Q2 2025 Cushman & Wakefield PLC Earnings Call

Good day and welcome to Cushman & wakefield's. Second quarter 2025 earnings conference call. All participants will be in a listen-only mode. If you need assistance, please signal a conference specialist, by pressing the star key followed by zero.

After today's presentation, there will be an opportunity to ask questions to ask a question. You may press star then 1 on a touchtone phone to withdraw your question. Please press star then 2

please note that this event is being recorded.

I would now like to turn the conference over to Megan McGrath head of investor relations. Please go ahead ma'am.

Thank you, and welcome to Cushman and Wakefield, second quarter 2025 earnings conference call.

Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation can be found on our investor relations website at IR. Cushman, wakefield.com

Please turn to the page in our presentation. Labeled cautionary, note on forward-looking statements,

Today's presentation contains forward-looking statements based on our current forecast and estimates of future events.

These statements should be considered estimates only and actual results May differ materially.

Financial measures as outlined by SEC guidelines.

Reconciliations of gaap to non-gaap financial measures definitions of non-gaap financial measures. And other related information are found within the financial tables of our earnings release and the appendix of today's presentation,

Also, please note that throughout the presentation comparisons and growth rates are to the comparable periods of 2024 and in local currency, unless otherwise stated all revenue figures refer to fee Revenue. Unless otherwise noted and any reference to organic growth. Excludes the impact of last year's deer of our non-core services business,

And with that, I'd like to turn the call over to our CEO. Michelle McKay.

Thank you, Megan.

Good morning, everyone. And thank you for joining us today.

2 years ago, we set a new course for Cushman and Wakefield grounded by 3, clear pillars protecting our core strengths operating with discipline and cultivating avenues for growth.

We have now achieved the majority of our 3 year Targets in that 2 year window. Well, ahead of plan by staying focused disciplined and action-oriented.

Today, we're pleased to share measurable progress on multiple fronts.

Outcomes made possible by our collective commitment.

Resilience and dedication to our Clear Vision.

We have a rebuilt the company from the inside out and now you will see us take flight.

Our results in the first half of this year demonstrate the impact and success of our transformational strategy.

We drove Topline growth in nearly every region and service. Line in both the first and second quarters.

Year to date. We have driven more than 90 basis points of improvement in adjusted. Ibiza margin versus the prior year and increase adjusted earnings per share by 95%.

To 39 cents per share.

An excluding the immediate period postco recovery in 2021. This is the strongest first half earnings growth. We have experienced since going public in 2018,

And as Neil will discuss in more detail. We are meaningfully raising our full year EPS guidance.

Our Capital markets business is expanding at an accelerating pace.

Bolstered by improving market dynamics as well as our internal Talent initiatives.

Capital markets Revenue Group by an impressive, 26% in the second quarter and we achieved this level of growth while only being in the very early stages of our talent expansion.

Year-to-date, in the Americas, we have recruited Capital, markets, Brokers with annual average revenue. That is 200% higher than we recruited in all of 2024.

We are adding professionals across all product types, and we are very enthusiastic about what they will bring to our business. Once fully ramped

Our leasing business continues to run on all cylinders.

We grew Revenue in all major asset classes in 2q including industrial, which was up 8% in the Americas.

our strength and leasing lies in the superior advice and execution, we provide our clients, regardless of the economic backdrop,

we see this acutely in our multi-market occupier group where mandate complexity is increasing driving average, contract Revenue up, 45% in the first half of this year,

And the turnarounds in our services. Business is in full swing.

We achieved 6% fully organic growth in the quarter and acceleration from first quarter's growth as our teams. Continue to drive positive momentum.

We are winning new business and driving incremental growth within our portfolio of existing customers.

As we more consistently, bring to them, the full Suite of capabilities of the Cushman platform.

And our intensified focus on client retention is seeing results within 96%, annualized retention rate. In our goes business, year to date.

Alongside our strong second quarter earnings performance. We are announcing that today, we have prepaid an additional 150 million in debt bringing. Our total debt repayments in the last 18 months to 400 million.

Our gross debt. Has now been reduced from 3.2 billion to 2.8 billion.

And the combination of this deleveraging with 5 successful repricing, over that same period has resulted in total interest Savings of more than 45 million annually.

Clear.

Leaders of companies, both large and small are navigating their businesses, through Market noise, and volatility and are making long-term strategic decisions about how they occupy and manage their real estate and infrastructure portfolios.

In addition, lender appetites to deploy Capital continues to provide borrowers with increasing optionality better terms and more flexibility providing a boost to Capital markets activity.

