Revenue of $3.2 billion, up 18% (20% local
currency)Fee Revenue of $2.1 billion, up 9% (11% local
currency)GAAP EPS of $0.31; Adjusted EPS of $0.50
CBRE Group, Inc. (NYSE:CBG) today reported solid financial
results for the third quarter ended September 30, 2016.
Third-Quarter 2016
Results*
- Revenue for the third quarter totaled
$3.2 billion, an increase of 18% (20% local currency1). Fee
revenue2 increased 9% (11% local currency) to $2.1 billion. The
third quarter of 2016 included approximately $429 million of
additional revenue from the Global Workplace Solutions business,
which CBRE acquired on September 1, 2015, with a full quarter of
activity reflected in the current quarter versus only one month of
activity in the third quarter of 2015. Excluding the acquired
Global Workplace Solutions business, revenue was up 2% (5% local
currency) and fee revenue was essentially unchanged in U.S.
dollars, but up 2% in local currency.
- On a GAAP basis, net income and
earnings per diluted share decreased to $104.2 million and $0.31
per share, respectively. GAAP net income for the third quarter of
2016 was reduced by $38.9 million (pre-tax) incurred in the
previously announced cost-elimination program, which is now
complete; $30.3 million (pre-tax) of acquisition-related non-cash
amortization; and $28.6 million (pre-tax) of integration costs
associated with the Global Workplace Solutions acquisition. These
costs were partially offset by an associated tax benefit of $31.3
million.
- Adjusted net income3 and adjusted
earnings per share3 both decreased 2% to $168.0 million and $0.50
per share, respectively. The decrease reflects lower property sales
revenue and the year-over-year impact of foreign currency
movement.
- Foreign currency movement, primarily
the impact of currency translation and the marking-to-market of
currency hedges, reduced current-quarter earnings per share by
approximately $0.01, and increased earnings per share by
approximately $0.01 for the third quarter of 2015. Due to rounding,
the year-over-year negative impact was $0.03 per share when
comparing the third quarter of 2016 to the third quarter of 2015.
In the absence of this impact, adjusted earnings per share would
have been up approximately 4%.
- EBITDA4 decreased 13% to $284.6 million
and adjusted EBITDA4 increased 1% to $349.4 million. In the third
quarter of 2016, EBITDA and adjusted EBITDA were negatively
impacted by $7.2 million of currency movement, primarily related to
the sharp decline in the value of the British pound sterling, and
in the third quarter of 2015, were positively impacted by $5.7
million of currency movement, primarily the marking-to-market of
currency hedges, for a total year-over-year negative impact of
$12.9 million.
- Adjusted EBITDA margin on fee revenue
was 16.5%.
* All percentage changes versus prior-year periods throughout
this press release are in U.S. dollars, except where noted.
Management Commentary
“Our results for the third quarter were solid and largely in
line with our – as well as the market’s – expectations,” said Bob
Sulentic, CBRE’s president and chief executive officer. “Our
performance is notable when viewed against the exceptionally strong
growth we posted in last year’s third quarter – when adjusted
earnings per share increased 28% – and a backdrop of lower property
sales volumes in most markets. In this environment, CBRE’s premier
position in commercial real estate – with a deep, diverse,
market-leading service offering – continues to serve our company
and our clients particularly well.”
The Americas, the company’s largest business segment, saw
revenue increase 14% (same in local currency). In EMEA (Europe, the
Middle East & Africa), revenue rose by 30% (39% local
currency), and in Asia Pacific (APAC), revenue increased 26% (23%
local currency). Without the contributions from the acquired Global
Workplace Solutions business, revenue increased 4% (5% local
currency) in the Americas and 9% (6% local currency) in APAC. In
EMEA, revenue without this acquisition increased 10% in local
currency, but slipped 1% when converted to U.S. dollars.
In the UK, overall revenue grew by 20% in local currency, or 8%
excluding the acquired Global Workplace Solutions business. This
growth occurred despite the slowdown in the UK transaction market
in the wake of Brexit.
Among the company’s business lines, occupier outsourcing
exhibited very strong growth. Global revenue rose 50% (55% local
currency), or 10% (16% local currency) without the contributions
from the acquired Global Workplace Solutions accounts. Occupier
outsourcing fee revenue rose 57% (63% local currency), or 11% (19%
local currency) without the contributions from this acquisition. In
local currency, double-digit growth in revenue and fee revenue was
achieved in all three regions, before the contributions of the
Global Workplace Solutions acquisition. CBRE signed 113 total
outsourcing contracts (including facilities management, project
management and transaction management) in the third quarter of
2016, including 52 expansions of existing client relationships – a
record for the company.
Property sales activity was healthy by historical standards, but
global sales revenue declined 7% compared with a very strong third
quarter of 2015, when the company’s global property sales revenue
rose by 19% on a local currency basis. EMEA saw strong growth in
France, the Netherlands and Switzerland, which offset continued
weakness in property sales in the UK in the wake of Brexit.
