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CB Richard Ellis Group Inc. (



Q1 2011 Earnings Call

April 27, 2011 10:30 am ET


Nick Kormeluk – SVP, IR

Brett White – CEO

Gil Borok – CFO


Anthony Paolone - JP Morgan

Sloan Bohlen - Goldman Sachs

Brandon Dobell - William Blair

David Ridley-Lane - Merrill Lynch



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Ladies and gentlemen, thank you for standing by, and welcome to the CB Richard Ellis First Quarter Earnings Call. Today's conference call is being recorded.

I would now like to turn the conference over to Mr. Nick Kormeluk. Please go ahead.

Nick Kormeluk

Thank you, and welcome to CB Richard Ellis' First Quarter 2011 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 This conference call is being webcast live 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, a transcript, and a PDF version of the slide presentation will be posted to the website later today.

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, business outlook and ability to complete and integrate our announced acquisition of ING REIM.

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 First Quarter Earnings report filed on Form 8-K and our current Annual Report on Form 10-K, 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 #3. Our management team members participating with me today are Brett White, our Chief Executive Officer; and Gil Borok, our Chief Financial Officer.

I’ll now hand the call off to Brett.

Brett White

Thank you, Nick. Good morning everyone. Please turn to slide 4. This past quarter we purchased very strong revenue and earnings growth across our business, with revenue gains of 16% for the company and much better growth in normalized EBITDA. Our revenue growth was aided by the continued recovery in the commercial real estate market and continued strong fundamental in our outsourcing business.

Normalized EBITDA grew 38% in the first quarter of 2011 versus the first quarter of 2010 and diluted adjusted earnings per share for the first quarter of 2011 was $0.13 as compared to $0.01 for the first quarter of 2010.

As you might recall from our fourth quarter 2010 earnings call, in the second half of 2010, we restored a significant portion of our US based compensation related expenses that were cut during the downturn due a stronger than expected first year recovery. In addition, in EMEA, in the fourth quarter of 2010 and continuing in the first quarter of 2011, we have aggressively hired producers and related support in anticipation of improving transaction based revenues. We believe that these personnel addition will serve as well in future quarters as our revenue pipelines are generally strong and operating leverage in this region should improve as the year progresses.

Our principal businesses performed very well during the quarter, with strong revenue increases accompanied by lower expenses in Investment Management and gains of $12.9 million of the sale of three properties in the Development business. The recovery and expansion in the global commercial real estate market continued at the rate consistent with early stage recovery in prior cycles. We like what we see in the market and are very excited about our opportunity to leverage our unique and industry-leading platform to produce outside gain for our investors and terrific outcomes for our clients.

Some of the more note worthy transactions we completed during or immediately following the quarter are listed in slide#5. As usual I will not go through them individually, but have included down to show some business wins.

I will now turn the call over Gil to go with the financial results in detail.

Gil Borok

Thank you, Brett. Please advance to slide 6. Revenue was $1.2 billion for the quarter of 2011, up 16% from last years first quarter. This increase resulted from improvement in nearly all business lines. Normalized EBITDA was up 38% to $120.6 million in the quarter from $87.5 million in the first quarter of 2010 delivering a normalized EBITDA margin of 10.2%, a 170 basis point increase versus the first quarter of 2010.

Our cost of services as a percentage of revenue remained almost even at 60.2% in the first quarter of 2011 versus 60% in the first quarter of 2010 primarily due to compensation re-instatements in the US and a notable hiring in EMEA in anticipation of improving transaction base revenues that Brett alluded to earlier.

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