)
Other			(255	)
Balance, March 31		$	128,971
Less: current portion		$	79,505
Non-current portion		$	49,466

The carrying amounts for cash, restricted cash, accounts receivable, accounts payable, advisor loans, other receivables and accrued liabilities approximate their estimated fair values due to the short-term nature of these instruments, unless otherwise indicated. The carrying value of the Company’s Revolving Credit Facility and other short-term borrowings approximate their estimated fair value due to their short-term nature and variable interest rate terms. The inputs to the measurement of the fair value of non-current receivables, advisor loans and long-term debt 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.

The following are estimates of the fair values for other financial instruments:

		March 31, 2021								December 31, 2020
		Carrying				Fair				Carrying				Fair
		amount				value				amount				value
Senior Notes		$	245,683				269,936			$	255,790			$	275,928
Convertible Notes			224,266				389,783				223,957				353,638

Other receivables include notes receivable from non-controlling interests and non-current income tax recoverable.

17. Commitments and Contingencies

Claims and Litigation

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.

Long Term Incentive Arrangement

Pursuant to an agreement approved in February 2004 and restated on June 1, 2015 (the “Long Term Incentive Arrangement” or “LTIA”), 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 Chairman & CEO’s family, their holding companies and trusts. The agreement provides for the Chairman & 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, 2021, the amount required to be paid to the Chairman & CEO, based on a market price of C$123.48 per Subordinate Voting Share, would be US$437,159. See note 20 for subsequent events related to the settlement of the LTIA.

Contingencies associated with US government sponsored enterprises

Colliers Mortgage is a lender in the Fannie Mae DUS Program. Commitments for the origination and subsequent sale and delivery of loans to Fannie Mae represent those mortgage loan transactions where the borrower has locked an interest rate and scheduled closing and the Company has entered into a mandatory delivery commitment to sell the loan to Fannie Mae. As discussed in note 16 the Company accounts for these commitments as derivatives recorded at fair value.

Page 18 of 20 

Colliers Mortgage is obligated to share in losses, if any, related to mortgages originated under the DUS Program. These obligations expose the Company to credit risk on mortgage loans for which the Company is providing underwriting, servicing, or other services under the DUS Program. Net losses on defaulted loans are shared with Fannie Mae based upon established loss-sharing ratios, and typically, the Company is subject to sharing up to one-third of incurred losses on loans originated under the DUS Program. As of March 31, 2021, the Company has funded and sold loans subject to such loss sharing obligations with an aggregate unpaid principal balance of approximately $4,162,000. As at March 31, 2021, the Loss Reserve was $15,662 (December 31, 2020 - $15,194) and was included within Other liabilities on the Consolidated Balance Sheets.

Pursuant to its licenses with Fannie Mae, Ginnie Mae and HUD, Colliers Mortgage is required to maintain certain standards for capital adequacy which include minimum net worth and liquidity requirements. If it is determined at any time that Colliers Mortgage fails to maintain appropriate capital adequacy, the licensor reserves the right to terminate the Company’s servicing authority for all or some of the portfolio. At March 31, 2021, Colliers Mortgage was in compliance with all such requirements.

18. Revenue

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				Mgmt				Corporate				Consolidated
Three months ended March 31,
2021
Leasing		$	134,204			$	25,589			$	19,868			$	-			$	-			$	179,661
Capital Markets			142,101				35,590				32,819				-				-				210,510
Property services			147,061				38,276				55,551				-				-				240,888
Valuation and advisory			38,432				25,093				17,384				-				-				80,909
IM - Advisory and other			-				-				-				44,627				-				44,627
IM - Incentive Fees			-				-				-				-				-				-
Other			13,979				1,565				2,629				-				146				18,319
Total Revenue		$	475,777			$	126,113			$	128,251			$	44,627			$	146			$	774,914
2020
Leasing		$	128,367			$	21,057			$	15,086			$	-			$	-			$	164,510
Capital Markets			94,241				31,937				16,825				-				-				143,003
Property services			99,817				41,244				49,611				-				-				190,672
Valuation and advisory			41,882				21,726				13,033				-				-				76,641
IM - Advisory and other			-				-				-				43,565				-				43,565
IM - Incentive Fees			-				-				-				2,260				-				2,260
Other			5,683				1,118				2,879				-				297				9,977
Total Revenue		$	369,990			$	117,082			$	97,434			$	45,825			$	297			$	630,628

Revenue associated with the Company’s debt finance and loan servicing operations are outside the scope of ASC 606, Revenue from Contracts with Customers (“ASC 606”). In the period ended March 31, 2021, $32,235 of revenue was excluded from the scope of ASC 606. These revenues were included entirely within the Americas segment within Capital Markets and Other revenue.

