Colliers International Group Inc. (CIGI) on Q3 2023 Results - Earnings Call Transcript
Operator: Welcome to the Colliers International Third Quarter Investor Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussions scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements. Additionally, information concerning that factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's annual information form as filed with the Canadian Securities Administrators and in the company's annual report on Form 40-F as filed with the US Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is November 2, 2023. And at this time, for opening remarks and instructions, I would like to turn the call over to Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.
Jay Hennick: Thank you, operator. Good morning and welcome to our third quarter conference call. As the operator mentioned, I'm Jay Hennick and joining me today is Chris McLernon, Chief Executive Officer of our Real Estate Services business; and Christian Mayer, our Chief Financial Officer. This call is being webcast and can be accessed in our Investor Relations section of our website where you can find the presentation slide deck. During the third quarter, Colliers achieved significant growth in our high-value recurring service lines with a 12% increase in outsourcing and advisory and a robust 23% increase in investment management. Our proven business model marked by a diverse array of high-value recurring services has continued to demonstrate our resilience. Today, about 70% of our earnings come from recurring revenues which bolsters our ability to navigate through various market fluctuations, including the current disruptions affecting our transactional business. Since the release of our second quarter report back in August, we've seen further industry-wide declines in transaction volumes due to ongoing factors such as rising interest rates, stricter credit conditions and continued uncertainty around return to work dynamics. As a result, we've adjusted our outlook for the traditionally strongest fourth quarter to be more conservative in our stance, as Christian will outline in just a few minutes. As I've said in the past, capital markets and leasing our essential services for all real estate investors, owners and occupiers or tenants. They may be impacted from time to time as they are now but they will rebound once things stabilize which could be as early as the second half of 2024. Several years ago, Colliers embarked on a strategic journey to rebalance and reposition our company by integrating more recurring revenue streams. We introduced 2 important new growth engines, engineering and design and investment management, both of which have seen substantial growth and success since inception and we expect that success to continue well into the future. Our nearly 30-year track record of performance demonstrates our success and dedication to continuing to create substantial shareholder value and we'll do that by continuing to grow our businesses 1 step at a time, expanding into new high-value recurring services and continually seeking out strategic growth opportunities especially in times like these. Now, let me turn things over to Chris McLernon to discuss some of the highlights. Following that, Christian will provide us with his customary financial report and then we'll open things up to questions. Chris?
Chris McLernon: Thank you, Jay and good morning. Our mission at Colliers is to maximize the potential of property and real assets to accelerate the success of our clients and our people while creating value for our shareholders. Today, Colliers remains resilient, benefiting from our years of strengthening our core business while adding fast-growing recurring service lines. In Outsourcing & Advisory, we achieved an impressive 12% year-over-year growth, 50% of which came internally through new contract wins. We expect this growth to continue in Engineering, Design, Project Management and Property Management. As mentioned, we have seen further declines in capital markets in Q3 due to interest rate volatility, limited access to debt and the continued price gap between buyers and sellers of real estate assets. We are confident that capital markets will rebound, perhaps in the second half of 2024 and we are poised to take advantage once market conditions stabilize. Over the past few years, we've accelerated our investments in capital markets platform to grow our business, fill gaps and take market share. For example, in the U.S., we have built a significant debt advisory business at Colliers Mortgage. Today, our platform spans the entire U.S. with more than 150 experienced debt professionals to assist our clients originate and place real estate debt at just the right time. Once again, our expertise and ability to deliver exceptional results for property occupiers, owners and investors as recognized by Euromoney. Colliers was named Global Agency of the Year across the Americas, EMEA and APAC which is a testament to our strong and growing position in the industry. Our professionals around the world continue to be enterprising, especially in the current market environment. Our latest global employee engagement survey saw our strongest scores ever, nicely exceeding external benchmarks. Our strong culture was also recently recognized by our inclusion in Forbes World's Best Employers 2023 list. Now, let me pass this over to Christian.
