CB Richard Ellis Group, Inc. reports earnings and revenue growth for first quarter 2011
EARNINGS PER SHARE RISE TO $0.13 FROM $0.01 IN 2010 FIRST QUARTER
REVENUE INCREASES 16% TO $1.2 BILLION
CB Richard Ellis Group, Inc. (NYSE:CBG) today reported strong earnings and revenue growth for the first quarter ended March 31, 2011.
• Net income on a U.S. GAAP basis improved sharply to $34.4 million, or $0.11 per diluted share, for the first quarter of 2011, compared with a net loss of $6.6 million, or $0.02 per diluted share, for the first quarter of 2010.
• Excluding selected charges1, net income2 would have totaled $40.6 million, or $0.13 per diluted share, for the current-year quarter, a significant increase from $3.2 million, or $0.01 per diluted share, in the first quarter of 2010.
• Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)3 rose 51% to $113.0 million for the first quarter of 2011 from $75.0 million a year earlier. Excluding selected charges, EBITDA3 rose 38% to $120.6 million in the current period from $87.5 million in the prior-year first quarter.
• Revenue for the quarter totaled $1.2 billion, an increase of 16% from $1.0 billion in the first quarter of 2010.
“Our results for the quarter reflect a very nice start for the year, with earnings per share and normalized EBITDA showing exceptional growth. This is particularly significant because the first quarter typically sets the tone for the rest of the year and historically is our seasonally weakest quarter,” said Brett White, CB Richard Ellis’ chief executive officer. “We are also pleased to have delivered strong EBITDA growth versus last year and to have achieved a double-digit normalized EBITDA margin.
“This year’s strong first quarter comes against a backdrop of steadily improving market fundamentals globally. The well-balanced, broadly diversified services platform we have built – across business lines and geographies – has positioned us well to serve clients and grow our business base during the current rebound. Looking ahead, general market trends remain favorable with rising transaction activity and improving fundamentals across most of the world.”
Outsourcing grew strongly. The 14% revenue increase was the best year-over-year growth rate for this business line since the third quarter of 2008. The Company also set a new record by signing 44 long-term outsourcing contracts with new and existing clients. An initiative to focus on health care and government institutions continued to pay dividends as the Company added six new outsourcing clients from these sectors during the quarter. Overall, CB Richard Ellis added 13 new outsourcing customers and expanded or renewed 31 existing clients.
Global property sales also grew robustly. Sales revenue rose 34% compared with a year ago as capital flows continued to improve and credit standards returned to historically normal levels. Reflecting the increased capital availability, mortgage brokerage revenue rose 79% from the first quarter of 2010, as U.S. loan origination volume nearly tripled from the depressed level of last year’s first quarter.
Global leasing revenue rose 8% during the quarter, posting solid gains on top of the 23% growth rate experienced in the first quarter of 2010, as employment continues to slowly recover.
Geographically, Asia-Pacific was the Company’s fastest-growing region, posting a 19% revenue increase. This growth was fueled by strong business performance in China, India, Japan and Singapore. The natural disaster and its aftermath did not materially affect the Company’s performance in Japan during the quarter, and is not expected to have a notable impact going forward. The Americas – the Company’s largest region -- also grew strongly with revenue rising 16% overall. Revenue rose by double-digits in nearly all Americas business lines. Revenue grew by 9% in EMEA as rapidly accelerated outsourcing gains were partially offset by slower property sales and leasing activity, primarily in the U.K.
Improved investment market conditions also contributed to a 28% rise in revenue from the Company’s global investment management business during the quarter. CB Richard Ellis’ planned acquisition of the majority of ING Group’s real estate investment management businesses (ING REIM) continues to progress on schedule with closing expected, as previously announced, in the second half of this year. During the quarter, the Company secured $800 million of new delayed-draw term loans, which we anticipate using, along with cash on hand, to finance the acquisition.
