CWK - Earnings call transcript Q3 2024 | Cushman & Wakefield plc

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Operator

Good day, and welcome to Cushman & Wakefield's Third Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Megan McGrath, Head of Investor Relations. Please go ahead.

Megan McGrath

Thank you, and welcome to Cushman & Wakefield's Third Quarter 2024 Earnings Conference Call.

a announcing issued for financial we period. the today, press our release results Earlier with can today's our along release, This presentation, website ir.cushmanwakefield.com. Investor be at Relations on found

Note in Please and the on actual estimates materially. These our estimate differ contains our statements on and based Forward-Looking forecast results future presentation forward-looking turn may statements Statements. page only, labeled of to current should presentation Today's considered Cautionary events. be

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

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

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

Michelle MacKay

Thank you, Megan.

successful top seeding areas, This deliver focusing record continued our flow conversion and creation of track on investment targeted growth. against in and value driving quarter, through our continuing free growth cash deleveraging execution goals, for strong we to line

also point marks an areas many our quarter across business. This of inflection

on year across investments informed make in to Over by into we clear promising translated asset have most strategic investments our results. targeted ago, a classes began and These view the opportunities leasing, geographies. measurable and

year-over-year quarter third XXXX. growth and leasing The highest consecutive our growth marks of our QX quarter leasing since fourth

markets quarter first XXXX. Capital the growth the reported of quarter also the have of Americas in We since second

markets We amongst the and market are in and activities optimism capital buyers seeing broadening increased sellers. of a

in revitalization The outside of and actions important of September the quarters. of the growth coming the first policy further the cut continue monetary easing Bank been markets. rate should to in Central Fed in The capital U.S. have the catalyze steps by

This in free flow. well in an was October, achieved our schedule. milestone to ahead we debt also roughly do, million maturities, our XXXX important by global work the $XXX we cash had drive outstanding extinguished pledged to of fully leverage. of our made In possible as reducing We teams

sheet priorities on to our ahead plan. of the full our priority opportunities, improving executed we flow X cash strategy take company our advantage months key to early Solidifying of and position this balance future and were growth in

continue forward, part an leverage offense. strategy. Looking investments reduction last allocation we shared be have our to as pivot capital our as already with accelerating important will we begun to quarter, of But we you growth more

the how the turn bit the and for a to I'll of to then review share more a Now we about call Neil positioning financials, are strategically come back over I'll for future.

Neil Johnston

Thank you, Michelle, afternoon, and everyone. good

Our well third improved to our business investments. of and in protecting as strengthening quarter balance as brokerage our we momentum results our the growth sheet areas several margins as continued commitment accelerate highlight

X% for Fee time Leasing experienced Capital for the our growth revenue revenue quarterly first Turning the quarter the markets increased and of results. we fourth quarter the increased to in year-over-year. positive by Americas second third for the consecutive XXXX. since revenue quarter,

well impact the is driven $XXX compared up as declined in On Adjusted our of EBITDA costs primarily a adjusted Services basis, $XX of as divestiture million million by X% to roughly last million recent the year. year. X% year-to-date compensation higher versus EBITDA $XXX of prior

$X.XX interest is Adjusted EPS savings. year, tax of $X.XX higher last benefiting from and than

for which quarter, of X% up is market. Leasing relatively and Leasing, remains a to office double-digit industrial. XX% remains continues both Leasing in we X% EMEA of strength Leasing with service in the revenue level at was look our XX% closer line global our year, in the stable with perform high XX% indicative driven and at down in by primarily grew strength APAC Japan. a growth growth a up results, nature. Taking Leasing India business largely in the Americas while believe quarter.

In Capital in first persists, the in industrial up growth months. saw improved We And while X past the Capital in with several a and Overall, revenue feel office, sentiment markets Americas uncertainty activity. some experienced the we've U.S. markets, X%. to in the market we confident the time we floor quarters, growth retail that in for return has during quarter. transactions passed

Looking internationally, fundamentals to markets lumpiness revenue EMEA Capital market X% as has EMEA declined the X% experience continue Capital the improve as to gradually. on revenue road Year-to-date, grown markets some continues to recovery.

