GAAP EPS of $0.58, up 61%Adjusted EPS
of $0.65, up 25%
CBRE Group, Inc. (NYSE:CBG) today reported very strong financial
results for the second quarter ended June 30, 2017 and increased
its expectations for adjusted earnings per share for full-year 2017
to a range of $2.53 to $2.63.
“CBRE posted another quarter of excellent performance, with
adjusted earnings per share up 25%. Continuing strength in our
regional services business – led this quarter by broad-based
strength in Asia Pacific and EMEA as well as continued strong
organic growth in our global occupier outsourcing and capital
markets businesses – was augmented by strong gains in our
development services business,” said Bob Sulentic, CBRE’s president
and chief executive officer. “Further, our regional services
businesses, together, achieved solid margin expansion with the help
of strong cost control.”
“Our performance demonstrates that we are operating a
diversified, well-balanced business. Our high-quality professionals
and globally integrated capabilities, increasingly enabled by
technology and data, are helping us to produce superior client
outcomes,” he continued. “Our prudent financial management has
allowed us to improve profitability while continuing to make
investments to further strengthen our position.”
Second-Quarter 2017
Results
- Revenue for the second quarter totaled
$3.3 billion, an increase of 4% (7% local currency1). Fee revenue2
increased 3% (6% local currency) to $2.2 billion.
- On a GAAP basis, net income increased
62% and earnings per diluted share increased 61% to $197.2 million
and $0.58 per share, respectively. Adjusted net income3 for the
second quarter of 2017 rose 27% to $222.3 million, while adjusted
earnings per share3 improved 25% to $0.65 per share.
- The adjustments to GAAP net income for
the second quarter of 2017 included $27.3 million (pre-tax) of
non-cash acquisition-related amortization and $15.4 million
(pre-tax) of integration costs associated with the Global Workplace
Solutions acquisition. These costs were partially offset by a $2.8
million (pre-tax) reversal of carried interest incentive
compensation and a net tax benefit of $14.8 million associated with
the aforementioned adjustments. The second quarter of 2017 is the
final period in which there are adjustments for integration costs
related to the Global Workplace Solutions acquisition.
- EBITDA4 increased 29% (31% local
currency) to $399.9 million and adjusted EBITDA4 increased 14% (16%
local currency) to $412.5 million. Adjusted EBITDA margin on fee
revenue increased 182 basis points to 18.8%. The company’s regional
services businesses – the Americas, Europe, the Middle East and
Africa (EMEA) and Asia Pacific (APAC) – produced combined adjusted
EBITDA growth for the quarter of 8% (10% local currency), or 12%
excluding the impact of all currency movement including hedging
activity.
Second-Quarter 2017 Segment
Review
The following tables present highlights of CBRE segment
performance during the second quarter of 2017 (dollars in
thousands):
Americas EMEA APAC
% Change from
Q2 2016
% Change from
Q2 2016
% Change from
Q2 2016
Q2 2017 USD LC Q2 2017
USD LC Q2 2017 USD
LC Revenue $ 1,856,887 4% 5% $ 954,734
0% 8% $ 420,628 17% 17% Fee revenue
1,264,132 1% 1% 547,831 4% 13% 270,425 17% 18% EBITDA 222,948 7% 7%
60,916 68% 80% 42,914 108% 107% Adjusted EBITDA 230,409 1% 1%
68,577 15% 23% 43,200 53% 52%
Global Investment
Management Development Services (5) % Change
from
Q2 2016
% Change from
Q2 2016
Q2 2017 USD LC Q2 2017 USD
LC Revenue $ 92,763 -3% 1% $ 17,203 -4% -4% EBITDA 26,685 3%
7% 46,453 151% 151% Adjusted EBITDA 23,910 -10% -6% 46,453 151%
151%
Excluding the impact of all currency movement including hedging
activity, adjusted EBITDA growth rates for the second quarter of
2017 were: 3% in the Americas, 30% in EMEA, 44% in APAC and 0% in
Global Investment Management.
Regionally, CBRE’s performance in the second quarter was led by
APAC and EMEA.
- APAC posted a 17% (same local currency)
revenue rise, with very strong growth in Australia, India, Japan
and Singapore.
