CBRE Group, Inc. Reports Financial Results for Second-Quarter 2022

DALLAS, August 04, 2022–(BUSINESS WIRE)–CBRE Group, Inc. (NYSE:CBRE) today reported financial results for the second quarter ended June 30, 2022.

“CBRE had an outstanding second quarter with strength across our global businesses. All three business segments posted double-digit revenue and segment operating profit growth, despite the significant currency headwinds that affected all U.S.-based global companies. Core EPS was the highest for any quarter in CBRE’s history – up 37% from last year’s second quarter and even slightly higher than last year’s record fourth quarter,” said Bob Sulentic, CBRE’s president and chief executive officer. “These results reflect the benefits of our diversification strategy and an economic backdrop that was still generally supportive despite heightened macro concerns.”

Consolidated Financial Results Overview

The following table presents highlights of CBRE performance (dollars in millions, except per share data; totals may not add due to rounding):

% Change

Q2 2022

Q2 2021

USD

LC (1)

Operating Results

Revenue

$

7,771

$

6,459

20.3

%

24.0

%

Net revenue (2)

4,803

3,912

22.8

%

26.5

%

GAAP net income

487

443

10.1

%

12.5

%

GAAP EPS

$

1.48

$

1.30

13.3

%

15.8

%

Core adjusted net income (3)

604

455

32.8

%

37.0

%

Core EBITDA (4)

919

708

29.8

%

33.6

%

Core EPS (3)

$

1.83

$

1.34

36.7

%

41.0

%

Cash Flow Results

Cash flow provided by operations

$

454

$

421

8.1

%

Less: Capital expenditures

55

46

17.9

%

Free cash flow (5)

$

400

$

375

6.8

%

Advisory Services Segment

The following table presents highlights of the Advisory Services segment performance (dollars in millions; totals may not add due to rounding):

% Change

Q2 2022

Q2 2021

USD

LC

Revenue

$

2,588

$

2,137

21.1

%

24.5

%

Net revenue

2,571

2,135

20.4

%

23.8

%

Segment operating profit (6)

521

465

12.1

%

15.2

%

Segment operating profit on revenue margin (7)

20.1

%

21.7

%

(1.6 pts)

(1.6 pts)

Segment operating profit on net revenue margin (7)

20.2

%

21.8

%

(1.5 pts)

(1.5 pts)

Note: all percent changes cited are vs. second-quarter 2021, except where noted.

Property Leasing

  • Global revenue rose 40% (43% local currency).

  • The Americas was the primary growth catalyst with revenue up 56% (same in local currency).

  • Leasing revenue grew by 14% in local currency in EMEA and APAC combined, with 5% growth in USD due to a significant foreign currency headwind.

  • All major property types realized revenue increases, led by office.

Capital Markets

  • Global sales revenue rose 17% (21% local currency), reflecting healthy market fundamentals and market share gains. Global mortgage origination revenue slipped 1% (same in local currency).

  • The Americas led sales revenue growth across regions, up 26% (same in local currency). Sales revenue in EMEA and APAC combined was flat in USD but increased 10% in local currency.

  • Global retail, industrial and multifamily sales maintained strong momentum.

  • Lower gains on mortgage origination servicing rights from loans sourced for the Government Sponsored Enterprises (GSEs) reduced mortgage origination revenue growth during the quarter. Aside from the lower gains on GSE servicing rights, global mortgage origination revenue rose 4%.

Other Advisory Business Lines

  • Loan servicing revenue surged 28% (29% local currency).

  • Valuation revenue rose 8% (13% local currency).

  • Property management net revenue rose 5% (10% local currency).

Global Workplace Solutions (GWS) Segment

The following table presents highlights of the GWS segment performance (dollars in millions; totals may not add due to rounding):

% Change

Q2 2022

Q2 2021

USD

LC

Revenue

$

4,908

$

4,083

20.2

%

23.8

%

Net revenue

1,956

1,538

27.2

%

31.0

%

Segment operating profit

218

170

28.3

%

33.4

%

Segment operating profit on revenue margin

4.4

%

4.2

%

0.2 pts

0.3 pts

Segment operating profit on net revenue margin

11.2

%

11.1

%

0.1 pts

0.2 pts

Note: all percent changes cited are vs. second-quarter 2021, except where noted.

  • Excluding $338 million of revenue from Turner & Townsend (60% interest acquired on November 1, 2021), GWS revenue rose 12% (16% local currency).

  • Net revenue increased 8% (12% local currency), excluding $292 million from Turner & Townsend. This growth was broad based by client type and supported by a mix of new wins and expansions.

  • Project management net revenue rose 12% (17% local currency), excluding Turner & Townsend contributions.

  • Facilities management saw 7% (11% local currency) net revenue growth.

