Q1 2021 Cushman & Wakefield PLC Earnings Call
[music].
Greetings welcomed to of Cushman and Wakefield first quarter of 2021 earnings conference call all.
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After the speaker's remarks that would be a question of the answer session. If you would like to ask a question. During this time simply pass star followed by the number one on the telephone keypad. If you would like to withdraw your question. Please price start and then the number two it.
It is now my pleasure to introduce Mister Lin Texter head of Investor Relations and global control of of Cushman Wakefield missed the text or you may begin at the conference.
Thank you and welcome again to Cushman and Wakefield first quarter of 2021 earnings Conference call earlier today, we issued a press release announcing I find out the results for the period.
This release, along with today's presentation can be found on our Investor Relations website at I R Dot Cushman and Wakefield Dot com.
These terms of the page labeled forward looking statements today's.
Today's presentation contains forward looking statements based on current forecast and estimates of future events. These statements should be considered estimates only an actual results may differ materially.
During today's call, we refer to non-GAAP financial measures as outlined by S. E. C guidelines reconciliations of GAAP to non-GAAP financial measures and definitions of non-GAAP financial measures are found within the financial tables of our earnings release, an appendix of today's presentation of.
Also please note that throughout the presentation comparison in growth rates arts of comparable periods of 2020 and our local currencies.
So those of you following along with our presentation will begin on page five and with that I'd like to turn the call over to our executive Chairman and C E O Brett White right.
Thank you and thank you to everyone joining us today.
The first starting with our first quarter of performance I'd like to again, thank our team of Cushman and Wakefield professionals around the world.
Continue the determination and service to our clients throughout the pandemic.
Since the beginning of of COVID-19, we'd been recognized as a leader in the industry as companies continue to turn the cushman and Wakefield for our expert advice to help them navigate these challenging times.
We will continue to play that role.
As we help our clients through this recovery.
We are pleased with our first quarter performance on or off to a very strong start to 2021.
For the quarter, we reported the revenue of $1.3 billion down on one per cent the prior year.
Oh, well ahead of expectations.
I just did EBITDA was $100 million for the quarter.
38% of ahead of prior year.
As a result of our continue delivery of significant cost savings across the business.
Revenue transfer of better than expected across the all segments and service lines.
Brokerage revenue was down seven per cent for the quarter.
With leaping in capital markets down five per cent and 10% respectively year of a year.
This is the lowest rate of year over year of percentage decline.
We have seen since the trough and.
In the second quarter of last year.
Yeah I'm at the on the service lines continue to be the source of stability.
He is contractual feebates revenue streams represent just over half of.
Of the toilet portfolio.
Throughout the pandemic are teams of been supporting our clients by keeping essential buildings open <unk>.
Reconfiguring offices and retail outlets for social distancing.
And providing the hands cleaning and facilities services.
Insure buildings are safe for tenants.
In addition of global Occupier services business.
Continues to win newest Simons.
And renew existing client engagements.
Where outsourcing services in the first quarter.
On balance we expect to continue to benefit from these trends.
Cushman and Wakefield is one of the three large firms that.
That provides the comprehensive and scales outsourcing solutions on.
On a global basis.
As we stated on our last earnings call.
Property recovery continues to be on even with strong performance in some sectors.
Week performance and others.
And varying degrees in between.
The industrial sector is one of the clearest examples of of strong performer.
Instead of me to benefit from the shift to online shopping.
The U S industrial sector absorb the more than 82 million square feet of space in the first quarter of 2021.
In fact.
The last two quarters with him on the highest readings on the record.
In terms of demand for industrial warehouse space.
In addition to industrial data centers life Sciences self storage of apartments are other sectors that are benefiting from secular shifts and accelerating trends.
And we expect the strong trends to continue for the remainder of 2021.
And beyond.
An office near.
Near term fundamentals remain the less clear as businesses continue to assess space requirements.
Which of course, it's difficult to do in the middle of the pandemic.
