10-QPeriod: Q1 FY2018

CBRE GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 10, 2018For Securities:CBRE

Summary

CBRE Group, Inc. reported strong first-quarter 2018 results with total revenue increasing by 15.4% year-over-year to $4.7 billion. 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 million, 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 million 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.

Financial Highlights

47 data points
Beta

Revenue

$4.67B

22.6% Gross Margin

Net Income

$150.29M

3.2% Net Margin

EPS (Diluted)

$0.44

Total Assets

$11.91B

Cash & Equivalents

$642.85M

Free Cash Flow

-$296.68M

Financial Statements
Beta
Revenue$4.67B
Cost of Revenue$3.62B
Gross Profit$1.05B
Operating Expenses$4.46B
Operating Income$213.61M
Interest Expense$28.86M
Net Income$150.29M
EPS (Basic)$0.44
EPS (Diluted)$0.44
Shares Outstanding (Basic)338.89M
Shares Outstanding (Diluted)342.59M

Key Highlights

  • 1Revenue increased by 15.4% to $4.7 billion, driven by strong organic growth across multiple service lines.
  • 2Net income attributable to CBRE Group, Inc. rose by 9.7% to $150.3 million.
  • 3Adjusted EBITDA increased by 11.1% to $347.8 million, reflecting improved operational performance.
  • 4The company successfully redeemed its $800 million 5.00% senior notes, improving its debt profile.
  • 5Significant increase in equity income from unconsolidated subsidiaries, up 167.5% to $40.2 million, largely from the Development Services segment.
  • 6The adoption of new revenue recognition guidance (ASC Topic 606) was effective January 1, 2018, with retrospective adjustments made to prior periods.
  • 7Company maintains a strong liquidity position with $2.3 billion available under its revolving credit facility.

Frequently Asked Questions

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.

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.

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.

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.