Exhibit 99.1

 

 

 

PRESS RELEASE

 

Corporate Headquarters

 

 

400 South Hope Street

 

 

25th Floor

 

 

Los Angeles, CA 90071

 

 

www.cbre.com

 

FOR IMMEDIATE RELEASE

 

For further information:

 

 

 

 

 

Brad Burke

 

Steve Iaco

Investor Relations

 

Media Relations

215.921.7436

 

212.984.6535

 

CBRE GROUP, INC. REPORTS STRONG REVENUE

AND EARNINGS GROWTH FOR FIRST-QUARTER 2019

 

GAAP EPS of $0.48, up 9%

Adjusted EPS of $0.79, up 46%

Revenue up 10% and Fee Revenue up 7%

 

 

Los Angeles, CA – May 8, 2019 — CBRE Group, Inc. (NYSE:CBRE) today reported strong financial results for the first quarter ended March 31, 2019.

“CBRE had an excellent start to 2019, as the positive momentum we experienced last year carried over into the first quarter,” said Bob Sulentic, president and chief executive officer of CBRE. “Strong operating leverage across each of our three business segments drove impressive bottom-line growth. Importantly, the organizational changes we announced last year are improving our lines of business and helping to make us a more efficient, client-focused company.”

“The macro market drivers and CBRE’s inherent competitive advantages remain intact.  As always, we caution against reading too much into first quarter results, as this is our seasonally smallest period,” Mr. Sulentic added.

First-Quarter 2019 Results

Revenue for the first quarter totaled $5.1 billion, an increase of 10% (13% local currency1). Fee revenue2 rose 7% (10% local currency) to $2.4 billion. Organic fee revenue2 growth was 5% (8% local currency).

On a GAAP basis, net income and earnings per diluted share both increased 9% to $164.4 million and $0.48 per diluted share, respectively. Adjusted net income3 for the first quarter of 2019 rose 44% to $267.5 million, while adjusted earnings per diluted share improved 46% to $0.79 per share.


 


CBRE Press Release

May 8, 2019

Page 2

First-quarter 2019 adjustments to GAAP net income had a net impact of $103.1 million, including:

 

o

Pre-tax adjustments of:

 

$89.0 million non-cash intangible asset impairment in the Real Estate Investments segment related to the securities investment management business, which has been impacted in part by the industry-wide shift in investor preference for passive investment programs;

 

$22.2 million of non-cash acquisition-related depreciation and amortization;

 

$15.8 million of expenses associated with the company reorganization, including related cost-savings initiatives;

 

$7.3 million of net carried interest incentive compensation expense to align with the timing of associated revenue, and

 

$2.6 million write-off of re-financing costs.

 

o

Offset by a $33.8 million net tax adjustment associated with the aforementioned pre-tax adjustments.

EBITDA4 increased 19% (20% local currency) to $426.9 million and adjusted EBITDA4 increased 29% (31% local currency) to $450.0 million. Adjusted EBITDA margin on fee revenue4 was 18.5% for the three months ended March 31, 2019 – up 320 basis points from first-quarter 2018.

First-Quarter 2019 Segment5 and Business Line Review

The following tables present highlights of CBRE segment performance during the first quarter of 2019 (dollars in thousands):

 

 

Advisory Services

 

 

Global Workplace Solutions

 

 

Real Estate Investments (6)

 

 

 

 

 

 

% Change from

Q1 2018

 

 

 

 

 

 

% Change from

Q1 2018

 

 

 

 

 

 

% Change from

Q1 2018

 

 

Q1 2019

 

 

USD

 

 

LC

 

 

Q1 2019

 

 

USD

 

 

LC

 

 

Q1 2019

 

 

USD

 

 

LC

 

Revenue

$

1,834,402

 

 

8%

 

 

11%

 

 

$

3,165,915

 

 

12%

 

 

16%

 

 

$

135,193

 

 

-8%

 

 

-5%

 

Fee revenue

 

1,601,637

 

 

8%

 

 

10%

 

