Cushman & Wakefield Reports Revenue Growth for First Quarter 2019

CHICAGO–(BUSINESS WIRE)–Cushman & Wakefield (NYSE: CWK) today reported financial results for the
first quarter ended March 31, 2019:

  • Revenue for the first quarter of 2019 was $1.9 billion, up 8% (10%
    local currencyi) from first quarter 2018. Fee revenue was
    $1.4 billion, up 10% (13% local currency).
  • Net loss for the first quarter of 2019 was $(20.9) million, an
    improvement of $72.0 million over first quarter of 2018 with Net loss
    per share of $(0.10). Adjusted earnings per share was $0.10.
  • Adjusted EBITDA was $88.4 million, up 18% (19% local currency) from
    first quarter 2018. Adjusted EBITDA margin of 6.4% was up 45 bps.

We are off to a good start in 2019 with continued momentum in the first
quarter marked by double-digit growth in Fee revenue and Adjusted
EBITDA,” said Brett White, Executive Chairman & CEO. “In addition, we
are executing our strategy, making significant progress on our
financial, operational and growth objectives. We are on track to
generate full-year Adjusted EBITDA of $685 to $735 millionii,
consistent with our guidance for 2019.

Consolidated Results (unaudited)

       
Three Three
Months Months
Ended Ended % Change
March March % Change in Local
(in millions) 31, 2019   31, 2018   in USD   Currency
Revenue:
Total revenue $ 1,903.0 $ 1,767.7 8 % 10 %
Less: Gross contract costs (531.0 ) (521.8 ) 2 % 5 %
Acquisition accounting adjustments     0.1     n/m   n/m
Total Fee revenue(1) $ 1,372.0     $ 1,246.0     10 %   13 %
Service Lines:
Property, facilities and project management $ 706.8 $ 615.0 15 % 18 %
Leasing 372.9 319.9 17 % 19 %
Capital markets 190.7 214.1 (11 )% (10 )%
Valuation and other 101.6     97.0     5 %   9 %
Total Fee revenue(1) $ 1,372.0     $ 1,246.0     10 %   13 %
 
Costs and expenses:
Cost of services, operating and administrative expenses excluding
gross contract costs
$ 1,320.6 $ 1,247.6 6 % 9 %
Gross contract costs 531.0 521.8 2 % 5 %
Depreciation and amortization 73.5 69.8 5 % 7 %
Restructuring, impairment and related charges 3.9     10.4     (63 )%   (62 )%
Total costs and expenses 1,929.0     1,849.6     4 %   7 %
Operating loss $ (26.0 )   $ (81.9 )   (68 )%   (68 )%
 
Adjusted EBITDA(1) $ 88.4 $ 74.8 18 % 19 %
Adjusted EBITDA margin(1) 6.4 % 6.0 %
 
Net loss $ (20.9 ) $ (92.9 ) (78 )%
Adjusted net income(1) $ 23.3 $ 11.5 103 %
 
Weighted average shares outstanding, basic 216.6 145.3
Weighted average shares outstanding, diluted(2) 224.0 156.2
 
Earnings per share, basic and diluted $ (0.10 ) $ (0.64 )
Adjusted earnings per share, diluted $ 0.10 $ 0.07
 

(1) See the end of this press release for reconciliations of
(i) Fee revenue to revenue; (ii) Fee-based operating expenses to total
costs and expenses; (iii) Adjusted EBITDA to net loss; and (iv) Adjusted
net income to net loss; and for explanations on the calculations of
Adjusted EBITDA margin and Adjusted earnings per share, diluted. See
also the definition of, and a description of the purposes for which our
management uses these non-GAAP measures under the Use of Non-GAAP
Financial Measures section in this press release.

(2) For all periods with GAAP net loss, weighted average
shares outstanding, diluted is used to calculate Adjusted earnings per
share, diluted.

First Quarter Results (unaudited)

Revenue

Revenue was $1.9 billion, an increase of $135.3 million or 8% over first
quarter of 2018. Gross contract costs, primarily in the Property,
facilities and project management service line, increased $9.2 million.
Foreign currency had a $43.9 million or 2%, unfavorable impact on
Revenue.