That said, we do see green shoots emerging.
The first is on office using employment, which is clearly rebounding as he economy gains strength.
Since the low point in April 2020 the.
The U S is added back.
1.9 million office using jobs through March 2021.
And most economists expect strong job growth to continue from this point forward.
Now the the U S economy is creating office jobs again.
Even assuming more people will work remotely post COVID-19.
It is only a matter of of time.
Before office buildings repopulate.
In other words are.
Or a thesis at the office sector will fully recover from this of that remains intact.
The second Green shoot I'll mention is that has the vaccine gets rolled out to more people.
We are clearly seen an increase in 10 of tour of activity of office space.
Our internal tracking shows the tenant tours were up significantly of March.
Versus the beginning of the year.
Granted tour activity is still down from pre pandemic levels.
But it's definitely trending in the right direction the.
The increase in two of activity in the solid leading indicators of for accelerated leasing activity.
Also has to be noted of year and we saw an abnormally high percentage of short term renewals as.
As well as the disruption to the normal churning leasing.
It's pent up demand dynamics should translate into an increase in leasing volume activity later this year.
And into 2022.
There is a broader return to the office.
Following near record volume for the month of December.
<unk> Marcus continues to show encouraging momentum.
With the first quarter volume of $97 billion. According to our C. A.
Which was well above the volume reported in the second and third quarter of 2020.
Despite Q1 being the seasonally slowest period of the year.
The man drivers remained favorable the flow interest rates.
Tractive yield GAAP that is the cap rate spread of a longterm bonds.
Pent up demand for real estate assets.
And pent up demand from cross border capital.
Additionally, what organizations continue to sort out the flexible work dynamic.
It is evident that the need for strategic advice and problem solving has increased significantly which bodes well both of our outsourcing and transactional businesses.
That's the companies navigate through these decisions.
In short.
Volatility in of recovery isn't very good thing for our business like ours.
Last year, we hosted an Investor day in the early March just as COVID-19 was becoming a global of that.
At that time, we unveiled the results of nearly six months of work, we had done to strategically real line the business to enable us to become a leaner.
Faster more efficient organization.
We identified the number of operating efficiency initiatives to optimize each of our businesses across our entire organization.
These actions represent permanent savings that included initiatives ranging from streamlining our organization to better match, our service delivery model.
The the optimization of business functions.
The automation and technology.
And can actually with these actions, we achieved $125 million of permanent savings last year.
And are on track to achieve an additional $125 million.
2021.
These offers are of key strategic advantage that will enhance our agility and speed in the marketplace.
As well as improve our profitability.
And build significant operating leverage in the business compared with even just one year ago.
Have you looked forward and.
And as we enter 2022.
We will have executed of significant reduction of permanent cost in the range of $250 million over the past two years.
But more directly.
Of rising tide lifts every competitor in our business, but.
But we firmly believed the significant actions, we will have taken to opera optimize our operating model.
Well disproportionately aid and accelerate.
Our margin expansion in the coming years.
Lastly.
Before I turn the call over to kneel.
I'd like to emphasize one last point about cushman and Wakefield, it's been slightly overlook the past year.
We are on the forefront with the industry, leading capabilities in terms of acquisitions and the integration.
We have completed twenty-seven infill M&A deal since the merger.
And have a demonstrated track record of accretive M&A.
And broker team on boarding.
We have a distinct advantage of one of the few firms that can deploy solutions on a global scale.
And I'll also growing our platform as a result of the additional white space to fill across geographies.
And the service lines.
I bring this up because of our experience.
Periods of volatility can drive opportunity for companies that are well capitalised on strategic.
Cause you know.
In 2021.
Solidified and already strong liquidity position.
And currently have over $2 billion of available capital.
To augment our growth through acquisition of the opportunities of they all themselves.
This recovery.
Despite the near term challenges faced in the industry.
And what will likely be an uneven of recovery.
