- Q4 GAAP EPS rose to $1.55
- Q4 Core EPS rose to $1.38
- FY GAAP EPS declined to $3.15
- FY Core EPS declined to $3.84
CBRE Group, Inc. (NYSE:CBRE) today reported financial results
for the fourth quarter and year ended December 31, 2023.
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
% Change
Q4 2023
Q4 2022
USD
LC (1)
FY 2023
FY 2022
USD
LC (1)
Operating Results
Revenue
$
8,950
$
8,194
9.2
%
7.7
%
$
31,949
$
30,828
3.6
%
4.1
%
Net revenue (2)
5,187
4,975
4.3
%
2.9
%
18,276
18,777
(2.7
)%
(2.2
)%
GAAP net income
477
81
487.9
%
503.9
%
986
1,407
(30.0
)%
(28.0
)%
GAAP EPS
1.55
0.25
508.3
%
524.8
%
3.15
4.29
(26.6
)%
(24.6
)%
Core adjusted net income (3)
426
424
0.3
%
3.2
%
1,199
1,863
(35.6
)%
(33.9
)%
Core EBITDA (4)
737
668
10.4
%
9.8
%
2,209
2,924
(24.5
)%
(23.7
)%
Core EPS (3)
1.38
1.33
3.8
%
6.8
%
3.84
5.69
(32.5
)%
(30.7
)%
Cash Flow Results
Cash flow provided by operations
$
853
$
814
4.8
%
$
480
$
1,629
(70.5
)%
Less: Capital expenditures
94
99
(5.4
)%
305
260
17.3
%
Free cash flow (5)
$
759
$
715
6.2
%
$
175
$
1,369
(87.2
)%
“We ended 2023 on a high note with fourth quarter year-over-year
operating profit growth across all three of our business segments,”
said Bob Sulentic, CBRE’s chair and chief executive officer.
“Even though 2023 was a difficult year for commercial real
estate, we delivered the third-highest full-year earnings in CBRE’s
history, as our resilient businesses(6) continued their strong
growth. This partly offset market-driven revenue declines in
businesses that are sensitive to interest rates and debt
availability,” he continued.
For 2024, CBRE expects to achieve core earnings-per-share of
$4.25 to $4.65, implying mid-teens percentage growth at the
midpoint of the range.
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
Q4 2023
Q4 2022
USD
LC
Revenue
$
2,591
$
2,613
(0.9
)%
(1.9
)%
Net revenue
2,567
2,595
(1.0
)%
(2.0
)%
Segment operating profit (7)
502
500
0.4
%
0.3
%
Segment operating profit on revenue margin
(8)
19.4
%
19.1
%
0.3
pts
0.4
pts
Segment operating profit on net revenue
margin (8)
19.5
%
19.3
%
0.3
pts
0.5
pts
Note: all percent changes cited are vs. fourth-quarter 2022,
except where noted.
Property Leasing
- Global leasing revenue edged up 1% (flat local currency),
slightly above expectations, driven by growth overseas.
- Leasing revenue grew 7% (1% local currency) in Europe, Middle
East & Africa (EMEA), paced by a handful of Continental
European countries.
- Asia-Pacific (APAC) leasing revenue growth of 2% (4% local
currency) was led by robust increases in Japan and India.
- Americas leasing revenue was flat, as large office deals in
Canada offset modestly lower U.S. activity.
- Globally, higher office leasing revenue offset a slight decline
in industrial activity.
Capital Markets
- Global sales revenue declined 19% (20% local currency), in line
with expectations amid a challenging real estate capital markets
environment.
- In the Americas, sales revenue fell 22% (same local currency),
while EMEA declined 16% (20% local currency) and APAC fell 12% (10%
local currency).
- Sales revenue declines were less pronounced in industrial and
retail than in multifamily and office, supported by healthier
fundamentals.
- Mortgage origination revenue rose 23% (same local currency),
attributable to interest earnings on escrow balances.
Other Advisory Business Lines
- Loan servicing revenue rose 6% (same local currency). The
servicing portfolio increased to $410 billion, up 4% for the
quarter and 8% for the prior year.
- Property management net revenue increased 9% (7% local
currency), reflecting fourth-quarter new account wins and
expansions.
- Valuations revenue slipped 1% (3% local currency).