Looking ahead. We anticipate continued growth in global leasing markets.

Ongoing progress in capital markets activity.

And increased opportunity to gain market, share in our services businesses.

Now, I'll hand it over to Neil to go through our second quarter results in more detail.

Thank you, Michelle. And good morning everyone. Before I get started as a quick, reminder, all comparisons are to the prior year and in local currency and organic growth figures exclude the impact of last year's destitute of our non-core services business and this, otherwise noted all revenue figures refer to fee Revenue.

We're very pleased to report another strong quarter with solid Top Line and bottom line performance fueled by broad momentum across our service lines and continued progress. On our growth initiatives, our Capital markets business delivered, double-digit year-over-year, Revenue growth for the third straight quarter, while leasing maintained its positive momentum with high single-digit Revenue, gains or

IC Services, Revenue growth accelerated to 6%. Exceeding, our expectations once again.

Second quarter fee, Revenue reached 1.7 billion growing by 7%. With Organic Revenue, up, 8% adjusted, ibido, Rose, 15% to 162 million. And I adjusted even a margin expanded 75 basis points to 9.5% reflecting our ability to drive operating leverage while effectively managing expenses to support continued growth.

Adjusted EPS grew year-over-year for the fourth consecutive quarter Rising, 50% to 30 cents from 20 cents a year ago.

now, turning to revenue performance by service line,

Leasing a core strength of our platform grew 8%. This quarter in the Americas. Leasing world's 9%, with strong demand, across all asset types office activity remained. Robust driven by return to office momentum and new business formation.

In industrial demand, remains strong across multiple sectors, including e-commerce, retail, and manufacturing.

In a mere leasing return to growth with Revenue up 8%. As we experience notable strengths in Germany and Ireland.

While Apex were at 3% decline in Revenue growth in India and Australia helped offset the impact of a tough year-over-year comparison in Greater China, due to the timing of a few large deals.

Overall investment in the APAC region, remains persistent, and the underlying Outsourcing and development trends. That have propelled, the Region's success remain intact. Giving us confidence in a near-term return to growth.

Chinese Capital markets, the America's delivered 30% growth driven by healthy fundamentals and strength for across asset classes and deal sizes.

Multi family and office transactions were particularly active and we benefited from an increase in larger deals. Our targeted hiring strategy is paying off and we're encouraged by the sustained momentum in this business.

Internationally Capital markets also performed. Well with a mere up 16% driven by strength in Spain and Germany. While APAC Capital markets, grew 4% with strength and India and Australia.

In our services segment, we remain on track to meet our guidance of mid single digit organic growth for the full year.

The America's posted 5% organic growth driven by client wins and expansion of current mandates in facilities management and facility services.

in Amia Services, grew 11% as our, retooled project management business, when new contracts in France and Italy,

APAC posted 5% Services growth supported by expansion in India, new business in Singapore and growing project management work in China.

Equity method Investments were down 4.1 million for the quarter mainly due to lower performance from our Greystone joint. Venture our 1, where partnership in China performed largely in line with last year.

As noted in our press release this morning, starting this quarter, our adjusted net income and adjusted ibida. Now exclude non-cash items related to Greystone specifically gains recognized from the retention of mortgage servicing rights or msrs.

Changes in fair value of msrs and credit loss, Provisions, related to mortgage loans.

Industry practices.

On the balance sheet, we ended the quarter with net leverage of 3.7 times. Training 12 months free cash flow was $126 million, representing an approximately 50% conversion rate. We continue to expect to exit the year at approximately 60%, in line with our free cash flow conversion target of 62% to 80%.

We've made significant progress in reducing our interest burden. We repaid, 25 million of 2030 debt during the quarter. And shortly after quarter end, we repriced approximately 950 million of term loan debt. Lowering our applicable interest rate by 50 basis points to sofa. Plus 275, the most favorable credit spread we've had since our IPO in 2018

as Michelle mentioned today we paid down an additional 150 million of term loan debt, using cash on hand.

Including this repayment. Our gross debt is now down to 2.8 billion.

We remain committed to investing in the business while continuing to reduce debt and achieving our net leverage Target of 2 to 3 times.

Our capital structure remains strong and resilient with no material debt maturities until 2028 and liquidity of 1.7 billion. Positioning us. Well to drive long-term value for shareholders.

Turning now to our outlook for the year, we are raising our Outlook as follows. We now, expect fully a leasing Revenue to grow 6, to 8% slightly above our previous forecast.

Capital markets revenue is expected to grow in the mid to high teens for the year. Also, an increase as our previous expectations.