- EMEA revenue rose 8% in local currency,
but was flat when converted to U.S. dollars due primarily to the
depreciation of the British pound sterling. The region’s
performance was paced by gains in the Netherlands, Spain and the
United Kingdom, where CBRE’s activity levels continue to rebound
strongly from the impact of last year’s Brexit vote.
- In the Americas, revenue increased 4%
(5% local currency), with notable growth in occupier outsourcing
and commercial mortgage services, which offset a relatively flat
performance in property sales and a decline in leasing.
Revenue growth across CBRE’s global business lines was almost
entirely organic.
- Global occupier outsourcing revenue
rose 5% (9% local currency), while fee revenue increased 5% (10%
local currency), all of which was organic growth.
- The Americas and APAC set the pace for
growth with strong gains in Canada, India, Mexico, Singapore and
the United States.
- The company continued to maintain a
highly active new business pipeline with 103 total contracts signed
during the second quarter, including 44 client expansions.
- The capital markets businesses –
property sales and commercial mortgage services – produced
double-digit growth with global revenue up 10% (12% local currency)
on a combined basis.
- Property sales revenue rose 11% (13%
local currency). This performance was paced by robust growth in
APAC, which increased 45% (same local currency), and EMEA, which
increased 32% (42% local currency).
- APAC saw strong growth across the
region, especially in Greater China, Japan and Singapore.
- EMEA’s growth was led by the United
Kingdom, where sales revenue surged 69%, as well as a broad range
of countries, including France, Germany, Italy and the
Netherlands.
- Americas sales revenue edged down 2%
(1% local currency), due primarily to a decrease in Canada. U.S.
revenue was up slightly compared with an 8% decrease in the broader
investment market, according to preliminary estimates from Real
Capital Analytics.
- Commercial mortgage services revenue
rose 10% (same local currency).
- CBRE’s loan servicing portfolio totaled
approximately $155 billion, up 16% from the year-earlier second
quarter.
- CBRE had strong loan origination
activity with life insurance companies, Wall Street conduits and
Government Sponsored Enterprises.
- Leasing revenue slipped 2% (1% local
currency), as continued strength in APAC and EMEA was offset by
weakness in the Americas.
- APAC lease revenue rose 10% (same local
currency), buoyed by Australia, India and Japan.
- In EMEA, Belgium, Spain and the United
Kingdom led the way to 6% (12% local currency) growth for the
region.
- Americas lease revenue declined 6%
(same in local currency).
- Property management and valuation
achieved solid growth.
- Revenue from property management
services rose 5% (7% local currency), while fee revenue increased
2% (4% local currency).
- Valuation revenue increased 4% (7%
local currency).
- In the Global Investment Management
segment, assets under management (AUM) totaled $91.7 billion, up
$3.1 billion from the second quarter of 2016. In local currency,
AUM increased by $2.6 billion.
- In the Development Services segment,
projects in process totaled $5.9 billion, down $1.2 billion from
the second quarter of 2016, while the pipeline rose to $5.9
billion, up $2.9 billion in the same period. Fee-only projects
constitute half of the pipeline.
Six-Month 2017 Results
- Revenue for the six months ended June
30, 2017 totaled $6.3 billion, an increase of 4% (7% local
currency). Fee revenue increased 4% (6% local currency) to $4.1
billion. This growth was almost entirely organic.
- On a GAAP basis, net income and
earnings per diluted share both increased 60% to $326.8 million and
$0.96 per share, respectively. Adjusted net income for the first
six months of 2017 rose 24% to $367.2 million, while adjusted
earnings per share improved 23% to $1.08 per share.
- The adjustments to GAAP net income for
the first six months of 2017 included $54.3 million (pre-tax) of
non-cash acquisition-related amortization and $27.4 million
(pre-tax) of integration costs associated with the Global Workplace
Solutions acquisition. These costs were partially offset by an
$18.0 million (pre-tax) reversal of carried interest incentive
compensation and a net tax benefit of $23.2 million associated with
the aforementioned adjustments.
- EBITDA increased 26% (27% local
currency) to $706.4 million and adjusted EBITDA increased 11% (13%
local currency) to $715.8 million. Adjusted EBITDA margin on fee
revenue increased 115 basis points to 17.4%.
