Cushman & Wakefield Ltd. · NYSE:CWK
Cushman & Wakefield — Q2 2020 Earnings Presentation
24 slides from Cushman & Wakefield's earnings presentation, Aug 6, 2020
Slide 1: Q2 Earnings Presentation
Cushman & Wakefield Q2 Earnings Presentation August 6, 2020
Slide 2: Cautionary Note on Forward-Looking Statements
Cautionary Note on Forward-Looking Statements All statements in this presentation (and oral statements made regarding the subjects of this presentation) other than historical facts are forward-looking statements, which rely on a number of estimates, projections and assumptions concerning future even
Slide 3: Non-GAAP Financial Measures and Other Financial Information
Non-GAAP Financial Measures and Other Financial Information We have used the following measures, which are considered "non-GAAP financial measures" under SEC guidelines: i. Segment operating expenses and Fee-based operating expenses; ii. Adjusted earnings before interest, taxes, depreciation and amo
Slide 4: Today's Presenters
Today's Presenters Brett White Duncan Palmer Kevin Thorpe Len Texter Executive Chairman Chief Financial Officer Chief Economist Investor Relations & CEO & Global Controller Cushman & Wakefield | Q2 2020 Earnings Conference Call 4
Slide 5: 2020 Q2 Business Update
2020 Q2 Business Update › Q2 fee revenue of $1.2B, down 24% versus 2019 - PM/FM(1) fee revenue was flat year over year - Leasing and Capital Markets down 45% and 52%, respectively › Adjusted EBITDA of $119M, down $56M or 31% versus 2019 › Decremental margins of 14% reflect permanent cost actions and
Slide 6: The Road Back to 2019
The Road Back to 2019 U.S. Real GDP Consensus Forecast: return to 2019 GDP 20,500 20,000 19,500 19,000 Oxford’s Billions of USD Baseline Moody’s 18,500 Baseline 18,000 17,500 17,000 16,500 16,000 15,500 2019Q4 2020Q1 2020Q2 2020Q3 2020Q4 2021Q1 2021Q2 2021Q3 2021Q4 2022Q1 2022Q2 2022Q3 2022Q4 2023Q1
Slide 7: As the Economy goes, so goes CRE
As the Economy goes, so goes CRE GDP vs. Investment Sales (All Property Types) GDP vs. Leasing 90 2 6.0% 150 1.8 5.0% 85 1.6 100 4.0% 1.4 80 3.0% 1.2 50 2.0% 75 1 0.8 1.0% 70 0 0.6 0.0% 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Slide 8: COVID-19 Accelerating Macro Trends
COVID-19 Accelerating Macro Trends United States Accelerates online shopping Generates Demand for Industrial-logistics 30% 400 24.9% 25% 23.8% 300 21.8% 20% 200 15% 16.0% 100 14.4% 13.2% 10% 11.8% 10.7% 9.7% 0 2019H1 2020H1 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2
Slide 9: US Office Sector: Cyclical Job Losses, Structural Working Remotely
US Office Sector Cyclical – Job Losses Structural – Working Remotely 34 65 33 60 32 31 55 COVID Recession: 30 2.6 million office jobs 50 lost 29 45 28 27 40 Great Financial 26 Crisis: 2.4 million office jobs lost 35 25 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 2011
Slide 10: US Office Vacancy Scenarios
US Office Vacancy Scenarios Baseline Assumptions: U.S. Vacancy Scenarios • GDP recovery follows the baseline scenario - returns to pre-crisis levels in 2022 24% Key Economic Assumptions • U.S. office employment declines by 1.2 22% 21.8% million office-using jobs in 2020 • Congress passes another fis
Slide 11: Path to Full Office Recovery
Path to Full Office Recovery Factors that point to full recovery: U.S. Office Property Price Index 300 • Economic growth (e.g. GDP, 280 population growth over the long- term) 260 • Share of office employment 240 Upside: Full Baseline: Full increasing as a share of nonfarm Recovery 2021Q4 220 Recover
Slide 12: Financial Overview
Financial Overview
Slide 13: Q2 Financial Highlights
