Colliers International's Q3 2025: Emerging Contradictions on Engineering Margins, Investment Management Strategy, and Leasing Revenue

Business Commentary:

• Revenue and Segment Growth:
• Colliers International reported third-quarter revenues of $1.46 billion, up 23% year over year.

• Growth was driven by strong performance in engineering and real estate services segments due to strategic acquisitions, robust organic performance, and increased transactional revenues.

• Engineering Segment Expansion:

• The engineering segment achieved a 36% increase in net revenue, fueled by acquisitions and internal growth.

• This expansion was attributed to strategic acquisitions, with over seven acquisitions completed so far this year, and significant organic growth in sectors like infrastructure and transportation.

• Real Estate Services Performance:

• Real estate services revenues increased by 13%, with capital markets and leasing both up significantly.

• The surge was due to strong sales growth in various asset classes and geographic regions, particularly in the U.K., Japan, and Canada.

• Investment Management and Fundraising:

• Assets under management finished the quarter at $108 billion, a 10% increase from last year.
• This was driven by successful acquisitions and solid fundraising momentum, raising $4.4 billion year-to-date, despite challenges such as integration costs under the HSAM brand.

Contradiction Point 1

Engineering Margin Expectations

It involves changes in financial forecasts, specifically regarding engineering margin expectations, which are critical indicators for investors.

Can you explain the engineering margins in the quarter and their impact on results? - Stephen McLeod(BMO)

2025Q3: Well, Steve, you got to look at this on a net revenue basis. We have a lot of pass-through costs in engineering, and those are at very low margins. So on a net basis, our margin was down very slightly. We’re talking 20 to 30 basis points. It really just is some service mix across our geographic markets. - Christian Mayer(CFO)

What factors drove the Engineering segment's margin expansion this quarter, and how sustainable is this trend? - Scott Fletcher(CIBC Capital Markets)

2025Q2: Engineering margin expansion came equally from acquisitions and organic improvement in productivity and efficiency. Future margin enhancement expected due to efficiencies. - Christian Mayer(CFO)

Contradiction Point 2

Investment Management Margin and Strategic Options

It involves changes in strategic direction and financial expectations, particularly regarding investment management margins and potential strategic options.

Do you still believe you can achieve the 45%-50% margin in investment management, and will you wait until reaching those levels before considering strategic options? - Julianne Bluing(Goldman Sachs)

2025Q3: To be honest, for us, what’s more important is growing out this platform and making it as strong as possible. We continue to be open for acquisition opportunities in this segment. There are tons of white space, and there are tons of opportunity right now. - Jay Hennick(CEO)

Has the leasing market changed more dramatically than expected, and has there been a significant rebound as we move into the second half of the year? - Anthony Paolone(JPMorgan Chase & Co, Research Division)

2025Q2: We are now realizing synergies across the global platform. It is still early, but we are seeing some meaningful progress versus prior year in all three of our business segments in terms of growing market share combined with the scale and the integrated global platform that we have developed over the last 12 months. - Jay Hennick(CEO)

Contradiction Point 3

Capital Markets Performance and Expectations

It involves changes in financial performance expectations, specifically regarding capital markets performance and growth prospects.

Can you clarify the impact of acquisitions on organic growth? - Tony Palone(JPMorgan)

2025Q3: Our year-to-date organic growth in engineering is around 8%. And I think for the year, we guided to sort of mid-high single-digit areas. So we’re fully on track with our organic growth ambitions for the year. - Christian Mayer(CFO)

Which asset classes or geographies drove Q2 capital markets performance, and what are expectations for Q3/Q4? - Himanshu Gupta(Scotiabank Global Banking and Markets, Research Division)

2025Q2: Capital markets performance led by U.S. and Western Europe. Strong growth expected to continue in Q3, with slight tougher comps in Q4. - Christian Mayer(CFO)

Contradiction Point 4

Leasing Revenue Expectations

It involves differing expectations for leasing revenue, which is a key performance indicator for the company's growth and profitability.

What factors are influencing your ability to maintain the real estate services revenue guide for the year? - Stephen Chaldon (William Blair)

2025Q3: Leasing should trend positively for the fourth quarter, and outsourcing continued strong. - Christian Mayer(CFO)

What gives confidence in leasing revenue reacceleration? - Stephen Sheldon (William Blair)

2025Q1: Leasing faced tough comps due to specialty asset transactions. Expect mid-single digit growth for the full year. - Christian Mayer(CFO)

Contradiction Point 5

Investment Management Margins

It involves changes in financial forecasts, specifically regarding Investment Management margins, which are critical indicators for investors.

Do you still believe you can achieve a 45%-50% margin in investment management, and will you wait until reaching those margins to consider strategic options? - Julianne Bluing (Goldman Sachs)

2025Q3: To be honest, for us, what’s more important is growing out this platform and making it as strong as possible. We continue to be open for acquisition opportunities in this segment. There are tons of white space, and there are tons of opportunity right now. - Jay Hennick(CEO)

Will Investment Management margins return to approximately 45% by 2026? - Stephen MacLeod (BMO Capital Markets)

2024Q4: Yes, margins are expected to improve as revenue grows. Additional investments in fundraising and acceleration of operational integration are impacting margins, but improved fundraising will drive revenue up, leading to increased margins over the next year. - Christian Mayer(CFO)