timing principally strong due year. quarter XX%, third Capital the markets APAC to deal prior in and revenue declined the

for a this in expect region pipelines strong, trends, in in remains activity the QX. region by rebound supported and we Our positive secular

management into by restructuring our margin project region. Australia in by continued divestiture, Revenue and Services the our APAC, continued revenue X%, growth design their momentum to reported, increased India services to as X% build Services. facility and was the spurred or excluding in and up as X% expectations. by In the Turning business. down we've EMEA, with In focus on impact of investment line price fixed

up on work growth transitional fourth Services we expect divestiture, business return to that complete, revenue Our the the excluding flat Americas, or essentially the X%, was reported. is to in In quarter. and as

our project services remain as and services delayed. office while be management continue renovations property management platform focused reaccelerating in and We on expansion declined growth highly to XXXX. Facility grew in

last the $XXX quarter of flow cash million for was $XXX flow. versus Free Turning in million year. the to third quarter cash

grown to Our our cash $XXX million. free improving favorably free has continues flow million, XX-month to trailing flow compare $XXX by XXXX, by approximately cash and year-to-date

XXXX accelerate execute flow cash ahead to begin growth beyond. Our year schedule as on us of deleveraging this have our for investments as well well plan enabled and improvements free incremental to

quarter quarter, repaid debt million, our extinguishing XXXX. in of the fully to due loan end, we XXXX the subsequent And we During maturities. $XX term remaining $XX million repaid

due lowering repricing another completed basis successful also XX We points. rate $X interest by applicable billion loan debt term of the of in XXXX,

outlook. Lastly, moving year to our full

strong the performance. expectation quarter's to our third mid-single-digit growth Leasing based mid-single-digit On side, on low XXXX growth to we're raising the revenue revenue primarily growth, from

and we continue XXXX. organic approximately with a Services, returning to In XXXX, flat revenue to forecast growth growth expect in to Capital expect sequentially continue of quarter revenue We mid-single-digit in to of XX%. growth improve revenue target markets fourth

year we EBITDA flow, within to the target. XX% free stated to XX% finish cash flow previously conversion expect On to cash our

For a adjusted XX% reference, that to free cash flow income net roughly translates to conversion.

Brokerage with the for are priorities. company conclusion, execution the In beginning to extremely against we Year-to-date, continued reinvest our we and of slightly. strategic our growth. we pleased sheet fully position is company balance as this XXXX adjusted into million. year, by the and At our up and strategy financial focus our X% margins cost EBITDA year prepaid flow has debt our solidifying free outlined $XXX savings the up business, are on repricings growth. protect the margins completed maturities, XXXX X over cash expanded revenue We debt

over back to With that, turn I'll the Michelle. call

Michelle MacKay

of examples as I'd year. you the demonstrate for drivers where give Many Neil. the few I more have the on have outcomes detail a we our of past the strategic work as thought Thanks, to asked in over see engaged opportunities. of we help well success recent

that team, is of we combined and themes been the empowered hear accountability, winning. our with and are interconnectivity have work investment an rigor. focus analytics, we you'll What dollars And when

and account year, services partnering midsized are For team this looking has analytics our success advisory incredible data companies to internal with and example, services unmatched seen brokerage for that integrated solutions teams multi-market to provide execution. our

in XX% are year. RFPs this over Our up

flow collections. to of year this Internally, our free to teams, in roughly receivables finance improve identifying created and down cross-functional improvement million part cash the work from which internal came opportunities done. We broke silos $XXX brokerage get

both and drive across and efficiencies we are talent, our opportunities. platform connect to data Additionally, making technology to targeted investments revenue

Services example, on basis With Strengthening meaningful businesses. already talent, us we past we identified focus our better a not these year. improvement enhance manage labor offerings. platform global for have in costs our achieved allows capabilities For have improvements, the over especially only talent in but retention to top a XXX point also opportunities management

be growth will Looking tuck-in with profitability to and fueling funding the will forward, our and categories: while and capital two, brokerage deleverage main revenue we recovery; one, opportunistically three our our organic reaccelerating and capital Services continue focused acquisitions; balance objectives. through in into on investments allocation three, leaning business markets priorities

uncovering a optionality are This, in growth, energized company, the for to about creating future. and more we with go-to-market and operations continue ever mindset, we our operational As more to we optimize we than and is drive business can turn, strategies. where opportunities a diligent in and are mature focused fully this

call turn the for Now to the over your Operator? I'll questions. operator

Operator

Our Instructions] question first Stephen with William Blair. [Operator today Sheldon is from

Stephen Sheldon

fourth nice results I markets On Really year-over-year here. growth that clarification start is XX% a quarter, for with question. or growth the sequential? in wanted Capital to

Neil Johnston

Yes, that's growth, year-over-year Stephen.

