CBRE GROUP, INC. REPORTS ROBUST REVENUE AND EARNINGS GROWTH FOR THE THIRD QUARTER OF 2015
Fee Revenue up 14% (21% in local currency) Normalized EBITDA up 18% (24% in local currency) Adjusted Earnings Per Share up 28% to $0.51 Company Increases Expected 2016 Adjusted EPS Accretion From Global Workplace Solutions Acquisition
Los Angeles, CA – October 27, 2015 — CBRE Group, Inc. (NYSE:CBG) today reported robust revenue and earnings growth for the third quarter ended September 30, 2015.
Third-Quarter 2015 Results*
- Revenue for the quarter totaled $2.7 billion, an increase of 19% (26% in local currency1). Fee revenue2 increased 14% (21% in local currency) to $1.9 billion. The third quarter of 2015 included approximately $237 million of revenue from the acquisition of the Global Workplace Solutions business from Johnson Controls, which was completed on September 1, 2015. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue were both up 9% (16% in local currency).
- On a U.S. GAAP basis, net income rose 39% to $149.1 million. GAAP earnings per diluted share rose 38% to $0.44.
- Adjusted net income3 rose 30% to $171.7 million, while adjusted earnings per share3 improved 28% to $0.51. For the third quarter of 2015, adjustments totaled $22.6 million, which included integration and other costs associated with the Global Workplace Solutions acquisition.
- Normalized EBITDA4 increased 18% to $344.6 million and EBITDA4 rose 12% to $326.6 million. Normalized EBITDA margin on fee revenue was 17.8%, approximately a 60 basis point increase from the prior-year third quarter.
*All percentage changes versus prior-year periods are in U.S. dollars except where noted.
- Foreign currency movement, including the marking of currency hedges to market, reduced EBITDA by approximately $16.9 million (or $0.03 per share, net of tax) as compared to the prior-year third quarter.
“Q3 was an excellent quarter for CBRE in EMEA, delivering material gains in both revenue and EBITDA in dollars and local currency. Our growth was driven by region-wide successes across all business lines– most notably in Capital Markets, our Occupier Outsourcing business, and Hotels, with core markets such as Germany, Spain, France and the UK performing strongly.
“These results demonstrate the benefit of the breadth of service and insight we are able to offer our clients across the region. Our recent acquisition of Global Workspace Solutions now also adds an important international Facilities Management dimension to our capability and we enter the fourth quarter with good momentum.”
“The third quarter was an eventful period for CBRE,” said Bob Sulentic, the company’s president and chief executive officer. “We continued to post double-digit growth on the top- and bottom-lines with broad-based strength in our business around the world. While doing this, we completed our largest acquisition in nearly a decade – the Global Workplace Solutions business from Johnson Controls. We also continued to make gains through investments in initiatives that help us to deliver great client outcomes and drive growth.”
CBRE’s three regional businesses each achieved sizeable increases in revenue despite the impact of foreign currency translation, which tempered growth rates outside the U.S. Growth was particularly notable in EMEA (Europe, the Middle East & Africa), where revenue surged 28% (42% in local currency). This increase was fueled by healthy gains across the region, including France, Germany, the Netherlands, Spain, Switzerland and the United Kingdom. Asia Pacific produced 12% revenue growth (29% in local currency) – led by Australia, Greater China and India. In the Americas, CBRE’s largest business segment, revenue grew by double digits – 17% (19% in local currency).
Amid strong capital flows into commercial real estate, CBRE’s capital markets businesses continued to perform exceptionally well. Property sales rose significantly across all regions with global revenue up 11% (19% in local currency), and commercial mortgage services, which is predominately an Americas business, saw revenue improve 32% (33% in local currency).
Global leasing also remained strong, although weak foreign currencies restrained growth. In local currency, leasing revenue rose 12% with strong growth in Australia, France, Greater China and India. When translated into US dollars, the global leasing revenue growth rate was 6%. The growth rate in the United States slowed modestly but remained strong at 9%.
Occupier outsourcing revenue (excluding related transaction revenue, which is accounted for in sales and leasing revenue), improved 42% (49% in local currency), while fee revenue (excluding related transaction revenue) increased 45% (53% in local currency). The increases included a one-month contribution from the acquired Global Workplace Solutions business. Excluding the acquired Global Workplace Solutions business, outsourcing revenue (excluding related transaction revenue) rose 8% (15% in local currency) and fee revenue increased 6% (14% in local currency).
Valuation revenue rose 4% (14% in local currency), which reflected higher volumes of appraisal and consulting assignments.
Investment Management also performed well in the quarter, with a 9% (19% in local currency) increase in revenue and a 48% rise in normalized EBITDA.