  • New contract signings for the quarter reached a record level.

  • The new business pipeline remained elevated, with a diversified mix of energy, financial and professional services, manufacturing/logistics and retail prospects.

  • Excluding contributions from Turner & Townsend, GWS segment operating profit increased 5% (10% local currency).

Real Estate Investments (REI) Segment

The following table presents highlights of the REI segment performance (dollars in millions):

% Change

Q2 2022

Q2 2021

USD

LC

Revenue

$

277

$

243

13.9

%

20.8

%

Segment operating profit

275

154

78.2

%

80.8

%

Note: all percent changes cited are vs. second-quarter 2021, except where noted.

Real Estate Development

  • Operating profit(8) surged by $96 million to approximately $215 million, driven by a strong pace of large asset and land dispositions.

  • The in-process portfolio ended the quarter at $19.3 billion, down $0.5 billion from the record level achieved in first-quarter 2022, due to the monetization of assets during the quarter.

  • The development pipeline increased $1.3 billion from first-quarter 2022 to $11.5 billion, a record level.

  • Industrial and multifamily assets continued to comprise more than two-thirds of the in-process portfolio.

Investment Management

  • Revenue rose 13% (20% local currency) to $158 million.

  • Growth was driven by higher asset management fees, up 14% (21% local currency), and incentive fees, up 113% (124% local currency).

  • Operating profit increased 29% (39% local currency) to approximately $58.4 million.

  • AUM increased by $0.1 billion ($4.4 billion local currency) to $146.9 billion, a record high.

  • Foreign currency movement largely offset strong net capital inflows and higher asset valuations.

Corporate and Other Segment

  • Operating loss increased by $79.0 million, primarily due to a $65.0 million decrease in fair-value adjustments on strategic non-core, non-controlled investment portfolio.

  • This was largely driven by a $42.6 million adjustment on the company’s investment interest in Altus Power, due to lower publicly traded share and warrant prices and an alignment-share conversion loss during the quarter.

  • Corporate overhead expenses increased by roughly $13.9 million (17.2%), driven by increases in general compensation and related benefits as well as incentive compensation.

Capital Allocation Overview

  • Free Cash Flow – During the second quarter of 2022, the company’s free cash flow was $399.8 million. This reflected cash from operating activities of $454.4 million, less total capital expenditures of $54.7 million. Net capital expenditures totaled $52.5 million. (9)

  • Stock Repurchase Program – The company repurchased approximately 7.5 million shares for $611.2 million ($81.39 average price per share) during the second quarter of 2022. As of July 31, 2022, repurchases for the year totaled approximately 12.7 million shares for nearly $1.1 billion ($85.17 average purchase price). There was $898.4 million of capacity remaining under the company’s authorized stock repurchase program as of July 31, 2022.

  • Acquisitions and Investments – During the second quarter of 2022, CBRE completed three in-fill acquisitions for a total of $42.2 million in cash and deferred consideration: a property evaluation and advisory firm in New Zealand, a property advisory consultant in Scotland and a sustainability advisory specialist in France.

Leverage and Financing Overview

  • Leverage – The company’s net leverage ratio (net debt(10) – to trailing twelve-month core EBITDA) was 0.20x as of June 30, 2022, which is substantially below the company’s primary debt covenant of 4.25x. The net leverage ratio is computed as follows (dollars in millions):

As of

June 30, 2022

Total debt

$

1,851

Less: Cash (11)

1,193

Net debt (10)

$

658

Divided by: Trailing twelve month consolidated Core EBITDA

$

3,339

Net leverage ratio

0.20x

  • Liquidity – As of June 30, 2022, the company had approximately $4.2 billion of total liquidity, consisting of approximately $1.2 billion in cash, plus the ability to borrow an aggregate of approximately $3.0 billion under its revolving credit facilities, net of any outstanding letters of credit.

Conference Call Details

The company’s second quarter earnings webcast and conference call will be held today, Thursday, August 4, 2022 at 8:30 a.m. Eastern Time. Investors are encouraged to access the webcast via this link or they can click this link beginning at 8:15 a.m. Eastern Time for automated access to the conference call.

Alternatively, investors may dial into the conference call using these operator-assisted phone numbers: 877.407.8037 (U.S.) or 201.689.8037 (International). A replay of the call will be available starting at 1:00 p.m. Eastern Time on August 4, 2022. The replay is accessible by dialing 877.660.6853 (U.S.) or 201.612.7415 (International) and using the access code: 13730633#. A transcript of the call will be available on the company’s Investor Relations website at https://ir.cbre.com.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.

Safe Harbor and Footnotes

This press release contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company’s future growth momentum, operations and business outlook. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this press release. Any forward-looking statements speak only as of the date of this press release and, except to the extent required by applicable securities laws, the company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: disruptions in general economic, political and regulatory conditions and significant public health events or the outbreak of war, particularly in geographies or industry sectors where our business may be concentrated; volatility or adverse developments in the securities, capital or credit markets, interest rate increases and conditions affecting the value of real estate assets, inside and outside the United States; poor performance of real estate investments or other conditions that negatively impact clients’ willingness to make real estate or long-term contractual commitments and the cost and availability of capital for investment in real estate; foreign currency fluctuations and changes in currency restrictions, trade sanctions and import/export and transfer pricing rules; disruptions to business, market and operational conditions related to the Covid-19 pandemic and the impact of government rules and regulations intended to mitigate the effects of this pandemic, including, without limitation, rules and regulations that impact us as a loan originator and servicer for U.S. Government Sponsored Enterprises (GSEs); our ability to compete globally, or in specific geographic markets or business segments that are material to us; our ability to identify, acquire and integrate accretive businesses; costs and potential future capital requirements relating to businesses we may acquire; integration challenges arising out of companies we may acquire; increases in unemployment and general slowdowns in commercial activity; trends in pricing and risk assumption for commercial real estate services; the effect of significant changes in capitalization rates across different property types; a reduction by companies in their reliance on outsourcing for their commercial real estate needs, which would affect our revenues and operating performance; client actions to restrain project spending and reduce outsourced staffing levels; our ability to further diversify our revenue model to offset cyclical economic trends in the commercial real estate industry; our ability to attract new user and investor clients; our ability to retain major clients and renew related contracts; our ability to leverage our global services platform to maximize and sustain long-term cash flow; our ability to continue investing in our platform and client service offerings; our ability to maintain expense discipline; the emergence of disruptive business models and technologies; negative publicity or harm to our brand and reputation; the failure by third parties to comply with service level agreements or regulatory or legal requirements; the ability of our investment management business to maintain and grow assets under management and achieve desired investment returns for our investors, and any potential related litigation, liabilities or reputational harm possible if we fail to do so; our ability to manage fluctuations in net earnings and cash flow, which could result from poor performance in our investment programs, including our participation as a principal in real estate investments; the ability of our indirect subsidiary, CBRE Capital Markets, Inc., to periodically amend, or replace, on satisfactory terms, the agreements for its warehouse lines of credit; declines in lending activity of U.S. GSEs, regulatory oversight of such activity and our mortgage servicing revenue from the commercial real estate mortgage market; changes in U.S. and international law and regulatory environments (including relating to anti-corruption, anti-money laundering, trade sanctions, tariffs, currency controls and other trade control laws), particularly in Asia, Africa, Russia, Eastern Europe and the Middle East, due to certain conflicts and the level of political instability in those regions; litigation and its financial and reputational risks to us; our exposure to liabilities in connection with real estate advisory and property management activities and our ability to procure sufficient insurance coverage on acceptable terms; our ability to retain, attract and incentivize key personnel; our ability to manage organizational challenges associated with our size; liabilities under guarantees, or for construction defects, that we incur in our development services business; variations in historically customary seasonal patterns that cause our business not to perform as expected; our leverage under our debt instruments as well as the limited restrictions therein on our ability to incur additional debt, and the potential increased borrowing costs to us from a credit-ratings downgrade; our and our employees’ ability to execute on, and adapt to, information technology strategies and trends; cybersecurity threats or other threats to our information technology networks, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; our ability to comply with laws and regulations related to our global operations, including real estate licensure, tax, labor and employment laws and regulations, as well as data privacy and protection regulations, and the anti-corruption laws and trade sanctions of the U.S. and other countries; changes in applicable tax or accounting requirements; any inability for us to implement and maintain effective internal controls over financial reporting; the effect of implementation of new accounting rules and standards or the impairment of our goodwill and intangible assets; and the performance of our equity investments in companies that we do not control.

Additional information concerning factors that may influence the company’s financial information is discussed under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures About Market Risk” and “Cautionary Note on Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2021, our latest quarterly report on Form 10-Q, as well as in the company’s press releases and other periodic filings with the Securities and Exchange Commission (SEC). Such filings are available publicly and may be obtained on the company’s website at www.cbre.com or upon written request from CBRE’s Investor Relations Department at investorrelations@cbre.com.

The terms “net revenue,” “core adjusted net income,” “core EPS,” “business line operating profit,” “segment operating profit on revenue margin,” “segment operating profit on net revenue margin,” “core EBITDA,” “net debt” and “free cash flow,” all of which CBRE uses in this press release, are non-GAAP financial measures under SEC guidelines, and you should refer to the footnotes below as well as the “Non-GAAP Financial Measures” section in this press release for a further explanation of these measures. We have also included in that section reconciliations of these measures in specific periods to their most directly comparable financial measure calculated and presented in accordance with GAAP for those periods.

