Colliers International Group Inc. (CIGI) Q3 2026 Earnings Call Transcript

Operator: Welcome to the Colliers International Third Quarter Investors Conference Call. Today's call is being recorded. Legal counsel requires us to advise that the discussion 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. 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 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 Wednesday, November 4, 2026, And at this time, for opening remarks and introductions, I would like to turn the call over to the global chairman and chief executive officer, mister Jay Stewart Hennick. Please go ahead, sir.

Jay Stewart Hennick: Thank you, operator. Good morning, everyone, and thanks for joining us As the operator said, I am the chairman and CEO of Colliers. Joining me today is Christian Mayer, our CFO and chief executive of commercial real estate. Today's webcast and presentation materials are available in the information in the Investor Relations section of our website. We are pleased with this quarter's results across all 3 segments of our business. Our teams executed well, and we continue to strengthen our market positions. Our more cautious fourth quarter outlook reflects continued geopolitical uncertainty and interest rate volatility not the strength of our businesses. Over the past decade, we built 3 global platforms 1 step at a time commercial real estate, engineering, and investment management. Each stands on its own but together, they make each other stronger so Colliers can grow faster, and be more resilient. Given market conditions, I wanted to take a moment to remind our shareholders why Colliers is different and how we build long term value. It comes down to 5 things. First, focus on growth. We operate in large fragmented global markets with significant opportunity to gain market share by adding geographies, capabilities, and services. So far this year, we did all 3. Ayesa Engineering, which closed in May, completed the foundation of our global engineering platform. Adding more than 3.3 thousand professionals in 23 countries with top tier qualifications in transportation, water, energy, and infrastructure. In Canada, we agreed to acquire Obsidian Engineering, a Calgary based firm whose 400 professionals have delivered more than 3.5 thousand complex energy infrastructure and data center projects, including Alberta's largest data center development. This further strengthens our position in Canada's energy sector. And through Harrison Street funds, we agreed to acquire a controlling interest in Vicinity Energy, the largest energy provider in The US. This transaction valued at $2.9 billion serves more than 1 thousand hospitals, universities, and other buildings across 12 cities, all under long term contracts. 3 transactions 3 more ways to grow across our enterprise, all in essential infrastructure, with durable long term demand and deeper client relationships. Second, grow our resilient earnings. Currently, about 70% of our earnings are repeat or recurring. A high quality earnings base that we intend to keep on growing. And when markets normalize, our higher margin businesses are well positioned to benefit. that is the balance we like. Protection on the downside and meaningful upside when the-- when the markets turn. Third, leverage our scale. Each of our businesses has the scale they need to serve the best clients. And to deliver on the largest and most complex projects. The opportunity between our platforms is just as important Data centers are an excellent example. Our real estate professionals help clients find and secure sites, Our engineers design, deliver, and manage facilities. And Harrison Street provides the capital. That combination truly sets Colliers apart. Fourth, allocate capital. Our asset light model generates strong cash flows which we can reinvest where returns are the highest. Internal growth always first, complemented by strategic acquisitions. This year is already a record year for acquisitions. We have added about $80 million in annualized EBITDA to our company. And we still have almost $1 billion of dry powder for new opportunities ahead. Finally, we think and act like owners. Let's face it. Equity ownership is the most important ingredient in delivering superior results over the long term. About 1.5 thousand of our operators hold significant equity in the businesses they run day to day, And together with senior leadership, we collectively own more than 1/3 of our company. That alignment with shareholders is our most defining characteristic. An entrepreneurial culture built over decades, and very difficult for others to replicate. If there is 1 thing I would leave you with today, it is this. We never manage Colliers quarter-to-quarter or even year-to-year. We manage it for the long term. As a permanent capital partner in each of our businesses, we can compound value for shareholders over many years. Markets move in cycles, we cannot control. What we can control is how well we run our businesses and you can be sure that we run them like owners. For more than 3 decades, our shares have compounded at about 20% per year although closer to 17% at today's price. If we keep strengthening and growing our businesses, 1 step at a time as we have always done in the past, I am confident our share price will again reflect the value we are creating. I will now turn things over to Christian to review our financial results in detail. Christian?