 

 

691,895

 

 

8%

 

 

12%

 

 

 

135,193

 

 

-8%

 

 

-5%

 

EBITDA

 

257,184

 

 

19%

 

 

20%

 

 

 

90,817

 

 

10%

 

 

11%

 

 

 

78,946

 

 

32%

 

 

34%

 

Adjusted EBITDA

 

263,850

 

 

22%

 

 

23%

 

 

 

99,679

 

 

20%

 

 

23%

 

 

 

86,503

 

 

74%

 

 

76%

 

Advisory Services Segment

Advisory Services produced revenue growth of 8% (11% local currency) and fee revenue growth of 8% (10% local currency). Growth was notably strong in France, Greater China, Japan and the U.S. Advisory Services adjusted EBITDA surged 22% (23% local currency).

 

Advisory leasing revenue rose 20% (22% local currency) and growth was almost entirely organic. In the U.S., revenue increased 28% with solid demand from multiple sectors, including consumer products, energy and technology. International markets also had very strong growth, led by France, Germany, India, Japan and the Netherlands.


 


CBRE Press Release

May 8, 2019

Page 3

 

Loan servicing revenue continued to grow briskly, rising 10% (same local currency). The portfolio increased to $210 billion – up 15% from first-quarter 2018.

 

Capital markets revenue, which includes both property sales and commercial mortgage origination, declined 3% (1% local currency) globally, reflecting meaningful gains in market share.

 

o

Commercial mortgage origination revenue rose 13% (same local currency), fueled by robust activity with the U.S. Government-Sponsored Enterprises as well as banks.

 

o

Advisory property sales revenue declined 7% (5% local currency). This reflected a tepid macro environment for market-wide property sales volume in all three global regions as well as a difficult comparison with first-quarter 2018.  A modest U.S. sales revenue decline of 1% reflects significant market share gains, as estimated market volumes decreased 8%, according to Real Capital Analytics.

 

Property and advisory project management revenue increased 7% (11% local currency) and fee revenue rose 6% (10% local currency), with strong growth in Australia, Greater China, India, Spain, the U.K. and the U.S.

 

Valuation revenue rose 3% (7% local currency), driven by France, Germany and the U.K.

Global Workplace Solutions Segment (Occupier Outsourcing Services)

Global Workplace Solutions achieved a 12% (16% local currency) increase in revenue and an 8% (12% local currency) rise in fee revenue. This segment’s adjusted EBITDA surged 20% (23% local currency), reflecting strong operating leverage.

Continued strong revenue and earnings increases reflect CBRE’s ability to capture a large share of the growing market for real estate outsourcing and account-based client service. Enhanced technology and service capabilities from the June 2018 FacilitySource acquisition also contributed to account wins and expansions in the quarter.

Real Estate Investments Segment (Development, Investment Management and Flexible-Space Solutions)

Revenue declined 8% (5% local currency). However, adjusted revenue – which includes both equity earnings and gains from real estate sales, net of controlling interests – rose 21% (23% local currency). This segment’s adjusted EBITDA surged 74% (76% local currency).

The robust adjusted EBITDA growth was fueled by the timing of several large development asset sales and gains from investment management co-investments, partially offset by costs associated with starting up the flexible-space solutions enterprise.

 

The in-process development portfolio increased to a record $9.7 billion, up $0.7 billion from year-end 2018, reflecting the continued conversion of pipeline activity. The pipeline declined by $0.9 billion during the first quarter to $2.8 billion.

 

Investment management assets under management (AUM) totaled $107.2 billion, up $1.7 billion ($2.0 billion local currency) from year-end 2018. Over the past 12 months, AUM has increased $3.0 billion ($7.8 billion local currency).

