Colliers International Group Inc

TSX:CIGI

Earnings Call Transcript 2022-Q3

[Operator]

Good day, and thank you for standing by. Welcome to the Colliers International Group Third Quarter 2022 Investor Conference Call. Today's call is being recorded.

Legal counsel requires us to advise the discussion scheduled to take place today may contain forward-looking statements that involve known and unknown and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward-looking statements.

Additional information concerning 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 the company's annual report on Form 40-F as filed with the U.S. Securities and Exchange Commission.

As a reminder, today's call is being recorded. Today is November 1, 2022. And at this time, for opening remarks and introductions, I would now like to turn the conference over to the Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.

[Jay Hennick, executive]

Thank you, operator. Good morning, and thanks for joining us for the third quarter conference call. As the operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer of the company. And with me is Christian Mayer, Chief Financial Officer. As always, this call is being webcast and is available in the Investor Relations section of our website.

A presentation deck is also available there to accompany today's call. Earlier today, Colliers reported very solid third quarter results with Outsourcing & Advisory and Investment Management and Leasing, all up strongly more than offsetting any softness in Capital Markets, which obviously has been impacted by higher interest rates, availability of capital and geopolitical uncertainties.

As you can see, growing recurring revenues and earnings now at 55% of our pro forma EBITDA, together with broader diversification across service lines, across geography and across client types is demonstrating that the Colliers diversified services model is more balanced and more resilient than ever.

For the quarter, revenues were $1.1 billion, up 12% in local currency; adjusted EBITDA was $145 million, up 21%; adjusted EPS was $1.42, up 11%, all versus the prior period. For 9 months, revenues were $3.2 billion, up 21%; adjusted EBITDA $428 million year-to-date, up 24%; and adjusted EPS was $4.69, up 20% versus the prior year.

Here are some of the highlights. With the recent acquisitions of Rockwood and Versus, our investment management business now represents about 30% of our pro forma EBITDA and total assets under management has surpassed the $92 billion mark firmly establishing Colliers as one of the top global players in the rapidly growing alternative private capital industry.

We have strategically built our IM business over the past 6 years, and we have done it the right way. Today, 85% of our assets under management are in perpetual or long-dated strategies with 70% of that capital invested in highly defensive and sought-after asset classes like alternatives and infrastructure.

In addition, each of our investment platforms has a long history of delivering top-tier investment returns for investors and best-in-class leadership teams, both significant and direct equity in their own operations, while benefiting from the collective resources of the whole.

The Colliers perpetual partnership philosophy has been a real differentiator for us, creating a permanent capital source for our partners and perfect alignment for our investors and for our shareholders.

We are very excited about the potential of this rapidly growing segment of our business. We also continue to aggressively grow our core service business. During the quarter, we acquired PEAKURBAN, adding significant engineering capabilities and a new growth engine to our market-leading service operations in Australia and Asia Pacific.

We bolstered our presence in the Nordics with an agreement to acquire Pangea Property Partners, a leading real estate advisory firm in Norway and Sweden. Once the transaction is completed, Colliers will be the #1 player in the Nordic region, together with our existing operations in Denmark and Finland, and the group will provide further strength and opportunity to the rest of our business in Europe and around the world.

Finally, just after the quarter end, we added Arcadia Property Management to our rapidly growing and highly successful U.S. services business. This acquisition adds further scale and capability to our property management operations, principally in the U.S. Southwest.

As you will hear from Christian in a few minutes, despite our very solid results for the quarter, we're adjusting our outlook slightly for the balance of the year. Let me conclude by reinforcing a few things. Colliers as a highly respected global brand and operating platform with a broadly diversified business model and multiple engines for growth.

We have virtually unlimited growth opportunities and a clear history of being able to capitalize, especially in times of dislocation as we are seeing now. Currently, 55% of our earnings come from recurring revenue streams, including our Investment Management segment, which now makes up about 30% of our business, as I mentioned.

Colliers is more balanced and more resilient than ever, and you can easily see this from the results we delivered. The Colliers strategy and way of business has stood the test of time. Our proven track record has delivered about 20% annual growth in share value over 27 years. That is a track record that is really second to none.

