CWK - Earnings call 1 2023 | Cushman & Wakefield plc

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Operator

Good afternoon, and welcome to the Cushman & Wakefield First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to run the conference over to Megan McGrath, Head of Investor Relations. Please go ahead.

Megan McGrath

Thank you, and welcome to Cushman & Wakefield's First Quarter 2023 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. on today's at be page ir.cushmanwakefield.com. Please presentation Cautionary with Investor on in along labeled website Relations turn Note release, presentation, found can our our This Statements. Forward-Looking to the of forward-looking contains our and based Today's future presentation statements events. current on forecasts estimates These materially. considered may be should only, and statements results actual estimates differ

other tables guidelines. found of will of to and non-GAAP GAAP the otherwise to we call, financial non-GAAP today's of measures to unless non-GAAP and are measures release growth presentation, earnings presentation. Also, XXXX please measures, the currency Reconciliations definitions are today's our related as comparisons financial stated. appendix note During refer the rates outlined the of local within financial of comparable periods and by that information SEC throughout in and financial

following you to I'd that, with CEO, John along X. And we Forrester. over our our like Page on will to of those For begin with turn call the presentation,

John Forrester

to Thanks, Megan, you thank and our everybody call. joining

employees that thank to such to times. want service deliver fluid our clients the value continue around all I and outstanding to through First, our world

inflation conditions complex elevated anticipated, and similar revenue sitting $X.X to quarter, near trough banking effect year as commercial or with at levels. in recent million all $XX versus interest billion continued adjusted higher-margin prior quarter our muted lower currently well contributing macro we activity transaction experienced in with business. Fee real first trends activity transactional environment current is quarter's estate. the fourth stress to rates recessionary as remains but believe in which The as and EBITDA of strength of Facilities The Management XXXX, Property the significantly and of reflect the

outlook challenging. We expect to remain the near-term

environment are for global through and providers ongoing of talent. like scale increasingly real to clients in diversified and Wakefield quality, true successfully best both is an economic an However, Cushman service cycles we believe positioned that navigate economic resulting complicated and to & flight estate

uncertainty remain to banking on the lending the continues volatility at Capital of Markets. Capital further end industry market as standards. the to Turning and sidelines tightened overall increased quarter

to this in review when the and and market meaningful are discuss is observing regularly them plan when, on help a recently deal to solution from strategic financing it happening to assets. whilst our improve, across of finding and However, we strategically if of we not deals return, areas are options areas an recovery. practice, To our optimization constrained are resources our delivering we underperforming and asset tailored are deploy with clients portfolios, allocating new where such environment, volumes meeting focused opportunity, capital conditions appetite integrated, investors reiterate, and matter as created for

cautious side, leasing sequentially consistent lower our a looking their increasingly and activity quarter. to and and expectations, are the through. Occupiers U.S. in first have the with On recession grown year-over-year as decisions remain in leasing work continue trended strategies cost-cutting filter for total of opportunities the odds as in hybrid leasing office the elevated

like aggressive well growth office The to the large will hybrid also asset all-time both a note and create it's more will will model nearly for quality. sector, ago. industrial fundamentals the expect the work It's on see near there critical that class industry still view sector leasing although vacancies our the to feet XX.X and This globally. asset averages. opportunities of classes challenges, to supports execute faces firm functionality the future. this, is occupied into through office billion space other below some evolution. it office the sector, a greater square and are continues to remain our preeminent industrial and headwinds advise flight we And its to continue resilience. In share as term, provide ongoing in with Notwithstanding remaining Although strong think to impact our continue years important historical company of size transactions near started lows clients X to that today, we of these

of long-term some outsized as During supported representing growth trends, executed X half quarter, deals the experienced facilities to And just in feet years. the the XX the U.S. previous in nearly total. did under over anticipate such sector remain is spending. the built first consumer relative million since XXXX, square and e-commerce of healthy, although we expected, industrial moderation QX industrial growth Net by tenants absorption to slow secular

ahead, to interest material inflection the point, our in of not rate anything look long-term is this positioning environment. business this share ultimate achieve market activity clarity gains opportunity substantial, at and the anticipating transactional year. shoots Regardless ourselves we market continue we and both when incremental for we're the for But are medium Looking to and green macroeconomic resumes. point,