Conference Call Details

The company’s first quarter earnings conference call will be held today (Wednesday, May 8, 2019) 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 May 8, 2019 and will be available for one week following the event. 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 13689185#. 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:CBRE), 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 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates)

 


CBRE Press Release

May 8, 2019

Page 4

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 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 our future growth momentum, operations, financial performance, market share, investment levels 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 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 the United Kingdom’s withdrawal from the European Union, including concerns relating to the economic impact of such withdrawal on businesses within the United Kingdom and Europe; 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; the emergence of disruptive business models and technologies; 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  investment management line of 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 our wholly-owned subsidiary, CBRE Capital Markets, Inc., 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 line of business within our Real Estate Investments segment; our and our employees’ ability to execute on, and adapt to, information technology strategies and trends; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; changes in domestic 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 Russia, Eastern Europe and the Middle East, due to the 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; negative publicity or actions by our employees, regulators, media, activists, competitors or others that harm our reputation or brand; changes in applicable tax or accounting requirements, including the impact of any subsequent additional regulation or guidance associated with the Tax Cuts and Jobs Act (which was enacted into law on December 22, 2017); 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

 


CBRE Press Release

May 8, 2019

Page 5

Form 10-K for the year ended December 31, 2018, 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 “fee revenue,” “organic fee revenue,” “adjusted revenue,” “adjusted net income,” “adjusted earnings per diluted share” (or adjusted EPS), “EBITDA,” “adjusted EBITDA” and “adjusted EBITDA on fee revenue margin,” 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.

1Local currency percentage change is calculated by comparing current-period results at prior-period exchange rates versus prior-period results.

2Fee 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. Organic fee revenue for the three months ended March 31, 2019 further excludes contributions from all acquisitions completed after first-quarter 2018.

3Adjusted net income and adjusted earnings per diluted share (or adjusted 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 for such charges. Adjustments during the periods presented included intangible asset impairment, non-cash depreciation and amortization expense related to certain assets attributable to acquisitions, costs associated with our reorganization, including cost-savings initiatives, certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue and the write-off of financing costs on extinguished debt. Adjustments for the three months ended March 31, 2018 also included an update to the provisional estimated tax impact of U.S. tax reform initially recorded in the fourth quarter of 2017.

4EBITDA represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation, amortization and intangible asset impairments. Amounts shown for adjusted EBITDA further remove (from EBITDA) costs associated with our reorganization, including cost-savings initiatives, and certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue. Adjusted EBITDA on fee revenue margin represents adjusted EBITDA divided by fee revenue.

5Our new organizational structure became effective on January 1, 2019. Under the new structure, we organize our operations around, and publicly report our financial results on, three global business segments: (1) Advisory Services; (2) Global Workspace Solutions; and (3) Real Estate Investments. Prior period results have been presented in conformity with the new structure.

6Revenue in the Real Estate Investments segment does not include equity income from unconsolidated subsidiaries and gain on disposition of real estate, net of non-controlling interests. Adjusted revenue for the Real Estate Investments segment reflects revenue for this segment with equity income from unconsolidated subsidiaries and gain on disposition of real estate, net of non-controlling interests, included. 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 Press Release

May 8, 2019

Page 6

CBRE GROUP, INC.

OPERATING RESULTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018

(Dollars in thousands, except share data)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

Fee revenue

 

$

2,428,725

 

 

$

2,276,899

 

Pass through costs also recognized as revenue

 

 

2,706,785

 

 

 

2,397,053

 

Total revenue

 

 

5,135,510

 

 

 

4,673,952

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

Cost of services

 

 

4,022,034

 

 

 

3,619,961

 

Operating, administrative and other

 

 

792,876

 

 

 

732,235

 

Depreciation and amortization

 

 

105,823

 

 

 

108,165

 

Intangible asset impairment

 

 

89,037

 

 

 

 

Total costs and expenses

 

 

5,009,770

 

 

 

4,460,361

 

 

 

 

 

 

 

 

 

 

Gain on disposition of real estate (1)

 

 

19,247

 

 

 

18

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

144,987

 

 

 

213,609

 

 

 

 

 

 

 

 

 

 

Equity income from unconsolidated subsidiaries (1)

 

 

72,664

 

 

 

40,179

 

Other income (loss)

 

 

20,853

 

 

 

(4,280

)

Interest income

 

 

1,534

 

 

 

3,621

 

Interest expense

 

 

22,726

 

 

 

28,858

 

Write-off of financing costs on extinguished debt

 

 

2,608

 

 

 

27,982

 

Income before provision for income taxes

 

 

214,704

 

 

 

196,289

 

Provision for income taxes

 

 

43,878

 

 

 

46,164

 

Net income

 

 

170,826

 

 

 

150,125

 

Less: Net income (loss) attributable to non-controlling interests (1)

 

 

6,417

 

 

 

(163

)

Net income attributable to CBRE Group, Inc.

 

$

164,409

 

 

$

150,288

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic income per share:

 

 

 

 

 

 

 

 

Net income per share attributable to CBRE Group, Inc.

 

$

0.49

 

 

$

0.44

 

Weighted average shares outstanding for basic income per share

 

 

336,020,431

 

 

 

338,890,098

 

 

 

 

 

 

 

 

 

 

Diluted income per share:

 

 

 

 

 

 

 

 

Net income per share attributable to CBRE Group, Inc.

 

$

0.48

 

 

$

0.44

 

Weighted average shares outstanding for diluted income per share

 

 

340,158,399

 

 

 

342,589,810

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

$

426,947

 

 

$

357,836

 

Adjusted EBITDA

 

$

450,032

 

 

$

347,807

 

 

 

(1)

Equity income from unconsolidated subsidiaries and gain on disposition of real estate, less net income attributable to non-controlling interests, includes income of $85.3 million and $35.7 million for the three months ended March 31, 2019 and 2018, respectively attributable to Real Estate Investments but does not include significant related compensation expense (which is included in operating, administrative and other expenses). In the Real Estate Investments 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 Press Release

May 8, 2019

Page 7

CBRE GROUP, INC.

SEGMENT RESULTS

FOR THE THREE MONTHS ENDED MARCH 31, 2019

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

Services

 

 

Global Workplace

Solutions

 

 

Real Estate

Investments

 

 

Consolidated

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

1,601,637

 

 

$

691,895

 

 

$

135,193

 

 

$

2,428,725

 

Pass through costs also recognized as

   revenue

 

 

232,765

 

 

 

2,474,020

 

 

 

 

 

 

2,706,785

 

Total revenue

 

 

1,834,402

 

 

 

3,165,915

 

 

 

135,193

 

 

 

5,135,510

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

1,083,099

 

 

 

2,938,935

 

 

 

 

 

 

4,022,034

 

Operating, administrative and other

 

 

496,618

 

 

 

135,472

 

 

 

160,786

 

 

 

792,876

 

Depreciation and amortization

 

 

71,647

 

 

 

29,483

 

 

 

4,693

 

 

 

105,823

 

Intangible asset impairment

 

 

 

 

 

 

 

 

89,037

 

 

 

89,037

 

Total costs and expenses

 

 

1,651,364

 

 

 

3,103,890

 

 

 

254,516

 

 

 

5,009,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on disposition of real estate

 

 

 

 

 

 

 

 

19,247

 

 

 

19,247

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income (loss)

 

 

183,038

 

 

 

62,025

 

 

 

(100,076

)

 

 

144,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity income (loss) from

   unconsolidated subsidiaries

 

 

675

 

 

 

(833

)

 

 

72,822

 

 

 

72,664

 

Other income (loss)

 

 

1,679

 

 

 

(16

)

 

 

19,190

 

 

 

20,853

 

Less: Net (loss) income attributable to

   non-controlling interests

 

 

(145

)

 

 

(158

)

 

 

6,720

 

 

 

6,417

 

Add-back: Depreciation and amortization

 

 

71,647

 

 

 

29,483

 

 

 

4,693

 

 

 

105,823

 

Add-back: Intangible asset impairment

 

 

 

 

 

 

 

 

89,037

 

 

 

89,037

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

257,184

 

 

 

90,817

 

 

 