As the chief architect of our company since its founding, I continue to believe that Colliers is not being valued properly and has not been valued properly over the past number of years and that is regardless of current market conditions. I say this because we built an incredible company with a unique operating culture, diversified business mix, significant recurring revenues and a demonstrated ability to create significant shareholder value year-over-year over a long period of time.

It is truly difficult to find investment opportunities as well managed and is growth oriented as we are at Colliers. But perhaps most importantly, our leadership team owns the largest stake in our company by a country mile. We have more skin in this game than absolutely anyone.

Now let me turn things over to Christian for his comments. Christian?

[Christian Mayer, executive]

Thank you, Jay. My comments follow the flow of the slides posted on the Investor Relations section of colliers.com accompanying this call.

Please note that the non-GAAP measures referenced on this call are as defined in this morning's press release. All references to revenue growth are expressed in local currency.

Our third quarter revenues were $1.1 billion, up 12% relative to the prior year period, with revenues up strongly in our Outsourcing & Advisory and Investment Management service lines. Our Leasing operations also generated solid growth, benefiting from increased activity in office and industrial asset classes.

Capital Markets activity softened in the quarter, reflecting the impact of higher interest rates, reduced availability of capital and geopolitical uncertainty. Internal growth was 4%, with the balance from acquisitions completed during the past 12 months.

Adjusted EBITDA for Q3 was $145 million, up 17% from 1 year ago, with margins at 13.1%, up 100 basis points relative to the prior year quarter. Third quarter Americas revenues were $695 million, up 13% over the prior period. Growth was led by Outsourcing & Advisory up 27% driven by engineering and design, including recent acquisitions.

Leasing activity was up 21%, with growth in both office and industrial asset classes. Capital Markets activity, including debt origination, was down 8% as clients paused to reassess the clearing prices for sales transactions given a rising rate environment as well as availability of debt capital.

Adjusted EBITDA was $67 million, up 2% from last year. The margin in the Americas was 9.6% relative to 10.7% in the prior year period and was impacted by higher discretionary and variable costs and a reduction in high-margin Capital Markets transactions.

EMEA revenues for Q3 were $164 million, up 23% from 1 year ago, with growth across all service lines, particularly project management. Although growth was unevenly distributed across countries, revenue growth was particularly strong in the United Kingdom, more than offsetting the impact of higher interest rates and geopolitical uncertainty in other markets.

Adjusted EBITDA was $13 million versus $15 million last year, with the margin primarily impacted by revenue mix with a higher proportion of project management at modest margins.

Asia Pacific revenues were $153 million, down 4% and were impacted by higher interest rates and COVID-19 restrictions in several Asian markets, especially China. Adjusted EBITDA was $21 million, flat relative to the prior year quarter on lower costs resulting from reduced variable compensation.

Third quarter Investment Management revenues were $96 million, up 23% from the prior year period. Excluding pass-through carried interest, revenues were up 62%, driven by acquisitions and management fee growth from increased assets under management.

Adjusted EBITDA for the quarter was $37 million, up 33% versus the comparative quarter. As a reminder, our reported adjusted EBITDA is equivalent to fee-related earnings, or FRE, that many pure-play IM firms report since our IM earnings come predominantly from recurring management fees.

We have generated solid new capital commitments from investors across our fund portfolio during the first 9 months of the year, albeit at a slower pace than during 2021.

Similar to our last quarter, we are currently seeing investors take more time to make capital allocation decisions. We ended the quarter with $87 billion of AUM, including Versus, which closed just after quarter end. Our AUM now exceeds $92 billion.

Our fee paying AUM is now $51 billion. Given the private and defensive nature of the real estate and real assets in our portfolio, we expect our FPAUM to remain stable despite this market turbulence.

Our financial leverage ratio as of September 30, 2022, defined as net debt to pro forma EBITDA was 1.5x, including acquisitions that have been announced but were not completed as of September 30, our financial leverage is 2.0x inside our stated comfort zone.

We expect to delever over time using our operating cash flow to pay down debt. We repurchased 373,000 shares during the past month for total consideration of $35 million under our normal course issuer bid. Year-to-date, we have repurchased 1.4 million shares for total consideration of $161 million.