Global Workplace Solutions Acquisition Update
The integration of the Global Workplace Solutions business is proceeding well. CBRE now expects:
- An increase to high-single digits from mid-single digits in the percentage accretion to 2016 adjusted earnings per share from the acquired business.
- A $0.03 to $0.04 contribution to adjusted earnings per share for the last four months of 2015. The calendar-year fourth quarter has typically been a seasonally slower period for the acquired Global Workplace Solutions business due to its fiscal year previously ending September 30th. As a result, the accretion for the last four months of 2015 is not indicative of the expected higher run-rate contribution in 2016.
Third-Quarter 2015 Segment Results
Americas Region (U.S., Canada and Latin America)
- Revenue rose 17% (19% in local currency) to $1.6 billion. Fee revenue rose 16% (18% in local currency) to $1.1 billion. Excluding the acquired Global Workplace Solutions business, revenue was up 11% (13% in local currency).
- Normalized EBITDA increased 16% to $218.1 million and EBITDA increased 9% to $203.6 million.
- Operating income rose 10% to $150.3 million.
EMEA Region (primarily Europe)
- Revenue improved 28% (42% in local currency) to $737.9 million. Fee revenue rose 16% (29% in local currency) to $458.0 million. Revenue growth was broad-based across the region with strong increases even after the negative effects of currency movement. Excluding the acquired Global Workplace Solutions business, revenue was up 7% (20% in local currency).
- Normalized EBITDA increased 51% to $56.7 million and EBITDA increased 49% to $55.8 million.
- Operating income increased 96% to $39.6 million.
Asia Pacific Region (Asia, Australia and New Zealand)
- Revenue increased 12% (29% in local currency) to $285.3 million. Fee revenue rose 5% (22% in local currency) to $215.3 million. Excluding the acquired Global Workplace Solutions business, revenue was up 2% (18% in local currency).
- Normalized EBITDA increased 28% to $29.2 million and EBITDA increased 22% to $27.7 million.
- Operating income increased 29% to $24.0 million.
Global Investment Management (investment management operations in the U.S., Europe and Asia Pacific)
- Revenue rose 9% (19% in local currency) to $114.1 million, primarily driven by higher carried interest tied to significant property disposition activity.
- Normalized EBITDA increased 48% to $30.2 million and EBITDA increased 37% to $29.0 million.
- Operating income increased 53% to $24.2 million.
- Assets Under Management (AUM) totaled $86.0 billion. Compared with the third quarter of 2014, AUM was up $1.6 billion in local currency, but down when converted into U.S. dollars.
Development Services (real estate development and investment activities primarily in the U.S.)
- Revenue increased 17% to $18.6 million.
- EBITDA decreased to $10.5 million.
- Operating income improved more than 130% to $2.0 million.
- Development projects in process totaled $6.7 billion, up $1.3 billion from the end of 2014. The pipeline inventory totaled $4.0 billion, unchanged from year-end 2014, as projects have been converted from pipeline to in-process.
- Revenue for the nine months ended September 30, 2015 totaled $7.2 billion, an increase of 14% (21% in local currency). Fee revenue increased 12% (19% in local currency) to $5.2 billion. Excluding the acquired Global Workplace Solutions business, both revenue and fee revenue increased 10% (17% in local currency).
- On a U.S. GAAP basis, net income rose 31% to $367.1 million. GAAP earnings per diluted share rose 30% to $1.09.
- Adjusted net income rose 25% to $417.7 million, while adjusted earnings per share improved 24% to $1.24. For the nine months ended September 30, 2015, adjustments totaled $50.6 million, which included integration and other costs associated with the Global Workplace Solutions acquisition.
- Normalized EBITDA increased 19% to $895.1 million and EBITDA rose 16% to $869.7 million.
- Foreign currency movement, including the marking of currency hedges to market, reduced EBITDA by approximately $31.0 million (or $0.06 per share, net of tax) as compared to the prior-year nine month period. Without currency effects, adjusted earnings per share would have increased 30%.
“As we enter the fourth quarter, 2015 is clearly emerging as another exceptional year for CBRE,” Mr. Sulentic said. “The actions we have taken to upgrade our talent base, enhance our service offering, materially strengthen our operating platform, particularly data and technology, and fortify our financial position are yielding strong results for our clients and shareholders.”
CBRE is mindful of challenges to the global economy. However, in light of its performance through the year’s third quarter and its strategic and financial momentum, CBRE is raising its guidance for full-year 2015 adjusted earnings per share by $0.10 to $2.00 to $2.05. The new guidance implies 20% year-over-year growth in adjusted earnings per share at the mid-point of the range.
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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.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.