78,946

 

 

 

426,947

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs associated with our reorganization,

   including cost-savings initiatives (1)

 

 

6,666

 

 

 

8,862

 

 

 

221

 

 

 

15,749

 

Carried interest incentive compensation

   expense to align with the timing of

   associated revenue

 

 

 

 

 

 

 

 

7,336

 

 

 

7,336

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

263,850

 

 

$

99,679

 

 

$

86,503

 

 

$

450,032

 

 

 

(1)

Primarily represents severance costs related to headcount reductions in connection with our reorganization announced in the third quarter of 2018 that became effective January 1, 2019.

 


 


CBRE Press Release

May 8, 2019

Page 8

CBRE GROUP, INC.

SEGMENT RESULTS—(CONTINUED)

FOR THE THREE MONTHS ENDED MARCH 31, 2018

(Dollars in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31, 2018 (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Advisory

Services

 

 

Global Workplace

Solutions

 

 

Real Estate

Investments

 

 

Consolidated

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fee revenue

 

$

1,486,646

 

 

$

643,238

 

 

$

147,015

 

 

$

2,276,899

 

Pass through costs also recognized as

   revenue

 

 

212,788

 

 

 

2,184,265

 

 

 

 

 

 

2,397,053

 

Total revenue

 

 

1,699,434

 

 

 

2,827,503

 

 

 

147,015

 

 

 

4,673,952

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

 

1,008,662

 

 

 

2,611,299

 

 

 

 

 

 

3,619,961

 

Operating, administrative and other

 

 

481,818

 

 

 

133,512

 

 

 

116,905

 

 

 

732,235

 

Depreciation and amortization

 

 

64,978

 

 

 

36,530

 

 

 

6,657

 

 

 

108,165

 

Total costs and expenses

 

 

1,555,458

 

 

 

2,781,341

 

 

 

123,562

 

 

 

4,460,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain on disposition of real estate

 

 

 

 

 

 

 

 

18

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

143,976

 

 

 

46,162

 

 

 

23,471

 

 

 

213,609

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity income from unconsolidated

   subsidiaries

 

 

4,431

 

 

 

 

 

 

35,748

 

 

 

40,179

 

Other income (loss)

 

 

1,799

 

 

 

32

 

 

 

(6,111

)

 

 

(4,280

)

Less: Net (loss) income attributable to

   non-controlling interests

 

 

(248

)

 

 

(11

)

 

 

96

 

 

 

(163

)

Add-back: Depreciation and amortization

 

 

64,978

 

 

 

36,530

 

 

 

6,657

 

 

 

108,165

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

215,432

 

 

 

82,735

 

 

 

59,669

 

 

 

357,836

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carried interest incentive compensation

   reversal to align with the timing of

   associated revenue

 

 

 

 

 

 

 

 

(10,029

)

 

 

(10,029

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

215,432

 

 

$

82,735

 

 

$

49,640

 

 

$

347,807

 

 

 

(1)

Our new organizational structure became effective on January 1, 2019. Under the new structure, we organize our operations around, and publicly report our financial results on, three global business segments. Results for 2018 have been presented in conformity with the new structure.

 


 


CBRE Press Release

May 8, 2019

Page 9

 

Non-GAAP Financial Measures

The following measures are considered “non-GAAP financial measures” under SEC guidelines:

 

(i)

Fee revenue

 

(ii)

Organic fee revenue

 

(iii)

Adjusted revenue for the Real Estate Investments segment

 

(iv)

Net income attributable to CBRE Group, Inc., as adjusted (which we also refer to as “adjusted net income”)

 

(v)

Diluted income per share attributable to CBRE Group, Inc. shareholders, as adjusted (which we also refer to as “adjusted earnings per diluted share” or “adjusted EPS”)

 

(vi)

EBITDA, adjusted EBITDA and adjusted EBITDA on fee revenue margin

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 and organic fee revenue:  the company believes that investors may find these measures useful to analyze the financial performance of our Global Workplace Solutions and Property and Advisory Project 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. Organic fee revenue for the three months ended March 31, 2019 further excludes contributions from all acquisitions completed after first-quarter 2018.