Contract balances

As at March 31, 2021, the Company had contract assets totaling $82,479 of which $73,873 was current ($66,436 as at December 31, 2020 - of which $61,101 was current). During the three months ended March 31, 2021, approximately 59% of the current contract assets were moved to accounts receivable or sold under the AR Facility (Note 10).

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As at March 31, 2021, the Company had contract liabilities (all current) totaling $17,707 ($21,076 as at December 31, 2020). Revenue recognized for the three months ended March 31, 2021 totaled $16,606 (2020 - $18,105) that was included in the contract liability balance at the beginning of the year.

Certain constrained brokerage fees, outsourcing & 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. Typically, 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.

19. Segmented information

Operating segments

Colliers has identified four reportable operating segments. Three segments are grouped geographically into Americas, Asia Pacific and EMEA. The Investment Management segment operates in the Americas and EMEA. 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				Mgmt				Corporate				Consolidated
Three months ended March 31
2021
Revenues		$	475,777			$	126,113			$	128,251			$	44,627			$	146			$	774,914
Depreciation and amortization			20,678				5,705				3,754				6,731				909				37,777
Operating earnings (loss)			42,853				(1,089	)			11,708				9,931				(23,447	)			39,956
2020
Revenues		$	369,990			$	117,082			$	97,434			$	45,825			$	297			$	630,628
Depreciation and amortization			8,070				5,443				3,603				6,635				1,140				24,891
Operating earnings (loss)			22,709				(13,451	)			1,228				11,778				(3,727	)			18,537

Page 20 of 20 

Geographic information

Revenues in each geographic region are reported by customer locations.

GEOGRAPHIC INFORMATION
		March 31
		2021				2020
United States
Revenues		$	417,239			$	317,079
Total long-lived assets			1,429,553				1,053,410
Canada
Revenues		$	90,500			$	81,196
Total long-lived assets			81,316				82,967
Euro currency countries
Revenues		$	64,208			$	68,332
Total long-lived assets			289,633				284,162
Australia
Revenues		$	53,933			$	38,883
Total long-lived assets			81,418				72,492
United Kingdom
Revenues		$	33,994			$	29,723
Total long-lived assets			77,266				78,782
Other
Revenues		$	115,040			$	95,415
Total long-lived assets			186,469				170,671
Consolidated
Revenues		$	774,914			$	630,628
Total long-lived assets			2,145,655				1,742,484

20. Subsequent events

Settlement of Long Term Incentive Arrangement

On February 26, 2021, the Company entered into an agreement with Jay S. Hennick, the Company’s Chairman & Chief Executive Officer and largest voting shareholder, pursuant to which disinterested holders of Subordinate Voting Shares were given an opportunity to approve a transaction (the “Transaction”) to settle the Management Services Agreement (the “MSA”), including the Long Term Incentive Arrangement (the “LTIA”) (see note 17), originally entered into on February 1, 2004, between the Company, Mr. Hennick and Jayset Management CIG Inc., a corporation controlled by Mr. Hennick. In addition, the Transaction established an orderly timeline for the elimination of the Company’s dual class voting structure by no later than September 1, 2028. As part of the Transaction, the Company agreed to (a) pay US$96,200 in cash and (b) issue a total of 3,572,858 Subordinate Voting Shares to an entity controlled by Mr. Hennick. The total purchase price was determined by applying the formula provided in the existing MSA for the LTIA using a price of US$106.40 per share (which is the volume weighted average price of the Subordinate Voting Shares on the Toronto Stock Exchange for the period from February 11, 2021 through to and including February 25, 2021, converted to US dollars).

On April 14, 2021, disinterested shareholders approved the Transaction. The Transaction was completed on April 16, 2021.

AR Facility extension

On April 26, 2021, the Company renewed its AR Facility with a third-party financial institution. The AR Facility has committed availability of $125,000 with a term of 364 days extending to April 25, 2022 and includes selected US and Canadian trade accounts receivable. 

Addition of new warehouse credit facility

On April 28, 2021, Colliers Mortgage entered into an additional warehouse credit facility with a borrowing capacity of $150,000 and an initial maturity date of April 27, 2022. The facility bears interest of LIBOR plus 1.60%.

COLLIERS INTERNATIONAL GROUP INC.

Management’s discussion and analysis

For the three months ended March 31, 2021

(in US dollars)

May 7, 2021

The following management’s discussion and analysis (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of Colliers International Group Inc. (“we,” “us,” “our,” the “Company” or “Colliers”) for the three months ended March 31, 2021 and the Company’s audited consolidated financial statements and MD&A for the year ended December 31, 2020. The 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 U.S./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 months ended March 31, 2021 and up to and including May 7, 2021.

