CBRE GROUP, INC. REPORTS RECORD FIRST QUARTER NORMALIZED EBITDA OF $ 247 MILLION, UP 24%
ADJUSTED EARNINGS PER SHARE RISES 28% TO $ 0.32
Los Angeles, CA – April 29, 2015 — CBRE Group, Inc. (NYSE:CBG) today reported strong revenue and earnings growth for the first quarter ended March 31, 2015.
First-Quarter 2015 Results
• Revenue for the quarter totaled $ 2.1 billion, an increase of 10% (15% in local currency) from $ 1.9 billion in the first quarter of 2014. Fee revenue1 increased 10% (15% in local currency) to $ 1.5 billion.
• Adjusted net income2 rose 29% to $ 106.0 million from $ 82.4 million in the first quarter of 2014, while adjusted earnings per diluted share2 improved 28% to $ 0.32 from $ 0.25 in the prior-year period. Adjusted net income and adjusted earnings per share excludes from U.S. GAAP net income and earnings per share the effect of selected charges3. For the first quarter of 2015, selected charges (net of income taxes) totaled $ 13.1 million versus $ 14.7 million for the same period in 2014.
• On a GAAP basis, net income rose 37% to $ 92.9 million, compared with $ 67.7 million for the first quarter of 2014. GAAP earnings per diluted share rose 40% to $ 0.28, compared with $ 0.20 in last year’s first quarter.
• Normalized EBITDA4, which excludes selected charges, increased 24% to $ 246.7 million from $ 198.8 million in the first quarter of 2014. EBITDA4 (including selected charges) rose 25% to $ 246.3 million for the first quarter of 2015, from $ 197.2 million for the same period a year earlier.
• These results include a net gain of approximately $ 13 million (approximately $ 8 million or $ 0.02 per share, net of tax) over the prior-year first quarter, from foreign currency movement, after the impact of currency hedging activities for the year.
Management Commentary
“Our strong results in the first quarter reflect the success of our people in executing our strategy and creating real advantages for our clients,” said Bob Sulentic, CBRE’s president and chief executive officer. “We are especially pleased with the double-digit top and bottom line growth we achieved while continuing to make strategic investments in our people and platform that will enhance our client offering and boost future growth.”
CBRE’s performance in the quarter was driven by the Americas, the company’s largest business segment. Americas revenue improved 20% (21% in local currency), as all of the region’s major business lines achieved double-digit revenue growth. The strong dollar tempered revenue growth in overseas markets. In Asia Pacific, revenue rose 7% (15% in local currency), driven by robust growth in Australia and China. In Europe, the Middle East and Africa (EMEA), revenue increased 6% in local currency but declined 5% when converted to U.S. dollars. The growth in EMEA followed an exceptionally strong first quarter in 2014.
CBRE’s Capital Markets businesses were particularly strong performers during the quarter, as investor appetite for commercial real estate remained robust. Global property sales revenue improved 16% (21% in local currency), while commercial mortgage services revenue surged 40% (41% in local currency), reflecting significantly increased origination and servicing activity with the U.S. Government-Sponsored Enterprises.
Global leasing revenue rose 9% (13% in local currency). The Americas was the primary catalyst with revenue up 18% (19% in local currency) as CBRE’s investments in producer recruiting and in-fill M&A -- along with increased productivity from existing producers -- continued to enhance performance.
CBRE’s occupier outsourcing business maintained strong growth in the first quarter, despite negative foreign currency effects. More corporations and other major space occupiers are purchasing integrated real estate and facilities services on an account basis. Globally, revenue from occupier outsourcing, excluding related transaction revenue, improved 8% (13% in local currency). Fee revenue (excluding related transaction revenue) from this business line rose 5% (12% in local currency).
Compared with the first quarter of 2014, CBRE’s net debt declined by approximately $ 275 million to 1.2 times trailing 12-month normalized EBITDA from 1.7 times. Reflecting the company’s increasingly strong financial position, Moody’s Investors Services raised its rating on CBRE’s senior secured and senior unsecured debt to Investment Grade. This upgrade followed Standard & Poor’s decision to increase CBRE’s corporate issuer rating to Investment Grade in late 2014.
On March 31, 2015, CBRE entered into a definitive agreement to acquire the Global WorkPlace Solutions (GWS) business of Johnson Controls, Inc. The GWS acquisition, which we expect to close in late third quarter or early fourth quarter of this year, will significantly enhance CBRE’s ability to self-perform facilities management services in more than 50 countries and deepen its relationships with large multi-national corporations. In addition, CBRE has completed two in-fill acquisitions thus far in 2015: United Commercial Realty, a leading retail real estate services specialist based in Dallas (which closed in the first quarter); and Environmental Systems, Inc., an energy management specialist based in Brookfield, Wisconsin (which closed in the second quarter).
First-Quarter 2015 Segment Results
Americas Region (U.S., Canada and Latin America)
• Revenue rose 20% (21% in local currency) to $ 1.2 billion, compared with $ 1.0 billion for the first quarter of 2014.
• Normalized EBITDA increased 52% to $ 190.5 million from $ 125.8 million in the prior-year first quarter. EBITDA (including selected charges) increased 49% to $ 187.3 million compared with $ 125.8 million in last year’s first quarter.
• Operating income rose 61% to $ 139.4 million, compared with $ 86.6 million for the prior-year first quarter.
• EBITDA and operating income include net gains from foreign currency movement, including full-year currency hedging activities.
EMEA Region (primarily Europe)
• Revenue totaled $ 494.0 million, compared with $ 518.7 million for the first quarter of 2014, reflecting the depreciation of the Euro and British pound sterling. Before negative foreign currency effects, revenue rose 6%.
• Revenue growth in EMEA followed an exceptionally strong first quarter of 2014, when revenue rose 32% (27% in local currency) over the first quarter of 2013, excluding the contributions from Norland Managed Services (which CBRE acquired at the end of 2013).
• EBITDA totaled $ 7.6 million compared with $ 23.4 million in the prior-year first quarter.
• Operating loss totaled $ 8.2 million compared with operating income of $ 5.1 million for the same period in 2014.
Asia Pacific Region (Asia, Australia and New Zealand)
• Revenue increased 7% (15% in local currency) to $ 208.4 million from $ 195.6 million for the first quarter of 2014. Performance improved in several countries, particularly Australia and China, but growth was tempered by negative foreign currency effects.
• EBITDA increased 28% to $ 10.6 million compared with $ 8.2 million for the prior-year first quarter.
• Operating income totaled $ 6.7 million, an increase of 29% from $ 5.2 million for the first quarter of 2014.
Global Investment Management (investment management operations in the U.S., Europe and Asia Pacific)
• Revenue totaled $ 110.2 million compared with $ 112.5 million in the first quarter of 2014, reflecting the depreciation of the Euro and British pound sterling. Before negative foreign currency effects, revenue rose 5%.
• Normalized EBITDA increased 8% to $ 32.1 million (including $ 3.4 million from carried interest) from $ 29.8 million in the prior-year first quarter. EBITDA (including selected charges) increased 23% to $ 34.9 million, compared with $ 28.3 million in the first quarter of 2014.
• Operating income totaled $ 28.7 million, an increase of 59% from $ 18.1 million for the first quarter of 2014.
• In local currency, Assets Under Management (AUM) was unchanged compared with year-end 2014, and up more than $ 5 billion from the first quarter of 2014. However, the weakening of the Euro and British pound sterling caused AUM to decrease to $ 87.1 billion from year-end 2014 when converted into U.S. dollars.
Development Services (real estate development and investment activities primarily in the U.S.)
• Revenue totaled $ 12.3 million compared with $ 12.4 million for the first quarter of 2014.
• EBITDA totaled $ 6.0 million compared with $ 11.6 million reported in the prior-year first quarter. The decrease was largely driven by fewer property sales in the first quarter of 2015 than in the prior-year quarter.
• Operating loss totaled $ 6.5 million compared with $ 2.5 million for the same period in 2014.
• Development projects in process totaled $ 5.5 billion, up approximately $ 100 million from year-end 2014, and the inventory of pipeline deals totaled $ 3.6 billion, down approximately $ 400 million from year-end 2014.
Business Outlook
“We are pleased with our strong start to 2015. However, it is important to bear in mind that the first quarter comprises a relatively small portion of our annual revenue and earnings, and as such, may not be an effective barometer of full-year performance,” Mr. Sulentic said. “There is good underlying momentum in our business and the advantages we enjoy as the global market leader are becoming more pronounced as we continue to invest in our people, platform and service offering. Increasingly, investors and occupiers are gravitating to CBRE due to our ability to deliver high-quality, globally integrated solutions that leverage the industry's top talent to create real competitive advantages for our clients around the world.”
CBRE re-affirms its expectations of achieving adjusted earnings-per-share in the range of $ 1.90 to $ 1.95 for full-year 2015.