Q2 Financial Highlights USD in Millions, except for Adjusted EPS Fee Revenue Adjusted EBITDA Adjusted EPS Q2 $1,170 $119 $0.19 (24)% (31)% $(0.20) YTD $2,490 $189 $0.22 (14)% (27)% $(0.28) Principally driven by lower Driven primarily by lower revenue brokerage activity due to COVID- partially offset
Slide 14: Q2 Fee Revenue by Segment
Q2 Fee Revenue by Segment Second Quarter and Six Months Ended Performance (USD $m) Three Months Ended June 30, % Change Six Months Ended June 30, % Change 2020 2019 USD LC 2020 2019 USD LC Americas $786 $1,081 (27)% (27)% $1,711 $2,018 (15)% (15)% EMEA 185 206 (10)% (8)% 372 390 (4)% (2)% APAC 199 2
Slide 15: Q2 Fee Revenue by Service Line
Q2 Fee Revenue by Service Line Second Quarter and Six Months Ended Performance (USD $m) Three Months Ended June 30, % Change Six Months Ended June 30, % Change 2020 2019 USD LC 2020 2019 USD LC Prop, Fac & Proj Management $693 $740 (6)% (4)% $1,425 $1,447 (1)% —% Leasing 264 489 (46)% (45)% 565 862
Slide 16: Americas - Q2 Performance
Americas - Q2 Performance Second Quarter 2018 Performance: Americas Second Quarter and Six Months Ended Performance (USD $m) Three Months Ended June 30, % Change Six Months Ended June 30, % Change 2020 2019 USD LC 2020 2019 USD LC Prop, Fac & Proj Management $487 $485 1% 2% $989 $948 4% 5% Leasing 1
Slide 17: EMEA - Q2 Performance
EMEA - Q2 Performance Second Quarter and Six Months Ended Performance (USD $m) Three Months Ended June 30, % Change Six Months Ended June 30, % Change 2020 2019 USD LC 2020 2019 USD LC Prop, Fac & Proj Management $83 $74 13% 16% $168 $143 17% 20% Leasing 41 57 (27)% (25)% 82 106 (22)% (20)% Capital
Slide 18: APAC - Q2 Performance
APAC - Q2 Performance Second Quarter and Six Months Ended Performance (USD $m) Three Months Ended June 30, % Change Six Months Ended June 30, % Change 2020 2019 USD LC 2020 2019 USD LC Prop, Fac & Proj Management $123 $182 (32)% (28)% $269 $356 (24)% (20)% Leasing 32 46 (30)% (27)% 55 73 (24)% (21)%
Slide 19: Outlook
Outlook › Limited line of sight to revenue › Brokerage activity in the second half expected to be broadly consistent with trends experienced during the second quarter › PM/FM expected to be relatively stable in 2020 › On track to achieve annualized cost reductions of $400m in 2020 › Decremental marg
Slide 20: Supplemental slides and reconciliations of GAAP to Non-GAAP financial measures
Supplemental slides and reconciliations of GAAP to Non-GAAP financial measures
Slide 21: Summary of Total Segment Revenues
Summary of Total Segment Revenues (USD $m) Three Months Ended Three Months Ended Six Months Ended June Six Months Ended June June 30, 2020 June 30, 2019 30, 2020 30, 2019 Americas Segment Service line fee revenue(1) $785.9 $1,081.1 $1,711.1 $2,018.2 Add: Gross contract reimbursables(2) 462.6 411.8 9
Slide 22: Summary of Total costs and expenses
Summary of Total costs and expenses (USD $m) Three Months Ended Three Months Ended Six Months Ended June Six Months Ended June June 30, 2020 June 30, 2019 30, 2020 30, 2019 Americas Fee-based operating expenses $733.4 $958.6 $1,594.6 $1,825.4 EMEA Fee-based operating expenses 159.6 191.8 351.7 377.2
Slide 23: Reconciliation of Net Income (Loss) to Adjusted EBITDA
Reconciliation of Net Income (Loss) to Adjusted EBITDA (USD $m) Three Months Ended June Three Months Ended June Six Months Ended June 30, Six Months Ended June 30, 30, 2020 30, 2019 2020 2019 Net income (loss) $(100.8) $6.3 $(155.9) $(14.6) Add/(less): Depreciation and amortization(1) 74.6 74.3 146.
Slide 24: Reconciliation of Net Income (Loss) to Adjusted Net Income
Reconciliation of Net Income (Loss) to Adjusted Net Income (USD $m, unless otherwise indicated) Three Months Ended Three Months Ended Six Months Ended June Six Months Ended June June 30, 2020 June 30, 2019 30, 2020 30, 2019 Net (loss) income $(100.8) $6.3 $(155.9) $(14.6) Add/(Less): Merger and acqu