We believe there will be consolidation of share to firms like cushman and Wakefield.
That have the capability.
Resources and scale the solve the challenges our clients face each day.
I continue to be very proud of our team and our execution throughout this challenging period.
Cushman and Wakefield holistic expertise.
Global market intelligence and thought leadership have never been more important to our clients.
Thank you again and with that let me turn on the call over to kneel the detail or quarter.
Ill.
Thanks bread and good afternoon, everyone.
Overall, we we're very encouraged with the stroke start to 2021.
The revenue for the first quarter of 1.3 billion without one per cent, while the adjusted EBITDA of of 100 million, what's up 38% as compared to 2020.
Oh of adjusted EBITDA margin of 7.5 per cent expanded by 215 basis points compared to a year ago.
This margin performance demonstrates on excellent operating performance as cost reductions more than offset the impact of a load brokerage revenues and higher year of of your bonus expense from non C. O N as in the first quarter.
Adjusted any sort of share was 11 sense of eight cents over the last year.
Taking a look at on fee revenue by service line of P. M. S N and valuation of the other service lines were of 2% respectively for the quarter.
M. P. M. S. M fantasy services represents just under half of the fee revenue.
Insisted that she said it says we typically perform.
Sub contract of variety of services through our operations of both of the Americas and APAC. This business generate solid cash flow on a stable revenue stream.
And the first caught up as soon as the services was up seven per cent compared to the first quarter of 2020 reflect on continued demand for COVID-19 related cooling surfaces, primarily in the Americas.
Well the quota leasing on capital markets revenue declined five per cent, and 10%, respectively, which was better than our expectations.
On balance the momentum of so at the ear and 2020 carried into the first quarter of 2021, which of certain little encouraging.
The industrial sector of continues to be an area of onto the strength in both of <unk> and capital markets across all three of our of portable segments, but particularly in the Americas.
The other we notice of this year and an abnormally high number of of short term the issue where needles.
This is the trend was so continue on the first quarter. That's the oldest pushed tenants away from month to month renewals and occupies continuous has longer term office requirements post COVID-19.
And capital markets and the non off of sectors. We continues to see of favorably environments. The capital investments, where we've seen the spread between price expectations of return acquirements hold up well.
The outlook remains less of can then get sort of the office capital markets.
While the first quarter results continue of positive trend, we do remain cautiously optimistic for the full yeah. That's the first quarter of snow this quarter of of the until size the timing can impact of itself.
Doesn't get on furniture of sounds by segment revenue in the Americas was up one per cent of strong growth in our P. M. S. N service the line of eight defense more than offset the decline in brokerage.
And the and a pack of post on five per cent of rule with P. M. S. M on both segments down nine per cent.
And in the AD brokerage was down 4% of a pet.
So positive growth of two per cent, primarily due to leasing activity in China and Hong Kong.
Adjusted EBITDA as of significantly on all segments Chew on efficiency initiatives.
The amount of operating efficiency, we are pleased with a continued strong execution.
We delivered 60 million of savings during the quota, which includes the savings from operating the efficiency initiatives as well as continued discipline in discretionary spending.
Roughly half of the savings for the quota represent totally productions, while the other half represent temporary cost savings, including Redactions and travel entertainment and events spend on the third party suppliers faster the nose and part time work schedules.
As the outlines on the fourth quarter Cole efficiency initiatives within a 2021 and upgrade budgets total of 125 million.
The savings will offset the much of the unwind and temporary cost savings will of course, we're off the yeah. That's the recovery advise of an activity picks up.
But the impact of these initiatives will not be sufficient to completely cut out of the returned to of more normal annual of brightness expense, which will be of drag of about 50 million. This year.
Anticipating of headwind to impact the Celts and the second and third quarters, principally due to the smell of otherwise of temporary cost savings in the first quarter.
Well the enough providing free of guidance at this point I wanted to provide the photo of remarks to help frame directionally, how we're thinking about the yeah, principally as it relates to the outlook for revenue.
