01—Abstract
Summary
Summary of the 10-Q filed November 9, 2018. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc. reported a solid third quarter for 2018, with total revenue increasing by 13.4% year-over-year to $5.26 billiona.
This growth was driven by broad-based organic increases across key service lines, including occupier outsourcing, property management, leasing, sales, and commercial mortgage origination. Net income attributable to CBRE Group, Inc. saw a significant increase to $290.5 millionb, up from $199.1 million in the prior year's third quarter. This improvement was bolstered by a one-time gain of $92.6 million from the remeasurement of an investment in an unconsolidated subsidiary.
Financially, the company demonstrated strong operational performance and a robust balance sheet. The successful redemption of $800 millionc in senior notes in the first quarter of 2018 contributed to a decrease in interest expense.
While operating, administrative, and other expenses saw an increase, partly due to reorganization costs and a litigation settlement, the company's overall revenue growth and a favorable effective tax rate helped drive substantial net income growth. Investors should note the ongoing impact of foreign currency fluctuations, which had a negative effect on reported revenue in this quarter.
02—Key points
Key Highlights
- Total revenue increased by 13.4% to $5.26 billion, driven by strong organic growth across multiple service lines.
- Net income attributable to CBRE Group, Inc. rose significantly to $290.5 million, up from $199.1 million in Q3 2017.
- A one-time gain of $92.6 million from investment remeasurement positively impacted 'Other Income'.
- Interest expense decreased by 22.7% due to the early redemption of 5.00% senior notes.
- Operating, administrative, and other expenses increased by 21.9%, impacted by reorganization costs and litigation settlement expenses.
- The effective tax rate decreased from 27.9% to 24.6% due to the lower U.S. corporate tax rate.
- The company completed the FacilitySource Acquisition for approximately $265.5 million, which contributed to goodwill and future growth potential.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2018, CBRE Group, Inc. kept $0.06.
- Revenue$5.26B100.0%
- Cost of revenue−$4.10B77.9%
- Gross profit$1.16B22.1%
- Operating costs−$972.3M18.5%
- Operating income$189.7M3.6%
- Interest, other & tax$100.8M1.9%
- Net income$290.5M5.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2018filed November 9, 2018Financial Statements
Q3 FY2018 against Q3 FY2017
| Line item | Q3 FY2018Q3 FY2017 | Change |
|---|---|---|
| Revenue | $5.26B$4.64B | +13.4% |
| Cost of Revenue | $4.10B$3.60B | +13.9% |
| Gross Profit | $1.16B$1.04B | +11.7% |
| Operating Expenses | $5.07B$4.41B | +15.1% |
| Operating Income | $189.72M$238.96M | −20.6% |
| Interest Expense | $26.65M$34.48M | −22.7% |
| Net Income | $290.47M$199.09M | +45.9% |
| EPS (Basic) | $0.86$0.59 | +45.8% |
| EPS (Diluted) | $0.85$0.58 | +46.6% |
| Shares Outstanding (Basic) | 339.48M337.95M | +0.5% |
| Shares Outstanding (Diluted) | 343.73M341.19M | +0.7% |
05—Questions
Frequently Asked Questions
How did CBRE's revenue perform in Q3 2018 compared to Q3 2017?
CBRE's total revenue increased by 13.4% to $5.26 billion in the third quarter of 2018, compared to $4.64 billion in the third quarter of 2017. This growth was driven by strong organic performance across its key business segments, including occupier outsourcing, property management, leasing, sales, and commercial mortgage origination.
What was the primary driver for the increase in net income?
Net income attributable to CBRE Group, Inc. increased significantly to $290.5 million in Q3 2018, up from $199.1 million in Q3 2017. This substantial increase was driven by strong revenue growth, a lower effective tax rate (24.6% vs. 27.9%) due to the Tax Cuts and Jobs Act, and a one-time gain of $92.6 million recognized from the remeasurement of an investment in an unconsolidated subsidiary.
How did the FacilitySource acquisition impact the company's financials?
CBRE completed the acquisition of FacilitySource for approximately $265.5 million in June 2018. This acquisition resulted in the recognition of goodwill and is expected to enhance the company's tech-enabled supply chain capabilities for the occupier outsourcing industry. The financial statements reflect the initial purchase accounting for this transaction.
What is the company's debt profile and what actions were taken regarding its debt?
CBRE refinanced its credit facilities in October 2017, establishing a $2.8 billion revolving credit facility and a $750 million term loan. Notably, in March 2018, the company redeemed its $800 million 5.00% senior notes in full, funded by borrowings under its credit facilities. This redemption led to a decrease in interest expense.
06—Continue