CWK - Earnings call 3 2023 | Cushman & Wakefield plc

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Operator

Welcome to the Cushman & Wakefield Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

It is now my pleasure to introduce Megan McGrath, Head of Investor Relations for Cushman & Wakefield. Ms. McGrath, you may begin the conference.

Megan McGrath

to Wakefield's welcome Earnings Quarter and Call. Conference you, Cushman Third & XXXX Thank issued release a results we today, Earlier press period. for announcing the financial our This found can website today's ir.cushmanwakefield.com. release, Investor at our Relations be along with on presentation, presentation Please on cautionary forward-looking in note labeled turn page to the our statements.

and differ be Today's only, considered forward-looking forecasts and on materially. events. future actual our based contains of These may estimates presentation current results statements estimates statements should

SEC other by Reconciliations During of the financial are earnings we measures the of our to today's financial of found release of will non-GAAP non-GAAP appendix outlined call, today's GAAP to non-GAAP refer as financial related within guidelines. measures, definitions presentation. and tables measures financial and information

growth in comparable of rates are Also, currency that local please note to XXXX periods and throughout and otherwise comparisons the stated. unless the presentation,

with over I'd call And to our to the like Michelle MacKay. that, turn CEO,

Michelle MacKay

for to call this you, you, us afternoon. Megan, earnings second joining my excited everyone, I'm as off thank and Thank CEO. kick

get have into in the I differentiates And simple: is numbers, asked we've action. that you during quarter. the what answer can a what accomplished often me And see as been bias third leader. we to a Before I've the

was leverage well lenders and more in our There transforming loan made in in with significant company's we This XXXX. billion offering, was oversubscribed refinanced $X.X million bond. $XXX it XXX interest our approximately XXX our stack We progress our XXXX lenders move strong than than more pushed by term in the capital will out the and reduce as has of initial loan. term our maturities

cost-out increase X.X%. The execution of QX EBITDA in ahead contributed schedule to of million target this for year. sequential are strong margin we our adjusted the on our Additionally, $XXX

company's softening Our QX the $XXX to that the make performance adjusted choices performance outpaced conditions are despite million in interest macro of environment. long-term regardless we QX as market continue of our EBITDA

pause the not. we processes is clients, in the on and people, investors. actions to really make deliver discussed take that and for mid-August What's to to we saw as opportunities cost business, taking we were quarter, things ensure that we and deliberate higher. focused, But to transaction stayed even markets when which for need to remain, uncertainties transactional arise our were clear true, moved done We the puts the the structure. our just improve have reduce in the capabilities It's to right balance employees sheet us rates another stabilize our I markets can the and prudent future. as We've during we the capitalize seat disciplined and that investments do they idle

me Now where more we and, some share let our detail review in strategy. our go-forward importantly, on are more strategic

These that planning bit were we with and road and map industry we road a of map you past months, have strategic a secular share I'll and allocation rigorous long-term created, I over As a last business of call, detailed thorough scenario earnings on the several assessment our completed and our more capital reviews, including part analysis. have today. very segments, of previewed activities financial

period our we map: time road strategic creating about our the of feel we've the very strengthening debt our short cost-out stage: first I balance enabling make the executed sheet reviews right good the and to from means in efforts of the phase that of optionality. in operationally and us best at possible accomplished time, flexibility move The comprised quarter strategic perspective, very company investments in position, putting cycle. and during to a This a to financing, both the core. third on what next

are absolute of focused we reducing level To our this end, on leverage.

developing are loan our earlier, organic brokerage. announced of of the the term opportunities further At a the remaining time, the years. pay in As for growth down also balance we debt reduction and and will intention both same to noted services invest we $XXX compelling plan several next over we I incremental million, in

committed to This plan, will retaining As and flex we hiring with we as part growth we're both the future appropriate. as ability markets spending, to recover, remain our help staffed, on and properly the capitalize so of that this now ensure opportunities.