Fee revenue was $1.4 billion, an increase of $155.9 million or 13% on a
local currency basis over first quarter 2018, reflecting increases
primarily in Property, facilities and project management and Leasing.
Property, facilities and project management Fee revenue increased $108.9
million or 18% on a local currency basis, driven by an Americas increase
of $62.5 million or 16%, on a local currency basis, with the remainder
of the Fee revenue growth primarily in APAC. Leasing Fee revenue
increased $59.4 million or 19%, on a local currency basis, driven by an
Americas increase of $52.5 million or 21%, on a local currency basis,
with the remainder of the Fee revenue growth primarily in EMEA.

Operating expenses

Operating expenses were $1.9 billion, an increase of $79.4 million or
4%. The increase in operating expenses reflected increased costs
associated with revenue growth.

Fee-based operating expenses, excluding Depreciation and amortization,
integration and other costs related to acquisitions and stock-based
compensation, were $1.3 billion, a 12% increase on a local currency
basis. The increase in Fee-based operating expenses reflected higher
cost of services associated with Fee revenue growth.

Interest expense

Net interest expense was $37.2 million, a decrease of $7.2 million,
driven by lower average borrowings during the quarter.

Benefit from income taxes

The net benefit from income taxes was $40.9 million, an increase of $8.9
million. The increase is driven primarily by a change in the mix of
geographical earnings from the prior period and release of valuation
allowances.

Net loss and Adjusted EBITDA

Net loss was $20.9 million, an improvement of $72.0 million, primarily
driven by stronger operating results, lower integration costs and a
higher benefit from income taxes.

Adjusted EBITDA was $88.4 million, an increase of $13.6 million or 19%,
on a local currency basis, driven by the increase in Fee revenue
exceeding the increase in Fee-based operating expenses. Adjusted EBITDA
margin, calculated on a Fee revenue basis, was 6.4%, compared to 6.0% in
the first quarter of 2018, driven by Fee revenue mix and operating
leverage.

Balance Sheet

  • The Company’s outstanding 2018 First Lien debt, net of deferred
    financing fees, was approximately $2.7 billion as of March 31, 2019,
    which net of cash and cash equivalents, resulted in a net debt
    position of approximately $2.2 billion.
  • Liquidity at the end of the first quarter was $1.2 billion, including
    availability on our undrawn revolving credit facility of $810 million
    and cash and cash equivalents of $411.0 million.

i In order to assist our investors and improve comparability
of results, we present the period-over-period changes in certain of our
financial measures, such as Fee revenue and Adjusted EBITDA, in “local”
currency. The local currency change represents the period-over-period
change assuming no movement in foreign exchange rates from the prior
period. We believe that this presentation provides our management and
investors with a better view of comparability and trends in the
underlying operating business.

ii 2019 Outlook: Cushman & Wakefield provides guidance on a
non-GAAP basis, as the Company cannot predict some elements that are
included in reported GAAP results, including the impact of foreign
exchange. Refer to the Use of Non-GAAP Financial Measures section for a
more detailed discussion of non-GAAP financial measures. The Company has
not reconciled the Adjusted EBITDA forward-looking guidance included in
this press release to the most directly comparable GAAP measure because
this cannot be done without unreasonable effort due to the variability
and low visibility with respect to costs related to integration and
other costs related to acquisitions and share-based compensation, which
are potential adjustments to future earnings. We expect the variability
of these items to have a potentially unpredictable, and a potentially
significant, impact on our future GAAP financial results.

Conference Call

The Company’s First Quarter 2019 Earnings Conference Call will be held
today, May 7, at 5:00 p.m. Eastern Time. A webcast, along with an
associated slide presentation, will be accessible through the Investor
Relations section of the Company’s website at http://ir.cushmanwakefield.com.

The direct dial-in number for the conference call is 877-683-2081 for
U.S. callers and 647-689-5424 for international callers. The Conference
ID is 1867538. A replay of the call will be available approximately two
hours after the conference call by accessing http://ir.cushmanwakefield.com.
A transcript of the call will be available on the Company’s Investor
Relations website at http://ir.cushmanwakefield.com.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services
firm that delivers exceptional value for real estate occupiers and
owners. Cushman & Wakefield is among the largest real estate services
firms with approximately 51,000 employees in 400 offices and 70
countries. In 2018, the firm had revenue of $8.2 billion across core
services of property, facilities and project management, leasing,
capital markets, valuation and other services. To learn more, visit www.cushmanwakefield.com
or follow @CushWake
on Twitter.