Commercial mortgage services revenue rose 23% (24% local
currency) in the third quarter, driven by gains from mortgage
servicing rights and increased loan originations for the Government
Sponsored Enterprises to provide financing for multi-family
assets.
Leasing revenue grew 1% (2% local currency) when compared with a
very strong third quarter of 2015, which saw global leasing revenue
increase 12% year over year. In the Americas, robust growth in
Brazil, Canada and Mexico offset flat performance in the U.S. In
APAC, leasing revenue increased 7% (4% local currency), led by
Greater China, Japan and Singapore. EMEA leasing revenue rose 3% in
local currency – a turn-around from a decline in the second quarter
of 2016 – but fell 5% in U.S. dollars. A number of countries showed
strength, notably France, Ireland, Poland and Switzerland.
Revenue from property management services rose by 3% (5% local
currency), while fee revenue increased 1% (2% local currency).
Valuation revenue slipped 3% (1% local currency) for the third
quarter.
Development services once again performed well, contributing
nearly $16 million of adjusted EBITDA for the third quarter of
2016. Global investment management’s $19 million of adjusted EBITDA
for the quarter was down from the third quarter of 2015, reflecting
robust carried-interest generated in the prior-year period that did
not recur in the current quarter. Global assets under management
(AUM) totaled $87.9 billion at the end of the third quarter of
2016, up $5.0 billion in local currency from the third quarter of
2015. Foreign currency movement over the past year limited the
increase in U.S. dollars to $1.9 billion, reflecting the fact that
approximately 60% of AUM, excluding securities, is in Europe and is
generally denominated in Euro and pound sterling. Development
projects in process totaled $7.1 billion, up $400 million from the
third quarter of 2015.
CBRE’s overall business mix continued to shift toward greater
contractual fee revenue5. For the company as a whole, contractual
fee revenue was 42% of fee revenue, up from 37% in the third
quarter of 2015 and 20% in the third quarter of 2006.
Third-Quarter 2016 Segment
Results
The following tables present highlights of CBRE segment
performance during the third quarter of 2016 (dollars in
thousands):
Americas EMEA
Asia Pacific % Change from Q3
2015 % Change from Q3 2015
% Change from Q3 2015 Q3 2016 USD
LC Q3 2016 USD LC
Q3 2016 USD LC Revenue $
1,770,369 14 % 14 % $ 956,492 30 % 39 % $ 358,320 26 % 23 % Fee
revenue 1,237,379 9 % 9 % 529,963 16 % 25 % 241,355 12 % 9 % Fee
revenue, excluding GWS 1,127,521 3 % 3 % 407,616 -2 % 8 % 207,020 1
% -2 % EBITDA 186,274 -6 % -5 % 49,774 -12 % -7 % 26,744 -20
% -23 % Adjusted EBITDA 221,766 5 % 5 % 61,741 7 % 14 % 31,180 -10
% -14 %
Global Investment Management
Development Services % Change from Q3 2015 %
Change from Q3 2015 ` Q3 2016 USD
LC Q3 2016 USD LC Revenue $
91,807 -20 % -16 % $ 16,499 -11 % -11 % EBITDA 6,054 -79 % -74 %
15,709 59 % 59 % Adjusted EBITDA 18,988 -38 % -33 % 15,709 59 % 59
%
Third-quarter 2016 results were adjusted for select items
including acquisition-related integration expenses and charges
associated with a cost elimination program that is now complete.
The company does not adjust for foreign currency movements,
including currency translation and gains or losses from currency
hedging. Accordingly, EBITDA and adjusted EBITDA were both impacted
by foreign currency movements. The current quarter segment impact
of foreign currency movements, including currency translation and
the marking-to-market of currency hedges, was as follows (dollars
in thousands):
Three Months Ended September 30,
2016 2015
Change Americas $ 413 $ (1,480 ) $ 1,893 EMEA 5,205
(1,728 ) 6,933 Asia Pacific (203 ) (1,112 ) 909 Global Investment
Management 1,790 (1,340 ) 3,130 Net
losses (gains) to EBITDA $ 7,205 $ (5,660 ) $ 12,865
Nine-Month Results
- Revenue for the nine months ended
September 30, 2016 totaled $9.2 billion, an increase of 29% (32%
local currency). Fee revenue increased 17% (19% local currency) to
$6.1 billion. The first nine months of 2016 included approximately
$2.0 billion of revenue from the acquired Global Workplace
Solutions business as compared to $236.6 million in the prior-year
period, when CBRE owned this business for only one month. Excluding
the acquired Global Workplace Solutions business, revenue was up 5%
(7% local currency) and fee revenue was up 3% (5% local
currency).
- On a GAAP basis, net income and
earnings per diluted share decreased to $308.0 million and $0.91
per share, respectively. GAAP net income for the first nine months
of 2016 was reduced by $81.8 million (pre-tax) of
acquisition-related non-cash amortization; $78.5 million (pre-tax)
incurred in the cost-elimination program; and $73.5 million
(pre-tax) of integration costs associated with the Global Workplace
Solutions acquisition. These costs were partially offset by an
associated tax benefit of $71.4 million.
