Adjusted Earnings Per Share up 17% for 2014; or 31% Ex. Carried Interest
Los Angeles, CA – February 4, 2015 — CBRE Group, Inc. (NYSE:CBG) today reported strong revenue and earnings growth for the year ended December 31, 2014.
Full-Year 2014 Results
- Revenue for full-year 2014 totaled $9.0 billion, an increase of 26% (27% in local currency) from $7.2 billion in 2013.
- Excluding selected charges1, net income2 for 2014 rose 18% to $561.1 million from $474.3 million in 2013, while earnings per diluted share improved 17% to $1.68 from $1.43 for the prior year. Selected charges (net of income taxes) totaled $76.6 million and $157.8 million in 2014 and 2013, respectively.
- Excluding carried interest in the Global Investment Management segment from both years, adjusted earnings per diluted share rose 31% from the prior year. 2013 included significantly more carried interest than 2014.
- On a U.S. GAAP basis, net income rose to $484.5 million, or $1.45 per diluted share, for 2014, up more than 50% from $316.5 million, or $0.95 per diluted share, for 2013. Prior-year results included a non-cash intangible asset impairment in the Global Investment Management business in continental Europe.
- Excluding selected charges, Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)3 increased 14% to $1.2 billion in 2014 from $1.0 billion in the prior year. EBITDA3 (including selected charges) rose 16% to $1.1 billion for 2014 from $982.9 million for 2013.
- EBITDA for the year was positively impacted by less than $1.0 million as a result of foreign currency translation, after the effect of hedging.
Fourth-Quarter 2014 Results
- Revenue for the quarter totaled $2.8 billion, an increase of 25% (28% in local currency) from $2.2 billion in the fourth quarter of 2013.
- Excluding selected charges1, net income2 rose 3% to $227.5 million from $221.3 million in the fourth quarter of 2013, and adjusted earnings per diluted share rose to $0.68 from $0.67 in the prior-year period. For the fourth quarter, selected charges (net of income taxes) totaled $23.2 million versus $106.6 million for the same period in 2013.
- Excluding carried interest in the Global Investment Management segment from both quarters, adjusted earnings per diluted share rose 18% from the prior-year quarter. The 2013 fourth quarter included significantly more carried-interest than the 2014 fourth quarter.
- On a U.S. GAAP basis, net income rose 78% to $204.3 million, compared with $114.6 million for the fourth quarter of 2013. GAAP earnings per diluted share rose 79% to $0.61, compared with $0.34 in last year’s fourth quarter. Prior-year results included the non-cash charge referenced in the 2014 full-year results summary.
- Excluding selected charges, EBITDA3 increased 5% to $412.4 million from $392.7 million in the fourth quarter of 2013. EBITDA3 (including selected charges) rose 9% to $392.0 million for the fourth quarter of 2014, from $358.3 million for the same period a year earlier.
- EBITDA for the quarter was negatively impacted by approximately $7.0 million as a result of foreign currency translation, after the effect of hedging.
Management Commentary
“2014 was a banner year for CBRE,” said Bob Sulentic, the company’s president and chief executive officer. “We generated strong growth and reached new milestones for total revenue and EBITDA. We achieved these results by investing in our professionals and platform, as our people worked together to create distinct advantages for our clients. Importantly, for the full year, our regional services businesses, together, achieved significant operating leverage before the contributions from Norland. In the fourth quarter, our people drove continued strong gains in our global leasing, occupier outsourcing and capital markets business lines as well as in our U.S. real estate development services business.”
For the quarter, revenue rose significantly in all three global regions. The Americas, CBRE’s largest business segment, saw a 19% (20% in local currency) revenue increase, as every major business line produced double-digit growth. In Europe, the Middle East and Africa (EMEA), organic revenue improved 16% (23% in local currency), or 71% (78% in local currency) including the contributions from Norland Managed Services Ltd, which CBRE acquired in December 2013. Asia Pacific posted revenue growth of 8% (14% in local currency), fueled by notable strength in Australia, India and Japan.
Among global business lines, revenue growth was paced by property leasing, which logged its sixth consecutive quarter of double-digit revenue increases. Globally, this business line saw revenue rise by 20% (23% in local currency) during the fourth quarter. This result reflects investments in growth initiatives as well as better underlying market conditions.
The strong growth of CBRE’s occupier outsourcing business continued in the fourth quarter. The company signed outsourcing contracts with 37 new customers – the most ever for a single quarter – reflecting its success at delivering integrated, value-added solutions for major occupiers. Globally, revenue from occupier outsourcing, including related transaction revenues, improved 59% (60% in local currency), or 17% (19% in local currency) without the contributions from Norland, during the fourth quarter.
Global property sales revenue improved 14% (17% in local currency) in the fourth quarter, with increases of 20% or more in the United States, France and Spain. Global commercial mortgage services revenue increased robustly, rising 34% (35% in local currency) in the fourth quarter, reflecting continued strong capital flows into commercial real estate as well as the company's efforts to expand this service offering outside the U.S.
The Development Services business continued to perform exceptionally well during the quarter, with revenue improving 32% (same in local currency).
As expected, Global Investment Management revenue declined during the quarter. The 26% (24% in local currency) decrease was primarily due to significantly higher carried-interest revenue in last year’s fourth quarter than in the fourth quarter of 2014. Carried interest is performance-based revenue that is generated when CBRE sells assets within its investment portfolios at values that exceed specified return thresholds. Capital raising activity in the Global Investment Management business remained strong, totaling approximately $8.6 billion for the full year.
During the fourth quarter, Standard & Poor’s raised CBRE’s corporate rating to Investment Grade. CBRE has taken advantage of liquidity and low interest rates in the debt markets to optimize the strength and flexibility of its balance sheet. In December 2014, the company issued $125 million of senior notes due 2025, following an earlier offering of $300 million of the same series of notes in September 2014. In January 2015, CBRE closed on an expanded $2.6 billion, five-year revolving credit facility and $500 million Tranche A term loan facility. The company used the proceeds from the new term loan and the December 2014 notes offering, along with cash on hand, to pay off the balances on its shorter-maturity, higher-interest rate term loans and the outstanding balance of approximately $5 million on its prior revolving credit facility.
Fourth-Quarter 2014 Segment Results
Americas Region (U.S., Canada and Latin America)
- Revenue rose 19% (20% in local currency) to $1.62 billion, compared with $1.36 billion for the fourth quarter of 2013. The revenue growth was driven by higher property sales, leasing, occupier outsourcing and commercial mortgage services activities.
- EBITDA increased 21% to $242.9 million compared with $201.3 million in last year’s fourth quarter.
- Operating income totaled $194.6 million, an increase of 18% from $165.3 million for the prior-year fourth quarter.
EMEA Region (primarily Europe)
- Revenue rose 71% (78% in local currency) to $740.1 million, compared with $432.7 million for the fourth quarter of 2013. Excluding the contributions from Norland, EMEA revenue increased 16% (23% in local currency) over the prior-year period. The increase was driven by higher property sales, leasing and appraisal activities as well as strong organic growth in occupier outsourcing. The company achieved significant improvement in several countries, including Germany, Ireland, the Netherlands, Spain and the United Kingdom.
- EBITDA increased 66% to $70.2 million compared with $42.3 million in the prior-year fourth quarter. The prior-year quarter was impacted by selected charges totaling $13.7 million for integration and other costs related to acquisitions, primarily Norland, as well as cost containment expenses, which did not recur in the fourth quarter of 2014.
- Operating income totaled $54.3 million, an increase of 54% from $35.2 million for the fourth quarter of 2013. Prior-year operating income was impacted by the same selected charges that impacted EBITDA.
Asia Pacific Region (Asia, Australia and New Zealand)
- Revenue was $277.2 million, an increase of 8% (14% in local currency) from $255.6 million for the fourth quarter of 2013. Performance improved in several countries, particularly Australia, India and Japan.
- EBITDA increased 28% to $33.1 million compared with $25.9 million in the prior-year fourth quarter. The prior-year period was impacted by selected charges totaling $4.3 million related to cost containment and acquisition-related integration expenses, which did not recur in the fourth quarter of 2014.
- Operating income totaled $29.1 million, an increase of 32% compared with $22.1 million in the fourth quarter of 2013. Prior-year operating income was impacted by the same selected charges that impacted EBITDA.
Global Investment Management (investment management operations in the U.S., Europe and Asia Pacific)
- Revenue totaled $125.2 million compared with $168.0 million for the fourth quarter of 2014. The decrease was largely driven by the decline in carried-interest revenue.
- Excluding selected charges, EBITDA totaled $29.2 million compared with $82.2 million in the prior-year fourth quarter. EBITDA (including selected items) totaled $8.7 million compared with $66.9 million in the fourth quarter of 2013. These results include the impact of carried interest described above.
- Prior-year period results included $58.4 million of normalized EBITDA associated with carried interest while fourth-quarter 2014 results included $11.7 million of normalized EBITDA associated with carried interest.
- Operating income was $4.4 million compared with an operating loss of $45.3 million for the fourth quarter of 2013.
- Assets Under Management increased during the quarter by $3.8 billion in local currency - offset by $1.8 billion of exchange rate impact - to $90.6 billion, driven by strong acquisition activity and higher property and securities values.
Development Services (real estate development and investment activities primarily in the U.S.)
- Revenue rose 32% to $24.3 million, compared with $18.4 million for the fourth quarter of 2013.
- EBITDA increased 70% to $37.0 million compared with $21.8 million in the prior-year period. The increase was largely driven by higher income from property sales (reflected primarily in gain on disposition of real estate) in the fourth quarter of 2014.
- Operating income totaled $6.3 million compared with an operating loss of $8.0 million for the fourth quarter of 2013. Under U.S. GAAP, equity earnings are not included in the calculation of operating income. If equity earnings were included, operating income would have totaled $34.0 million in the fourth quarter of 2014, compared to $19.0 million for the fourth quarter of 2013.
- Development projects in process totaled $5.4 billion, up $300 million from third-quarter 2014, and the inventory of pipeline deals totaled $4.0 billion, up $1.1 billion from third-quarter 2014. Most of the pipeline increase is due to fee-development work in the health care sector.
Business Outlook
“By any measure, 2014 was an excellent year for CBRE, and we believe 2015 will be another year of strong growth,” Mr. Sulentic said. “The investments we’ve made in our people and operating platform have materially strengthened our global business lines and positioned them for further market share gains by delivering enhanced value to our clients.”
In light of its outlook for its business performance in 2015, CBRE expects to achieve earnings-per-share, as adjusted, in the range of $1.90 to $1.95 for the full year.
Conference Call Details
The company’s fourth-quarter earnings conference call will be held today (Wednesday, February 4, 2015) at 5:00 p.m. Eastern Time. A webcast will be accessible through the Investor Relations section of the company’s website at www.cbre.com/investorrelations.
The direct dial-in number for the conference call is 877-407-8037 for U.S. callers and 201-689-8037 for international callers. A replay of the call will be available starting at 10 p.m. Eastern Time on February 4, 2015, and ending at midnight Eastern Time on February 11, 2015. The dial-in number for the replay is 877-660-6853 for U.S. callers and 201-612-7415 for international callers. The access code for the replay is 13598701. A transcript of the call will be available on the company’s Investor Relations website at www.cbre.com/investorrelations.
