Cushman & Wakefield (NYSE: CWK) today reported financial results for the second quarter ended June 30, 2021:

• Revenue for the second quarter of 2021 of $2.2 billion was up 29% (up 25% local currencyⁱ) from the second quarter of 2020. Fee revenue of $1.6 billion was up 39% (up 34% local currency) versus prior year.
  • Fee revenue better than expected across all segments and service lines, brokerage fee revenue improved 89% on local currency led by the Americas
  • Property, facilities and project management and Valuation and other fee revenue grew 7% and 16%, respectively, on local currency
• Net income and earnings per share for the second quarter of 2021 were $52.7 million and $0.23, respectively. Adjusted earnings per share was $0.50.
• Adjusted EBITDA was $219.9 million, up 85% (76% local currency) from the second quarter of 2020.
• Adjusted EBITDA margin of 13.5% expanded 335 basis points from the second quarter of 2020.
• Generated $30 million of gross savings for the second quarter from permanent cost reduction actions.
• Significant liquidity as of June 30, 2021 of $2.1 billion consisting of cash on hand of $1.1 billion and availability under the Company's undrawn revolving credit facility of $1.0 billion.
• Planned executive transition announced -- John Forrester, currently Cushman & Wakefield’s Global President, will become CEO, effective January 1, 2022. Brett White to remain Executive Chairman, a role he’s held at Cushman & Wakefield since 2015.
• As Executive Chairman, Brett White will remain an employee of Cushman & Wakefield and will continue to lead strategy, M&A and succession planning, alongside Forrester.

“I began my work here as Executive Chairman, and, given the firm’s strong performance and bright future, now is the right time for me to return to that role,” said Brett White, Cushman & Wakefield Chief Executive Officer. “John is a deeply admired and respected leader both inside our firm and across our industry. His high level of integrity, exceptional work ethic, deep client knowledge and strong global relationships, make him the obvious choice as our next CEO.”

In his current role as Cushman & Wakefield’s Global President, Forrester has direct operational and management oversight of all of the firm’s service lines and regions (Americas, EMEA and APAC). He is a member of the Global Executive Committee and Global Management Board. Forrester joined Cushman & Wakefield predecessor DTZ in 1988, and served as Group Chief Executive, before DTZ’s eventual merger with Cushman & Wakefield in 2015.

“I’m honoured to continue leading this great organization, now as the Chief Executive. Our people and our brand carry incredible momentum as we continue to lead the industry through this global recovery,” said John Forrester, Global President, Cushman & Wakefield.

“In this time of significant innovation and transition in the commercial real estate industry, and the need for relentless focus on operational excellence, there is no question John is the ideal executive to assume the CEO position at Cushman & Wakefield,” said Timothy Dattels, Cushman & Wakefield Director and Co-Managing Partner of TPG Capital Asia.

Consolidated Results (unaudited)

Second Quarter Results (unaudited)

Revenue

Revenue was $2.2 billion, an increase of $504.7 million versus the three months ended June 30, 2020. Revenue growth in Leasing and Capital markets of $190.0 million and $169.4 million, respectively, reflects the recovery of brokerage activity, particularly in the Americas. Revenue growth in Property, facilities and project management, Gross contract reimbursables and Valuation and other of $76.5 million, $44.7 million and $24.1 million, respectively, reflects owners and occupiers' reliance and confidence in the Company’s industry leading capabilities and thought leadership during this recovery, in regards to return to work best practices and work space requirements along with continued demand for enhanced cleaning and facility services to ensure buildings are safe for tenants.

Cost of services

Cost of services of $1.8 billion increased $328.5 million or 23%. Cost of services provided to clients increased principally due to higher variable costs including commissions, annual bonus for non-fee earners and direct labor, as well as compensation costs. This increase was partially offset by operating efficiency initiatives and cost savings actions. Cost of Gross contract reimbursables increased 8% driven by growth in our Property, facilities and project management service line.

Operating, administrative and other

Operating, administrative and other of $284.2 million increased by $12.1 million principally due to higher annual bonus expense for non-fee earners. This increase was partially offset by operating efficiency initiatives and cost savings actions. Overall, as a percentage of total revenue, operating, administrative and other costs was 13% for the second quarter of 2021 as compared to 16% for the second quarter of 2020.

Depreciation and amortization

Depreciation and amortization was $42.5 million, a decrease of $32.1 million. The decrease primarily reflects the complete amortization of certain merger related customer relationships that occurred in the third quarter of 2020.

