Frederic Bastien

Frederic Bastien asked about the M&A competitive landscape, specifically if private equity firms' struggles are improving conditions for strategic buyers like FirstService, and where the company sees the best opportunities to deploy future capital, such as consolidating California Closets or Paul Davis franchises versus newer platforms.

Answer

CEO D. Scott Patterson noted that while the M&A market is slower, particularly in roofing, they haven't seen a significant change in the competitive landscape or a decrease in high multiples. He emphasized a focus on owning major markets for California Closets (expecting one acquisition per year) and Paul Davis (one to two per year), as well as tuck-under acquisitions within existing platforms, maintaining patience due to high valuations and a limited number of quality companies.

Frederic Bastien asked about the M&A market, specifically if private equity struggles are improving the competitive landscape for strategic buyers like FirstService, and where the company sees the best opportunities to deploy future capital, including consolidating remaining California Closets and Paul Davis franchises.

Answer

CEO D. Scott Patterson noted that the M&A market is slower, with opportunities pulled or delayed, and multiples remain high. He hasn't seen mid-market private equity deals yet. For capital deployment, he confirmed the desire to own major markets over time, expecting to acquire one California Closets franchise and one or two Paul Davis franchises annually, particularly underperforming ones. The focus remains on tuck-unders within existing platforms, with patience due to high valuations and a preference for partnering with founders seeking a 'forever owner.'

Frederic Bastien inquired about the current state of labor availability and costs, and whether improvements in this area are helping to facilitate market share gains.

Answer

Executive D. Patterson described the labor environment as 'much better,' with employee turnover returning to pre-COVID levels and wage inflation stabilizing. He confirmed that this stability enhances the employee and customer experience, as tenured frontline staff help drive customer retention and referrals, which in turn contributes positively to winning market share.

Frederic Bastien sought an update on the 7 AI factories totaling 6 gigawatts of compute capacity partnerships mentioned at Investor Day, including progress and potential new announcements. He also questioned the comfort level with achieving the 1 GW target for behind-the-meter power generation with Bloom Energy, given the current commitment of just under 300 MW.

Answer

CEO Sam Pollock reported ongoing progress on AI factory initiatives globally, with discussions in Europe, North America, the Middle East, and Oceania. He expressed hope for one or two progressions during the year, noting these tend to be smaller (50-250 MW in phases) than hyperscaler mega-sites. Regarding Bloom Energy, he felt optimistic about reaching and potentially exceeding the 1 GW target due to current demand and developments.

Frederic Bastien requested an update on the progress of the 7 AI factories totaling 6 gigawatts of compute capacity, inquiring about potential new developments. He also asked about the comfort level in reaching the 1 GW target for behind-the-meter power generation under the agreement with Bloom Energy.

Answer

Sam Pollock, CEO, confirmed ongoing progress on AI factory initiatives globally (Europe, North America, Middle East, Oceania), with hopes for one or two to progress during the year, noting they are typically smaller (50-250 MW) than hyperscaler mega-sites. He expressed optimism about reaching and potentially exceeding the 1 GW target with Bloom Energy due to strong demand and development momentum.

Frederic Bastien inquired whether the promising AI factory opportunities flagged during Brookfield Infrastructure's investor day are consistent with the Bloom Energy partnership for behind-the-meter solutions or if they vary depending on the specific partnership.

Answer

CEO Sam Pollock confirmed that AI factory opportunities vary. While some are similar to the Bloom Energy arrangement, facilitating capital needs for data centers and hyperscalers, he expects building out AI factories to represent the majority of Brookfield Infrastructure's AI-related activities and involve different types of arrangements.

Frederic Bastien from Raymond James questioned if the investment pipeline is as robust as the sales pipeline and sought clarification on the pro-forma liquidity position after accounting for recent deals.

Answer

CEO Sam Pollock acknowledged the investment pipeline is still full but perhaps not to the same degree as in previous quarters, though multiple deals are still being pursued. CFO David Krant clarified that the reported $5.7 billion in liquidity as of June 30 did not yet include the $1.3 billion in new investment commitments or the ~$1.1 billion in secured sale proceeds, resulting in a relatively similar pro-forma liquidity position.

Frederic Bastien asked if Brookfield was opportunistically acquiring toehold positions in public stocks during recent market volatility and questioned the current composition of the M&A pipeline across different business segments.

Answer

CEO Sam Pollock declined to comment on specific market activities but noted no 'significant' investments have been made recently. He described the M&A pipeline as the strongest in years, with a high probability of success as competitors pause. The pipeline is deep, relatively balanced across sectors, and slightly skewed towards U.S. opportunities and the digitalization theme, but also includes transport and other large infrastructure assets.

Frederic Bastien of Raymond James noted the absence of the Utilities platform from recent recycling efforts and asked whether the new U.S. administration is viewed as a positive for the business.

Answer

CEO Sam Pollock explained that the lack of utility sales is a matter of timing, as larger assets have significant growth ahead, but pointed to the recent sale of Los Ramones and a planned monetization in Brazil as examples of ongoing recycling. Regarding the U.S. administration, he stated that any reduction in regulatory burden that encourages growth is positive for an infrastructure owner, without taking a political stance.

Frederic Bastien asked about the potential for additional engineering growth in the U.S., Australia, and Europe, and an update on the performance of the recent Asterisk and Triovest acquisitions.

Answer

Jay Hennick (Global Chairman and CEO) highlighted significant growth opportunities in engineering across the U.S., Australia, and especially Europe, emphasizing Colliers' differentiated partnership philosophy and decentralized model. Jay Hennick (Global Chairman and CEO) stated it's too early to fully assess Triovest and Asterisk, but Triovest is being integrated into Canadian property management with potential U.S. expansion, and Asterisk is overperforming with increased opportunities in infrastructure financing.