Christian Mayer: Thank you, Jay, and good morning, everyone. Please note that the non GAAP measures discussed on this call are defined in our press release and quarterly presentation. Unless otherwise noted, all revenue growth figures are presented in local currency. Third quarter consolidated revenues came in at $1.6 billion, up 12% and net revenues increased 13% to $1.4 billion Internal revenue growth was 2%, and on a net basis, was 4%. Against a tough prior year comparable internal growth was up 13%. Adjusted EBITDA was $219 million, up 14% and adjusted EPS increased 20% to $1.97 Our third quarter commercial real estate segment net revenue increased 6% capital markets revenues rose 9%, led by the Americas, and EMEA. With slowing transaction velocity late in the quarter as geopolitical and interest rate volatility increased. Leasing revenues were up 6% as expected. Compared to a very tough prior year comparable. In Q3 25, we had industry-leading leasing growth of 15%, Segment margin was 11.3%, up from 10.9% in the prior year on operating leverage from higher transactional revenues. Third quarter engineering net revenue up 37% driven primarily by recent acquisitions including the first full quarter of Ayesa. And solid internal growth. Our net margin was 17.3%, up 30 basis points over last year. We continue to see strong tailwinds driving demand for infrastructure defense projects and technical consulting services. Our engineering backlog stood at just over 12 months, as of September 30, up nicely from June 30. Investment management net revenues increased 8% The net margin was 38%, reflecting continued investments in people, new capabilities, and integration under the global Harrison Street Asset Management brand. Bringing together a global business and streamlining operations takes time, and the team is executing well. We expect margins to stabilize in the 40% range through 2027. Assets under management $110.5 billion at September 30, up 2% from a year ago, driven by new capital raised net of realizations. We have raised $5.3 billion in new capital commitments so far this year through the end of October. We continue to see good momentum on fundraising and expect to finish the year within our previously-discussed range of $6 billion to $9 billion During the quarter, Harrison Street successfully sold $1.8 billion in assets at compelling valuations with proceeds being returned to our investors. For 2026, we expect to sell over $5 billion of assets. Our demonstrated capability to generate strong realized gains and returns of capital to investors differentiates us from other asset managers. Our deployment of new capital raised has been slower than expected with the result that the commencement of certain management fee revenue is being deferred into 2027. Turning to our balance sheet. In the third quarter, our leverage ratio improved to 2.7x. We expect to continue delevering in the fourth quarter, as seasonal cash flow comes in, and we expect to finish the year at or under 2.5x. Free cash flow for the trailing 12 months, $428 million or 118% of adjusted net earnings. Reflecting our asset light business model and strong cash generation. We have revised our full-year 2026 outlook to reflect year to date results and increasing geopolitical uncertainty and interest rate volatility. Which we expect to affect commercial real estate transaction volumes for the remainder of the year. We now expect low-teens growth in each of our key metrics compared to mid-teens growth previously. Our margin expectations for each segment are unchanged. That concludes my prepared remarks. Operator, can you please open the line for questions?

Operator: We will now begin the question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question is from the line of Stephen Sheldon with William Blair. Stephen, your line is open. Please go ahead.

Stephen Sheldon: Hey, good morning. Thanks. Just first 1 on the capital markets slowdown late in the quarter. Can you just give some more detail on how broad based that was versus being more targeted in certain subsectors like multifamily or in certain geographies. And does it seem like. More like a delay or push out, or are you seeing deals get canceled out? Right? Just would love more detail more detail on what you are seeing. In the third quarter and maybe some early detail on what you are seeing in the fourth quarter so far.

Christian Mayer: Yes, Stephen. We are not seeing cancellations of deals. We are seeing deals slow down, get pushed out. And it is most notably in Europe. And as you can imagine, in Europe there is a lot of geopolitical tension. At the moment, places like France in particular. So that is causing, you know, some delay in decision making. that is really the bulk of it. I think things are also perhaps affected a little bit in Australia. that is a market that is seen 3 interest rate increases and some government taxation challenges. So, you know, that is really where we are seeing the bulk of the impact.

