CBRE Group, Inc. Reports Financial Results for Q4 and Full Year 2022

February 23, 2023 at 6:55 AM·21 min read

GAAP EPS fell 21% for FY 2022 to $4.29
Core EPS rose 7% for FY 2022 to $5.69

DALLAS, February 23, 2023--(BUSINESS WIRE)--CBRE Group, Inc. (NYSE:CBRE) today reported financial results for the fourth quarter and year ended December 31, 2022.

Consolidated Financial Results Overview

The following table presents highlights of CBRE performance (dollars in millions, except per share data; totals may not add due to rounding):

					% Change								% Change
	Q4 2022		Q4 2021		USD		LC⁽¹⁾		FY 2022		FY 2021		USD		LC⁽¹⁾
Operating Results
Revenue	$	8,194	$	8,550	(4.2	)%	1.1	%	$	30,828	$	27,746	11.1	%	15.3	%
Net revenue ⁽²⁾		4,975		5,566	(10.6	)%	(5.8	)%		18,777		17,010	10.4	%	14.5	%
GAAP net income		81		692	(88.3	)%	(97.0	)%		1,407		1,837	(23.4	)%	(24.5	)%
GAAP EPS		0.25		2.04	(87.5	)%	(96.8	)%		4.29		5.41	(20.7	)%	(21.7	)%
Core adjusted net income ⁽³⁾		424		610	(30.4	)%	(36.2	)%		1,863		1,810	2.9	%	4.1	%
Core EBITDA ⁽⁴⁾		668		956	(30.1	)%	(25.7	)%		2,924		2,864	2.1	%	6.1	%
Core EPS ⁽³⁾		1.33		1.80	(26.0	)%	(32.2	)%		5.69		5.33	6.7	%	7.9	%

Cash Flow Results
Cash flow provided by operations	$	814	$	1,164	(30.0	)%			$	1,629	$	2,364	(31.1	)%
Less: Capital expenditures		99		88	12.1	%				260		210	24.0	%
Free cash flow ⁽⁵⁾	$	715	$	1,076	(33.5	)%			$	1,369	$	2,154	(36.5	)%

"Although core earnings declined significantly in the fourth quarter, they slightly exceeded the estimate we provided last quarter. This outcome was driven by better-than-expected growth in several of the more cyclically resilient elements of our business like outsourcing and others that are secularly favored like project management and the logistics asset class – offset by a slightly larger-than-expected decline in transactional revenue," said Bob Sulentic, CBRE’s president and chief executive officer.

"For all of 2022, we achieved a solid, 7% growth rate in core earnings-per-share despite the more than doubling of long-term interest rates, sharp equity market decline and the credit crunch that constrained investment activity for most of the second half.

For 2023, we expect core earnings-per-share to decline by low- to mid-double digits, but still to be the third-highest in CBRE’s history. While the macro environment can certainly change, we expect core earnings-per-share to grow strongly in 2024, exceeding the 2022 peak and reaching a record level in just the first year after a recession."

Advisory Services Segment

The following table presents highlights of the Advisory Services segment performance (dollars in millions; totals may not add due to rounding):

							% Change
	Q4 2022			Q4 2021			USD		LC
Revenue	$	2,613		$	3,319		(21.3	)%	(17.4	)%
Net revenue		2,595			3,302		(21.4	)%	(17.6	)%
Segment operating profit ⁽⁶⁾		500			744		(32.9	)%	(28.8	)%
Segment operating profit on revenue margin ⁽⁷⁾		19.1	%		22.4	%	(3.3 pts)		(3.1 pts)
Segment operating profit on net revenue margin ⁽⁷⁾		19.3	%		22.5	%	(3.3 pts)		(3.1 pts)

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

Property Leasing

Global leasing revenue declined 7% (3% local currency).
The decline was driven by the Americas, where revenue fell 7% (same in local currency).
Foreign currency headwinds masked growth in overseas markets. Combined EMEA/APAC leasing revenue was up 7% in local currency, but down 6% in U.S. dollars. Before currency effects, growth was notably strong in North Asia, Pacific and the United Kingdom.
Global leasing revenue declined across all major property types, except retail.