facilities property, project well most Moving perform growth and which double-digit achieved the management continues its to quarter. and in on business. to in This our in current environment, facilities and project the management both resiliency notably demonstrate

business as our property fragmented outsourcing as as asset Our multifamily in and life management. management has sciences the into from take market well build-out this diversification PM/FM of global both share and to our in benefited such project capabilities classes

business, challenging no strong, new time a in all this participants summary, Our market. In for doubt transactional in environment commercial pipeline estate. positive operating is secular that even is there the growth during business a remains trends long-term real the this highlighting in challenging

capabilities, us more and However, improved near-term and importantly, efficiency steer to continue deep positioning. with strength through market emerge expertise headwinds to our global and the operational us allow will

more performance. detail Now I'd over to to like the financial discuss call turn Neil? to Neil our in

Neil Johnston

and John, good you, afternoon, Thank everyone.

EBITDA $X.X was And the the versus year. first year. record of versus fee prior $XX a prior XX% versus declined of adjusted million quarter $X.XX, was of a $X.XX quarter, Adjusted share per of XXXX. revenue XX% a for down billion decrease loss For earnings first quarter

the sector industrial was lower PM/FM the strong against comparison. relatively The in up in but Project year. main Facilities by quarter declined and X%, the experienced in valuation PM/FM decline quarter quarter decline driven performance revenue were other first year similar Valuation EBITDA in reflected businesses. XXXX. Leasing continued components. prior continue markets, Management and decision-making in up performed lower a Our prior fourth revenue revenue our which principally Office This the with XXXX in reduce to first in was XXXX. total, declined in service weakness CapEx decline the of versus as the quarter X XX%, Management challenging XX% Performance resulted activity. The strong down of offering and the spend. versus was delay capital leasing in was XX% in well, declined was XX% transactions quarter to first when especially as adjusted of slowdown our activity leasing against occupiers

which First, experienced significant most in business multifamily the as as joint brokerage decline high-margin component was Greystone volumes. lending our lower transactional the well venture,

operating XXXX. environment were higher expenses the to of the ramp in year-over-year inflation a due high-growth year early Second, and quarter prior from investment

and be focused initiatives moderate our we the of are offset fully cost cost on through our investment We balance impacts actions. we and inflation year, to as the move by to these and expect

year from Lastly, roughly subsidies we APAC experienced our currency in headwinds. nonrecurrence discrete the primarily versus headwinds foreign in business $XX the well as as prior the million government of in quarter,

$XX track XXXX. approximately target first are terms we million quarter In achieve achieved on savings cost the plans, and to cost-saving in of $XX in million currently of our cost full the saving

will costs are and are us environment, current more actioning tightening we that to discretionary spending efficiently. our on the allow items further additional Given operate

business Americas, in most in in impact Turning for our primary both were lower each environment office The all experienced segment headwinds. the facilities in brokerage the Americas, declines lower EMEA brokerage in prominent brokerage adjusted the year quarter. the declines from continued to to the perform These partially the resiliency fee sector. macroeconomic the EBITDA. project In cost adjusted the EBITDA project were most the higher and revenue decline The to management. in brokerage investment continued inflation rate offset principally lower specifically was of facilities contribution decline by our of similar driver was well, PM/FM, across Declines by notably in types and in driven PM/FM in management. segment activity, Greystone results segment and as in in saw in and the APAC the and brokerage business. APAC and due we prior asset while in interest declines

the APAC, the of subsidies in nonrecurrence contributed government the also year to in prior received Additionally, decline. year-over-year the

flow. capital in our the quarter Moving ended outflow sheet first level cash and This reflects We seasonal first in an operating quarter typical cash to of line with is our patterns trends and business. balance with $XXX million. historical working

year. full timing any of Given recovery on of size year in latter half flow cash and the highly depend our the will the performance market the seasonality,