Cautionary Note on Forward-Looking Statements

All statements in this release other than historical facts are
forward-looking statements, which rely on a number of estimates,
projections and assumptions concerning future events. Such statements
are also subject to a number of uncertainties and factors outside
Cushman & Wakefield’s control. Such factors include, but are not limited
to, uncertainty regarding and changes in global economic or market
conditions and changes in government policies, laws, regulations and
practices. Should any Cushman & Wakefield estimates, projections and
assumptions or these other uncertainties and factors materialize in ways
that Cushman & Wakefield did not expect, there is no guarantee of future
performance and the actual results could differ materially from the
forward-looking statements in this press release, including the
possibility that recipients may lose a material portion of the amounts
invested. While Cushman & Wakefield believes the assumptions underlying
these forward-looking statements are reasonable under current
circumstances, recipients should bear in mind that such assumptions are
inherently uncertain and subjective and that past or projected
performance is not necessarily indicative of future results. No
representation or warranty, express or implied, is made as to the
accuracy or completeness of the information contained in this press
release, and nothing shall be relied upon as a promise or representation
as to the performance of any investment. You are cautioned not to place
undue reliance on such forward-looking statements or other information
in this press release and should rely on your own assessment of an
investment or a transaction. Any estimates or projections as to events
that may occur in the future are based upon the best and current
judgment of Cushman & Wakefield as actual results may vary from the
projections and such variations may be material. Opinions expressed are
current opinions as of the date of this release.

 

Cushman & Wakefield plc

Condensed Consolidated Statement of Operations

 
Three Months Ended March 31,
(in millions, except per share data) (unaudited)   2019   2018
Revenue $ 1,903.0   $ 1,767.7
Costs and expenses:
Cost of services (exclusive of depreciation and amortization) 1,564.8 1,473.8
Operating, administrative and other 286.8 295.6
Depreciation and amortization 73.5 69.8
Restructuring, impairment and related charges 3.9     10.4  
Total costs and expenses 1,929.0     1,849.6  
Operating loss (26.0 ) (81.9 )
Interest expense, net of interest income (37.2 ) (44.4 )
Earnings from equity method investments 0.8 0.4
Other income, net 0.6     1.0  
Loss before income taxes (61.8 )   (124.9 )
Benefit from income taxes (40.9 )   (32.0 )
Net loss $ (20.9 )   $ (92.9 )
 
Basic and diluted loss per share:
Net loss per share attributable to common shareholders, basic and
diluted
$ (0.10 ) $ (0.64 )
Weighted average shares outstanding, basic and diluted 216.6 145.3
 
 

Cushman & Wakefield plc

Consolidated Balance Sheets

 
As of
(in millions, except per share data)  

March 31, 2019
(unaudited)

  December 31, 2018
Assets  
Current assets:
Cash and cash equivalents $ 411.0 $ 895.3

Trade and other receivables, net of allowance balance of $51.2
million and $49.5 million, as of March 31, 2019 and December 31,
2018, respectively