Capital Markets

A highly constrained capital environment and difficult comparisons with fourth-quarter 2021 caused global sales revenue to fall 47% (44% local currency).
Investment activity weakness was broad-based. Combined EMEA/APAC sales revenue dropped 33% (23% in local currency); however, China, India and Japan showed strong growth before currency effects.
In the Americas, sales revenue was down 53% (same local currency) below last year’s robust level. Americas sales revenue increased 90% in fourth-quarter of 2021 versus fourth-quarter 2020, making the current quarter comparison particularly challenging.
Global sales revenue was down significantly across all major property types.
Most debt capital sources remained on the sidelines throughout the quarter. As a result, global mortgage origination revenue declined 42% (41% local currency).

Other Advisory Business Lines

Loan servicing revenue fell 19% (18% local currency), reflecting lower prepayment fees, which were unusually elevated in last year’s fourth quarter. Excluding prepayment fees, loan servicing revenue increased 2%, compared with fourth-quarter 2021. The servicing portfolio ended the year at $381 billion, up 9% from third-quarter 2022 and 16% for the year.
Property management net revenue rose 4% (10% local currency), paced by the Americas, Continental Europe, and Pacific.
Valuations revenue rose 4% in local currency but declined 3% in U.S. dollars.

Global Workplace Solutions (GWS) Segment

The following table presents highlights of the GWS segment performance (dollars in millions; totals may not add due to rounding):

							% Change
	Q4 2022			Q4 2021			USD		LC
Revenue	$	5,294		$	4,823		9.8	%	15.9	%
Net revenue		2,093			1,855		12.8	%	19.2	%
Segment operating profit		259			198		30.5	%	39.4	%
Segment operating profit on revenue margin		4.9	%		4.1	%	0.8 pts		0.8 pts
Segment operating profit on net revenue margin		12.4	%		10.7	%	1.7 pts		1.8 pts

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

GWS revenue increased 7% (13% local currency), excluding revenue from Turner & Townsend (60% interest acquired on November 1, 2021).
Net revenue increased 6% (12% local currency), excluding Turner & Townsend.
Project management net revenue growth was particularly strong even before the Turner & Townsend contributions, rising 14% (21% local currency).
Facilities management net revenue rose 3% (9% local currency), supported by significant growth from technology and healthcare clients.
The Turner & Townsend business continued to perform ahead of expectations.
The GWS new business pipeline increased, driven by a diversified mix of prospects in the financial and professional services, industrial and technology sectors.
Excluding contributions from Turner & Townsend, GWS segment operating profit rose 17% (25% local currency) reflecting strong top-line growth, prudent cost management actions and the benefit of one-time items.

Real Estate Investments (REI) Segment

The following table presents highlights of the REI segment performance (dollars in millions):

					% Change
	Q4 2022		Q4 2021		USD		LC
Revenue	$	291	$	413	(29.6	)%	(23.4	)%
Segment operating profit		17		156	(89.0	)%	(91.8	)%

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

Real Estate Development

Operating loss ⁽⁸⁾ totaled $6 million compared with a $122 million profit in fourth-quarter 2021.
The result reflects sharply lower U.S. asset dispositions versus last year’s robust fourth quarter, as anticipated, as well as losses on development activities in the U.K. and Continental Europe.
For full-year 2022, development operating profit of $333 million was the second-highest in company history.
The in-process portfolio ended the year at $16.9 billion, down $2.6 billion from third-quarter 2022, reflecting deferred timing of certain new projects in light of market conditions.
Industrial and multifamily assets comprised more than two thirds of the in-process portfolio.

Investment Management

Revenue edged up 3% in local currency but fell 6% in U.S. dollars to $140 million.
Asset management fees, up 2% (12% local currency), were the primary growth catalyst.
Operating profit decreased 42% (39% local currency) to $24 million, in part due to co-investment losses versus a gain in fourth-quarter 2021.
Assets Under Management (AUM) increased $5.4 billion from third-quarter 2022 to $149.3 billion, a record high for the company. The increase was attributable to net inflows of capital and positive currency movement. In local currency, AUM was down $0.5 billion, reflecting lower property values.

Corporate and Other Segment

Non-core operating loss totaled $167 million, primarily due to the lower fair-value of the company’s investment in Altus Power, Inc. (NYSE:AMPS), reflecting a decline in the share price during the quarter. Fourth-quarter 2021 non-core operating profit was $169 million, primarily due to a one-time gain recognized upon the merger of CBRE Acquisitions Holdings, Inc. with Altus Power.
Corporate overhead expenses decreased by roughly $35 million (24.6%), driven by lower stock compensation, bonus expense and corporate donations, partially offset by higher salary and benefits expenses.

