- GAAP EPS Up 10% to $0.41
- Core EPS Down 15% to $0.78
CBRE Group, Inc. (NYSE:CBRE) today reported financial results
for the first quarter ended March 31, 2024.
Consolidated Financial Results
Overview
The following table presents highlights of CBRE performance
(dollars in millions, except per share data; totals may not add due
to rounding):
% Change
Q1 2024
Q1 2023
USD
LC (1)
Operating Results
Revenue
$
7,935
$
7,411
7.1
%
6.9
%
Net revenue (2)
4,444
4,181
6.3
%
6.1
%
GAAP net income
126
117
8.0
%
10.3
%
GAAP EPS
0.41
0.37
10.4
%
12.8
%
Core adjusted net income (3)
241
290
(16.7
)%
(15.8
)%
Core EBITDA (4)
424
533
(20.3
)%
(20.0
)%
Core EPS (3)
0.78
0.92
(14.8
)%
(13.9
)%
Cash Flow Results
Cash flow used in operations
$
(492
)
$
(745
)
(34.0
)%
Less: Capital expenditures
68
60
12.4
%
Free cash flow (5)
$
(560
)
$
(805
)
(30.5
)%
“We started 2024 by delivering core earnings that exceeded our
expectations heading into the year, driven, in part, by solid net
revenue growth,” said Bob Sulentic, CBRE’s chair and chief
executive officer. “Leasing outperformed expectations, driven by
office leasing growth globally that reflects a resilient economy
and companies making progress on bringing their employees back to
the office. At the same time, persistent inflation kept interest
rates higher than expected, which led to underperformance in our
property sales transaction activity.
“Our Global Workplace Solutions segment again delivered
double-digit net revenue growth, even as margins fell short of
expectations. We have initiated actions to bring our costs in this
segment quickly back into line with revenue trajectory.”
During the first quarter of 2024, CBRE’s revenue rose 8% for its
Resilient Businesses(6) and 1% for its Transactional
Businesses.(6)
Looking ahead, CBRE still expects to generate core earnings per
share in the range of $4.25 to $4.65 in 2024.
“Our confidence in achieving our earnings outlook is underpinned
by our Resilient Businesses’ continued strong performance, our
rapid actions on costs, and the fact that the Advisory Segment
remains on track to achieve its growth target for the year, despite
a more uncertain economic outlook,” Mr. Sulentic said.
Advisory Services
Segment
The following table presents highlights of the Advisory Services
segment performance (dollars in millions; totals may not add due to
rounding):
% Change
Q1 2024
Q1 2023
USD
LC
Revenue
$
1,904
$
1,854
2.7
%
2.9
%
Net revenue
1,880
1,832
2.7
%
2.8
%
Segment operating profit (7)
262
270
(3.0
)%
(2.1
)%
Segment operating profit on revenue margin
(8)
13.7
%
14.5
%
(0.8 pts)
(0.7 pts)
Segment operating profit on net revenue
margin (8)
13.9
%
14.7
%
(0.8 pts)
(0.7 pts)
Note: all percent changes cited are vs. first-quarter 2023,
except where noted.
Property Leasing
- Global leasing revenue rose 4% (same local currency), exceeding
expectations.
- Americas leasing revenue rose 4% (same local currency) with the
U.S. achieving solid growth for the first time in six
quarters.
- Asia-Pacific (APAC) set the pace with growth of 9% (13% local
currency), led by Australia, India and South Korea. Japan leasing
revenue grew modestly, despite an outsized year-over-year increase
in first-quarter 2023.
- Leasing revenue increased 4% (1% local currency) in Europe,
Middle East & Africa (EMEA), driven by Continental Europe,
notably France and Spain.
- Globally, office leasing grew by double digits, as continued
economic resilience and progress on return-to-office plans
emboldened tenants to make occupancy decisions.
Capital Markets
- Sales activity remained under pressure from high interest rates
and tight credit conditions. Global sales revenue declined 11% (10%
local currency), slightly more than expected.
- EMEA bucked the downward global trend with sales revenue up 8%
(4% local currency), driven by the U.K., where property values have
made the most progress toward resetting, as well as Spain.
- Conversely, sales revenue fell 15% (same local currency) in the
Americas and 14% (7% local currency) in APAC, although Japan
continued to perform well.
- Globally, office sales had the least pronounced decline
followed by multifamily.
- Mortgage origination revenue jumped 34% (33% local currency),
attributable to higher loan fees and interest earnings on escrow
balances.
Other Advisory Business Lines
- Loan servicing revenue rose 5% (same local currency). The
servicing portfolio increased to approximately $414 billion, up 1%
for the quarter and 7% from a year ago.
- Property management net revenue increased 7% (same local
currency), with strength in all regions around the world.
- Valuations revenue edged up 1% (same local currency).
- Absent one-time costs and excluding mortgage servicing rights
gains, Advisory segment operating profit margin would have improved
25 basis points compared with first-quarter 2023.
Global Workplace Solutions
(GWS) Segment
The following table presents highlights of the GWS segment
performance (dollars in millions; totals may not add due to
rounding):
% Change
Q1 2024
Q1 2023
USD
LC
Revenue
$
5,809
$
5,338
8.8
%
8.5
%
Net revenue
2,342
2,130
9.9
%
9.6
%
Segment operating profit
232
230
0.9
%
0.4
%
Segment operating profit on revenue
margin
4.0
%
4.3
%
(0.3 pts)
(0.3 pts)
Segment operating profit on net revenue
margin
9.9
%
10.8
%
(0.9 pts)
(0.9 pts)
Note: all percent changes cited are vs. first-quarter 2023,
except where noted.
- Facilities management net revenue increased 11% (same local
currency), paced by the continued strength in the Local
business.
- Project management net revenue rose 7% (same local currency),
slightly below trend, reflecting a difficult comparison with
first-quarter 2023, when net revenue rose 18%.
- Weak operating leverage in the quarter reflected certain
one-time expenses, including higher-than-anticipated medical
claims, and increased costs, which the company is now focused on
substantially reducing.
- Even with a second consecutive quarter of very strong business
wins, the pipeline remained elevated, notably driven by the
industrial & logistics, media & technology and financial
& professional services sectors.
Real Estate Investments (REI)
Segment
The following table presents highlights of the REI segment
performance (dollars in millions):
% Change
Q1 2024
Q1 2023
USD
LC
Revenue
$
228
$
223
1.9
%
0.5
%
Segment operating profit
34
131
(73.8
)%
(73.6
)%
Note: all percent changes cited are vs. first-quarter 2023,
except where noted.
Real Estate Development
- Global development operating loss(9) totaled approximately $4
million, in line with expectations. The company realized an
unusually large gain on a development portfolio sale in last year’s
first quarter, accounting for its robust performance in that
period. As expected, U.S. development was modestly profitable in
the current first quarter.
- The in-process portfolio ended first-quarter 2024 at $18.8
billion, up $3.0 billion from year-end 2023. The increase was
largely driven by a new fee-based industrial development project.
The pipeline decreased $0.5 billion during the quarter to $12.8
billion.
Investment Management
- Total revenue edged up 1% (flat local currency), with flat
asset management fees.
- Operating profit fell 14.0% (same local currency) to
approximately $37 million, slightly better than expected.
- Assets Under Management (AUM) totaled $144.0 billion, a
decrease of $3.5 billion from year-end 2023. The decrease was
driven by lower asset values and adverse foreign currency
movement.
Corporate and Other
Segment
- Non-core operating loss totaled $71 million, primarily due to
the lower value of the company’s investment in Altus Power, Inc.
(NYSE:AMPS), reflecting a decline in its share price during the
quarter.
- Core corporate operating loss increased 5%, or roughly $5
million.
Capital Allocation
Overview
- Free Cash Flow – During the first quarter of 2024, free
cash outflow was $560 million. This reflected cash used in
operating activities of $492 million, adjusted for total capital
expenditures of $68 million.(10) Cash flow conversion improved for
the second consecutive quarter.
- Stock Repurchase Program – The company did not
repurchase any of its common stock during the first quarter of
2024. There was approximately $1.5 billion of capacity remaining
under the company’s authorized stock repurchase program as of March
31, 2024.
- Acquisitions and Investments – During the first quarter,
CBRE acquired J&J Worldwide Services, Inc., a provider of
engineering services, base support operations and facilities
maintenance for the U.S. federal government, for a total cash and
non-cash consideration of $820 million. This acquisition was
partially funded by a $500 million senior notes offering completed
during the quarter. The notes have an interest rate of 5.5% and are
due in 2029.
Leverage and Financing
Overview
- Leverage – CBRE’s net leverage ratio (net debt(11) to
trailing twelve-month core EBITDA) was 1.47x as of March 31, 2024,
which is substantially below the company’s primary debt covenant of
4.25x. The net leverage ratio is computed as follows (dollars in
millions):
As of
March 31, 2024
Total debt
$
4,128
Less: Cash (12)
1,044
Net debt (11)
$
3,084
Divided by: Trailing twelve-month Core
EBITDA
$
2,101
Net leverage ratio
1.47x
- Liquidity – As of March 31, 2024, the company had
approximately $3.9 billion of total liquidity, consisting of
approximately $1.04 billion in cash, plus the ability to borrow an
aggregate of approximately $2.85 billion under its revolving credit
facilities, net of any outstanding letters of credit.
Conference Call Details
The company’s first quarter earnings webcast and conference call
will be held today, Friday, May 3, 2024 at 8:30 a.m. Eastern Time.
Investors are encouraged to access the webcast via this link
or they can click this link beginning at 8:15 a.m. Eastern
Time for automated access to the conference call.
Alternatively, investors may dial into the conference call using
these operator-assisted phone numbers: 877.407.8037 (U.S.) or
201.689.8037 (International). A replay of the call will be
available starting at 1:00 p.m. Eastern Time on May 3, 2024. The
replay is accessible by dialing 877.660.6853 (U.S.) or 201.612.7415
(International) and using the access code: 13745735#. A transcript
of the call will be available on the company's Investor Relations
website at https://ir.cbre.com.
About CBRE Group,
Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500
company headquartered in Dallas, is the world’s largest commercial
real estate services and investment firm (based on 2023 revenue).
The company has more than 130,000 employees (including Turner &
Townsend employees) serving clients in more than 100 countries.
CBRE serves a diverse range of clients with an integrated suite of
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. We routinely post important
information on our website, including corporate and investor
presentations and financial information. We intend to use our
website as a means of disclosing material, non-public information
and for complying with our disclosure obligations under Regulation
FD. Such disclosures will be included in the Investor Relations
section of our website at https://ir.cbre.com. Accordingly,
investors should monitor such portion of our website, in addition
to following our press releases, Securities and Exchange Commission
filings and public conference calls and webcasts.
Safe Harbor and
Footnotes
This press 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 the economic outlook, the company’s future growth
momentum, operations 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 press release. Any forward-looking statements speak only as of
the date of this press 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, political and
regulatory conditions and significant public health events,
particularly in geographies or industry sectors where our business
may be concentrated; volatility or adverse developments in the
securities, capital or credit markets, interest rate increases and
conditions affecting the value of real estate assets, inside and
outside the United States; poor performance of real estate
investments or other conditions that negatively impact clients’
willingness to make real estate or long-term contractual
commitments and the cost and availability of capital for investment
in real estate; foreign currency fluctuations and changes in
currency restrictions, trade sanctions and import/export and
transfer pricing rules; our ability to compete globally, or in
specific geographic markets or business segments that are material
to us; our ability to identify, acquire and integrate accretive
companies; costs and potential future capital requirements relating
to companies we may acquire; integration challenges arising out of
companies we may acquire; increases in unemployment and general
slowdowns in commercial activity; trends in pricing and risk
assumption for commercial real estate services; the effect of
significant changes in capitalization 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;
our ability to further diversify our revenue model to offset
cyclical economic trends in the commercial real estate industry;
our ability to attract new occupier 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 continue investing in
our platform and client service offerings; our ability to maintain
expense discipline; the emergence of disruptive business models and
technologies; negative publicity or harm to our brand and
reputation; the failure by third parties to comply with service
level agreements or regulatory or legal requirements; the ability
of our 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; the
ability of our indirect subsidiary, CBRE Capital Markets, Inc., to
periodically amend, or replace, on satisfactory terms, the
agreements for its warehouse lines of credit; declines in lending
activity of U.S. GSEs, regulatory oversight of such activity and
our mortgage servicing revenue from the commercial real estate
mortgage market; changes in U.S. and international law and
regulatory environments (including relating to anti-corruption,
anti-money laundering, trade sanctions, tariffs, currency controls
and other trade control laws), particularly in Asia, Africa,
Russia, Eastern Europe and the Middle East, due to the level of
political instability in those regions; litigation and its
financial and reputational risks to us; 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; our ability to retain, attract and incentivize
key personnel; our ability to manage organizational challenges
associated with our size; liabilities under guarantees, or for
construction defects, that we incur in our development services
business; variations in historically customary seasonal patterns
that cause our business not to perform as expected; 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;
our and our employees’ ability to execute on, and adapt to,
information technology strategies and trends; cybersecurity threats
or other threats to our information technology networks, including
the potential misappropriation of assets or sensitive information,
corruption of data or operational disruption; our ability to comply
with laws and regulations related to our global operations,
including real estate licensure, tax, labor and employment laws and
regulations, fire and safety building requirements and regulations,
as well as data privacy and protection regulations and ESG matters,
and the anti-corruption laws and trade sanctions of the U.S. and
other countries; changes in applicable tax or accounting
requirements; any inability for us to implement and maintain
effective internal controls over financial reporting; the effect of
implementation of new accounting rules and standards or the
impairment of our goodwill and intangible assets; and the
performance of our equity investments in companies that we do not
control.
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 our Annual Report on Form 10-K for the year ended
December 31, 2023, our latest quarterly report on Form 10-Q, as
well as in the company’s press releases and other periodic filings
with the Securities and Exchange Commission (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.
The terms “net revenue,” “core adjusted net income,” “core
EBITDA,” “core EPS,” “business line operating profit (loss),”
“segment operating profit on revenue margin,” “segment operating
profit on net revenue margin,” “net debt” and “free cash flow,” 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.
Totals may not sum in tables in millions included in this
release due to rounding.
Note: We have not reconciled the (non-GAAP) core 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.
(1)
Local currency percentage change is
calculated by comparing current-period results at prior-period
exchange rates versus prior-period results.
(2)
Net revenue is gross revenue less costs
largely associated with subcontracted vendor work performed for
clients. These costs are reimbursable by clients and generally have
no margin.
(3)
Core adjusted net income and core earnings
per diluted share (or core EPS) exclude the effect of select items
from GAAP net income and GAAP earnings per diluted share as well as
adjust the provision for (benefit from) income taxes and impact on
non-controlling interest for such charges. Adjustments during the
periods presented included non-cash depreciation and amortization
expense related to certain assets attributable to acquisitions and
restructuring activities, certain carried interest incentive
compensation expense to align with the timing of associated
revenue, costs incurred related to legal entity restructuring,
write-off of financing costs on extinguished debt, integration and
other costs related to acquisitions, asset impairments, and costs
associated with efficiency and cost-reduction initiatives. It also
removes the fair value changes and related tax impact of certain
strategic non-core non-controlling equity investments that are not
directly related to our business segments (including venture
capital “VC” related investments).
(4)
Core EBITDA represents earnings, inclusive
of non-controlling interest, before net interest expense, write-off
of financing costs on extinguished debt, income taxes, depreciation
and amortization, asset impairments, adjustments related to certain
carried interest incentive compensation expense to align with the
timing of associated revenue, costs incurred related to legal
entity restructuring, integration and other costs related to
acquisitions and costs associated with efficiency and
cost-reduction initiatives. It also removes the fair value changes,
on a pre-tax basis, of certain strategic non-core non-controlling
equity investments that are not directly related to our business
segments (including venture capital “VC” related investments).
(5)
Free cash flow is calculated as cash flow
provided by operations, less capital expenditures (reflected in the
investing section of the consolidated statement of cash flows).
(6)
Net revenue from Resilient Businesses
includes the entire Global Workplace Solutions segment, property
management, loan servicing, asset management fees in the investment
management business, and valuations. Net revenue from Transactional
Businesses includes sales, leasing, mortgage origination, carried
interest and incentive fees in the investment management business,
and development fees.
(7)
Segment operating profit (loss) is the
measure reported to the chief operating decision maker (CODM) for
purposes of making decisions about allocating resources to each
segment and assessing performance of each segment. Segment
operating profit represents earnings, inclusive of non-controlling
interest, before net interest expense, write-off of financing costs
on extinguished debt, income taxes, depreciation and amortization
and asset impairments, as well as adjustments related to the
following: certain carried interest incentive compensation expense
to align with the timing of associated revenue, costs incurred
related to legal entity restructuring, and integration and other
costs related to acquisitions, and costs associated with efficiency
and cost-reduction initiatives.
(8)
Segment operating profit on revenue and
net revenue margins represent segment operating profit divided by
revenue and net revenue, respectively.
(9)
Represents line of business
profitability/losses, as adjusted.
(10)
For the three months ended March 31, 2024,
the company incurred capital expenditures of $67.7 million
(reflected in the investing section of the condensed consolidated
statement of cash flows) and received tenant concessions from
landlords of $7.3 million (reflected in the operating section of
the condensed consolidated statement of cash flows).
(11)
Net debt is calculated as total debt
(excluding non-recourse debt) less cash and cash equivalents.
(12)
Cash represents cash and cash equivalents
(excluding restricted cash).
CBRE GROUP, INC.
OPERATING RESULTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2024 AND 2023
(in millions, except share and
per share data)
(Unaudited)
Three Months Ended March
31,
2024
2023
Revenue:
Net revenue
$
4,444
$
4,181
Pass through costs also recognized as
revenue
3,491
3,230
Total revenue
7,935
7,411
Costs and expenses:
Cost of revenue
6,475
6,006
Operating, administrative and other
1,111
1,209
Depreciation and amortization
158
162
Total costs and expenses
7,744
7,377
Gain on disposition of real estate
13
3
Operating income
204
37
Equity (loss) income from unconsolidated
subsidiaries
(58
)
142
Other income
9
2
Interest expense, net of interest
income
36
28
Income before (benefit from) provision for
income taxes
119
153
(Benefit from) provision for income
taxes
(29
)
28
Net income
148
125
Less: Net income attributable to
non-controlling interests
22
8
Net income attributable to CBRE Group,
Inc.
$
126
$
117
Basic income per share:
Net income per share attributable to CBRE
Group, Inc.
$
0.41
$
0.38
Weighted average shares outstanding for
basic income per share
305,808,212
310,464,609
Diluted income per share:
Net income per share attributable to CBRE
Group, Inc.
$
0.41
$
0.37
Weighted average shares outstanding for
diluted income per share
308,502,456
315,358,147
Core EBITDA
$
424
$
533
CBRE GROUP, INC.
SEGMENT RESULTS
FOR THE THREE MONTHS ENDED
MARCH 31, 2024
(in millions, totals may not
add due to rounding)
(Unaudited)
Three Months Ended March 31,
2024
Advisory
Services
Global Workplace
Solutions
Real Estate
Investments
Corporate (1)
Total Core
Other
Total
Consolidated
Revenue:
Net revenue
$
1,880
$
2,342
$
228
$
(6
)
$
4,444
$
—
$
4,444
Pass through costs also recognized as
revenue
24
3,467
—
—
3,491
—
3,491
Total revenue
1,904
5,809
228
(6
)
7,935
—
7,935
Costs and expenses:
Cost of revenue
1,148
5,279
43
5
6,475
—
6,475
Operating, administrative and other
497
297
189
128
1,111
—
1,111
Depreciation and amortization
69
71
3
15
158
—
158
Total costs and expenses
1,714
5,647
235
148
7,744
—
7,744
Gain on disposition of real estate
—
—
13
—
13
—
13
Operating income (loss)
190
162
6
(154
)
204
—
204
Equity income (loss) from unconsolidated
subsidiaries
1
1
11
—
13
(71
)
(58
)
Other income
2
2
—
5
9
—
9
Add-back: Depreciation and
amortization
69
71
3
15
158
—
158
Adjustments:
Costs associated with efficiency and
cost-reduction initiatives
—
—
—
29
29
—
29
Carried interest incentive compensation
expense to align with the timing of associated revenue
—
—
14
—
14
—
14
Costs incurred related to legal entity
restructuring
—
—
—
1
1
—
1
Integration and other costs related to
acquisitions (2)
—
(4
)
—
—
(4
)
—
(4
)
Total segment operating profit (loss)
$
262
$
232
$
34
$
(104
)
$
(71
)
$
353
Core EBITDA
$
424
_______________
(1)
Includes elimination of
inter-segment revenue.
(2)
During the three months ended
March 31, 2024, integration and other costs related to acquisitions
include $17.5 million in deal and integration costs, offset by
reversal of $21.7 million in previously recognized
transaction-related bonus expense due to change in estimate.
CBRE GROUP, INC.
SEGMENT
RESULTS—(CONTINUED)
FOR THE THREE MONTHS ENDED
MARCH 31, 2023
(in millions, totals may not
add due to rounding)
(Unaudited)
Three Months Ended March 31,
2023
Advisory
Services
Global Workplace
Solutions
Real Estate
Investments
Corporate (1)
Total Core
Other
Total
Consolidated
Revenue:
Net revenue
$
1,832
$
2,130
$
223
$
(4
)
$
4,181
$
—
$
4,181
Pass through costs also recognized as
revenue
22
3,208
—
—
3,230
—
3,230
Total revenue
1,854
5,338
223
(4
)
7,411
—
7,411
Costs and expenses:
Cost of revenue
1,127
4,842
38
(1
)
6,006
—
6,006
Operating, administrative and other
523
323
252
111
1,209
—
1,209
Depreciation and amortization
78
64
7
13
162
—
162
Total costs and expenses
1,728
5,229
297
123
7,377
—
7,377
Gain on disposition of real estate
—
—
3
—
3
—
3
Operating income (loss)
126
109
(71
)
(127
)
37
—
37
Equity income (loss) from unconsolidated
subsidiaries
1
—
167
—
168
(26
)
142
Other income
2
—
—
—
2
—
2
Add-back: Depreciation and
amortization
78
64
7
13
162
—
162
Adjustments:
Costs associated with efficiency and
cost-reduction initiatives
63
50
21
5
139
—
139
Integration and other costs related to
acquisitions
—
7
—
11
18
—
18
Carried interest incentive compensation
expense to align with the timing of associated revenue
—
—
7
—
7
—
7
Total segment operating profit (loss)
$
270
$
230
$
131
$
(98
)
$
(26
)
$
507
Core EBITDA
$
533
_______________
(1)
Includes elimination of inter-segment
revenue.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
(Unaudited)
March 31, 2024
December 31, 2023
ASSETS
Current Assets:
Cash and cash equivalents
$
1,044
$
1,265
Restricted cash
83
106
Receivables, net
6,172
6,370
Warehouse receivables (1)
848
675
Contract assets
462
443
Prepaid expenses
308
333
Income taxes receivable
162
159
Other current assets
365
315
Total Current Assets
9,444
9,666
Property and equipment, net
900
907
Goodwill
5,554
5,129
Other intangible assets, net
2,298
2,081
Operating lease assets
1,003
1,030
Investments in unconsolidated
subsidiaries
1,298
1,374
Non-current contract assets
88
75
Real estate under development
331
300
Non-current income taxes receivable
85
78
Deferred tax assets, net
353
361
Other assets, net
1,610
1,547
Total Assets
$
22,964
$
22,548
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses
$
3,415
$
3,562
Compensation and employee benefits
payable
1,342
1,459
Accrued bonus and profit sharing
829
1,556
Operating lease liabilities
249
242
Contract liabilities
304
298
Income taxes payable
187
217
Warehouse lines of credit (which fund
loans that U.S. Government Sponsored Enterprises have committed to
purchase) (1)
839
666
Revolving credit facility
820
—
Other short-term borrowings
7
16
Current maturities of long-term debt
19
9
Other current liabilities
222
218
Total Current Liabilities
8,233
8,243
Long-term debt, net of current
maturities
3,282
2,804
Non-current operating lease
liabilities
1,055
1,089
Non-current income taxes payable
30
30
Non-current tax liabilities
141
157
Deferred tax liabilities, net
253
255
Other liabilities
871
903
Total Liabilities
13,865
13,481
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock
3
3
Additional paid-in capital
—
—
Accumulated earnings
9,263
9,188
Accumulated other comprehensive loss
(1,005
)
(924
)
Total CBRE Group, Inc. Stockholders’
Equity
8,261
8,267
Non-controlling interests
838
800
Total Equity
9,099
9,067
Total Liabilities and Equity
$
22,964
$
22,548
_______________
(1)
Represents loan receivables, the
majority of which are offset by borrowings under related warehouse
line of credit facilities.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Three Months Ended March
31,
2024
2023
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
148
$
125
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization
158
162
Amortization of financing costs
2
1
Gains related to mortgage servicing
rights, premiums on loan sales and sales of other assets
(29
)
(23
)
Gain on disposition of real estate
assets
(13
)
—
Net realized and unrealized (gains)
losses, primarily from investments
(5
)
—
Provision for doubtful accounts
3
4
Net compensation expense for equity
awards
30
18
Equity loss (income) from unconsolidated
subsidiaries
58
(142
)
Distribution of earnings from
unconsolidated subsidiaries
22
178
Proceeds from sale of mortgage loans
2,054
2,167
Origination of mortgage loans
(2,216
)
(2,495
)
Increase in warehouse lines of credit
173
335
Tenant concessions received
7
1
Purchase of equity securities
(11
)
(2
)
Proceeds from sale of equity
securities
10
2
Increase in real estate under
development
(5
)
(6
)
Decrease (increase) in receivables,
prepaid expenses and other assets (including contract and lease
assets)
244
(73
)
Decrease in accounts payable and accrued
expenses and other liabilities (including contract and lease
liabilities)
(211
)
(74
)
Decrease in compensation and employee
benefits payable and accrued bonus and profit sharing
(824
)
(844
)
Increase in net income taxes
receivable/payable
(43
)
(57
)
Other operating activities, net
(44
)
(22
)
Net cash used in operating activities
(492
)
(745
)
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(68
)
(60
)
Acquisition of businesses, including net
assets acquired and goodwill, net of cash acquired
(783
)
(45
)
Contributions to unconsolidated
subsidiaries
(28
)
(29
)
Distributions from unconsolidated
subsidiaries
22
15
Acquisition and development of real estate
assets
(59
)
—
Other investing activities, net
16
4
Net cash used in investing activities
(900
)
(115
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from revolving credit
facility
1,070
1,660
Repayment of revolving credit facility
(250
)
(629
)
Proceeds from notes payable on real
estate
2
—
Proceeds from issuance of 5.500% senior
notes
495
—
Repurchase of common stock
—
(130
)
Acquisition of businesses (cash paid for
acquisitions more than three months after purchase date)
(8
)
(60
)
Units repurchased for payment of taxes on
equity awards
(97
)
(46
)
Non-controlling interest contributions
1
—
Other financing activities, net
(21
)
(34
)
Net cash provided by financing
activities
1,192
761
Effect of currency exchange rate changes
on cash and cash equivalents and restricted cash
(44
)
14
NET DECREASE IN CASH AND CASH
EQUIVALENTS AND RESTRICTED CASH
(244
)
(85
)
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH, AT BEGINNING OF PERIOD
1,371
1,405
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH, AT END OF PERIOD
$
1,127
$
1,320
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period
for:
Interest
$
100
$
39
Income tax payments, net
$
90
$
82
Non-cash investing and financing
activities:
Deferred and/or contingent
consideration
$
11
$
—
Non-GAAP Financial
Measures
The following measures are considered “non-GAAP financial
measures” under SEC guidelines:
(i)
Net revenue
(ii)
Core EBITDA
(iii)
Business line operating profit/loss
(iv)
Segment operating profit on revenue and
net revenue margins
(v)
Free cash flow
(vi)
Net debt
(vii)
Core net income attributable to CBRE
Group, Inc. stockholders, as adjusted (which we also refer to as
“core adjusted net income”)
(viii)
Core EPS
These measures are not recognized measurements under United
States generally accepted accounting principles (GAAP). When
analyzing our operating performance, investors should use these
measures 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. The company believes 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 net revenue, net revenue is gross revenue less
costs largely associated with subcontracted vendor work performed
for clients. We believe that investors may find this measure useful
to analyze the company’s overall financial performance because it
excludes costs reimbursable by clients that generally have no
margin, and as such provides greater visibility into the underlying
performance of our business.
With respect to Core EBITDA, business line operating
profit/loss, and segment operating profit on revenue and net
revenue margins, 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 strategic
acquisitions, which would include impairment charges of goodwill
and intangibles created from such acquisitions, 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 Core EBITDA, this measure is not intended to be a measure of
free cash flow for our management’s discretionary use because it
does not consider cash requirements such as tax and debt service
payments. The Core EBITDA measure 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. The company also uses segment operating
profit and core EPS as significant components when measuring our
operating performance under our employee incentive compensation
programs.
With respect to free cash flow, the company believes that
investors may find this measure useful to analyze the cash flow
generated from operations after accounting for cash outflows to
support operations and capital expenditures. With respect to net
debt, the company believes that investors use this measure when
calculating the company’s net leverage ratio.
With respect to core EBITDA, core EPS and core adjusted net
income, the company believes that investors may find these measures
useful to analyze the underlying performance of operations without
the impact of strategic non-core equity investments (Altus Power,
Inc. and certain other investments) that are not directly related
to our business segments. These can be volatile and are often
non-cash in nature.
Core net income attributable to CBRE Group, Inc. stockholders,
as adjusted (or core adjusted net income), and core EPS, are
calculated as follows (in millions, except share and per share
data):
Three Months Ended March
31,
2024
2023
Net income attributable to CBRE Group,
Inc.
$
126
$
117
Adjustments:
Non-cash depreciation and amortization
expense related to certain assets attributable to acquisitions and
restructuring activities
41
49
Impact of adjustments on non-controlling
interest
—
(10
)
Net fair value adjustments on strategic
non-core investments
71
26
Costs associated with efficiency and
cost-reduction initiatives
29
139
Carried interest incentive compensation
expense to align with the timing of associated revenue
14
7
Costs incurred related to legal entity
restructuring
1
—
Integration and other costs related to
acquisitions (1)
(4
)
18
Tax impact of adjusted items and strategic
non-core investments
(37
)
(56
)
Core net income attributable to CBRE
Group, Inc., as adjusted
$
241
$
290
Core diluted income per share attributable
to CBRE Group, Inc., as adjusted
$
0.78
$
0.92
Weighted average shares outstanding for
diluted income per share
308,502,456
315,358,147
Core EBITDA is calculated as follows (in millions, totals may
not add due to rounding):
Three Months Ended March
31,
2024
2023
Net income attributable to CBRE Group,
Inc.
$
126
$
117
Net income attributable to non-controlling
interests
22
8
Net income
148
125
Adjustments:
Depreciation and amortization
158
162
Interest expense, net of interest
income
36
28
(Benefit from) provision for income
taxes
(29
)
28
Costs associated with efficiency and
cost-reduction initiatives
29
139
Carried interest incentive compensation
expense to align with the timing of associated revenue
14
7
Costs incurred related to legal entity
restructuring
1
—
Integration and other costs related to
acquisitions (1)
(4
)
18
Net fair value adjustments on strategic
non-core investments
71
26
Core EBITDA
$
424
$
533
_______________
(1)
During the three months ended March 31,
2024, integration and other costs related to acquisitions include
$17.5 million in deal and integration costs, offset by reversal of
$21.7 million in previously recognized transaction-related bonus
expense due to change in estimate.
Core EBITDA for the trailing twelve months ended March 31, 2024
is calculated as follows (in millions):
Trailing Twelve Months
Ended March 31, 2024
Net income attributable to CBRE Group,
Inc.
$
995
Net income attributable to non-controlling
interests
55
Net income
1,050
Adjustments:
Depreciation and amortization
618
Interest expense, net of interest
income
157
Provision for income taxes
193
Costs incurred related to legal entity
restructuring
14
Integration and other costs related to
acquisitions (1)
40
Costs associated with efficiency and
cost-reduction initiatives
50
One-time gain associated with remeasuring
an investment in an unconsolidated subsidiary to fair value as of
the date the remaining controlling interest was acquired
(34
)
Net fair value adjustments on strategic
non-core investments
13
Core EBITDA
$
2,101
_______________
(1)
During the three months ended March 31,
2024, integration and other costs related to acquisitions include
$17.5 million in deal and integration costs, offset by reversal of
$21.7 million in previously recognized transaction-related bonus
expense due to change in estimate.
Revenue includes client reimbursed pass-through costs largely
associated with employees that are dedicated to client facilities
and subcontracted vendor work performed for clients. Reimbursement
related to subcontracted vendor work generally has no margin and
has been excluded from net revenue. Reconciliations are shown below
(dollars in millions):
Three Months Ended March
31,
2024
2023
Consolidated
Revenue
$
7,935
$
7,411
Less: Pass through costs also recognized
as revenue
3,491
3,230
Net revenue
$
4,444
$
4,181
Three Months Ended March
31,
2024
2023
Property
Management Revenue
Revenue
$
496
$
464
Less: Pass through costs also recognized
as revenue
24
22
Net revenue
$
472
$
442
Three Months Ended March
31,
2024
2023
GWS
Revenue
Revenue
$
5,809
$
5,338
Less: Pass through costs also recognized
as revenue
3,467
3,208
Net revenue
$
2,342
$
2,130
Three Months Ended March
31,
2024
2023
Facilities
Management Revenue
Revenue
$
4,067
$
3,680
Less: Pass through costs also recognized
as revenue
2,515
2,285
Net revenue
$
1,552
$
1,395
Three Months Ended March
31,
2024
2023
Project
Management Revenue
Revenue
$
1,742
$
1,658
Less: Pass through costs also recognized
as revenue
952
923
Net revenue
$
790
$
735
Below represents a reconciliation of REI business line operating
profitability/loss to REI segment operating profit (in
millions):
Three Months Ended March
31,
Real Estate
Investments
2024
2023
Investment management operating profit
$
37
$
43
Global real estate development operating
(loss) profit
(4
)
90
Segment overhead (and related
adjustments)
1
(2
)
Real estate investments segment operating
profit
$
34
$
131
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240503691395/en/
Brad Burke - Investors 214.863.3100 Brad.Burke@cbre.com
Steve Iaco - Media 212.984.6535 Steven.Iaco@cbre.com
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