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
Q4 2023
Q4 2022
USD
LC
Revenue
$
6,103
$
5,294
15.3
%
13.6
%
Net revenue
2,363
2,093
12.9
%
11.2
%
Segment operating profit
292
259
12.9
%
11.2
%
Segment operating profit on revenue
margin
4.8
%
4.9
%
(0.1
pts)
(0.1
pts)
Segment operating profit on net revenue
margin
12.4
%
12.4
%
—
pts
—
pts
Note: all percent changes cited are vs. fourth-quarter 2022,
except where noted.
- Facilities management net revenue increased 14% (13% local
currency). This growth was driven by increased activity in the
technology and financial services sectors within the Enterprise
business and the continued robust growth of the Local business,
notably in the U.S.
- Project management net revenue rose 11% (9% local currency),
led by the continued expansion of Turner & Townsend’s
large-scale program management work globally.
- The pipeline going into 2024 remains elevated and significantly
above year-earlier levels, notably driven by industrial &
logistics and financial & professional services.
Real Estate Investments (REI)
Segment
The following table presents highlights of the REI segment
performance (dollars in millions):
% Change
Q4 2023
Q4 2022
USD
LC
Revenue
$
262
$
291
(9.9
)%
(12.7
)%
Segment operating profit
68
17
295.9
%
294.5
%
Note: all percent changes cited are vs. fourth-quarter 2022,
except where noted.
Real Estate Development
- Global development operating profit (9) totaled $27.0 million,
compared with a U.K.-driven loss in last year’s fourth quarter. The
current quarter result exceeded expectations, due to the
earlier-than-anticipated monetization of several U.S. assets.
- The in-process portfolio ended 2023 at $15.8 billion, up $0.4
billion from third-quarter 2023.
Investment Management
- Total revenue increased 11% (8% local currency), driven by
higher incentive fees. Asset management fees rose 4% (1% local
currency).
- Operating profit surged 76% (72% local currency) to $41.7
million, reflecting the higher incentive fees and recurring asset
management fees.
- Assets Under Management (AUM) totaled $147.5 billion, an
increase of $3.3 billion from third-quarter 2023. The increase was
primarily driven by favorable foreign currency movement, along with
modest net capital inflows, which offset lower private asset
values.
Corporate and Other
Segment
- Non-core profit totaled $76 million, primarily due to an
improvement in the value of CBRE’s investment in Altus Power, Inc.
(NYSE:AMPS), whose share price increased during the quarter.
- Core corporate operating loss increased by roughly $16 million
(15%), with lower incentive compensation expense being outweighed
by a change in the timing of certain expense recognition and cost
transfers from the business segments.
Capital Allocation
Overview
- Free Cash Flow – During the fourth quarter, free cash
flow was $759 million. This reflected cash provided by operating
activities of $853 million, less total capital expenditures of $94
million.(10)
- Stock Repurchase Program – The company repurchased
approximately 0.3 million shares for $19.6 million ($68.69 average
price per share) during the fourth quarter. There was approximately
$1.5 billion of capacity remaining under the company’s authorized
stock repurchase program as of year-end 2023.
- Acquisitions and Investments – During the fourth
quarter, CBRE completed five in-fill acquisitions, four in Advisory
Services and one in REI, totaling $111 million in cash and non-cash
consideration. The company’s planned acquisition of J&J
Worldwide Services, announced on February 5, 2024, is expected to
close in the coming months. CBRE will acquire J&J, a leading
provider of engineering services, base support operations and
facilities maintenance for the U.S. federal government, for $800
million in cash, plus a potential earn-out of up to $250 million,
payable in 2027, subject to the acquired business meeting certain
performance thresholds.
Leverage and Financing
Overview
- Leverage – CBRE’s net leverage ratio (net debt (11) to
trailing twelve-month Core EBITDA) was 0.71x as of December 31,
2023, 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
December 31, 2023
Total debt
$
2,830
Less: Cash (12)
1,265
Net debt (11)
$
1,565
Divided by: Trailing twelve-month Core
EBITDA
$
2,209
Net leverage ratio
0.71x
- Liquidity – As of year-end 2023, the company had
approximately $4.9 billion of total liquidity, consisting of
approximately $1.3 billion in cash, plus the ability to borrow an
aggregate of approximately $3.7 billion under its revolving credit
facilities, net of any outstanding letters of credit.
Conference Call Details
The company’s fourth quarter earnings webcast and conference
call will be held today, Thursday, February 15, 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 February 15, 2024.