With respect to adjusted revenue: the company believes that investors may find this measure useful to analyze the financial performance of our Real Estate Investments segment because it is more reflective of this segment’s total operations.

With respect to adjusted net income, adjusted EPS, EBITDA, adjusted EBITDA and adjusted EBITDA on fee revenue margin:  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, adjusted EBITDA and adjusted EBITDA fee revenue margin—the effects of financings and income tax and the accounting effects of capital spending. All of these measures and adjusted revenue 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.

 


 


CBRE Press Release

May 8, 2019

Page 10

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

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Net income attributable to CBRE Group, Inc.

 

$

164,409

 

 

$

150,288

 

 

 

 

 

 

 

 

 

 

Plus / minus:

 

 

 

 

 

 

 

 

Intangible asset impairment

 

 

89,037

 

 

 

 

Non-cash depreciation and amortization expense related to certain assets

   attributable to acquisitions

 

 

22,226

 

 

 

28,972

 

Costs associated with our reorganization, including cost-savings initiatives (1)

 

 

15,749

 

 

 

 

Carried interest incentive compensation expense (reversal) to align with

   the timing of associated revenue

 

 

7,336

 

 

 

(10,029

)

Write-off of financing costs on extinguished debt

 

 

2,608

 

 

 

27,982

 

Tax impact of adjusted items

 

 

(33,848

)

 

 

(11,537

)

Impact of U.S. tax reform

 

 

 

 

 

548

 

 

 

 

 

 

 

 

 

 

Net income attributable to CBRE Group, Inc. shareholders,

   as adjusted

 

$

267,517

 

 

$

186,224

 

 

 

 

 

 

 

 

 

 

Diluted income per share attributable to CBRE Group, Inc.

   shareholders, as adjusted

 

$

0.79

 

 

$

0.54

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted income

   per share

 

 

340,158,399

 

 

 

342,589,810

 

 

 

EBITDA and adjusted EBITDA are calculated as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Net income attributable to CBRE Group, Inc.

 

$

164,409

 

 

$

150,288

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

105,823

 

 

 

108,165

 

Intangible asset impairment

 

 

89,037

 

 

 

 

Interest expense

 

 

22,726

 

 

 

28,858

 

Write-off of financing costs on extinguished debt

 

 

2,608

 

 

 

27,982

 

Provision for income taxes

 

 

43,878

 

 

 

46,164

 

Less:

 

 

 

 

 

 

 

 

Interest income

 

 

1,534

 

 

 

3,621

 

 

 

 

 

 

 

 

 

 

EBITDA

 

 

426,947

 

 

 

357,836

 

 

 

 

 

 

 

 

 

 

Adjustments:

 

 

 

 

 

 

 

 

Costs associated with our reorganization, including cost-savings initiatives (1)

 

 

15,749

 

 

 

 

Carried interest incentive compensation expense (reversal) to align

   with the timing of associated revenue

 

 

7,336

 

 

 

(10,029

)

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

450,032

 

 

$

347,807

 

 

 

(1)

Primarily represents severance costs related to headcount reductions in connection with our reorganization announced in the third quarter of 2018 that became effective January 1, 2019.

 


 


CBRE Press Release

May 8, 2019

Page 11

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. Organic fee revenue for the three months ended March 31, 2019 further excludes contributions from all acquisitions completed after first-quarter 2018. Reconciliations are shown below (dollars in thousands):

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Organic Fee Revenue

 

 

 

 

 

 

 

 

Consolidated fee revenue

 

$

2,428,725

 

 

$

2,276,899

 

Less: Acquisitions

 

 

(46,244

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Organic fee revenue

 

$

2,382,481

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Workplace Solutions (Occupier Outsourcing Services)

 

 

 

 

 

 

 

 

Fee revenue

 

$

691,895

 

 

$

643,238

 