Capital Allocation Overview

Free Cash Flow – During the fourth quarter of 2022, free cash flow was $715 million. This reflected cash provided by operating activities of $814 million, less total capital expenditures of $99 million. Net capital expenditures totaled $97 million. ⁽⁹⁾
Stock Repurchase Program – The company repurchased approximately 6.1 million shares for $451 million ($73.84 average price per share) during the fourth quarter of 2022, and 22.9 million shares for $1.9 billion ($81.31 average price per share) during all of 2022. There was approximately $2.1 billion of capacity remaining under the company’s authorized stock repurchase program as of December 31, 2022.
Acquisitions and Investments – CBRE completed two in-fill acquisitions totaling $114 million in cash and deferred consideration during the fourth quarter.

Leverage and Financing Overview

Leverage – CBRE’s net leverage ratio (net debt ⁽¹⁰⁾ to trailing twelve-month Core EBITDA) was 0.14x as of December 31, 2022, which is substantially below the company’s primary debt covenant of 4.25x. The net leverage ratio is computed as follows (dollars in millions):

	As of
	December 31, 2022
Total debt	$	1,734
Less: Cash ⁽¹¹⁾		1,318
Net debt ⁽¹⁰⁾	$	416

Divided by: Trailing twelve-month Core EBITDA	$	2,924

Net leverage ratio	0.14x

Liquidity – As of December 31, 2022, the company had approximately $4.8 billion of total liquidity, consisting of approximately $1.3 billion in cash, plus the ability to borrow an aggregate of approximately $3.5 billion under its revolving credit facilities, net of any outstanding letters of credit.

Conference Call Details

The company’s fourth quarter earnings webcast and conference call will be held today, Thursday, February 23, 2023 at 8:30 a.m. Eastern Time. Investors are encouraged to access the webcast via this link or they can click this link beginning at 8:15 a.m. Eastern Time for automated access to the conference call.

Alternatively, investors may dial into the conference call using these operator-assisted phone numbers: 877.407.8037 (U.S.) or 201.689.8037 (International). A replay of the call will be available starting at 1:00 p.m. Eastern Time on February 23, 2023. The replay is accessible by dialing 877.660.6853 (U.S.) or 201.612.7415 (International) and using the access code: 13735397#. A transcript of the call will be available on the company’s Investor Relations website at https://ir.cbre.com.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.