The replay is accessible by dialing 877.660.6853 (U.S.) or
201.612.7415 (International) and using the access code: 13743718#.
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
businesses; costs and potential future capital requirements
relating to businesses 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; 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, 2022, our quarterly report on Form 10-Q for the
quarterly period ended September 30, 2023, 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 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 (reversal) expense to align with the timing
of associated revenue, the impact of fair value adjustments to real
estate assets acquired in the acquisition of Telford Homes plc in
2019 (the Telford acquisition) (purchase accounting) that were sold
in the period, costs incurred related to legal entity
restructuring, write-off of financing costs on extinguished debt,
integration and other costs related to acquisitions, asset
impairments, provision associated with Telford’s fire safety
remediation efforts, costs associated with efficiency and
cost-reduction initiatives, and a 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. 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
(reversal) to align with the timing of associated revenue, fair
value adjustments to real estate assets acquired in the Telford
acquisition (purchase accounting) that were sold in the period,
costs incurred related to legal entity restructuring, integration
and other costs related to acquisitions, provision associated with
Telford’s fire safety remediation efforts, costs associated with
efficiency and cost-reduction initiatives, and a 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. 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)
Resilient businesses include the
entire Global Workplace Solutions segment, loan servicing,
valuation, property management, and recurring asset management fees
in the investment management business.
(7)
Segment operating profit 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
(reversal) to align with the timing of associated revenue, fair
value adjustments to real estate assets acquired in the Telford
acquisition (purchase accounting) that were sold in the period,
costs incurred related to legal entity restructuring, integration
and other costs related to acquisitions, provision associated with
Telford’s fire safety remediation efforts, costs associated with
efficiency and cost-reduction initiatives, and a 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.
(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
December 31, 2023, the company incurred capital expenditures of
$93.8 million (reflected in the investing section of the condensed
consolidated statement of cash flows) and received tenant
concessions from landlords of $4.0 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 AND TWELVE
MONTHS ENDED DECEMBER 31, 2023 AND 2022
(in millions, except share and
per share data)
(Unaudited)
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Revenue:
Net revenue
$
5,187
$
4,975
$
18,276
$
18,777
Pass through costs also recognized as
revenue
3,763
3,219
13,673
12,051
Total revenue
8,950
8,194
31,949
30,828
Costs and expenses:
Cost of revenue
7,093
6,499
25,675
24,239
Operating, administrative and other
1,206
1,314
4,562
4,649
Depreciation and amortization
157
160
622
613
Asset impairments
—
22
—
59
Total costs and expenses
8,456
7,995
30,859
29,560
Gain on disposition of real estate
10
44
27
244
Operating income
504
244
1,117
1,512
Equity income (loss) from unconsolidated
subsidiaries
128
(167
)
248
229
Other income (loss)
39
2
61
(12
)
Interest expense, net of interest
income
40
18
149
69
Write-off of financing costs on
extinguished debt
—
—
—
2
Income before provision for (benefit from)
income taxes
631
61
1,277
1,658
Provision for (benefit from) income
taxes
136
(25
)
250
234
Net income
495
86
1,027
1,424
Less: Net income attributable to
non-controlling interests
18
5
41
17
Net income attributable to CBRE Group,
Inc.
$
477
$
81
$
986
$
1,407
Basic income per share:
Net income per share attributable to CBRE
Group, Inc.
$
1.56
$
0.26
$
3.20
$
4.36
Weighted average shares outstanding for
basic income per share
304,728,400
314,248,642
308,430,080
322,813,345
Diluted income per share:
Net income per share attributable to CBRE
Group, Inc.
$
1.55
$
0.25
$
3.15
$
4.29
Weighted average shares outstanding for
diluted income per share
308,526,651
319,221,283
312,550,942
327,696,115
Core EBITDA
$
737
$
668
$
2,209
$
2,924
CBRE GROUP, INC.