and a management. From in on prioritizing where high-growth and facility X acquisition focused As of and in of capital We our flow are our businesses, to our improvements cost consisting hand opportunity. first net on $X.X cash market $XXX the on significant remains was we no liquidity, our had long-term with leverage quarter. borrowings continue end we through to performance, standpoint, targets, cash on are revolver part our takeout working and Overall, credit outstanding of financial of spend sectors improve billion. achieve our see disciplined talent and capital high-growth revolving availability investment focused billion a to efficiency services driving cash position our at allocation of of in strong X.Xx areas: markets currently million the efforts $X.X teams

more is XX% are Our on dated, than basis. a our profile fixed debt debt long net maturities and

continue await our markets moving clarity uncertain. challenging further on outlook. to both and economic both The and macroeconomic outlook, interest leasing remains highly Market capital to Finally, activity. the environment participants rates

is recurring low growth Given this continued stability business to Our revenue these expected we XXXX. anticipate revenue factors, mid-single-digit following: the to environment, in PM/FM generating in provide

naturally above wins lap existing Although we normalize the new first business results prior in year. came business will quarter growth rate the expectation, of as this the large in

our contract second on fee In gross addition, will of the contracts the of resemble result lower change in trends we we've one in in brokerage, the year, seen quarter no of about our on as an total previous revenue markets. expect the beginning X million services annualized previous $XX to in with reimbursables of facility in revenue the material quarter EBITDA. a second with this impact quarters basis adjusted comments, In of shift no or consistent XXXX

XXXX. under strong from a expect we to brokerage a XXXX, we are in maintaining remain pressure position in to Although market recovery benefit

margins XXXX, EBITDA significant X% expect of no this As adjusted our to mild recovery recession we XX%, year. year be a full result these to in range the a view in brokerage of which of with incorporates expectations, in

to and adjusted John. anticipate for trend effective the back meaningful upwards expect year tax year. That improve full growth cost a back turn As trends margins macroeconomic the our efficiencies. I'll brokerage We that, now more both concludes to XX% review. With business an the of and see the experiences recovery, revenue rate through we financial call

John Forrester

Neil. Thanks,

seen lead what and likely talented contemplated must announcement and people & in as from Michelle. and be think worked the I'm guiding all I'm colleagues growth years clear today You've evening closely as myself continued Cushman at Michelle recent about Cushman company. business, in now and in hands culture making the value and together could both company. when proud our as seat that real friends. But experience incredibly decisions company months, It's Wakefield past the far growth been confident turn than saw our people, stage It Chief of to to to strategy. This the place. over our retire of special Cushman became Michelle a Board many IPO it And my long team have is shareholder the forward, a future, most we've these really the next with her CEO strategies of enjoyed me the XXXX, person MacKay values accountable and as became the person this since the agreed Wakefield made those in industry future. I in decision honor over commitment the working Wakefield's and and I the over have estate become I the not we and thoroughly will company's drive over leaving bright evolution with and as a unique & after XX her & I'll commercial management accomplished special about and together. We of member built all company to to true more better CEO. Michelle And the the Officer. to Operating into years she the have the as be that shepherd for

Michelle MacKay

the business you. on first I the The you excited and role of on Wakefield past want to & John, the take made to person on and lives Cushman collaboration Thank made you've your of personally careers impact for CEO of in will thank inevitably but of to number And be impact legacy. I'm that is that people large part of over the you an untold leadership your be several the July. the years.

about So future. integrate & require time the let's into don't to Cushman Wakefield. talk I

foundation as an for our look to as the brokerage As a joined now the talented a future people have the makes sense our I allow stepping to and future. public the our more core dedicated me went today spending lead ability with about to the time, our we'll company this you is the built. foundation capital reassess part years. the with sheet years This and of I'll back on happy that where we're than been the of probably all and the of money on know, and Board your the and business inside & accordingly. business, and course, of energy operator, resilient speaking our The strong continued and what balance importantly, as key be is we after many expect company aligning it high-growth of the out reconfirm the will evaluation and Cushman to have for right ensuring take plan turn allocation that for model I the to more map driver. of and Wakefield. And assessment fortune and forward future to you X ago, call growth services X great have I focus will, model questions. I

Operator

[Operator Instructions] Paolone question from comes Your Anthony from JPMorgan. first

Anthony Paolone

you. Thank

congratulations, I $XX more some Neil, items I the bit little Is the there was going targeting, to of coming a you as guess Or is of mentioned Michelle. more First, first million best a that that? and confused are additional by you be about I I think $XX and part My well. that John, actioning comment. to wishes, a million? question, beyond the was bit that Monday ask expenses. want

Neil Johnston

Yes, sure, Tony.

