Cushman & Wakefield(CWK) - 2022 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements Q1 2022 saw a significant financial turnaround, with 21% revenue growth leading to net income from a prior-year loss, while assets and liabilities slightly decreased Condensed Consolidated Balance Sheets As of March 31, 2022, total assets and liabilities slightly decreased from year-end 2021, while total equity increased Condensed Consolidated Balance Sheet Highlights (in millions) | Balance Sheet Item | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $611.9 | $770.7 | | Goodwill | $2,084.3 | $2,081.9 | | Total Assets | $7,756.1 | $7,890.4 | | Long-term debt, net | $3,215.9 | $3,220.5 | | Total Liabilities | $6,217.6 | $6,441.8 | | Total Equity | $1,538.5 | $1,448.6 | Condensed Consolidated Statements of Operations Q1 2022 revenue grew 21% to $2.33 billion, leading to a net income of $45.5 million, a significant turnaround from a prior-year loss Q1 Statement of Operations Summary (in millions, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Revenue | $2,331.0 | $1,923.8 | | Operating income (loss) | $135.3 | $(7.2) | | Net income (loss) | $45.5 | $(17.2) | | Diluted earnings (loss) per share | $0.20 | $(0.08) | Condensed Consolidated Statements of Cash Flows Net cash used in Q1 2022 operating activities increased to $158.2 million due to compensation, while investing activities provided $36.3 million, reversing prior-year usage Q1 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(158.2) | $(16.4) | | Net cash provided by (used in) investing activities | $36.3 | $(28.8) | | Net cash used in financing activities | $(35.9) | $(13.6) | | Change in cash, cash equivalents and restricted cash | $(157.8) | $(58.8) | Notes to the Condensed Consolidated Financial Statements Notes detail segment performance, revenue disaggregation, debt, and fair value, highlighting strong growth, a WeWork investment loss, and a credit facility amendment Q1 2022 Revenue by Segment (in millions) | Segment | Q1 2022 Revenue | Q1 2021 Revenue | % Change | | :--- | :--- | :--- | :--- | | Americas | $1,785.3 | $1,424.9 | 25% | | EMEA | $237.7 | $223.9 | 6% | | APAC | $308.0 | $275.0 | 12% | | Total | $2,331.0 | $1,923.8 | 21% | Q1 2022 Revenue by Service Line (in millions) | Service Line | Q1 2022 Revenue | Q1 2021 Revenue | | :--- | :--- | :--- | | Property, facilities and project management | $1,460.2 | $1,350.2 | | Leasing | $459.8 | $294.8 | | Capital markets | $289.8 | $166.8 | | Valuation and other | $121.2 | $112.0 | - In October 2021, the company made a $150.0 million strategic investment in WeWork. During Q1 2022, an unrealized loss of $26.7 million was recognized related to this investment[77][79] - Subsequent to the quarter's end, on April 28, 2022, the company amended its Revolver, increasing its availability to $1.1 billion and extending the maturity to 2027[99] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reported strong Q1 2022 results, with revenue up 21% and Adjusted EBITDA up 115%, driven by brokerage services and broad segment growth, addressing the Russia-Ukraine conflict impact Outlook and Recent Developments The company highlighted strong Q1 2022 performance with significant revenue and profitability growth, particularly in brokerage services, while addressing the disposal of Russian operations and real estate sector resiliency - Revenue increased 21% to $2.3 billion[104] - Net income was $45.5 million, compared to a net loss of $17.2 million in Q1 2021[105] - Adjusted EBITDA increased 115% to $214.4 million[106] - Total liquidity was $1.6 billion at quarter-end[106] - Due to the Russia-Ukraine conflict, the company transferred its Russian operations to a local operator, recording a loss of $13.8 million. Russian operations represented less than 0.5% of total 2021 revenue[112] Results of Operations Revenue grew by $407.2 million (21%) year-over-year, driven by strong brokerage activity, with costs increasing slower, leading to significant operating leverage and a swing to net income Q1 2022 vs Q1 2021 Performance (in millions) | Metric | Q1 2022 | Q1 2021 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $2,331.0 | $1,923.8 | 21% | | Total costs of services | $1,860.5 | $1,589.5 | 17% | | Operating income (loss) | $135.3 | $(7.2) | n.m. | | Net income (loss) | $45.5 | $(17.2) | n.m. | | Adjusted EBITDA | $214.4 | $99.7 | 115% | - Adjusted EBITDA margin expanded by 512 basis points to 12.6% of service line fee revenue, up from 7.5% in Q1 2021, reflecting strong revenue growth and cost management[150] Segment Operations All three geographic segments reported strong year-over-year growth, led by the Americas with 25% revenue and 126% Adjusted EBITDA growth, while EMEA and APAC also saw significant increases Q1 2022 Segment Performance (in millions) | Segment | Revenue | % Change (USD) | Adjusted EBITDA | % Change (USD) | | :--- | :--- | :--- | :--- | :--- | | Americas | $1,785.3 | 25% | $176.1 | 126% | | EMEA | $237.7 | 6% | $16.7 | n.m. | | APAC | $308.0 | 12% | $21.6 | 11% | Liquidity and Capital Resources As of March 31, 2022, the company maintained strong liquidity of $1.6 billion, despite a seasonal $158.2 million cash outflow from operations, primarily for compensation payments - Total liquidity stood at $1.6 billion as of March 31, 2022[182] - The seasonal nature of cash flow resulted in a net use of $158.2 million for operating activities in Q1 2022, an increase from a use of $16.4 million in Q1 2021, driven by higher bonus and commission payments[185] - The company utilized its off-balance sheet Accounts Receivable (A/R) Securitization program, with $80.0 million drawn on the $125.0 million limit as of quarter-end[183] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate volatility on variable-rate debt and foreign exchange risk, managed through derivative financial instruments like swaps and forwards - The principal market risks identified are interest rates on the 2018 First Lien Loan and revolving credit facility[198] - Foreign exchange exposure arises from operations in multiple currencies[198] - The company uses derivative instruments, including interest rate swaps and foreign currency forwards, for risk management purposes, not for speculation[199][202][204] Item 4. Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2022[207] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[208] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company reports no material changes to its legal proceedings since the disclosure in its 2021 Annual Report on Form 10-K - There have been no material changes to legal proceedings as previously disclosed in the 2021 Annual Report on Form 10-K[210] Item 1A. Risk Factors There have been no material changes to the company's risk factors as disclosed in its 2021 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2021 Annual Report on Form 10-K[211] Other Part II Items The company reported no unregistered sales of equity securities, no defaults upon senior securities, and no applicable mine safety disclosures for the period - Item 2 (Unregistered Sales of Equity Securities), Item 3 (Defaults Upon Senior Securities), and Item 4 (Mine Safety Disclosures) were reported as 'None' or 'Not applicable'[212][213][214]