Stephen Sheldon

Great. Okay.

in in talked think to I getting about XXXX. mid-single-digit organic sure. quarter Services, want to Just confidence And last make about growth next year then back you

factors the that you that of acceleration? confidence level thinking So And just some be curious, now? that investors what's what will changed? are of has How about should help drive your that

Neil Johnston

about will I'm where based growth Stephen. we're pieces, way businesses. into to the continue each Look, you exactly that reaccelerating on it that, our best good break we about of help is each what to happy to The seeing of Sure. take think of sort it in we're up feel to very understand and hopefully working.

of largest year-to-date basis, of continues in and facilities On the key This strong business one a is region and our APAC that's X%, the we're management. the management business expanding example, components very So perform is our there. that up Singapore, provider all facilities there well. the is in one And in an our key client markets. as We're which to base very are regions. we largest

organically is done there in we establishing we're grow confident feel we And that single lot If services our and to business, look now. look business, that a forward. in business starting as we of impact digits, that It's We've our the development the growing feel work contracts strong. growing. we is on very low pipeline at healthier facility but can too

certainly take The the are That's we a longer other very of our see the that potential and nice to we is but is businesses will nice longer positive That some more into path business. business occupier there. so business business. the revenue really had focused about integrating our are growth we most that area GOS global growth wins a services in translate on, term, recently, very, see excited lot with fully an and that wins we

business then expected also the in primarily in shorter tends property And multifamily, It's side those than this bit nature. of management project a to The term management, it have year. project management be management. more little slowed to project and or relates

And markets. then we Leasing our business a so business a will well, as management exceptionally are done just and has lift pipelines good. is start there seeing that property and stronger also that give us And Capital the

tremendous that see growth the Services to be will look in as year happening. XXXX overall, key So a business. pipelines, opportunity we we at for And start

Operator

Morgan from with is Kamdem Stanley. Ronald question next The

Ronald Kamdem

be does it imply the in same sort pipeline? here. a markets had the on way Capital of larger I sort quarter, Is there question came reacceleration I some there? it it how, on deal the into X asking any that Maybe different color think there geography? Is of Is in about XX% growth. because would a XX% helpful. of a Just the sort month

Neil Johnston

Yes.

basically So at at to are as we the pipeline. we're the markets, through. looking Capital deals We're that at looking look come starting

As early very momentum there, sort And to months to X we're develop. regions. all you that look what of it as we X for feel about business the really know, we good seeing takes in just at

Michelle MacKay

and more And to markets. in as referred long and effect, I our said a In we're over waterfall multiyear velocity with Capital in call, I would producing it we a expecting earnings the more be as say, time. last to the past, recovery volume market this

Ronald Kamdem

Okay. second for the going high-level just of Great. commentary on was looking sort margins. just then on be my to And question

Services talked You about recovery. markets mid-single-digit of the and growth sort the Capital

thinking differently of are sort businesses level, as high you those Just perform? about any margins sort of guys impact

Neil Johnston

Yes, sure.

margins So through sort on we've protecting move the very focused recession. this year, been of our as we

offset So business of year, were of bottom We've cycle. was what the the cost from are, out. came and said at We're feel we as to like through with any inflation basically we're beginning turn, starting now we see progressed to we we the the going the that. really

at not so giving are, any 'XX. And we on this guidance point,

as the about those very certainly business in think is, we strong, will But slightly business. reinvest comes back, the the what we've but brokerage the to below be are the incrementals near the there as before business way seen term in incrementals

well on cycle defend margins again, the that looking year, invest go to certainly the growth. we'll And to We is are one. be early positioned but so that year, opportunity make into of going once some as we'll we be our for also sure we long a to next in think

we the And year. so for be very, well through we want very prepared it to as go

Operator

with Paolone Anthony from is JPMorgan. question next The

Anthony Paolone

basis have on I think, in the Maybe, I Neil, notes you margin just being would I my be expenses full staying impacted from think, quarter to impact the about some the ended this tune points. that of, the to like negatively comp the over margin on quarter third up by and with us the side, maybe item. help what last Can update XXX XQ numbers point? year how at you think and

Neil Johnston

Yes. Good question, Tony.

that So end of teams to not to of probably million headwind. nearly range, in and we $XX at million QX. more costs margin. $XX did low We as an We'll matching basically guided the the bit roughly excellent million, $XX actually ensure the material probably held saw we to for million a QX, job little $X the level, see that $XX to so same million in not of

Anthony Paolone

if on the do guess it digits basically that suggests I digits, as side, Okay. Great. be to there, mid-single the revenue math up then Leasing would mid-single That's I like XQ of well. just going some helpful. And Leasing

