Cushman & Wakefield plc

Greetings. Welcome to the Cushman and Wakefield third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Len Texter. You may begin.

Thank you, and welcome again to Cushman and Wakefield's third quarter 2020 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our investor relations website at ir.cushmanwakefield.com. Please turn to the page labeled Forward-Looking Statements. Today's presentation contains forward-looking statements based on our current forecast and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. Also, please note that throughout the presentation, comparison and growth rates are to comparable periods of 2019 and are in local currency. For those of you following along with our presentation, we'll begin on page five. And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White. Brett?

Thanks, Len, and thank you to everyone for joining our call today. Richmond and Wakefield reported third quarter consolidated fee revenue of $1.3 billion and adjusted EBITDA of $117 million. Overall, we are encouraged by the performance across our business and by brokerage revenue trends, which showed recovery against the trough we experienced in the second quarter. Additionally, we continue to execute well on managing our costs and capturing market opportunities while driving growth by leveraging our leading full-service platform. Both our revenue and EBITDA performance exceeded our expectations. Since the beginning of this pandemic, Cushman & Wakefield has been at the very forefront of thought leadership in our industry. In early April, we launched our Six Feet Office prototype and our Recovery Readiness Guide to demonstrate how buildings could operate be operated safely, including many of the building hygiene protocols now considered commonplace. Since then, we've published research on the future of the workplace, as well as a holistic review of the office market, including forecasts on recovery timing and an exploration of the continued evolution of the role of the office-based workplace. In addition to our industry-leading expertise, Cushman & Wakefield has a unique advantage when it comes to the increasingly important role that proper building hygiene plays in ensuring the safety of tenants. Our property management and facility management capabilities and specific ability to self-perform facility services gives Cushman & Wakefield a distinct differentiator in the marketplace. As a result, we continue to see solid growth in our CNW services business as our market-leading commercial cleaning platform is being used by organizations to reopen and maintain safe workplaces, and by real estate owners who see building hygiene as a critical factor in attracting tenants back to their buildings while giving workers confidence and peace of mind. With that, let me start with an overview of our results. Consistent with the lower demand for transactional services across our industry due to the pandemic and resulting downturn, our consolidated revenues were down 15% compared to last year. As expected, PMFM revenues, which represent more than half of our overall mix annually, were stable and in fact increased by 3% over last year. As you know, these are contractual fee-based assignments tied to essential functions for operating commercial real estate assets. It is the stability of this business that makes PMFM a strategically important part of our overall business in challenging environments like this. As I mentioned a moment ago, the pandemic continues to create opportunities for growth across these service lines. For example, In addition to our standard and comprehensive suite of services delivered in normal course, we are actively engaging with clients to provide critical services for reopening strategies, ranging from guides to educate leaders and employees on return to the office expectations and protocols, partnering to acquire PPE, customizing floor plans for social distancing and signage placement using our own safe six principles, procuring and installing signage, plexiglass shields, and sanitizer stations in office, retail, and industrial environments, and partnering with clients' response teams on positive case reporting and contact tracing. Our leasing and capital market service lines were down 32% and 35% respectively compared to last year. However, Important to note that the decline compares favorably to the trough experience in the second quarter where year-over-year declines were 45% and 52% respectively. As we think about the outlook for brokerage revenue, we expect the fourth quarter year-over-year declines to be higher than the third quarter due to 2019 comparisons. While the overlying trend across the second half of 2020 is expected to be better than what we expected at the onset of the pandemic, it's worth noting in the comparisons from 2019 to 2020 that the third quarter 2019 brokerage revenue was down year over year, while fourth quarter 2019 brokerage revenue grew year over year. We generated $117 million of adjusted EBITDA for the quarter, a 31% decline, which principally reflects the impact of lower brokerage activity. Partially offsetting the brokerage revenue decline was the stability of our PMFM service lines and our continued excellent execution in cost management. Decremental margins were 18% on a year-to-date basis, consistent with our expectation of mid-20s for the full year. Overall, We are on track to realizing cost savings of over $300 million in 2020, which represents $400 million on an annualized basis. Turning to the balance sheet, our capitalization remains quite strong with cash of more than $900 million and liquidity totaling $1.9 billion. Going forward, the strong financial position has given us tremendous flexibility and prepared us for a variety of economic scenarios that will allow us to take advantage of growth opportunities through infill or other M&A opportunities and other investments that might arise. Looking ahead, we're developing our operating plans for 2021 right now during a very uncertain environment, but are targeting plans that increase revenue and EBITDA year over year. Expect our strong focus on cost reduction to continue. We have identified concrete plans for further permanent cost reductions to add to those we executed before COVID. These permanent cost reductions will replace many of the temporary cost reductions we put in place earlier in 2020 and will enable sustainable improvement to our long-term margin as markets recover. However, we do expect to see an increase in operating costs overall in 2021, driven by a return to a more normal level spending on items like variable bonus compensation as compared to 2020. And Duncan will cover that in a bit more detail later. In summary, I continue to be very proud of our team and our execution throughout this challenging year. Fishman & Wakefield's holistic expertise, global market intelligence, and thought leadership have never been more important to our clients. While we see a challenging year ahead for commercial real estate, we also believe the pandemic will likely accelerate the consolidation of market share to firms like Cushman and Wakefield that have the capability, resources, and scale to solve the challenges our clients face each and every day. And with that, I'll turn the call over to Duncan.