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

Our consolidated revenues for the first quarter ended March 31, 2021 were $774.9 million, an increase of 23% versus the prior year period (18% in local currency). The increase was primarily attributable to the impact of recent acquisitions, stabilizing transactional activity, especially Capital Markets, and continued strength in recurring services. Diluted net earnings per common share were $0.11, flat versus the prior year, with the increase in revenues offset by (i) higher amortization expense and contingent consideration expense, both related to recent acquisitions, and (ii) an increase in diluted share count related to an offering of 4% Convertible Senior Subordinated Notes due 2025 (the “Convertible Notes”) in May 2020. Adjusted earnings per share, which exclude restructuring costs, non-controlling interest redemption increment and amortization of intangible assets (see “Reconciliation of non-GAAP financial measures” below) were $1.04, up 93% from $0.54 in the prior year period. Adjusted earnings per share and GAAP net earnings per share for the three months ended March 31, 2021 would have been approximately $0.04 lower excluding the impact of changes in foreign exchange rates.

On March 8, 2021, we acquired a Miami-based specialty transportation engineering and design firm.

For the three months March 31, 2021, local currency revenue growth was driven by the impact of recent acquisitions and strong Capital Markets activity.

		Three months ended
(in thousands of US$)		March 31								Change				Change
(LC = local currency)		2021				2020				in US$ %				in LC%
Outsourcing & Advisory		$	340,116			$	277,290				23	%			17	%
Investment Management (1)			44,627				45,825				-3	%			-3	%
Leasing			179,661				164,510				9	%			6	%
Capital Markets			210,510				143,003				47	%			40	%
Total revenues		$	774,914			$	630,628				23	%			18	%

 ⁽¹⁾ Investment Management local currency revenues, excluding pass-through carried interest, were up 2% for the three months ended March 31, 2021.

Results of operations – three months ended March 31, 2021

For the three months ended March 31, 2021, revenues were $774.9 million, up 23% compared to the prior year period (18% in local currency). Acquisitions contributed 14% to local currency revenue growth while internally generated revenues were up 4% on stabilizing transactional revenues which were impacted in the prior year quarter during the early stages of the pandemic.

Operating earnings were $40.0 million versus $18.5 million in the prior year period. The operating earnings margin was 5.2% versus 2.9% in the prior year period with the increase attributable to (i) the impact of higher margin acquisitions of Colliers Mortgage and Colliers Engineering & Design; (ii) operating leverage from higher transactional revenues; and (iii) measures taken to reduce costs due to the pandemic. Adjusted EBITDA (see “Reconciliation of non-GAAP financial measures” below) was $92.1 million, up 69% versus $54.5 million in the prior year. Adjusted EBITDA margin increased by 330 basis points to 11.9% as compared to 8.6% in the prior year period.

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Depreciation expense was $10.4 million relative to $8.9 million in the prior year period, with the increase attributable to the impact of recent acquisitions and increased investments in office leaseholds.

Amortization expense was $27.3 million relative to $16.0 million in the prior year period, with the increase attributable mainly to intangible assets recognized in connection with recent business acquisitions, including those of Colliers Mortgage and Colliers Engineering & Design.

Net interest expense was $8.3 million, up from $7.6 million in the prior year period and included interest from our Convertible Notes offering in May 2020. The average interest rate on our debt during the period was 3.5%, versus 3.1% in the prior year period.

Consolidated income tax expense was $8.8 million relative to $5.2 million in the first quarter of 2020, reflecting effective tax rates of 26% and 45%, respectively. The prior year quarter’s tax rate was impacted by the reversal of a $2.0 million tax benefit recorded in 2019 due to a change in tax law applied retroactively. The effective tax rate for the full year is expected to be 25% to 28%.

Net earnings were $24.8 million, compared to $6.5 million in the prior year period.

Revenues in the Americas region totalled $475.8 million for the first quarter, up 29% (27% in local currency) versus $370.0 million in the prior year quarter. Revenue growth was driven by recent acquisitions and stabilizing transactional revenues, especially Capital Markets activity across the region. Foreign exchange tailwinds positively impacted revenue growth by 1%. Adjusted EBITDA was $56.9 million, up 82% from $31.2 million in the prior year quarter, and includes the impact of recent acquisitions and reduced costs from measures implemented due to the pandemic. GAAP operating earnings were $42.9 million, relative to $22.7 million in the prior year quarter.

