10-QPeriod: Q2 FY2010

CBRE GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2010

Filed August 9, 2010For Securities:CBRE

Summary

CBRE Group, Inc. (CBRE) reported a significant turnaround in its financial performance for the quarter and six months ended June 30, 2010, compared to the same periods in 2009. The company posted net income attributable to shareholders of $54.8 million and $48.2 million, respectively, a stark contrast to the net losses recorded in the prior year. This improvement was driven by a substantial increase in revenue, up 22.6% for the quarter and 19.1% for the six months, reflecting a rebound in global commercial real estate transaction activity, particularly in sales, leasing, and outsourcing services across its Americas, EMEA, and Asia Pacific segments. The company's operational efficiency also improved, with costs and expenses growing at a slower pace than revenue. This led to a significant increase in operating income and EBITDA. Despite a challenging macroeconomic environment that continues to impact the real estate sector, CBRE has demonstrated resilience and a clear path towards recovery, benefiting from the early stages of a commercial real estate rebound. Investors should note the company's ongoing efforts to manage its significant debt load, with recent debt modifications and prepayments aimed at extending maturities and improving financial flexibility.

Financial Highlights

43 data points
Beta

Revenue

$1.17B

Net Income

$54.79M

4.7% Net Margin

EPS (Diluted)

$0.17

Total Assets

$4.93B

Cash & Equivalents

$743.56M

Free Cash Flow

$89.65M

Financial Statements
Beta
Revenue$1.17B
Operating Expenses$1.08B
Operating Income$97.18M
Interest Expense$50.27M
Net Income$54.79M
EPS (Basic)$0.17
EPS (Diluted)$0.17
Shares Outstanding (Basic)312.91M
Shares Outstanding (Diluted)318.43M

Key Highlights

  • 1Reported net income attributable to CBRE shareholders of $54.8 million for the three months ended June 30, 2010, compared to a net loss of $6.6 million in the prior year period.
  • 2Revenue increased by 22.6% to $1.17 billion for the quarter and 19.1% to $2.20 billion for the six months ended June 30, 2010, driven by increased sales, leasing, and outsourcing activity.
  • 3Operating income more than doubled to $97.2 million for the quarter and more than tripled to $142.9 million for the six months, indicating improved operational performance.
  • 4EBITDA significantly increased to $161.6 million for the quarter and $236.6 million for the six months, demonstrating strong operational profitability before interest, taxes, depreciation, and amortization.
  • 5The company reported income from discontinued operations of $7.1 million for the quarter and six months, primarily related to a property sale.
  • 6CBRE has actively managed its debt, with recent modifications extending maturities and a $150 million prepayment of term B senior secured term loans in July 2010.

Frequently Asked Questions

The primary driver for the improved financial performance was a significant increase in revenue, up 22.6% year-over-year, driven by higher worldwide sales, leasing, and outsourcing activity. This rebound in commercial real estate transaction volume across its key geographic segments signifies an early stage of recovery in the market.

CBRE has been actively managing its debt. This includes entering into loan modification agreements to extend debt maturities and amortization schedules. Notably, the company prepaid $150 million of its tranche B senior secured term loans in July 2010, which is expected to result in interest expense savings and enhance financial flexibility.

While CBRE is experiencing a recovery, it acknowledges that the macroeconomic environment remains challenging. The company's future performance is contingent on sustained economic growth, improving credit markets, and restored business and consumer confidence. They continue to monitor these factors closely and manage their operations accordingly.

Yes, CBRE adopted Accounting Standards Update (ASU) 2009-17, 'Consolidations (Topic 810),' effective January 1, 2010. This led to the consolidation of certain variable interest entities that were not previously consolidated, impacting reported revenues, expenses, and assets, particularly within the Global Investment Management segment. The company has also adopted other new accounting pronouncements related to fair value measurements, which primarily affect disclosures.