01—Abstract
Summary
Summary of the 10-Q filed November 9, 2016. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc. reported a mixed financial performance for the nine months ended September 30, 2016.
While consolidated revenue saw a significant increase of 29.2% to $9.25 billiona, largely driven by the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business in September 2015, net income attributable to CBRE Group, Inc. declined by 16.1% to $308.0 million compared to the same period in the prior year. This decline was primarily attributed to increased costs associated with the GWS acquisition, including integration expenses and cost-elimination initiatives, which impacted the cost of services and operating expenses. Despite the decrease in net income, the company highlighted strong organic growth in several service lines, including property, facilities, and project management fees, as well as leasing and commercial mortgage brokerage activities.
However, sales activity saw a decline. The company also noted significant foreign currency headwinds, particularly from the weakening British pound sterling, which negatively impacted reported revenue. CBRE is actively managing these challenges through cost-efficiency programs and a focus on leveraging its global platform.
02—Key points
Key Highlights
- Consolidated revenue increased by 29.2% to $9.25 billion for the nine months ended September 30, 2016, largely due to the GWS acquisition contributing $1.8 billion in revenue.
- Net income attributable to CBRE Group, Inc. decreased by 16.1% to $308.0 million for the nine months ended September 30, 2016, compared to the prior year.
- Cost of services as a percentage of revenue increased from 63.6% to 70.5% for the nine months ended September 30, 2016, primarily due to the GWS acquisition and cost-elimination projects.
- Operating, administrative, and other expenses increased by 13.7% for the nine months ended September 30, 2016, driven by GWS acquisition costs and cost-elimination initiatives.
- Foreign currency translation had a significant negative impact, reducing total revenue by $168.8 million for the nine months ended September 30, 2016, primarily due to the British pound sterling.
- The company announced a new $250 million stock repurchase program authorized by its board of directors.
- Liquidity remains strong, with $2.7 billion of borrowings available under the revolving credit facility as of September 30, 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2016, CBRE Group, Inc. kept $0.03.
- Revenue$3.19B100.0%
- Cost of revenue−$38.9M1.2%
- Gross profit$3.15B98.8%
- Operating costs−$2.98B93.4%
- Operating income$172.5M5.4%
- Interest, other & tax−$68.3M2.1%
- Net income$104.2M3.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed November 9, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $3.19B$2.71B | +17.7% |
| Cost of Revenue | $38.88M— | — |
| Gross Profit | $3.15B— | — |
| Operating Expenses | $3.03B$2.48B | +22.5% |
| Operating Income | $172.49M$240.10M | −28.2% |
| Interest Expense | $37.27M$30.70M | +21.4% |
| Net Income | $104.16M$149.12M | −30.1% |
| EPS (Basic) | $0.31$0.45 | −31.1% |
| EPS (Diluted) | $0.31$0.44 | −29.5% |
| Shares Outstanding (Basic) | 335.77M332.68M | +0.9% |
| Shares Outstanding (Diluted) | 338.49M336.56M | +0.6% |
05—Questions
Frequently Asked Questions
What was the primary driver of the revenue increase in the nine months ended September 30, 2016?
The primary driver of the revenue increase was the acquisition of Johnson Controls' Global Workplace Solutions (GWS) business on September 1, 2015. This acquisition contributed $1.8 billion to revenue for the nine-month period.
Why did net income attributable to CBRE Group, Inc. decrease despite the revenue growth?
Net income decreased due to higher costs associated with the GWS acquisition, including integration expenses, and the initiation of cost-elimination programs. These factors increased the cost of services and operating expenses, impacting profitability.
How did foreign currency fluctuations affect CBRE's results?
Foreign currency translation had a negative impact on reported revenue, reducing it by $168.8 million for the nine months ended September 30, 2016, primarily due to the weakening of the British pound sterling. This also affected costs and expenses.
What is the company's outlook regarding liquidity and capital resources?
CBRE believes it can meet its working capital and funding requirements through internally generated cash flow and its revolving credit facility. As of September 30, 2016, the company had $2.7 billion available under its credit facility, indicating strong liquidity. They also announced a $250 million stock repurchase program.
06—Continue