Stephen Sheldon: Got it. Makes sense. And then hey. it is great to see the year over year expansion in engineering margins. Can you just unpack what drove that? And how should we be thinking about the margin trajectory for the rest of this year and into next based upon what you can see there? Are there levers that you would expect to support continued year over year expansion as we look out over the over the coming quarters?

Christian Mayer: So Stephen, the engineering business does have seasonality in its margins. And Q3 is the seasonal margin peak given the nature of summer work season in Canada. and the U.S. So when we add Ayesa, it. it is geographic presence is much more, I would say, more modest weather. So its business tends to be more evenly spaced through the year. So the margin increase in Q3 was 30 basis points on a highly seasonal number to begin with. The impact of Ayesa was very modest. In the quarter. So we did see some margin expansion on the organic business. Which was good. In the fourth quarter, you will see the seasonal lower margins in our North American business and you will also see the impact of ISS, so the margin growth in Q4 will be greater Great.

Stephen Sheldon: Thank you.

Operator: Next question is from the line of Himanshu Gupta with Scotiabank. Himanshu, your line is open.

Himanshu Gupta: Thank you, and good morning. So first, a follow-up on capital markets. How is the pipeline looking for Q4? Was there some revenue slippage from Q3 into Q4 as you mentioned about pushing out of certain deals?

Christian Mayer: Yeah. Himanshu, our pipelines look good. For the fourth quarter. But as you know, a pipeline always has a level of uncertainty to it. And requires probability weighting, That probability weighting, based on our interactions with our clients, has been impacted by the geopolitical situation. And rate environment that we are experiencing. So we are accordingly adjusting our expectations for fourth quarter capital markets growth. It will still grow, it just will not grow as much as we expected.

Himanshu Gupta: Got it. Okay. Thank you. And then on real estate services margins, Q3 margins were up nicely. But your full year margin outlook has not changed. Is it some conservatism built into, like, Q4 margins on real estate?

Christian Mayer: Yeah. I think that is right, Himanshu. We had very strong margins in fourth quarter of 2025. And it will be difficult for us to replicate that given the current backdrop, so trying to be a bit conservative there.

Himanshu Gupta: Got it. Okay. Now shifting to investment management. Looks like fundraising was solid in Q3 and year-to-date. How much of this will start producing fee in Q4 Or is it mostly next year when the funds get deployed?

Christian Mayer: So, Himanshu, I noted in my prepared remarks that the commencement of management fees is being delayed and we have had a very successful fundraising push this year, in particular in the month of October. $800 million raised that month alone. But that capital will not necessarily start being fee bearing immediately. As I am sure we have a mix of closed end and open ended funds separately managed accounts. And those open ended funds and separately managed accounts require the capital to be deployed before it can start earning fees. And as such we are seeing a bit of a delay in terms of the capital starting to bear fees. That will happen. The capital is committed. And that revenue will start to be recognized as we proceed early into 2027.

Himanshu Gupta: Yeah. And then in terms of the timeline or the catalyst for it to be revenue producing, should we look for the final closing of the European Value Add fund and the Basalt V? Is that the. what we should be eyeing for? Well, those 2 funds are active in their marketing periods. And they are flagship funds for us and ones that are highly visible in the market. We continue to actively and successfully raise capital for those strategies. Okay.

Christian Mayer: Thank you so much, and I will turn back.

Operator: Your next question is from the line of Stephen MacLeod with BMO Capital Markets. Stephen, your line is now open.

Stephen MacLeod: Thank you. Good morning. Good morning, guys. Just had a couple of follow ups relative to just the investment management business. Just on the capital deployment delay, or maybe just extending the timeline on that. Is any of it driven by the macro factors you referenced relative to the CRE business, or is it just a matter of timing?