Interest expense decreased by $16.1 million in the first quarter of 2011 versus the first quarter of 2010, due to a net reduction in outstanding debt in the second half of 2010.
First-Quarter 2011 Segment Results
Americas Region (U.S., Canada and Latin America)
• Revenue rose 16% to $750.1 million, compared with $645.6 million for the first quarter of 2010.
• Operating income rose 37% to $62.5 million from $45.8 million for the prior-year first quarter.
• EBITDA totaled $78.1 million, up 26% from $62.0 million in last year’s first quarter.
• The region saw double-digit revenue growth across most business lines.
EMEA Region (primarily Europe)
• Revenue rose 9% to $205.0 million from $188.2 million for the first quarter of 2010. The increase was driven by growth in France, Germany, Italy, Russia and the U.K.
• Operating income totaled $0.7 million compared with $1.3 million for the same period in 2010.
• EBITDA totaled $3.0 million compared with $4.1 million in last year’s first quarter.
• Current-period results continue to reflect the recruitment and on-boarding of fee-earners to support new initiatives and recently won contracts that have yet to translate into meaningful revenue. The benefits of these investments should be realized as the year progresses.
Asia Pacific Region (Asia, Australia and New Zealand)
• Revenue rose 19% to $160.5 million from $134.4 million for the first quarter of 2010.
• Operating income rose 83% to $11.3 million, compared with $6.2 million for the first quarter of 2010.
• EBITDA increased 51% to $12.4 million compared with $8.3 million for last year’s first quarter.
• The improved results reflect higher revenue and profitability in several countries, particularly China, Japan and Singapore.
Global Investment Management Business (investment management operations in the U.S., Europe and Asia)
• Revenue increased 28% to $50.3 million from $39.4 million in the first quarter of 2010 largely driven by higher asset management and acquisition fees in the current-year period.
• Operating income totaled $1.3 million, an improvement from an operating loss of $4.4 million in the same period of 2010.
• EBITDA improved significantly to $6.0 million from an EBITDA loss of $4.9 million in the prior-year quarter. Prior-year EBITDA included $4.5 million of net non-cash write-downs of property investments, which were not included in the 2010 operating loss.
• Current-year operating results include $7.5 million of costs associated with the anticipated acquisition of ING REIM.
• Assets under management totaled $37.9 billion at the end of the first quarter of 2011, up 1% from year-end 2010 and 14% from the first quarter of 2010.
Development Services (real estate development and investment activities primarily in the U.S.)
• Revenue rose 5% to $19.2 million, compared with $18.3 million for the first quarter of 2010.
• Operating loss narrowed to $2.6 million as compared with $3.2 million for the same period in 2010.
• EBITDA increased to $13.5 million compared with EBITDA of $5.5 million in the prior-year first quarter.
• Improved EBITDA in the current-year period was primarily driven by higher equity earnings associated with gains on property sales, which is not included in the operating loss.
• Development projects in process totaled $4.9 billion, unchanged from year-end 2010 and up $0.2 billion from the first quarter of 2010. The inventory of pipeline deals rose to $1.5 billion, up $0.3 billion from year-end 2010 and $0.6 billion from the first quarter of 2010.
Conference Call Details
The Company’s first-quarter earnings conference call will be held on Wednesday, April 27, 2011 at 10:30 a.m. Eastern Time. A live webcast will be accessible through the Investor Relations section of the Company’s Web site at www.cbre.com/investorrelations.
The direct dial-in number for the conference call is 800-398-9398 for U.S. callers and 612-332-0523 for international callers. A replay of the call will be available starting at 1 p.m. Eastern Time on April 27, 2011, and ending at midnight Eastern Time on May 3, 2011. The dial-in number for the replay is 800-475-6701 for U.S. callers and 320-365-3844 for international callers. The access code for the replay is 201786. A transcript of the call will be available on the Company’s Investor Relations Web site at www.cbre.com/investorrelations.