1,370.9 1,463.5
Income tax receivable 38.0 41.1
Prepaid expenses and other current assets 312.2     343.4  
Total current assets 2,132.1 2,743.3
Property and equipment, net 306.9 313.8
Goodwill 1,946.9 1,778.5
Intangible assets, net 1,193.1 1,128.2
Equity method investments 9.3 8.7
Deferred tax assets 84.7 84.0
Non-current operating lease assets 531.6
Other non-current assets 502.9     489.5  
Total assets $ 6,707.5     $ 6,546.0  
Liabilities and Shareholders’ Equity
Current liabilities:
Short-term borrowings and current portion of long-term debt $ 38.7 $ 39.9
Accounts payable and accrued expenses 982.2 1,047.7
Accrued compensation 580.0 817.9
Income tax payable 60.1 43.2
Other current liabilities 201.0     90.0  
Total current liabilities 1,862.0 2,038.7
Long-term debt 2,639.1 2,644.2
Deferred tax liabilities 77.3 136.4
Non-current operating lease liabilities 492.9
Other non-current liabilities 305.8     366.6  
Total liabilities 5,377.1     5,185.9  
Commitments and contingencies (See Note 11 to financial statements)
Shareholders’ Equity:
Ordinary shares, nominal value $0.10 per share, 216.7 and 216.6
issued and outstanding at March 31, 2019 and December 31, 2018
21.7 21.7
Additional paid-in capital 2,801.4 2,791.2
Accumulated deficit (1,318.1 ) (1,298.4 )
Accumulated other comprehensive loss (174.6 )   (154.4 )
Total equity 1,330.4     1,360.1  
Total liabilities and shareholders’ equity $ 6,707.5     $ 6,546.0  
 

Cushman & Wakefield plc

Consolidated Statements of Cash Flows

 
Three Months Ended
(in millions) (unaudited)   March 31, 2019   March 31, 2018
Cash flows from operating activities  
Net loss $ (20.9 ) $ (92.9 )
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization 73.5 69.8
Impairment charges 3.9
Unrealized foreign exchange loss 1.4
Stock-based compensation 14.5 13.1
Lease Amortization 27.8
Amortization of debt issuance costs 1.0 3.4
Change in deferred taxes (76.5 ) (54.0 )
Bad debt expense 6.0 5.5
Other non-cash operating activities 0.2 1.3
Changes in assets and liabilities:
Trade and other receivables 128.5 31.6
Income taxes payable 21.8 10.2
Prepaid expenses and other current assets 7.8 (37.3 )
Other non-current assets (5.3 ) 21.2
Accounts payable and accrued expenses (116.0 ) (0.7 )
Accrued compensation (243.9 ) (146.7 )
Other current and non-current liabilities (37.3 )   3.5  
Net cash used in operating activities (214.9 )   (170.6 )
Cash flows from investing activities
Payment for property and equipment (13.7 ) (20.6 )
Proceeds from sale of property, plant and equipment 0.2
Acquisitions of businesses, net of cash acquired (262.2 )
Other investing activities, net     0.2  
Net cash used in investing activities (275.9 )   (20.2 )
Cash flows from financing activities
Net proceeds from issuance of shares 6.4
Shares repurchased for payment of employee taxes on stock awards (3.1 ) (2.1 )
Payment of contingent consideration (2.5 )
Proceeds from long-term borrowings 250.0
Repayment of borrowings (6.8 ) (26.6 )
Debt issuance costs (1.8 )
Payment of finance lease liabilities (2.8 ) (0.9 )
Other financing activities, net 0.7     (1.5 )
Net cash (used in) provided by financing activities (12.0 )   221.0  
 
Change in cash, cash equivalents and restricted cash (502.8 ) 30.2
Cash, cash equivalents and restricted cash, beginning of the period 965.4 467.9
Effects of exchange rate fluctuations on cash, cash equivalents and
restricted cash
0.7     5.2  
Cash, cash equivalents and restricted cash, end of the period $ 463.3     $ 503.3  
 

Consolidated Results (unaudited)

       
Three Three
Months Months
Ended Ended % Change
March March % Change in Local
(in millions) 31, 2019   31, 2018   in USD   Currency
Revenue:
Total revenue $ 1,903.0 $ 1,767.7 8 % 10 %
Less: Gross contract costs (531.0 ) (521.8 ) 2 % 5 %
Acquisition accounting adjustments     0.1     n/m   n/m
Total Fee revenue(1) $ 1,372.0     $ 1,246.0     10 %   13 %
Service Lines:
Property, facilities and project management $ 706.8 $ 615.0 15 % 18 %
Leasing 372.9 319.9 17 % 19 %
Capital markets 190.7 214.1 (11 )% (10 )%
Valuation and other 101.6     97.0     5 %   9 %
Total Fee revenue(1) $ 1,372.0     $ 1,246.0     10 %   13 %
Costs and expenses:
Cost of services, operating and administrative expenses excluding
gross contract costs
$ 1,320.6 $ 1,247.6 6 % 9 %
Gross contract costs 531.0 521.8 2 % 5 %
Depreciation and amortization 73.5 69.8 5 % 7 %
Restructuring, impairment and related charges 3.9     10.4     (63 )%   (62 )%
Total costs and expenses 1,929.0     1,849.6     4 %   7 %
Operating loss $ (26.0 )   $ (81.9 )   (68 )%   (68 )%
 