Given the fact that of significant portion of a fever Avenue and in the second half of the year and the the near term business outlook of environment remains on certain we continue to have limited line of sight to fully of revenue trends in a brokerage service lines.
The thing said, we do expect brokerage revenue the she had to be up this is 2024 the phone yeah.
Do you believe there will be a full recovery and brokerage revenue of of the time, we did not expect brokerage to recover the 20th 19 levels do you think.
Any quota in 2021.
Yeah M. S. N is expected to grow an allergic of mid single digits for the year.
Funny Tenney trial balance sheet on financial position remains strong we ended the first quarter with 2 billion of liquidity consisting of cash on hand of 1 billion and availability on our fault of the credit facility of 1 billion we.
We had no outstanding borrowings on all of the father.
We continue to be active in exploring info M&A opportunities to further in the head South book Soda the service is globally.
And given out of liquidity, well well positioned should opportunities arise.
With that I'll turn the call back to the operator for the Q&A portion of stays call operator.
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One moment, while we pull far first question.
Our first question comes from Anthony Paolo with J P. Morgan. Please proceed.
Ah. Thank you my first question relates to the savings net against.
Some of the drags so you mentioned 60 million of savings in the first quarter.
But $50 million of net drag for the year. So we shall we think about two Q to four Q as having 110 million of of headwind.
I'm looking at it wrong.
No I try any of the way to think about it is first of all of if you look at the 60 on the first quota of that was 30 per year.
So the temporary but basically half of that uhm occurred in the first quarter as we look at the balance of the yeah. The will be a $50 million of headwind related to a bonus so over the full yeah. There's 125 million of payment savings there'll be 125 reversal of temporary savings for those.
Two of offset each other and then the 50 million is a headwind related to the bonus coming back on.
Okay.
Okay, I don't think through that and then as it relates to the top line.
You know how should we think about just the sequential seasonality do you think that that is a fairly normal as we think about how how trends are working right now I'm working like from one huge huge you or or any thoughts on that front.
Yeah sure so.
Cortes over the smallest quarters. So we do expect sequential growth from the first quarter into the second quarter, it's difficult to say exactly what normal is based on on price yeah, but.
But we do expect as I say brokerage, we have seen sequential growth and brokerage over the last five quarters.
Okay, and then last question for for Brett as you think about coming out of COVID-19 and working out. The next few years. What are you. She is sort of the the strategic priorities in terms of of where you see the most opportunities I think pre.
The pandemic you'd made some acquisitions on on the residential side. It seems like I see your name more often these days associated with debt placement, there's co working because of it.
The water sort of the key areas you see as your big of opportunities.
Yeah, I would say the Tony debt our priorities are of strategic objectives are are wholly unchanged from where they were pre care of it first and foremost as you know and we've spoken about for some time now.
We have a benefit which is we still have white space on our platform, but geographically and by the surface line areas that we can fill within fill acquisitions and we believe that many of the didn't go opportunities will come.
To us on to the market over the next year or two years, we're tracking the number of interesting opportunities from the market at the moment so into lemonade remains of key priority for a second priority for US remains deficiency. So we are we think we're very good at using technology and creative solutions to build a more efficient organization that should be of a <unk>.
Margin enhancement total for us as it has been it will continue to be so in the I think the broader marketplace, there's there's definitely and the evolution and the corporate outsourcing world the business run by Bill nightly for US where property Tech is playing on.
Never bigger role and how people think about workplace and how people think about driving value end of the workplace, we see a lot of opportunity on that we spent a lot of time of the last two years on that topic and think there's great opportunity there as well and as we said are prepared come as ourselves on are are too large peers were just really well positioned.
<unk> right now two of Creat share both in the corporate occupier side because of the investments we've all made the other.
The systems and technology and people, but also on the institutional investors side, where more and more of of the marketplace.
Is being controlled by fewer and fewer large institutional on her so all of that plays really well into the core strategic principles. We've laid out the the last few years.
