CBRE(CBRE) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company expects full year 2023 core EPS to decline by 20% to 25% compared to last year's record level, primarily due to a delayed recovery in capital markets [69][70] - Free cash flow is now anticipated to be in the range of $600 million to$ 800 million, down from an original expectation of over $1 billion [76][77] - The company raised$ 1 billion through a senior unsecured bond offering and an additional $350 million from refinancing and upsizing its euro term loan, enhancing its capacity to invest while maintaining an investment-grade balance sheet [53][54] Business Line Data and Key Metrics Changes - Global Workplace Solutions (GWS) net revenue increased by 13% and SOP grew by 7% in the quarter, driven by strength in the local business in the UK and expansion into the U.S. [50][51] - Advisory net revenue fell by 21%, with capital markets businesses seeing a revenue decline of 44% [70][71] - The local business is expected to grow by over 20% this year, with a pipeline that remains elevated, more than 20% above the Q2 2022 level [51][52] Market Data and Key Metrics Changes - In the Americas, property sales revenue fell by 49%, reflecting limited credit availability and a gap between buyer and seller expectations [48] - The office sector was the weakest, with revenue down 30%, while industrial revenue was down only 10% [48] - Revenue in Japan increased by 16% in local currency year-to-date, becoming the most profitable advisory market outside the U.S. [71] Company Strategy and Development Direction - The company is focused on pursuing M&A opportunities that enhance its ability to serve clients and are well-run companies [85][86] - Investments are being made in broker recruitment and land acquisitions for future development, with an expectation to invest more in these areas compared to previous quarters [54][55] - The company anticipates a mild recession occurring at least one quarter later than previously thought, followed by a recovery beginning next year [46][68] Management's Comments on Operating Environment and Future Outlook - Management noted that the economy performed better than anticipated in terms of GDP and employment growth, but interest rate increases pressured capital flow-sensitive businesses [45][46] - There are signs of improving investor sentiment, with many exploring opportunities to take advantage of the reset in pricing for 2024 commitment plans [68] - The company expects to see a recovery in capital markets next year, which will positively impact its business [61][98] Other Important Information - The company did not repurchase any shares in Q2 but has completed$ 100 million in buybacks in July [53][54] - The company has a robust M&A pipeline and is evaluating multiple opportunities in the range of $1 billion [53][54] Q&A Session Summary Question: What is the outlook for M&A opportunities? - The company is pursuing M&A opportunities that enhance client service and involve well-run companies, with a strong pipeline across its portfolio [85][86] Question: How is the company managing its cost structure? - The company is consistently focused on cost management, balancing fixed costs with investments that drive future growth [30][31] Question: What is the outlook for the capital markets? - The company expects a delayed recovery in capital markets, with clarity needed on interest rates and debt availability for improved performance [61][98]