And should just to go? question so in around I'm quarter more down outsized put looks to Was is, think and number about trying room what guess comes we my that. now? Or I the brackets some just there how is normalization Leasing that like? maybe third

Neil Johnston

Yes.

as which strength of got you a we've is know, quarters Leasing. big of been now, something, our saying It's part Leasing, So revenue. X in we've

we at performance. Americas individual also at there were quarters. in lumpiness have The really And to look the and is So drove run. helped contributed. the always look through an over the We not We've quarter, longer it look it, up to XX%. probably way said, is some quarter great deals big alone did which you really go as the

about feel And so certainly good Leasing how grew. our revenue

Operator

from with is Michael question Griffin next Citi. The

Michael Griffin

and you kind these deals back maturity to market of if go the Just Can and expectations some a distress-driven? and sense kind maybe give of you're get more are seeing. are debt what activity us wanted mainly if converging seller buyer and on a in transaction color or the lot of

I see about a you going declining volumes capital then increased tighter conditions. joint release of result be I that you're note think that venture to And if availability in transaction would important debt noted kind would the Greystone the of the lending as activity.

kind you with transaction tightness of markets? expectation the pickup So for how do marry in some seems what a like activity the debt

Michelle MacKay

Okay.

over to this, with then I'll So I'm going and hand to start it Neil.

been that rate help go service get we and to line, having. have cheaper. equal, alleviate know pressure move exactly is other about year-end was we pent-up step all market is mean that debt September first With which optimistic the market us. going a some of Fed really continue debt of across and and And we they've this to be handle terms deals probably In coming believe year-end may fundamentals, There should challenges rate for floating cuts, that are and future week, important to to an continue some one recovery. Fed amount need to positioned we The be where in that. enormous demand waiting, we as help else we especially finish we into

estate what in And And symbolically, November the leasing lastly, risk in means the commercial by because signals are to likely at from that I least better more capital we've some the a for forward which which that sector growth rate for off the cycle. less help supportive restrictive, real more and one think the become the real ahead again, investor days financial slightly importantly, for at rate step cut the is this dry cusp to we signals conditions estate policies commercial powder incremental a markets. and extension, of step mindset anticipate and, that of cuts, economy next it to supportive conditions one most And is move forward seen it is because, in risk sidelines is going on. off December, real these

then, talk Greystone? you little to bit did And want Neil, a about

Neil Johnston

in We as the some But Greystone, GSEs, the happy very we of have policies tightness to in what the seeing that. Certainly September. of change result a in seeing in at Greystone mortgage saw basically and originations space. multifamily in strong we're opportunity about lending in multifamily. talk Greystone month we're lending had that markets. seen a

there And a that's At it's may coming. and be month, so it the not trend. signals that same opportunity X certainly time,

move multifamily of closely. long we're the space So in next certainly, and feel the into it remains about we as run. good watching a year bit area through back We an do key a lumpiness strategic us. year. expect But very we It's of little the for

Michael Griffin

I if really at I of there. out you've about going the your the laid remarks, are side, in as three, to flow, first to sense of you maybe could be but insights balance two sheet end really appreciate three stay really think levels on to you the there. those work you those pivoting cash historical of going But appreciate the the Michelle, of And leverage if additional makes prepared grow terms and know elevated priorities done just relative kind priorities leverage context improving see growth the the to to enterprise? it a the catalyst, kind then, I what's

Michelle MacKay

changing the the just I about to allocating, allocation, not some speak time, way about approaching context decisions. you a that I would investments bit for because more how a you I the don't quite we're just it's context increasing have little and for want we're been more to all how that about way say, we're I anticipate asking here it's capital making Yes. know we're around leverage. give

call, our year to the what with, doing. surgical going we're capital spent precision, that practice continue a allocating I'll we So last

investment for of actual made now our the list the And markets is changed in advisory in I've the the I've allocation our capital holds the And here. come global form criteria changed and future to growth for making And systems our on of past an with investments. and I've on to investments surrounding management eye high talent investments, process, the to not whole. three that's capital I've and what adding pool post-close what changed industry, components going on represents. our the changed