Christian Mayer: Thank you, Chris and good morning, everyone. I will provide some additional commentary on our consolidated results, our financial outlook for the full year and our balance sheet. Please note that all references to revenue growth made on this call are expressed in local currency and that the non-GAAP measures discussed here today are as defined in the materials accompanying this call. In the third quarter, revenues were $1.1 billion, down 6% relative to the comparative prior year quarter. Our Capital Markets and Leasing service lines reported revenue declines of 42% and 9%, respectively, continuing the trends that started during the third quarter of last year. Having said that, our recurring service lines, Investment Management and Outsourcing and Advisory, each reported robust growth from a combination of acquisitions and strong internal growth. On an overall basis, internal revenues declined 10%. Consolidated adjusted EBITDA for the second quarter was $145 million, flat relative to the prior year with margins of 13.7% versus 13.1% in the prior year quarter. The margin uptick was driven by growth in our higher-margin investment management operations with margin compression in our transaction business partially offset by ongoing aggressive cost control actions across the company. We achieved cost savings of $25 million during the third quarter and $53 million year-to-date. We expect an additional roughly $30 million of cost savings in the fourth quarter. We are preparing to extend our cost control efforts into 2024 to match the duration of the expected transactional revenue downturn. We have revised our financial outlook for 2023 to reflect the declines in transaction velocity that occurred in the third quarter and the more challenging current market environment. We expect capital markets and leasing transaction volumes to be down 5% to 15% in the seasonally strongest fourth quarter relative to the prior year period with the impact partly offset by ongoing cost control efforts. In our recurring service lines, we are expecting to see continued growth, both internally as well as from recent smaller tuck-in acquisitions. In Investment Management, fundraising year-to-date has been softer than expected and that trend continued in the third quarter. For the full year, we now expect fundraising to be approximately $3 billion compared to $8 billion raised in 2022. We do, however, continue to see strong interest in our alternative investing strategies which should translate into accelerated fundraising in 2024. Implied in our full year outlook is the expectation that fourth quarter EBITDA will be roughly flat versus the prior year quarter. Although we had previously expected EBITDA to increase in the fourth quarter, a flat result will demonstrate the resilience of our recurring revenue streams and the highly variable nature of the cost structure in our transactional operations given the current market conditions. Our adjusted earnings per share is expected to continue being impacted by higher interest expense as well as the larger proportion of earnings coming from non-wholly owned operations. As such, we now expect full year adjusted earnings per share to be down from last year to the range of $5.10 to $5.50. In terms of our balance sheet, our financial leverage ratio defined as net debt to pro forma adjusted EBITDA was 2.4x at September 30, consistent with the level reported at June 30 and driven by capital deployed on acquisitions, over the past 2 years. These acquisitions are predominantly in recurring service lines and are performing well. We now expect our leverage to decline to 2x to 2.2x by year-end. That concludes my prepared remarks. I would now like to open the call for questions. Operator, can you please open the line?
Operator: [Operator Instructions] Our first question comes from the line of Michael Doumet of Scotiabank.
Michael Doumet: The first question I had was really just as it relates to the slowing leasing activity. Just wondering if you can break that down in terms of end markets and how that's evolved in the last 12 months. Just wondering if you see incremental weakness in industrial and if so, what that means for the cadence into 2024.
Chris McLernon: Michael, it's Chris here. Just some commentary. There are some bright spots throughout the global platform. If you look at leasing in our Asia Pacific region, we were up 9.5% year-over-year. And that relates across the board. We had some strong leasing in Australia, New Zealand, Singapore, Hong Kong and India and that would predominantly be in office and industrial. Another bright spot would have been Canada. We had a 52% increase in leasing. So there is some leasing taking place on the negative side. You'd see we've always been quite strong in industrial leasing around the world. And it's the lack of supply, you're looking at 3% to 4% vacancy. So it's hard to get some transactions there. So, I think we're seeing looking forward some continued growth in leasing in Asia Pacific and the recovery in the Americas and EMEA may be a little bit slower.
