10-QPeriod: Q1 FY2020

CBRE GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 7, 2020For Securities:CBRE

Summary

CBRE Group, Inc. reported $5.89 billion in revenue for the first quarter of 2020, a 14.7% increase year-over-year, primarily driven by strong organic growth in its Global Workplace Solutions and Advisory Services segments, alongside contributions from the recent Telford Acquisition. Despite revenue growth, net income attributable to CBRE Group, Inc. saw a modest increase to $172.2 million from $164.4 million in the prior year period. The company experienced a significant increase in asset impairments, totaling $75.2 million, largely due to the impact of the COVID-19 pandemic on future cash flow expectations, leading to a $25.0 million goodwill impairment in the Real Estate Investments segment. The onset of the COVID-19 pandemic in Q1 2020 significantly impacted the company's operations and outlook, leading to increased uncertainty and a negative impact on commercial real estate markets. CBRE anticipates adverse effects on its financial position, results of operations, and cash flows for the remainder of fiscal year 2020. The company's cash flow from operations was negative for the quarter, reflecting working capital changes, and it continues to manage its liquidity through its revolving credit facility.

Financial Highlights

45 data points
Beta

Revenue

$5.89B

20.0% Gross Margin

Net Income

$172.19M

2.9% Net Margin

EPS (Diluted)

$0.51

Total Assets

$15.68B

Cash & Equivalents

$628.45M

Free Cash Flow

-$191.01M

Financial Statements
Beta
Revenue$5.89B
Cost of Revenue$4.71B
Gross Profit$1.18B
Operating Income$220.29M
Net Income$172.19M
EPS (Basic)$0.51
EPS (Diluted)$0.51
Shares Outstanding (Basic)334.97M
Shares Outstanding (Diluted)339.74M

Key Highlights

  • 1Revenue increased by 14.7% to $5.89 billion year-over-year, driven by growth in Global Workplace Solutions and Advisory Services, and the Telford Acquisition.
  • 2Net income attributable to CBRE Group, Inc. increased to $172.2 million ($0.51 per share) from $164.4 million ($0.49 per share) in Q1 2019.
  • 3The company recorded significant asset impairments totaling $75.2 million, including a $25.0 million goodwill impairment, due to the impact of COVID-19 on future cash flow projections.
  • 4Operating income increased to $220.3 million from $144.9 million in the prior year period.
  • 5Adjusted EBITDA decreased slightly to $430.4 million from $450.0 million year-over-year.
  • 6Cash flow from operations was negative at ($136.3) million for the quarter, compared to ($392.6) million in Q1 2019.
  • 7The company maintained a strong liquidity position with $2.8 billion available under its revolving credit facility as of March 31, 2020.

Frequently Asked Questions

The COVID-19 pandemic created significant uncertainty and disruption, leading to a decline in commercial real estate transaction volumes. This impact is reflected in the company's financial results, particularly through increased asset impairments and a cautious outlook for the remainder of fiscal year 2020. Management anticipates adverse impacts on financial position, results of operations, and cash flows.

CBRE's Advisory Services segment saw revenue growth of 5.3%, driven by property and project management, loan servicing, and advisory sales. Global Workplace Solutions revenue grew by a strong 18.3%, fueled by the market for real estate outsourcing services. The Real Estate Investments segment revenue increased significantly by 56.4%, primarily due to the Telford Acquisition and higher carried interest revenue, though it recorded an operating loss and an asset impairment charge.

CBRE's outlook for fiscal year 2020 is subject to significant uncertainty due to the COVID-19 pandemic. The company expects continued adverse impacts on its financial position, results of operations, and cash flows. However, its contractual, fee-for-services businesses, particularly in outsourcing, are expected to provide some offset to the negative impacts on transactional revenue streams. The company's focus remains on managing operating expenses and maintaining liquidity.

As of March 31, 2020, CBRE maintained a strong liquidity position with $2.8 billion available under its revolving credit facility. However, cash flow from operating activities was negative for the quarter, primarily due to changes in working capital. The company is re-evaluating its capital expenditures for the year and anticipates funding its working capital and capital expenditure needs through internally generated cash flow and its credit facilities.