Jay Stewart Hennick: it is totally impacted by the macro, also interest rates in particular. You have read a lot about, and we have heard even in today's call about delayed transactions. there is still this gap between buyer and seller. And the increased interest rates do have an impact on the velocity of the closing of transactions. So, yes, we have enjoyed some great success in raising capital this year. We think we will have continued success going into the balance of the year. Christian also mentioned realizations. We have had very good realizations at great prices for our investors, and that hopefully helps accelerate the fundraising growth But now we have to put that money to work And, you know, Harrison Street has a unique needs based, demographically focused strategy that works. And so. And the relationships that are deep. So we are quite excited about some of the things in the pipeline The Vicinity deal that I talked about is an important deal for us. It expands our infrastructure business in a major way. And that is, you know, a beautiful investment for those that are looking for durable, long-term investments that will pay dividends over a long period of time. We are excited about a lot of things Harrison Street right now. that is great color. Thanks, Jay.

Stephen MacLeod: Maybe just turning the page to the engineering business. Obviously, a very strong quarter there. And positive commentary around just the long term drivers. Just curious, does the macro uncertainty impact that business at all? Or are you still seeing no real changes in demand and workflow? I know you referenced your backlog, but just curious if you are seeing anything more on the nitty gritty Well--

Jay Stewart Hennick: Again, it is totally impacting us. For example, Ayesa looks after all or most of the desalination in the Middle East. And a few of them have been bombed. So that is good for us because we have got to fix them up. But it is not so good for us because we have got to wait until we fix them to start managing them again. So that is just 1 example of the macro that is impacting our business. But what is very interesting is our pipelines continue to grow. Our backlogs continue to grow. Our internal growth in that segment of our business is nice. And so we are quite excited about that segment of our business as well. But in giving you the answer, I think the macro and interest rate environment impacts all of our businesses. And that is 1 of the reasons why we are taking a cautious outlook on the fourth quarter.

Operator: Your next question is from the line of Jimmy Shan with RBC Capital Markets. Jimmy, your line is open. Please go ahead. [Inaudible] a reminder a reminder to unmute your line if you can. Thanks.

Jimmy Shan: I wanted to maybe get your early thoughts on 2027.

Jay Stewart Hennick: Well, Jimmy, we do not talk about-- [Inaudible]

Christian Mayer: So what.

Analyst:

Operator:

Christian Mayer: We can hear you. We can hear you. We can hear you.

Analyst: Yeah, I think--

Operator: Your next question is from the line of Daryl Young with Stifel. Daryl, your line is open. Please go ahead.

Daryl Young: Hey. Good morning, everyone. My question is around the engineering business, and wanted to get a little bit more color on your Canada business, your recent Obsidian acquisition. And just how you are planning your pipeline or maybe around some of the Canadian infrastructure initiatives that are underway and the natural resource renaissance Well, Obsidian is a great addition, it has not closed yet.

Jay Stewart Hennick: But it really augments our Western Canadian business, which is very strong already. And we have enjoyed the Canadian operations, the engineering operations that has enjoyed several new projects around Canada's drive not only to be a superpower, but also its investments in military. So for example, this quarter, we. We are doing. We were given the contract to do all of the modernization of, the Bagotville CFB, which is all the supporting facilities for the air operations to support NORAD. that is a big retainer. It will take several years for us. And it is just another example of the benefits that engineering is realizing. Based on what Canada's current thinking is in terms of investment.

Daryl Young: Got it. Okay. And then 1 more for me on investment management. Fundraising's obviously tracking well towards your guidance. Can you give us a bit of detail on the mix of new LPs versus re ups from existing? And I am just wondering if the monetization activity is what is really fueling the fundraising, or are you seeing benefits of your cross-sell, and I will call it a more diverse investment product capability, with the integration work you are doing?