- Adjusted net income rose 11% to $463.8
million, while adjusted earnings per share improved 10% to
$1.37.
- Foreign currency movement, primarily
the impact of currency translation and the marking-to-market of
currency hedges, caused a net decrease of $0.03 per share in the
first nine months of 2016 compared with the same prior-year period.
This reflected a reduction of earnings per share for the 2016
period by approximately $0.02 per share, and an increase to
earnings per share of approximately $0.01 for the 2015 period. In
the absence of this impact, adjusted earnings per share would have
been up approximately 13%.
- EBITDA decreased 3% to $847.1 million
while adjusted EBITDA increased 11% to $992.5 million.
- Adjusted EBITDA margin on fee revenue
was 16.4%.
- Foreign currency movement, including
currency translation and the effect of hedging, negatively impacted
EBITDA and adjusted EBITDA by $10.4 million for the 2016 nine-month
period and positively impacted them by $6.5 million for the 2015
nine-month period for a total year-over-year negative impact of
$16.9 million.
Business Outlook
“CBRE has continued to produce strong results for our
shareholders, as we invest in our people and platform, including
digital initiatives, to drive long-term growth and create superior
outcomes for our clients,” Mr. Sulentic said. “Commercial real
estate fundamentals remain healthy in most parts of the world and
the global economy continues to grow at a modest pace. CBRE – as
the clear market leader – is well positioned to achieve strong
long-term financial performance and widen our competitive advantage
in the marketplace.”
The company continues to expect adjusted EPS for the full year
of $2.15 to $2.30 – which represents solid growth of approximately
9% at the midpoint of the range.
Conference Call Details
The company’s third-quarter earnings conference call will be
held today (Thursday, October 27, 2016) at 8:00 a.m. Eastern Time.
A webcast, along with an associated slide presentation, will be
accessible through the Investor Relations section of the company’s
website at www.cbre.com/investorrelations.
The direct dial-in number for the conference call is
877-407-8037 for U.S. callers and 201-689-8037 for international
callers. A replay of the call will be available starting at 1 p.m.
Eastern Time on October 27, 2016, and ending at midnight
Eastern Time on November 3, 2016. The dial-in number for the replay
is 877-660-6853 for U.S. callers and 201-612-7415 for international
callers. The access code for the replay is 13645729. A transcript
of the call will be available on the company’s Investor Relations
website at www.cbre.com/investorrelations.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500
company headquartered in Los Angeles, is the world’s largest
commercial real estate services and investment firm (based on 2015
revenue). The company has more than 70,000 employees (excluding
affiliates), and serves real estate investors and occupiers through
more than 400 offices (excluding affiliates) worldwide. CBRE offers
a broad range of integrated services, including facilities,
transaction and project management; property management; investment
management; appraisal and valuation; property leasing; strategic
consulting; property sales; mortgage services; and development
services. Please visit our website at www.cbre.com.
The information contained in, or accessible through, the
company’s website is not incorporated into this press release.
Note: This release contains forward-looking statements within
the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995, including statements
regarding our future growth momentum, operations, financial
performance (including adjusted earnings per share expectations),
market share, and business outlook. These forward-looking
statements involve known and unknown risks, uncertainties and other
factors that may cause the company’s actual results and performance
in future periods to be materially different from any future
results or performance suggested in forward-looking statements in
this release. Any forward-looking statements speak only as of the
date of this release and, except to the extent required by
applicable securities laws, the company expressly disclaims any
obligation to update or revise any of them to reflect actual
results, any changes in expectations or any change in events. If
the company does update one or more forward-looking statements, no
inference should be drawn that it will make additional updates with
respect to those or other forward-looking statements. Factors that
could cause results to differ materially include, but are not
limited to: disruptions in general economic and business
conditions, particularly in geographies where our business may be
concentrated; volatility and disruption of the securities, capital
and credit markets; interest rate increases; the cost and
availability of capital for investment in real estate; clients’
willingness to make real estate or long-term contractual
commitments and other factors affecting the value of real estate
assets, inside and outside the United States; foreign currency
fluctuations; increases in unemployment and general slowdowns in
commercial activity; trends in pricing and risk assumption for
commercial real estate services; the effect of significant
movements in average cap rates across different property types; a
reduction by companies in their reliance on outsourcing for their
commercial real estate needs, which would affect our revenues and
operating performance; client actions to restrain project spending
and reduce outsourced staffing levels; declines in lending activity
of Government Sponsored Enterprises, regulatory oversight of such
activity and our mortgage servicing revenue from the U.S.