Safe Harbor and Footnotes

This press release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding the company’s future growth momentum, operations, business outlook, capital deployment and financial performance, including core earnings per share. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this press release. Any forward-looking statements speak only as of the date of this press release and, except to the extent required by applicable securities laws, the company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: disruptions in general economic, political and regulatory conditions and significant public health events, particularly in geographies or industry sectors where our business may be concentrated; volatility or adverse developments in the securities, capital or credit markets, interest rate increases and conditions affecting the value of real estate assets, inside and outside the United States; poor performance of real estate investments or other conditions that negatively impact clients’ willingness to make real estate or long-term contractual commitments and the cost and availability of capital for investment in real estate; foreign currency fluctuations and changes in currency restrictions, trade sanctions and import/export and transfer pricing rules; our ability to compete globally, or in specific geographic markets or business segments that are material to us; our ability to identify, acquire and integrate accretive businesses; costs and potential future capital requirements relating to businesses we may acquire; integration challenges arising out of companies we may acquire; increases in unemployment and general slowdowns in commercial activity; trends in pricing and risk assumption for commercial real estate services; the effect of significant changes in capitalization rates across different property types; a reduction by companies in their reliance on outsourcing for their commercial real estate needs, which would affect our revenues and operating performance; client actions to restrain project spending and reduce outsourced staffing levels; our ability to further diversify our revenue model to offset cyclical economic trends in the commercial real estate industry; our ability to attract new user and investor clients; our ability to retain major clients and renew related contracts; our ability to leverage our global services platform to maximize and sustain long-term cash flow; our ability to continue investing in our platform and client service offerings; our ability to maintain expense discipline; the emergence of disruptive business models and technologies; negative publicity or harm to our brand and reputation; the failure by third parties to comply with service level agreements or regulatory or legal requirements; the ability of our investment management business to maintain and grow assets under management and achieve desired investment returns for our investors, and any potential related litigation, liabilities or reputational harm possible if we fail to do so; our ability to manage fluctuations in net earnings and cash flow, which could result from poor performance in our investment programs, including our participation as a principal in real estate investments; the ability of our indirect subsidiary, CBRE Capital Markets, Inc., to periodically amend, or replace, on satisfactory terms, the agreements for its warehouse lines of credit; declines in lending activity of U.S. GSEs, regulatory oversight of such activity and our mortgage servicing revenue from the commercial real estate mortgage market; changes in U.S. and international law and regulatory environments (including relating to anti-corruption, anti-money laundering, trade sanctions, tariffs, currency controls and other trade control laws), particularly in Asia, Africa, Russia, Eastern Europe and the Middle East, due to the level of political instability in those regions; litigation and its financial and reputational risks to us; our exposure to liabilities in connection with real estate advisory and property management activities and our ability to procure sufficient insurance coverage on acceptable terms; our ability to retain, attract and incentivize key personnel; our ability to manage organizational challenges associated with our size; liabilities under guarantees, or for construction defects, that we incur in our development services business; variations in historically customary seasonal patterns that cause our business not to perform as expected; our leverage under our debt instruments as well as the limited restrictions therein on our ability to incur additional debt, and the potential increased borrowing costs to us from a credit-ratings downgrade; our and our employees’ ability to execute on, and adapt to, information technology strategies and trends; cybersecurity threats or other threats to our information technology networks, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; our ability to comply with laws and regulations related to our global operations, including real estate licensure, tax, labor and employment laws and regulations, fire and safety building requirements and regulations as well as data privacy and protection regulations, ESG matters and the anti-corruption laws and trade sanctions of the U.S. and other countries; changes in applicable tax or accounting requirements; any inability for us to implement and maintain effective internal controls over financial reporting; the effect of implementation of new accounting rules and standards or the impairment of our goodwill and intangible assets; and the performance of our equity investments in companies we do not control.

Additional information concerning factors that may influence the company’s financial information is discussed under "Risk Factors," "Management’s Discussion and Analysis of Financial Condition and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk" and "Cautionary Note on Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2021, our quarterly report on Form 10-Q for the quarterly period ended September 30, 2022, as well as in the company’s press releases and other periodic filings with the Securities and Exchange Commission (SEC). Such filings are available publicly and may be obtained on the company’s website at www.cbre.com or upon written request from CBRE’s Investor Relations Department at investorrelations@cbre.com.

The terms "net revenue," "core adjusted net income," "core EBITDA," "core EPS," "business line operating profit (loss)," "segment operating profit on revenue margin," "segment operating profit on net revenue margin," "net debt" and "free cash flow," all of which CBRE uses in this press release, are non-GAAP financial measures under SEC guidelines, and you should refer to the footnotes below as well as the "Non-GAAP Financial Measures" section in this press release for a further explanation of these measures. We have also included in that section reconciliations of these measures in specific periods to their most directly comparable financial measure calculated and presented in accordance with GAAP for those periods.

Totals may not sum in tables in millions included in this release due to rounding.

Note: We have not reconciled the (non-GAAP) core earnings per share forward-looking guidance included in this presentation to the most directly comparable GAAP measure because this cannot be done without unreasonable effort due to the variability and low visibility with respect to costs related to acquisitions, carried interest incentive compensation and financing costs, which are potential adjustments to future earnings. We expect the variability of these items to have a potentially unpredictable, and a potentially significant, impact on our future GAAP financial results.