small generated achieve flow, cash on moment, by investment in improving sheet and a noncore expand to and expect by We balance Neil identifying free will these goals which our monetizing and assets. internally

this and growth that believe balance optimal a focus for on will the accelerating value. sharpened debt between We reducing driver shareholder be long-term

sustainable client-centric and growth. drive road clients map this diversify business our and further all their insights. data, gains but not strategy. arming market achieve help brokers to and forward. by our intend is continuing differentiated, long-term partnering to with through share in stage just with We final revenue to hiring about The our proprietary drive This these agile analytics brokers We're means a

bespoke with the won example we've EV large advisory levered knowledge Cushman by spectrum brought from mandate is and technology professionals. a recently team One When we of that the platform business how company a a of expertise by and that, do of the of else's. cross-functional a services, anyone creating client our global power we've a our bet against perspective full solution unique development. team I'll informed We and on the

to down and capabilities this our company are on positioned should to even also road. and our the develop X analytical be a XX where XX We using clients view years

will where helps benefiting sits of segments the in identify both urbanization, and world, demographics, sector such We This geopolitics, are mega trends typical change climate believe built at sake. as and understand us of stages trends into and distinct subsectors factors be each to growth and estate terms we resilience real these in that mega the technology, a layering disproportionately looking closely cycle. cycle real in each estate across

advice and one by independent continuing solutions company independent, only are tailored how our of clients. while led analysis proprietary highly the team and research valuable we provide our be positioning for This is opportunistic to to example data-driven

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team, of uniquely Our best-in-class us analytics, only meet share and to a positions not integrated also that highly in the to but newly gain need our market. fragmented strength

see, As you months, on beginning to have plan. made strides and the past fine-tuning execute over significant our several we in can

We where are a hard to really pushing create trends more matters. Wakefield and when resilient & captures market agile, advantage anticipates it that Cushman first-mover efficient and and

process quarter our the ongoing adviser we built more share we these an in position goals. view premier as will of each I the global evolution this company We world. solidify as as a details as pursue

our finish, hard through continued like uncertain I as employees all work we operational navigate their as I'd And to for this environment. of thank

You to your extra mile go every for drive with impress me day clients. and our dedication the

over for to financial a I'd like review results. third quarter now the our to of And call Neil hand

Neil Johnston

Thank you, and Michelle, afternoon, good everyone.

in the on and For sequential profitability driving EBITDA adjusted despite third decline both business. we adjusted margin in quarter, reported sequential our This our increase EBITDA continued enhancing commitment a a cost to demonstrates efficiencies revenue. in focus our through

enhanced the significant saw progress improving efficiency. we the quarter, also with improvement and our cash During strength on flow made of free capital and balance in working flexibility sheet

details of Moving the on quarter. to the

difficult brokerage year-over-year lap markets in the summer began line, we the market XXXX. late improvement On as conditions, saw remain transactional challenged, began trends we which in while an top to

adjusted X%. fee year quarter down revenue prior to down mentioned on down revenue $XX XX% with reimbursables XX%, XX% a be capital quarter leasing million in EBITDA. at facility PM/FM reduced change markets our Third on on gross roughly or call would that contract of revenue the fee revenue contracts, by revenue with of our impact basis $X.X services an and due the earnings billion one no We versus our revenue PM/FM total declined annualized first

in roughly Excluding was the quarter. impact change, revenue the of this PM/FM up X%

the transactions XX% continue in declined the result third other to as lower in valuation and activity. quarter Valuation in slowdown

and was Adjusted EBITDA quarter margin $XXX our X.X%. million of versus for XX% third adjusted was third down EBITDA year, quarter the prior

quarter, we the programs. continued benefit cost savings from During our previously announced to

cost-cutting the rightsize actions, our million for the efficiently slightly and landscape. We the operating ahead and of to to recovery We $XX operate expect with of ways communicated have environment appropriate execution and current pursue team's business of level I'm we savings continually taken on previously near-term regardless actions profitably gross realized end year more we've to the of believe $XXX the target. million and period. pleased these the year-to-date our will

decrease Adjusted quarter a was earnings of prior per versus year. $X.XX, $X.XX for share the

