Operator: Good day and welcome to Cushman & Wakefield’s First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Megan McGrath, Head of Investor Relations. Please go ahead.

Megan McGrath: Thank you and welcome to Cushman & Wakefield’s first 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.cushmanwakefield.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 forecasts and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today’s call, we will refer to non-GAAP 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. And with that, I’d like to turn the call over to our CEO, Michelle MacKay.

Michelle MacKay: Thank you, Megan. Good morning, everyone, and thank you for joining us today. This quarter marks true momentum in our growth strategy in numbers, mindset and operations. For the past 18 months, we focused on building the strength to fuel long-term growth. And today, we’re seeing that strategy come to life. In the first quarter, we increased revenue in each of our service lines, achieving mid single-digit organic growth in our services business, two quarters ahead of target. We drove 100 basis points of year-over-year adjusted EBITDA margin improvement and further reduce leverage by paying down an additional $25 million in debt. Since I took over as CEO, we have repaid $230 million in debt and have successfully refinanced and repriced our debt 5x, reducing our annual cash interest burden.

And in the same way that we have attacked our leverage over the past year, we are now attacking growth, and we are delivering results ahead of schedule, entering new phases of expansion and building momentum, positioning ourselves to win through the cycle. Our disciplined investments have not only stabilized the business but have unlocked new areas of organic growth. We’ve taken bold steps to remove complexity, better aligning teams to opportunities and create the clarity and agility that sustainable growth requires. We believe these changes will allow us to scale faster, move with purpose and seize growth opportunities as they emerge. They are also enabling us to respond more quickly to market shifts and uncertainties as we are operating much more nimbly than in the past.

Our key differentiator continues to lie in our ability to meet clients where they are and guide them on their desired journey. Our flat organizational culture allows us to swiftly adapt to clients’ buying patterns. We deliver customized bespoke solutions tailored to each client’s needs instead of relying on predefined approaches. Our teams not only work harder than our competitors, but they also work smarter. By fostering a culture of solutioning, problem-solving and trust, we let our people shine. We recently held a call with our global think tank on current market conditions where we had upwards of 4,000 clients joined to hear what our teams are thinking. Talent is a critical component of our growth strategy, and we continue to attract strong teams to our platform.

Year-to-date in the Americas, we have recruited leasing and capital markets brokers with more average annual revenue than we recruited in all of 2024. All of this work is culminating in momentum across our business. For example, in the Americas, our pipeline of large capital markets deals is 2x the size it was 1 year ago. In Americas leasing and our multi-market occupier group, which represents roughly one-third of our tenant rep business, our RFPs are up by 35% versus last year. In our valuation business, bid volume was up 30% in Q1, with March setting a 2-year record for volume of bids. In services, in the past 2 years, our global occupier services team has won all or a material part of the largest outsourcing deals in the market. Our APAC services business continues to demonstrate both resiliency and momentum with strong retention rates on existing contracts and 5 new sizable contracts coming online in the first half of this year.

And our CW services business, once referred to as our janitorial business is now 70% mechanical and engineering following a major contract win, making it more technical and a more strategic fit for us. We’ve built a strong growth engine, which is now powering us forward across every part of the business. We’re leaning in with clear purpose, excellent market positioning and a stronger foundation. Now I’ll turn the call over to Neil.

Neil Johnston: Thank you, Michelle and good morning everyone. As a quick reminder, all prior year comparisons will be in local currency, and any reference to organic growth excludes the impact of last year’s non-core services divestiture. We achieved strong first quarter results that exceeded expectations. Our brokerage business consisting of leasing and capital markets carried over its momentum from the fourth quarter to achieve double-digit growth. And our services business on an organic basis reached mid-single-digit growth ahead of schedule, as our teams captured incremental revenue opportunities throughout the quarter. Fee revenue reached $1.5 billion, an increase of 4%, with organic fee revenue growing 6%. Adjusted EBITDA rose 24% to $96 million.

