10-QPeriod: Q2 FY2014

CBRE GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2014

Filed August 11, 2014For Securities:CBRE

Summary

CBRE Group, Inc. reported strong revenue growth for the second quarter and first half of 2014, driven by a combination of the Norland acquisition and robust organic growth across its global operations. The company saw significant increases in property, facilities, and project management fees, alongside higher leasing and sales activity. Despite increased costs, particularly related to the Norland integration and higher compensation expenses, CBRE managed to improve its net income attributable to the company. Financially, the company demonstrated improved liquidity, with net cash provided by financing activities in the first half of 2014, a significant turnaround from the prior year's debt refinancing activities. CBRE's balance sheet shows a healthy increase in total assets and equity. The company's debt levels remain substantial but are managed with a focus on extending maturities and lowering interest expenses. The company is well-positioned to meet its working capital requirements and fund investments through internally generated cash flow and its revolving credit facility.

Financial Highlights

48 data points
Beta

Revenue

$2.13B

Net Income

$105.46M

5.0% Net Margin

EPS (Diluted)

$0.32

Total Assets

$7.47B

Cash & Equivalents

$381.87M

Free Cash Flow

$6.03M

Financial Statements
Beta
Revenue$2.13B
Operating Expenses$1.94B
Operating Income$206.01M
Interest Expense$28.47M
Net Income$105.46M
EPS (Basic)$0.32
EPS (Diluted)$0.32
Shares Outstanding (Basic)330.13M
Shares Outstanding (Diluted)333.92M

Key Highlights

  • 1Revenue for the three months ended June 30, 2014, increased by 22.1% to $2.13 billion compared to the same period in 2013, driven by the Norland acquisition and strong organic growth.
  • 2Net income attributable to CBRE Group, Inc. for the second quarter of 2014 rose to $105.5 million from $69.9 million in the prior year's quarter.
  • 3Operating income increased to $206.0 million for the second quarter of 2014, up from $187.6 million in the prior year's quarter.
  • 4The EMEA segment saw significant revenue growth of 89.1% due to the Norland acquisition, with underlying organic growth also positive.
  • 5Global Investment Management revenue increased by 9.7% driven by carried interest revenue.
  • 6Total debt as of June 30, 2014, was approximately $2.2 billion (excluding non-recourse debt and warehouse lines of credit), with a leverage ratio of 1.66x.
  • 7Net cash provided by financing activities was $110.7 million for the first half of 2014, a significant improvement from the prior year's net cash used of $740.0 million.

Frequently Asked Questions

The acquisition of Norland Managed Services, Ltd. in December 2013 significantly contributed to CBRE's revenue growth, particularly in the EMEA segment. While it increased costs, especially in cost of services and operating expenses due to integration and related expenses, it also bolstered the company's real estate outsourcing platform and contributed positively to overall revenue and operating income.

CBRE has actively managed its debt. The company completed significant refinancing transactions in 2013, which extended debt maturities and lowered interest expenses. As of June 30, 2014, total debt (excluding certain categories) was approximately $2.2 billion, with a leverage ratio of 1.66x. The company's debt agreements contain restrictive covenants, but CBRE remains compliant with its financial covenants.

Revenue growth was driven by a combination of factors. The Norland acquisition provided a substantial boost, particularly in the EMEA region. Organically, the company experienced strong growth in property, facilities, and project management fees, along with increased leasing and sales activity across its global segments. The Global Investment Management segment also saw improved revenue due to carried interest.

Approximately 45% of CBRE's business is transacted in foreign currencies. The company manages its exposure by balancing assets and liabilities in the same currencies and maintaining necessary operating cash levels abroad. They also use foreign currency exchange forward contracts to mitigate risks associated with currency fluctuations impacting EBITDA. While foreign currency movements had mixed impacts on revenue and expenses in this period, the company actively monitors these exposures.