Cushman & Wakefield (NYSE: CWK) today reported financial results for the third quarter of 2022:

Year-to-Date Results:

• Revenue of $7.5 billion and service line fee revenue of $5.4 billion for the nine months ended September 30, 2022 increased 15% and 16%, respectively, from the nine months ended September 30, 2021.
  • Leasing, Capital markets and Property, facilities and project management experienced continued growth, led by the Americas.
• Net income and earnings per share for the nine months ended September 30, 2022 were $166.6 million and $0.73, respectively.
  • Adjusted earnings per share of $1.54 was ahead of the nine months ended September 30, 2021 of $1.10.
  • Adjusted EBITDA of $679.0 million increased 26% from the nine months ended September 30, 2021.
• Liquidity as of September 30, 2022 was $1.5 billion, consisting of availability on the Company's undrawn revolving credit facility of $1.1 billion and cash and cash equivalents of $0.4 billion.

Third Quarter Results:

• Revenue of $2.5 billion and service line fee revenue of $1.8 billion for the third quarter of 2022 increased 8% and 4%, respectively, from the third quarter of 2021.
  • Leasing and Property, facilities and project management grew 13% and 10%, respectively.
  • Capital markets declined 20%.
• Net income and earnings per share for the third quarter of 2022 were $23.9 million and $0.11, respectively.
  • Adjusted earnings per share of $0.43 was down 10% from the third quarter of 2021.
  • Adjusted EBITDA of $201.9 million was down 8% from the third quarter of 2021.

“Cushman & Wakefield has again delivered top-line growth, as we continue to make excellent progress on our multi-year strategy of investing in the long-term growth sectors of our industry,” said John Forrester, Cushman & Wakefield Chief Executive Officer. "Property, facilities and project management, as well as our Leasing service lines across a broad spectrum of sectors, performed well. Our global and diversified service platform, strong balance sheet and liquidity also position us well in the current macroeconomic environment and enable our people to continue to execute against our strategic priorities. Even in the midst of the current environment, we remain extremely encouraged about the long-term fundamentals in our industry and our ability to drive value for our clients and shareholders."

Third Quarter Results (unaudited)

Revenue

Revenue of $2.5 billion increased $182.2 million or 8% compared to the three months ended September 30, 2021, led by the Americas, which increased 12%. Service line fee revenue growth was led by our Leasing and Property, facilities and project management service lines, which were up 13% and 10%, respectively. Leasing revenue growth was principally driven by steady improvement in the office sector, as well as continued strength in the industrial sector. Property, facilities and project management revenue growth was primarily driven by growth in our project management and facilities management businesses, which also resulted in Gross contract reimbursables growth of 17%. Partially offsetting these trends were unfavorable movements in foreign currency of $67.2 million or 3% compared to the third quarter of 2021, as a result of a stronger U.S. Dollar ("USD"), as well as a decline in Capital markets revenue of 20% where a less constructive macroeconomic environment resulted in lower volumes.

Costs of services

Costs of services of $2.1 billion increased $202.7 million or 11% compared to the three months ended September 30, 2021. Cost of services provided to clients increased 8% principally due to higher commissions as a result of higher Leasing revenue, higher salaries and wages, and higher variable costs associated with revenue growth in our Property, facilities and project management service line. Cost of gross contract reimbursables increased 17% driven by the continued growth in our Property, facilities and project management service line.

Operating, administrative and other

Operating, administrative and other expenses of $315.6 million increased by $13.1 million or 4% compared to the three months ended September 30, 2021, primarily due to higher salaries and wages.

Restructuring, impairment and related charges

Restructuring, impairment and related charges were $0.6 million, a decrease of $6.6 million compared to the three months ended September 30, 2021. This decrease principally reflects the reduction of severance-related costs and impairment charges in connection with the Company's previously announced strategic realignment of the business, which was substantially complete at the end of 2021.

Earnings from equity method investments

Earnings from equity method investments of $20.0 million increased by $16.6 million compared to the three months ended September 30, 2021, primarily due to the earnings recognized from our equity method investment with Greystone in the Americas, which was finalized in December 2021.

Other (expense) income, net

Other expense during the three months ended September 30, 2022 reflects net unrealized losses on fair value investments of $33.5 million, primarily related to our investment in WeWork, which closed in the fourth quarter of 2021, partially offset by royalty income. Comparatively, other income recognized during the three months ended September 30, 2021 reflects unrealized gains on fair value investments along with royalty income.

Provision for income taxes

Provision for income taxes for the third quarter of 2022 was $26.2 million on earnings before income taxes of $50.1 million. For the third quarter of 2021, the provision for income taxes was $22.9 million on earnings before income taxes of $91.6 million. The increase in income tax expense was driven by a higher effective tax rate in the three months ended September 30, 2022 compared to the same period last year primarily due to unrealized losses on fair value investments which are included in earnings before income taxes but excluded from the tax computation and changes in the jurisdictional mix of earnings.

Net income and Adjusted EBITDA

Net income of $23.9 million decreased 65% compared to the three months ended September 30, 2021, principally due to unrealized losses on fair value investments, higher commissions and unfavorable movements in foreign currency, partially offset by earnings recognized from our equity method investment with Greystone in the Americas and the strong performance of our Leasing and Property, facilities and project management service lines.