Michael Doumet: That's great. Just going back to the Q4 expectation for flattish EBITDA, Christian, just wondering if you can maybe break that down a little bit again. So you're expecting capital markets leasing to be down between 5% and 15%. Presumably, O&A is rising there, just not sure on the quantum, if you can talk about that? And then lastly on investment management for Q4.
Christian Mayer: Yes. Thanks, Michael. So in terms of O&A, we do expect organic growth in Q4. That's going to continue and we've been running mid- to high single-digit organic growth there this year and that's going to continue. And in terms of investment management, we have a nice cadence management fee revenue that is in the EBITDA in Q3. That's going to continue and we do expect a little bit of fundraising in the fourth quarter as well that will be additive to EBITDA in the Investment Management segment.
Operator: Our next question comes from the line of Stephen Sheldon at William Blair.
Stephen Sheldon: First thing here just on if you think about 2024 adjusted EBITDA, can you help us think about how much benefit you might have in terms of incremental flow-through from cost actions taken so far? And I guess the planned reduction that you talked about for 4Q which I think was $30 million, if I heard that correctly. How much of an incremental boost could that be as we think about bridging 2024 adjusted EBITDA back to 2023?
Christian Mayer: Yes, Stephen, thanks for that question. We certainly expect to be able to continue and sustain the level of cost actions we've taken to date. So that was our -- that's kind of our operating assumption into 2024. It may be difficult to increase the level of cost action but that's something we will consider as we go through our budgeting process here over the course of the next month and have detailed reviews with our operators, I believe, locally and regionally.
Stephen Sheldon: Okay. I guess just as we think about the $52 million year-to-date cost-cutting number, is that kind of are you reaching that full run rate in 2023? Or I assume there'd be some flow-through actions into -- I guess [indiscernible] based into 2023 and how much of this flow-through in 2024?
Christian Mayer: Exactly. So we have reached our run rate at this point and $25 million to $30 million a quarter is the run rate. And those actions took effect in Q2 of this year. So they are now fully in effect and they will continue until we see a meaningful recovery in the transaction business.
Stephen Sheldon: Okay. And then just on the IM side, I just kind of want to ask on how we should think about modeling AUM in the fourth quarter? I think you kind of mentioned maybe that there would be a step-up given the fundraising activity. But just -- and then -- so kind of how should we think about 4Q? what are you seeing that gives you confidence about fundraising equity maybe picking back up next year?
Jay Hennick: Well, let me talk -- let me let Christian talk about the fourth quarter and how we're seeing the fourth quarter. But fundraising across the board with absolutely every publicly traded firm that reports their fundraising has been tough regardless of asset class which has been interesting, of course, traditional real estate has been hit the most but alternate asset classes and infrastructure like we have has done much better but still soft. What's been interesting is there is a lot of interest in our funds and I believe other funds that are in the market that are similar to our types of funds but there's been just been a delay that's impacted us. So if we look at our pipelines relative to last year, they're up materially, whether we can convert them towards the end of the year or most probably mostly into the first part of 2024 is still a question to be answered. But the results of our investment management professionals have been stellar relative to others in their industry. They're in the market actively with several different strategies. So that puts us in the game. And we're cautiously optimistic that 2024 will be a very strong year for fundraising. My guess is it will do better than we did last year in overall fundraising but we still have to wait and see.
Christian Mayer: And Stephen, on turning to the fourth quarter, we do expect some fundraising. It will be modest. And as I outlined in my comments, fundraising this year is significantly less than it was in 2022. And so I would expect our AUM will be roughly flat to perhaps up a little bit in the fourth quarter. Positive benefit from fundraising and also some ongoing activity in terms of mark-to-market which we've been experiencing now over the last year, modest mark-to-market on our traditional real estate assets primarily. So hopefully that's helpful.