Revenues in the EMEA region totalled $126.1 million for the first quarter compared to $117.1 million in the prior year quarter, up 8% (down 3% in local currency), with activity returning to near prior year levels in each service line. Foreign exchange tailwinds positively impacted revenue growth by 11%. Adjusted EBITDA was $4.5 million, versus a loss of $3.6 million in the prior year with the improvement primarily attributable to cost savings from measures implemented due to the pandemic. The GAAP operating loss was $1.1 million compared to a loss of $13.5 million in the prior year quarter.

Revenues in the Asia Pacific region totalled $128.3 million for the first quarter compared to $97.4 million in the prior year quarter, up 32% (19% in local currency). Revenue growth was driven by a rebound in activity relative to the sharply reduced levels experienced during the early stages of the pandemic in the first quarter of 2020. Foreign exchange tailwinds positively impacted revenue growth by 12%. Adjusted EBITDA was $15.5 million compared to $5.2 million in the prior year quarter with the improvement in margin attributable to operating leverage and a lower cost base. GAAP operating earnings were $11.7 million, versus $1.2 million in the prior year quarter.

Investment Management revenues for the first quarter were $44.6 million compared to $45.8 million in the prior year quarter. No pass-through revenue from historical carried interest was recognized in the first quarter, versus $2.3 million in the prior year quarter. Excluding the impact of pass-through revenue, revenues were up 2% (2% in local currency) on solid management fee growth, partially offset by transaction fees recognized in the prior year period in Europe. Adjusted EBITDA was $17.7 million, relative to $18.4 million in the prior year quarter, down 3% versus a strong prior year comparative, which included transaction fees. GAAP operating earnings were $9.9 million in the quarter, versus $11.8 million in the prior year quarter. Assets under management were $41.6 billion at March 31, 2021, up 5% from $39.5 billion at December 31, 2020 and up 19% from $35.1 billion at March 31, 2020.

Unallocated global corporate costs as reported in Adjusted EBITDA were $2.6 million in the first quarter, relative to a recovery of $3.3 million in the prior year quarter, with the change primarily attributable to incentive compensation accruals recorded in the current year period. The corporate GAAP operating loss for the quarter was $23.4 million, relative to $3.7 million in the first quarter of 2020 attributable to an increase in the fair value of contingent acquisition consideration on strong operating performance of recently acquired businesses as well as incentive compensation accruals.

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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 further quarter.

Summary of quarterly results - years ended December 31, 2021, 2020 and 2019

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

		Q1				Q2				Q3				Q4
Year ended December 31, 2021
Revenues		$	774,914
Operating earnings			39,956
Net earnings			24,807
Basic net earnings per common share			0.11
Diluted net earnings per common share			0.11
Year ended December 31, 2020
Revenues		$	630,628			$	550,206			$	692,307				913,716
Operating earnings			18,537				14,523				52,074				79,443
Net earnings			6,458				6,483				31,979				49,568
Basic net earnings per common share			0.12				(0.26	)			0.53				0.84
Diluted net earnings per common share			0.11				(0.26	)			0.52				0.80
Year ended December 31, 2019
Revenues		$	635,123			$	745,517			$	736,883			$	928,288
Operating earnings			13,397				57,198				48,175				99,428
Net earnings			5,463				35,575				28,672				67,877
Basic net earnings per common share			0.04				0.60				0.75				1.21
Diluted net earnings per common share			0.04				0.60				0.74				1.20
Other data
Adjusted EBITDA - 2021		$	92,128
Adjusted EBITDA - 2020			54,454				59,962				92,120				154,906
Adjusted EBITDA - 2019			43,571				87,323				84,262				144,320
Adjusted EPS - 2021		$	1.04
Adjusted EPS - 2020			0.54				0.70				1.08				1.79
Adjusted EPS - 2019			0.51				1.10				1.04				2.01

Impact of COVID-19 pandemic

The COVID-19 pandemic resulted in a sharp reduction in Leasing and Capital Markets transaction activity beginning in March 2020 as governments around the world implemented lockdowns and other measures to contain the virus. During 2020, the Company took significant measures to maintain business continuity across all service lines, including steps to optimize the level of all critical functions across our business. Certain of these measures remained in place during the first quarter of 2020 and to the present date.

As of March 31, 2021, the Company’s financial leverage ratio expressed in terms of net debt to pro forma Adjusted EBITDA was 1.1x (1.0x as of December 31, 2020), relative to a maximum of 3.5x permitted under its debt agreements. As of the same date, the Company had $724 million of unused credit under its committed revolving credit facility maturing in April 2024.

