Adjusted Earnings Per Share up 22% to $2.05 for 2015 (26% local currency)
Los Angeles, February 3, 2016 — CBRE Group, Inc. (NYSE:CBG) today reported robust revenue and adjusted earnings growth for the year and fourth quarter ended December 31, 2015, with full-year revenue and normalised EBITDA reaching new highs for the company*.
Full-Year 2015 Results
• Revenue for full-year 2015 totaled $10.9 billion, an increase of 20% (26% local currency1). Fee revenue2 increased 14% (20% local currency) to $7.7 billion. Excluding the acquired Global Workplace Solutions business, which CBRE purchased on September 1, 2015, revenue and fee revenue both increased 15% in local currency.
• Adjusted net income3 for 2015 rose 23% to $689.2 million, while adjusted earnings per diluted share3 improved 22% to $2.05. Adjustments (net of tax) for the year included $15.8 million to align the timing of carried interest expense and associated revenue recognition, $34.6 million for integration costs associated with the Global Workplace Solutions acquisition, $61.4 million of acquisition-related non-cash amortisation as well as $28.6 million that was incurred to eliminate costs to enhance margins going forward.
• On a U.S. GAAP basis, net income for 2015 rose 13% to $547.1 million, and earnings per diluted share increased 12% to $1.63.
• Normalised EBITDA4 increased 21% to $1.4 billion in 2015 and EBITDA4 rose 14% to $1.3 billion for 2015.
*All percentage changes versus prior-year periods throughout this press release are in U.S. dollars except where noted.
• Normalised EBITDA margin on fee revenue was 18.3% for 2015, a 110 basis point increase from the prior year.
• Foreign currency movement, including the marking of currency hedges to market, reduced EBITDA by approximately $34.8 million (or $0.07 per share) as compared to the prior year. Without currency effects, adjusted earnings per share would have increased 26%.
“2015 was another year of exceptional performance for CBRE,” said Bob Sulentic, the company’s president and chief executive officer. “The hard work of our people enabled us to set new company records for total revenue and earnings and drive double-digit top- and bottom-line growth. As important, we made many strategic gains, which have positioned CBRE to continue to create value for our clients and shareholders.”
Fourth-Quarter 2015 Results
Adjusted Earnings Per Share up 19% to $0.81 for Q4 2015 (21% local currency)
Fee Revenue up 18% for Q4 2015 (23% local currency)
• Revenue for the fourth quarter totaled $3.7 billion, an increase of 33% (38% local currency). Fee revenue increased 18% (23% local currency) to $2.6 billion. The fourth quarter of 2015 included approximately $745 million of revenue from the acquired Global Workplace Solutions business. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue were up 11% and 10%, respectively, in local currency. This growth was achieved on top of an exceptionally strong fourth quarter of 2014, when revenue increased 25% (28% local currency) compared with the year-earlier fourth quarter.
• Adjusted net income rose 19% to $271.5 million, while adjusted earnings per share improved 19% to $0.81. For the fourth quarter of 2015, adjustments (net of tax) included $15.5 million to align the timing of carried interest expense and associated revenue recognition, $16.6 million for integration costs associated with the acquired Global Workplace Solutions business, $27.2 million of acquisition-related non-cash amortization as well as $28.6 million that was incurred to eliminate costs to enhance margins going forward.
• On a U.S. GAAP basis, net income and earnings per diluted share decreased to $180.0 million and $0.53, respectively.
• Normalised EBITDA increased 26% to $517.6 million and EBITDA rose 9% to $427.6 million.
• Normalised EBITDA margin on fee revenue was 20.3%, a 130 basis point increase from the prior-year fourth quarter.
• Foreign currency movement, including the marking of currency hedges to market, reduced EBITDA by approximately $3.8 million (or $0.01 per share) as compared to the prior-year fourth quarter.
During the fourth quarter, revenue grew by double digits in all three global regions. The Americas, CBRE’s largest business segment, posted its 13th consecutive quarter of double-digit year-over-year increases as revenue climbed 22% (23% local currency). EMEA (Europe, the Middle East & Africa) and Asia Pacific saw revenue increase by 60% (69% local currency) and 37% (49% local currency), respectively.
The company’s principal businesses – global investment management and development services – also posted exceptionally strong results for the quarter.
Occupier outsourcing revenue and fee revenue more than doubled with the acquisition of Global Workplace Solutions. Excluding contributions from this acquisition, revenue and fee revenue rose 16% and 19%, respectively, in local currency. (Occupier outsourcing revenue excludes associated leasing and sales revenue, most of which is contractual.)
Global leasing revenue rose 4% (8% local currency). In the United States, growth was muted at 4%, which reflects a solid performance on top of an exceptionally strong 28% year-over-year increase in the fourth quarter of 2014. The global increase in leasing was paced by Europe – notably France and the United Kingdom – as well as strong contributions from Canada and Mexico.