Services remained on track for Mid single digit organic Topline growth consistent with our updated guidance last quarter.

We anticipate full year, 2025 adjusted, EPS growth of 25% to 35%. Well, ahead of our initial expectations.

In summary, we are very pleased with our financial performance and momentum. This quarter, we're confident in our strategy and excited about the opportunities ahead. I'll turn the call back over to Michelle.

Thank you, Neil.

Our results for the first half of the Year demonstrate that our business and operational performance has kicked into another gear.

We are driving strong, Topline, growth and margin and earnings expansion while simultaneously ramping up growth Investments, and reducing our Leverage.

And you should continue to expect more from us.

Enhanced operational performance continued market, share gains, ongoing reduction of debt, and interest expense.

All contributing to continued momentum as we look forward to 2026 and Beyond.

If you are waiting to see if we could get it done, you have your answer now.

This progress this quickly with this, many achievements is all because of the people who work at Cushman and Wakefield.

They are not just rowing together. They are competing together to win more win. Bigger.

And at the heart of this is listening to the client and delivering what they need.

a big thank you to everyone at Cushman and Wakefield, we are a group that never settles sharing a culture of high performance expectations and executions for ourselves, and for our clients,

Let me now hand the call back to the operator for questions.

Thank you.

We will now begin the question-and-answer session. To ask a question, you may press star, then 1 on your touchtone phone.

If you are using a speaker-phone, please pick up your handset before pressing the keys.

if at any time your question has been addressed and you would like to withdraw your question, please press star then 2

In the interest of time, we ask that you please limit yourself to 1 question and 1 follow-up. We will now pause momentarily to assemble the roster.

Do you get to choose your calling on first or you already ordered it? And your first question today will come from Steven Sheldon with William Blair please go ahead.

Hey, thanks and really nice job here. Um, so first it seemed like things in a Mia picked up nicely in the quarter.

So, how much of that is being driven by operational improvements? Especially under new leadership versus, uh, easier comps and and any changes I guess in the in the broader demand environment. So how much is is it being driven by you guys versus versus versus things in in the backdrop?

Thanks for the question, Stephen, we're seeing similar themes. Play out in Europe as in the US.

The management changes are pretty recent. Although it is starting to drive some progress.

Certainty activity is improving across that region and QT, particularly strong as Neil mentioned and was observed for us.

In a couple of countries in particular in Ireland, Netherlands, Germany and Spain during 2 Q. We were the broker for the largest single asset office. Leasing deal in the EU since, uh, 2020 in Ireland and the largest ever office leasing deal in Barcelona.

The office continues to Trend higher in a media for us and vacancy remains relatively low under 10% as of Q2 in 2025, and on the Capital Market side momentum is building as well. There's pretty good labor market resilience inflation returning to Target. They've had multiple rate Cuts over there. As I'm sure, you know, bringing the key policy rate down under 2%,

Effectively back to neutral. So all in all what we're seeing is growing investor confidence across Europe but then you compound that with a lot of the operational work and efficiency work that we've been doing around, how we run the company, how we manage information and data? And when you start to bring these things together, you get the multiplier effect that you're starting to see now.

Got it. Yeah, that's great to hear. Um,

In Services, just as we think about the setup for growth in the back half of the year, we want to make sure you'll be positioned to drive growth from the investment. And so,

Does the guidance kind of assume you'll be back to Mid single digit growth in in 3 q and 4 q, even on a reported basis. Am I thinking about that, right?

Yeah, you're a student. That's exactly the right way to think about it.

Okay. And and then on um, I think Michelle, you talked about 96% annualized retention, uh, in goes so far. This year, seems very strong any sense how that metric is looked in the past few years. And I guess asked another way is that a notable improvement from what you've seen? Uh, historically there.

Yeah. It's a notable Improvement and it's also given us some tools to apply across the services business in general. People have believed historically that something even in the low 90s was compelling, but we're proving that we can really create a much stickier environment for our clients and services. And as you can imagine on the increment every 100 basis points that we add to that is is pretty profitable.

And your next question today will come from Anthony pallone with JP Morgan. Please go ahead.

Uh, yeah, thanks. Good morning. A nice quarter. Um, first question relates to leasing, can you maybe, uh, give us a little bit more context around the various property types and how much runway you see for further, uh, growth maybe in the back half of the year. Um, it seems like we've had a few mixed messages on Industrial in particular as it relates to, you know, what some of the landlords have been saying versus the Brokers. And so just, you know, if you could dig a little bit further into leasing in the back half the year, that'd be great.

Sure, let me, let me hit on Industrial for you because you're right. There's been some mixed messages out there. We didn't come into the year, I think as a lot of people didn't come into the year with high expectations for industrial leasing. We anticipated mild growth, but the sector continues to surprise for the upside year to date. For us, it's up in the high single digits. And here's what we're seeing and why we think that's happening the demand remains solid while the industrial Market cooled, uh, from that pandemic fueled, boom. It's still growing in Q2 alone and the sector recorded almost 30 million square feet of net absorption. So although the pace is moderated, a bit industrial users are still expanding and taking space.

second thing is lease rollovers unlocking higher transaction values, so industrial rents have really soared like we all know since the pandemic of roughly 50% in the US and even higher in markets, like New Jersey, Philly,

Inland Empire places where we're particularly strong.

And then there's just been this like the quality. So as we're all thinking about Technologies and Ai and things of that nature, what we've seen in the office space, which was a flight to qualities. Also true in industrial, there's a flight to Quality their new industrial space space. That's been coming on the market. In the last few years causes people to take a look and realize that if they want to compete, they need to have some of the latest technology and features so they're making moves.

In the very near term, we still think that even with the macro uncertainty, the outlook is pretty solid for the industrial community mid to longer term. We feel great about the business overall.

Out, it's hard for us to see profitability though. Can you maybe comment on, just how? That's going? Because you did strategically seem to make some shifts there. To, to not only kind of stabilize the growth rate, but also make more money and so any um, context around that would be great.

Sure, Tony, um, you're right, we we very focused on profitability and margins in the services business. Uh, we were particularly focused in Europe, especially around project management, uh, where we restructured that business, and we've seen a nice Improvement, um, in margins there, you know, overall, um, we see continued expansion of margin in Services through 2 things. First of all, as the revenue goes, we're going to see operating leverage. Um, and then we remain focused on driving efficiency. Um, some of our investment on the surface side is all around the infrastructure to support services. Um, and what that will do is it'll make the business more efficient. So you know we we are focused both on growth but then also, as you say profitability, underlying that

And your next question today will come from Ronald Camden with Morgan Stanley. Please go ahead.

Hey, great come. Congrats on a great execution. Um, I think last quarter, we talked about maybe some, some margin headwinds as you reinvested in the business.

Uh, but you were still sort of expecting growth to re accelerate, you know, next year versus this year, I guess I was just love some updated commentary about maybe a little bit more about some of the Investments, you're making for the long term and your thoughts on sort of that margin and growth re acceleration.

Okay, so let me just refresh everybody on our Capital allocation and then maybe turn it over to Neil. Um, so from the first conference call 2 years ago, I discussed the importance of us finding our optimal Capital allocation strategy, which gets your point on organic investing. And you've seen us focus a lot on debt reduction, and then this year also, leaning more heavily into internal growth Investments, like Talent like organic Investments that do cause potentially some headwinds. Um, but we're always toggling that Capital allocation model between those 2 universes. Uh, and we've just been doing honestly, such a great job operationally that we're already seeing expansion in this quarter, in the margin from the work that we've done. Resetting the operations of the organization Neil. Do you want to add anything to that? Yes, so I'm just, you know, on a on a on a very specific note, um, in in terms of guidance, as Michelle said, you know, we building up a very, very strong first half. Uh, we do expect that Topline momentum to continue as a result of the Investments we're making.

Um, we we will see the margin in the second half the the slightly below the large and we saw in the first half. Um, as a result of a slight increase in investment, spend in the back half of the year. Um, but I still expecting margin expansion for the full year.

Great. And then my my second or follow-up would would just be going back to sort of the capital markets uh re acceleration in the quarter. Maybe you comment on Trends in in in July um, at at this point and and what you're hearing in terms of potential tariff impact or do they even matter anymore?

Yeah, I think tariffs have been disruptive but they've yet to show that they are destructive.

Capital markets flow, uh, over the month of July was still compelling and driving us in the same direction.

And your next question today will come from Seth burgie with City. Please go ahead.

Hi. Thanks for taking my question, you know, just you know, kind of following up on that um you know, in your conversations with clients, you know what are they thinking about as they think about, you know, their leasing needs for additional space or underwriting transactions. Are they looking through?

Tariffs are expecting, you know, Fed rate Cuts or, you know, just trying to understand kind of the puts and takes of, um, you know what, clients are, what your clients are thinking about, kind of, for the back half of the year.

yeah, Business Leaders, as I said in in my pre-recorded script continue to make decisions and I think for anyone out there running a company

The macro uncertainty has now been a constant throughout the year and our business has performed really well under it because people can continue to make decisions. So what we see for the second half of the year is just a lot of the same, our pipelines are strong. That gives us confidence heading into the second half of the year and those same uncertainty forces that supported performance in the first half remain in place. And as I said, I think the tariffs have been disruptive. They create volatility but you you haven't seen destruction from them yet.