2021 outlook

Given stronger than expected operating results for the first quarter, the Company is increasing its previously provided financial outlook. However, a number of risks and uncertainties remain, including: (i) the resurgence of COVID-19 cases in various parts of the world may impact overall results; (ii) stabilizing transactional revenues experienced in the first quarter may not be sustainable during the balance of the year; and (iii) certain operating costs, reduced in light of the pandemic, are expected to increase as restrictions and conditions ease and may temper margins. The outlook for the full year 2021 (relative to 2020), including the impact of completed acquisitions, is as follows:

	Full Year 2021 Outlook
	Updated	Previous
Revenue	+15% to +30%	+10% to +25%
Adjusted EBITDA	+15% to +30%	+10% to +25%

Page 4 of 11 

This financial outlook is based on the Company’s best available information as of the date of this MD&A and remains subject to change based on numerous macroeconomic, health, social, geo-political and related factors (see “Risks associated with COVID-19 pandemic” below).

The Company received wage subsidies totalling $2.5 million during the first quarter from governments in several countries. These subsidies were recorded in earnings as an offset to employment costs.

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 Capital Markets transactions. Revenues and earnings during the balance of the year are relatively even. Historically, Capital Markets operations comprised approximately 25% of consolidated annual revenues. Variations can also be caused by business acquisitions which alter the consolidated service mix.

Liquidity and capital resources

Net cash used in operating activities for the three month period ended March 31, 2021 was $38.1 million, versus $120.0 million used in the prior year period. The prior year period was impacted by significant working capital usage in our transactional operations. We believe that cash from operations and other existing resources, including our $1.0 billion multi-currency revolving credit facility (the “Revolving Credit Facility”), will continue to be adequate to satisfy the ongoing working capital needs of the Company.

For the three months ended March 31, 2021, capital expenditures were $22.1 million (2020 - $40.4 million). Capital expenditures for the year ending December 31, 2021 are expected to be $65-$75 million with the increase primarily attributable to investments in office space in major markets, some of which were deferred from 2020.

Net indebtedness as at March 31, 2021 was $404.9 million, versus $323.3 million at December 31, 2020, which excludes the Convertible Notes and warehouse credit facilities. Including the Convertible Notes, our net indebtedness as at March 31, 2021 would have been $629.2 million. Net indebtedness is calculated as the current and non-current portion of long-term debt less cash and cash equivalents. We are in compliance with the covenants contained in our agreements relating to our debt agreements as at March 31, 2021 and, based on our outlook for 2021, we expect to remain in compliance with these covenants.

The Convertible Notes, due 2025, are unsecured and subordinated to all of the existing and future senior and/or secured indebtedness, and are treated as equity for financial leverage calculations under our existing debt agreements. The Convertible Notes are convertible into 3.97 million subordinate voting shares or, if not converted, may be settled at maturity with subordinate voting shares or cash at the option of the Company.

Colliers Mortgage utilizes warehouse credit facilities for the purpose of funding warehouse receivables. Warehouse receivables represent mortgage loans receivable, the majority of which are offset by borrowings under warehouse credit facilities which fund loans that financial institutions have committed to purchase. The warehouse credit facilities are excluded from the financial leverage calculations under our debt agreements.

On April 26, 2021, we renewed and extended our structured accounts receivable facility (the “AR Facility”) with a third-party financial institution. The AR Facility has committed availability of $125 million with a term of 364 days extending to April 25, 2022 and includes selected US and Canadian trade accounts receivable (the “Receivables”).

On December 10, 2020, the Company’s Board of Directors declared a semi-annual dividend of $0.05 per share to shareholders of record on December 31, 2020. This dividend amounting to $2.0 million was paid on January 14, 2021.

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 $193.9 million as at March 31, 2021 (December 31, 2020 - $208.6 million). Unless it contains an element of compensation, contingent consideration is recorded at fair value each reporting period. The fair value recorded on the consolidated balance sheet as at March 31, 2021 was $129.0 million (December 31, 2020 - $115.6 million). Contingent consideration with a compensatory element is revalued at each reporting period and recognized on a straight-line basis over the term of the contingent consideration arrangement. The liability recorded on the balance sheet for the compensatory element of contingent consideration arrangements as at March 31, 2021 was $11.7 million (December 31, 2020 - $17.6 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 February 2025. We estimate that approximately 85% of the contingent consideration outstanding as of March 31, 2021 will ultimately be paid.

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The following table summarizes our contractual obligations as at March 31, 2021:

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		$	521,533			$	8,467			$	267,383			$	-			$	245,683
Warehouse credit facilities			105,937				105,937				-				-				-
Convertible Notes			224,266				-				-				224,266				-
Interest on long-term debt
and Convertible Notes			111,326				26,304				52,008				21,600				11,414
Finance lease obligations			1,867				978				883				6				-
Contingent acquisition consideration			128,971				79,505				45,090				4,268				108
Operating leases obligations			475,563				93,188				147,534				94,206				140,635
Purchase commitments			28,844				15,087				5,773				3,080				4,904
Co-investment Commitments			25,809				25,809				-				-				-
Total contractual obligations		$	1,624,116			$	355,275			$	518,671			$	347,426			$	402,744

At March 31, 2021, we had commercial commitments totaling $18.0 million comprised of letters of credit outstanding due to expire within one year.