Restructuring, impairment and related charges

Restructuring, impairment and related charges were $14.7 million, an increase of $8.9 million, primarily due to actions taken in connection with the Company's strategic realignment of the business principally including severance and employment-related charges.

Interest expense, net

Net interest expense was $43.8 million, an increase of $5.0 million. This increase was principally attributed to the incremental interest incurred as a result of the issuance of 2020 senior secured notes in the second quarter of 2020.

Other income, net

Other income was $10.1 million, an increase of $18.7 million. This increase is principally due to losses incurred in the prior year from the disposal of holding companies in connection with the Company's strategic realignment of the business and the current year mark-to-market gain on investments in real estate ventures.

Provision for income taxes

The Company's income tax provision for the three months ended June 30, 2021 was an expense of $43.2 million on the income before taxes of $95.9 million. For the three months ended June 30, 2020, the Company's income tax provision was a benefit of $7.7 million on losses before taxes of $108.5 million. The Company's estimated effective tax rate was higher in the three months ended June 30, 2021 compared to the same period last year primarily due to a change in jurisdictional mix of earnings in 2021 resulting in a greater expense.

Net income and Adjusted EBITDA

Net income of $52.7 million principally reflects the impact of the significant increase in brokerage activity, as Leasing and Capital markets fee revenue increased 67% and 141% on a local currency basis, respectively. Revenue in Property, facilities and project management and Valuation and other also increased 7% and 16% on a local currency basis, respectively.

Adjusted EBITDA of $219.9 million increased by $101.1 million or 76%, on a local currency basis, primarily due to the impact of revenue growth in all service lines, particularly Leasing and Capital markets, and savings generated by cost reduction actions and operating efficiency initiatives. As a result, Adjusted EBITDA margin, measured against service line fee revenue, of 13.5% for the three months ended June 30, 2021, expanded 335 basis points as compared to 10.2% in the three months ended June 30, 2020.

Year-to-Date Results (unaudited)

Revenue

Revenue was $4.2 billion, an increase of $533.1 million versus the six months ended June 30, 2020. Revenue growth in Leasing and Capital markets of $179.9 million and $153.7 million, respectively, reflects the recovery of brokerage activity, particularly in the Americas. Revenue growth in Property, facilities and project management, Gross contract reimbursables and Valuation and other of $112.5 million, $55.9 million, and $31.1 million, respectively, reflects owners and occupiers' reliance and confidence in the Company’s industry leading capabilities and thought leadership during this recovery, in regards to return to work best practices and work space requirements along with continued demand for enhanced cleaning and facility services to ensure buildings are safe for tenants.

Cost of services

Cost of services of $3.4 billion increased $319.2 million or 10%. Cost of services provided to clients increased principally due to higher variable costs including commissions, annual bonus for non-fee earners and direct labor, as well as higher compensation costs. This increase was partially offset by operating efficiency initiatives and cost savings actions. Cost of Gross contract reimbursables increased 5% driven by growth in our Property, facilities and project management service line.

Operating, administrative and other

Operating, administrative and other of $565.0 million increased by $8.9 million principally due to higher annual bonus for non-fee earners. This increase was partially offset by operating efficiency initiatives and cost savings actions. Overall, as a percentage of total revenue, operating, administrative and other costs was 14% for the first half of 2021 as compared to 15% for the first half of 2020.

Depreciation and amortization

Depreciation and amortization was $85.6 million, a decrease of $61.0 million. The decrease primarily reflects the complete amortization of certain merger related customer relationships that occurred in the third quarter of 2020.

Restructuring, impairment and related charges

Restructuring, impairment and related charges were $32.3 million, an increase of $0.4 million. The increase was primarily due to actions taken in connection with the Company's strategic realignment of the business principally including severance and employment-related charges.

Interest expense, net

Net interest expense was $86.2 million, an increase of $10.9 million. This increase was principally attributed to the incremental interest incurred as a result of the issuance of 2020 senior secured notes in the second quarter of 2020.

Other income, net

Other income was $12.1 million, a decrease of $18.4 million. This decline reflects the $36.9 million gain recognized last year as a result of the formation of the Cushman & Wakefield Vanke Service joint venture in China, partially offset by prior year losses incurred from the disposal of holding companies in connection with the Company's strategic realignment of the business and the current year mark-to-market gain on investments in real estate ventures.

Provision for income taxes

The Company's income tax provision for the first six months of 2021 was an expense of $15.2 million on income before taxes of $50.7 million. For the first six months of 2020, the Company's income tax provision was a benefit of $34.2 million on losses before taxes of $190.1 million. The Company's effective tax rate was higher in the six months ended June 30, 2021 compared to the same period last year primarily due to benefit recorded in 2020 for the release of valuation allowance related to tax attributes as a result of the U.S. CARES Act.