SEGMENT RESULTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2023
(in millions, totals may not
add due to rounding)
(Unaudited)
Three Months Ended December
31, 2023
Advisory
Services
Global Workplace
Solutions
Real Estate
Investments
Corporate (1)
Total Core
Other
Total
Consolidated
Revenue:
Net revenue
$
2,567
$
2,363
$
262
$
(6
)
$
5,187
$
—
$
5,187
Pass through costs also recognized as
revenue
23
3,740
—
—
3,763
—
3,763
Total revenue
2,591
6,103
262
(6
)
8,950
—
8,950
Costs and expenses:
Cost of revenue
1,533
5,502
53
4
7,093
—
7,093
Operating, administrative and other
559
310
202
135
1,206
—
1,206
Depreciation and amortization
73
66
3
15
157
—
157
Total costs and expenses
2,165
5,878
258
154
8,456
—
8,456
Gain on disposition of real estate
—
—
10
—
10
—
10
Operating income (loss)
425
225
14
(160
)
504
—
504
Equity income from unconsolidated
subsidiaries
1
—
56
—
57
70
128
Other income (loss)
31
(1
)
—
3
33
6
39
Add-back: Depreciation and
amortization
73
66
3
15
157
—
157
Adjustments:
Integration and other costs related to
acquisitions
—
2
—
—
2
—
2
Carried interest incentive compensation
reversal to align with the timing of associated revenue
—
—
(5
)
—
(5
)
—
(5
)
Costs incurred related to legal entity
restructuring
—
—
—
9
9
—
9
Costs associated with efficiency and
cost-reduction initiatives
5
—
—
8
14
—
14
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
)
—
—
—
(34
)
—
(34
)
Total segment operating profit (loss)
$
502
$
292
$
68
$
(124
)
$
76
$
813
Core EBITDA
$
737
_______________
(1)
Includes elimination of
inter-segment revenue.
CBRE GROUP, INC.
SEGMENT
RESULTS—(CONTINUED)
FOR THE THREE MONTHS ENDED
DECEMBER 31, 2022
(in millions, totals may not
add due to rounding)
(Unaudited)
Three Months Ended December
31, 2022
Advisory
Services
Global Workplace
Solutions
Real Estate
Investments
Corporate (1)
Total Core
Other
Total
Consolidated
Revenue:
Net revenue
$
2,595
$
2,093
$
291
$
(3
)
$
4,975
$
—
$
4,975
Pass through costs also recognized as
revenue
19
3,201
—
—
3,219
—
3,219
Total revenue
2,613
5,294
291
(3
)
8,194
—
8,194
Costs and expenses:
Cost of revenue
1,612
4,770
120
(3
)
6,499
—
6,499
Operating, administrative and other
545
304
335
131
1,314
—
1,314
Depreciation and amortization
84
63
5
8
160
—
160
Asset impairments
—
—
22
—
22
—
22
Total costs and expenses
2,240
5,137
481
136
7,994
—
7,995
Gain on disposition of real estate
—
—
44
—
44
—
44
Operating income (loss)
373
156
(147
)
(139
)
244
—
244
Equity loss from unconsolidated
subsidiaries
—
—
—
—
—
(167
)
(167
)
Other income (loss)
1
2
—
(1
)
2
—
2
Add-back: Depreciation and
amortization
84
63
5
8
160
—
160
Add-back: Asset impairments
—
—
22
—
22
—
22
Adjustments:
Costs associated with efficiency and
cost-reduction initiatives
42
21
12
23
99
—
99
Integration and other costs related to
acquisitions
—
17
—
—
17
—
17
Provision associated with Telford’s fire
safety remediation efforts
—
—
139
—
139
—
139
Carried interest incentive compensation
reversal to align with the timing of associated revenue
—
—
(13
)
—
(13
)
—
(13
)
Impact of fair value adjustments to real
estate assets acquired in the Telford acquisition (purchase
accounting) that were sold in period
—
—
(1
)
—
(1
)
—
(1
)
Costs incurred related to legal entity
restructuring
—
—
—
1
1
—
1
Total segment operating profit (loss)
$
500
$
259
$
17
$
(108
)
$
(167
)
$
501
Core EBITDA
$
668
_____________
(1)
Includes elimination of
inter-segment revenue.
CBRE GROUP, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in millions)
(Unaudited)
December 31, 2023
December 31, 2022
Assets:
Cash and cash equivalents
$
1,265
$
1,318
Restricted cash
106
87
Receivables, net
6,370
5,327
Warehouse receivables (1)
675
455
Contract assets
518
529
Income taxes receivable
237
134
Property and equipment, net
907
836
Operating lease assets
1,030
1,033
Goodwill and other intangibles, net
7,210
7,061
Investments in unconsolidated
subsidiaries
1,374
1,318
Other assets, net
2,856
2,415
Total assets
$
22,548
$
20,513
Liabilities:
Current liabilities, excluding debt and
operating lease liabilities
$
7,310
$
6,915
Warehouse lines of credit (which fund
loans that U.S. Government Sponsored Enterprises have committed to
purchase) (1)
666
448
Revolving credit facility
—
178
Senior term loans, net
743
—
5.950% senior notes, net
974
—
4.875% senior notes, net
597
597
2.500% senior notes, net
490
489
Current maturities of long term debt
9
428
Other debt
16
43
Operating lease liabilities
1,331
1,310
Other long-term liabilities
1,345
1,499
Total liabilities
13,481
11,907
Equity:
CBRE Group, Inc. stockholders' equity
8,267
7,853
Non-controlling interests
800
753
Total equity
9,067
8,606
Total liabilities and equity
$
22,548
$
20,513
_______________
(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)
Twelve Months Ended December
31,
2023
2022
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income
$
1,027
$
1,424
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
622
613
Amortization and write-off of financing
costs on extinguished debt
6
8
Gains related to mortgage servicing
rights, premiums on loan sales and sales of other assets
(102
)
(203
)
Gain associated with remeasuring our
investment in a previously unconsolidated subsidiary to fair value
as of the date we acquired the remaining interest
(34
)
—
Gain on disposition of real estate
assets
(27
)
—
Asset impairments
—
59
Net realized and unrealized (gains)
losses, primarily from investments
(6
)
30
Provision for doubtful accounts
16
17
Net compensation expense for equity
awards
96
160
Equity income from unconsolidated
subsidiaries
(248
)
(229
)
Distribution of earnings from
unconsolidated subsidiaries
256
389
Proceeds from sale of mortgage loans
9,714
14,527
Origination of mortgage loans
(9,905
)
(13,652
)
Increase (decrease) in warehouse lines of
credit
218
(830
)
Tenant concessions received
12
12
Purchase of equity securities
(15
)
(28
)
Proceeds from sale of equity
securities
14
30
Decrease in real estate under
development
81
95
Increase in receivables, prepaid expenses
and other assets (including contract and lease assets)
(860
)
(503
)
Increase in accounts payable and accrued
expenses and other liabilities (including contract and lease
liabilities)
22
64
Decrease in compensation and employee
benefits payable and accrued bonus and profit sharing
(173
)
(2
)
Increase in net income taxes
receivable/payable
(97
)
(133
)
Other operating activities, net
(137
)
(219
)
Net cash provided by operating
activities
480
1,629
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures
(305
)
(260
)
Acquisition of businesses, including net
assets acquired, intangibles and goodwill, net of cash acquired
(203
)
(173
)
Contributions to unconsolidated
subsidiaries
(127
)
(385
)
Distributions from unconsolidated
subsidiaries
54
87
Acquisition and development of real estate
assets
(171
)
—
Proceeds from disposition of real estate
assets
77
—
Investment in VTS
—
(101
)
Other investing activities, net
(6
)
—
Net cash used in investing activities
(681
)
(832
)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from revolving credit
facility
4,006
1,833
Repayment of revolving credit facility
(4,184
)
(1,655
)
Proceeds from senior term loans
748
—
Repayment of senior term loans
(437
)
—
Proceeds from notes payable on real
estate
76
39
Repayment of notes payable on real
estate
(43
)
(28
)
Proceeds from issuance of 5.950% senior
notes
975
—
Repurchase of common stock
(665
)
(1,850
)
Acquisition of businesses (cash paid for
acquisitions more than three months after purchase date)
(145
)
(34
)
Units repurchased for payment of taxes on
equity awards
(72
)
(38
)
Non-controlling interest contributions
6
2
Non-controlling interest distributions
(42
)
(1
)
Other financing activities, net
(69
)
(34
)
Net cash provided by (used in) financing
activities
154
(1,766
)
Effect of currency exchange rate changes
on cash and cash equivalents and restricted cash
13
(166
)
NET DECREASE IN CASH AND CASH
EQUIVALENTS AND RESTRICTED CASH
(34
)
(1,135
)
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH, AT BEGINNING OF YEAR
1,405
2,540
CASH AND CASH EQUIVALENTS AND
RESTRICTED CASH, AT END OF YEAR
$
1,371
$
1,405
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest
$
191
$
89
Income tax payments, net
467
604
Non-cash investing and financing
activities:
Deferred and/or contingent
consideration
$
54
$
—
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 acquisitions, which
would include impairment charges of goodwill and intangibles
created from 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 December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Net income attributable to CBRE Group,
Inc.