commercial real estate mortgage market; our ability to diversify
our revenue model to offset cyclical economic trends in the
commercial real estate industry; our ability to attract new user
and investor clients; our ability to retain major clients and renew
related contracts; our ability to leverage our global services
platform to maximize and sustain long-term cash flow; our ability
to maintain EBITDA margins that enable us to continue investing in
our platform and client service offerings; our ability to control
costs relative to revenue growth; variations in historically
customary seasonal patterns that cause our business not to perform
as expected; changes in domestic and international law and
regulatory environments (including relating to anti-corruption,
anti-money laundering, trade sanctions, currency controls and other
trade control laws), particularly in Russia, Eastern Europe and the
Middle East, due to the rising level of political instability in
those regions; economic volatility and market uncertainty globally
related to uncertainty surrounding the implementation and effect of
the United Kingdom’s referendum to leave the European Union,
including uncertainty in relation to the legal and regulatory
framework that would apply to the United Kingdom and its
relationship with remaining members of the European Union; our
ability to identify, acquire and integrate synergistic and
accretive businesses; costs and potential future capital
requirements relating to businesses we may acquire; integration
challenges arising out of companies we may acquire; our ability to
retain and incentivize producers; the ability of our Global
Investment Management business to maintain and grow assets under
management and achieve desired investment returns for our
investors, and any potential related litigation, liabilities or
reputational harm possible if we fail to do so; our ability to
manage fluctuations in net earnings and cash flow, which could
result from poor performance in our investment programs, including
our participation as a principal in real estate investments; our
leverage under our debt instruments as well as the limited
restrictions therein on our ability to incur additional debt, and
the potential increased borrowing costs to us from a credit-ratings
downgrade; litigation and its financial and reputational risks to
us; the ability of CBRE Capital Markets to periodically amend, or
replace, on satisfactory terms, the agreements for its warehouse
lines of credit; our exposure to liabilities in connection with
real estate advisory and property management activities and our
ability to procure sufficient insurance coverage on acceptable
terms; liabilities under guarantees, or for construction defects,
that we incur in our Development Services business; our ability to
compete globally, or in specific geographic markets or business
segments that are material to us; our and our employees’ ability to
execute on, and adapt to, information technology strategies and
trends; our ability to comply with laws and regulations related to
our global operations, including real estate licensure, tax, labor
and employment laws and regulations, as well as the anti-corruption
laws and trade sanctions of the U.S. and other countries; our
ability to maintain our effective tax rate at or below current
levels; and the effect of implementation of new accounting rules
and standards.
Additional information concerning factors that may influence the
company’s financial information is discussed under “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” “Quantitative and Qualitative Disclosures
About Market Risk” and “Cautionary Note on Forward-Looking
Statements” in both our Annual Report on Form 10-K for the year
ended December 31, 2015 and our Quarterly Reports on Form 10-Q for
the quarters ended March 31, 2016 and June 30, 2016, as well as in
the company’s press releases and other periodic filings with the
Securities and Exchange Commission (the SEC). Such filings are
available publicly and may be obtained on the company’s website at
www.cbre.com or upon written request from CBRE’s Investor Relations
Department at investorrelations@cbre.com.
Note – CBRE has not reconciled the (non-GAAP) adjusted earnings
per share forward-looking guidance included in this release to the
most directly comparable GAAP measure because this cannot be done
without unreasonable effort due to the variability and low
visibility with respect to costs related to acquisitions, carried
interest incentive compensation and financing costs, which are
potential adjustments to future earnings. We expect the variability
of these items to have a potentially unpredictable, and a
potentially significant, impact on our future GAAP financial
results.
The terms “fee revenue,” “adjusted net income,” “adjusted
earnings per share” (or adjusted EPS), “EBITDA,” “adjusted EBITDA”
and “contractual fee revenue” all of which CBRE uses in this press
release, are non-GAAP financial measures under SEC guidelines, and
you should refer to the footnotes below as well as the “Non-GAAP
Financial Measures” section in this press release for a further
explanation of these measures. We have also included in that
section reconciliations of these measures in specific periods to
their most directly comparable financial measure calculated and
presented in accordance with GAAP for those periods.
1 Local currency percentage change is calculated by comparing
current-period results at prior-period exchange rates versus
prior-period results.
2 Fee revenue is gross revenue less both client reimbursed costs
largely associated with employees that are dedicated to client
facilities and subcontracted vendor work performed for clients.
3 Adjusted net income and adjusted earnings per share (or
adjusted EPS) exclude the effect of select charges from GAAP net
income and GAAP earnings per diluted share as well as adjust the
provision for income taxes for such charges. Adjustments during the
periods presented included the write-off of financing costs on
extinguished debt, amortization expense related to certain
intangible assets attributable to acquisitions, integration and
other costs related to acquisitions, cost-elimination expenses and
certain carried interest incentive compensation (reversal) expense
to align with the timing of associated revenue.
4 EBITDA represents earnings before net interest expense,
write-off of financing costs on extinguished debt, income taxes,
depreciation and amortization. Amounts shown for adjusted EBITDA
further remove (from EBITDA) the impact of certain cash and
non-cash charges related to acquisitions, cost-elimination expenses
and certain carried interest incentive compensation (reversal)
expense to align with the timing of associated revenue.