Plus: Pass through costs also recognized as revenue

 

 

2,474,020

 

 

 

2,184,265

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

3,165,915

 

 

$

2,827,503

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and Advisory Project Management

 

 

 

 

 

 

 

 

Fee revenue

 

$

288,119

 

 

$

271,994

 

Plus: Pass through costs also recognized as revenue

 

 

232,765

 

 

 

212,788

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

520,884

 

 

$

484,782

 

 

 

Real Estate Investments adjusted revenue is computed as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Real Estate Investments

 

 

 

 

 

 

 

 

Total revenue

 

$

135,193

 

 

$

147,015

 

Add:

 

 

 

 

 

 

 

 

Equity income from unconsolidated subsidiaries

 

 

72,822

 

 

 

35,748

 

Gain on disposition of real estate

 

 

19,247

 

 

 

18

 

Less:

 

 

 

 

 

 

 

 

Non-controlling interests

 

 

6,720

 

 

 

96

 

 

 

 

 

 

 

 

 

 

Adjusted revenue

 

$

220,542

 

 

$

182,685

 

 

Adjusted EBITDA on fee revenue margin is calculated as follows (dollars in thousands):

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

$

450,032

 

 

$

347,807

 

Fee revenue

 

 

2,428,725

 

 

 

2,276,899

 

Adjusted EBITDA on fee revenue margin

 

 

18.5

%

 

 

15.3

%

 

 


 


CBRE Press Release

May 8, 2019

Page 12

CBRE GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents (1)

 

$

604,952

 

 

$

777,219

 

Restricted cash

 

 

82,716

 

 

 

86,725

 

Receivables, net

 

 

3,801,474

 

 

 

3,668,591

 

Warehouse receivables (2)

 

 

1,548,249

 

 

 

1,342,468

 

Property and equipment, net

 

 

730,450

 

 

 

721,692

 

Operating lease assets (3)

 

 

938,681

 

 

 

 

Goodwill and other intangibles, net

 

 

5,002,528

 

 

 

5,093,617

 

Investments in and advances to unconsolidated subsidiaries

 

 

228,406

 

 

 

216,174

 

Other assets, net

 

 

1,755,552

 

 

 

1,550,307

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

14,693,008

 

 

$

13,456,793

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Current liabilities, excluding debt and operating lease liabilities

 

$

3,924,845

 

 

$

4,471,473

 

Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises

   have committed to purchase) (2)

 

 

1,561,207

 

 

 

1,328,761

 

Revolving credit facility

 

 

336,000

 

 

 

 

Senior term loans, net

 

 

744,009

 

 

 

751,255

 

4.875% senior notes, net

 

 

592,990

 

 

 

592,781

 

5.25% senior notes, net

 

 

422,757

 

 

 

422,688

 

Other debt

 

 

2,998

 

 

 

3,682

 

Operating lease liabilities (3)

 

 

1,154,673

 

 

 

 

Other long-term liabilities

 

 

749,313

 

 

 

876,251

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

9,488,792

 

 

 

8,446,891

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

 

CBRE Group, Inc. stockholders' equity

 

 

5,089,379

 

 

 

4,938,797

 

Non-controlling interests

 

 

114,837

 

 

 

71,105

 

 

 

 

 

 

 

 

 

 

Total equity

 

 

5,204,216

 

 

 

5,009,902

 

 

 

 

 

 

 

 

 

 

Total liabilities and equity

 

$

14,693,008

 

 

$

13,456,793

 

 

 

(1)

Includes $107.0 million and $155.2 million of cash in consolidated funds and other entities not available for company use as of March 31, 2019 and December 31, 2018, respectively.

(2)

Represents loan receivables, the majority of which are offset by borrowings under related warehouse line of credit facilities.

(3)

Reflects assets and liabilities recorded as a result of adopting Accounting Standards Update (ASU) No. 2016-02, “Leases (Topic 842)” on January 1, 2019 prospectively using the optional transitional method with no adjustment to comparative period financial statements presented for prior periods.