And we believe this is going to continue.

Great. Thank you.

And your next question today, will come from Julian, blowen, with Goldman Sachs, please go ahead.

Hi. Thank you for taking my question um and congrats on the quarter team. Um so in terms of the turnaround and emia services, it sounds like project management saw some real wins in in France and Italy just want to get a sense of like how much of that is uh improvements you've made uh kind of going back to a question that was asked earlier and and how much of it visibility do you have in sort of continued wins? Um in emia going forward?

Yeah, look at project management and services, in general, in Europe, has been a focus area for us. We see a lot of opportunity. There, we have a very strong team there. Um, project management does tend to be, um, slightly shorter term in nature than than the long contracts. We see in some of our other services businesses. Um, but we very pleased with with the progress, we are making their

Thank you and um maybe on the the margin side. Uh again in emia I mean margins doubled uh year-over-year I guess how much of that was driven by incremental on The Brokerage side versus how much of that um was the services side and some of the changes that you've made to sort of unprocess

Profitable Services contracts.

Yeah, and and Mia. We've, we've worked very hard on margins and efficiency. We've got that platform to where we we, we want it. Um I think going forward, the focus is going to turn from really restructuring the platform to growth on the top line.

Um, so you know, you will see continued margin expansion. Um, but but, but less around, um, platform costs, I think we've done that hard work, uh, which means we can then create operating leverages as we grow that business. I would also just add with the restructuring and putting new teams in place. We have a different mindset around driving growth versus just 1 of say operational rigor. And now we've put ourselves in a position to have both skill sets. So as we grow, that margin expansion will happen naturally.

And your next question today will come from Peter Abramovich with Jeff. Please go ahead.

Yes, thank you. Uh, just wanted to dig into the conversation. Uh, I know maybe the the your your your kind of catching up um uh in terms of The Office Solution growth here. But do do you hit the tough cops at any point in the back half of the year and I guess just how does that factor?

Into your outlook for the rest of the year.

Sure, um, we did see the pickup in leasing beginning Q3 last year. We had a very strong Q3 in leasing. Um, I think we're up around 13%. Um, so we will face those comps as we look to the back half of the year. But, um, at the same time, the momentum we're seeing in leasing is very early. Revenue numbers for July look good. And so, you know, we feel pretty good about our guidance of seeing the same sort of momentum in the second half that we saw in the first half.

Okay, got it. And and then also on the office side, I guess, could you just comment. I think there's a lot of headlines. And, and a lot of news stories out there about certain markets, kind of running out of trophy space and top end space. Uh, does it seem like the leasing recovery is kind of proliferated to, to the rest of the market kind of sub trophy or sub, um, Topline space. It it kind of what your view on that.

Yeah, uh exactly what you're saying. So we're also seeing like if you talk about something like New York is the original kind of place of of strength, you're seeing it now in Boston Dallas, Miami Houston, non Gateway markets, like, Phoenix, San Diego, uh, and Toronto. We're also strong for us. So the the regional strength is broadening as well. And yes, you're seeing the move into what you would consider say Triple A Class A Space to what you might consider a minus space as the best space in the market, it's been absorbed.

And your next question today will come from Mitch Germaine with citizens. Please go ahead.

Uh, thank you. Congrats on the quarter. Um, I think Michelle you I think you termed it early stages of talent expansion. So I'm curious, you know how broad-based is some of the hiring effort from uh, maybe business line or or global perspective?

Positions. We've reorganized, we did a complete reorganization in the fall of the America's advisory business

Instead better connect the organization and pull up talent and new leaders into many senior level seats individuals who are now drivers of growth. In addition to that, in terms of Brokers, um, as I shared in my prepared remarks, we've hired Capital markets, Brokers with 200% more average revenue than we did in the entirety of 24 and for leasing that number is also 150% higher. And in terms of the number of teams there, this equates to 10 more Capital markets teams for a total of 28 new teams since we started to ramp up our hiring.

And what I should also mention here, which you didn't ask is that we're getting more productivity per existing Brokers as well. So we're focusing. Yes, on Capital, markets, yes, on leasing. But also on Services talent and talent across the board.

Great. That's it for me. Thanks.

For conclude our question and answer session. I would like to turn the conference back over to Michelle McKay for any closing remarks.

Thank you, everyone. We look forward to speaking to you again on our Q3 earnings call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect