This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk09: 19 levels. And then our recurring revenue businesses, our PMFM, also had very nice growth above our expectations. So we see nothing on the horizon that suggests that the business is slowing down at this point. At the same time, it's too early in the year to update guidance. It's our policy not to update right now. We'll revisit that as we finish up the second quarter and we have a better view to the full year.
spk01: Okay. Thanks, and then second question on the Greystone joint venture. I think it was 16 million of equity income. I'm guessing the bulk of that was Greystone. You said it was kind of performing in line. Can you make any comments on how to think about that just seasonally as we look ahead and just any other further details in terms of how it's going so far?
spk09: Yeah, the business is doing well. It's right in line with expectations. Not significant seasonality. You're right. The majority of that $16 million relates to Greystone. We guide it to around $70 million of EBITDA for the full year, and we expect to be right in line with that as we finish up the year.
spk01: Okay. Got it. And then last question on PMFM. You talked about the outsourcing business generally a bit. If I think about it, historical play was you'd get these deals and it would also give you the opportunity to cross-sell into things like leasing and sales. What's the opportunity today? Is it still selling into those high-margin business lines, or are there other things that you're doing with clients?
spk04: John, will you take this, please? Yes. Tony, this is John. Our thesis on on the outsource market and these very large and very sticky contracts remains. The announcement we made about the very large contract winning in Q1 is a full service contract where we will provide all services from one extreme to the other from transaction management and transaction delivery all the way through to FM and integrated FM. So that is And entirely with this, we are building our outsourced model on. And ultimately, there are only now three companies in our entire industry who have the skills, the capability, the infrastructure, the stretch and geography to undertake contracts of that scale. And that outsourced market itself is a secular growing trend. more clients outsourcing more of their operations in more geographies all of the time. So we're building a real battleship outsourcing business for the future. I feel very good about the growth profile.
spk02: Okay. Thanks for the help. Thanks, Tony.
spk00: Thank you. Our next question is from Chandni Ludhra with Goldman Sachs. Please go ahead.
spk03: Hi, good evening, and thank you for taking my question. Could you guys perhaps give some color on geographies outside the U.S.? Your APAC business obviously grew very nicely in the quarter. How do you think about business exposure across different markets there, and how should we think about performance of your JV with Wanqing, mainland China, and on similar lines, Could you perhaps talk about what you're seeing in Europe, given, you know, obviously the humanitarian crisis that you talked about, but just, you know, broader concerns and any malaise that's spreading because of it with investors looking to pause activity or something along those lines?
spk04: Don, you want to take that? Happy to. Hi, Jenny. I'll try and unpack the, I think it was three questions in there, all around geography and our operations. I'd lead by reinforcing what we said in the prepared statements, which is across all geographies and all service lines, we've seen increased high levels of performance year over year, and that reflects every single part of our global platform. So, we're quite happy with our overall balance of business, which varies slightly year by year, but on the whole, it's 70% Americas, around about 15% each to EMEA and APAC. We'd like them all to be bigger, and we have the momentum within the organization that you can see from our numbers that that growth is coming through everywhere. On the Vanki joint venture, again, reiterating our prepared statements in terms of the performance of the overall business, the performance of that is seen right on top of where we expected it to. First quarter is a slightly unusual quarter in China, of course, because quite a lot of the trading period covers the very quiet period of Chinese New Year, and we had a lockdown. But actually, the first quarter came in exactly where we thought it would, And we're pleased with that. And overall, we've seen a lift in particular, a very strong lift in our brokerage business across APAC. Neil referenced an excess of 40% growth in brokerage in APAC year over year. Turning now to EMEA, we had a stellar performance in EMEA in the first quarter. Very substantial EBITDA contribution from our EMEA business, which typical to our sector is normally low. Pretty quiet in terms of profit contribution in Q1, given the seasonality of not only the business, but also the payments of bonuses and the like. And that record first quarter in EMEA, of course, shows no reflection of any either pending or known impact on the overall business of what we're seeing in Eastern Europe, in Ukraine. Europe has this innate capability of providing investors in particular with alternative markets and market profiles. So what we're seeing is actually a reallocation of capital through different sectors and different geographies in Europe, all adding up to record volumes in quarter one. So as yet, no direct contagion of the issues, but we keep a very, very careful eye on it daily. Does that cover all the questions, Jenny?
spk03: Yes, just one quick one. Any update on your partnership with WeWork? Thank you.
spk04: Go ahead, John. I'll keep going, shall I? Yeah, so we're going live at this very moment on the transition of the FM contract. WeWork into our global occupier services business, which is another example of a major contract win. And Again, mentioning, going back to the referral, the big win we had in Q1 in that outsourced business, our full service offering, including Flex, including that relationship with WeWork, was a fundamental part in the reason why we won that bid. So our thesis of showing up and able to deliver to clients a full end-to-end service of how an occupier can utilize space can experience space is again proving to be a very good part of our armory and weaponry as we go to market. I would also say that we're excited by WeWork's performance, sorry, WeWork's investments and relationship building with Yardi, and that is going to enhance the capabilities both of WeWork and our partnership to deliver even better quality services and technologies to our clients.