Business Outlook
“Our people around the world turned in an outstanding
performance in the first half of 2017,” Mr. Sulentic said. “We
enter the second half of 2017 with a stable global economy and
solid fundamentals in most commercial real estate markets.”
CBRE has increased its outlook for 2017 adjusted earnings per
share to a range of $2.53 to $2.63. At the mid-point of the range,
this implies 12% growth in adjusted earnings per share for
full-year 2017. Compared to its prior guidance given in February,
the company expects its leasing revenue to be slightly below and
its capital markets revenue to be slightly above its initial
expectations for the year. The company expects fee revenue growth
for its occupier outsourcing business to be 10% or slightly higher.
The company expects adjusted EBITDA contributions from its
development services and investment management businesses,
together, to be flat to slightly up in 2017 versus its prior
expectation of flat to slightly down. Finally, full-year margins
are now likely to be at the high-end of the previously guided 17.5%
to 18.0% range, despite a continued shift in business mix.
CBRE’s outlook for adjusted EBITDA in the second half of 2017 is
little changed from its expectations at the beginning of the year.
The expected benefit from a lower tax rate will be somewhat offset
by growth in depreciation and amortization. The company
expects positive earnings growth in the second half from its
regional services businesses and its combined investment management
and development services businesses.
Conference Call Details
The company’s second-quarter earnings conference call will be
held today (Thursday, July 27, 2017) at 8:30 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 1:00
p.m. Eastern Time on July 27, 2017, and ending at midnight
Eastern Time on August 3, 2017. 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 13663913. 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 2016
revenue). The company has more than 75,000 employees (excluding
affiliates), and serves real estate investors and occupiers through
approximately 450 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.
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 and margin expectations),
currency movement, 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;
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 U.S. Government
Sponsored Enterprises, regulatory oversight of such activity and
our mortgage servicing revenue from the 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 and
adjusted EBITDA margins that enable us to continue investing in our
platform and client service offerings; our ability to control costs
relative to revenue growth; 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 the remaining members of the
European Union; foreign currency fluctuations; our ability to
retain and incentivize key personnel; 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 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; 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; the ability of CBRE Capital Markets to
periodically amend, or replace, on satisfactory terms, the
agreements for its warehouse lines of credit; variations in
historically customary seasonal patterns that cause our business
not to perform as expected; 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; liabilities under guarantees, or for construction defects,
that we incur in our Development Services business; our and our
employees’ ability to execute on, and adapt to, information
technology strategies and trends; 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; 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; changes in
applicable tax or accounting requirements, including potential tax
reform under the current U.S. administration; 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 our Annual Report on Form 10-K for the year ended
December 31, 2016 and our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2017, 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.
Note – CBRE has not reconciled the (non-GAAP) adjusted earnings
per share forward-looking guidance included in this release to the
most directly comparable GAAP measure because this cannot be done
without unreasonable effort due to the variability and low
visibility with respect to costs related to acquisitions, carried
interest incentive compensation, financing costs and future tax
rates, 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” and “adjusted
EBITDA” 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.
Certain adjustments have been made to 2016 fee revenue to conform
with current-year presentation.
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 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 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 to
align with the timing of associated revenue.
5 Revenue in the Development Services segment does not include
equity income from unconsolidated subsidiaries and gain on
disposition of real estate, net of non-controlling interest. EBITDA
includes equity income from unconsolidated subsidiaries and gain on
disposition of real estate, net of non-controlling interests, and
the associated compensation expense.
CBRE GROUP, INC.