Totals may not sum in tables in millions included in this release due to rounding.

(1)

Local currency percentage change is calculated by comparing current-period results at prior-period exchange rates versus prior-period results.

(2)

Net revenue is gross revenue less costs largely associated with subcontracted vendor work performed for clients. These costs are reimbursable by clients and generally have no margin.

(3)

Core adjusted net income and core earnings per diluted share (or core EPS) exclude the effect of select items from GAAP net income and GAAP earnings per diluted share as well as adjust the provision for income taxes and impact on non-controlling interest for such charges. Adjustments during the periods presented included non-cash depreciation and amortization expense related to certain assets attributable to acquisitions, certain carried interest incentive compensation (reversal) expense to align with the timing of associated revenue, the impact of fair value adjustments to real estate assets acquired in the acquisition of Telford Homes plc in 2019 (the Telford acquisition) (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, integration and other costs related to acquisitions, asset impairments and a provision associated with Telford’s fire safety remediation efforts. It also removes the fair value changes and related tax impact of certain strategic non-core non-controlling equity investments that are not directly related to our business segments (including venture capital “VC” related investments). Note: Core adjusted EPS has been renamed core EPS for simplicity.

(4)

Core EBITDA represents earnings, inclusive of non-controlling interest, before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization, asset impairments, adjustments related to certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, and integration and other costs related to acquisitions. It also removes the fair value changes, on a pre-tax basis, of certain strategic non-core non-controlling equity investments that are not directly related to our business segments (including venture capital “VC” related investments).

(5)

Free cash flow is calculated as cash flow from operations, less capital expenditures (reflected in the investing section of the consolidated statement of cash flows).

(6)

Segment operating profit is the measure reported to the chief operating decision maker (CODM) for purposes of making decisions about allocating resources to each segment and assessing performance of each segment. Segment operating profit represents earnings, inclusive of non-controlling interest, before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization and asset impairments, as well as adjustments related to the following: certain carried interest incentive compensation (reversal) expense to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, integration and other costs related to acquisitions and a provision associated with Telford’s fire safety remediation efforts. The above definition was changed in the fourth quarter of 2021 to include non-controlling interest given the acquisition of Turner & Townsend. Prior period results have been recast to conform to this definition.

(7)

Segment operating profit on revenue and net revenue margins represent segment operating profit divided by revenue and net revenue, respectively.

(8)

Represents line of business profitability/losses, as adjusted.

(9)

For the three months ended June 30, 2022, the company incurred capital expenditures of $54.7 million (reflected in the investing section of the condensed consolidated statement of cash flows) and received tenant concessions from landlords of $2.1 million (reflected in the operating section of the condensed consolidated statement of cash flows).

(10)

Net debt is calculated as cash and cash equivalents less total debt (excluding non-recourse debt).

(11)

Cash represents cash and cash equivalents (excluding restricted cash).

CBRE GROUP, INC.

OPERATING RESULTS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2022 AND 2021

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2022

2021

2022

2021

Revenue:

Net revenue

$

4,802,558

$

3,911,693

9,178,589

7,270,677

Pass through costs also recognized as revenue

2,968,720

2,546,920

5,925,622

5,126,815

Total revenue

7,771,278

6,458,613

15,104,211

12,397,492

Costs and expenses:

Cost of revenue

6,053,984

5,016,759

11,806,178

9,736,305

Operating, administrative and other

1,188,819

957,216

2,254,815

1,785,543

Depreciation and amortization

162,359

119,085

311,391

241,163

Asset impairments

26,405

36,756

Total costs and expenses

7,431,567

6,093,060

14,409,140

11,763,011

Gain on disposition of real estate

177,226

929

198,818

1,085

Operating income

516,937

366,482

893,889

635,566

Equity income from unconsolidated subsidiaries

119,168

212,132

162,039

295,726

Other (loss) income

(6,909

)

12,045

(21,373

)

14,777

Interest expense, net of interest income

18,518

13,772

31,344

23,878

Income before provision for income taxes

610,678

576,887

1,003,211

922,191

Provision for income taxes

120,762

133,445

117,024

209,772

Net income

489,916

443,442

886,187

712,419

Less: Net income attributable to non-controlling interests

2,594

805

6,568

3,580

Net income attributable to CBRE Group, Inc.

$

487,322

$

442,637

$

879,619

$

708,839

Basic income per share:

Net income per share attributable to CBRE Group, Inc.

$

1.50

$

1.32

$

2.68

$

2.11

Weighted average shares outstanding for basic income per share

325,415,305

335,643,233

328,692,585

335,751,530

Diluted income per share:

Net income per share attributable to CBRE Group, Inc.

$

1.48

Source link