Cushman & Wakefield plc

Welcome to Cushman and Wakefield's third quarter 2021 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks today, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star then two. 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 third quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our finance 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 current forecasts 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, definition of non-GAAP financial measures, and other related information are found within the financial tables of 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 in our local currency. For those of you following along with our presentation, we will begin on slide four. 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 we speak to the quarter, we have invited John Forrester, our current president and incoming CEO as of January 1st, to join us on the call today to provide some comments on our operations and performance for the quarter. Following John's comments, Neil will provide additional detail on our financial results for the quarter. I'd like to once again thank our incredibly talented team of Cushman & Wakefield professionals around the globe. We are proud of the hard work you perform every day to help our clients And we are thrilled to see those efforts come through in another quarter of very strong results. First half momentum continued in the third quarter with consolidated fee revenue of $1.7 billion, improving 27% compared to prior year. Third quarter brokerage revenue, including our leasing and capital markets businesses, was up 64% compared to a year ago and up 10% versus 2019 pre-COVID levels. We continue to observe a sustainable recovery in capital markets and non-office leasing. As expected, office leasing continues to lag other sectors, but we are continuing to see green shoots emerge each quarter, which I will touch on shortly. Additionally, our recurring revenue streams and our PMFM service lines continue to perform well, with free revenue growth of 5% for the quarter and valuation and other growth of 11% year over year. In the third quarter, we reported $219 million of adjusted EBITDA, which represents an adjusted EBITDA margin of 12.9%. This improvement of adjusted EBITDA of 85% and margin expansion of 405 basis points year-over-year reflects the impact of stronger brokerage activity and savings generated from cost reduction actions. On a year-to-date basis, comparing our results to 2019 as a baseline, the business is well ahead of 2019 levels as margins are more than 190 basis points higher year-to-date. It's a tremendous accomplishment given the environment, but ultimately this has been and continues to be our goal. There is significant operating leverage inherent in our model as we've experienced throughout the year. This quarter, we announced strategic partnerships with two industry leaders as we continue to build out our platform and service offerings for clients. First, we entered into an agreement to acquire a 40% stake in Greystone's agency, FHA, and servicing businesses, which will fully round out our service offering to investors in the U.S. multifamily sector. Greystone is a top multifamily lender, including Fannie Mae, Freddie Mac, and HUD, giving our client base more direct access to a broad range of debt products for property acquisition, refinancing, and rehabilitation or new construction. We are very excited about this partnership and expect it will be immediately accretive to our operating results upon closing later this year. Neil will touch on some of the other specifics of the transaction a bit later. Second, we have formed an exclusive strategic partnership with WeWork. Let me begin with the strategic rationale for the partnership. For years now, WeWork has been seen as an innovator in our industry for two very good reasons. First, they have demonstrated an ability to create an experience the tenants are drawn to, from office programming to amenities to workplace design. And secondly, they've been a pioneer in using technology to efficiently manage that experience and the office space around it. Richmond Wakefield has a deep history of operating buildings for the world's largest landlords and owners, and in solutioning and executing large, scaled facilities management outsourcing strategies on behalf of Fortune 500 occupiers. Through this partnership, we will help scale WeWork's tenant experience platform from beyond just their branded centers into the rest of the office market, starting with our clients. While it's only been a few weeks since announcing this partnership, we've already had a strong positive reaction from our clients, as managing employees' in-office experience is a top priority right now. John will share more details on how we expect this new offering will help differentiate Cushman & Wakefield with both investor and occupier clients. We are confident partnering with industry-leading firms like Greystone and WeWork will continue to strengthen and differentiate Cushman and Wakefield as one of the premier commercial real estate platforms for both occupiers and investors. Before providing some market commentary, 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 the ongoing challenges presented by the pandemic, The commercial real estate sector has proven extremely resilient to nearly every obstacle thrown its way as evidenced by the strong performing property sectors. The trends we experienced in the first half have continued their momentum into the third quarter with substantial growth in industrial, data centers, multifamily, and life sciences assets. In the third quarter, The U.S. industrial sector absorbed 141 million square feet of space, an all-time record high. Year-to-date, the sector has absorbed 366 million square feet of space, which is already higher than the previous peak in 2018. The U.S. capital market sector is also booming. According to Real Capital Analytics, third-quarter property sales transactions registered at $193 billion, which is an all-time high. Year-to-date, sales volumes totaled $462 billion, which again is a record-setting pace. This surge in activity is being driven by different property types relative to past boom cycles. However, it is notable that investors are beginning to warm up to the office sector recovery as well. In the third quarter, office sale volume increased by nearly 140% relative to a year ago, and office cap rates tightened by 30 basis points. In terms of office leasing, as we have said before, this sector faces a prolonged recovery relative to other asset classes. Moreover, Delta clearly pushed back some of the return to the office for some employees. That being said, green sheets continue to emerge each quarter, supporting our thesis that the office sector will fully recover from this event. Gross leasing activity is picking up in virtually every market we track. Tour activity remains extremely robust. And as I've said on past calls, that is a great leading indicator for future leasing. And we are observing businesses returning to signing longer-term leases. In fact, nearly 75% of leases signed during the third quarter have been for more than five years, which is consistent with the pre-pandemic norms. Finally, there is perhaps no single factor more important for office leasing than job creation, and that has been absolutely spectacular in this recovery cycle. The US cut 2.9 million office jobs last spring, and through August 2021, 2.3 million of those jobs have already been recovered. At the current pace, we estimate the US will return to pre-pandemic peak levels of office employment by mid-2022, a little more than two years to full recovery. As a comparison, it took six years to fully recover from the great financial crisis. Amidst a fluid environment and ever-changing requirements, a few things continue to be apparent. First, a recovery in office is inevitable based upon the behaviors we are seeing. And second, companies require high-quality service providers like Cushman and Wakefield now more than ever to help them navigate and develop their workplace strategies. Before I turn the call over to our incoming CEO, John Forrester, for a few remarks, I'd like to quickly welcome our newest member of the board of directors, Angela Sun. Angela is an accomplished executive who will add a unique perspective to our board, given her diverse range of experiences across numerous sectors, including data, and technology, financial services, government, and healthcare. We are thrilled to have her on the board. With that, I'd like to go ahead and hand the call over to John.