Operator: Our next question comes from the line of Stephen MacLeod at BMO Capital.
Stephen MacLeod: Great. I appreciate the color. Just a couple of follow-up questions just relating to your commentary around the potential transaction activity picking up in the back half of next year. I'm just curious sort of how you could characterize your visibility into that? I mean, is that something that you're hearing from your clients because they have demand pent up? Or is it more just a reflection of the macro backdrop and the rates backdrop? Just curious if you give a little bit of color there.
Jay Hennick: It's a great question, Steve, because just 90 days ago, we gave you our best guess of -- and probably not -- it's not best guess. It's best information. Across the world on how we would be doing had market conditions remained as they were 90 days ago. And since then, we've seen substantial increases in interest rates. Everybody in the world is reading about lack of availability of credit and tougher credit conditions across the board. There is a lot of money in the private marketplace and being raised in private debt collection right now not yet implemented. And all of those things are having an impact on transactions. And so to me, this is just common to anybody that follows the industry when you have substantially rising interest rates, when it's very difficult to get debt, when you're looking at your existing portfolio and you're saying I've got existing debt coming due in 12 months or 18 months and the interest rates are going to go up materially, my covenants are going to be offside, everybody in the industry is pausing, everybody. Now there's transactions that are happening on some trophy assets here or there. Banks are supporting their better customers but they're supporting them at a substantially higher interest rates at low loan-to-value ratios. So when we think back to 90 days ago and see the drastic change, you've got to absolutely reflect on where is this going to go for the fourth quarter which we're taking a much more conservative stance, as I said but the reality is, my view when you're asking me for my view, my view is unless there's stability in the marketplace around interest rates; one, unless we see lenders in the marketplace, providing debt at the same types of ratios as they did historically. And finally, sellers being more realistic about their price expectations, this is going to delay. And that's why we say it's likely to be beyond the first half. Earlier in the year, we were expecting the fourth quarter to be quite strong actually, because we were expecting there to be some stability in interest rates. I don't think anybody, anywhere in the industry anticipated the strict lending conditions and how they've evolved during the course of the year. So all of this to say, we remain unclear as to when that's going to change. But when it does, it's going to be a massive change and it's going to happen, I think, relatively, it's going to be slow at first but then it will take on a velocity because there's lots of dry powder in the marketplace, banks have to lend in order to make money and there is a lot of people in the real estate sector. It's the biggest sector out there. So as Chris McLernon said earlier, we have for the past couple of years in our core business alone, forget all the work we've done around recurring revenue and how that's transformed Colliers into a different type of diversifying services business and asset management business. We've invested heavily in our core business and we're ready, willing and able to help clients not only buy and sell but most importantly finance -- not most importantly but as importantly, finance those transactions. We just need a normalization to happen. So it's -- as operators in this business, it's our job to keep our heads focused on what's important and that is to have strong financial wherewithal, to capitalize on transactions, to continue to invest in your platform to call out costs in times like these that you can call out without having an impact necessarily on the strength of the business going forward. So we're doing all of those things and we believe that it's going to translate into significant shareholder value at some point in the future. I just don't know when it is, the end of -- the middle of next year towards the end of next year, I don't know.
Stephen MacLeod: That's great color, Jay. And then I just wanted to follow up because I think it's important. You mentioned, obviously, the recurring revenue business continues to hold in quite well which is significant piece of your evolution. Can you just talk a little bit about if you have any incremental color around the areas of relative strength and weakness within the O&A business? And how you see those potentially evolving going forward as well?
Jay Hennick: The beauty of our O&A business is that it is very stable. The -- we've been very -- and Chris might want to talk to this a little bit, property management for us has grown materially around the world. And it's been, frankly, a surprise, I think, to us in some respects. And so that's been a very positive sign. Project management continues to be very strong. And our project management is representing owners in major construction projects. And that piece of our business continues to be very strong. They are long-dated retainers, sometimes 5 and 7 years between a project beginning from estimate to completion. So we're seeing those businesses grow considerably. Chris, is there any other areas that have been a surprise to you as you look across the board?