OPERATING RESULTS
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2017 AND 2016
(Dollars in thousands, except share
data)
(Unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016
2017 2016 Revenue: Fee revenue (1) $
2,192,354 $ 2,120,248 $ 4,113,429 $ 3,956,623 Pass through costs
also recognized as revenue 1,149,861 1,087,289
2,209,990 2,097,648 Total revenue 3,342,215
3,207,537 6,323,419 6,054,271 Costs and
expenses: Cost of services 2,318,562 2,254,233 4,405,641 4,267,846
Operating, administrative and other 712,374 680,442 1,318,605
1,323,808 Depreciation and amortization 100,386
90,268 194,423 177,262 Total costs and expenses
3,131,322 3,024,943 5,918,669 5,768,916
Gain on disposition of real estate (2) 11,298
- 12,683 4,819 Operating income 222,191
182,594 417,433 290,174 Equity income from unconsolidated
subsidiaries (2) 75,384 34,929 90,402 92,230 Other income 3,186
3,882 7,301 7,097 Interest income 1,427 3,066 3,838 4,525 Interest
expense 35,430 36,987 69,440 71,777
Income before provision for income taxes 266,758 187,484 449,534
322,249 Provision for income taxes 68,362 64,039
119,635 114,164 Net income 198,396 123,445 329,899
208,085 Less: Net income attributable to non-controlling interests
(2) 1,231 1,777 3,137 4,250 Net income
attributable to CBRE Group, Inc. $ 197,165 $ 121,668 $ 326,762 $
203,835 Basic income per share: Net income per share
attributable to CBRE Group, Inc. $ 0.59 $ 0.36 $ 0.97 $ 0.61
Weighted average shares outstanding for basic income
per share
336,975,149 335,076,746 336,941,681
334,534,841 Diluted income per share: Net income per share
attributable to CBRE Group, Inc. $ 0.58 $ 0.36 $ 0.96 $ 0.60
Weighted average shares outstanding for diluted income
per share
340,882,603 338,080,641 340,214,246
337,797,887 EBITDA $ 399,916 $ 309,896 $ 706,422 $
562,513 Adjusted EBITDA $ 412,549 $ 360,451 $ 715,757 $ 643,134
(1) Certain adjustments have been made to 2016 fee revenue
to conform with current-year presentation. (2) Equity income from
unconsolidated subsidiaries and gain on disposition of real estate,
less net income attributable to non-controlling interests, includes
income of $76.7 million and $28.5 million for the three months
ended June 30, 2017 and 2016, respectively, and $87.0 million and
$80.8 million for the six months ended June 30, 2017 and 2016 ,
respectively, attributable to Development Services but does not
include significant related compensation expense (which is included
in operating, administrative and other expenses). In the
Development Services segment, related equity income from
unconsolidated subsidiaries and gain on disposition of real estate,
net of non-controlling interests, and the associated compensation
expense, are all included in EBITDA.
CBRE GROUP, INC.
SEGMENT RESULTS
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2017 AND 2016
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016
(1) 2017 2016 (1)
Americas
Revenue: Fee revenue (1) $ 1,264,132 $ 1,250,641 $ 2,394,785 $
2,321,699 Pass through costs also recognized as revenue
592,755 529,748 1,154,748 1,046,565 Total
revenue 1,856,887 1,780,389 3,549,533
3,368,264 Costs and expenses: Cost of services 1,288,799 1,235,106
2,453,476 2,338,370 Operating, administrative and other 350,973
340,801 673,288 658,600 Depreciation and amortization 71,724
63,200 140,293 123,803 Operating income $
145,391 $ 141,282 $ 282,476 $ 247,491 EBITDA $ 222,948 $
208,472 $ 433,670 $ 381,637 Adjusted EBITDA $ 230,409 $ 227,411 $
450,809 $ 414,625
EMEA
Revenue: Fee revenue (1) $ 547,831 $ 525,561 $ 1,023,566 $ 991,278
Pass through costs also recognized as revenue 406,903
428,357 775,356 802,987 Total revenue 954,734
953,918 1,798,922 1,794,265 Costs and
expenses: Cost of services 729,977 757,781 1,399,500 1,435,326
Operating, administrative and other 164,686 160,689 307,777 308,890
Depreciation and amortization 18,845 16,252
34,415 31,252 Operating income $ 41,226 $ 19,196 $ 57,230 $
18,797 EBITDA $ 60,916 $ 36,281 $ 92,647 $ 51,591 Adjusted
EBITDA $ 68,577 $ 59,854 $ 102,441 $ 87,665
Asia
Pacific
Revenue: Fee revenue (1) $ 270,425 $ 230,418 $ 481,887 $ 422,865
Pass through costs also recognized as revenue 150,203
129,184 279,886 248,096 Total revenue 420,628
359,602 761,773 670,961 Costs and expenses:
Cost of services 299,786 261,346 552,665 494,150 Operating,
administrative and other 77,909 77,547 146,095 145,326 Depreciation
and amortization 4,389 4,299 8,703
8,482 Operating income $ 38,544 $ 16,410 $ 54,310 $ 23,003
EBITDA $ 42,914 $ 20,631 $ 63,063 $ 31,362 Adjusted EBITDA $ 43,200
$ 28,235 $ 63,481 $ 41,103
(1)
In 2017, we have changed the presentation of the operating
results of one of our emerging businesses among our regional
services reporting segments. Prior year amounts have been
reclassified to conform with the current-year presentation. This
change had no impact on our consolidated results. Additionally,
certain adjustments have been made to 2016 fee revenue to conform
with current-year presentation.