Adjusted EBITDA(1) $ 88.4 $ 74.8 18 % 19 %
Adjusted EBITDA margin(1) 6.4 % 6.0 %
 
Net loss $ (20.9 ) $ (92.9 ) (78 )%
Adjusted net income(1) $ 23.3 $ 11.5 103 %
 
Weighted average shares outstanding, basic 216.6 145.3
Weighted average shares outstanding, diluted(2) 224.0 156.2
 
Loss per share, basic and diluted $ (0.10 ) $ (0.64 )
Adjusted earnings per share, diluted $ 0.10 $ 0.07

(1) See the end of this press release for reconciliations of
(i) Fee revenue to revenue; (ii) Fee-based operating expenses to total
costs and expenses; (iii) Adjusted EBITDA to net loss; and (iv) Adjusted
net income to net loss; and for explanations on the calculations of
Adjusted EBITDA margin and Adjusted earnings per share, diluted. See
also the definition of, and a description of the purposes for which our
management uses these non-GAAP measures under the Use of Non-GAAP
Financial Measures section in this press release.

(2) For all periods with a GAAP net loss, weighted average
shares outstanding, diluted is used to calculate Adjusted earnings per
share, diluted.

Segment Results

The following tables summarize our results of operations for our
operating segments for the three months ended March 31, 2019 and 2018.

Corporate expenses are allocated to the segments based upon Fee revenue
of each segment. Gross contract costs are excluded from operating
expenses in determining “Fee-based operating expenses”. Adjusted EBITDA
is the profitability metric reported to the chief operating decision
maker for purposes of making decisions about allocation of resources to
each segment and assessing performance of each segment. Adjusted EBITDA
excludes Depreciation and amortization, interest expense, net of
interest income, income taxes, as well as integration and other costs
related to acquisitions, expenses related to the Cassidy Turley deferred
payment obligation, stock-based compensation for plans enacted before
the Company’s initial public offering and other charges.

Americas Results

       
Three Three
Months Months
Ended Ended % Change
March March % Change in Local
(in millions) (unaudited)   31, 2019   31, 2018   in USD   Currency
Total revenue $ 1,347.6 $ 1,206.2 12 % 12 %
Less: Gross contract costs (410.5 ) (356.3 ) 15 % 15 %
Acquisition accounting adjustments     0.1     n/m   n/m
Total Fee revenue $ 937.1     $ 850.0     10 %   11 %
 
Service lines:
Property, facilities and project management $ 463.0 $ 404.2 15 % 16 %
Leasing 297.3 246.0 21 % 21 %
Capital markets 140.4 163.1 (14 )% (14 )%
Valuation and other 36.4     36.7     (1 )%   %
Total Fee revenue $ 937.1     $ 850.0     10 %   11 %
 
Segment operating expenses $ 1,277.3 $ 1,143.9 12 % 12 %
Less: Gross contract costs (410.5 )   (356.3 )   15 %   15 %
Total Fee-based operating expenses $ 866.8     $ 787.6     10 %   11 %
 
Adjusted EBITDA $ 70.3 $ 62.5 12 % 13 %
Adjusted EBITDA Margin 7.5 % 7.4 %
 

EMEA Results

       
Three Three
Months Months
Ended Ended % Change
March March % Change in Local
(in millions) (unaudited)   31, 2019   31, 2018   in USD   Currency
Total revenue $ 202.6 $ 209.2 (3 )% 5 %
Less: Gross contract costs (18.8 )   (45.9 )   (59 )%   (56 )%
Total Fee revenue $ 183.8     $ 163.3     13 %   22 %
 