Chris McLernon: So I think what's great is that in these regions, the Americas, EMEA and Asia Pacific, O&A is up year-over-year growth. So it's balanced across the world. Some of the bright spots, Jay mentioned, property management. We've grown in the U.S. and this is new clients or expanding clients' portfolios. And it's time to see the growth in L.A., Chicago, New York, Atlanta, some of those bigger centers in the U.S. but also, you're looking at the U.K., Netherlands, Finland, Poland, expanding property management. So it's quite exciting there. The second pillar is our project management. We've got a fantastic business in India that is going all guns. Obviously, there's strong GDP growth in India and we're taking advantage of that. We invested at the right time. So we're seeing some real significant growth there. The acquisitions in Australia, New Zealand and engineering and project management are now fully integrated into the Colliers business and we're seeing synergies on the revenue side and the cost side. So that's quite exciting in the O&A space on a global basis.
Operator: Our next question comes from the line of Frederic Bastien of Raymond James.
Frederic Bastien: Question is for Jay or Chris. Obviously, it's a tough slug on the capital market side. But if you take a step back and do a bit of a health check on your brokerage business, what are the things that excite you most? You did cite great employee engagement scores earlier but are there other things that you'd like to highlight?
Jay Hennick: I'll jump in. Chris, you can jump in if you want. I mean one of the things that Chris mentioned in his prepared remarks, is the entire Colliers Mortgage business and over the past several years, we have created a national platform which Colliers never had before where we're ready, willing and able and busy providing debt advisory advice and restructuring advice to our clients everywhere. This is particularly needed in times like this. It doesn't necessarily translate into transactions immediately but clients -- this team of professionals and I think it's up to [indiscernible]. They are busier than ever working with clients on existing portfolios and loans that are coming due and they need help in not only re-envisioning their portfolios but finding new financing sources. So -- and we do this in other parts of the world but I think Colliers Mortgage has really set the standard and that we're excited about what that could mean for the U.S. business or the North American business going forward.
Chris McLernon: Thanks, Jay. I think if I look at the overall brokerage business, one of the key highlights to our success is our strong culture that people really enjoy working at Colliers and we have a lot of long tenure within the business. We've also worked a lot on retention. So we have a high retention rate of our key producers throughout the world. And we're positioned quite strongly for when that recovery comes. One of the exciting things in the U.S., we continue our recruiting and we're ahead of plan in 2023 and that's exceeding our recruiting targets in the year before. So lots of excitement in the brokerage business about strengthening our team, keeping our team in place and getting ready for that recovery.
Frederic Bastien: That's helpful. Next one is for Christian. I think you partly answered this saying the fundraising, you expected roughly $3 billion in fundraising for the full year. Is that all back-end loaded? Or did some of this already get kind of recorded in year-to-date results?
Christian Mayer: Yes, Frederic, we've got about $2 billion [ph] year-to-date fundraising already completed. So we're expecting $800 million to $900 million in the fourth quarter. So some activity but like I said, modest and we have pretty high visibility on that at this point. And we're obviously gearing up for a return to more normal fundraising activity in 2024 with the products we have in the market.
Frederic Bastien: Come from a mix of alternative assets and infrastructure? The fundraise.
Christian Mayer: Exactly.
Frederic Bastien: Yes. And then obviously, you might explain the modest sequential increase we saw in AUM this quarter that I think you had an increase of what $8.8 billion.
Christian Mayer: AUM is pretty flat this quarter.
Operator: Our next question comes from the line of Jimmy Shan at RBC Capital Markets.
Jimmy Shan: So just a follow-up on the capital markets business. Yes, timing of the recovery is hard to predict but how should we think about the level at which the revenue when it does recover like the level at which it normalizes at? Because on the one hand, it sounds like there's a lot of operating leverage in the business. But on the other hand, asset values are down, so presumably lower fees on a proportionate basis. So if 2022 was $1 billion of revenue, do you think you get back to that level at some point?