Net income and Adjusted EBITDA

Net income of $35.5 million principally reflects the improvement of brokerage activity as Leasing and Capital markets fee revenue increased 29% and 48% on a local currency basis, respectively. Revenue in Property, facilities and project management and Valuation and other also increased by 5% and 9%, respectively.

Adjusted EBITDA of $319.6 million increased by $130.5 million or 62%, on a local currency basis, primarily due to the impact of revenue growth in all service lines, particularly Leasing and Capital markets, and savings generated by cost reduction actions and operating efficiency initiatives. As a result, Adjusted EBITDA margin, measured against service line fee revenue, of 10.8% for the six months ended June 30, 2021, expanded 320 basis points as compared to 7.6% in the six months ended June 30, 2020.

Balance Sheet

Liquidity at the end of the second quarter was $2.1 billion, including availability on the Company's undrawn revolving credit facility of $1.0 billion and cash and cash equivalents of $1.1 billion.

Net debt as of June 30, 2021 was $2.2 billion including the Company's 2018 First Lien debt of $2.6 billion and the 2020 Notes of $640.1 million and net of cash and cash equivalents of $1.1 billion.

ⁱ In order to assist our investors and improve comparability of results, we present the period-over-period changes in certain of our financial measures, such as Service line fee revenue and Adjusted EBITDA, in "local" currency. The local currency change represents the period-over-period change assuming no movement in foreign exchange rates from the prior period. We believe that this presentation provides our management and investors with a better view of comparability and trends in the underlying operating business.

Conference Call

The Company’s Second Quarter 2021 Earnings Conference Call will be held today, August 5, 2021, at 5:00 p.m. Eastern Time. A webcast, along with an associated slide presentation, will be accessible through the Investor Relations section of the Company’s website at http://ir.cushmanwakefield.com.

The direct dial-in number for the conference call is 855-327-6837 for U.S. callers and 631-891-4304 for international callers. The Conference ID is 10015498. A replay of the call will be available approximately two hours after the conference call by accessing http://ir.cushmanwakefield.com. A transcript of the call will be available on the Company’s Investor Relations website at http://ir.cushmanwakefield.com.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is a leading global real estate services firm that delivers exceptional value for real estate occupiers and owners. Cushman & Wakefield is among the largest real estate services firms with approximately 50,000 employees in 400 offices and 60 countries. In 2020, the firm had revenue of $7.8 billion across core services of Property, facilities and project management, Leasing, Capital markets, Valuation and other services. To learn more, visit www.cushmanwakefield.com or follow @CushWake on Twitter.

Cautionary Note on Forward-Looking Statements

All statements in this release other than historical facts are forward-looking statements, which rely on a number of estimates, projections and assumptions concerning future events. Such statements are also subject to a number of uncertainties and factors outside Cushman & Wakefield’s control. Such factors include, but are not limited to, uncertainty regarding and changes in global economic or market conditions and changes in government policies, laws, regulations and practices. Should any Cushman & Wakefield estimates, projections and assumptions or these other uncertainties and factors materialize in ways that Cushman & Wakefield did not expect, there is no guarantee of future performance and the actual results could differ materially from the forward-looking statements in this press release, including the possibility that recipients may lose a material portion of the amounts invested. While Cushman & Wakefield believes the assumptions underlying these forward-looking statements are reasonable under current circumstances, recipients should bear in mind that such assumptions are inherently uncertain and subjective and that past or projected performance is not necessarily indicative of future results. No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained in this press release, and nothing shall be relied upon as a promise or representation as to the performance of any investment. You are cautioned not to place undue reliance on such forward-looking statements or other information in this press release and should rely on your own assessment of an investment or a transaction. Any estimates or projections as to events that may occur in the future are based upon the best and current judgment of Cushman & Wakefield as actual results may vary from the projections and such variations may be material. Any forward-looking statements speak only as of the date of this press release and, except to the extent required by applicable securities laws, Cushman & Wakefield expressly disclaims any obligation to update or revise any of them, whether as a result of new information, future events or otherwise. Additional information concerning factors that may influence the company’s results is discussed under “Risk Factors” in Part I Item 1A of its Annual Report on Form 10-K for the year ended December 31, 2020 and our other filings with the Securities and Exchange Commission.

Segment Results

The following tables summarize our results of operations for our operating segments for the three and six months ended June 30, 2021 and 2020.

Adjusted EBITDA is the profitability metric reported to the chief operating decision maker for purposes of making decisions about allocation of resources to each segment and assessing performance of each segment. Adjusted EBITDA excludes Depreciation and amortization, interest expense, net of interest income, income taxes, as well as integration and other costs related to merger, stock-based compensation for plans enacted before the Company's initial public offering, acquisition related costs and efficiency initiatives and other charges. Segment operating expense is comprised of Fee-based operating expenses and Cost of gross contract reimbursables. Corporate expenses are allocated to the segments based upon Service line fee revenue of each segment.

Americas Results

(in millions) (unaudited)

EMEA Results

(in millions) (unaudited)

APAC Results

(in millions) (unaudited)

Cushman & Wakefield plc

Use of Non-GAAP Financial Measures

We have used the following measures, which are considered "non-GAAP financial measures" under SEC guidelines:

Our management principally uses these non-GAAP financial measures to evaluate operating performance, develop budgets and forecasts, improve comparability of results and assist our investors in analyzing the underlying performance of our business. These measures are not recognized measurements under GAAP. When analyzing our operating results, investors should use them in addition to, but not as an alternative for, the most directly comparable financial results calculated and presented in accordance with GAAP. Because the Company’s calculation of these non-GAAP financial measures may differ from other companies, our presentation of these measures may not be comparable to similarly titled measures of other companies.

The Company believes that these measures provide a more complete understanding of ongoing operations, enhance comparability of current results to prior periods, and may be useful for investors to analyze our financial performance. The measures eliminate the impact of certain items that may obscure trends in the underlying performance of our business. The Company believes that they are useful to investors, for the additional purposes described below.

Segment operating expenses and Fee-based operating expenses: Consistent with GAAP, reimbursed costs for certain customer contracts are presented on a gross basis in both revenue and operating expenses for which the Company recognizes substantially no margin. Total costs and expenses include segment operating expenses as well as other expenses such as depreciation and amortization, integration and other costs related to merger, pre-IPO stock-based compensation, acquisition related costs and efficiency initiatives. Segment operating expense includes Fee-based operating expenses and Cost of gross contract reimbursables. We believe Fee-based operating expenses more accurately reflects the costs we incur during the course of delivering services to our clients and is more consistent with how we manage our expense base and operating margins.

Adjusted EBITDA and Adjusted EBITDA margin: We have determined Adjusted EBITDA to be our primary measure of segment profitability. We believe that investors find this measure useful in comparing our operating performance to that of other companies in our industry because these calculations generally eliminate integration and other costs related to merger, pre-IPO stock-based compensation, acquisition related costs and efficiency initiatives and other items. Adjusted EBITDA also excludes the effects of financings, income tax and the non-cash accounting effects of depreciation and intangible asset amortization. Adjusted EBITDA margin, a non-GAAP measure of profitability as a percent of revenue, is measured against service line fee revenue.

Adjusted Net Income and Adjusted earnings per share: Management also assesses the profitability of the business using Adjusted net income. We believe that investors find this measure useful in comparing our profitability to that of other companies in our industry because this calculation generally eliminates integration and other costs related to merger, pre-IPO stock-based compensation, acquisition related costs and efficiency initiatives, depreciation and amortization related to merger and acquisition activity and other items. Income tax, as adjusted, reflects management’s expectation about our long-term effective rate as a public company. The Company also uses Adjusted EPS as a significant component when measuring operating performance. Management defines Adjusted EPS as Adjusted net income, divided by total basic and diluted weighted-average outstanding shares.

Local currency: In discussing our results, we refer to percentage changes in local currency. These metrics are calculated by holding foreign currency exchange rates constant in year-over-year comparisons. Management believes that this methodology provides investors with greater visibility into the performance of our business excluding the effect of foreign currency rate fluctuations.

Net debt: Net debt is used as a measure of our liquidity and is calculated as total debt minus cash and cash equivalents.

The interim financial information for the three and six months ended June 30, 2021 and 2020 is unaudited. All adjustments, consisting of normal recurring adjustments, except as otherwise noted, considered necessary for a fair presentation of the unaudited interim consolidated financial information for these periods have been included. Users of all of the aforementioned unaudited interim financial information should refer to the audited Consolidated Financial Statements of the Company and notes thereto for the year ended December 31, 2020.

Please see the following tables for reconciliations of our non-GAAP financial measures to the most closely comparable GAAP measures.

Adjustments to GAAP financial measures used to calculate non-GAAP financial measures

Reconciliation of Net income (loss) to Adjusted EBITDA:

Reconciliation of Net income (loss) to Adjusted Net Income: