01—Abstract
Summary
Summary of the 10-Q filed May 10, 2018. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc. reported strong first-quarter 2018 results with total revenue increasing by 15.4% year-over-year to $4.7 billiona.
This growth was driven by robust organic performance across key service lines, including occupier outsourcing, property management, sales, leasing, and commercial mortgage origination. Net income attributable to CBRE Group, Inc. rose to $150.3 millionb, up from $137.0 million in the prior year period. The company also benefited from a lower effective tax rate due to the recent Tax Cuts and Jobs Act, and saw a significant increase in equity income from unconsolidated subsidiaries.
The company successfully redeemed its $800 millionc 5.00% senior notes, demonstrating proactive debt management. Despite an increase in operating expenses, primarily related to payroll and occupancy costs, the company's adjusted EBITDA grew to $347.8 million. CBRE continues to manage its capital effectively, maintaining significant availability under its revolving credit facility, positioning it well for future growth and strategic initiatives.
02—Key points
Key Highlights
- Revenue increased by 15.4% to $4.7 billion, driven by strong organic growth across multiple service lines.
- Net income attributable to CBRE Group, Inc. rose by 9.7% to $150.3 million.
- Adjusted EBITDA increased by 11.1% to $347.8 million, reflecting improved operational performance.
- The company successfully redeemed its $800 million 5.00% senior notes, improving its debt profile.
- Significant increase in equity income from unconsolidated subsidiaries, up 167.5% to $40.2 million, largely from the Development Services segment.
- The adoption of new revenue recognition guidance (ASC Topic 606) was effective January 1, 2018, with retrospective adjustments made to prior periods.
- Company maintains a strong liquidity position with $2.3 billion available under its revolving credit facility.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, CBRE Group, Inc. kept $0.03.
- Revenue$4.67B100.0%
- Cost of revenue−$3.62B77.4%
- Gross profit$1.05B22.6%
- Operating costs−$840.4M18.0%
- Operating income$213.6M4.6%
- Interest, other & tax−$63.3M1.4%
- Net income$150.3M3.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 10, 2018Financial Statements
Q1 FY2018 against Q1 FY2017
| Line item | Q1 FY2018Q1 FY2017 | Change |
|---|---|---|
| Revenue | $4.67B$4.05B | +15.4% |
| Cost of Revenue | $3.62B— | — |
| Gross Profit | $1.05B— | — |
| Operating Expenses | $4.46B$3.85B | +15.9% |
| Operating Income | $213.61M$205.21M | +4.1% |
| Interest Expense | $28.86M$34.01M | −15.1% |
| Net Income | $150.29M$137.02M | +9.7% |
| EPS (Basic) | $0.44$0.41 | +7.3% |
| EPS (Diluted) | $0.44$0.40 | +10.0% |
| Shares Outstanding (Basic) | 338.89M336.91M | +0.6% |
| Shares Outstanding (Diluted) | 342.59M339.69M | +0.9% |
05—Questions
Frequently Asked Questions
What were the primary drivers of revenue growth in Q1 2018?
Revenue growth was primarily driven by strong organic performance across several service lines, including occupier outsourcing (up 11.8%), property management (up 7.2%), sales (up 10.9%), leasing (up 5.1%), and commercial mortgage origination (up 26.4%). Higher revenue from the Global Investment Management segment (up 29.8%) also contributed significantly. Positive foreign currency translation, particularly from the British pound sterling and euro, added approximately $170.8 million to total revenue.
How did the company manage its debt during the quarter?
CBRE Group, Inc. proactively managed its debt by redeeming its $800 million 5.00% senior notes in full during March 2018. This redemption was funded through $550 million in borrowings from its tranche A term loan facility and additional borrowings from its revolving credit facility. This action, along with a generally lower interest rate environment and lower net borrowings, resulted in a decrease in interest expense.
What is the impact of the new revenue recognition standard (ASC 606)?
CBRE adopted ASC 606 effective January 1, 2018, using the full retrospective method. This adoption resulted in a cumulative adjustment to accumulated earnings and affected prior period financial statements. For Q1 2018, the new guidance led to an acceleration of revenue recognition for certain contingent-based commissions, such as leasing commissions, by recognizing performance obligations earlier. This also accelerated related expense recognition and impacted contract assets and liabilities.
What is the company's liquidity position?
CBRE maintains a strong liquidity position. As of March 31, 2018, the company had $642.9 million in cash and cash equivalents and $78.9 million in restricted cash. Furthermore, it had approximately $2.3 billion of borrowings available under its $2.8 billion revolving credit facility, indicating ample resources to meet its working capital and funding requirements.
06—Continue