Cushman & Wakefield plc

Welcome to the Cushman and Wakefield fourth quarter 2020 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number two. It is now my pleasure to introduce Len Texter, head of investor relations and global controller for Cushman and Wakefield. Mr. Texter, you may begin the conference.

Thank you and welcome again to Cushman & Wakefield's fourth 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 will 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 currencies. For those of you following along with our presentation, we began on page five. And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White. Brett.

Thank you, Len, and thank you to everyone joining us today. Before I start with a brief review of our fourth quarter performance, including some color by region and service line, I wanted to let you know we have again invited Kevin Thorpe, our Chief Economist, to join us today to provide some commentary on the recovery, and more specifically, office. Following Kevin's comments, Duncan will provide additional detail on our financial results for the quarter and the full year. First, I want to thank our team of Cushman and Wakefield professionals around the world. It goes without saying that 2020 was incredibly challenging, and our employees' perseverance, creativity, and service to our clients continue to go above and beyond. From those who have continued to support frontline operations through the pandemic to those delivering new and unprecedented solutions to our clients, I continue to be extremely proud of how our people have risen to the occasion. Second, as previously announced, our Chief Financial Officer, Duncan Palmer, will be retiring as of February 28th. Duncan is a first-class CFO. He's been a terrific partner to me, and has added significant value to Cushman and Wakefield, and I can't thank him enough for his work and friendship over the past six years. From the merger to numerous acquisitions to a very successful IPO, a global pandemic, and everything in between, he has excelled, and we wish Duncan all the best in his next chapter. Neil Johnston, our incoming chief financial officer, has an impressive pedigree as well, and we are lucky to have him and look forward to him becoming CFO on February 28th. Neil brings 30 years of finance and executive leadership experience, having previously served as the CFO of Presidio and Cox Automotive. Neil is looking forward to meeting our investors and analysts in the coming months, and we look forward to him joining us on our first quarter earnings call. And with that, let me turn to our results. Richmond and Wakefield reported fourth quarter consolidated fee revenue of $1.6 billion and adjusted EBITDA of $198 million. Overall, we were encouraged by the performance across our portfolio, including brokerage, where revenue exceeded expectations, particularly in America's capital markets. Additionally, we delivered significant cost savings in the quarter, from the decisive cost management actions taken earlier in the year, as well as our continued tight management of discretionary costs. For the full year, we reported fee revenue of $5.5 billion and adjusted EBITDA of $504 million. The impact of leasing and capital markets revenue declines of 34% and 26%, respectively, were partially offset by the continuing stability of our PMFF service lines and over $300 million of cost savings realized in-year in 2020. For the year, our decremental margins were 24%, which was consistent with our guidance. Duncan will provide additional detail on our results for the quarter and full year. I would summarize our fourth quarter results as a balance of encouraging signals on business activity, especially in brokerage, and validation of our commitment to operational excellence. We have executed very well in a very fluid and uncertain environment. With that, let me provide an overview of the market and what we saw across our service lines in the fourth quarter. As expected, our PMFM service lines were a continuing source of stability this year. These contractual fee-based revenue streams represent just over half of our total portfolio this year. Throughout the pandemic, our teams in these businesses have been directly supporting our clients by keeping essential buildings open, reconfiguring offices and retail outlets for social distancing, providing enhanced cleaning and specific facility services to ensure buildings are safe for tenants. In addition, our global occupier services business continue to win new assignments and renew existing client engagements for outsourcing services, as large occupiers continue to focus on operational efficiency through the down cycle, including recent wins or renewals with Citibank, Digital Realty, and Sun Life Financial, just to name a few. On balance, we expect to continue to benefit from these trends, as Cushman & Wakefield is one of the three large firms that provide comprehensive and scaled outsourcing solutions on a global basis. As mentioned, brokerage activity was ahead of what we expected for the quarter, as leasing and capital markets were down 37% and 14% respectively. More specifically, we saw capital markets in Americas decline just 3% versus the fourth quarter of 2019. Capital markets revenue was driven by a couple of factors. First, there remains a significant amount of capital that has been raised for commercial real estate investment sitting on the sidelines. Transaction velocity that had been lower at peak pricing has accelerated as sales prices and resulting buyer return requirements have narrowed over the year in a very low interest rate environment. We believe that sellers were more active in anticipation of potential changes to tax rates with the new U.S. administration. In leasing, we continue to see positive momentum for industrial warehouse and data center space, which was already performing well. As we have discussed, near-term office fundamentals remain less clear as businesses continue to assess space requirements, as vaccinations become more abundant, and the recovery advances. As you will hear from Kevin in a minute, we believe, and as the data shows, the structural impacts of work-from-home trends will likely be offset by economic growth and office-using job growth, which will lead to a full recovery in office over time. I regularly hear from other CEOs on the significance of the office to their organizations. Kevin will highlight some recent data that echoes these sentiments and more specifically points out the importance of the office for collaboration, team building, and culture. Turning to the balance sheet, our capitalization remains strong with cash at more than $1.1 billion and liquidity totaling $2.1 billion. Going forward, this strong financial position gives us tremendous flexibility and positions us to take advantage of growth opportunities, including infill, M&A, or larger opportunities should they arise. Going forward, The outlook for 2021 contemplates continuing uncertainty in the near-term environment, and in particular, a challenging first half. We anticipate continued stability and growth in PMFM and some level of recovery in year-over-year brokerage revenue, particularly in the second half of the year. We remain very focused on operational excellence and plan to deliver additional permanent cost reductions in 2021, building on our strong execution in 2020. These permanent cost reductions will largely replace many of the temporary cost reductions we realized in 2020 and should, in the long term, enable a return to 2019 margins even before the recovery in brokerage revenue is complete. As we said on the third quarter call, we do expect an increase in operating costs in the first half of 2021 driven by a return to a more normal year of bonus compensation for non-fee earner staff. Despite the ongoing near-term challenges faced in the industry, we believe the consolidation of share to firms like Cushman and Wakefield that have the capability, resources, and scale to solve the challenges our clients face each day will likely continue to increase. In summary, I continue to be very proud of our team and our execution throughout this past challenging year. Cushman & Wakefield's holistic expertise, global market intelligence, and thought leadership have never been more important to our clients. With that, I'd like to turn the call to Kevin to provide a few comments on the recovery and more, specifically office. Kevin?