10-QPeriod: Q2 FY2015

CBRE GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2015

Filed August 10, 2015For Securities:CBRE

Summary

CBRE Group, Inc. reported strong revenue growth of 12.4% for the three months ended June 30, 2015, reaching $2.4 billion, and a 11.4% increase for the six months ended June 30, 2015, totaling $4.4 billion. This growth was driven by increased property, facilities, and project management fees, as well as higher sales and leasing activity across its global operations. Net income attributable to CBRE Group, Inc. for the quarter was $125.0 million ($0.37 per diluted share), an increase from $105.5 million ($0.32 per diluted share) in the prior year. For the six-month period, net income was $218.0 million ($0.65 per diluted share), up from $173.1 million ($0.52 per diluted share) in the comparable period of 2014. The company is actively pursuing a significant acquisition of Johnson Controls' Global WorkPlace Solutions (GWS) business for $1.475 billion, expected to close in late 2015, and is managing its liquidity through a combination of operating cash flow and an undrawn revolving credit facility.

Financial Highlights

48 data points
Beta

Revenue

$2.39B

Net Income

$125.03M

5.2% Net Margin

EPS (Diluted)

$0.37

Total Assets

$7.46B

Cash & Equivalents

$336.42M

Free Cash Flow

$105.90M

Financial Statements
Beta
Revenue$2.39B
Operating Expenses$2.17B
Operating Income$228.75M
Interest Expense$26.15M
Net Income$125.03M
EPS (Basic)$0.38
EPS (Diluted)$0.37
Shares Outstanding (Basic)332.00M
Shares Outstanding (Diluted)336.15M

Key Highlights

  • 1Revenue increased by 12.4% to $2.4 billion for the three months ended June 30, 2015, and by 11.4% to $4.4 billion for the six months ended June 30, 2015, driven by higher service fees and transaction activity.
  • 2Net income attributable to CBRE Group, Inc. grew to $125.0 million ($0.37/share) in Q2 2015 from $105.5 million ($0.32/share) in Q2 2014, and to $218.0 million ($0.65/share) for the first six months of 2015 from $173.1 million ($0.52/share) in the prior year.
  • 3The company announced a significant acquisition of Johnson Controls' Global WorkPlace Solutions (GWS) business for $1.475 billion, expected to close in late 2015, which will expand its integrated facilities management capabilities.
  • 4Operating income improved to $228.8 million in Q2 2015 from $206.0 million in Q2 2014, and to $388.9 million for the first six months of 2015 from $318.5 million in the prior year.
  • 5EBITDA increased to $296.9 million in Q2 2015 from $260.2 million in Q2 2014, and to $543.1 million for the first six months of 2015 from $457.4 million in the prior year, demonstrating operational leverage.
  • 6The company maintained a strong financial position with $336.4 million in cash and cash equivalents as of June 30, 2015, and a healthy leverage ratio of 1.15x.
  • 7International operations represent a significant portion of revenue (42% in non-U.S. dollar currencies for the six months), with strong performance noted in EMEA and Asia Pacific, though partially impacted by foreign currency translation.

Frequently Asked Questions

CBRE's revenue growth in the reported period was primarily driven by increases in worldwide property, facilities, and project management fees, as well as higher sales and leasing activity across its global operations. Growth in global appraisal revenue and commercial mortgage brokerage activity also contributed.

The acquisition of Johnson Controls' GWS business for $1.475 billion is expected to significantly expand CBRE's integrated facilities management capabilities globally. While the transaction is expected to close in late 2015, the company anticipates that acquisitions can initially have an adverse impact on operating and net income due to integration costs, though strategic acquisitions are viewed as a key growth driver.

CBRE manages its liquidity through operating cash flow and its revolving credit facility. As of June 30, 2015, the company had $336.4 million in cash and cash equivalents and an undrawn revolving credit facility of $2.6 billion. The company also refinanced its debt, notably entering into an amended and restated credit agreement in January 2015, and maintains covenants that it met as of the reporting date, including a leverage ratio of 1.15x.

Foreign currency fluctuations have a notable impact on CBRE's financial results due to its significant international operations. For the six months ended June 30, 2015, approximately 42% of its business was transacted in non-U.S. dollar currencies. The company reported a negative impact on revenue due to foreign currency translation but also uses hedging strategies to mitigate some of this exposure.