Cushman & Wakefield plc

Welcome to Cushman and Wakefield's second quarter 2021 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'd like to ask a question during this time, simply press star or by the number 1 on your telephone keypad. If you'd like to withdraw your question, please press star then 2. It is now my pleasure to introduce Len Texter, Head of Investor Relations and Global Controller for Cushman & Wakefield. Mr. Texter, you may begin the conference.

Thank you, and welcome again to Cushman & Wakefield's second quarter 2021 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, definitions of non-GAAP financial measures, and other related information 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 2020 and are in local currency. For those of you following along with the 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.

Thank you, Len, and thank you to everyone joining us today. Before we speak to the quarter, I'd like to start by again thanking our team of incredibly talented Cushman and Wakefield professionals around the globe. Your hard work over the past year continues to pay off as we've seen more and more people return to the office. Our clients benefit every day from your expertise, and we are proud to see those results as we report in another very strong quarter for Cushman and Wakefield. We are very pleased with the continued momentum experience in the second quarter as consolidated fee revenue of $1.6 billion improved 34% compared to prior year. While this quarter's year-over-year comparison is against the trough experienced a year ago, we are very encouraged to see our transactional brokerage business rebound so quickly in the first half of 2021. Our second quarter brokerage revenue, including our leasing, and capital markets businesses was up 89% compared to a year ago and returned to pre-COVID levels of 2019. I'll provide more detail on the drivers of this activity, but we believe the faster than expected recovery we've experienced through the first half of the year in capital markets and non-office leasing is sustainable. Additionally, Our property management, facility management, and valuation segments continue to perform well, with fee revenue growing 7% and 16%, respectively, for the quarter. Our recurring revenues have continued to be a source of strength and resiliency throughout the pandemic, as both investors and occupiers have continued to turn to us for advice and services. For example, Our asset services business in the Americas performed well throughout the pandemic, and it's growing double digits through the first half of 2021, as investors continue to rely on our leadership, insight, and comprehensive offering of services. In the second quarter, we reported $220 million of adjusted EBITDA on the already mentioned $1.6 billion of fee revenue, both of which are a second quarter record for the firm. and represents an adjusted EBITDA margin of 13.5%. This improvement of adjusted EBITDA up 76% and margin expansion of 335 basis points year-over-year reflects the impact of stronger brokerage activity, savings generated from permanent cost actions, and continued tight management of temporary costs. We have continued to focus on being a more agile and efficient organization. This quarter is an excellent example of the potential that lies ahead for our profitability profile as a global economy recovers and we continue to capture greater volume and mandates on a more efficient cost structure. More specifically, we believe we have a distinct advantage being one of a few firms that can offer holistic solutions to owners and occupiers on a global basis. The challenges facing our clients continue to expand as the world reopens, causing them to turn to Cushman & Wakefield for help. Additionally, we believe Cushman & Wakefield has a differentiated advantage as we continue to grow in markets and business lines where we are underrepresented. Lastly, we see a multi-year opportunity to capitalize on the resulting operating leverage as we continue to scale our platform and the economy recovers and grows. Before providing commentary on what we are seeing across our different geographies and markets, I'd like to make a few comments about the pandemic. The situation remains fluid, and although the world is making progress towards herd resiliency, the pandemic continues to disrupt economic activity in certain parts of the world. Despite this, we are seeing encouraging signs of property recovery. As we stated on prior earnings calls, over the course of a year, GDP is a solid predictor for gauging the health and performance of property markets. That correlation is holding true again in this cycle. U.S. real GDP bottomed in the second quarter of 2020 and has been recovering robustly since that time. As such, real GDP has now fully recovered and surpassed pre-pandemic levels. having grown by a 6.5% annualized rate in the second quarter of this year. Property recovery has also shown improvement from the pandemic lows, and the speed of the recovery varies depending on geography and product type. As we look across different property types, we are seeing a broad-based recovery with varying degrees of performance. At the top of the list, we are seeing strong growth continue in industrial data centers, multifamily, and life sciences assets. In the Americas specifically, we saw continued growth in industrial leasing in the second quarter. The sector continues to benefit from the shift to online shopping. In the first half of 2021, approximately 204 million square feet of space was absorbed, a record high. Occupancy of industrial space was roughly 96% in the second quarter of 2021. Also, a record high. In addition to these stronger property sectors, we are starting to see some encouraging trends in sectors that have been laggards throughout the recovery. In