spk03: Thank you very much.
spk00: Thank you. Our next question is from Rich Hill with Morgan Stanley. Please go ahead.
spk08: Hey, good afternoon. First and foremost, congrats on a really impressive quarter. I just have two questions. First, maybe we can talk about capital deployment. You still have a fair amount of cash on balance sheet. Looks like that's growing given the strong performance. Have your views on how to deploy that cash changed given the macro backdrop over the past, call it four to five months?
spk09: They haven't, Rich. If anything, I think we see opportunity to grow the platform. We do have cash. We'll be looking at ways in which to grow the business, both organically and using some of that cash. But we constantly evaluate the best use for it. We also consider whether we should pay down debt. Our leverage is right where we want it, two and a half times. But certainly, we could use cash to reduce our interest cost as we look forward at rising interest rates, and then also look at other ways to return capital to shareholders. But at this stage, we still believe, especially with prices moving where they are, that there are opportunities for us to grow the business. Thank you.
spk08: And maybe a bigger picture question on transaction volumes. You noted your brokerage business being quite strong. We track the RCA data very closely as well. And I do think there's a lot of hand-wringing right now about backup and interest rates and what that will do to transaction volumes. So maybe you could just comment a little bit on what you're hearing from your clients, why do investors in commercial real estate still find the asset class compelling? Is it because the unlevered returns are actually still pretty compelling for many investors here and they're less insulated from a rising interest rate environment? So really it's just sort of a boots on the ground question. What are you seeing? What do you think is still driving these very robust transaction volumes in OneQ?
spk04: Go ahead, John. Yeah, it's John. I think in a way you did answer your own question in part there, and I think it's probably a better answer than I could give. It is an attractive sector because so much of the characteristics of an income stream in many sectors provides a real hedge against inflation with rent profiles rising through the term of release, the ability for clients to asset manage their relationship with tenants and to increase income streams, and really improve buildings and asset value as they go. So one thing I would comment on is, of course, the reality of rising debt costs has been in the system now for a number of months. So what the Fed has done very recently is not a shock to the market. It's been pricing this in for a number of months. And therefore, the record volumes we saw in Q1, I think, speaks to the fact that the market is at this point so ready to transact on attractive assets, and there are attractive assets to be bought in the market. Ultimately, it's the liquidity of the market that's important to our revenues, not necessarily the specific price of any asset.
spk08: Got it. Maybe just one follow-up question to that. Do you think your clients have sort of pre-funded acquisitions? So did they have an opportunity to lock in cheap debt in advance of a rising interest rate environment, and therefore they can be a little bit more acquisitive?
spk04: I would be overly general to say yes on all transactions, but certainly the vast majority of, you know, we specialize in a lot of very large-scale transactions, high-value transactions. That's a sophisticated market that requires is invariably in place even before the bids are made, let alone a deal closes. So there is already a very structured capital proposition in place prior to any transaction being attempted. And by the way, that's part of the sale process, making sure that all buyers are well-funded and the market certainly shows continual appetite and a lot of available equity and debt.
spk02: Thank you, guys. Kudos again. Thank you.
spk00: Thank you. Our next question is from Michael Griffin with Citi. Please go ahead.
spk06: Hey, guys, appreciate you taking the time and glad to join the call this quarter. You know, given that there's been more talk, you know, of recent potential recession on the medium term, just curious how that's factoring into your thinking, you know, across the different business lines, particularly segments that might be more volatile and susceptible to a downturn.
spk09: Yeah, you know, Michael, there really isn't anything we see right now. Interest rates are rising, but, you know, in terms of that and the combination of that and inflation doesn't really impact our PMF and business because most of those contracts are fixed. So feel good about that. We see capital markets as strong as ever with a lot of capital coming in. Multi-family was also strong, and there's just so much demand there. We've seen strength there. So, you know, as we look to the year, we still feel very positive about the full year, and there really is nothing that's showing up, certainly in the very near term.
spk06: Yeah, great. No, that's helpful.
spk04: I would just add a – Sorry, Michael, as I was just going to add one point there, and this is something that Brett has mentioned on a number of these calls, ultimately looking out over the coming quarters. Actually, the health of our industry is largely based around positive GDP as opposed to directly in relation to any single factor of either the cost of debt or inflation. So that's really the strength of the economy as a whole is what we're keeping a very close eye on.
spk06: Yep, I got you. No, that was very helpful. And then just touching on the PMFM side of the business, you mentioned a big new client acquisition this quarter. I'm curious, how has your strategy, has it changed at all for kind of winning new clients and getting to that kind of cross-selling feature that you mentioned?
spk04: We're seeing the fruition of a multi-year strategy of building out through any gaps we might have had historically in the capabilities of onboarding some of these extremely large and complex contracts. You're not even invited to bid on contracts like this unless the clients and their advisors are 100% sure that you can deliver all of the services to a very high standard over multiple years. And that's sort of, you know, you get to that point. These bids sometimes take 18 months to 24 months just to pursue, to land. So, you know, as I said in prepared remarks, multi-year strategy to build a really strong outsourcing business in a secular growth area.