Frederic Bastien asked about the potential for additional engineering growth in the U.S., Australia, and Europe, and an update on the performance of the recent Asterisk and Triovest acquisitions.

Answer

Jay Hennick (Global Chairman and CEO) highlighted significant growth opportunities in engineering across the U.S., Australia, and especially Europe, emphasizing Colliers' differentiated partnership philosophy and decentralized model. Jay Hennick (Global Chairman and CEO) stated it's too early to fully assess Triovest and Asterisk, but Triovest is being integrated into Canadian property management with potential U.S. expansion, and Asterisk is overperforming with increased opportunities in infrastructure financing.

Frederic Bastien of Raymond James Financial, Inc. asked if global trade uncertainty had adversely impacted the engineering business. He also noted a trend of Q2 being the weakest quarter for Investment Management EBITDA and asked for the reason behind the sequential decline.

Answer

CFO Christian Mayer stated that there have been no significant impacts from tariffs or government policy on the engineering business or its backlog. Regarding the sequential decline in Investment Management EBITDA, he explained it was due to a combination of higher co-investment income in Q1, the timing of certain expenses like investor conferences in Q2, and the presence of highly accretive catch-up fees in Q1 that were not present in Q2.

Frederic Bastien asked if global trade uncertainty had adversely impacted the engineering business and sought an explanation for the sequential decline in Investment Management EBITDA, noting it appears to be a seasonal trend.

Answer

CFO Christian Mayer confirmed there has been no significant impact on the engineering business or its backlog from tariffs or trade policy. He explained the Q2 sequential EBITDA decline in Investment Management was driven by higher co-investment income in Q1, the timing of certain expenses like investor conferences in Q2, and the presence of highly accretive catch-up fees in Q1 which did not recur in Q2.

Frederic Bastien asked if global trade uncertainty had negatively impacted the engineering business. He also inquired about the reasons for the sequential decline in Investment Management EBITDA, noting that Q2 appears to be a seasonally weak quarter.

Answer

CFO Christian Mayer confirmed that they have not seen any significant impact from tariffs or government policy on the engineering business or its backlog. He attributed the sequential EBITDA decline in Investment Management to several factors: the timing of expenses like investor conferences, higher co-investment income in Q1, and the presence of highly accretive catch-up fees in Q1 which were absent in Q2.

Frederic Bastien asked if global trade uncertainty had negatively impacted the engineering business. He also questioned the reasons for the sequential decline in investment management EBITDA and whether Q2 is typically a seasonally weak quarter for that segment.

Answer

CFO Christian Mayer stated that they have not seen any significant impact from tariffs or policy on the engineering business or its backlog. He explained the sequential EBITDA decline in investment management was due to a combination of higher co-investment income in Q1, the timing of expenses like investor conferences, and the presence of highly accretive catch-up fees in Q1 that did not recur in Q2.

Frederic Bastien asked if global trade uncertainty had negatively impacted the engineering business. He also inquired about the reasons for the sequential decline in Investment Management EBITDA and the recurring weakness in Q2.

Answer

CFO Christian Mayer confirmed that there have been no significant impacts from trade policy or tariffs on the engineering business or its backlog. He explained the sequential EBITDA decline in Investment Management was due to higher co-investment income and highly accretive catch-up fees in Q1 that did not recur in Q2, as well as some timing of expenses.

Frederic Bastien asked if global trade uncertainty has impacted the engineering business and questioned the reasons for the sequential decline in Investment Management EBITDA, noting a potential seasonal trend in Q2.

Answer

CFO Christian Mayer confirmed there has been no significant impact from tariffs or policy on the engineering business or its backlog. He attributed the sequential decline in IM EBITDA to higher co-investment income in Q1, the presence of catch-up fees in Q1 but not Q2, and the timing of certain expenses like investor conferences.

Frederic Bastien asked for a breakdown of the key disciplines where the U.S. engineering business excels and inquired about its current scale and areas for regional growth through M&A or organic expansion.

Answer

CEO Jay Hennick noted the U.S. business is highly diversified. CFO Christian Mayer elaborated that core strengths include infrastructure and transportation, serving departments of transportation in several large states, as well as commercial and programmatic clients. He stated the U.S. engineering platform now has approximately $600 million in revenue and 2,500 employees.

Frederic Bastien asked about the cadence of the expected margin expansion in the Engineering business for 2025, questioning if it would be linear or back-end loaded. He also inquired about the organic growth expectations for the segment and how they compare to peers.

Answer

CFO Christian Mayer explained that there is seasonality in the Engineering business, with margin expansion effects becoming more apparent in the peak quarters of Q2 and Q3. He confirmed that Colliers is aiming for organic growth in the 5% to 8% range, similar to its peers, driven by long-term tailwinds in infrastructure spending across its key markets.

Frederic Bastien asked if Colliers is considering another corporate split to unlock value, similar to the 2015 FirstService spin-off, as its engineering and investment management businesses gain scale.

Answer

Chairman and CEO Jay Hennick acknowledged that the company considers all options to create shareholder value but stated there is no rush to pursue a split. He indicated that they would wait for the Investment Management business to build stronger momentum before seriously considering such a strategic move, while noting his belief that the company's stock is undervalued.

Frederic Bastien from Raymond James asked for more specifics on the drivers of the U.S. organic growth reacceleration, inquired about specific disciplines targeted for M&A, and questioned the reason for the lower guided tax rate.

Answer

Executives Gordon Johnston and Vito Culmone noted the U.S. growth was broad-based, with double-digit organic growth in Water, Buildings, E&R, and community development in Q4. On M&A, Johnston stated they are not looking to enter new business lines but see significant growth potential in their existing five units. Culmone clarified the guided tax rate of 22.5% is not a material change from prior periods.