CBRE GROUP, INC.
SEGMENT RESULTS—(CONTINUED)
FOR THE THREE AND SIX MONTHS ENDED JUNE
30, 2017 AND 2016
(Dollars in thousands)
(Unaudited)
Three Months Ended Six Months Ended June
30, June 30, 2017 2016 (1)
2017 2016 (1)
Global Investment
Management
Revenue $ 92,763 $ 95,737 $ 182,329 $ 186,117 Costs and expenses:
Operating, administrative and other 71,309 73,577 122,831 145,967
Depreciation and amortization 4,885 5,817
9,924 12,437 Operating income $ 16,569 $ 16,343 $ 49,574 $
27,713 EBITDA $ 26,685 $ 25,987 $ 67,785 $ 47,523 Adjusted
EBITDA $ 23,910 $ 26,426 $ 49,769 $ 49,341
Development
Services
Revenue $ 17,203 $ 17,891 $ 30,862 $ 34,664 Costs and expenses:
Operating, administrative and other 47,497 27,828 68,614 65,025
Depreciation and amortization 543 700 1,088 1,288 Gain on
disposition of real estate 11,298 - 12,683
4,819 Operating loss $ (19,539 ) $ (10,637 ) $ (26,157 ) $
(26,830 ) EBITDA and Adjusted EBITDA $ 46,453 $ 18,525 $
49,257 $ 50,400 (1) In 2017, we have changed the
presentation of the operating results of one of our emerging
businesses among our regional services reporting segments. Prior
year amounts have been reclassified to conform with the
current-year presentation. This change had no impact on our
consolidated results.
Non-GAAP Financial
Measures
The following measures are considered “non-GAAP financial
measures” under SEC guidelines:
(i) Fee
revenue (ii) Net income attributable to CBRE Group, Inc., as
adjusted (which we also refer to as “adjusted net income”) (iii)
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”) (iv) EBITDA and adjusted
EBITDA
These measures are not recognized measurements under United
States generally accepted accounting principles, or “GAAP.” When
analyzing our operating performance, investors 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. 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. Fee revenue excludes costs reimbursable
by clients, and as such provides greater visibility into the
underlying performance of our business.
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.
Net income attributable to CBRE Group, Inc., as adjusted (or
adjusted net income), and diluted income per share attributable to
CBRE Group, Inc. shareholders, as adjusted (or adjusted EPS), are
calculated as follows (dollars in thousands, except share
data):
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 Net income attributable to CBRE
Group, Inc. $ 197,165 $ 121,668 $ 326,762 $ 203,835 Plus /
minus: Non-cash amortization expense related to certain intangible
assets attributable to acquisitions
27,324 26,581 54,315 51,452 Integration and other costs related to
acquisitions 15,408 27,751 27,351 44,924 Cost-elimination expenses
(1) - 27,176 - 39,579 Carried interest incentive compensation
reversal to align
with the timing of associated revenue
(2,775 ) (4,372 ) (18,016 ) (3,882 ) Tax impact of adjusted items
(14,796 ) (23,885 ) (23,245 ) (40,144 )
Net income attributable to CBRE Group, Inc. shareholders,
as adjusted
$ 222,326 $ 174,919 $ 367,167 $ 295,764 Diluted income per
share attributable to CBRE Group, Inc.