spk02: Got it. Well, I appreciate the color and a great quarter. Thank you.
spk00: Thank you. Our next question is from Stephen Sheldon with William Blair. Please go ahead.
spk05: Hi, everyone. This is Matt Filek on for Stephen. Congrats on the solid quarter, and thank you for taking my questions. First off, I was wondering if you could provide some additional commentary on leasing. For instance, what are you seeing in terms of lease durations versus historical averages, and then what portion of your leasing revenue is derived from office space? John?
spk04: Okay. I presume when we're talking about lease duration, you're primarily focusing on office there, Matt, because, of course, there's growth in logistics, for instance, to longer lease terms over the last 15 to 20 years. So let me be specific around the office lease term question. We are seeing very significant lease term acquisitions in the tenant market. approaching the stabilized lease terms that we saw pre-pandemic. And a lot of this business has been driven by occupiers seeking to benefit from the incentives that can be achieved by taking long leases. That's always been part of the makeup of the market. But I think it does point to the fact that the office remains a fundamental part of the operational structure of companies and how they think about their workforce going forwards. So we are seeing very good trend data on lease terms, particularly in the U.S. Was there another part to that question?
spk05: Yeah, just the last part was what portion of leasing revenue is derived from office space, if you can remind me?
spk04: Okay, so we've mentioned this on prior calls. Historically, that's going back again, pre-pandemic office leasing made up you know, getting on towards 60% of our leasing total. We expect that to come back when offices are fully in full volume again, and we do feel we're getting towards our projected 23, 24 full weight again in offices. We feel it'll come back to around about 50%. And if you look at our overall leasing growth, where we have material leasing growth over 2019, That has, of course, come from growth in other sectors. And in passing, I would mention something that hasn't been spoken about for a little while now, but we've seen some very significant upticks in retail leasing, for instance, in 2021. We've seen the largest amount of net absorption in the U.S. market since 2017. So it isn't just always that playoff in leasing between logistics and office. We have secular growth markets elsewhere and large asset classes elsewhere to consider and to focus on as a multidisciplinary company.
spk05: Great. That's very helpful. Thank you for all of that, Collar. One more question for me. Can you also talk about your ability to source labor and meet future demand, particularly within the PFM segment with the tight labor market in mind?
spk02: All right, John.
spk04: Yeah, excuse me. So we have the ability, and I'll cover the question directly, but also talk to inflation and how that shows up in the business. When we provide labor to clients or resources, skilled technicians, ultimately our clients need that resource to show up to do the work. And primarily in our FM and facility services business, we pass on the cost of that labor directly to the client. So ultimately, the client wants the labor to show up. The client is prepared to pay, not whatever it takes, but within reason, to pay inflated labor costs taken directly by the client for the resource to show up and undertake the work. So whilst it is a relatively tight labor market, of course, particularly in certain skill sets in the U.S. at this point, we're not seeing any particular issue around availability of labor or an impact of inflation on our margin.
spk05: That's great to hear. That's it for me. Congrats again on the results. Thank you.
spk00: Thank you. Our next question is from Doug Harter with Credit Suisse. Please go ahead.
spk07: Thanks. Can you talk about the pace at which FM or that... that contracts are coming up for bidding now, you know, I mean, meaning, you know, how do you view your opportunity to kind of continue to win new clients today versus, you know, kind of pre-COVID?
spk04: Go ahead, John. So the, excuse me, our ability to grow RFM businesses made up both of new wins but also retentions. And, of course, our existing contracts come up from time to time. They tend to be long and they tend to be very sticky, so our win rate is very high. And growth comes from basically winning more of our fair share in pursuits, but also that market is growing itself as I discussed earlier in the outsourcing. So the pipeline at the moment as we see the outsource market for occupied services is growing. And whilst we mentioned one contract, actually two now, we work on this call, we are onboarding a number of very significant wins right across our facilities business, both services and facilities management. And the pipeline looking forward is also very positive. So it isn't just the revenues, of course, where we're seeing very healthy growth. It's actually the throw-off of those revenues into our transactional business and into our project management business that is so attractive. Again, it plays back to building out push and wait for globally to be able to take advantage of the secular trends that we're seeing in an expanding client spend landscape.
spk10: I think the way to think about FM is it doesn't really, don't think about it as a sine wave of velocity of bids going out to market. There's just always been and always will be a regular and steady flow of contracts coming back to market. What's different, and John talked about it, is our ability to compete and win those contracts is improving every month, every quarter, every year. John talked about, and we've mentioned in the release, our win of the premier financial services global outsourcing contract and a big piece of that contract that's evidenced of our moving up the food chain, ability to win more. So it's really, it's not that there's more contracts or less contracts coming to market. What's different for us is every day we're more competitive in that market, as evidenced by this most recent win.
spk00: Thank you. That concludes today's question and answer session. I will now turn the call back over to Brett White for concluding remarks.
spk10: Great. Well, thank you everyone for dialing in. We look forward to talking to you at the end of the second quarter.
spk00: Thank you. This concludes today's conference. You may disconnect at this time. Thank you for your participation.
Disclaimer