Given our future growth prospects, strong financial capacity and our current market valuation, we believe it is prudent to make modest share repurchases at this time. We are updating our outlook for the full year 2022 to reflect year-to-date operating results, contributions from acquisitions, the operating impact of rising global interest rates and geopolitical uncertainties as well as adverse foreign exchange impacts on AEPS.

The outlook is subject to risks and uncertainties as outlined in the accompanying slides. We now expect our adjusted EBITDA margin to improve 60 to 80 basis points relative to 2021 from a combination of higher-margin acquisitions and internal operating leverage. We also expect our tax rate and NCI share of earnings to be slightly higher than anticipated, reflecting our expected mix of earnings for the full year.

As a result, we now expect our adjusted earnings per share to grow this year at a mid-teens percentage rate relative to the low 20s rate previously anticipated. 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] And our first question comes from Chandni Luthra with Goldman Sachs.

[Chandni Luthra, analyst]

Could you discuss as we think about a tougher economic environment ahead, what kind of levers do you have to pull? How would you think about potential cost cuts? And is there a way to frame that as we go into 2023?

[Christian Mayer, executive]

Well, Chandni, thanks for the question. We always manage our costs closely. And as you know, our cost structure is highly variable, particularly in our transactional business, predominantly commissioned that flex directly with revenue.

As we talked about overfilling softness in our capital market service line, and this is going to continue, I think, for a little while until interest rates and credit conditions stabilize in the market, the rest of our business is doing well, as you saw in the results. And as a result, we don't have a reason for a formal cost-cutting program right now.

But I can say that we have our budget process underway currently. And certainly, cost management is top of mind for that as we prepare for 2023 with varying levels of transaction revenues that could transpire over the next 12 months.

Finally, I'd add that these times, challenging times are good times to invest in recruiting, and we're going to continue to do that and bring on new talent in our various service lines as we look ahead.

[Jay Hennick, executive]

Chandni, let me just highlight some of the things that Christian said and put it in sort of my perspective a little bit. The bottom line is that our business, because we are becoming way more resilient and diversified, we're really -- this quarter, and we think it will continue, is really only impacted by the softness in Capital Markets.

And if you put all of that into perspective, both for the final quarter and as you look into the new year, it is a small percentage of our overall business. It represents a small percentage of our EBITDA and not to diminish that in any way, but we don't think it's going to slow down the growth and development of our business as we look forward.

[Chandni Luthra, analyst]

Very helpful. And for my follow-up, so as we think about the implied guidance for fourth quarter, especially on the EBITDA portion, $208 million at the mid point, I think implies high single-digit year-on-year growth, very strong sequentially, I think, up 45%.

Help us understand what portion of that EBITDA growth would you attribute to organic versus inorganic? And just trying to understand the incremental acquisitions that were part of the business in 3Q from 2Q, how much are they contributing? And how should we think about the split in fourth quarter?

[Christian Mayer, executive]

Yes. Another good question, Chandni. And certainly, we just closed on the Versus transaction in mid-October. We've got another acquisition in Europe that's expected to close in the coming weeks. So there certainly will be incremental acquisition contribution from those new deals as well as transactions that we completed earlier this year.

So I think the majority of EBITDA growth in Q4 will be from acquisitions. But certainly, our organic growth in the year -- in the fourth quarter will be strong in Outsourcing & Advisory as it has been all year.

Leasing, looks like conditions are still quite good. And of course, Capital Markets we're watching closely, and that's the real area of focus for us. And also Investment Management, Chandni, I forgot to mention the organic components in Investment Management, Harrison Street and their European business that we've owned for years, they'll also have organic growth to contribute for Q4.

[Operator]

Our next question comes from Michael Doumet with Scotiabank.

[Michael Doumet, analyst]

Questions are really just, I guess, a follow-up to some of the prior questions. If I look at your 2022 guidance based on the math that I'm calculating. It implies a negative call it, mid-single-digit internal growth for Q4 that compares to the positive internal growth of 4% in Q3.

So -- again, maybe just for confirmation, but just to make sure that I understand it correctly, is that an incremental softness expected to come strictly from capital markets in Q4?

[Christian Mayer, executive]

Yes, that's right, Michael. That's the area that we're most focused on and certainly and you could see it in the Q3 results as well.