Christian Mayer: So I'll start on that one, Jay and maybe Chris can add to it. We have been adding productive capacity to our brokerage business over the last few years. So we have a strong team of professionals on the ground that is positioned to participate in the recovery. And we talked about when that happens, not exactly sure when that happened but it will happen. So we're well positioned on that front. Now you make a good point about asset values and it's really impacting office only which is about 1/3 of our sales activity. So that will have a modest impact perhaps on our commission levels. That being said, as assets are more difficult to sell, the commission rates tend to increase. So that's a bit of an offset to that. So I think the recovery will be strong. Our position in the market has gotten stronger. Our number of producers and our productivity has increased. So I think we're well positioned for the recovery.
Chris McLernon: And just to add some color, 3 years ago, we, as a senior management team, identified capital markets is an area of significant growth and we looked at where our gaps were so we've been doing recruiting of senior professionals and also doing acquisitions. So we're poised to really get back to where we were in terms of revenues and exceed that as we take market share going forward.
Jay Hennick: The last thing I would add just for additional color, my take on asset values is maybe different than most. Industrial continues to be very strong. And Chris already mentioned that there is a shortage of industrial space around the world. So not only are our rates going up but the valuations of those properties are going up. Multifamily continues to be good. Retail has rebounded very nicely. So the only category that I think there is price adjustment coming is in office and not all office. It's only probably Tier 2 B Plus office, suburban office where valuations will fall. And the beauty of our business is we're a service business. We don't own those assets. We just trade those assets and that's one of the great things about having a high cash flow generating low CapEx type business. So -- and as Christian said, the tougher the asset to sell, the higher the fee we typically get. So I don't think valuations of real estate will have any impact on us. And at the end of the day, we'll see what happens. And just to circle again, what Chris said, our numbers of real estate professionals are up. The number of debt professionals we have is up materially over the past 3 years. So that creates additional revenue streams. So all of that, together with an overall relative stabilization in real estate values will and should continue to translate into a very solid rebound for Colliers and to the point where we'll do better in the future than we have in the past in our view.
Jimmy Shan: I appreciate the color. And then my second question is on the investment management side. Can you give us a sense of how big that pipeline is in terms of the funds that you have in the market today?
Jay Hennick: You never know. You never know if you can -- I'll show you the pipeline, you tell me who's going to subscribe, who isn't going to subscribe, when, it's always we waited [ph]. We have a very detailed process around assessing our potential for fundraising and -- but our overall pipeline in every category of certainty of close is up materially. So we think it's up across the board and should translate into substantial additional fundraising as we go forward.
Operator: Our next question comes from the line of Andrew Rosivach at Wolfe Research.
Andrew Rosivach: I was going to go again with one more asset management question. You guys have kind of hit it a lot in different pieces. If I put some numbers around it, your AUM September 30 was down 1% sequentially, up 14% year-over-year. If we were kind of decompose that between redemptions in marks or maybe even funds that you purchased, is there any way we could kind of break down what's driving that?
Christian Mayer: Yes. Andrew, that's a great question. I don't have year-over-year numbers in front of me but I do have year-to-date numbers which I think are -- illustrate the point. So as I mentioned, we've raised just around $2 billion of new capital this year. We've had modest redemptions that are a small fraction of that, like I'm talking about $500 million or less. And our mark-to-market activity has been around 2% which is about $2 billion as well in the portfolio. So those are really the drivers of it. And as I mentioned, the mark-to-market is on the traditional assets primarily. So -- and that has been happening last year and may continue modestly here in the fourth quarter.
Andrew Rosivach: So modestly means you can continue to see increases in the valuation despite kind of the challenges that we're seeing.