Our takeout the guidance provided. in assumes million the $XX full we've guidance

evaluating cost this currently them. point, measures. We additional can't At are quantify I

the So does measures. cost contemplate not any guidance additional

we'll efficiency are in certainly, year. halfway fairly move year, muted. we will But impact already provide the be into and -- we rate through the on as next run Given savings

Anthony Paolone

Okay. can to margins million the recall. you the I more But last know maybe can't changed guidance your in there? be else don't just But And kind what's the is guidance like you so terms the talk $XX to that what that may then in I now. of a really difficult in there. of provided, But quarter, X% -- margin? that in gave margin changed it business is for I you thinking sounds to number and calculus brokerage right to get just XX% know

Neil Johnston

Yes.

will we a what our guidance The Tony, in very we recovery consistent delayed, think, the quarter. gave with by brokerage change I only is is last about be quarter. delayed that believe probably slightly

a into, assuming the in Naturally, have easier year. especially recovery comps move we do fourth are as guidance, in our we quarter. not we So meaningful through the in brokerage

the lot will the we second look So a at better. quarter. the be level to clients a of quarter, the similar will we're be But as first assuming at sort brokerage year-over-year

Anthony Paolone

thinking slowing Okay. And as about then conversion or any free we down? on on about for should Any you cash be last one. can about just anything comments And CapEx think just we the thoughts flow provide year? thinking EBITDA there

Neil Johnston

saw No, our consistent in normal first free business. quarter very cash the in seasonality was flow with that we the

outflow improves certainly, year. back well you the the the year, we move dramatically of half as As through know, through cash the

brokerage seen year. of see medium we what free staying the we brokerage on -- historically. expect year, the not cash conversion we've XX%. But with the maintain do of the to in A through naturally, see how still We'll muted term, that back we through flow are year. depend the But a brokerage to consistent we quickly lot certainly, XX% this target are expect recover as still recovers. our see with We very that half will of generally, trends

Operator

question ahead. from Sheldon Blair. comes next William Your go from Please Stephen

Matthew Filek

Sheldon. for start that janitorial in things event and the services overall? traction, for on You have To some here, Filek to you to segment like do the PM/FM movement the return Matt see lose starts demand office Stephen dampening

John Forrester

very question. that Ultimately, in there forecast making Thanks forward performance It's our the believe in the we the at a for strong question. out moment, recessionary offices decision good clients the pretty driving particular. is in by main

the services, and trends priced with work office market massive volume, we what it. The say again, to management, return is and extent, see the hybrid management a go into sector. facilities an as to additional along brokerage but of I other the So seen that would services than course, market project is we've

sector I misplaced relative think the versus the within as others size sitting we of talk is headwinds office. that about

growth very strong winning in this new our point. seeing growth, of at That are outsourcing it We business from lot a office contracts. comes

& on reins space in margins, forward. Even said X as for, & exposure years. their occupier pulling still I ongoing growing the just have That So portfolio. quarter-on-quarter Cushman now little -- individual Cushman companies prepared year-on-year, Wakefield bit that they the much actually office rationalization any our see with rationale in remarks, going a and how might back be maybe the like Wakefield, has I been of within is

Matthew Filek

a focus quality persists? to Got are to starting tenants shift their office to up that higher flight the it. macro helpful reducing challenging given encourage employees follow-up Are quality you on to of back their seeing That's color. space office to kind come where hold in as cost then to narrative And looking somewhat still environment that leasing. or lease

John Forrester

in as we And are A, ESG deals around are actually tougher in to Class you those where what very there large gateway of deals that that times. are rest where both the is renovations having see market seeing we're or shares. we active Both seeing happening is cities qualified of are questions are world best-in-class then your market not The the then what ultimately exposed space. we're the because

So are within this fair of I question/observation both your those at components point. think

Operator

comes Kamdem [Operator from Ronald from Instructions] next Your question Morgan Stanley.

