CBRE Group Inc

Hello, and welcome to the CBRE second quarter 2020 conference call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Kristen Ferryman, Vice President, Investor Relations and Corporate Finance. Please go ahead.

Good morning, everyone, and welcome to CBRE's second quarter 2020 earnings conference call. Earlier today, we issued a press release announcing our financial results and posted it on the investor relations page of our website, cbre.com, along with a presentation slide deck that you can use to follow along with our prepared remarks, as well as an Excel file that contains additional supplemental material. Our agenda for this morning's call will be as follows. First, I'll provide an overview of our financial results for the quarter. Next, Bob Selentik, our president and CEO, and Leah Stearns, our CFO, will discuss our second quarter results in more detail. After their comments, we'll open up the call for your questions. Before I begin, I'll remind you that this presentation contains forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding CBRE's future growth prospects, operations, market share, capital deployment, acquisition integration, financial performance, and 2020 outlook, including the impact of COVID-19 and any other statements regarding matters that are not historical fact. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered estimates only and certain factors may affect us in the future and could cause actual results to differ materially from those expressed in these forward-looking statements. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this morning's earnings release and our most recent annual and quarterly reports filed on Form 10-K and Form 10-Q, respectively. We have provided reconciliations of adjusted EPS, adjusted EBITDA, fee revenue, and certain other non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures together with explanations of these measures in the appendix of the presentation slide deck. Now, please turn to slide four of our presentation, which highlights our financial results for the second quarter of 2020. Total revenue and fee revenue fell about 6% and 21% respectively, driven by declines in advisory and REI. Lower revenue coupled with $25 million of incremental COVID-related costs and a $16 million donation to the company's COVID relief fund caused adjusted EBITDA to fall 43%. Overall, adjusted EPS for the quarter was $0.35, including the negative impact of around $0.10 attributable to the COVID-related expenses and relief fund donation. Now for insights on the quarter and our longer-term outlook, please turn to slide six, and I will turn the call over to Bob.

Thanks, Kristen, and good morning, everyone. As expected, COVID-19 took a toll on our performance in the second quarter with impacts felt across every part of our business. However, the overall impact was cushioned by our diverse business mix, particularly the sustained growth of our contractual businesses over the past decade. We also benefited from early moves to reduce our expense base, a process that is continuing and strengthened our financial position and cash flow generation despite the ongoing challenges from the pandemic. Double-digit adjusted EBITDA growth in our global workplace solutions segment demonstrated the resiliency of a business that occupier clients increasingly rely on in good times and bad to run essential operations and drive critical cost efficiencies. Since the global financial crisis, other parts of our business have become more resilient as well. For example, our U.S. development business is expected to earn twice as much both this year and next as it did at the peak of the last market cycle. This reflects greater emphasis on core product development, particularly industrial and multifamily projects, along with an emphasis on fee development. We have built a $245 billion loan servicing portfolio that adds growing recurring revenue to our capital markets offering. We are large originators for Freddie and Fannie, which are expected to match last year's loan volumes this year and we are positioned to capture a significant share of their business. Our investment management business grew nicely in the quarter. Today, it earns a significant majority of its adjusted EBITDA from recurring asset management fees. This business continues to raise new capital at a brisk pace, so the revenue base should grow. Like any major crisis, COVID will have near-term and long-term effects on our sector and how we serve clients. In the near term, we've seen precipitous drop in leasing and sales activity. Investment capital has moved to the sidelines as investors begin the process of price discovery. Occupiers are hesitant to make long-term decisions amid the uncertainty, preferring short-term lease renewals where possible. Our ongoing interaction with major occupier clients has given us insight into their current thinking. Three distinct trends are emerging. First, most companies will give their employees greater flexibility to choose between working in the office and working from home. Second, the physical office will remain vitally important in these hybrid work models, particularly in fostering culture and collaboration and attracting talent. Third, the decades-long densification trend is likely to reverse, negating some of the effects on office demand associated with more remote working. The pandemic has elevated the importance of the workplace strategy on corporate agendas. Now more than ever, clients will need the strategic insight, thoughtful advice, and reliable execution that CBRE and our people are best positioned to provide. We have built the company for opportunities like this and intend to capitalize on it. Now I'm going to turn the call over to Leah, who will take you through the second quarter.