Turning quarter. decline decline to a for year-over-year In a our the segments the we XX% and Americas, in in PM/FM. revenues saw X% brokerage

brokerage Americas X.X%. interest grew PM/FM a in principally declines types, across and The the contract higher due Excluding most were macroeconomic headwinds. to rate asset in environment revenues the change,

large XX%, sequentially were deals but as revenue was brokerage XX% EMEA Leasing able PM/FM remained and revenues. successfully in the execute revenue to pressure, several year-over-year trends down experienced Capital revenue year-over-year quarter. a EMEA teams under our improved markets was down during X%, up X%. decline

solid with Japan. reported quarter brokerage India region year-over-year countries, up Our and APAC revenue in as growth Australia, we experienced including several a XX%

APAC Our at X% primarily down management PM/FM to activity. business due project lower was

EBITDA the EMEA driven markets. the Americas by grew declined and APAC in principally the by activity, brokerage EBITDA driven in Adjusted lower while capital improvements XX% in

free $XX cash the a previously XX-month compared cash quarter we a million flow of the $XX million trailing of third improvement we in free As Free XXXX. million million basis, generated was flow. in for On ago. versus significant mentioned, flow with a quarter saw third year $XXX $XXX cash

notes we quarter, our majority Term the with $XXX remaining billion refinanced of of new due XXXX Term of of third the of and secured $X a billion B During Loan B combination the XXXX due $X.X million XXXX. due Loan

Loan debt million our cost refinancing hand. meaningfully approximately cash fixed. We not of XX% to our $XXX did our remaining The XXXX. This repay moves B approximately with funded significant Term nearest expect borrowing to overall and due the increase XXXX remains maturity debt on

We third of million on revolving financial no borrowings liquidity, and on $X.X revolver our strong billion $X.X availability our net quarter. position cash with of of X.Xx facility of $XXX end consisting outstanding and credit Overall, on remains leverage at was had the billion. hand the of our

on Finally, to outlook. moving our

digits. year full low to PM/FM our the we XXXX, For in revenues the anticipate grow single

for full We expect to the brokerage to end expect of to reduced year Due this XX% down brokerage be revenues, guidance compared be X% year EBITDA to to XX% range of full XX%. XXXX the previous expectations near revenues XXXX. guidance to our for adjusted low previous our down margin we XX% of the now for

until into interest that we of next Looking may be a delayed recent in move Fed around XXXX. the recovery rates brokerage year, half market ahead uncertainty in and higher continued second actions, the expect given

extremely driving Despite and sheet, current XXXX positions navigate balance strengthening cash on achieving free year. our financially the believe we us flow, throughout work we've the market done well cost conditions, efficiencies upcoming

the now financial to turn the and Michelle. call I'll review, concludes back That

Michelle MacKay

to doing Neil. the Thanks, position the what are I'm we've and the during third work accomplished the proud of company quarter for we future.

We sustainable position go-forward a will company flexibility within to focus what's on each that this optionality progress with strategy reach control next creating growth. the and our for am will long-term stage. continue I quarter. you our our to I sharing with And look forward in confident

Operator? I'll turn call take over your the operator to the to And now questions.

Operator

[Operator with Instructions] from Our first question today JPMorgan. Paolone is Anthony

Anthony Paolone

if the I'm a do expand wondering if monetized. balance I debt all these cash wondering guess relates magnitude there could brackets see that question be sheet Are you right bit CWK of maybe that put reduce what first find assets the a sold? next give sort order detail businesses? you and now to over you you on having around that. to could could incremental that more to years. plan the on are on Just and little my just be investments some can Like, outlined few of

Michelle MacKay

Sure.

the And to long-term X% about and best I our get is debt paydown way to growth. to a range. there we think between for through target X% of think the EBITDA plan leverage combination

allocating to the balance two we're the goal and demonstrate way Our a is that between capital.