[Jay Hennick, executive]

And most impacted, obviously, by higher interest rates and availability of capital for sure. I mean, and the other thing that does impact us, and we really can't control this is currency fluctuations. Michael, you can see that -- yes, go ahead.

[Michael Doumet, analyst]

Yes. No, look, that makes sense to me. I think it makes sense to everybody. If I look back, organic growth in Capital Markets has amounted to approximately 40% since 2019, I guess, based on your disclosure.

You've done a good job expanding the platform, increasing the headcount. There's a lot of things you've done internally, obviously, but we're seeing activity soften now. And I'm just wondering if there's a bogey just in terms of what number we think that you guys will eventually normalize to based on what you're seeing in the interest rate environment. Just as we think about where our Capital Markets can go in the next couple of quarters and what effectively normalization periods look like?

[Christian Mayer, executive]

Michael, we've been adding producers and market share over the last couple of years, the last 6 quarters, for sure, post-pandemic. So that's a lever. Our producers are becoming more productive over time.

We don't think that's going to change. They're going to remain at higher productivity levels than they were in the past. So if you look at market conditions and the impact of our ability to complete transactions, interest rates, the availability of capital, I mean those are -- those are the factors that we're focused on.

But fundamentally, I think our Capital Markets business is well positioned and is going to continue to grow as we add more producers, take market share. We've also got a couple of acquisitions in Capital Markets that we'll add to our scale and have added to our scale over the past year or two. So we're pretty bullish from a long-term perspective about our Capital Markets business.

[Operator]

And the next question comes from Stephen Sheldon with William Blair.

[Stephen Sheldon, analyst]

First question here, I just wanted if you could provide some more detail on the Americas margin and especially the higher discretionary and variable costs, what are those? And how are you thinking about adjusted EBITDA margins in the Americas looking forward, although I know the mix between Capital Markets and other business lines might have a big impact on that?

[Christian Mayer, executive]

Stephen, that's a good question. The Americas, as you know, through 2021, and this is true across the business. There was not much travel. There wasn't much client engagement directly, conferences and stuff like that. That activity has resumed pretty strongly in 2022.

We've been very active meeting with our clients in person attending conferences, other discretionary and variable costs like that have increased significantly after a couple of years of virtually shutting those kinds of costs down.

So you're seeing the impact of that in our margins in the Americas. You're also seeing the impact of our business performing very strongly in the first half of the year and our revenue producers hitting their higher commission thresholds earlier in the year.

And as a result, they are earning higher splits, and the margins that we generate as the -- as a firm are slightly lower from that phenomenon. And those commission levels, they reached that annually. So that is something that will reset in January, but certainly another factor driving the Americas margin in particular.

Finally, I note our capital -- in our Capital Markets business, we have a debt origination platform and debt originations at profitable service line, more profitable than the other types of services and the impact of reduction activity in debt origination is having an impact on the margin as well in the quarter.

[Stephen Sheldon, analyst]

Got it. Yes, that's helpful. Maybe a follow-up, I think you'd mentioned a favorable recruiting environment right now. Just curious how much your producer headcount has grown if we look back over the last few quarters of the last year in the brokerage businesses?

And are you seeing more urgency in this environment within the smaller or maybe more independent teams to look at joining bigger established platforms like Colliers. I guess just what are you seeing there from an urgency standpoint?

[Jay Hennick, executive]

Well, we don't share our recruiting numbers with anyone, but I'd say that we have been very aggressive from a recruiting standpoint over the past number of years. You can see that in our numbers as our numbers have ramped up over the past number of years.

And so I would say that recruiting is top of mind for us more so now, we think, while others are running for cover, there's a tremendous opportunity for us to redouble our efforts in a couple of areas in a couple of markets. We're very strategic about our recruiting. Colliers is, if not the most highly respected name in the industry in North America, it's probably #2. And it is far and away a very comfortable place for people to come to, and we're surely seeing that in our recruiting numbers, size of transactions that were -- that the new recruits are handling, size of deals that they're handling. Christian made a comment earlier about hitting thresholds earlier in the year. Part of that is just the power of our recruiting. And that's just not North America-based, it's global.

So there's a global initiative around recruiting, filling specific gaps, particularly in areas where our Investment Management operations have strength and infrastructure and other, I would say, recession proof or recession-resistant asset classes. So we're trying to strategically up our game in terms of the expertise in those asset class areas.

[Operator]

[Operator Instructions] Our next question comes from Stephen MacLeod with BMO Capital.

[Stephen MacLeod, analyst]

Just wanted to follow up on a couple of things. I'm just wondering if you can talk a little bit about the Capital Markets backdrop and sort of how it evolved through the quarter?

I mean, did you see some sort of like some strength towards the beginning of the quarter and maybe some weakness towards the end. Just trying to get a sense of how that unfolded with respect to how your revenues unfolded in the capital markets business?

[Jay Hennick, executive]

Yes. It's a good question, Stephen. The first 2 months of sort of, I would say, from Labor Day on, it just sort of fell off and -- but make no mistake, there are tons of buyers in the marketplace with capital to deploy, and there's tons of sellers in the market with capital to deploy.

The difference is that there's this gap between expectation of value and the ability to buy assets given the current interest rate environment, but also capital availability generally. So there's a huge amount of pent-up demand that we see will start to break over time. It will be impacted in some proportion to interest rates changing direction, in some proportion to availability of capital, in some proportion to existing owners having debt coming due, and they're going to have to deal with that debt one way or the other.

So there's a lot of things that can happen that can really change the trending as we go. But the interesting thing for Colliers today, Stephen, is that we're so much more diversified. It's very important for investors to put everything into perspective, which is the point I tried to make earlier. How big is Capital Markets? What is the contribution of Capital Markets? What might it look like next year? When might this thing change? And really does it matter overall to the company?

Yes, we'd like to have additional revenue streams and profitability come from our strong Capital Markets business, but we know it's there and we know it will return, but it really in the overall scheme of things doesn't have that big an impact on our company as a whole.

So I just wanted to make that point very clearly, especially to somebody like you who's followed us for as many years as you have.

[Stephen MacLeod, analyst]

Okay. That's helpful, Jay. I appreciate that. And then just maybe with respect to the acquisition pipeline, I mean, you talked about you have -- just recently closed a deal and have another deal in the process of closing. How do you think about the acquisition pipeline as we do enter a period of softness in 2023?

[Jay Hennick, executive]

Well, first of all, this was a record year of acquisitions for us if we complete the last acquisition before year-end, which we fully expect to do. That will put us well over $1 billion in acquisitions this year, which is by far a record year for us.

So to your main question, when the markets get tough, we get excited -- excited. And so we have great opportunity out there. We have worked very hard over a long period of time to build relationships with prospective acquisition targets. And I think that as other people find it more difficult to fund acquisitions or to complete them, the Colliers proposition of our perpetual partnership approach just gets better and stronger. And we're just as an organization for many years have been exceptional partners to our operating partners across the board.

So we're quite excited about acquisitions. We hope to be able to continue the pace over time, but we still will be very strategic and discerning as we have for 27 years in terms of creating shareholder value.

[Stephen MacLeod, analyst]

Okay. That's great. And just one more, if I may. With respect to -- you talked about there being lots of buyers in the market, lots of sellers in the market. What do you think is the piece that needs to get removed from the logjam? Is it more about rates? Is it more about availability of capital? Is it people sort of wait until the calendar turns until there's a bit more certainty on 2023. Just curious if you're hearing anything consistently from your leads?

[Jay Hennick, executive]

It's all of the above, Stephen, because really what happened was 6 months ago or 9 months ago, a seller had an expectation of generating a certain return on an asset and a buyer thought that they could buy an asset with an interest rate and availability of capital at a point where it made sense for the buyer and the seller.

Well, the gap has widened materially right now. And I think there's a lot of people waiting on the sidelines, and we're seeing that in our Investment Management business in spades. In Investment Management, there is always a sale -- an asset sales program that happens in the ordinary course of its business.

And right now, we're slowing that process down because the returns that we would get on the sale of assets are lower in November than they were in February. So -- and we have first-class assets and believe that the values will return one way or the other over time.

And just to make an extra point, in our alternative asset classes, our revenues really reset annually. So we do have a buffer against rising interest rates and so on. So buyers will buy our assets faster than they might those that have a lot of fixed rate lease terms in place in the more traditional real estate asset classes.

[Operator]

Our next question comes from Daryl Young with TD Securities.