Adjusted EBITDA margin expanded 100 basis points versus prior year, beating our first quarter guidance for flat year-over-year margins due primarily to greater-than-expected leasing and services revenue as well as some expense timing benefits. Adjusted EPS increased to $0.09 from breakeven a year ago. Importantly, we are achieving these results from a position of financial strength, with net leverage at 3.9x EBITDA and free cash flow performing in line with our full year targets. Now turning to our service line performance. Our leasing business continued to show robust expansion in the quarter, up 9%, even against solid compares from the prior year, demonstrating the sustainable trends propelling global leasing growth including return to office mandates and the demand for quality space in all asset classes.

Americas leasing remained a standout, growing by 14% in Q1, our third consecutive quarter of double-digit growth. We experienced solid demand across the industrial and office sectors during the quarter, and our leasing pipeline has remained relatively stable. APAC leasing grew 16% as the Australian market continued its momentum from the second half of last year, and China experienced a return to growth in the quarter. EMEA leasing contracted 26%, primarily due to a difficult comparison against last year when we closed several large leasing deals. Capital markets continued its expansionary trend, growing 11% globally. In the Americas, strong industrial performance was partially offset by a slowdown in office transactions, resulting in 4% growth.

APAC’s 59% growth was primarily driven by strength in Japan while EMEA’s 17% growth was driven by strength in the U.K. and the Netherlands. Moving on to services. Our initiatives to improve top line growth in that business are already yielding results. with services revenue on an organic basis, up 4% in the quarter. We have reached our near-term target of returning to mid-single-digit growth earlier than targeted and anticipate services revenue growth to remain in this healthy mid-single-digit range for the remainder of 2025. In the Americas, organic services fee revenue grew by 6%, driven by strength in facilities management and facility services. EMEA services continue to experience a reduction in project management work, while APAC Services grew 3% with particular strength in India.

Looking at our balance sheet and cash flow this quarter. Free cash flow was a use of $167 million. Our first quarter use of cash is in line with historical working capital trends, including annual payment of U.S. bonuses and reflects typical seasonal patterns in our business. Our trailing 12-month free cash flow was approximately 60% of adjusted net income, and we expect to achieve our full year target of 60% to 80% free cash flow conversion. During the quarter, we completed another repricing of $1 billion of term loan debt, lowering the applicable interest rate by 25 basis points. We also paid off a further $25 million in debt due in 2030. We closed the quarter with $1.7 billion in liquidity and have no funded debt maturities until 2028. Reducing our leverage and interest expense through well-timed repayments and repricing will continue to be a key component of our capital allocation strategy this year.

Now moving to our guidance. The guidance we presented on our last earnings call in February remains essentially unchanged. While we are clearly operating in a dynamic and rapidly evolving macro landscape, we remain focused on driving continued improved execution and managing towards long-term growth. Given our strong first quarter performance, we continue to expect the full year revenue targets we provided last quarter are achievable. However, given that the range of possible outcomes for the economy has widened, we will remain flexible and watchful at the operating environment and make any necessary adjustments, just as we’ve done successfully over the past several years. Specifically, for the full year, we expect leasing growth in the mid-single digits.

We expect Capital Markets growth to exceed 2024’s mid-single-digit growth rate. We expect services to achieve mid-single-digit top line growth for the full year. This is an improvement compared to our previous guidance of achieving a mid-single-digit run rate by midyear. On the cost side, our plans to accelerate investments in the business this year are unchanged and we’ll continue to balance increased investment spend with a focus on long-term returns and managing the business through this cycle. In conclusion, we are very pleased with our performance this quarter and remain confident in our path ahead. We continue to expect EPS growth in 2025 to exceed the growth we reported in 2024 and to further accelerate in 2026. With that, I’ll turn the call back over to Michelle.

Michelle MacKay: Thanks Neil. We continue to believe that we are at the beginning of a multiyear recovery in commercial real estate. We have a management team that excels at navigating uncertainty across market cycles and a global workforce that is proving time and time again that they will exceed expectations while continuing to raise the bar. Given our improved balance sheet, enhanced execution and large market opportunity, we believe our shares represent a compelling value opportunity for investors. I want to thank our teams, partners, clients and shareholders. Your belief in our vision fuels us every day. We are proud of how far we have come, and we are even more excited about where we are going. Let me now hand the call back to the operator for questions.