Christian Mayer: I mean, look, we can't predict the future of the valuations but it's certainly possible that we will have further mark-to-market negative adjustments in the coming 1 or 2 quarters as interest rate volatility continues. I should point out, though, that most of our portfolio is in closed-end funds which does not get impacted by mark-to-market activity in terms of the management fee revenue. So it's only 1/3 of our portfolio that has mark-to-market activity and then even in that part only a small amount of traditional real estate assets. So it's not a big driver of our fee revenue in terms of considering mark-to-market activity.
Jay Hennick: Most of what Christian is talking about is in infrastructure and alternative asset classes which the marks have been modest extremely modest, almost non-existent because they're wonderful assets and they're valued over a long period of time. So we don't really see much there. And we haven't even felt it over the past 12 months.
Christian Mayer: Yes. The mark-to-market is not something that's driving our management fee revenue. The driver is fundraising. And we've talked about that quite a bit.
Andrew Rosivach: And one other thing just so we get this right, your $3 billion of fundraising this year, would that all be fee paying?
Christian Mayer: Yes, because that's the equity component of the -- yes. That's right.
Operator: And we currently have one question in the queue. [Operator Instructions] And next question comes from the line of Maxim Sytchev of National Bank Financial.
Maxim Sytchev: Jay, or maybe Christian, wondering if maybe you can comment around the market share dynamics in capital markets and leasing because when we look at how you guys performed during the financial crises, I mean, it was much better versus peers. And even right now, kind of the levels of declines are less. So do you mind maybe if you have some data points that you can point to on that front, that would be helpful.
Chris McLernon: Yes. I think the data we have from RCA has the market down 51% and we're down 42%. So I think there is some market share gain. That's the data point that I have handy.
Jay Hennick: Yes. I think if you look across the board at virtually all of the peers that have reported so far, we're either at or better than every single one of those peers in virtually every category. So I would say in each case, we're picking up market share all the way along. And a lot of that has to do with what Chris said. Our culture is very strong. Our retention rates are exceptionally strong. We've been recruiting nicely over the past number of years. We've built significant platforms within our core services business in addition to engineering and design and investment management, we continue one step at a time to invest in our core platform which is getting stronger. It's global. So there's global growth opportunities. So we're feeling very good about our business and its future and we believe that we're picking up market share virtually everywhere.
Maxim Sytchev: Excellent. And just one follow-up question. I guess, Jay, you spent time with sort capital allocators and everybody is trying to figure out what is kind of the trigger for certain things to start normalizing because when you're expectation of sort of a rebound during Q2 commentary. I think the long-term rate was around kind of 3.5%. Do you think that's kind of the level where the 10-year in the U.S. has to go to in order to sort of see catalysts for activity to get going? Or like what is your sense from that perspective. And again, I appreciate it's a super fluid dynamic obviously.
Jay Hennick: Yes, frankly, I don't care. I really don't care like it can be pick your rate. Anybody -- everybody's got an opinion. We just need stability. In our business, we just need stability and we need availability of debt and the market will look after itself, the buyers and sellers will come together and they will make transactions because they either have to or they want to or they've got dry powder. So the problem that we've all had in this industry and by the way, it's leaked out into the entire marketplace. It's -- the availability of capital has impacted the ability to make acquisitions. It's impacted the earnings per share of every company out there that borrows money. So this is a market that is impacting everybody. But I think in real estate, it's such a massive market. And as soon as there's stability, you'll see activity. And that's all we really focus on.
Operator: And there are no further questions in the queue at this time. So I'll hand the floor back to Mr. Hennick for the closing comments.
Jay Hennick: Thanks very much, operator. Thanks, everyone, for joining us on this conference call. Let's see how we do in the fourth quarter and we've given you our best information at this point. Hopefully, we'll be able to do a little bit better than that but we'll see how things transpire. So looking forward to speaking at the next conference call. Thanks for joining us today.
Operator: Thank you. Ladies and gentlemen, this concludes the conference call. Thank you for your participation and have a nice day.