Redeemable non-controlling interests

In most operations where managers or employees are also non-controlling owners, the Company is party to shareholders’ agreements. These agreements allow us to “call” the redeemable non-controlling interests (“RNCI”) 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. Non-controlling owners may also “put” their interest to the Company at the same price, with certain limitations including (i) the inability to “put” more than 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 non-controlling shareholder acquired their interest, as the case may be.

The total value of the RNCI (the “redemption amount”), as calculated in accordance with shareholders’ agreements, was $413.3 million as of March 31, 2021 (December 31, 2020 - $415.1 million). The amount recorded on our balance sheet under the caption “redeemable non-controlling interests” is the greater of (i) the redemption amount (as above) or (ii) the amount initially recorded as RNCI at the date of inception of the minority equity position. As at March 31, 2021, the RNCI recorded on the balance sheet was $440.0 million (December 31, 2020 - $442.4 million). The purchase prices of the RNCI may be paid in cash or in Subordinate Voting Shares of Colliers. If all RNCI were redeemed in cash, the pro forma estimated accretion to diluted net earnings per share for the three months ended March 31, 2021 would be $0.40, and the accretion to adjusted EPS would be $0.09.

Reconciliation of non-GAAP financial measures

In this MD&A, we make reference to “adjusted EBITDA” and “adjusted EPS,” 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, including amortization of mortgage servicing rights (“MSRs”); (v) gains attributable to MSRs; (vi) acquisition-related items (including contingent acquisition consideration fair value adjustments, contingent acquisition consideration-related compensation expense and transaction costs); (vii) restructuring costs and (viii) 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
		March 31
(in thousands of US$)		2021				2020
Net earnings		$	24,807			$	6,458
Income tax			8,847				5,198
Other income, including equity earnings from non-consolidated investments			(1,982	)			(704	)
Interest expense, net			8,284				7,585
Operating earnings			39,956				18,537
Depreciation and amortization			37,777				24,891
Gains attributable to MSRs			(9,075	)			-
Equity earnings from non-consolidated investments			1,406				555
Acquisition-related items			18,847				2,750
Restructuring costs			293				5,468
Stock-based compensation expense			2,925				2,253
Adjusted EBITDA		$	92,129			$	54,454

Page 6 of 11 

Adjusted EPS is defined as diluted net earnings per share as calculated under the “if-converted” method, 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 and MSRs; (iii) gains attributable to MSRs; (iv) acquisition-related items; (v) restructuring costs and (vi) 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 EPS is not a recognized measure of financial performance under GAAP, and should not be considered as a substitute for diluted net earnings per share from continuing operations, 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 per share to adjusted EPS appears below.

Adjusted EPS is calculated using the “if-converted” method of calculating earnings per share in relation to the Convertible Notes, which were issued on May 19, 2020. As such, the interest (net of tax) on the Convertible Notes is added to the numerator and the additional shares issuable on conversion of the Convertible Notes are added to the denominator of the earnings per share calculation to determine if an assumed conversion is more dilutive than no assumption of conversion. The “if-converted” method is used if the impact of the assumed conversion is dilutive. For the three months ended March 31, 2021, the “if-converted” method is anti-dilutive for the GAAP diluted EPS calculation but dilutive for the adjusted EPS calculation.

		Three months ended
		March 31
(in thousands of US$)		2021				2020
Net earnings		$	24,807			$	6,458
Non-controlling interest share of earnings			(7,780	)			(3,377	)
Interest on Convertible Notes			2,300				-
Amortization of intangible assets			27,338				16,013
Gains attributable to MSRs			(9,075	)			-
Acquisition-related items			18,847				2,750
Restructuring costs			293				5,468
Stock-based compensation expense			2,925				2,253
Income tax on adjustments			(9,666	)			(5,805	)
Non-controlling interest on adjustments			(3,335	)			(2,150	)
Adjusted net earnings		$	46,654			$	21,610

		Three months ended
		March 31
(in US$)		2021				2020
Diluted net earnings per common share		$	0.14			$	0.11
Non-controlling interest redemption increment			0.28				(0.04	)
Amortization expense, net of tax			0.37				0.24
Gains attributable to MSRs, net of tax			(0.11	)			-
Acquisition-related items			0.30				0.07
Restructuring costs, net of tax			-				0.10
Stock-based compensation expense, net of tax			0.06				0.06
Adjusted EPS		$	1.04			$	0.54
Diluted weighted average shares for Adjusted EPS (thousands)			44,738				40,167

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.

