CBRE Group, Inc. (CBG)

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CBRE Group (CBG)

Q4 2012 Earnings Call

February 06, 2013 5:00 pm ET

Executives

Nick Kormeluk - Senior Vice President of Investor Relations

Robert E. Sulentic - Chief Executive Officer, President and Director

William F. Concannon - Chief Executive Officer of Global Corporate Services

Gil Borok - Chief Financial Officer

Analysts

Anthony Paolone - JP Morgan Chase & Co, Research Division

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

William C. Marks - JMP Securities LLC, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division

Todd Lukasik - Morningstar Inc., Research Division

David Gold - Sidoti & Company, LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the CBRE Fourth Quarter Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. I'll now turn the conference over to Nick Kormeluk, Investor Relations. Please go ahead, sir.

Nick Kormeluk

Thank you, and welcome to CBRE's Fourth Quarter 2012 Earnings Conference Call.

About an hour ago, we issued a press release announcing our Q4 financial results. This release is available on the homepage of our website at cbre.com.

This conference call is being webcast and is available on the Investor Relations section of our website. Also available is a presentation slide deck, which you can use to follow along with our prepared remarks. An archived audio of the webcast and a PDF version of the slide presentation will be posted to the website later today, and a transcript of our call will be posted tomorrow.

Please turn to the slide labeled Forward-Looking Statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance and business outlook. These statements should be considered as estimates only, and actual results may ultimately differ from these estimates.

Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements you may hear today. Please refer to our fourth quarter earnings report filed on Form 8-K, our current annual report on Form 10-K and our current quarterly report on Form 10-Q, in particular, any discussion of risk factors or forward-looking statements, which are filed with the SEC and available at the SEC's website, sec.gov, for a full discussion of the risks and other factors that may impact any estimates you may hear today.

We may make certain statements during the course of this presentation, which include references to non-GAAP financial measures, as defined by SEC regulations. As required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures, which are attached hereto within the appendix.

Participating with me today are Bob Sulentic, our President and Chief Executive Officer; Gil Borok, our Chief Financial Officer; and Bill Concannon, the Chief Executive Officer of our Global Corporate Services business. I'll now turn the call over to Bob.

Robert E. Sulentic

Thanks, Nick, and please turn to Slide 4.

CBRE's performance rebounded strongly in the final quarter of 2012. Following a sluggish Q3, activity improved in virtually all business lines, particularly our capital markets businesses. All 3 global operating regions delivered solid top line growth with especially strong results in the Americas. The positive turn in performance reflects improved market sentiment, which has fluctuated throughout the current recovery, as well as CBRE's distinct advantages as the global market leader.

Revenue for the year set a new milestone at $6.5 billion, and both earnings and normalized EBITDA exhibited strong growth. Our full year normalized EBITDA margin of 14.1% was the highest since 2007 and increased 50 basis points over 2011.

These achievements in a year of economic and market uncertainty are a testament to the strength and diversity that comes from our geographic footprint and broad product offering, our brand and our people's talents for collaborating to create value for our clients.

Please turn to Slide 5. Global business line highlights for the quarter include: a 22% increase in global property sales revenue as we completed single-asset and portfolio sales valued at more than $1 billion in several markets, including Berlin and Frankfurt, Moscow, New York, Seattle and Silicon Valley. Sales activity was especially strong in the Americas, rising 32%.

Despite Europe's weak economic growth and continued financial stress, property sales in EMEA rose 13%, aided by robust performance in the United Kingdom. Commercial mortgage brokerage revenue improved 38%, fueled by continued strong U.S. loan origination activity. In a generally soft market, leasing revenue grew 5%, led by the Americas and Asia Pacific. Outsourcing continued its strong growth. Overall revenue rose 13% as all 3 global regions posted double-digit increases.

As you will hear from Bill Concannon shortly, we signed a record number of new Global Corporate Services contracts and aggressively expanded our scope of services for existing clients in 2012. Investment Management revenue, excluding discontinued operations and normalized EBITDA, grew 18% and 48%, respectively, as a result of higher incentive fees, as well as increased asset management fees, which benefited from a full quarter of ING REIM Europe contributions.

As the market enters its fourth year of slow recovery, we expect conditions to continue to improve gradually, tracking the performance of the global economy. While we are encouraged by positive underlying trends in the U.S. and China and the easing of credit market tensions in Europe, the pace of recovery remains subpar, and investors and occupiers alike are still managing their businesses cautiously.

Read the rest of this transcript for free on seekingalpha.com