10-QPeriod: Q3 FY2018

CBRE GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2018

Filed November 9, 2018For Securities:CBRE

Summary

CBRE Group, Inc. reported a solid third quarter for 2018, with total revenue increasing by 13.4% year-over-year to $5.26 billion. 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 million, 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 million 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.

Financial Highlights

47 data points
Beta

Revenue

$5.26B

22.1% Gross Margin

Net Income

$290.47M

5.5% Net Margin

EPS (Diluted)

$0.85

Total Assets

$12.98B

Cash & Equivalents

$550.47M

Free Cash Flow

$549.96M

Financial Statements
Beta
Revenue$5.26B
Cost of Revenue$4.10B
Gross Profit$1.16B
Operating Expenses$5.07B
Operating Income$189.72M
Interest Expense$26.65M
Net Income$290.47M
EPS (Basic)$0.86
EPS (Diluted)$0.85
Shares Outstanding (Basic)339.48M
Shares Outstanding (Diluted)343.73M

Key Highlights

  • 1Total revenue increased by 13.4% to $5.26 billion, driven by strong organic growth across multiple service lines.
  • 2Net income attributable to CBRE Group, Inc. rose significantly to $290.5 million, up from $199.1 million in Q3 2017.
  • 3A one-time gain of $92.6 million from investment remeasurement positively impacted 'Other Income'.
  • 4Interest expense decreased by 22.7% due to the early redemption of 5.00% senior notes.
  • 5Operating, administrative, and other expenses increased by 21.9%, impacted by reorganization costs and litigation settlement expenses.
  • 6The effective tax rate decreased from 27.9% to 24.6% due to the lower U.S. corporate tax rate.
  • 7The company completed the FacilitySource Acquisition for approximately $265.5 million, which contributed to goodwill and future growth potential.

Frequently Asked Questions

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.

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.

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.

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.