CBRE Group Inc

Greetings. Welcome to CBRE's second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Kristen Farabond, Vice President of Investor Relations and Corporate Finance. Thank you. You may begin.

Good morning, everyone, and welcome to CBRE's second quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our financial results, which is posted 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 materials. Separately, we also announced some changes to our leadership team, appointing Emma Giammartino as Global Group President, Chief Financial Officer and Chief Investment Officer, and Vikram Kohli as Global Group President, Business Intelligence. Before we kick off today's call, 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 including 2021 qualitative outlook and multi-year growth framework operations market share capital deployment strategy and share repurchases mna and investment activity financial performance including profitability expenses margins adjusted eps and the effects of both cost savings initiatives and the COVID pandemic, the integration and performance of acquisitions, 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, net 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 this presentation slide deck. Our agenda for this morning's call will be as follows. First, I'll provide an overview of our quarterly financial results. Next, Bob Cilentic, our President and CEO, will provide insight on our Q2 performance, the recently announced Turner and Townsend transaction, and today's senior leadership changes. Following Bob's remarks, Emma will discuss the quarter in detail, along with our revised qualitative outlook for 2021, our capital deployment activities, and broader investment strategy. Then we'll open up the call for questions. Now please turn to slide four, which highlights our second quarter 2021 results. Total revenue grew about 20% to a new second quarter record of nearly $6.5 billion, while net revenue grew 31% to $3.9 billion, partially driven by a strong rebound in property sales and to a lesser extent leasing, as well as favorable foreign currency effects. The quarter also saw tangible benefit from last year's transformation initiatives, which have improved our cost structure and operational agility. Adjusted EBITDA grew 169% to $718 million, surpassing Q2 2019's total by 53%. Overall, adjusted EPS grew 291% to 136, while GAAP EPS rose 437% to 130. Compared with Q2 2019, these metrics were up 68% and 98% respectively. Both adjusted and GAAP EPS in the prior year second quarter included a 10 cent headwind from incremental COVID related costs and a terrible contribution to COVID relief efforts. Additionally, certain venture capital investments contributed two cents to GAAP and adjusted EPS this quarter. The fact all key financial metrics significantly surpassed Q2 2019 levels is a testament to the resiliency of our business and the actions we have taken to create a business prime to deliver scalable and enduring growth. Now for deeper insights, please turn to slide six for Bob's remarks. Bob?

Thanks, Kristen, and good morning, everyone. As you've seen from the results Kristen just summarized, CBRE continues to benefit from the multi-year efforts to diversify our business across four dimensions, asset type, business line, client type, and geography. We've moved decisively to capitalize on this opportunity and are making investments in driving organic growth initiatives that will continue this trend. Overall, Q2 2021 adjusted EBITDA grew at a better than 20% compounded rate from Q2 2019 with strong growth across all three business segments. Each segment experienced significant margin expansion over this two-year period due to our disciplined expense management along with the benefits of diversification. Thoughtful investments shaped by a well-developed strategy will play a central role as we continue to grow and diversify our business across asset type, business line, client type, and geography. Our balance sheet was very strong going into COVID and has strengthened further as we emerge from the pandemic. We are putting some of this balance sheet capacity to work with a particular focus on investing in secularly favored companies that enhance our ability to provide clients with customized solutions and will benefit from a relationship with CBRE. You saw this earlier this year when we acquired a 40% ownership interest in Industrious in the FlexSpace arena, and again this month with our SPACs sponsorship of Altus Power in the commercial and industrial solar energy sector. On Tuesday, we announced a $1.3 billion purchase of a 60% stake in Turner & Townsend, a global leader in project, program, and cost management. This is a great brand and great management team operating in sectors with favorable long-term growth profiles. Turner & Townsend will advance diversification across the four dimensions of our business that we've been discussing. For example, across asset types, Turner & Townsend brings us capabilities in infrastructure and green energy where they can help support our efforts to meet our clients' carbon reduction goals. They are the global leader in cost consultancy, a line of business where we have a small practice now. Geographically, they move our project management business into new markets in Asia and the Middle East, while we can help them grow in the Americas and elsewhere. And they add an array of new clients around the world, most notably in the government sector. We look forward to hitting the ground running with Turner and Townsend when the transaction closes later this year. Before concluding, I'll briefly comment on the leadership changes we announced this morning. Over the past several years, we've evolved our senior leadership team dramatically, identifying our most compelling executives and putting them in roles where they can have the greatest impact on our business. The elevation of Emma Giammartino and Vikram Kohli, the global group president roles represents another step in this direction. Consolidating our capital investment and finance functions under Emma reflects the growing importance of capital allocation to the long-term growth aspirations that we outlined at the end of last year. She has proven to be an accomplished investor of our capital, who has an exceptional ability to work effectively with our leaders around the world to execute our capital and strategy. Vikram has rapidly emerged as a leader with a unique ability to harness data and insight from across our business as well as from external sources. And like Emma, he has excelled at working across our global platform. Adding our strategy and digital and technology functions to his mandate will create a business intelligence capability that will better enable us to make powerful fact-based decisions as we guide the company's growth. Vikram is the first Seabury executive from outside the U.S. to ascend to this level in the company. We expect to elevate other executives from outside the U.S. into senior global leadership roles as we continue to put our best talents into key positions. Leah Stearns will remain with us through the year end to ensure a smooth transition of financial leadership responsibilities. I want to thank Leah for her vision in initiating the transformation of our finance organization, managing finance through the worst of the COVID-19 crisis, and together with Kristen, taking our investor relations program to a new level. including articulating the financial framework for our long-term growth aspirations. We wish Leah continued success. With that, I'll turn the call over to Emma.