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CB Richard Ellis Group CEO Discusses Q3 2010 Results - Earnings Call Transcript

CB Richard Ellis Group CEO Discusses Q3 2010 Results - Earnings Call Transcript

Call Start: 10:30

Call End: 11:28

CB Richard Ellis Group, Inc. (

CBG

)

Q3 2010 Earnings Call

October 27, 2010 10:30 am ET

Executives

Nick Kormeluk - SVP, IR

Brett White - CEO

Gil Borok - CFO

Analysts

Sloan Bohlen - Goldman Sachs

Will Marks - JMP Securities

TheStreet Recommends

Anthony Paolone - JPMorgan

Brandon Dobell - William, Blair & Company

Presentation

Operator

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Ladies and gentlemen, good morning. Thank you for standing by and welcome to the CB Richard Ellis third quarter earnings conference call. At this time, all lines are in a listen-only mode. Later, there will be an opportunity for your questions and instructions will be given at that time. [Operator Instructions]

At this time, I would like to turn the conference over to our host, Chief Executive Officer, Mr. Brett White, please go ahead.

Nick Kormeluk

Welcome to CB Richard Ellis' third quarter 2010 earnings conference call. Last night, we issued a Press Release announcing our financial results. This release is available on the home page of our website at www.cbre.com. This conference call is been webcast live and is available on the Investor Relations section of our website. Also available the presentation slide deck, which you can use to follow along with our prepared remarks.

An archived audio of the webcast, a transcript and PDF version of the slide presentation will be posted to the website later today. Please turn to the slide labeled forward-looking statements.

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 our 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 security laws, we undertake no obligation to update or publicly revise any of these forward-looking statements you may hear today.

Please refer to our third quarter earnings report filed on Form 8-K last night and our current Annual Report on form 10-K and 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 www.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 to three.

Our management team members participating with me today are Brett White, our Chief Executive Officer, and Gil Borok, our Chief Financial Officer. I will now hand the call off to Brett.

Brett White

Thank you, Nick. And please turn to slide four. We are pleased to once again report strong revenue and earnings growth in our business, as we continue to benefit from the ongoing recovery in the commercial real estate services industry. Our increased market share and continued discipline in managing our operating expenses.

Our third quarter total revenue was $1.3 billion, a 24% increase over the third quarter of 2009. As was the case in the second quarter, our revenue increase was driven by sizable gains and our three largest lines of business. Investment sales revenue increased 63% around the globe. Leasing revenue rose 27% led by the Americas and outsourcing revenue grew 7% led by Asia Pacific and EMEA.

The recovery and the commercial real estate services business is especially welcome given the continued mixed signals and uncertainty about the pace of the global economic recovery. Although, we have benefited from a recovery in our industry, our revenue growth has also been fueled by our ability to continue to grow market share.

An example of this is U.S. investment property sales, where our U.S. market share grew to 17.9% in the third quarter, more than 400 basis points higher than the third quarter of 2009, and more than double our next largest competitor according to real capital analytics.

While we grew revenue by 24%, our normalized EBITDA was $175.5 million in the third quarter of 2010. A 60% increase over the $109.9 million in the third quarter of 2009, this translated into a normalized EBITDA margin of 13.9% in the third quarter of 2010 versus 10.7% in the third quarter of 2009. This accelerated growth in normalized EBITDA results from a shift in our revenue for the transaction business and the operating leverage created, as we significantly reduced our expense structure during the industry downturn.

We are pleased to be able to generate this EBITDA growth in the third quarter, when we restored certain salary, commission, and other reductions implemented during the downturn. Some of the more sizable transactions completing during or immediately following the quarter are listed on Slide five. As usual I will not go through them individually, but have included them to show some key business wins.

And with that I will now turn the call over to Gil to go over the financial results. Gil?

Gil Borok

Thank you, Brett. Please advance to Slide 6.

Revenue was $1.3 billion for the third quarter of 2010, up 23.8% from last year, resulting from improvements in sales, leasing, outsourcing, and commercial mortgage brokerage activities. Reported EBITDA increased 73.1% in the third quarter of 2010 to $169.9 million from $98.1 million in the third quarter of 2009.

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