And Second, Band-Aid right continued in them. capital the Services to going making, as to things allocation, our we're us to patching business not seen for for make, growth. fix long-term ensure choices going to be be you've we're

best basic this instilling talking I'm practices, cross-pollinating here: were our see about across very implications practices is And employing systems, can business. great that positive some cash So the already. and labor very rigorous approach, Services flow operating free what blocking tackling you for management

area, execute the third in as great of capital this the I our with growing. And is your as thing know you it of priced here, you the importantly, were year, well, think leverage. cost. we that out our And case Xx leverage which no of about what's starting having this is that and, to But going the focus hit is as And of target the park, our we leverage been cycle that rightsizing accomplish and frankly, every do We we're we foresee virtuous you know year. reducing is which exactly this impact time goal XXX% certainty, what increasing be. a financial reducing

Operator

Kramm [Operator question from is The next with Instructions] UBS. Alex

Alex Kramm

comment just made Services earlier bit, you also upon heard more but correctly. you this little margin, on touched I around if a being the side the on Maybe focused a you

it more And it a get change you bit about think business? maybe just it dynamic? in in that? can pricing? on do you scale? upside you do you Is maybe that talk you that quickly focused So gaining margin little think achieve can a how Is competitive entails? Where can what Is more

Neil Johnston

money, build a lot business a over we EMEA, and Alex. a We've is been on in and contracts. said, at fixed if months, that where we're work. had where have which We've shouldn't X great focused be the business, past price sure, essentially of design we making Yes, It's not question. doing the we've looked very particularly that we

have That related up. EBITDA seen you down, complete. been but Services so is has tell the actually And EMEA, essentially I'll to you work revenue that in

area. one in that So but was starting the growth see you'll to happen Europe,

looked will now once as the the done, very And a feel with work at again contracts said lead in line, we've then work contracts, accretive is pleased businesses, to of Most growth the we within we're really top that really on our profitability and and starting the focus to done. number go on We we've of more our forward. we've and U.S. critical. Services is those now

Alex Kramm

coming Okay. back Great. capital And then maybe allocation. to just

Services remembered I business, think in about business. also I mentioned only think, the M&A talked But Capital just small like advisory markets in you the your I tuck-ins, correctly, remarks, the prepared Michelle. you context if you of

levels? is as that M&A Or M&A? an So leverage at these you generally for said, how particular, do think stay probably also area in you just about

Michelle MacKay

think Yes. particular, now, The advisory But or And It in the in of hunt data door well. doing business also right as is regard and in are markets for the for lot us analytics to in new be always open could on we in particular. for advisory talent a we're M&A. investing with in I services. advisory the Capital

Operator

is from question with Abramowitz Jefferies. The next Peter

Peter Abramowitz

I Neil's to to and kind project on just he side, know bit there. things be little sensitive a I tends from management think delays customers of which some comments, mentioned in confidence macro the the in

that what's delay ease? those about been projects is away just and anything that should customers I there when in ask, So to to causing we to think thematic take want might how

Neil Johnston

nothing really Yes, Peter, there. there's thematic

projects and more seen, starting focused and is executed. just see get the of in pipelines just of some market. forward, canceled dampener build-outs. tide that seen thematic. area, in business. function a on. we've have projects we're we projects feel We function those build confident that a space we're we turning to in have and and office been really But there's put bit of have a essentially, nothing a the on that are We the some of We going It we It a feel just working really subdued the some sort in of that delays is like space, just there, are particularly but is believe,

Peter Abramowitz

And is the of then sort term of in used terms think, Okay. I a function the waterfall recovery. Capital Michelle, you've helpful. markets That's

be acceleration you quarter. So XX% a would already you're in expecting seem to significant if indicating fourth the

further So ago they're should know week of as that about I sort a we we potentially a I as acceleration one of your peers or it into thinking get recovery. X expect XXXX? mentioned gradual guess,

that are how XXXX Capital think you the markets from as ahead? budget sort a year and out context thinking in curious about perspective of you about build just So your

Michelle MacKay

Yes. we often we've as expect about spoken gradual invest recovery. how the I mean recovery. always it about talked things a over in I've we a quite long long-term term, and

So continue XXXX. our by the that of followed cut to rate to base in assumes to relates Capital toward it case is reductions markets gradual back rate end Fed XX as range until around X% December, the rates points they the to November down bring going by basis and

to about process believe But you normalized for all We this going curve CRE. to into positive the foreseeable we're is hover putting yield which the the X.X% that range place, when future, XX-year X% about interest year. happening think also that, is for in over a more talking rate next

Operator

Michelle question-and-answer for closing This like to I our concludes MacKay over to any would conference back the remarks. turn session.

Michelle MacKay

today, participating look to speaking for quarter. everyone, you we you, Thank our in call next with forward and

Operator

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

may You disconnect. now

Cushman & Wakefield (CWK) 4 Nov 242024 Q3 Earnings call transcript