Operator: [Operator Instructions] The first question is from Ronald Kamdem with Morgan Stanley. Please go ahead.

Ronald Kamdem: Hey. Congrats on a great quarter. Just can we start with sort of the margin improvement, 100 basis points year-over-year, I think that that number was expected to be flat three months ago. So, maybe can you talk about what the outperformance, what drove that would be helpful?

Neil Johnston: Sure Ron. Yes, we are very pleased with the first quarter. Our Q1 margin versus expectations was driven primarily by top line strength. We saw stronger than expected leasing and services. There was some expense timing benefit, which accounted for approximately 30% of the beat. Then as we look to the rest of the year, that – some of that benefit from the expense timing will reverse primarily in the second quarter and the remainder of any potential upside to margin will ultimately depend on the performance we see in our service lines, especially in leasing and capital markets as the year progresses.

Ronald Kamdem: Great. And then my follow-up would be I think the comments on whether it’s the capital markets or the leasing or the pipeline, sounded pretty encouraging. It sounds like since April 2nd, there hasn’t really been that much impact from tariffs and you are still in wait and see mode. So, I guess my question is just how would you characterize the environment in April specifically? And how are you guys thinking about the impact of tariffs on the leasing and capital markets businesses? Thanks.

Michelle MacKay: Thanks for the question, Ron. The tariff uncertainty has not materially impacted our sector. We are continuing to see improving trends in office and strong demand for high-quality products. And say, in the industrial sector, we also continue to see absorption of space. It’s performing in line with our expectations for the year. I would say that when you consider our business in today’s market conditions and you think about client behavior, which is really what you are talking about, our data is showing that their decision-making is really falling into two buckets. Group one, our clients that are going forward with the decision on the existing timeline they have. And this is, I would say, about 90% to 95% of what we have seen out of our clients through mid-April.

These are clients that are confident, they are making choices. They are moving through the noise in the market. And then there is group two. And I would say this is 5% or less of what we are seeing today, our clients who are opting to delay their decisions today, but will make that decision later in 2025. So, what we are not witnessing is a freeze in decision-making. And that’s in large part why we see our Q2 numbers and frankly, our 2025 performance staying intact.

Ronald Kamdem: Great. That’s it for me. Thank you.

Operator: The next question is from Anthony Paolone with JPMorgan. Please go ahead.

Anthony Paolone: Thanks. Good morning. Maybe continuing on the macro, do you have a view as to what might happen to the office leasing business if we do go into a recession and maybe does that follow the normal historical pattern of weakening significantly, or do you think the fact that it’s coming off maybe the lows that, that mitigates it. Just wondering what your thoughts are there.

Michelle MacKay: Yes. I mean again, based on the data that we are seeing demand for office leasing remains really strong through the quarter. And we haven’t seen the uncertainty in the economy impact occupiers’ confidence to move forward with their workplace strategies. We are signing long-term leases. Lease terms are getting longer. They are up to about 77 months on average in Q1. And so I think when we are projecting our forward models, we do some sensitivity around softening, Tony, but nothing that significant.

Anthony Paolone: Okay. Thanks. And then Michelle, I think you alluded to some of the recruiting efforts there. Can you maybe just talk a bit more about recruiting and retention and just kind of how you think about where the system sits today versus maybe six months a year ago and just all things being equal, like just magnitude of kind of what you have done on the people front.

Michelle MacKay: Yes, sure. And I want to talk a little bit about the philosophy of our approach in this market because we plan to invest consistently regardless of market conditions and talent. And over the next 18 months – over the last 18 months, we have really strengthened ourselves. So, we are going to focus on capital markets talent, leasing talent, investing organically in the business. I think I have said on the last earnings call, we shared that we hired 10 capital markets teams in the Americas in late 2024. And now we have had an additional eight capital markets team since our last call joined us, and we also haven’t taken our foot off of the gas in leasing either. We have hired another 20 leasing teams already in the U.S. this year. So, we are full steam ahead.

Anthony Paolone: Okay. Thank you.

Operator: The next question is from Peter Abramowitz with Jefferies. Please go ahead.

Peter Abramowitz: Yes. Thanks for taking the time and congrats on a strong quarter here. I have a question similar to Tony’s, but I wanted to touch on the industrial leasing side of things. Just given everything going on with the potential trade war would seem to be kind of the most directly impacted sectors. So, just curious how you are thinking about that, maybe what you are seeing in trends post Liberation Day and how you are thinking about the rest of ‘25 overall?

Michelle MacKay: Sure. Look, we believe we have been outperforming in industrial leasing from past year, 1.5 years, and we are still seeing positive trends in industrial leasing revenues in the Americas in five quarters of the last six quarters that we have had here, including Q1. But as we discussed last quarter, we didn’t come into the year with unrealistic expectations around leasing growth and expected some normalization of demand. But what hasn’t changed even in the midst of the tariff discussions is the businesses still need industrial space to get their products to their customers, and we are helping them figure that out and executing on their strategies, whether they are the old strategies or they are the modified strategies.

Peter Abramowitz: Okay. Thanks Michelle. That’s helpful. And then one other question, I guess just on the rate outlook. We have seen a lot of volatility. Is there sort of a frictional level whether it would be in the 10-year or whether it be in spreads, where you start to maybe question or get a little bit concerned about the capital markets business. I know one of your competitors mentioned the 5% 10 years, kind of that technical level. Just wondering how you think about that and how we should think about the sensitivities on the capital markets side.

Michelle MacKay: Yes. We don’t hold exactly the same point of view. I think all-in borrowing costs is really what you are looking at. And so that also considers credit spread for that particular borrower. And I understand that we cut off and think about capital markets as an asset-specific level of borrowing, but many large investors have other ways of borrowing even at the corporate level to facilitate transactions. So, when I am looking at our capital markets pipeline now, in large measure, our clients are closing deals and financing if they like them. But if they are not so compelled by the financing market, a lot of these players still can cut a full cash check and they are doing so.

Peter Abramowitz: Alright. That’s all for me. Thank you.

Operator: [Operator Instructions] The next question is from Stephen Sheldon with William Blair. Please go ahead.

Pat McIlwee: Hi team. You have Pat McIlwee on this morning. My first question, I know you mentioned the weakness in EMEA leasing was driven by a tough comparison quarter, but looked like services revenue came in a bit soft as well. So, I just wanted to ask if you could provide some more commentary on what you are seeing in that region in terms of both macro and within your business.

Neil Johnston: Yes, sure. As we look at EMEA, I think you have got to put it in context. EMEA as a whole is probably our weakest economy in terms of our three segments. So, that is sort of weighing on the results in EMEA. But we are certainly seeing some green shoots. For example, in capital markets, we had very nice growth in the UK. You have seen the ECB drop rates there. So, I think that’s conducive to capital markets. On the leasing side, we did have those large deals that I spoke about. That accounted for about half of the weakness, but I think the economics they are playing through. And then on the services side, what we did see is we saw the final unwind of some of the project management work we have been doing around the business.

But even there, there were some green shoots. About half of our business there is property management, and we actually saw that grow. So, we feel like EMEA is at the bottom of the cycle. It will be a slow recovery given the general economic environment there. But I think that gives you a lot of color around what we are seeing in that market.

Pat McIlwee: Yes, Thanks Neil. That’s helpful. And then you have spoken a little bit about this, but you continue to invest in talent and the business as a whole out of growth, but you also continue to repay debt, which you did again this quarter. So, I just wanted to ask how you plan to balance defense versus offense in this environment, and has that balance changed at all since your last call in February?

Michelle MacKay: Yes. Balance hasn’t changed, capital allocation strategy hasn’t changed. It continues to be focused on growth and deleveraging to your point, with the growth as an investment that’s a higher percentage of our overall capital allocation, but obviously, we are going to continue to de-lever at the same time.

Pat McIlwee: Understood. Thanks Michelle.

Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Michelle MacKay for any closing remarks.

Michelle MacKay: Thank you everybody and we look forward to speaking to you again after our second quarter earnings call.

Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect. Goodbye.

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