Revenue up 34%
Fee Revenue up 19%
GAAP EPS of $0.36; Adjusted EPS of
$0.52
CBRE Group, Inc. (NYSE:CBG) today reported strong financial
results for the second quarter ended June 30, 2016.
Second-Quarter 2016
Results*
- Revenue for the second quarter totaled
$3.2 billion, an increase of 34% (35% local currency1). Fee
revenue2 increased 19% (20% local currency) to $2.1 billion. The
second quarter of 2016 included approximately $690 million of
revenue from the acquired Global Workplace Solutions business.
Excluding the acquired Global Workplace Solutions business, revenue
was up 5% (6% local currency) and fee revenue was up 3% (4% local
currency).
- On a GAAP basis, net income and
earnings per diluted share decreased to $121.7 million and $0.36
per share, respectively. GAAP net income for the second quarter of
2016 was reduced by $27.8 million (pre-tax) of integration costs
associated with the Global Workplace Solutions acquisition; $27.2
million (pre-tax) incurred in the previously announced
cost-elimination program; and $26.6 million (pre-tax) of
acquisition-related non-cash amortization. These costs were
partially offset by an associated tax benefit of $23.9
million.
- Adjusted net income3 rose 25% to $174.9
million, while adjusted earnings per share3 improved 24% to $0.52
per share.
- Foreign currency movement, primarily
the impact of marking-to-market of currency hedges, increased
current-quarter earnings per share by approximately $0.01 per
share. For the second quarter of 2015 this impact reduced earnings
per share by approximately $0.03.
- EBITDA4 rose 4% to $309.9 million and
adjusted EBITDA4 increased 19% to $360.5 million. EBITDA and
adjusted EBITDA were both positively impacted by $4.1 million of
currency movement, primarily the marking-to-market of currency
hedges in the second quarter of 2016. EBITDA and adjusted EBITDA
were both negatively impacted by $13.9 million of currency
movement, primarily the marking-to-market of currency hedges in the
second quarter of 2015.
- Adjusted EBITDA margin on fee revenue
was 17.0%.
* All percentage changes versus prior-year periods throughout
this press release are in U.S. dollars, except where noted.
Management Commentary
“CBRE posted another quarter of strong growth,” said Bob
Sulentic, the company’s president and chief executive officer.
“This growth came amid uncertainty in the macro environment, making
the diversity of CBRE’s service offering especially important. Our
performance for the quarter was supported by strong growth in
occupier outsourcing and mortgage services, with leasing also up
nicely in the Americas and Asia Pacific. In addition, our
investment management and development services businesses also
produced solid earnings gains.”
The Americas, the company’s largest business segment, saw
revenue increase 24%. In EMEA (Europe, the Middle East &
Africa), revenue rose by 64% (66% local currency), and in Asia
Pacific (APAC) revenue increased 36% (38% local currency). Without
the contributions from the Global Workplace Solutions business,
which CBRE acquired in September 2015, revenue increased 7% in the
Americas, 3% (6% local currency) in EMEA and 3% (5% local currency)
in APAC.
Occupier outsourcing continued to exhibit strong growth. Global
revenue was up 105% (107% local currency), aided by contributions
from the Global Workplace Solutions acquisition. Without the
contributions from this acquisition, revenue rose 13% (15% local
currency). Occupier outsourcing fee revenue without the Global
Workplace Solutions acquisition rose 8% (10% local currency).
Globally, the company signed 96 total contracts, including 37 with
new clients.
Commercial mortgage services showed very good growth with
revenue up 14%, driven by strong activity with private lenders,
particularly banks, and continued growth with Government Sponsored
Enterprises.
Leasing achieved good growth in the Americas, up 8%, and APAC,
up 6% (7% local currency), as the company continued to benefit from
producers choosing to join CBRE through its recruitment initiative.
In the Americas, Canada, Mexico and the U.S. all turned in healthy
performances while APAC was led by Greater China, India and New
Zealand. EMEA leasing revenue fell 11% for the quarter.
Global property sales revenue fell 6% (5% local currency).
Americas sales revenue rose 1% (2% local currency), while EMEA
declined 17% (16% local currency) and APAC decreased 18% (16% local
currency). This compared with a robust second quarter of 2015, when
year-on-year growth rates were 23% (25% local currency) in the
Americas; 37% (62% local currency) in EMEA and 8% (24% local
currency) in APAC.
Revenue from property management services increased 3% (4% local
currency), while Valuation revenue dipped 2% (1% local
currency).
The global investment management and development services
businesses performed well during the quarter, contributing more
than $26 million and $18 million of adjusted EBITDA, respectively.
Global investment assets under management (AUM) totaled $88.6
billion at the end of the second quarter of 2016, up $3.9 billion
in local currency from the second quarter of 2015. However, foreign
currency movement over the past year limited the increase in U.S.
dollars to $0.2 billion. Development projects in process totaled
$7.1 billion, up $1.1 billion from the second quarter of 2015.
For the entire company, CBRE’s business mix continued to shift
toward greater contractual fee revenue5. For the company as a
whole, contractual fee revenue was 44% of fee revenue, up from 34%
in second-quarter 2015 and 19% in the second quarter of 2006.
United Kingdom
Operations
A high degree of uncertainty affected the United Kingdom (UK)
real estate market leading up to the country’s referendum on its
European Union membership on June 23, 2016. This can be seen in a
nearly 40% drop in the UK market-wide property sales volumes,
according to CBRE Research. The effect on CBRE’s UK revenue during
the second quarter was materially less pronounced.
Overall, without the contributions of the acquired Global
Workplace Solutions business, total UK revenue slipped only 2% (up
3% local currency) compared with a very strong second quarter of
2015. UK fee revenue was 9% (5% local currency) below the
year-earlier pace, when fee revenue rose 19% (32% local currency)
versus the second quarter of 2014.
Including contributions of the acquired Global Workplace
Solutions business, CBRE’s total UK revenue increased 26% (30%
local currency), and its UK fee revenue increased 8% (12% local
currency).
This performance highlights how significantly CBRE’s UK business
has evolved in recent years. During the first half of 2016,
occupier outsourcing and property management—which is sticky,
recurring revenue—accounted for 69% of UK fee revenue versus just
19% of UK fee revenue for the first half of 2013. This shift in UK
revenue mix has been driven by the company’s acquisitions of
Norland Managed Services in December 2013 and Global Workplace
Solutions in September 2015.
Second-Quarter 2016 Segment
Results
The following tables present highlights of CBRE segment
performance during the second quarter of 2016 (dollars in
thousands):
Americas EMEA
Asia Pacific % Change from Q2 2015 %
Change from Q2 2015 % Change from Q2 2015 Q2
2016 USD LC Q2 2016 USD
LC Q2 2016 USD LC
Revenue $ 1,775,756 24% 24% $ 961,835 64% 66% $ 356,318 36% 38% Fee
revenue 1,247,799 17% 18% 530,498 30% 31% 232,829 16% 18% Fee
revenue, excluding GWS 1,123,958 6% 6% 398,422 -3% -1% 198,090 -1%
1% EBITDA 208,407 -3% -2% 36,702 -7% -4% 20,275 -32% -29% Adjusted
EBITDA 227,346 4% 5% 60,274 53% 56% 27,880 -8% -5%
Global Investment Management Development Services
% Change from Q2 2015 % Change from Q2 2015 `
Q2 2016 USD LC Q2 2016 USD
LC Revenue $ 95,737 2% 2% $ 17,891 24% 24% EBITDA
25,987 101%
103% 18,525 2360% 2360% Adjusted EBITDA 26,426 75% 77% 18,525 2360%
2360%
Second-quarter 2016 results were impacted by select items
including acquisition-related integration expenses and charges
associated with cost elimination actions. The company does not
adjust for currency movements, including gains or losses from
currency hedging. Accordingly, EBITDA and adjusted EBITDA were both
impacted by foreign currency movements, including the
marking-to-market of currency hedging. This increased the
current-quarter adjusted EBITDA by $4.1 million with the breakdown
by segment as follows: Americas $0.7 million; EMEA $4.5 million;
and Global Investment Management $1.0 million. Asia Pacific was
negatively impacted by $2.1 million. Second-quarter 2015 adjusted
EBITDA was negatively impacted by $13.9 million with the breakdown
by segment as follows: Americas $0.2 million; EMEA $8.3 million;
Asia Pacific $2.5 million; and Global Investment Management $2.9
million.
Six-Month Results
- Revenue for the six months ended June
30, 2016 totaled $6.1 billion, an increase of 36% (38% local
currency). Fee revenue increased 22% (24% local currency) to $3.9
billion. The first six months of 2016 included approximately $1.3
billion of revenue from the acquired Global Workplace Solutions
business. Excluding the acquired Global Workplace Solutions
business, revenue was up 6% (8% local currency) and fee revenue was
up 5% (7% local currency).
- On a GAAP basis, net income and
earnings per diluted share decreased to $203.8 million and $0.60
per share, respectively. GAAP net income for the first six months
of 2016 was reduced by $51.5 million (pre-tax) of
acquisition-related non-cash amortization; $44.9 million (pre-tax)
of integration costs associated with the Global Workplace Solutions
acquisition; and $39.6 million (pre-tax) incurred in the
cost-elimination program. These costs were partially offset by an
associated tax benefit of $40.1 million.
- Adjusted net income rose 20% to $295.8
million, while adjusted earnings per share improved 21% to $0.88
per share.
- EBITDA rose 4% to $562.5 million and
adjusted EBITDA increased 17% to $643.1 million.
- Adjusted EBITDA margin on fee revenue
was 16.3%.
- Foreign currency movement, including
the effect of hedging, negatively impacted adjusted EBITDA for the
first six months of 2016 by $3.2 million and positively impacted
the first six months of 2015 by $0.9 million.
Business Outlook
“Our business has performed very well in the first half of 2016,
even with a decline in market-wide property sales volumes compared
to a year ago,” Mr. Sulentic said. “It is important to note that
market fundamentals in commercial real estate remain in good shape
– with the impact of Brexit largely limited to property transaction
activity in the UK – and we anticipate solid earnings growth for
the year. Looking ahead, we are adjusting our outlook for the
remainder of the year. This is due principally to the impact of
Brexit on UK property transaction volumes, and less visibility
around the timing of the realization of certain incentives in our
global investment management and development services
businesses.”
These factors have caused CBRE to reduce its guidance by 3% at
the top end of the range and by 5% at the bottom end. This results
in expected adjusted earnings-per-share for the calendar year of
$2.15 to $2.30, which represents solid growth of approximately 9%
at the mid-point of the range.
Mr. Sulentic concluded: “As the clear market leader, CBRE is
well positioned to further extend our competitive advantage in the
marketplace. Our ongoing talent and technology initiatives,
collaborative culture, market-leading service offering and
financial strength uniquely position us to satisfy clients’ growing
demand for our services.”
Conference Call Details
The company’s second-quarter earnings conference call will be
held today (Thursday, July 28, 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 July 28, 2016, and ending at midnight Eastern
Time on August 4, 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 13639263. 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 Report on Form 10-Q for
the quarter ended March 31, 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 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, cost elimination
expenses, 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 SIX MONTHS ENDED JUNE
30, 2016 AND 2015
(Dollars in thousands, except share
data)
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016
2015 Revenue $ 3,207,537 $ 2,390,506 $
6,054,271 $ 4,443,009 Costs and expenses: Cost of services
2,254,233 1,487,974 4,267,846 2,778,751 Operating, administrative
and other 688,974 599,052 1,324,812 1,149,236 (Gains) losses on
currency hedges (8,532 ) 11,106 (1,004 ) (7,303 ) Depreciation and
amortization 90,268 70,605
177,262 140,451 Total costs and expenses
3,024,943 2,168,737 5,768,916
4,061,135 Gain on disposition of real
estate (1) - 6,986 4,819
6,986 Operating income 182,594 228,755 290,174
388,860 Equity income from unconsolidated subsidiaries (1)
34,929 6,693 92,230 22,144 Other income (loss) 3,882 (1,069 ) 7,097
18 Interest income 3,066 1,402 4,525 3,699 Interest expense 36,987
26,154 71,777 52,368 Write-off of financing costs on extinguished
debt - - - 2,685
Income before provision for income taxes 187,484 209,627
322,249 359,668 Provision for income taxes 64,039
76,474 114,164 133,377
Net income 123,445 133,153 208,085 226,291 Less: Net income
attributable to non-controlling interests (1) 1,777
8,124 4,250 8,325 Net
income attributable to CBRE Group, Inc. $ 121,668 $ 125,029
$ 203,835 $ 217,966 Basic income
per share: Net income per share attributable to CBRE Group, Inc. $
0.36 $ 0.38 $ 0.61 $ 0.66
Weighted average shares outstanding for
basic income per share
335,076,746 331,999,935
334,534,841 331,988,489 Diluted income
per share: Net income per share attributable to CBRE Group, Inc. $
0.36 $ 0.37 $ 0.60 $ 0.65
Weighted average shares outstanding for
diluted income per share
338,080,641 336,154,524
337,797,887 335,926,626 EBITDA $
309,896 $ 296,860 $ 562,513 $ 543,148
(1) Equity income from unconsolidated
subsidiaries and gain on disposition of real estate, less net
income attributable to non-controlling interests, includes income
of $28.5 million and $1.3 million for the three months ended June
30, 2016 and 2015, respectively, and income of $80.7 million and
$13.1 million for the six months ended June 30, 2016 and 2015,
respectively, attributable to Development Services but does not
include significant related compensation expense. 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 SIX MONTHS ENDED JUNE
30, 2016 AND 2015
(Dollars in thousands)
Three Months Ended Six
Months Ended June 30, June 30, 2016
2015 (1 ) 2016
2015 (1 )
Americas
Revenue $ 1,775,756 $ 1,434,489 $ 3,359,315 $ 2,662,105 Costs and
expenses: Cost of services 1,231,632 924,509 2,331,023 1,711,626
Operating, administrative and other (2) 339,707 301,926 656,890
577,347 Depreciation and amortization 63,197
44,591 123,797 87,541 Operating
income $ 141,220 $ 163,463 $ 247,605 $ 285,591
EBITDA $ 208,407 $ 213,956 $ 381,745 $
384,018
EMEA
Revenue $ 961,835 $ 585,714 $ 1,809,333 $ 1,079,738 Costs and
expenses: Cost of services 763,779 400,947 1,447,457 763,450
Operating, administrative and other (2) 162,187 145,959 311,502
260,249 Depreciation and amortization 16,257
14,607 31,262 29,399 Operating
income $ 19,612 $ 24,201 $ 19,112 $ 26,640
EBITDA $ 36,702 $ 39,479 $ 51,916 $
57,662
Asia
Pacific
Revenue $ 356,318 $ 261,828 $ 664,842 $ 470,194 Costs and expenses:
Cost of services 258,822 162,518 489,366 303,675 Operating,
administrative and other (2) 77,143 69,620 144,424 122,367
Depreciation and amortization 4,297 3,783
8,478 7,629 Operating income $
16,056 $ 25,907 $ 22,574 $ 36,523
EBITDA $ 20,275 $ 29,724 $ 30,929 $ 44,186
Global Investment
Management
Revenue $ 95,737 $ 94,053 $ 186,117 $ 204,277 Costs and expenses:
Operating, administrative and other (2) 73,577 77,690 145,967
148,443 Depreciation and amortization 5,817
7,061 12,437 14,672 Operating
income $ 16,343 $ 9,302 $ 27,713 $ 41,162
EBITDA $ 25,987 $ 12,948 $ 47,523 $
50,993
Development
Services
Revenue $ 17,891 $ 14,422 $ 34,664 $ 26,695 Costs and expenses:
Operating, administrative and other 27,828 14,963 65,025 33,527
Depreciation and amortization 700 563 1,288 1,210 Gain on
disposition of real estate - 6,986
4,819 6,986 Operating (loss) income $
(10,637 ) $ 5,882 $ (26,830 ) $ (1,056 ) EBITDA $ 18,525
$ 753 $ 50,400 $ 6,289 (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, which excludes from revenue client reimbursed pass
through costs largely associated with employees that are dedicated
to client facilities and subcontracted vendor work performed for
clients, is calculated as follows (dollars in thousands):
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015
Consolidated
Revenue $ 3,207,537 $ 2,390,506 $ 6,054,271 $ 4,443,009 Less: Pass
through costs also recognized as revenue 1,082,783
610,283 2,113,425 1,207,646 Fee revenue $ 2,124,754 $
1,780,223 $ 3,940,846 $ 3,235,363
Three Months Ended June
30, 2016 2015 2006
Non-contractual fee revenue $ 1,195,293 $ 1,168,276 $
677,386 Contractual fee revenue 929,461 611,947
158,389 Fee revenue $ 2,124,754 $ 1,780,223 835,775 Plus:
Pass through costs also recognized as revenue 67,769
Consolidated Revenue $ 903,544
June 30,
June 30, 2016 2015
2016 2015
Occupier
Outsourcing
Revenue (1) $ 1,530,204 $ 745,773 $ 2,943,498 $ 1,440,636 Less:
Pass through costs also recognized as revenue 950,486
477,042 1,847,786 938,577 Fee revenue (1) $ 579,718 $
268,731 $ 1,095,712 $ 502,059
Property
Management
Revenue (1) $ 261,622 $ 254,650 $ 512,296 $ 507,109 Less: Pass
through costs also recognized as revenue 132,297
133,241 265,639 269,069 Fee revenue (1) $ 129,325 $
121,409 $ 246,657 $ 238,040 _________________________ (1)
Excludes associated leasing and sales revenue.
June
30, June 30, 2016 2015
2016 2015
Americas
Revenue $ 1,775,756 $ 1,434,489 $ 3,359,315 $ 2,662,105 Less: Pass
through costs also recognized as revenue 527,957
371,976 1,042,655 741,337 Fee revenue $ 1,247,799 $
1,062,513 $ 2,316,660 $ 1,920,768
EMEA
Revenue $ 961,835 $ 585,714 $ 1,809,333 $ 1,079,738 Less: Pass
through costs also recognized as revenue 431,337
176,578 831,446 346,697 Fee revenue $ 530,498 $
409,136 $ 977,887 $ 733,041
Asia
Pacific
Revenue $ 356,318 $ 261,828 $ 664,842 $ 470,194 Less: Pass through
costs also recognized as revenue 123,489 61,729
239,324 119,612 Fee revenue $ 232,829 $ 200,099 $
425,518 $ 350,582
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 per share
data):
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016 2015 Net income
attributable to CBRE Group, Inc. $ 121,668 $ 125,029 $ 203,835 $
217,966 Plus / minus: Integration and other costs
related to acquisitions 27,751 4,805 44,924 8,018 Cost elimination
expenses 27,176 - 39,579 -
Amortization expense related to certain
intangible assets attributable to acquisitions
26,581 14,726 51,452 29,887
Carried interest incentive compensation
(reversal) expense to align with the timing of associated
revenue
(4,372) 2,115 (3,882) (657) Write-off of financing costs on
extinguished debt - - - 2,685 Tax impact of adjusted items (23,885)
(6,663) (40,144) (11,934)
Net income attributable to CBRE Group,
Inc. shareholders, as adjusted
$ 174,919 $ 140,012 $ 295,764 $ 245,965
Diluted income per share attributable to
CBRE Group, Inc. shareholders, as adjusted
$ 0.52 $ 0.42 $ 0.88 $ 0.73
Weighted average shares outstanding for
diluted income per share
338,080,641 336,154,524 337,797,887 335,926,626
EBITDA and adjusted EBITDA, are calculated as follows (dollars
in thousands):
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 2016
2015 Net income attributable to CBRE Group,
Inc. $ 121,668 $ 125,029 $ 203,835 $ 217,966 Add:
Depreciation and amortization 90,268 70,605 177,262 140,451
Interest expense 36,987 26,154 71,777 52,368 Write-off of financing
costs on extinguished debt - - - 2,685 Provision for income taxes
64,039 76,474 114,164 133,377 Less: Interest income 3,066
1,402 4,525 3,699 EBITDA
309,896 296,860 562,513 543,148 Adjustments: Integration and
other acquisition related costs 27,751 4,805 44,924 8,018 Cost
elimination expenses 27,176 - 39,579 -
Carried interest incentive compensation
(reversal) expense to align with the timing of associated
revenue
(4,372 ) 2,115 (3,882 ) (657 ) Adjusted
EBITDA $ 360,451 $ 303,780 $ 643,134 $ 550,509
EBITDA and adjusted EBITDA, for segments are calculated as
follows (dollars in thousands):
Three Months Ended Six Months
Ended June 30, June 30, 2016
2015 (1 ) 2016
2015 (1 )
Americas
Net income attributable to CBRE Group, Inc. $ 90,464 $ 111,653 $
161,982 $ 194,788 Adjustments: Depreciation and amortization 63,197
44,591 123,797 87,541 Interest expense, net 22,165 4,247 43,091
7,793 Write-off of financing costs on extinguished debt - - - 2,685
Royalty and management service income (13,389 ) (1,881 ) (20,157 )
(6,965 ) Provision for income taxes 45,970
55,346 73,032 98,176 EBITDA
208,407 213,956 381,745 384,018 Integration and other costs related
to acquisitions 17,998 4,195 28,689 7,408 Cost elimination expenses
941 - 4,299 -
Adjusted EBITDA $ 227,346 $ 218,151 $ 414,733
$ 391,426
EMEA
Net income (loss) attributable to CBRE Group, Inc. $ 7,889 $ 10,674
$ (4,246 ) $ 386 Adjustments: Depreciation and amortization 16,257
14,607 31,262 29,399 Interest expense, net 4,326 11,375 7,838
22,822 Royalty and management service expense (income) 4,303 (4,051
) 3,677 (2,861 ) Provision for income taxes 3,927
6,874 13,385 7,916 EBITDA
36,702 39,479 51,916 57,662 Cost elimination expenses 16,580 -
23,602 - Integration and other costs related to acquisitions
6,992 30 12,472 30
Adjusted EBITDA $ 60,274 $ 39,509 $ 87,990 $
57,692
Asia
Pacific
Net income attributable to CBRE Group, Inc. $ 5,062 $ 9,192 $ 2,492
$ 12,978 Adjustments: Depreciation and amortization 4,297 3,783
8,478 7,629 Interest (income) expense, net (873 ) 991 42 1,889
Royalty and management service expense 8,094 4,913 14,352 7,761
Provision for income taxes 3,695 10,845
5,565 13,929 EBITDA 20,275 29,724
30,929 44,186 Cost elimination expenses 4,844 - 5,978 - Integration
and other costs related to acquisitions 2,761
580 3,763 580 Adjusted EBITDA $
27,880 $ 30,304 $ 40,670 $ 44,766
Global Investment
Management
Net income (loss) attributable to CBRE Group, Inc. $ 8,181 $ (6,044
) $ 15,465 $ 7,829 Adjustments: Depreciation and amortization 5,817
7,061 12,437 14,672 Interest expense, net 7,816 7,818 15,513 15,502
Royalty and management service expense 992 1,019 2,128 2,065
Provision for income taxes 3,181 3,094
1,980 10,925 EBITDA 25,987 12,948
47,523 50,993 Cost elimination expenses 4,811 - 5,700 - Carried
interest incentive compensation (reversal) expense (4,372 )
2,115 (3,882 ) (657 ) Adjusted EBITDA $
26,426 $ 15,063 $ 49,341 $ 50,336
Development
Services
Net income (loss) attributable to CBRE Group, Inc. $ 10,072 $ (446
) $ 28,142 $ 1,985 Adjustments: Depreciation and amortization 700
563 1,288 1,210 Interest expense, net 487 321 768 663 Provision for
income taxes 7,266 315 20,202
2,431 EBITDA $ 18,525 $ 753 $
50,400 $ 6,289 (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)
June 30, December 31, 2016 2015
Assets: Cash and cash equivalents (1) $ 431,768 $ 540,403
Restricted cash 70,502 72,764 Receivables, net 2,373,157 2,471,740
Warehouse receivables (2) 847,712 1,767,107 Property and equipment,
net 533,575 529,823 Goodwill and other intangibles, net 4,457,264
4,536,466 Investments in and advances to unconsolidated
subsidiaries 226,742 217,943 Other assets, net 981,852 881,697
Total assets $ 9,922,572 $ 11,017,943
Liabilities:
Current liabilities, excluding debt $ 2,704,792 $ 3,208,932
Warehouse lines of credit (2) 839,295 1,750,781 Revolving credit
facility 156,000 - Senior term loans, net 864,807 877,899 5.00%
senior notes, net 789,766 789,144 4.875 senior notes, net 590,832
590,469 5.25% senior notes, net 422,071 421,964 Other debt 63 79
Other long-term liabilities 651,176 619,605 Total liabilities
7,018,802 8,258,873
Equity: CBRE Group, Inc.
stockholders' equity 2,855,118 2,712,652 Non-controlling interests
48,652 46,418 Total equity 2,903,770 2,759,070 Total liabilities
and equity $ 9,922,572 $ 11,017,943 (1)
Includes $79.7 million and $70.2 million of cash in consolidated
funds and other entities not available for company use as of June
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/20160728005469/en/
Steve IacoSenior Managing DirectorInvestor Relations &
Corporate Communications212-984-6535
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