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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 no impact from acquired entities in the current and prior periods. Revenue from acquired entities, including any foreign exchange impacts, are treated as acquisition growth until the respective anniversaries of the acquisitions. 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 and acquisitions. 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 market value of operating assets and the projected gross cost of development properties 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.

Impact of recently adopted accounting standards

Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting of Income Taxes to simplify the accounting for income taxes. The guidance eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences related to changes in ownership of equity method investments and foreign subsidiaries. The guidance also simplifies aspects of accounting for enacted changes in tax laws or rates, and clarifies the accounting for transactions that result in step-up in tax basis of goodwill. The Company adopted the guidance effective January 1, 2021. The Company’s processes and disclosures have been updated to incorporate the new standard. The adoption of the standard did not have a material impact on the Company’s consolidated financial statements.

Recently issued accounting guidance, not yet adopted

Reference Rate Reform

The FASB has issued two ASU related to reference rate reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting and in January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. With reference rates like the London Interbank Offered Rates (“LIBOR”) expecting to be discontinued at the end of 2021, a significant volume of contracts and other arrangements will be impacted by the transition required to alternative reference rates. This ASU provides optional expedients and exceptions to reduce the costs and complexity of applying existing GAAP to contract modifications and hedge accounting if certain criteria are met. The standard is effective for a limited time for all entities through December 31, 2022. The Company has certain debt and hedging arrangements which may qualify for use of the practical expedients permitted under the guidance. The Company has evaluated and will continue to evaluate arrangements subject to rate reform and the options under the ASU to facilitate an orderly transition to alternative reference rates and their potential impacts on its consolidated financial statements and disclosures.

Debt with Conversion Options

In August 2020, the FASB issued ASU No. 2020-06, Debt- Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contract in an Entity’s Own Equity. The ASU simplifies the accounting for convertible instruments and reduces the number of embedded conversion features being separately recognized from the host contract as compared to current GAAP. The ASU also enhances information transparency through targeted improvements to the disclosures for convertible instruments and earnings-per-share guidance. The standard is effective for fiscal years beginning after December 15, 2021. The standard can be applied using the modified retrospective method of transition or a fully retrospective method of transition. The Company is currently assessing the options available under this ASU and their potential impacts on its consolidated financial statements. 

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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, 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, the Company is 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 $100.0 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. Financial instruments involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. If we have financial instruments outstanding and such events occur, our results of operations and financial position may be adversely affected.

Off-balance sheet arrangements

As of March 31, 2021, the Company did 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 (i) the Long-Term Incentive Arrangement contained in the Management Services Agreement between Colliers, Jayset Management CIG Inc. and Jay S. Hennick, (see Note 18 to the Consolidated Financial Statements for a description) and (ii) the AR Facility. As of March 31, 2021, the Company had drawn $113.5 million under the AR Facility. The AR Facility is recorded as a sale of accounts receivable, and accordingly sold Receivables are derecognized from the consolidated balance sheet. The AR Facility results in a significant decrease to our borrowing costs.

Settlement of long-term incentive arrangement

On April 16, 2021, after receiving approval from 95% of disinterested shareholders, the Company completed the previously announced transaction (the “Transaction”) to settle the Management Services Agreement, including the Long-Term Incentive Arrangement, between Colliers, Jay S. Hennick and Jayset Management CIG Inc., a corporation controlled by Mr. Hennick. The Transaction also established a timeline for the orderly elimination of Colliers’ dual class voting structure by no later than September 1, 2028. The completion of the Transaction resulted in the issuance of 3,572,858 Subordinate Voting Shares from treasury and a cash payment of $96.2 million funded from the Company’s revolving credit facility.

Mr. Hennick remains Chairman and Chief Executive Officer of the Company and has control and direction over a total of 6,331,063 shares of Colliers representing 14.4% of the outstanding shares and 45.6% of the votes.

Transactions with related parties

As at March 31, 2021, the Company had $3.3 million of loans receivable from non-controlling shareholders (December 31, 2020 - $3.4 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 42,605,800 Subordinate Voting Shares and 1,325,694 Multiple Voting Shares. In addition, as at the date hereof 2,028,625 Subordinate Voting Shares are issuable upon exercise of options granted under the Company’s stock option plan.

