01—Abstract
Summary
Summary of the 10-Q filed November 6, 2019. Cited figures are marked; the original filing is the authoritative source.
CBRE Group, Inc. (CBRE) reported its third-quarter 2019 financial results, showing robust revenue growth driven by its Global Workplace Solutions and Advisory Services segments.
Total revenue increased by 12.6% year-over-year for the quarter and 11.5% for the first nine months, largely due to strong organic growth across key service lines, despite a negative impact from foreign currency translations. While revenue showed a healthy increase, net income attributable to CBRE Group, Inc. decreased for both the quarter and the nine-month period compared to 2018. This was primarily influenced by a significant one-time gain recognized in the prior year related to an investment remeasurement and a $89 milliona intangible asset impairment charge in the Real Estate Investments segment during the nine months of 2019.
The company also reported a lower effective tax rate in 2019 due to a tax benefit in a foreign subsidiary. CBRE continues to demonstrate strong operating leverage, with operating expenses as a percentage of revenue decreasing.
The company also highlighted its ongoing stock repurchase program, announcing an additional $100 millionb authorization, bringing the total under the new program to $400 million. The acquisition of Telford Homes Plc, announced in July 2019, closed on October 1, 2019, further expanding its Real Estate Investments segment in the London area.
02—Key points
Key Highlights
- Consolidated revenue increased by 12.6% for the three months ended September 30, 2019, reaching $5.9 billion, compared to $5.3 billion in the prior year period. For the nine months ended September 30, 2019, revenue grew 11.5% to $16.8 billion.
- Net income attributable to CBRE Group, Inc. decreased to $256.6 million for the third quarter of 2019 from $290.5 million in the prior year quarter, primarily impacted by a significant one-time gain in the prior year and an intangible asset impairment charge in 2019.
- The Global Workplace Solutions segment showed strong performance with revenue up 15.3% for the quarter, and Advisory Services also experienced growth, driven by property and advisory project management, sales, and commercial mortgage origination.
- An intangible asset impairment of $89.0 million was recorded in the Real Estate Investments segment during the nine months ended September 30, 2019, due to a review of anticipated cash flows and a decrease in assets under management in its public securities business.
- The company's effective tax rate decreased from 24.6% in Q3 2018 to 19.7% in Q3 2019, primarily due to a net tax benefit recognized in a foreign subsidiary.
- CBRE continued its share repurchase program, with an additional authorization of $100 million, bringing the total authorized amount under the new program to $400 million. As of November 6, 2019, approximately $300 million remained under this program.
- The acquisition of Telford Homes Plc, a multifamily residential property developer in London, was completed on October 1, 2019, expanding CBRE's Real Estate Investments segment.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, CBRE Group, Inc. kept $0.04.
- Revenue$5.93B100.0%
- Cost of revenue−$4.69B79.1%
- Gross profit$1.24B20.9%
- Operating costs−$921.1M15.5%
- Operating income$316.6M5.3%
- Interest, other & tax−$60.0M1.0%
- Net income$256.6M4.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed November 6, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $5.93B$5.26B | +12.6% |
| Cost of Revenue | $4.69B$4.10B | +14.4% |
| Gross Profit | $1.24B$1.16B | +6.5% |
| Operating Income | $316.63M$189.72M | +66.9% |
| Net Income | $256.60M$290.47M | −11.7% |
| EPS (Basic) | $0.76$0.86 | −11.6% |
| EPS (Diluted) | $0.75$0.85 | −11.8% |
| Shares Outstanding (Basic) | 336.20M339.48M | −1.0% |
| Shares Outstanding (Diluted) | 341.10M343.73M | −0.8% |
05—Questions
Frequently Asked Questions
What was the primary driver behind the decrease in net income for the third quarter of 2019 compared to the prior year?
The decrease in net income was primarily influenced by a significant one-time gain recognized in the prior year's third quarter related to the remeasurement of an investment in an unconsolidated subsidiary. Additionally, a $89.0 million intangible asset impairment charge recorded in the nine-month period of 2019 within the Real Estate Investments segment also impacted profitability.
How did the company's revenue performance vary across its different business segments?
CBRE experienced strong revenue growth across its key segments. Global Workplace Solutions saw a 15.3% increase in revenue for the quarter, while Advisory Services also performed well with growth in property and advisory project management, advisory sales, and commercial mortgage origination. The Real Estate Investments segment also showed revenue growth, primarily driven by its investment management line of business.
What is the company's outlook on 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. The company anticipates that its operating cash flow and revolving credit facility will be sufficient for its needs for the foreseeable future, and at least for the next 12 months, barring extraordinary events or large strategic acquisitions. The company also has a substantial remaining capacity under its stock repurchase program.
How did the adoption of new lease accounting standards impact the company's financial statements?
CBRE adopted new lease accounting standards (ASC Topic 842) in the first quarter of 2019. This resulted in the recognition of approximately $1.2 billion in additional lease liabilities and corresponding right-of-use assets on the balance sheet as of January 1, 2019. However, the adoption did not have a material impact on the consolidated statements of operations.
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