shareholders, as adjusted
$ 0.65 $ 0.52 $ 1.08 $ 0.88 Weighted average shares
outstanding for diluted income
per share
340,882,603 338,080,641 340,214,246
337,797,887
EBITDA and adjusted EBITDA, are calculated as follows (dollars
in thousands):
Three Months Ended Six Months Ended
June 30, June 30, 2017 2016
2017 2016 Net income attributable to CBRE
Group, Inc. $ 197,165 $ 121,668 $ 326,762 $ 203,835 Add:
Depreciation and amortization 100,386 90,268 194,423 177,262
Interest expense 35,430 36,987 69,440 71,777 Provision for income
taxes 68,362 64,039 119,635 114,164 Less: Interest income
1,427 3,066 3,838 4,525 EBITDA 399,916
309,896 706,422 562,513 Adjustments: Integration and other
costs related to acquisitions 15,408 27,751 27,351 44,924
Cost-elimination expenses (1) - 27,176 - 39,579 Carried interest
incentive compensation reversal to
align with the timing of associated
revenue
(2,775 ) (4,372 ) (18,016 ) (3,882 )
Adjusted EBITDA $ 412,549 $ 360,451 $ 715,757 $ 643,134
(1)
Represents cost-elimination expenses relating to a program
initiated in the fourth quarter of 2015 and completed in the third
quarter of 2016 to reduce the company’s global cost structure after
several years of significant revenue and related cost growth.
Cost-elimination expenses incurred during the three months and six
months ended June 30, 2016 consisted of $25.1 million and $36.9
million, respectively, of severance costs related to headcount
reductions in connection with the program and $2.1 million and $2.7
million, respectively, of third-party contract termination costs.
Revenue includes client reimbursed pass through costs largely
associated with employees that are dedicated to client facilities
and subcontracted vendor work performed for clients, both of which
are excluded from fee revenue. Reconciliations are shown below
(dollars in thousands):
Three Months Ended Six Months
Ended June 30, June 30, 2017
2016 2017 2016
Occupier
Outsourcing
Fee revenue (1) (2) $ 606,575 $ 575,213 $ 1,165,698 $ 1,111,490
Plus: Pass through costs also recognized as revenue
1,005,655 954,991 1,920,801 1,832,008
Revenue (2) $ 1,612,230 $ 1,530,204 $ 3,086,499 $ 2,943,498
Property
Management
Fee revenue (2) $ 131,768 $ 129,324 $ 256,096 $ 246,656 Plus: Pass
through costs also recognized as revenue 144,206
132,298 289,189 265,640 Revenue (2) $ 275,974
$ 261,622 $ 545,285 $ 512,296 (1) Certain adjustments
have been made to 2016 fee revenue to conform with current-year
presentation. (2) Excludes associated leasing and sales revenue.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Dollars in thousands)
(Unaudited)
June 30, December 31, 2017 2016
Assets:
Cash and cash equivalents (1)
$ 535,681 $ 762,576 Restricted cash 74,720 68,836 Receivables, net
2,653,346 2,605,602
Warehouse receivables(2)
1,069,889 1,276,047 Property and equipment, net 556,480 560,756
Goodwill and other intangibles, net 4,494,737 4,392,431 Investments
in and advances to unconsolidated subsidiaries 246,715 232,238
Other assets, net 974,650 881,101 Total assets
$ 10,606,218 $ 10,779,587
Liabilities: Current
liabilities, excluding debt $ 2,742,553 $ 3,270,749 Warehouse lines
of credit (which fund loans that U.S. Government Sponsored Entities
have committed to purchase) (2)
1,054,970 1,254,653 Senior term loans, net 745,461 744,332 5.00%
senior notes, net 791,060 790,405 4.875% senior notes, net 591,583
591,203 5.25% senior notes, net 422,300 422,183 Other debt 27 30
Other long-term liabilities 675,238 648,787
Total liabilities 7,023,192 7,722,342
Equity: CBRE Group, Inc. stockholders' equity 3,539,693
3,014,487 Non-controlling interests 43,333 42,758
Total equity 3,583,026 3,057,245 Total
liabilities and equity $ 10,606,218 $ 10,779,587 (1)
Includes $78.4 million and $73.3 million of cash in consolidated
funds and other entities not available for company use as of June
30, 2017 and December 31, 2016, respectively. (2) Represents loan
receivables, the majority of which are offset by borrowings under
related warehouse line of credit facilities.
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version on businesswire.com: http://www.businesswire.com/news/home/20170727005300/en/
CBRE Group, Inc.Brad BurkeInvestor Relations215.921.7436orSteve
IacoMedia Relations212.984.6535
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