On July 16, 2020, the Company announced a Normal Course Issuer Bid (“NCIB”) effective from July 20, 2020 to July 19, 2021. The Company is entitled to repurchase up to 3,000,000 Subordinate Voting Shares on the open market pursuant to the NCIB. Any shares purchased under the NCIB will be cancelled.

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Canadian tax treatment of common share 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.

Disclosure controls and procedures

Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in reports filed or submitted by us under U.S. and Canadian securities legislation is recorded, processed, summarized and reported within the time periods specified in those rules, and include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted by us under U.S. and Canadian securities legislation is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to permit timely decisions regarding required disclosure. Management, including the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in the rules of the U.S. Securities and Exchange Commission and the Canadian Securities Administrators, as at March 31, 2021. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as at March 31, 2021.

Changes in internal control over financial reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Any system of internal control over financial reporting, no matter how well-designed, has inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Management has used the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 2013 framework to evaluate the effectiveness of our internal control over financial reporting. Based on this assessment, management has concluded that as at March 31, 2021, our internal control over financial reporting was effective.

During the three months ended March 31, 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal control 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.

Risks associated with COVID-19 pandemic

We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our clients, employees, and services. We expect that we will continue to be adversely impacted on a global basis in future periods, and we are unable to predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. The extent to which our operations may be impacted by the pandemic will depend largely on future developments, which are uncertain and cannot be accurately predicted, including new information which may emerge concerning the severity of the outbreak and actions by government authorities to contain the pandemic or treat its impact. Furthermore, the impacts of a potential worsening of global macroeconomic conditions and the continued disruptions to and volatility in the financial markets remain unknown.

Operating during the global pandemic exposes the Company to multiple risks which, individually or in the aggregate, could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows, including following:

· a reduction in commercial real estate transactions and decreases in expenditure at our clients and therefore a reduction in the demand for the services the Company provides;

· a decrease in property values and vacancy rates, which could negatively impact Leasing and Capital Markets commissions;

· liquidity challenges, including impacts related to delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies;

· inability to access capital or financing at favorable terms due to possible adverse effect on our liquidity and financial position; and

· the occurrence of asset impairment losses.

Further, many of the risks discussed in the “Risk Factors” section of the Company’s Annual Information Form are, and could be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. Given the dynamic nature of these events, the Company cannot reasonably estimate the period of time that the COVID-19 pandemic and related market conditions will persist, the full extent of the impact they will have on our business, financial condition, results of operations or cash flows or the pace or extent of any subsequent recovery. Even after the pandemic and related containment measures subside, we may continue to experience adverse impacts to our business, financial condition and results of operations, the extent of which may be material.

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Risks associated with Colliers Mortgage

Our recently acquired Colliers Mortgage operations have certain key risk factors unique to the services provided. The following is a summary of key risk factors:

· a change in or loss of our relationship with US government agencies, such as Fannie Mae or Ginnie Mae could significantly impact our ability to originate mortgage loans;

· defaults by borrowers on loans originated under the Fannie Mae Delegated Underwriting and Servicing^TM Program could materially affect our profitability as we are subject to sharing up to one-third of incurred losses;

· a decline in origination volumes or termination of our current servicing agreements, could significantly impact profitability, with a majority of our earnings generated from loan servicing; and

· a termination or changes to our warehouse credit facilities could lead to unfavourable replacement terms and may significantly impact our ability to originate new loans.

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”, “Risks associated with the COVID-19 pandemic” , “Risks associated with Colliers Mortgage” and those set out in detail in the “Risk Factors” section of the Company’s Annual Information Form:

· The COVID-19 pandemic and its related impact on global, regional and local economic conditions, and in particular its impact on client demand for our services, our ability to deliver services and ensure the health and productivity of our employees.

· 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.

· 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.

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

· A decline in our ability to attract, recruit and retain talent.

· A decline in our ability to attract new clients and to retain major clients and renew related contracts.

· Reliance on subcontractors.

· Labor shortages or increases in wage and benefit costs.

· A decline in our performance impacting our continued compliance with the financial covenants under our debt agreements, or our ability to negotiate a waiver of certain covenants with our lenders.

· The effect of increases 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.

· A decline in our ability to identify and make acquisitions at reasonable prices and successfully integrate acquired operations.

· Disruptions or security failures in our information technology systems.

· The ability to comply with laws and regulations related to our global operations, including real estate and mortgage banking 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.

· The ability to protect against cybersecurity threats as well as to monitor new threats.

· Changes in climate and environment-related policies that directly impact our businesses.

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

· Conversion of the Convertible Notes to subordinate voting shares may dilute the ownership of existing shareholders.

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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, particularly in light of the ongoing and developing COVID-19 pandemic and its impact on the global economy and its anticipated impact on our business. 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, 2020, 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.