Capital markets businesses remained highly active globally, although growth rates slowed from earlier in the year. Global property sales rose 1% (7% local currency), after accounting for a decline in market volumes in the United Kingdom. Excluding the United Kingdom, the global growth rate was 6% (13% local currency) – driven by improved performance in the United States and across much of Asia Pacific and continental Europe. While investor interest in United Kingdom property remains strong, with cap rates stable and rental rates increasing in the fourth quarter, capital has been migrating to continental Europe as the economies there strengthen and property yields are higher. Commercial mortgage services revenue increased 5% (6% local currency). CBRE’s loan servicing portfolio totaled $135 billion at the end of 2015.
Asset Services had a strong quarter. Revenue rose 10% (15% local currency) while fee revenue increased 12% (18% local currency) with notable growth in EMEA and the Americas. Valuation revenue rose 1% (9% local currency).
During the fourth quarter, CBRE completed four in-fill acquisitions, including a data analytics firm, a retail brokerage specialist, a leader in capital markets services for affordable housing, and its former affiliate in Memphis, TN.
Fourth-Quarter 2015 Segment Results
Americas Region (U.S., Canada and Latin America)
Revenue rose 22% (23% local currency) to $2.0 billion. Fee revenue rose 15% (17% local currency) to $1.4 billion. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue both rose 9% in local currency. Normalised EBITDA increased 7% (9% local currency) to $260.9 million.
EMEA Region (primarily Europe)
Revenue improved 60% (69% local currency) to $1.2 billion. Fee revenue rose 26% (36% local currency) to $687.7 million. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue were up 13% and 12%, respectively, in local currency. Normalised EBITDA increased 33% (45% local currency) to $93.1 million.
Asia Pacific Region (Asia, Australia and New Zealand)
Revenue increased 37% (49% local currency) to $379.5 million. Fee revenue rose 14% (27% local currency) to $260.3 million. Excluding the acquired Global Workplace Solutions business, revenue and fee revenue were up 16% and 11%, respectively, in local currency. Normalised EBITDA increased 11% (24% local currency) to $36.8 million.
Global Investment Management (investment management operations in the U.S., Europe and Asia Pacific)
Revenue rose 14% (22% local currency) to $142.3 million, primarily driven by higher carried interest tied to significant returns for clients on property dispositions. Normalized EBITDA increased 79% (94% local currency) to $52.2 million.
Assets Under Management (AUM) totaled $89.0 billion at the end of 2015. Compared with year-end 2014, AUM was up $1.9 billion in local currency, but down when converted into U.S. dollars. During the fourth quarter, AUM increased by $3.0 billion, after a $1.1 billion drag from currency movement.
Development Services (real estate development and investment activities primarily in the U.S.)
Revenue decreased to $20.3 million, while EBITDA more than doubled to $74.7 million. Development projects in process totaled $6.7 billion, up $1.3 billion from year-end 2014. The pipeline inventory totaled $3.6 billion, down $0.4 billion from year-end 2014, as projects have been converted from pipeline to in-process.
Business Outlook
“CBRE has a sustained competitive advantage. Our leading global brand and strong culture help us to attract – and keep – tremendous talent and highly desirable clients. Investments in our platform, particularly in technology and data analytics, are helping our people create value for these clients. Our revenue base is more stable and ‘stickier’ than ever before,” Mr. Sulentic said.
“While we are mindful of concerns about China’s slowing growth and the effect of lower oil prices, fundamentals in our sector remain on solid footing. We are positioned for another strong year in 2016, but are maintaining flexibility in case the economy weakens. Our outlook is based on economists’ consensus view that the global economy will maintain its modest rate of growth in 2016.”
CBRE anticipates double-digit growth again in 2016, supported by continued gains in market share, and expects to achieve adjusted earnings-per-share in the range of $2.27 to $2.37 for 2016. This equates to a growth rate of 13% at the mid-point of the guidance.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
Note – CBRE has not reconciled the (non-GAAP) adjusted earnings per share guidance included in this release to the most directly comparable GAAP measure because this cannot be done without unreasonable effort.
The terms “fee revenue,” “adjusted net income,” “adjusted earnings per share” (or adjusted EPS), “EBITDA” and “Normalized EBITDA,” 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 U.S. GAAP for those periods.
1 Local currency percentage change is calculated by comparing current-period results at prior-period exchange rates versus prior-period results.
2 Fee revenue is gross revenue less both client reimbursed costs largely associated with employees that are dedicated to client facilities and subcontracted vendor work performed for clients.
3 Adjusted net income and adjusted earnings per share (or adjusted EPS) include the impact of adjusting the provision for income taxes to a normalized rate as well as exclude the effect of selected charges from U.S. GAAP net income and U.S. GAAP earnings per diluted share. Adjustments during the periods presented included the write-off of financing costs on extinguished debt, amortization expense related to certain intangible assets attributable to acquisitions, integration and other costs related to acquisitions, cost containment expenses and certain carried interest incentive compensation expense.
4 EBITDA represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization. Amounts shown for Normalized EBITDA further remove (from EBITDA) the impact of certain cash and non-cash charges related to acquisitions, cost containment expenses and certain carried interest incentive compensation expense.