Adjusted EBITDA of $201.9 million decreased by $17.2 million or 8%, driven by the same factors impacting Net income discussed above, with the exception of unrealized losses on fair value investments.

Year-to-Date Results (unaudited)

Revenue

Revenue of $7.5 billion, an increase of $953.7 million or 15% compared to the nine months ended September 30, 2021, reflects strong revenue growth across all segments and service lines. Service line fee revenue growth was led by our Leasing, Capital markets and Property, facilities and project management service lines which were up 27%, 18% and 11%, respectively. Leasing revenue growth was principally driven by steady improvement in the office sector, as well as continued strength in the industrial sector. Property, facilities and project management growth was driven by growth in our project management and facilities management businesses. Valuation and other and Gross contract reimbursables also grew 3% and 12%, respectively. Partially offsetting these trends were unfavorable movements in foreign currency of $143.7 million or 2% compared to the prior year as a result of a stronger USD.

Costs of services

Costs of services of $6.0 billion increased $768.8 million or 15% compared to the nine months ended September 30, 2021. Cost of services provided to clients increased 16% principally due to higher variable costs, including commissions, as a result of higher brokerage revenue, as well as revenue growth in Property, facilities and project management. Cost of gross contract reimbursables increased 12% driven by the continued growth in our Property, facilities and project management service line.

Operating, administrative and other

Operating, administrative and other expenses of $926.5 million increased by $59.0 million or 7% compared to the nine months ended September 30, 2021, primarily driven by higher salaries and wages, as well as higher technology and communication expenses. Operating, administrative and other costs as a percentage of total revenue were 12% for the nine months ended September 30, 2022 as compared to 13% for the nine months ended September 30, 2021.

Restructuring, impairment and related charges

Restructuring, impairment and related charges were $3.1 million, a decrease of $36.4 million compared to the nine months ended September 30, 2021. This decrease principally reflects the reduction of severance-related costs and impairment charges in connection with the Company's previously announced strategic realignment of the business, which was substantially complete at the end of 2021.

Earnings from equity method investments

Earnings from equity method investments of $54.4 million increased by $43.5 million compared to the nine months ended September 30, 2021, primarily due to the earnings recognized from our equity method investment with Greystone in the Americas, which was finalized in December 2021.

Other (expense) income, net

Other expense was $89.5 million in the nine months ended September 30, 2022 compared to other income of $15.8 million recognized in the nine months ended September 30, 2021. This decline is primarily due to net unrealized losses on fair value investments of $89.6 million, principally related to our investment in WeWork, which closed in the fourth quarter of 2021. In addition, the Company recognized a loss of $13.8 million in the first quarter of 2022 related to the disposal of operations in Russia.

Provision for income taxes

Provision for income taxes for the nine months ended September 30, 2022 was $82.6 million on earnings before income taxes of $249.2 million. For the nine months ended September 30, 2021, the provision for income taxes was $38.1 million on earnings before income taxes of $142.3 million. The increase in income tax expense from the prior year was primarily driven by higher pre-tax earnings, unrealized losses on fair value investments which are included in earnings before income taxes but excluded from the tax computation and changes in the jurisdictional mix of earnings.

Net income and Adjusted EBITDA

Net income of $166.6 million increased by $62.4 million compared to the nine months ended September 30, 2021, principally due to the strong performance of brokerage activity as Leasing and Capital markets fee revenue increased 27% and 18%, respectively, as well as an increase in earnings recognized from our equity method investment with Greystone in the Americas.

Adjusted EBITDA of $679.0 million increased by $140.3 million or 26%. As a result, Adjusted EBITDA margin, measured against service line fee revenue, of 12.6% for the nine months ended September 30, 2022 increased 105 basis points as compared to 11.5% in the nine months ended September 30, 2021.

Balance Sheet

Liquidity at the end of the third quarter was $1.5 billion, including availability on the Company's undrawn revolving credit facility of $1.1 billion and cash and cash equivalents of $0.4 billion.

Net debt as of September 30, 2022 was $2.8 billion including the Company's outstanding term loan of $2.6 billion and senior secured notes of $0.6 billion, net of cash and cash equivalents of $0.4 billion. See the Use of Non-GAAP Financial Measures section in this press release for the definition of, and a description of the purposes for which management uses, this non-GAAP measure.

Conference Call

The Company’s Third Quarter 2022 Earnings Conference Call will be held today, November 3, 2022, 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 1-877-846-1676 for U.S. callers and 1-416-641-6712 for international callers. The Conference ID is 22020840. 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 Investor Relations section of the Company's 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 over 400 offices and approximately 60 countries. In 2021, the firm had revenue of $9.4 billion across core services of property, facilities and project management, leasing, capital markets, and 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, 2021 and in its other periodic reports filed with the Securities and Exchange Commission.

Segment Results

The following tables summarize our results of operations for our operating segments for the three and nine months ended September 30, 2022 and 2021.

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 and other items. Segment operating expenses 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, unrealized (gains) / losses on investments, 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, unrealized (gains) / losses on investments, 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 earnings per share ("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 nine months ended September 30, 2022 and 2021 is unaudited. All adjustments, consisting of normal recurring adjustments, except as otherwise noted, considered necessary for a fair presentation of the unaudited interim condensed 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, 2021 in the Company's 2021 Annual Report on Form 10-K.

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 to Adjusted EBITDA:

Reconciliation of Net income to Adjusted net income:

Summary of Total costs and expenses: