CBRE Group, Inc. (CBG)

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CBRE Group (CBG)

Q3 2013 Earnings Call

October 29, 2013 5:00 pm ET

Executives

Nick Kormeluk - Senior Vice President of Investor Relations

Robert E. Sulentic - Chief Executive Officer, President, Director, Chairman of Acquisition Committee and Member of Executive Committee

Gil Borok - Chief Financial Officer and Executive Vice President

Michael J. Strong - President of EMEA

Analysts

Anthony Paolone - JP Morgan Chase & Co, Research Division

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

David Ridley-Lane - BofA Merrill Lynch, Research Division

Mitchell B. Germain - JMP Securities LLC, Research Division

Todd Lukasik - Morningstar Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the CBRE Third Quarter Earnings Conference Call. [Operator Instructions]

As a reminder, this conference is being recorded. And I would now like to turn the conference over to our host, Mr. Nick Kormeluk in Investor Relations. Please go ahead.

Nick Kormeluk

Thank you, and welcome to CBRE's Third Quarter 2013 Earnings Conference Call. About an hour ago, we issued a press release announcing our Q3 financial results. This release is available on the home page 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 that you may hear today. Please refer to our third quarter earnings report filed on Form 8-K, our current annual report filed 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 that 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.

Please turn to Slide 3. Participating with me today are Bob Sulentic, our President and Chief Executive Officer; Gil Borok, our Chief Financial Officer; and Mike Strong, our EMEA Chairman and Chief Executive Officer. I'll now turn the call over to Bob.

Robert E. Sulentic

Thanks, Nick. Please turn to Slide 4. The third quarter was another period of strong growth for CBRE. Before we review this quarter in detail, I'd like take you back to our Second Quarter Earnings Conference Call in July. As we looked ahead to the rest of 2013, we said we expected that property sales would remain strong despite modestly higher interest rates and anxieties over the U.S. Federal Reserve's policies. Occupier outsourcing would sustain steady low-double-digit growth rates. Leasing would gain momentum as a result of our increased focus and slowly improving market fundamentals. Investment Management would benefit from significant carried interest revenue, much of which was anticipated in our initial expectation for 2013. EBITDA margin would expand by around 50 basis points in the full year driven by increased contributions from Investment Management as well as the normal increase in transaction activity during second half of the year.

The third quarter overall played out much as we expected. Our performance relative to our 3 primary financial metrics: revenue, normalized EBITDA and earnings per share was consistent with our plan. Importantly, we achieved solid top and bottom line growth while continuing to make very important strategic investments as previously announced in people and technology. These investments are strengthening our abilities for our professionals and serve our clients while positioning us for future success. Gil will provide more details on these efforts.

Our growth in this quarter came amid highly variable global market conditions caused by a soft economic recovery and ongoing U.S. fiscal and monetary policy uncertainty underlined by the extreme policy discord in Washington, D.C. in recent weeks. Despite all of this, there were many areas of significant strength along with a few weak spots which added up to healthy growth for the quarter. In fact, in a market like this, we benefit significantly from our well-balanced business and lean position we hold across business lines and markets around the world.

Regionally, our growth was paced by very strong performance in EMEA. Mike Strong will join us shortly to discuss how we have strengthened this business and how we are benefiting from the beginning of an economic recovery in Europe. We also achieved a number -- another strong quarter of double-digit revenue growth in the Americas, our largest business segment. Looking at Asia-Pacific, in U.S. dollar terms, revenue rose only 1%, however, this result was impacted materially by weaker foreign currencies, notably the Australian dollar, the rupee and the yen. In local currencies, Asia-Pacific revenue grew solidly rising 13% when compared to a year earlier.

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