retail, we are seeing strength particularly in experiential concepts as the economy reopens and there's more pent-up consumer demand. As an example, in the hotel sector, STR, a subsidiary of CoStar, reports that occupancy has grown from the low 20% range in March of this year to 66% in June and with 71% in the week of July 11th through the 17th. In the office sector, although leasing continues to improve, we emphasize that the near-term fundamentals remain less clear as businesses continue to make their way back to the office and assess space requirements. At the beginning of the year, roughly 17% of U.S. office employees were back at the office, At the end of the second quarter, it was closer to one-third. The office sector will continue to recalibrate to address the remote working dynamic. Most employers are providing time for employees to prepare for their summer or fall office returns, but will continue to navigate the balance of being in the office and remote working. Ultimately, companies will need help in developing their workplace for the future, and Cushman & Wakefield is one of the few firms capable of helping clients navigate these solutions. Within office leasing, we have seen some pent-up demand coming through in 2021 from delayed decision-making. While we expect this to be a longer road to recovery, we are seeing some very encouraging green shoots emerging in the office sector. In addition to the strength of employment data for office using jobs relative to employment data in other industries, tour activity has been surging in conjunction with vaccine rollout. According to VTS, tour activity of office space has increased by over 80% from January to May of this year. The fact that more businesses are touring space is a solid leading indicator for future leasing activity. The second green shoot is that for the first time since the pandemic started, market-wide gross leasing activity trended higher. Based on the 87 U.S. markets we track at Cushman and Wakefield, the total volume of office leasing was at 15% versus last quarter. Not only are more businesses touring space, but they are also increasingly signing deals to occupy that space with some longer-term leases this year. In the first half of 2021, over 75% of all leases signed in the U.S. have been for more than a year, and nearly 40% have been for four years or more, an indication of a shift back to normalcy. Turning to capital markets, as we noted on prior earnings calls, there was clear momentum forming in late 2020, and that has continued into the first half of 2021. According to Real Capital Analytics, in the first half of this year, property sales transactions increased 34% compared to a year ago. For context, that volume is only down 2% versus pre-COVID levels in the first half of 2019. Clearly, commercial real estate remains an attractive asset class for investors, as demand drivers remain favorable. Fundraising for commercial real estate investment and dry powder metrics remain at near record levels. There is no shortage of capital to be deployed for the right opportunities. In addition to interest rates remaining below historical averages, finding yield is becoming more difficult in other asset classes. making spreads in commercial real estate all the more attractive, which will keep capital flowing into our sector. To be sure, the property recovery will continue to be bumpy and uneven. But as we look ahead, we certainly believe that the positives are outweighing the negatives. As discussed on prior calls, we are in our second year of the work we began before the pandemic to strategically reline the business to enable us to become a leaner, faster, more efficient organization. I am pleased to report that these initiatives are on track to deliver an additional $125 million of operating efficiency initiatives in 2021, which is on top of the $125 million of permanent cost savings we delivered last year. These initiatives include permanent savings ranging from streamlining our organization to better match our service delivery model to the optimization of business functions through automation and technology. These actions are focused across the entire organization and provide a strategic advantage that will enhance our agility and speed in the marketplace, improve our profitability, and build significant operating leverage in the business compared with even just a year ago. Lastly, Before I turn the call over to Neil, I'd like to provide a few comments on our acquisition pipeline. As always, M&A is an important strategic pillar, having completed 27 infill deals since the merger. We possess industry-leading capabilities in terms of acquisitions and integration, and have a demonstrated track record of accretive M&A and broker onboarding. We believe this is a distinct advantage as one of a few firms that can deploy solutions on a global scale, while also growing our platform as a result of the additional white space to fill across geographies and service lines. There remains a long runway of talent consolidation to global full-service brokerage firms like Cushman & Wakefield, and we expect that a portion of our growth in the years to come will be a direct result of acquisition or key hires. I will also reemphasize that our significant liquidity position, which stands at $2.1 billion, is a valuable asset both for opportunistic M&A and brokerage team hires. We are well positioned to drive shareholder value in many ways, including our global competitive advantage, our significant operating leverage in recovery, and our strong liquidity position, allowing us to grow inorganically while simultaneously deleveraging to the resulting growth in our adjusted EBITDA. Overall, we are extremely pleased with the first half of 2021. And with that, let me turn the call over to Neil to detail our quarter. Neil?