Service lines:
Property, facilities and project management $ 69.8 $ 54.6 28 % 38 %
Leasing 48.8 47.9 2 % 11 %
Capital markets 26.4 23.9 10 % 19 %
Valuation and other 38.8     36.9     5 %   14 %
Total Fee revenue $ 183.8     $ 163.3     13 %   22 %
 
Segment operating expenses $ 204.2 $ 219.2 (7 )% 1 %
Less: Gross contract costs (18.8 )   (45.9 )   (59 )%   (56 )%
Total Fee-based operating expenses $ 185.4     $ 173.3     7 %   15 %
 
Adjusted EBITDA $ (0.2 ) $ (8.6 )

n/m

n/m

Adjusted EBITDA Margin (0.1 )% (5.3 )%
 

APAC Results

       
Three Three
Months Months
Ended Ended % Change
March March % Change in Local
(in millions) (unaudited)   31, 2019   31, 2018   in USD   Currency
Total revenue $ 352.8 $ 352.3 0 % 7 %
Less: Gross contract costs (101.7 )   (119.6 )   (15 )%   (7 )%
Total Fee revenue $ 251.1     $ 232.7     8 %   14 %
 
Service lines:
Property, facilities and project management $ 174.0 $ 156.2 11 % 19 %
Leasing 26.8 26.0 3 % 10 %
Capital markets 23.9 27.1 (12 )% (11 )%
Valuation and other 26.4     23.4     13 %   18 %
Total Fee revenue $ 251.1     $ 232.7     8 %   14 %
 
Segment operating expenses $ 334.5 $ 331.3 1 % 8 %
Less: Gross contract costs (101.7 )   (119.6 )   (15 )%   (7 )%
Total Fee-based operating expenses $ 232.8     $ 211.7     10 %   16 %
 
Adjusted EBITDA $ 18.3 $ 20.9 (12 )% (9 )%
Adjusted EBITDA Margin 7.3 % 9.0 %
 

Cushman & Wakefield plc

Use of Non-GAAP Financial Measures

The following measures are considered “non-GAAP financial measures”
under SEC guidelines:

i. Fee revenue and Fee-based operating expenses;

ii. Adjusted earnings before interest, taxes, Depreciation and
amortization (“Adjusted EBITDA”) and Adjusted EBITDA margin;

iii. Adjusted net income and Adjusted earnings per share; and

iv. Local currency.

Our management principally uses these non-GAAP financial measures to
evaluate operating performance, develop budgets and forecasts, improve
comparability of results and assist our investors in analyzing the
underlying performance of our business. These measures are not
recognized measurements under GAAP. When analyzing our operating
results, investors should use them in addition to, but not as an
alternative for, the most directly comparable financial results
calculated and presented in accordance with GAAP. Because the Company’s
calculation of these non-GAAP financial measures may differ from other
companies, our presentation of these measures may not be comparable to
similarly titled measures of other companies.

The Company believes that these measures provide a more complete
understanding of ongoing operations, enhance comparability of current
results to prior periods and may be useful for investors to analyze our
financial performance. The measures eliminate the impact of certain
items that may obscure trends in the underlying performance of our
business. The Company believes that they are useful to investors, for
the additional purposes described below.

Fee revenue: The Company believes that
investors may find this measure useful to analyze the financial
performance of our Property, facilities and project management service
line and our business generally. Fee revenue is GAAP revenue excluding
costs reimbursable by clients which have substantially no margin, and as
such provides greater visibility into the underlying performance of our
business.

Additionally, pursuant to business combination accounting rules, certain
fees that may have been deferred by the acquiree may be recorded as a
receivable on the acquisition date by the Company. Such fees are
included in Fee revenue as acquisition accounting adjustments based on
when the acquiree would have recognized revenue in the absence of being
acquired by the Company.

Fee-based operating expenses: Consistent
with GAAP, reimbursed costs for certain customer contracts are presented
on a gross basis (“gross contract costs”) in both revenue and operating
expenses. As described above, gross contract costs are excluded from
revenue in determining “Fee revenue.

Contacts

INVESTOR RELATIONS
Bill Knightly
Investor
Relations
+1 312 338 7860
IR@cushwake.com

MEDIA
CONTACT

Brad Kreiger
Corporate Communications
+1
312 424 8010
brad.kreiger@cushwake.com

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