[Daryl Young, analyst]

I have a 2-part question around the Investment Management business. I think you mentioned the capital raising was slightly tougher currently. But as you look out to 2023, is there a pipeline you can speak to in terms of new funds in the market and how those might evolve next year?

And then just secondly, on the valuation of the portfolio, is there any mark-to-market risks that we should be considering next year?

[Jay Hennick, executive]

Okay. So I'll let Christian handle the second part of that question. But the first part of the question is you're seeing it hearing about it everywhere that fundraising right now is softer than it has been. There's a whole bunch of reasons for that.

It's not just high interest rates and higher interest rates and things like that. But what we're finding is that we're doing better than most, #1. And #2, I think in terms of the pipeline of prospective investors for our group or group of investing companies has -- is massive right now. So way bigger than it has been in previous years.

They just, for the most part, have not yet made final commitment. So we're optimistic that the quality of our asset classes are such that we'll generate more than our fair share of capital. But as Christian mentioned, I believe in his prepared remarks, we'll probably be slightly less in capital raising in the aggregate in this current year than we were last year, but not materially so, but the pipeline of new opportunities going into '23 is bigger than it's ever been for us. Christian, do you want to...

[Christian Mayer, executive]

Yes. So to answer your question, Daryl, on valuation, we invest in private real estate and real assets. Those assets are mark-to-market quarterly. They're not subject to public variation -- public market variation like some other asset managers and our competitors in the commercial real estate space who have a significant amount of their portfolios and publicly traded assets.

So for us, we look at valuation on a quarterly basis. It is done using third-party services and mark-to-market on that basis. As Jay mentioned, the assets in our portfolios are defensive in that they have the ability to reprice the rents frequently. Think about student housing where the rents reprice annually, seniors housing where there is a level of attrition each month in the portfolio, and those rents can be repriced frequently. So that's -- there's a level of inflation protection there and an ability to reprice those rents and maintain market values and those are just a couple of examples.

But throughout our alternative portfolio and our infrastructure portfolio, we have the ability to maintain market values of our portfolio. So we don't expect any significant changes in our portfolio from mark-to-market perspective, certainly not an adverse mark-to-market perspective in the coming quarters.

[Daryl Young, analyst]

Okay. Great. And then maybe just one more staying on the IM theme. It might be a little bit early days to talk about integration and synergies. But when I look at all the deals you've done, and I wonder if there is potential for margin upside compared to what it would seem on each individual business if you think you can get some synergies from the integration of sales and marketing efforts or if there is upside to the consolidated platform in the years to come?

[Jay Hennick, executive]

Well, there's for sure upside in all of that, but it's going to take time to generate that. You're talking about consolidation -- consolidating things like distribution and back office and things like that.

But I think we can have some early wins around working with some of the platforms and bringing their margins up to more appropriate levels for a variety of reasons and based on some experience we have internally in doing that. So that's where our focus is near term. And we're hoping to be able to do a little bit of that.

But for the past -- in the past quarter, as an example, the margin in our IM business, not counting promotes was circa 47%. So pretty high margins to start with, and that's one of the benefits that we have in that business.

[Operator]

Our next question comes from Frederic Bastien with Raymond James.

[Frederic Bastien, analyst]

Wondering if Harrison Street and the IM businesses that you brought on, are they in the process of raising capital currently? And if so, can you update us on how the fund raising is going?

[Jay Hennick, executive]

Yes, Frederic, we are almost constantly in the market, raising capital. And I can tell you we have a number of funds currently in various stages of the capital raising process. And some of the perpetual funds are perpetually raising capital as they expand over time, not really at liberty to talk about specific funds, but that's the general view.

[Frederic Bastien, analyst]

Is it conceivable then that you could exit the year with a number in AUM that's a lot higher than the $92 billion you reported or you disclosed?

[Jay Hennick, executive]

Well, I would say higher, a lot is a relative term. We'll see how we do as we enter the final quarter of the year.

[Frederic Bastien, analyst]

Okay. And then you discussed -- you talked a little earlier about the promotes that are sort of bringing the margins down on the investment management side. I guess the margins were consistent with what you posted in the second quarter, but they're a bit below the 40-plus percent that you've been sort of guiding us towards? Is it a function of those promotes? Or -- and what can we expect in the next couple of quarters?