⁽¹⁾		Local currency percentage change is calculated by comparing current-period results at prior-period exchange rates versus prior-period results.
⁽²⁾		Net revenue is gross revenue less costs largely associated with subcontracted vendor work performed for clients. These costs are reimbursable by clients and generally have no margin.
⁽³⁾		Core adjusted net income and core earnings per diluted share (or core EPS) exclude the effect of select items from GAAP net income and GAAP earnings per diluted share as well as adjust the provision for income taxes and impact on non-controlling interest for such charges. Adjustments during the periods presented included non-cash depreciation and amortization expense related to certain assets attributable to acquisitions, certain carried interest incentive compensation (reversal) expense to align with the timing of associated revenue, the impact of fair value adjustments to real estate assets acquired in the acquisition of Telford Homes plc in 2019 (the Telford acquisition) (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, write-off of financing costs on extinguished debt, integration and other costs related to acquisitions, asset impairments, provision associated with Telford’s fire safety remediation efforts, and costs associated with efficiency and cost-reduction initiatives. It also removes the fair value changes and related tax impact of certain strategic non-core non-controlling equity investments that are not directly related to our business segments (including venture capital "VC" related investments). Note: Core adjusted EPS has been renamed core EPS for simplicity.
⁽⁴⁾		Core EBITDA represents earnings, inclusive of non-controlling interest, before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization, asset impairments, adjustments related to certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, integration and other costs related to acquisitions, provision associated with Telford’s fire safety remediation efforts, and costs associated with efficiency and cost-reduction initiatives. It also removes the fair value changes, on a pre-tax basis, of certain strategic non-core non-controlling equity investments that are not directly related to our business segments (including venture capital "VC" related investments).
⁽⁵⁾		Free cash flow is calculated as cash flow provided by operations, less capital expenditures (reflected in the investing section of the consolidated statement of cash flows).
⁽⁶⁾		Segment operating profit is the measure reported to the chief operating decision maker (CODM) for purposes of making decisions about allocating resources to each segment and assessing performance of each segment. Segment operating profit represents earnings, inclusive of non-controlling interest, before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization and asset impairments, as well as adjustments related to the following: certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, costs associated with workforce optimization, transformation initiatives and integration and other costs related to acquisitions, provision associated with Telford’s fire safety remediation efforts, and costs associated with efficiency and cost-reduction initiatives.
⁽⁷⁾		Segment operating profit on revenue and net revenue margins represent segment operating profit divided by revenue and net revenue, respectively.
⁽⁸⁾		Represents line of business profitability/losses, as adjusted.
⁽⁹⁾		For the three months ended December 31, 2022, the company incurred capital expenditures of $99.1 million (reflected in the investing section of the condensed consolidated statement of cash flows) and received tenant concessions from landlords of $2.5 million (reflected in the operating section of the condensed consolidated statement of cash flows).
⁽¹⁰⁾		Net debt is calculated as cash and cash equivalents less total debt (excluding non-recourse debt).
⁽¹¹⁾		Cash represents cash and cash equivalents (excluding restricted cash).

*CBRE GROUP, INC.*
*OPERATING RESULTS*
*FOR THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2022 AND 2021*
*(in thousands, except share and per share data)*
*(Unaudited)*

	Three Months Ended December 31,					Twelve Months Ended December 31,
		2022			2021		2022			2021
Revenue:
Net revenue	$	4,975,109		$	5,565,853	$	18,776,533		$	17,009,501
Pass through costs also recognized as revenue		3,219,380			2,984,364		12,051,713			10,736,535
Total revenue		8,194,489			8,550,217		30,828,246			27,746,036

Costs and expenses:
Cost of revenue		6,498,820			6,584,255		24,239,488			21,579,507
Operating, administrative and other		1,314,329			1,262,960		4,649,460			4,074,184
Depreciation and amortization		159,561			162,144		613,088			525,871
Asset impairments		21,957			—		58,713			—
Total costs and expenses		7,994,667			8,009,359		29,560,749			26,179,562

Gain on disposition of real estate		43,854			51,378		244,418			70,993

Operating income		243,676			592,236		1,511,915			1,637,467

Equity (loss) income from unconsolidated subsidiaries		(167,013	)		159,162		228,998			618,697
Other income (loss)		1,667			181,139		(11,864	)		203,609
Interest expense, net of interest income		17,698			15,436		68,999			50,352
Write-off of financing costs on extinguished debt		—			—		1,860			—
Income before (benefit from) provision for income taxes		60,632			917,101		1,658,190			2,409,421
(Benefit from) provision for income taxes		(25,461	)		224,227		234,230			567,506
Net income		86,093			692,874		1,423,960			1,841,915
Less: Net income attributable to non-controlling interests		4,981			882		16,590			5,341
Net income attributable to CBRE Group, Inc.	$	81,112		$	691,992	$	1,407,370		$	1,836,574

Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.26		$	2.07	$	4.36		$	5.48
Weighted average shares outstanding for basic income per share