Cushman & Wakefield(CWK) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Fee revenue for Q3 2024 increased by 3% year-over-year, with adjusted EBITDA of $143 million declining by 5$0.23, an increase of $0.02 from the previous year, benefiting from interest and tax savings [11] - Year-to-date adjusted EBITDA of$360 million is up 1% compared to last year [11] Business Line Data and Key Metrics Changes - Leasing revenue grew by 13% in Q3, marking the fourth consecutive quarter of growth, with Americas Leasing up 16% and APAC Leasing up 13% [11][12] - Capital Markets revenue in the Americas increased by 2%, marking the first growth in nine quarters, while EMEA Capital Markets revenue declined by 5% [12] - Services revenue grew by 1% excluding the impact of divestiture, with APAC Services revenue increasing by 6% [13] Market Data and Key Metrics Changes - The Fed rate cut in September has revitalized Capital Markets, contributing to increased optimism among buyers and sellers [8] - EMEA Capital Markets revenue has shown a year-to-date growth of 3%, indicating gradual improvement in fundamentals [12] - APAC Capital Markets revenue declined by 44% due to deal timing, but strong pipelines are expected to support a rebound in Q4 [12] Company Strategy and Development Direction - The company is focusing on deleveraging and strategic investments in leasing, aiming to capitalize on growth opportunities [7][9] - Future capital allocation will prioritize funding brokerage business, re-accelerating Services revenue, and opportunistic deleveraging [21] - The company is committed to improving operational efficiencies and enhancing global platform offerings through targeted investments [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in Capital Markets, anticipating further growth driven by Fed rate cuts and improved financial conditions [39][54] - The company expects to finish the year within the 30% to 40% free cash flow to EBITDA conversion target, translating to approximately 80% free cash flow to adjusted net income conversion [16] - Management highlighted the importance of maintaining margins while investing in growth opportunities as the brokerage business recovers [30] Other Important Information - The company fully extinguished its $200 million in 2025 debt maturities ahead of schedule, solidifying its balance sheet [8][17] - Free cash flow for Q3 was$187 million, an increase from $174 million in the same quarter last year, with year-to-date free cash flow improving by$146 million [14][17] Q&A Session All Questions and Answers Question: Clarification on 20% growth for Capital Markets in Q4 - The 20% growth for Capital Markets in Q4 is year-over-year growth [22] Question: Confidence in returning to mid-single digit organic growth in Services - Management remains confident in re-accelerating growth, particularly in facilities management and global occupied services [23][24] Question: Insights on Capital Markets growth drivers - The growth in Capital Markets is supported by a strong pipeline and improving market conditions, with expectations for a gradual recovery [26][28] Question: Commentary on margins and their impact - Management is focused on protecting margins while also investing in the business to prepare for growth [29][30] Question: Update on project management delays - Delays in project management are not thematic but rather a function of a subdued market, with expectations for improvement [51]