[Jay Hennick, executive]

Yes, Frederic, we didn't have any carried interest in the third quarter. So our margin in the third quarter was 38%. And we brought on a couple of new acquisitions in the quarter, and that's having a bit of an impact on the margin mix there.

But our view would be that, excluding carried interest, we will certainly look to enhance our margins over time as well. And back to your question about capital raising, there was tremendous operating leverage from raising new funds. And that will help us over time enhance our margin profile in this business as well.

[Frederic Bastien, analyst]

I'm sort of the same line of thinking with respect to valuation. So just wondering if given the opportunity to invest in incremental dollar today, would you favor buying back your own stock or still deploy it on M&A or both?

[Jay Hennick, executive]

Well, the answer is clearly both. But based on where we're currently -- we're currently trading, it should be open field running on our -- or buying back our stock, to be honest, but it's always a balancing effort because this is a near-term decision versus a long-term decision when you add an important element to your business for the long term.

[Operator]

And I have a follow-up with Michael Doumet with Scotiabank.

[Michael Doumet, analyst]

A question on the margins. Obviously, there was some compression in Americas and the EMEA in Q3. That was offset by a gain in Corporate. But year-to-date, your EBITDA margins are up 40 basis points. So that implies EBITDA margins will be up in Q4 versus last year.

So again, just trying to get a sense if that's all in Investment Management. If there's something in Corporate again? Or generally, what you expect in trends in the regions?

[Christian Mayer, executive]

Yes. I think all of the above, Michael. I think we do expect to have some level of operating leverage from the existing operations in the -- on the full year basis. But the majority will be from the acquisitions.

And as we've talked about, the Investment Management acquisitions are very high margin relative to the other service lines. And that is I think the key driver.

[Michael Doumet, analyst]

Anything in specific, Christian, on the Corporate side, Q4?

[Christian Mayer, executive]

Yes. I mean I think the biggest one is going to be that variable incentive compensation that certainly, last year was an outsized year and this year will be more modest in terms of the incentive compensation.

[Michael Doumet, analyst]

Okay. That makes sense. And last one, sorry, guys. But for leasing, I imagine there is some cyclicality related to that business, but you previously pointed to some strength in office given some of the dynamics there in the last couple of years, especially with the pent-up demand as several renewals got pushed back.

So how much runway do you think you have in office from pent-up demand that could potentially offset some of the other categories if we do head into a slowdown?

[Christian Mayer, executive]

Yes. That's a good question, Michael. Office leasing has been challenged over the last couple of years. I think this quarter, we finally broke through the 2019 levels. So our Office leasing levels are actually above Q3 2019 for the first time.

And there is a significant number of lease maturities coming due in 2023. And occupiers are going to have to make decisions about their premises. And that will be an opportunity for our teams to help our clients and negotiate new leases and generate revenue. So I think office leasing has some pretty good dynamics at play for those reasons. And industrial leasing continues to be an area of strength and should be resilient as well, at least in the coming quarter or two.

[Operator]

And I have a follow-up with Daryl Young with TD Securities.

[Daryl Young, analyst]

Just one more for me. With respect to hiring on producers, I think historically, in the Americas, you've had a bit of a margin drag as you've staffed up just before they become fully productive and maybe some incentives to bring them over.

Is that a dynamic we should consider across 2023 if you do find there's opportunities for good people?

[Jay Hennick, executive]

Yes. That's the nature of that business for sure. But we're so big globally and the percentage of recruiting that actually happens, again, is a small percentage of our overall broker group. I mean we might have -- and I won't have the exact number, but circa 5,000 revenue producers globally and it's a small percentage, 3%, 4% that we might recruit on an annual basis.

So it's all factored into our numbers as we present them and as we budget for them.

[Operator]

I'm currently showing no further questions at this time. I'd like to hand the conference back to Mr. Hennick for any closing remarks.

[Jay Hennick, executive]

Thank you very much, operator. Thanks, everyone, for joining us on this third quarter conference call. Looking forward to our fourth quarter which is obviously the biggest quarter for Colliers and that will be in February. So thanks for participating, and thank you, operator, for coordinating this call.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Everyone, have a wonderful day.