CB Richard Ellis Group's CEO Discusses Q2 2012 Results - Earnings Call Transcript

CB Richard Ellis Group, Inc. (CBG)

Q2 2012 Earnings Call

July 31, 2012, 05:00 pm ET

Executives

Nick Kormeluk - IR

Brett White - CEO

Bob Sulentic - President

Gil Borok - CFO

Analysts

Anthony Paolone - JPMorgan

Brandon Dobell - William Blair

Will Marks - JMP Securities

David Ridley-Lane - Bank of America Merrill Lynch

Presentation

Operator

Ladies and gentlemen, thank you for standing by and welcome to the CBRE Q2 earnings conference. 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) And as a reminder, this conference is being recorded.

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

Nick Kormeluk

Thank you and welcome to CBRE’s second quarter 2012 earnings conference call. About an hour ago, we issued a press release announcing our Q2 financial results. This release is available on the home page of our website at www.cbre.com. 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 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 our ability to integrate the ING REIM businesses. 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 second quarter earnings report filed on Form 8-K, 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 on the SEC’s website at 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 includes 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 will now turn the call over to Brett.

Brett White

Thanks, Nick and please turn to slide four. I am glad we have Bob joining our call today. Bob’s well known to most of you. I know you will enjoy interacting with him more regularly as he gears to assume the CEO duty at the end of the year.

We are very pleased with our results for the quarter. We grew our topline by double-digits, improved our bottomline by nearly 30% and increased our normalized EBITDA margin by 170 basis points. Our stronger performance reflects a broad well balanced global platform we have built over two decades. One of which strengthens and certain the compliance in markets, compensates weaknesses in others. It also demonstrates our ability to control costs while executing on our growth strategy.

Right now the Americas is experiencing the best of all our region. Our permanent position in markets across the U.S. Canada and Latin America has enabled us to sustain double-digit revenue and profit growth despite the lack of meaningful job creation. Asia-Pacific achieved solid growth in the second quarter as well; notwithstanding China’s economic slowdown. As expected, EMEA saw softer results as it continue to fight formidable headwind related to both the Euro zone’s ongoing economic and debt issues and notable negative currency effects.

Benefits continue to accrue from our acquisition of the ING REIM businesses last year. We believe that the blending of ING REIM’s professional talent with our own has forged a new industry leader in real estate investment management and have certainly given us an enhanced stream of stable revenue at higher margins than most of our other businesses.

The 25% normalized EBITDA margin that this business achieved during the quarter served us particularly well in a choppy market environment and we expect positive contributions from the ING REIM acquisition to continue.

Our global outsourcing business continue to make strong gains with double-digit revenue growth for the seventh consecutive quarter. We signed 54 total contracts including 24 with new outsourcing customers, staying a company record for new wins in a quarter. This business continues to exhibit good momentum for reasons we will discuss later.

Our capital markets business has also performed well. Although a small component of total company revenue, mortgage brokerage had robust revenue growth of 36% as loan origination volumes and related servicing demand continue to rise.

While still a relatively moderate portion of overall revenue, property sales moved higher in all regions paced by the Americas, reflecting generally soft occupier market condition particular in Europe, property leasing edged up slightly on a global basis. The Americas and Asia-Pacific accounted for the increase.

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