Cushman & Wakefield(CWK) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter fee revenue was $1.6 billion, a decline of 14$146 million, down 44% compared to the prior year, with an adjusted EBITDA margin of 8.9%, showing improvement from the first quarter margin of 4% [55][63] - Free cash flow for the second quarter was an outflow of $27 million, an improvement from an outflow of$100 million in the same period last year [63] Business Line Data and Key Metrics Changes - In the Americas, brokerage declined by 32% year-over-year, partially offset by a 4% growth in property management and facilities management (PM/FM) [4] - EMEA experienced a similar decline in brokerage as the Americas, while APAC reported flat brokerage trends with improvements in leasing, particularly in Australia [4] - PM/FM revenue was up 3%, driven by strength in property management and facilities services, while valuation and other services declined by 13% [55] Market Data and Key Metrics Changes - The decline in brokerage activity was attributed to a higher interest rate environment and macroeconomic headwinds affecting most asset types [4] - The company anticipates a 20% revenue decline in brokerage for the full year, with low to mid-single digit revenue growth expected in PM/FM [29][67] Company Strategy and Development Direction - The company is focusing on a holistic review of operations and strategic direction while maintaining a strong financial position [27][54] - A capital allocation framework is being updated to ensure business resiliency and evaluate returns on investments across business lines [3] - The company announced an additional $40 million in cost-cutting measures, building upon a previously announced$90 million program, aiming for total savings of $130 million for the year [84][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to drive sustainable improvements and capitalize on long-term opportunities despite current market challenges [64] - The outlook remains cautious, with no significant recovery expected in the fourth quarter, although sequential improvement is anticipated as the year progresses [100] - Management noted that the health of the balance sheet and liquidity profile will remain a top priority as they refine their strategy [62] Other Important Information - The company has a strong liquidity position with$1.6 billion available, including $502 million in cash and$1.1 billion from a revolving credit facility [63] - The adjusted earnings per share for the quarter was $0.22, a decrease of$0.41 compared to the prior year [85] Q&A Session Summary Question: What is the outlook for free cash flow conversion? - Management indicated that they aim for a free cash flow conversion rate around 30% and are focused on improving cash flow through working capital management [32] Question: Can you elaborate on the $11 million servicing liability fee related to account receivable securitization? - The CFO explained that the account receivable securitization facility provides$200 million to manage working capital, renewing every couple of years [51] Question: How do you see the brokerage market recovering? - Management believes there will be a thawing of capital markets late this year into early next year, with expectations for a recovery in transaction volumes [71] Question: What are the key areas for potential growth? - Management is evaluating each business line for growth opportunities and is focused on retaining talent that will contribute to future growth [72][101] Question: How do cost cuts impact margin guidance? - The cost-cutting measures are expected to contribute positively to margins, with $130 million in savings anticipated to enhance efficiency and margins as brokerage recovers [102]