CBRE Group, Inc. (CBG)

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CBRE Group, Inc. (CBG)

Q3 2012 Results Earnings Call

October 30, 2012 5:00 PM ET


Nick Kormeluk - Investor Relations

Brett White - Chief Executive Officer

Bob Sulentic - President

Gil Borok - Chief Financial Officer


Will Marks - JMP Securities

David Ridley-Lane - Merrill Lynch



Ladies and gentlemen, thank you for standing by. And welcome to the CBRE Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. (Operator Instructions)

As a reminder, this conference is being recorded. I’d now like to turn the conference over to our host Mr. Nick Kormeluk with Investor Relations. Please go ahead, sir.

Nick Kormeluk

Thank you. And welcome to CBRE’s third quarter 2012 earnings conference call. About an hour ago, we issued a press release announcing our Q3 financial results. This release is available on the homepage of our website at

This conference call is being webcast and is available on the Investor Relations section of our website. Also available is the presentation slide deck which you can use to follow along with our prepared remarks. An archive 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 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, and 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 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 three. Participating with me today are Brett White, our Chief Executive Officer; Bob Sulentic, our President, who as you know will succeed Brett as CEO at the end of the year; and Gil Borok, our Chief Financial Officer.

I’ll now turn the call over to Brett.

Brett White

Thank you, Nick, and please turn to slide four. As you know, the market environment turned more cautious in the third quarter of this year. Many investors and occupiers deferred making decisions and commitments, concerns about ongoing European sovereign debt issues and slowing growth in Asia, which have been vain on the markets most of the year were joined by heightened uncertainty starting from lower corporate profit expectations, as well as the upcoming U.S. election and so called fiscal cliff.

The increase caution was manifested in lower business volumes, particularly sale and lease transactions. In most of our geographies, also across EMEA, this was also the case in all other significant service lines.

Despite this very challenging macro conditions we were nevertheless able to improve revenue, while holding operating expenses flat exclusive of cost containment expenses, thereby supporting normalized EBITDA and adjusted earnings per share, and preserving our industry-leading margins. This of course is a credit to our people and our broad diverse global platform.

We’ve worked hard over a number of years to build a well-balanced integrated platform to meet the needs of our clients. The benefits of these efforts will vary evident in the third quarter of this year.

Our acquisition of the ING REIM business has added significant and largely recurring fee based revenue to our Global Investment Management operations. As a result, this segment saw revenue grow sharply and its contribution to total company normalized EBITDA versus the third quarter of 2011 increased significantly.

We’re quite pleased with the 32% normalized EBITDA margin, this business delivered in the third quarter, and we believe it is indicative of where it can perform on a consistent basis.

Outsourcing continue to grow solidly with revenue up 7% globally or 11% in local currency and 13% in the Americas. Steady adoption of outsourcing continues and CBRE remains well-positioned to capitalize on this trend.

We signed 67 total contracts in the third quarter, our highest total ever for one quarter, including 25 with new customers and 16 contract expansions, also single quarter company records.

Despite the slowdown in global investment sales, our mortgage brokerage business posted a double-digit revenue increase, driven by our deep and strong position in the U.S. multi-family finance market. These two business lines outsourcing and mortgage brokerage were the biggest growth drivers in our Americas operations.

While the property sales market was soft, we were able to expand the gap between ourselves and the number two firm in the world’s two largest investment markets which are drawing global capital through their status as relative safe-haven namely, the United States and United Kingdom.

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