this be to reducing path returns. to for grow an shareholder over as is and right? growth, in level business everybody that we So committed our optimum because we we is debt I reducing what's This strong either/or think the both to not conversation. And is the generating believe time to debt important we're investing want understand

can a a I business that an monetization, is, about forms. of talk tell them And in of or And size company necessarily that or company. sale into was what of an mergers strategic I are long-term to but entity the about place going through before small of think say meet the they are of of terms I that profile always the not to necessarily in components growth variety are can they the you speak to all-out acquisitions, In a the there the today, directly not that we're or speak because and what can that, are entity. I just brought were to not that I way or It's fact core. outline want they monetization built wouldn't take and series

Anthony Paolone

question, then up good cost million challenged into $XXX mentioned if bit And and my and coming saves be where business before the Neil, kind stays there? cost-saving 'XX other contemplated? see that you you or for have at about maybe that. But Are just in Okay. 'XX, felt much wondering, recovery, above you felt I second longer end like just you little could goes a you'd is do there could that other or we think levers target pull of

Neil Johnston

level this not that XXXX appropriate feel point, this in in terms $XXX recession. marked the a year contemplates what we through we also our the are at XXXX forecasting, of million Tony, we're is ensure only and margins that but like to targeting

We are efficiencies. focused always on

we improving always are always pull. additional there So operating levers of business. the can ability the that We are

I like of to think to basis XX% about the out business savings, sort things costs those the $XXX of that for XXXX, a back obviously, to on of marketing, would to business. see then run we about we million from to travel, easiest $XXX then through $XXX types of the same savings it of the And back about temporary which the costs. way If hold into the is, million levels costs allowing took are million in think cost year. year, in continue about the increase market at did next come all permanent way on would any those we that

Operator

UBS. The with next question is from Kramm Alex

Alex Kramm

maybe think outlook, I the don't a your nitty-gritty but low mid. updated if it, think, first it's contract you look I prior your know I from, you expectation downgrade but to had starting think on single-digit low to Maybe expectation here. business, change, little PM/FM at the a the I Neil, mentioned I is

sales So about curious the lowered in business. has business So Are just cycles slightly. because Is what like seems else expectations just it that you talk there just longer? changed that churn increasing? maybe

Michelle MacKay

through Yes. Neil you I'll services some to Michelle. our going This then let the I'm address talk is strategy. of and numbers,

Neil Johnston

things. Sure. services best Alex, to our is way think three I think the business about considering really different

X% that growth the arguably line say, first contract is in one X%, that mid low That to which we change. positive a the fact with our is you had at As to takes the from negative but low end.

growth. is, in services year, very prior The second the thing we saw strong

In the through the fact, double all that quarters growth was first way X year. the digit of

So you're see tend which really comps, we would it numbers expected. that was We project was lumpy. management finally, activity Asia fairly the than slightly business ago. did business Pacific, That does third the our lower very that year really came in slightly as this have be to a into in and And quarter. showed in year, seeing tougher we then we strong

up if X%. a APAC year-to-date one on actually so services was basis, around looks And

that of some lumpiness. smooths sort of And the so

Michelle MacKay

to area a the we want make level the key big for while few reported it business. items I this satisfied impacting results, that a we our in. priority quarter this organic and there's is of And to And a business services unique invest with low that growth aren't in us clear

accelerated our grow services businesses for specifically. we lot on to there's in will us business opportunity So growth a and be focusing of driving this organically,

Alex Kramm

know a environment growth lower. kind do next enough. I a lot a I'm outlook, but pretty are the side, go think on this of in half large maybe I are share. XXXX, market not maybe renewals next it still but of on leasing expenses All then see soft looking is down the an obviously, secondarily, growth you're year. you supposed year, for think, a And I second follow-up to stay to on more businesses be actually like then of earlier still recovery focused this to there's right. hard getting capital we Fair then levels? these the don't we're already; much think and if so business mean, sales you And for on have I side, But here, from and markets if you again, in kind question again, the portion recurring side, but

So environment, an bit unchanged can maybe an headwinds Or question in but do would of XXXX, a actually early little there think be you from still here? about you grow here? some

Michelle MacKay

Okay.