Okay. Thanks right.
You bet.
Our next question comes from Stephen Sheldon with William Blair. Please proceed.
Hey, thanks.
I know you don't buy guidance, but it just seems like transactional activity came in well of Bob your expectations in the first quarter.
So curious how your level of optimism about the remainder of the year and the and the transaction of lines right now I guess compares to where it would've stood a couple of months ago. I guess, you have you become more optimistic about what what type of after the you can see of of the rest of the year.
Sure of Stephen but let me, let me hit it from a high level of and then hand, it to Neil to the mind that we're not gonna get any guidance, but I'm thinking of of high level.
You're right. So what has changed over the last three months is that the pace of the of recovery.
Has certainly accelerated from what we were expecting near the end of the last year and that's wholly and entirely later, we believe to the master of a lot of vaccine.
So I was thinking around 2021 is that while there's still a lot of uncertainty across the marketplace globally.
And there's uncertainty of cross some of the product types of as well there's more certainty that recovery is is on its way in in some sense already here.
But as as you know and as Neil is mentioned as comments you mentioned a moment ago. There are headwinds on their tailwind in 2021 of those all come into play.
And I would say that well, yes, we are certainly more optimistic about 2021 on the river of three months ago. There's a lot of uncertainty of the marketplace meal of anything you want to add to that I think it was very comprehensive right [laughter], yeah, nothing nothing to add.
Great and then it just on capital markets I guess, but it would be curious to know what you are seeing in terms of the pipeline there across the different regions and what's your sense of how bad at spread maybe trended during the first quarter of if you have visibility end of that property sales.
Sure well, it's very clear in which you know in Tony of the rest of the colors nobody watching the RCA data on hearing anecdotal data from the other regions the capital markets on.
Was the first the major business line to come back fourth quarter of last year. As we all know was was surprisingly strong in the queue wanted to share. It was certainly better than we had projected and I think the market had projected so a couple of market.
Is is doing you know relatively speaking well and I I think part of this is that Steve.
The Stephen is that institutional investors are.
And then there's exception of this of course, but it's usually the rest of your beginning to look through COVID-19.
Yeah, and I think there's a growing consensus that as as nasty as that short recession wasn't as tough as the pandemic wasn't it the questions. It's created around how people to use space I think there's a much <unk>.
The stronger growing consensus that this was a point in time of that and that the market will cure from this in a relatively short period of time I don't think there's a lot of of pin and out there today and by the way there was six months ago as to what the future of of.
This will hold on I think at this point and you've heard this from our peers, who the lottery reported we all feel that all of the off the season job shed in the first half of 2020 will be regained by the end of the sheer we generally all field that day can see and rinse will have been fully recovered by mid 2022, if not a bit soon.
All of that then says to an investor, it's really kind of high quality of it in a high quality location, there's not a lot of of.
Of turnover in the rent will over the next 18 months in the Ozark, where they are assets of pretty attractive. So we feel good about the capital markets. It's like it's not gonna be.
Back to it was in in a quarter, but we like the trend.
Great I appreciate the color of thanks for taking my questions.
You bet.
On My next question comes from pick from my whole trial with Morgan Stanley peaceful sleep at the question.
Thanks for taking the question.
We just first one you mentioned the the M&A you know that that you've done over the over the last few years I'm just wandering through the pandemic.
And they're making as we emerge.
Where would you say cushman had sort of the greatest market share game, maybe region or segments. Yeah, and then I also had also because the talk about white space and you've been trying to fill it out over the last few years. So I'm just wondering as you emerge out where would you say you can't share.
Okay. So let me let me answer the question absent the M&A component of of your question. Please answer the question in terms of where we think we're gaining share have gained share. The last few years I would say first in the in the global capital market space. This company for years ago, where the.
Player in capital markets, but by no means of leader in the major markets. Today, we are so capital markets market share has certainly grown quite a bit over the last few years. We also four or five years ago were relatively new to the party on large complex global corpora.
Outsourcing, we're not due to the party anymore and two of great extent any large multinational corporate outsourcing bed that comes to market. We're at the table and we are gaining share there as well. We also the is you know we have a very large very strong on global.
Brokerage transaction business.
And the the structural trends in the industry of sexual trends in the marketplace. The debt extent for a number of years or even as true today as they were before which is share it as an industrial as an analyst I think I think we can all agree the chair across the business line.
Is going to of Creed to those few firms that had a truly global platform a free.
Full suite of services deliverable whatever of multinational client may need it in with the track record of of quality outcomes with our clients and that will the narrows the field down to three firms of which were one and I think that the share games that you'd seen the past few years of cross are too large peers and ourself on.
Our service certainly indicative of of what you would expect to see for a very long time, it's just very difficult in the marketplace today to be a half built firm and compete against the sweet powerhouses.
That's a fair enough you know on on the on the topic of you know the the P. M. S. M. As you know you you kind of do the two now that you know you're competing with two of your peers.
I I I'm curious to get your your sense on we we talk a lot about the M. S N as it pertains large office you know corporate users I'm wondering on the industrial of the side of you see more automation in warehouses and obviously the girl at the in the industrial space you know.
What's the opportunity to to grow in that segment of B M. S. M.
Yeah, that's a great question and and it isn't isn't the answer I would love to give you which is simply does we historically, we have had a higher percentage of our PM work and R. F M work in industrials the.
Most firms and that is that is it wasn't deliberate. It's the result of the legacy of the companies, we put together and one in particular of cast Detroit was was and we are now very strong and the industrial space, but PM FM here on the U S. Industrials have been cause they've been of a sweet spot for us for some time now that has.
The men said the trend towards the growth of industrial space over the last four years does not a trend that was ignored by any of the major firms in the business. So we have been like others heavily focused on growing out our industrials business, we have but what is interesting to me in a way it was different.
Here at Cushman and Wakefield for me was the strength of the company has had an does currently have in manufacturing and industrial and and logistics. So that's an area of that of course of them on the phone nose is growing very rapidly right now the good news for us as we've had a strong for her.
<unk> and that political for some time in the intend to continue to expand it and we are I should say just finally, we are investing materially in our industrial logistics businesses across the globe. It's one of our three vertical priorities that are three major regions are pursuing together.
Yeah that makes sense and then just lost one.
You know you you talk a little bit about six months ago. There was debate around returned to work and and and you know kind of just the office prospects you know fundamentally as you say office is likely to recover by mid 22 in terms of the rents, but but I'm curious to get your thoughts on you know two topics. One is just the.
The use of the office of it as it may change and maybe a bit of taught from what you're hearing from some of your large tenants and then second related to that the the the the flex office topic. If some of your peers have certainly been a lot more active or taking actually the integrating and some of those businesses.
What's your view on Cushman his desire of ability to do that.
Right. So let me take those in order so.
It's very clear I think to certainly to you in to the folks from the call into us the.
The house do you on the future of authors has materially changed for the more positive the past three months past couple of months Uhm and.
Anecdotally I was with a C E O. The very very large global office occupier last week.
And this individual asked us to begin cataloguing class a space that has been shed into the sublease market by other occupiers. The past 12 months, because they're how skewed and this is a very large occupier is that the work from home model will be in the rearview mirror too.
Great extent fairly soon and they would like to start acquiring high quality class a space in major markets and warehouse that space, because it's so inexpensive and the sublease market never would've heard that six months ago and so as we sit here today I would tell you that the majority view of major.
Corporate occupiers right now is that work from home doesn't really work well there is certainly a component of their work force. There's a component of art work force them in a higher percentage of the work force that will be allowed to work remotely primarily maybe spot from 5% free pandemic, the 10 or 12% post pandemic and.
There's a higher percentage of office workers, who I think will be given permission to work remotely occasionally, but I I have to say that the the the talk on the market from corporate users has really moved the last four to six months from.
Work from home is working really well now to work from home really doesn't work very well, we're gonna be more agile and how we allow people to have choice around where they work and how many days or in the office versus being somewhere else, but I think it's very clear to us now debt office <unk>.
<unk> is here to stay office buildings are here. This day, we are not going to see goes towns of class a high rises in Midtown Manhattan. The other major cities.
So in terms of then getting to the second part of your question on the flat space. So we've seen in the last three months two of our peers.
Make investments into flex companies and I think those are smart investments the flex space.
Working has.
Been redefine through COVID-19 the model of long dated leases in class a buildings sublet too small kind of.
Uhm that model I think is very troubled and I think of the market has opined on that and the model of changed and so what we see now or a smaller number of high quality flex providers that are really focused more on the client experience inside buildings, maybe maybe the the two property tax.
The the other things they do and also and more importantly to us helping institutional owners redefine the way a building is is viewed by attendant not just the color of space. The the entire quite experienced in corporate occupiers. I think now are beginning to this sort of some years ago, but has.
The accelerated a bit corporate occupiers of beginning to look at variable beast tons of space as a component of small one but of component of their footprint. So.
I think what we're gonna see going forward is that when you look at large corporate occupiers, there will be a percentage of bare footprint that will always be an influx space and plug space massively shorter term least term space. So we admire with some of our appears did I think I think they were smart moves we also.
Are very focused on how we provide variable leafs opportunity to our clients.
And that is something that we've done for some time now and it's something we're very focused on right. Now. So you should expect us to be very active in that area and bring into our clients flexible solutions on how they look at their footprints include in the next office.
Great. Thanks, so much for all of the color.
However, the next question comes from Doug harder with credit Suisse. Please supposed to get the question.
Saying can we talk about the the environment for for recruiting theaters now of that yeah. That's true.
Volume the capital markets of started to to recover.
Sure so for the past 12 months.
Which is typical of recession the market for theaters, certainly cooled off and that's what happens in every recession. It tends to cool off for two reasons one is still.
Theaters.
The in a recession are much more reluctant to change firms. It's just another risk factor in the already very risky environment. When we're in the recession on.
And as you emerge out of recession that market should and and is right now beginning of heat up a little I would say, it's still the the movement of scanners is still the oppressed from what we saw perhaps three years ago or two and a half years ago, but in the in the marketplace like in a in a full.
Functioning normal operating environment, and the brokerage business, there's always a material amount of movement among firms the more robust the market places typically the more movement you see because of firms are willing to pay a bit more for that talent right now as we as we get into a what looks to be.
The over the next Tuesday, or as a fairly robust recovery I would expect to see an active market for fear of recruiting for cushman and Wakefield, we're not really in the business of of just blanket recruiting for us our recruiting is very very specific to either vertical.
<unk> that we want to build out.
So the product type of Ah brokers that we think.
Fit into a strategic option that we have and two white space, where we feel that our share.
In brokerage is not what it should be so for us it's great that there's some movement of the marketplace and we can see opportunities to hire people, but we really we're really not in the business of just blanket recruiting brokers. It. It's a it's a very specific targeted activity to fill a very specific.
And I would expect that in 2021 and 2022.
On that market it'll be relatively active.
Great. Thank you.
On My next question comes from Michael Funk with Bank of America. Please proceed.
Yeah, Hi, good evening and thank you for the questions couple of if I could so you're you're all your comments about about the M&A and the track record of them the.
To go in and capital to potentially deploy there what would love to get your thoughts on what the right target mix is by service line going forward or if they're area is that you want to beef up and then even by capabilities. If the additional capabilities, maybe the cushman doesn't have today, but you believe could be.
You spell to meet the market in the next couple of years.
Sure well, let me answer the question on this way because the.
The areas. We are currently focused on for M&A that would be very competitive information, which I am not going to disclose I will tell you that.