$
477
$
81
$
986
$
1,407
Plus / minus:
Carried interest incentive compensation
reversal to align with the timing of associated revenue
(5
)
(13
)
(7
)
(4
)
Impact of fair value adjustments to real
estate assets acquired in the Telford acquisition (purchase
accounting) that were sold in period
—
(1
)
—
(5
)
Costs incurred related to legal entity
restructuring
9
1
13
13
Integration and other costs related to
acquisitions
2
17
62
40
Costs associated with efficiency and
cost-reduction initiatives
14
99
159
118
Provision associated with Telford’s fire
safety remediation efforts
—
139
—
186
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
)
—
(34
)
—
Net fair value adjustments on strategic
non-core investments
(76
)
167
(32
)
175
Non-cash depreciation and amortization
expense related to certain assets attributable to acquisitions
38
45
167
166
Asset impairments
—
22
—
59
Write-off of financing costs on
extinguished debt
—
—
—
2
Tax impact of adjusted items, tax benefit
attributable to legal entity restructuring, and strategic non-core
investments
7
(117
)
(82
)
(254
)
Impact of adjustments on non-controlling
interest
(6
)
(15
)
(33
)
(40
)
Core net income attributable to CBRE
Group, Inc., as adjusted
$
426
$
424
$
1,199
$
1,863
Core diluted income per share attributable
to CBRE Group, Inc., as adjusted
$
1.38
$
1.33
$
3.84
$
5.69
Weighted average shares outstanding for
diluted income per share
308,526,651
319,221,283
312,550,942
327,696,115
Core EBITDA is calculated as follows (in millions, totals may
not add due to rounding):
Three Months Ended December
31,
Twelve Months Ended December
31,
2023
2022
2023
2022
Net income attributable to CBRE Group,
Inc.
$
477
$
81
$
986
$
1,407
Net income attributable to non-controlling
interests
18
5
41
17
Net income
495
86
1,027
1,424
Adjustments:
Depreciation and amortization
157
160
622
613
Asset impairments
—
22
—
59
Interest expense, net of interest
income
40
18
149
69
Write-off of financing costs on
extinguished debt
—
—
—
2
Provision for (benefit from) income
taxes
136
(25
)
250
234
Carried interest incentive compensation
reversal to align with the timing of associated revenue
(5
)
(13
)
(7
)
(4
)
Impact of fair value adjustments to real
estate assets acquired in the Telford acquisition (purchase
accounting) that were sold in period
—
(1
)
—
(5
)
Costs incurred related to legal entity
restructuring
9
1
13
13
Integration and other costs related to
acquisitions
2
17
62
40
Costs associated with efficiency and
cost-reduction initiatives
14
99
159
118
Provision associated with Telford’s fire
safety remediation efforts
—
139
—
186
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
)
—
(34
)
—
Net fair value adjustments on strategic
non-core investments
(76
)
167
(32
)
175
Core EBITDA
$
737
$
668
$
2,209
$
2,924
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 December
31,
2023
2022
Consolidated
Revenue
$
8,950
$
8,194
Less: Pass through costs also recognized
as revenue
3,763
3,219
Net revenue
$
5,187
$
4,975
Three Months Ended December
31,
2023
2022
Property
Management Revenue
Revenue
$
519
$
474
Less: Pass through costs also recognized
as revenue
23
19
Net revenue
$
495
$
456
Three Months Ended December
31,
2023
2022
GWS
Revenue
Revenue
$
6,103
$
5,294
Less: Pass through costs also recognized
as revenue
3,740
3,201
Net revenue
$
2,363
$
2,093
Three Months Ended December
31,
2023
2022
Facilities
Management Revenue
Revenue
$
3,995
$
3,908
Less: Pass through costs also recognized
as revenue
2,479
2,580
Net revenue
$
1,516
$
1,329
Three Months Ended December
31,
2023
2022
Project
Management Revenue
Revenue
$
2,108
$
1,385
Less: Pass through costs also recognized
as revenue
1,261
621
Net revenue
$
847
$
764
Below represents a reconciliation of REI business line operating
profitability/loss to REI segment operating profit (in
millions):
Three Months Ended December
31,
Real Estate
Investments
2023
2022
Investment management operating profit
$
42
$
24
Global real estate development operating
profit (loss)
27
(6
)
Segment overhead (and related
adjustments)
(1
)
(1
)
Real estate investments segment operating
profit
$
68
$
17
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240215789058/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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