5 Contractual fee revenue refers to revenue derived from our
Occupier Outsourcing, Property Management, Investment Management
and Valuation businesses.
CBRE GROUP, INC.
OPERATING RESULTS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2016 AND 2015
(Dollars in thousands, except share
data)
Three Months Ended Nine Months Ended
September 30, September 30, 2016
2015 2016 2015
Revenue $ 3,193,487 $ 2,712,559 $ 9,247,758 $ 7,155,568
Costs and expenses: Cost of services 2,252,783 1,773,660
6,520,629
4,552,411
Operating, administrative and other 686,723 636,157 2,011,535
1,785,393 Gains on currency hedges (193 ) (9,252 ) (1,197 ) (16,555
) Depreciation and amortization 92,725 75,047
269,987 215,498 Total costs and
expenses 3,032,038 2,475,612
8,800,954 6,536,747 Gain on disposition
of real estate (1) 11,043 3,154
15,862 10,140 Operating income 172,492
240,101 462,666 628,961 Equity income from unconsolidated
subsidiaries (1) 24,672 17,242 116,902 39,386 Other income (loss)
1,356 (4,945 ) 8,453 (4,927 ) Interest income 1,020 1,158 5,545
4,857 Interest expense 37,273 30,699 109,050 83,067 Write-off of
financing costs on extinguished debt - -
- 2,685 Income before provision
for income taxes 162,267 222,857 484,516 582,525 Provision for
income taxes 51,414 72,866
165,578 206,243 Net income 110,853 149,991
318,938 376,282 Less: Net income attributable to non-controlling
interests (1) 6,690 868 10,940
9,193 Net income attributable to CBRE Group,
Inc. $ 104,163 $ 149,123 $ 307,998 $ 367,089
Basic income per share: Net income per share
attributable to CBRE Group, Inc. $ 0.31 $ 0.45 $ 0.92
$ 1.10
Weighted average shares outstanding for
basic income per share
335,770,122 332,684,487
334,949,606 332,223,036 Diluted income
per share: Net income per share attributable to CBRE Group, Inc. $
0.31 $ 0.44 $ 0.91 $ 1.09
Weighted average shares outstanding for
diluted income per share
338,488,975 336,561,877
338,053,297 336,140,923 EBITDA $
284,555 $ 326,577 $ 847,068 $ 869,725
(1) Equity income from unconsolidated
subsidiaries and gain on disposition of real estate, less net
income attributable to non-controlling interests, includes income
of $26.2 million and $11.1 million for the three months ended
September 30, 2016 and 2015, respectively, and income of $107.0
million and $24.3 million for the nine months ended September 30,
2016 and 2015, respectively, attributable to Development Services
but does not include significant related compensation expense
(which is included in operating, administrative and other
expenses). Equity income from unconsolidated subsidiaries and gain
on disposition of real estate, net of non-controlling interests,
and the related compensation expense, are all included in EBITDA in
the Development Services segment.
CBRE GROUP, INC.
SEGMENT RESULTS
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2016 AND 2015
(Dollars in thousands)
Three Months Ended Nine Months Ended
September 30, September 30, 2016
2015 (1) 2016 2015
(1)
Americas
Revenue $ 1,770,369 $ 1,556,648 $ 5,129,684 $ 4,218,753 Costs and
expenses: Cost of services 1,252,503 1,046,245 3,583,526 2,757,871
Operating, administrative and other (2) 334,924 319,091 991,814
896,438 Depreciation and amortization 62,545
47,209 186,342 134,750 Operating
income $ 120,397 $ 144,103 $ 368,002 $ 429,694
EBITDA $ 186,274 $ 197,379 $ 568,019 $
581,397
EMEA
Revenue $ 956,492 $ 737,863 $ 2,765,825 $ 1,817,601 Costs and
expenses: Cost of services 740,824 542,037 2,188,281 1,305,487
Operating, administrative and other (2) 165,946 140,149 477,448
400,398 Depreciation and amortization 19,385
15,175 50,647 44,574 Operating
income $ 30,337 $ 40,502 $ 49,449 $ 67,142
EBITDA $ 49,774 $ 56,666 $ 101,690 $
114,328
Asia
Pacific
Revenue $ 358,320 $ 285,337 $ 1,023,162 $ 755,531 Costs and
expenses: Cost of services 259,456 185,378 748,822 489,053
Operating, administrative and other (2) 72,177 66,724 216,601
189,091 Depreciation and amortization 4,479
3,728 12,957 11,357 Operating
income $ 22,208 $ 29,507 $ 44,782 $ 66,030
EBITDA $ 26,744 $ 33,252 $ 57,673 $
77,438
Global Investment
Management
Revenue $ 91,807 $ 114,094 $ 277,924 $ 318,371 Costs and expenses:
Operating, administrative and other (2) 86,493 81,058 232,460
229,501 Depreciation and amortization 5,673
8,423 18,110 23,095 Operating
(loss) income $ (359 ) $ 24,613 $ 27,354 $ 65,775
EBITDA $ 6,054 $ 29,397 $ 53,577 $
80,390
Development
Services
Revenue $ 16,499 $ 18,617 $ 51,163 $ 45,312 Costs and expenses:
Operating, administrative and other 26,990 19,883 92,015 53,410
Depreciation and amortization 643 512 1,931 1,722 Gain on
disposition of real estate 11,043 3,154
15,862 10,140 Operating (loss) income $
(91 ) $ 1,376 $ (26,921 ) $ 320 EBITDA $ 15,709
$ 9,883 $ 66,109 $ 16,172 (1)
During 2016, we changed our methodology for
allocating certain costs to our reporting segments, including stock
compensation, currency hedging and certain intercompany
transactions. Prior-year amounts have been reclassified to conform
with the current-year presentation. Such changes had no impact on
our consolidated results. (2) Operating, administrative and
other expenses includes gains and losses on currency hedges.
Non-GAAP Financial
Measures
As noted above, the following measures are considered “non-GAAP
financial measures” under SEC guidelines:
(i) Fee revenue
(ii) Contractual fee revenue (iii) Net income attributable to CBRE
Group, Inc., as adjusted (which we also refer to as “adjusted net
income”) (iv) Diluted income per share attributable to CBRE Group,
Inc. shareholders, as adjusted (which we also refer to as “adjusted
earnings per share” or “adjusted EPS”) (v) EBITDA and adjusted
EBITDA
None of these measures is a recognized measurement under United
States generally accepted accounting principles, or “GAAP,” and
when analyzing our operating performance, readers should use them
in addition to, and not as an alternative for, their most directly
comparable financial measure calculated and presented in accordance
with GAAP. Because not all companies use identical
calculations, our presentation of these measures may not be
comparable to similarly titled measures of other companies.
Our management generally uses these non-GAAP financial measures
to evaluate operating performance and for other discretionary
purposes, and the company believes that these measures provide a
more complete understanding of ongoing operations, enhance
comparability of current results to prior periods and may be useful
for investors to analyze our financial performance because they
eliminate the impact of selected charges that may obscure trends in
the underlying performance of our business. The company further
uses certain of these measures, and believes that they are useful
to investors, for purposes described below.
With respect to fee revenue: the company believes that investors
may find this measure useful to analyze the financial performance
of our Occupier Outsourcing and Property Management business lines
and our business generally because it excludes costs reimbursable
by clients, and as such provides greater visibility into the
underlying performance of our business.
With respect to contractual fee revenue: the company believes
investors may find this measure useful to analyze the company’s
overall financial performance because it identifies revenue streams
that are typically more stable over time.
With respect to adjusted net income, adjusted EPS, EBITDA and
adjusted EBITDA: the company believes that investors may find these
measures useful in evaluating our operating performance compared to
that of other companies in our industry because their calculations
generally eliminate the accounting effects of acquisitions, which
would include impairment charges of goodwill and intangibles
created from acquisitions—and in the case of EBITDA and adjusted
EBITDA—the effects of financings and income tax and the accounting
effects of capital spending. All of these measures may vary for
different companies for reasons unrelated to overall operating
performance. In the case of EBITDA and adjusted EBITDA, these
measures are not intended to be measures of free cash flow for our
management’s discretionary use because they do not consider cash
requirements such as tax and debt service payments. The EBITDA and
adjusted EBITDA measures calculated herein may also differ from the
amounts calculated under similarly titled definitions in our credit
facilities and debt instruments, which amounts are further adjusted
to reflect certain other cash and non-cash charges and are used by
us to determine compliance with financial covenants therein and our
ability to engage in certain activities, such as incurring
additional debt and making certain restricted payments. The company
also uses adjusted EBITDA and adjusted EPS as significant
components when measuring our operating performance under our
employee incentive compensation programs.
Fee revenue excludes the following from revenue: client
reimbursed pass through costs largely associated with employees
that are dedicated to client facilities and subcontracted vendor
work performed for clients. Fee revenue is calculated as follows
(dollars in thousands):
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015
Consolidated
Revenue $ 3,193,487 $ 2,712,559 $ 9,247,758 $ 7,155,568 Less: Pass
through costs also recognized as revenue 1,076,484
772,856 3,189,909 1,980,502 Fee revenue $ 2,117,003 $
1,939,703 $ 6,057,849 $ 5,175,066
Three Months Ended
September 30, 2016 2015 2006
Non-contractual fee revenue $ 1,225,046 $ 1,224,669 $ 720,882
Contractual fee revenue 891,957 715,034
182,452 Fee revenue $ 2,117,003 $ 1,939,703 903,334 Plus: Pass
through costs also recognized as revenue 64,607 Consolidated
Revenue $ 967,941
Three Months Ended Nine Months
Ended September 30, September 30, 2016
2015 2016 2015
Occupier
Outsourcing
Revenue (1) $ 1,494,466 $ 996,127 $ 4,437,964 $ 2,436,763 Less:
Pass through costs also recognized as revenue 938,172
641,902 2,785,958 1,580,479 Fee revenue (1) $ 556,294
$ 354,225 $ 1,652,006 $ 856,284
Property
Management
Revenue (1) $ 261,813 $ 253,455 $ 774,109 $ 760,563 Less: Pass
through costs also recognized as revenue 138,312
130,954 403,951 400,023 Fee revenue (1) $ 123,501 $
122,501 $ 370,158 $ 360,540 _________________________ (1)
Excludes associated leasing and sales revenue.
Americas
Revenue $ 1,770,369 $ 1,556,648 $ 5,129,684 $ 4,218,753 Less: Pass
through costs also recognized as revenue 532,990
422,911 1,575,645 1,164,248 Fee revenue $ 1,237,379 $
1,133,737 $ 3,554,039 $ 3,054,505
EMEA
Revenue $ 956,492 $ 737,863 $ 2,765,825 $ 1,817,601 Less: Pass
through costs also recognized as revenue 426,529
279,866 1,257,975 626,563 Fee revenue $ 529,963 $
457,997 $ 1,507,850 $ 1,191,038
Asia
Pacific
Revenue $ 358,320 $ 285,337 $ 1,023,162 $ 755,531 Less: Pass
through costs also recognized as revenue 116,965
70,079 356,289 189,691 Fee revenue $ 241,355 $
215,258 $ 666,873 $ 565,840
Net income attributable to CBRE Group, Inc., as adjusted (or
adjusted net income), and diluted income per share attributable to
CBRE Group, Inc. shareholders, as adjusted (or adjusted EPS), are
calculated as follows (dollars in thousands, except share
data):
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Net income attributable to CBRE
Group, Inc. $ 104,163 $ 149,123 $ 307,998 $ 367,089 Plus /
minus: Cost-elimination expenses 38,877 - 78,456 -
Amortization expense related to certain
intangible assets attributable to acquisitions
30,306 16,875 81,758 46,762 Integration and other costs related to
acquisitions 28,596 16,904 73,520 24,922
Carried interest incentive compensation
(reversal) expense to align with the timing of associated
revenue
(2,644 ) 1,150 (6,526 ) 493 Write-off of financing costs on
extinguished debt - - - 2,685 Tax impact of adjusted items
(31,271 ) (12,343 ) (71,415 ) (24,277 )
Net income attributable to CBRE Group,
Inc. shareholders, as adjusted
$ 168,027 $ 171,709 $ 463,791 $ 417,674
Diluted income per share attributable to
CBRE Group, Inc. shareholders, as adjusted
$ 0.50 $ 0.51 $ 1.37 $ 1.24
Weighted average shares outstanding for
diluted income per share
338,488,975 336,561,877
338,053,297 336,140,923
EBITDA and adjusted EBITDA are calculated as follows (dollars in
thousands):
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 2016
2015 Net income attributable to CBRE
Group, Inc. $ 104,163 $ 149,123 $ 307,998 $ 367,089 Add:
Depreciation and amortization 92,725 75,047 269,987 215,498
Interest expense 37,273 30,699 109,050 83,067 Write-off of
financing costs on extinguished debt - - - 2,685 Provision for
income taxes 51,414 72,866 165,578 206,243 Less: Interest income
1,020 1,158 5,545 4,857
EBITDA 284,555 326,577 847,068 869,725 Adjustments:
Cost-elimination expenses (1) 38,877 - 78,456 - Integration and
other costs related to acquisitions 28,596 16,904 73,520 24,922
Carried interest incentive compensation
(reversal) expense to align with the timing of associated
revenue
(2,644 ) 1,150 (6,526 ) 493 Adjusted
EBITDA $ 349,384 $ 344,631 $ 992,518 $ 895,140
(1) Represents cost-elimination expenses relating to
a program initiated in the fourth quarter of 2015 to reduce the
Company’s global cost structure after several years of significant
revenue and related cost growth. Cost-elimination expenses incurred
in the three and nine months ended September 30, 2016 consisted of
$36.7 million and $73.6 million, respectively, of severance costs
related to headcount reductions in connection with the program and
$2.2 million and $4.9 million, respectively, of third-party
contract termination costs.
EBITDA and adjusted EBITDA for segments are calculated as
follows (dollars in thousands):
Three Months Ended
Nine Months Ended September 30, September 30,
2016 2015 (1) 2016
2015 (1)
Americas
Net income attributable to CBRE Group, Inc. $ 69,176 $ 92,008 $
231,158 $ 286,796 Adjustments: Depreciation and amortization 62,545
47,209 186,342 134,750 Interest expense, net 21,492 9,692 64,583
17,485 Write-off of financing costs on extinguished debt - - -
2,685 Royalty and management service income (3,138 ) (2,703 )
(23,295 ) (9,668 ) Provision for income taxes 36,199
51,173 109,231 149,349
EBITDA 186,274 197,379 568,019 581,397 Integration and other costs
related to acquisitions 17,518 14,462 46,207 21,870
Cost-elimination expenses 17,974 -
22,273 - Adjusted EBITDA $ 221,766
$ 211,841 $ 636,499 $ 603,267
EMEA
Net income attributable to CBRE Group, Inc. $ 23,524 $ 24,535 $
19,278 $ 24,921 Adjustments: Depreciation and amortization 19,385
15,175 50,647 44,574 Interest expense, net 4,078 10,834 11,916
33,656 Royalty and management service (income) expense (2,992 )
(1,452 ) 685 (4,313 ) Provision for income taxes 5,779
7,574 19,164 15,490
EBITDA 49,774 56,666 101,690 114,328 Integration and other
costs related to acquisitions 9,929 969 22,401 999 Cost-elimination
expenses 2,038 - 25,640
- Adjusted EBITDA $ 61,741 $ 57,635 $
149,731 $ 115,327
Asia
Pacific
Net income attributable to CBRE Group, Inc. $ 11,576 $ 16,665 $
14,068 $ 29,643 Adjustments: Depreciation and amortization 4,479
3,728 12,957 11,357 Interest expense, net 1,250 800 1,292 2,689
Royalty and management service expense 5,277 3,581 19,629 11,342
Provision for income taxes 4,162 8,478
9,727 22,407 EBITDA 26,744 33,252
57,673 77,438 Cost-elimination expenses 3,287 - 9,265 - Integration
and other costs related to acquisitions 1,149
1,473 4,912 2,053 Adjusted
EBITDA $ 31,180 $ 34,725 $ 71,850 $ 79,491
Global Investment
Management
Net (loss) income attributable to CBRE Group, Inc. $ (7,830 ) $
10,717 $ 7,635 $ 18,546 Adjustments: Depreciation and amortization
5,673 8,423 18,110 23,095 Interest expense, net 7,611 8,060 23,124
23,562 Royalty and management service expense 853 574 2,981 2,639
(Benefit of) provision for income taxes (253 ) 1,623
1,727 12,548 EBITDA 6,054 29,397
53,577 80,390 Cost-elimination expenses 15,578 - 21,278 - Carried
interest incentive compensation (reversal) expense (2,644 )
1,150 (6,526 ) 493 Adjusted
EBITDA $ 18,988 $ 30,547 $ 68,329 $ 80,883
Development
Services
Net income attributable to CBRE Group, Inc. $ 7,717 $ 5,198 $
35,859 $ 7,183 Adjustments: Depreciation and amortization 643 512
1,931 1,722 Interest expense, net 1,822 155 2,590 818 Provision for
income taxes 5,527 4,018 25,729
6,449 EBITDA $ 15,709 $ 9,883 $
66,109 $ 16,172 (1) During 2016,
we changed our methodology for allocating certain costs to our
reporting segments, including stock compensation, currency hedging
and certain intercompany transactions. Prior-year amounts have been
reclassified to conform with the current-year presentation. Such
changes had no impact on our consolidated results.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
September 30, December 31, 2016
2015 Assets: Cash and cash equivalents (1) $
446,346 $ 540,403 Restricted cash 70,755 72,764 Receivables, net
2,399,161 2,471,740 Warehouse receivables (2) 1,642,394 1,767,107
Property and equipment, net 550,779 529,823 Goodwill and other
intangibles, net 4,459,915 4,536,466 Investments in and advances to
unconsolidated subsidiaries 249,883 217,943 Other assets, net
957,537 881,697 Total assets $ 10,776,770 $
11,017,943
Liabilities: Current liabilities,
excluding debt $ 2,819,730 $ 3,208,932 Warehouse lines of credit
(2) 1,619,091 1,750,781 Revolving credit facility 83,000 - Senior
term loans, net 856,664 877,899 5.00% senior notes, net 790,083
789,144 4.875% senior notes, net 591,016 590,469 5.25% senior
notes, net 422,126 421,964 Other debt 52 79 Other long-term
liabilities 613,505 619,605 Total liabilities
7,795,267 8,258,873
Equity: CBRE Group, Inc.
stockholders' equity 2,935,025 2,712,652 Non-controlling interests
46,478 46,418 Total equity 2,981,503
2,759,070 Total liabilities and equity $ 10,776,770 $ 11,017,943
(1) Includes $79.1 million and $70.2 million
of cash in consolidated funds and other entities not available for
company use as of September 30, 2016 and December 31, 2015,
respectively. (2) Represents loan receivables, the majority
of which are offset by borrowings under related warehouse line of
credit facilities.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161027005431/en/
CBRE Group, Inc.Steve IacoSenior Managing DirectorInvestor
Relations & Corporate Communications212-984-6535
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