So of there's unpack. things a couple to

we'll and leasing, with start here. just experience our let's So you give

to going eventually. couple they're you How that a we've leases large quarter decision off them we're this decision-making. translate on year, for this seeing have to is got can So make occupiers, of holding but also a

So Typically, and this leasing obviously downturn. careful getting with And year. their which higher in of at. is for actually some because they've perhaps of cost really this But happening year is we been you're what it's have getting ahead that defensive occupiers unusual been posture of leasing is of moves a job right? XXXX dip have pulled in capital, GDP to taken a would decision-making. expenditures, very the But line with weakness think what growth, that's forward impacts

fact So as if spoken to improve Neil as to we're prepared, through expect hopefully that were a well year structure services over we has both But to, our leasing be and volume the you've next cost not we in said, case, that hold and have time. the business.

of in capital the you to talk to lead it's about the the is starting in there's the that shoots cap is form and predicting see valuations the on will are going week. that recovery come. We're behind other mark, Fed to We've coming in indicators stressed know preconditions right? be look in, sector. think difficult, trading, asset really And around to we When Inflation and going if the to of that timing pause distressed a the rebound markets, starting here. this there. you We some but surface, got

Operator

Michael Citi. Griffin The next is question from with

Michael Griffin

response Michelle, piggybacking previous on off your the Maybe there, of just PM/FM business.

going us? can talked around You initiatives for initiatives some undertake. color organic those that growth to chance Is you're would helpful. quantify you of there any about And any be

Michelle MacKay

duration, Yes. for at one tell push both toggle to growth, the today, on pushing other target pedals will think in business and right? when think going business. think I same our see investment. for for GOS, deleveraging about We're we investing a be pockets, and is areas key time. you for going mean you that and to us but think that it of it always to not And about going I'm the just you Services, nature us, valuable relationship you're We're really to particular of the between about in CW that those not pedal. going quantify are on I to asset Services,

Michael Griffin

Got just then And you. helpful. on the That's business. markets maybe capital

of For mean, sellers and buyers give are what where can the out what's anything, deals there are sense And us that are? there, I trading, a would buyers expecting, helpful. be you if anything

Michelle MacKay

a Yes. deploy and have cash investors two out of and levels a getting XX% the sectors you are friction are done it. the as for clearly surface most to with lot we of multifamily. trading. anxious also flight And movement and clearing still right? opportunistic, there, And to in lot flow still dry and buildup deals have of There's I the in the to well. powder assets capital there's are see There's actually in industrial strong I lenders buyers, XX% of confidence in. getting that those mean quality regard sellers the think in to

is to to It's going but probably terms stress months the more clearing before couple in it's we see markets. volume going a really it think we of in start to we and a So right? of happen, distressed happen, have matter don't

Operator

Kamdem Morgan The Stanley. next from Ronald question is with

Ronald Kamdem

Yes, just two quick ones.

hey, that capital So talked determined? of, How year the is expected. Is think which recovery, peers going sort one of second just we a sort the it later more that to to figure so all the for, macro? is 'XX, I unwind? better, half being is on probably about based for of on be is to I'm markets should are macro to something a trying Or lot have is than the down those a obviously deals days we transact? how Or be it have just out just there we looking a the therefore, pinning people for recovery? like

Michelle MacKay

think stronger cap activity. leads Okay. to I Yes. leads rate stabilization key, mean to stabilization, That I rate the that is transaction right?

of and it when So was have all XX taking a above with You The real the I think do year, half have that point years, functioned curve has X% view the second a for normalized leans markets to next well. what curve. right? to functioned estate the of looks of we're like, XX-year toward when lot want right, a

start to transact the curve So for people the timing next. to is that we're going for out versus when that waiting normalized have Fed to happen we waiting come so around a can and

Ronald Kamdem

back this cash Got statement, flow it. through cash there next going the then of And was my that question, flowed to just looks lot quarter. a like it

year, Just any think back as of any onetimer should the thinking flow? sort half as of that one-off to translating we're EBITDA of about we cash about sort we're other and, the

Neil Johnston

Generally, being capital. No, seeing lower is, seeing offset working what with the earnings release earnings, we're of the the Ron. by lower we're

job have focused on working a Our teams done field capital. in phenomenal really the

taxes lower of lower benefits of the seeing are we a so earnings. cash that. the seeing We're as also And result

driving items think do strong. sort that to cash those So be free is are We this of are flow specific going nothing cash onetime. flow the and very but the year

Operator

Stephen is Blair. from question with next Sheldon The Instructions] William [Operator

Patrick McIlwee

business And Neil, is, on impact to Blair. the Michelle, in more now, My PM/FM on much that the begin you or vacancies that XX% space outsourcing your question how business? near in would you that expect been at weighing from Pat see office occupancy all? you've demand McIlwee for has services first trends growth in U.S. got do William with

Michelle MacKay

me with question. just to you come back mean let I that

in you office do vacancy impacting the mean our that So buildings services business?

Patrick McIlwee

service. Yes, the demand for outsourcing Correct.

Michelle MacKay

Yes.

remote of we're work nearing we're that it is that thinking end way the the impact. we think the think about I now

it in U.S. something is mind already, decisions the So lease keep in right? or space. X most we've years made happen of average already on have that seen is X and businesses the to long, lot And about their a

new likely a to they signed space sublease. their space existing their for they're lease still listed they either less or in So or space

of in portfolios played course of already we the system. office But So XXXX that some wouldn't in has the the anticipate a lot over a this change that did over We manage. through have I XXXX. impact material

Patrick McIlwee

Understood. And further just little the cost-saving follow-up, then a as bit a on initiatives.

heard bit recovery. that we've So changed capacity producer see on terms that head count curious more versus say in we that just looking the margins I'm of for they're given a has if peers until longer your expected strategy do And downturn. how maintaining front or supporting recovery

Neil Johnston

the I any on been return think producers. focused we've we're making in always of investment very

And in good allocation. direction. capital we're about either recruiting that think and we forward been changing feel in prudent growing see our our We our investment producer so we've as either very in And with our I move the making I don't retention.

good for feel and potential production about in capacity sets XXXX. So up very recovery that we any us our how

Michelle MacKay

Yes. little much team the paring pruning we really bit or look the and strategy, consider that is that of our businesses, area new that And And like have talent talent question on? we're so philosophy just around we individual a to our it, look want you of in our at on we're Do that drive always in makes focused at shop right? like bringing future talent we what any in portfolio do business, give of that of an we core What that right? economics we're advisers in? And sense, the the company. focused we so really you

coming of business be and course about leaving you us, Cushman. people at I for movement So think when think normal to is it, in, going meaning people a that

Operator

Next question Raymond is with James. from Patrick O'Shaughnessy

Patrick O'Shaughnessy

of strategic So any WeWork? with risks would implications to be relationship on bankruptcy the streams? Are what a any WeWork there potential revenue tangible your

Neil Johnston

taken There them, mark-to-market to whole are investment it's we company. work but overall as lot we've our for not not. there. in The of do, a do of And then relationship the with a material them, terms the already --

need would those essential I if was an get there need So still still bankruptcy, It's that get service. to to a still serviced, of many anticipate or to need get managed changed. spaces

it we to see So don't material company. the as a impact

Patrick O'Shaughnessy

noncore Great. would updated Greystone? the be And Graystone to we core of part you they In on do your a thoughts bucket? particular, core maybe can then consider fit a Or asset your get and strategy? into

Neil Johnston

We We over we platform, investment long constructive that term. view the in strong. fundamentals very believe remain business and underlying on the our Graystone are the long-term multifamily in

with of performance. we in or Greystone lending quarter see #X the basis took relative primarily of lender. quite pleased a we're did a While a reduction Freddie. in agencies. remain X on in We volumes, to the in decline FHA in actually due the terms We're #X our We Fannie, share #X with all partner

we move And and so we continue as forward. strategic to take share view that very as

Operator

concluded. for now presentation. session, participating today's our question-and-answer and you the has in conference Thank This also concludes

You disconnect. may now

Cushman & Wakefield (CWK) 30 Oct 232023 Q3 Earnings call transcript