Jay Stewart Hennick: So if you are in the asset business, you never raise enough capital. it is always the issue. So yes, we are having a much better year than last year. We are quite excited about stuff, but it is never enough. So let's start with that. The second thing I would say is that we have expanded the number of LPs in our various funds significantly. I think the number I do not have it exactly, but I think it is up 20% in terms of number of net new investors in our various funds. What happens on realizations is some investors reinvest the total amount realized. Some invest more. Some invest less. So there is a give and take. it is very hard to give you net new numbers. Of investors, but some are in their allocations or reduce their allocations based on their internal parameters. But generally speaking, we are. We continue to expand the number of LPs And, frankly, the integration of the 4 pieces, the 4 pillars of Harrison Street has really helped there. Because LPs that might have been in the Basalt Fund are now going into the Harrison Street funds and vice versa. And that is happening throughout the organization. Number 1. And number 2, we have consolidated all of our fundraising into 1 global group, and that too is helping to introduce new LPs to funds that they might not have invested in before. So, again, lots' happening at Harrison Street. And the team is executing well, as Christian said. Got it. that is great. I will get back in the queue. Thanks very much.

Operator: Your next question is from the line of Frederic Bastien with Raymond James. Frederic, your line is open. Please go ahead.

Frederic Bastien: Thank you. Just building on this last question around fundraising and the momentum you have been enjoying. Which strategies are seeing the strongest investor demand right now? And where are you having the most success in raising capital?

Jay Stewart Hennick: Well, that is a good question. Infrastructure, very, very strong right now. Vicinity is just 1 example, but it is happening across the board. And, you know, I think the percentage of our business from infrastructure as a percentage of overall AUM will go up this year. As a result. We are also seeing a resurgence in interest in all of Harrison Street's traditional needs based, demographically focused funds. Seniors, students, 3 p partnerships, health care facilities, all of these have been the focus of Harrison Street since they began. And those are a resurgence when you think about real estate where do you want to allocate your capital? You want to allocate your capital in assets like those where rates go up on an annual basis or there is an opportunity to increase rates on an annual basis, so they are almost inflation adjusted. And so I think that a lot of our LPs are increasing their allocations to those 2 areas in a big way. Thanks, Jay, for the color.

Frederic Bastien: Switching gears to engineering. Give us. Can you give us a sense of how organic growth is trending across the business? I appreciate, Christian, you mentioned healthy increase, but any way you can provide a number around the growth and is that growth concentrated in certain regions or discipline?

Christian Mayer: Frederic, the organic growth in our engineering business on a net revenue basis is trending in the mid single digits. It was 4% in the third quarter and we expect that to continue in the coming quarters.

Frederic Bastien: It is definitely benefiting from additional infrastructure work that we are doing. there is a couple of areas that are softer. that is the reason we have a balanced business and a mixed business. That has multiple end markets and public and private sector clientele. Okay. And from a regional standpoint, given the comments you made about the Middle East and Europe, Is it fair to say that you are seeing better growth in North America right now?

Christian Mayer: I think the growth is pretty even. Geographically.

Jay Stewart Hennick: You know, just to add to what Christian said, my sense is The US has been tougher. In terms of internal growth in the last quarter or so. I mean, it showed internal growth, but it is been tougher. I do not know whether it is the interest rate environment, the political environment in the U.S., the private sector clients in a couple of areas in the U.S. But on balance, I think we are we are pretty solid.

Christian Mayer: There you go.

Jay Stewart Hennick: Thank you.

Operator: Question my apologies. Your next question is from the line of Julien Blouin with Goldman Sachs. Julien, your line is open. Please go ahead.

Julien Blouin: Yes. Thank you for taking my question. I know it is still early, but I was wondering if you could provide any parameters for how we should be thinking about 2027. And I guess just the bigger picture here, the last time we saw capital markets become choppier in 2023, I think Collier's earnings growth remained relatively resilient versus peers. Wondering, do you think that consistency of earnings growth should recur in 2027 sort of irrespective of the capital markets environment And how does you know, the differences today, whether it be geopolitical or the mix of engineering investment management, maybe sort changed change your thinking?

Christian Mayer: it is a good question. Julien, and I think Jimmy will thank you because that is the 1 he was trying to ask when he called earlier. So we do not give 2027 guidance until February. But your question is a good 1. And we have a resilient business as Jay said. We have 70% of our earnings coming from recurring and repeat services. So I think that is only stronger now than it was back in 2023. So the resiliency of our business is high. And should there be another capital markets shock of some kind, we definitely will enjoy the benefits of that diversification that we have built in our business.

Jay Stewart Hennick: The 1 thing I will say about 2027 is that we have as Jay mentioned, made significant acquisitions this year during the year. And all else being equal, those acquisitions will add about 5% revenue and about 7% to our EBITDA in 2027 just as they annualize. And the other point I might make, Julien, and I guess this relates primarily to commercial real estate, there is a misnomer out there a little bit. When you talk about transaction services because transaction services is typically made up of capital markets and leasing. And if you look at the numbers from 2023 on, and in fact, over the past decade or more for us, leasing consistently delivers it is not recurring. We do not call it recurring revenue. But every lease is 1, 3, 5, 10 years. And our leasing professionals build relationships with clients as they renew their leases or expand their operations or contract or whatever they are doing that creates a repeat revenue stream from a client relationship So when I think about volatility, I think more about volatility around capital markets. Versus leasing. And so I thought I would just add that point because I think it gets lost in the narrative. Especially for those that talk around commercial real estate. Thank you. Appreciate those thoughts, Jay.

Julien Blouin: And then, Christian, the net margin in investment management, I think, fell another sort of 4 percentage points year over year. I think that is 9 percentage points over the last couple years. I appreciate the comments around stabilizing in the 40% range. Through 2027. I guess can you give us a sense of how far along you are in the integration efforts And is there a path sort of back up to the mid-40% margins that the business used to see?

Christian Mayer: As I indicated in my prepared remarks, we see a 40% margin through 2027. Certainly that margin can continue to evolve and expand over time. But I think I want to of be careful and cautious around talking about getting margins to the 45% or higher percent range. Our mix of business has shifted a little bit in the segment. We have added credit capabilities as an example. Which generally has a little bit lower fee attached to it. So there is things like that. That are impacting the margin profile. Of the business as well as some ancillary services that we now offer. As well beyond just the usual management fees.

Julien Blouin: Okay. Great. Thank you.

Operator: Your next question is from the line of Anthony Paolone with JPMorgan. Anthony, your line is open. Please go ahead.

Anthony Paolone: Great. Thanks. Apologies if maybe you covered some of this, but you guys were cutting out on my line bit through this. Was the guidance change was that all capital markets related?

Christian Mayer: Or can you maybe go through the bigger segments and provide any changes that were made, to get to that? Yeah. Anthony, the guidance change is primarily tied to our expectations for capital markets revenues. For the fourth quarter. But as Jay mentioned, you know, the rate environment that rate environment does impact all of our businesses. And would include what we talked about earlier, the deployment of capital on our investment management business, which we have raised a solid amount of capital but it is later in the year, so the fees are turning on later than we originally expected. So it is primarily cap markets, but also just generally some impact on the business.

Anthony Paolone: Okay. And then my other question relates to management of data centers. You brought that up as 1 of the things you do in terms of providing a full suite of products there. Have not heard much about it in the past, but can you talk about how big that business is? Rate of growth and kinda exactly what you are doing at the site on an ongoing basis?

Jay Stewart Hennick: Yes. Couple things on data centers. Number 1, and this. We discussed this on the last quarterly call. Data centers is an important element of-- and Christian can talk to this in the commercial real estate segment. it is and it is an important segment of our business, but it is not overly material. In the overall scheme of things. Where it is very interesting is in our engineering business where we are actively involved in many aspects of the construction, the design, the management of data centers. And Harrison Street has been in the data center business now for 7 years. And has something like $6 to $7 billion in investments in data centers already. This is not new for them. So data centers is an important element of. For the company virtually across the board. But, you know, in each 1 of the segments, it has a different a different level of materiality, I would say.

Anthony Paolone: Okay. Thank you.

Operator: Your next question is from the line of Erin Kyle with CIBC. Erin, your line is open. Please go ahead.

Erin Kyle: Just to thanks for taking the questions. I apologize, can you hear me?

Christian Mayer: Yes. We can hear you. Go ahead, Erin.

Erin Kyle: Thank you. Thanks. there is some line issues as you were cutting out on my end. But as it relates to the guidance, you know, you referenced geopolitical uncertainty in the rate environment I wanted to ask as it relates to your U.S. business and commercial real estate and capital markets specifically, without changing the guide, have the U.S. midterm results changed your view at all in terms of the range of potential outcomes, particularly around transaction activity or business confidence in the U.S.?

Jay Stewart Hennick: Well, I mean, we have not really had full time to digest that 1.

Christian Mayer: Yet, but based on what You have had 2 hours, 3 hours. But, you know, certainly, what you see in the commentators and what you see in the markets, it is a possibly a positive sign that could yield some upside for the fourth quarter.

Erin Kyle: that is fair enough. Your point, it is fair enough.

Jay Stewart Hennick: It might bring some-- I was going to say it might bring some stability. But I think that the. Some. to help transactions get over the line. As Christian said, there is a lot of them that are there or delayed. But I think what is really impacting them right now, especially the active ones, is the interest rate environment. And that is what is really slowing the transactions down. I am not sure the political environment in The US on existing transactions that will flow through the fourth quarter will really impact anything. But that is just my take on it. that is helpful. Thank you.

Erin Kyle: And maybe just on the capital allocation side then with organic growth moderating a bit and some parts of the business, does it change to the willingness at all to use the balance sheet for buybacks? Understanding, I know leverage is still around 2.7x, but how are you thinking about that ceiling? Is there room to push it at all?

Christian Mayer: Yeah. Erin, certainly, you know, we look at the full range of capital allocation opportunities in front of us all the time. And we are an active acquirer of businesses. And recently, just this Obsidian transaction is the latest and 1 we are really excited about. Our first priority is always going to be allocating capital to acquisition opportunities. And as we delever, and as we talked about this last quarter, we will also consider a stock buyback, if that is the right thing to do at that point in time.

Jay Stewart Hennick: We are thinking about all this stuff, you know, on an ongoing basis. But as Christian said, you know, our goal is to build each of the 3 platforms 1 step at a time. And 1 of the interesting things that is happening now is that there is some interesting business-- there is some interesting acquisition opportunities coming into the marketplace. They have not been able to sell for a whole variety of reasons. And, they would be great additions to our business. And as I said in my prepared remarks, we really do focus on building long term shareholder value And if there is something spectacular that we think that we can acquire now, because the market conditions are conducive, that would be our first priority. Thank you.

Operator: Your next question is from the line of Stephen Sheldon with William Blair. Stephen, your line is open. Please go ahead.

Stephen Sheldon: Hey, thanks for fitting me back in. Just had a quick follow-up for Christian on interest expense. It seemed like it dipped quite a bit sequentially this quarter. So curious if there were onetime items driving that. And then any guardrails you can give us on interest expense you have embedded for the fourth quarter in the guide? Yes.

Christian Mayer: Steven, there was a 1-time item in the interest expense for the quarter. And it resulted it was a result of an interest rate swap that we terminated late in the quarter and it was something we had to do from a balance sheet management perspective, but it was at an opportune time. And we took a nice gain on that of $0.17 Also in the quarter, we had a tax matter in Europe, which results in certain deferred tax assets being written off, which had a fully offsetting impact of about $0.16 So those 2 items combined neutralized each other and offset each other.

Stephen Sheldon: Great. Thank you.

Operator: This concludes our question and answer period. I will now turn the call back to mister Jay Stewart Hennick for closing remarks.

Jay Stewart Hennick: Thank you, operator, and thanks, everyone, participating in the third quarter conference call. We appreciate it. We will see you at year end.

Operator: Ladies and gentlemen, this concludes the conference call. Thank you for your participation, and have a nice day.