The five vehicles right now that we are very focused on on <unk> figure. It's we're very focused on to lead into over the next few years.
And we are actively looking in the marketplace for infill opportunities and those five verticals I would say that what different today from say three years ago.
Is.
We've we've completed the work we wanted to do in a number of verticals and we've identified.
Some additional verticals to know do what again either that weren't as high of a priority for years ago or Ah relatively new to the party of opportunities we see on the marketplace today and going forward that weren't as attractive.
Two or three years ago. So.
R. R capital deployment strategy of our M&A of strategy is very very focused very very targeted.
We each year, we take a look at the portfolio of businesses. We have we take a look at growth statistics across all of the two groups from vehicles, we make very deliberate decisions about where we're going to try to deploy capital and if you know that deployment of capital can be either in teams of theatres, who work on marketplace of France.
<unk> I don't think it's any secret debt industrial logistics is it we mentioned the survey are very high growth vertical and so we're very focused in that area.
The teams of theatres that might be very good and that we can also do it the infill M&A and we can also do the two joint venture and all of those opportunities are available to us and we're very focused on as I mentioned five discrete areas right now that we believe provide outside of the opportunity for the from.
Understood the Ikea and then going back to the temporary cost on why you called out of 125 of temporary cost on reversal for 2021 can you help us think about about the timing of that the sequencing throughout the year I I I mean, I've seen much more backing loaded certainly with T.
And a portion but can't let's think about the the sequencing of about 125.
Sure I I think the easiest way to think about it lack of it's really just to think about.
It'll be fairly even we did see a delay and temper costs coming back. So it will depend to a certain extent of on the on the up quickly we see brokerage recover so I would say the majority of it will be in the second and the third quarter.
And then in terms of the bonus that will also the 50 million dollar headwind that will be in the second and the third quarter as well so I would say over the year of the 125, the 225 balance each other.
With the bulk of it happening and that's in the middle half.
On understood and then one of them or if I could place you you mentioned the pace of the recovery.
Accelerated much faster the media expected, even a few months ago or are there any specific areas to call out the opener, particularly surprising what the case of the recovery so far.
[noise] property so.
The service line.
Yeah, Yeah, and I wanted to be as clear as possible on on this point.
So what has changed in the last three months from our perspective is our outlook on B pace of the recovery going forward. So what we saw on the first quarter was really stabilization of of the markets and some incremental improvement across the almost all of our service line that was great.
It was better what we expected, but I would not describe that as a while for covering I'd call. The stabilization of the marketplace, an incremental improvement of revenues because of the good such a great job on efficiency last year that incremental improvement basically flat and revenues went straight to the bottom line and you saw that across the industry in the first quarter what.
What is the what is different for us as as we think about the year and we thought about how 2021 would play out we were hopeful the Q3 and Q4 would show some recovery I think we feel more optimistic now but that will indeed be the case. Your specific question because that when you look across the board flow of our businesses.
You don't see wild increases the cross any of the business. What you see is improving across almost all of them. Instead of specifically answer. Your question is almost all of our businesses almost of the exception of project management showed no improvement in the first quarter the from what we expected.
I go to avoid it.
Yeah, one more thing I make it might be helpful. In the leafing business.
Still down over prior year, but what we did see for Green shoots was more property tours, we're seeing a lot more interest by corporate occupiers and looking at space. It's not that taught it was it's not that the normal but there's no doubt the property tours are well up from the takes the or at the end of last year.
And in the third quarter and that of course is a leading indicator for pizza recover in the same.
Great. Thank you very much of the questions.
Thank you we have come to the end of our question and answer session. Today I would like to turn the call back over to Mister Brett White for closing comments.
Perfect well thanks, everyone for dialing in we're we're real happy with the Q1 excited about the year and look forward to talking to you in three months.
This that concludes today's teleconference. You may disconnected line at this time and thank you for your participation and have a great day.