CBRE Group (CBRE) Q4 2006 earnings summary

Executive summary

• Record FY06 performance: revenue $4.032B, adjusted net income $348.0M, adjusted diluted EPS $1.48 and normalized EBITDA $652.5M; organic growth drove over two-thirds of revenue gains.

• Trammell Crow acquisition closed Dec. 20, expanding outsourcing and development capabilities; 2006 results include its operations only from that date.

• The global platform served ~85 Fortune 100 clients across 50+ countries; contractual outsourcing revenue reached 23% of pro forma FY06 revenue after the acquisition.

Financial highlights

• FY06 revenue was $4.032B, up 26.2% YoY; operating income was $550.1M and net income was $318.6M.

• Adjusted FY06 net income was $348.0M, up 51% YoY; adjusted diluted EPS was $1.48, up 48%; normalized EBITDA rose 41% to $652.5M.

• Q4 FY06 revenue was $1.409B, operating income $223.8M, net income $125.1M and diluted EPS $0.53.

• Operating cash flow was $370.5M; investing cash outflow was $2.062B, primarily reflecting acquisitions, while financing cash inflow was $1.479B.

Outlook and guidance

• FY07 diluted EPS growth guidance was 25%–30%, excluding one-time items.

• Expected net expense synergies from the Trammell Crow acquisition were $65M; anticipated FY07 integration expenses were ~$30M.

• FY07 interest expense was estimated at ~$140M; anticipated net capital expenditures were $88.1M, including $27.3M associated with recent acquisitions.

• The commercial real estate outlook was positive, with expected U.S. office rent acceleration and stronger industrial rent growth; continued economic growth and absorption were key assumptions.