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CBRE Group, Inc. Reports Strong Financial Results for First-Quarter 2016

LOS ANGELES, Apr 28, 2016 (BUSINESS WIRE) -- CBRE Group, Inc. CBG, +0.72% today reported strong financial results for the first quarter ended March 31, 2016.

First-Quarter 2016 Results*

  • Revenue for the first quarter totaled $2.8 billion, an increase of 39% (42% local currency [1] ). Fee revenue [2] increased 25% (28% local currency) to $1.8 billion. The first quarter of 2016 included approximately $654 million of revenue from the acquired Global Workplace Solutions business. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue were both up 7% (10% local currency).
  • On a U.S. GAAP basis, net income and earnings per diluted share decreased to $82.2 million and $0.24, respectively. GAAP net income for the first quarter of 2016 was affected by $17.0 million of acquisition-related non-cash amortization, $11.6 million of integration costs associated with the Global Workplace Solutions acquisition, as well as $8.8 million incurred in the cost elimination program that the company referenced in its fourth quarter 2015 earnings release.
  • Adjusted net income [3 ] rose 14% to $120.8 million, while adjusted earnings per share improved 13% to $0.36.
  • Foreign currency movement, primarily the impact of marking to market of currency hedges, reduced earnings per diluted share and adjusted earnings per diluted share, by approximately $0.04 as compared to the prior-year first quarter.
  • EBITDA [4] rose 3% to $252.6 million and Normalized EBITDA [4] increased 15% to $282.7 million. EBITDA and Normalized EBITDA were negatively impacted by $21.1 million and $22.0 million, respectively, of currency movement, primarily the marking to market of currency hedges in the first quarter of 2016 versus the first quarter of 2015.
  • Normalized EBITDA margin on fee revenue was 15.6%.

* All percentage changes versus prior-year periods throughout this press release are in U.S. dollars, except where noted.

Management Commentary

“We started 2016 with very strong performance,” said Bob Sulentic, CBRE’s president and chief executive officer. “Our people around the world worked together to again produce double-digit revenue and adjusted earnings per share growth, despite significant negative effects from currency hedges in the quarter. Without this impact, adjusted earnings per share would be up 25%.”

Mr. Sulentic added: “CBRE continues to achieve market share gains by attracting and developing top talent and enabling them to leverage our powerful platform to provide superb insight and value to our clients.” Earlier this month, Forbes named CBRE the 15th best employer in America, reflecting the strength of the company’s culture.

Revenue growth was strong in each of CBRE’s three global regions. The Americas, the company’s largest business segment, saw revenue increase 29% (30% local currency). In EMEA (Europe, the Middle East & Africa), revenue rose by 72% (79% local currency) with all countries posting gains, highlighted by The Netherlands, Spain and the United Kingdom. In Asia Pacific (APAC), India and Japan were the catalysts for a 48% (54% local currency) increase in revenue.

Global leasing was exceptionally strong during the first quarter as revenue surged 15% (18% local currency). The United States set the pace, with revenue up 20%, driven by a number of large transactions. A broad range of countries also generated strong growth, including Canada, France, India, Italy and Japan. The United Kingdom showed growth of 7% (16% local currency).

The occupier outsourcing business line continued to benefit from strong underlying growth drivers, augmented by contributions from the acquired Global Workplace Solutions business. Excluding contributions from this acquisition, fee revenue improved 11% (17% local currency), with all three regions posting double-digit growth in local currency. (note:leasing and sales revenue generated by contractual occupier clients is recorded in our leasing and sales revenue categories.)

On a global basis, property sales revenue grew 7% (9% local currency) with notable growth outside the United States. APAC registered the strongest growth with revenue up 12% (18% local currency), paced by Japan. Strong gains in France, The Netherlands and Spain – as well as growth in the United Kingdom – resulted in a 4% (11% local currency) revenue increase in EMEA. The Americas saw revenue rise 6% (7% local currency). Commercial mortgage services revenue increased 3% (same in local currency), driven by higher loan origination volumes with banks.

Development Services also posted very strong revenue and earnings growth. Projects in process in this business totaled $7.1 billion, up $1.6 billion from the first quarter of 2015. The pipeline inventory totaled $3.1 billion, down $0.5 billion from a year ago, as development projects converted from pipeline to in-process. In the Global Investment Management business, Assets Under Management totaled $89.7 billion at the end of the first quarter 2016. This represents an increase of $0.7 billion from year-end 2015 or $0.3 billion in local currency.

The first quarter results reflect the ongoing evolution of CBRE’s business base toward more stable revenue. Contractual fee revenue accounted for 46% of total fee revenue in the current quarter – up from 39% in the first quarter of 2015. Contractual fee revenue, plus leasing, rose to 74% of total fee revenue from 70% during the prior-year period.

First-Quarter 2016 Segment Results

The following tables present highlights of CBRE segment performance during the first quarter of 2016 (dollars in thousands):

Americas EMEA Asia Pacific
% Change from Q1 2015 % Change from Q1 2015 % Change from Q1 2015
Q1 2016 USD LC Q1 2016 USD LC Q1 2016 USD LC
Revenue

$

1,583,559

29% 30%

$

847,498

72% 79%

$

308,524

48% 54%
Fee revenue 1,068,861 25% 26% 447,389 38% 45% 192,689 28% 34%
Fee revenue, excluding GWS 950,809 11% 12% 343,197 6% 13% 158,353 5% 11%
EBITDA 173,338 2% 2% 15,214 -16% -10% 10,654 -26% -29%
Normalized EBITDA 187,387 8% 8% 27,716 52% 63% 12,790 -12% -15%
Global Investment Management Development Services
% Change from Q1 2015 % Change from Q1 2015 `
Q1 2016 USD LC Q1 2016 USD LC
Revenue $ 90,380 -18% -15% $ 16,773 37% 37%
EBITDA 21,536 -43% -42% 31,875 476% 476%
Normalized EBITDA 22,915 -35% -33% 31,875 476% 476%

First-quarter 2016 results were impacted by select items including acquisition-related integration expenses and charges associated with cost elimination actions. The company does not normalize for currency movements, including gains or losses from currency hedging. Accordingly, EBITDA and Normalized EBITDA were negatively impacted by foreign currency movements, primarily the marking to market of currency hedging. This reduced the current quarter Normalized EBITDA relative to the first quarter of 2015 as follows: Americas $4.9 million; EMEA $5.4 million; Asia Pacific $7.0 million; and Global Investment Management $4.7 million.

Business Outlook

“We are very encouraged by our strong start to 2016,” Mr. Sulentic said. “As we look ahead, it is important to remember that the first quarter is typically our seasonally lightest quarter for revenue and earnings. As always, we caution against using the first quarter as a barometer of full year performance. However, our business has positive momentum and the macro environment – while more cautious than a year ago – remains generally supportive, with consensus forecasts calling for continued modest economic growth in the U.S. and globally.”

CBRE continues to expect adjusted earnings-per-share in the range of $2.27 to $2.37 for full-year 2016. This represents 13% year-on-year growth at the mid-point of the range.

Conference Call Details

The Company’s first-quarter earnings conference call will be held today (Thursday, April 28, 2016) at 8:00 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 p.m. Eastern Time on April 28, 2016, and ending at midnight Eastern Time on May 5, 2016. 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 13633047. 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. CBG, +0.72% a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2015 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. 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.

Note: This release contains forward-looking statements within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance (including adjusted earnings per share expectations), market share, and business outlook. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this release. Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, the Company expressly disclaims any...


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