Ronald Kamdem

Congrats, John Great. Michelle. and

Just to think just get quick this guidance, X% did -- of end Clearly, more bit what to a to XX% I year. there's the little quantified going one to that into EBITDA are quarter. of in it by if of the XQ, a of the you trying you assumptions sort get sort which of color on X%

brokerage So to are you get are you pieces what to depressed, the I the saying but is that of X% for other understand X% XX% some to for year? full that

Neil Johnston

business, Yes, the sure, Ronald. as we that, seasonal. look at know, in it's Look, as very you

quarter quarter in our year. a is first first revenue lot far by quarter, is just of the less The the so smallest rest the than base the

And so contemplate pretty XX% to that as the getting year, we to about margin. feel we good X%

that the in through revenue. The as in first improve is natural year we we earnings only way more of year, margin the year had margins the the in and where back the the growth highest always than fourth the the our half of business, our to this the see of half certainly see most of we year base the have year. quarter difference all naturally will the the increases last think, You where business I will front than record quarter the

the pretty industry. trends with So but historical slightly in different consistent I'm

John Forrester

shows year in as the that muted up whilst to quarter-on-quarter and this grows one be actually of point the the grow QX, will more cost moves ultimately, why year revenue at margins confidence the that's through. will point, they just a proportionately, with And through lot always reiterate

Ronald Kamdem

maybe then the statement, cash you're question, in course, through looks what conversion seasonality helpful. XQ, would cash some to obviously, as going that fully my to appreciate the of EBITDA going comments be And year like on second the flow but Great. I

Neil Johnston

sure. Yes,

year, some With cash capital. difficult we the our pleased around of course, will very the the but working improvement is. free cash We saw calculate first in nice cash muted trends is you working we're on highly in flow. the there ratio it's conversion tell outflow what brokerage, capital. were to receivables. of by decline half of doing first the good very all focused a quarter in our work in in That, the We seeing certainly a I

be again, XX% we medium through that's move flow, range. cash as once brokerage flow the this run, not will where As mentioned year, the But cash the we to to back, that the expect in conversion comes earlier, certainly, XX% be. I in

Operator

next from Your Instructions] question [Operator Michael comes Citi. from Griffin

Michael Griffin

well. half what the X.Xx again, that run number Pleasure on think makes is a about XX Congrats of do any rate, Michelle, you back and you level. Ron's you working seasonality curious pretty going good more pretty sense. there a back for question run to that as John. with And you do So Maybe leverage if If get putting I'm the congrats a I'm it, rate taking commentary question. of you year, a on annualize it's right? forward? that just elevated leverage around Talk in number months, around that? last to

Neil Johnston

Sure.

of With Xs range. the the the higher X.Xx We that in X.Xx to come the to expect leverage as end EBITDA like than comes in brokerage probably is be. lower once down comfortable. back. will it by net then Clearly, and feel to we'd But EBITDA, as again we grows pretty year, the be leverage low

But always leverage up. to we'll cycle, Xx. feel good is to go as good, Xx goal be the our very that in move opportunities. naturally, But about see feel Our certainly through that we

we As our pushed which to out we $X of loan know, you term amended B, and extended billion XXXX.

good feel about feel our our very I So and maturities liquidity. about good

is shape. while like, is a the feel leverage good than like we'd So very little in balance sheet higher

Michael Griffin

that Neil, reminder a plus on just it debt, was XXX, And SOFR right?

Neil Johnston

plus XXX. No SOFR

Michael Griffin

Got you.

how comments just John you maybe looks the year. of end add CEO the I'm seems alternatives, any I'm about the here. adviser prepared if kind until there Michelle, But It were remarks, that John, Okay. of strategic let's like and will resolution like curious an your as on for about the you're then you any just shareholders. Obviously, on just curious, June, or the the stuff Board's end future. until conversations to one That's in It And like stay helpful. can discussion. said, this if Michelle, the came be transition. talks right maybe around there of talk of

Michelle MacKay

It's question. answer. your Thank will I you Michelle. for

John conversations pull needed realized that that forward, probably we having little to in of faster as think been said, than the we I secession the company, about a we've future bit the we today, And any initially with to next focused anticipated. going I on and specific the can't thoughts out you but XX company of that so... we're share years mapping be the

Michael Griffin

I thought Great. been And years. your then just more or 'XX, years? you a X But clarification is for at John. kind fantastic When from to beginning going XX it the the be [indiscernible]? gentleman plan That's who XX the the you was mean, current think interim you've was in always of took weren't the of career. of role Chairman, over always I there a that for for an

John Forrester

over decisions reiterate a it's estate joined where as is going Board, a the in. fact The very diligent actually is I'd decisions that leaders occur is of of fact I've an Michelle as that point. some just and big that timing great extent, solid who trends consistent the to to and on really very real important Michelle in we ability company about to that in always means our our said. -- its need anybody work color planning. Since and just But required through time what in accountable company. that day-to-day believe see The is this -- trends succession to but this contemporary accordingly is in decisions market I've industries public and in such a growth don't the with many in prepared taking we to drive also that been be ultimately, how based very industry. listen Michelle dynamic the we growth the And important positive that already is to the leadership to that a operate to very And direction in take are me. fast-moving forward a serious around industry those we always now those the to future focus secular we very see, who's out sense, -- this majority organization -- is always as discussing gives to the we grow for, going really and at industry services push went recession is are very about an And this is company. be of at

Operator

question Patrick comes Raymond from next from Your O'Shaughnessy James.

Patrick O'Shaughnessy

Can an your with status it's Obviously, you that of provide struggling. update mystery on no been the has WeWork? WeWork partnership

So kind with how partnering going is of curious the of effort you them. about

John Forrester

pursuit ongoing the become with successful, successful. clients believe services will client our within as Really a I'll WeWork partner been with the and therefore, There's there. secondly, is that where And portfolio. in to that mentioned This and continue that. has key to are positive. made investment you is with we -- has a estate how slight major real with take in John. actually One supplier and been disconnect them Actually, highly that relationship was and of work be that have WeWork the fact focused we to on. WeWork running WeWork the strategic we issues our into helping X areas we that

aspects are healthy, about X those ongoing, think we So that's with. remain and our how relationship

Patrick O'Shaughnessy

Great. Appreciate robustly? your you rebound roughly more to for joint Would Or that. track a rest Can the to little expect multifamily you your the the bit that remainder you of over the business? outlook venture brokerage maybe would Greystone expect year? provide of

John Forrester

make a company incremental the joint of gains this year into very for becoming and like forward that rebound performance other [indiscernible] quarter mandates the market have growth relationship I'd making the to quickly short-term than future. every actually, an quarter-by-quarter, this us working joint the valuable our see on expect strategic We industrial again, important multifamily, to And more fundamentally we to us venture proposition more like feel share certainly adds certain sectors. on, about going The we're very more irrespective and improvement at faster sectors we're and sure. that and do the that focus good That's day. one value itself that for is

Patrick O'Shaughnessy

Great. And be How it of are could. terms brokerage going looks like? impact for that then that I a if talent lean of an in like environment what things one and looks to How the attracting does is last backdrop environment where retaining one, maybe extended period time? in

John Forrester

any this prospects our talent market or growth in in in doesn't and people are for actually always areas future. say, ebb are where or industry revenue. The correlate of higher flow line brokerage potentially John. And, particular, sees in Great to those high is rebound demand. the revenues vaster And that the a service

months day, So into was the and they're the retention than it different office, XX months last levers high is more far our talent. And today thinking across more are organization nonrevenue One both the they manageable important, though, overall no is very of come through driven is every recruitment we face about muted ago, year. are our inflation the than seeing, that ago. QX and it office the that's being XX say was thing in in in business the becoming

the as and some reduced and seeing there. attrition inflation lower benefits well the slowdown are overall markets labor we in So as

Operator

Forrester back session. turn time, further at over now I'd questions our any this like to to Instructions] John [Operator for the closing As there this Mr. remarks. does question-and-answer conference are no conclude

John Forrester

Neil you to and forward all our again And second quarter the look earnings with call. of Michelle, joining at for us rest today. Thank the you team speaking

Operator

Thank you presentation. has today's now concluded. for attending conference The

disconnect. now may You

Cushman & Wakefield (CWK) 4 May 232023 Q1 Earnings call transcript