Earnings call: Cushman & Wakefield outlines refinancing strategy amid softening market conditions

Cushman & Wakefield (NYSE:) recently disclosed its Q3 2023 financial results, revealing a strategic refinance of their $1.4 billion term loan due in 2025, and robust performance in the Asia-Pacific (APAC) region despite overall softening market conditions. The real estate giant is focusing on reducing leverage, diversifying revenue, and investing in organic growth opportunities to achieve sustainable long-term growth.

Key takeaways from the earnings call include:

• The company exceeded its $130 million cost-out target for the year and reported a Q3 adjusted EBITDA of $150 million, an improvement over Q2.
• Fee revenue declined 11% YoY, with adjusted earnings per share at $0.21, down $0.22 from the previous year.
• PM/FM revenue grew 2% excluding the impact of a contract change, and the company anticipates further growth in the low single digits for the full year 2023.
• The company refinanced the majority of its Term Loan B due in 2025, reducing the company’s leverage by approximately $200 million in 2025, and currently has $1.7 billion of liquidity.
• APAC region experienced a solid quarter, with brokerage revenue up 15% YoY in countries including Australia, India, and Japan.

Despite the challenging market conditions, Cushman & Wakefield’s adjusted EBITDA performance improved from Q2, underpinned by exceeding their $130 million cost-out target for the year. However, fee revenue declined by 11% YoY, while adjusted EBITDA was down 27%, and adjusted earnings per share fell by $0.22 to $0.21 in Q3.

The company’s PM/FM revenue experienced a modest growth of 2%, excluding the impact of a contract change. Cushman & Wakefield refinanced a significant portion of their 2025 Term Loan B, which is expected to reduce the company’s leverage by approximately $200 million in 2025. This move, coupled with their focus on reducing leverage and investing in organic growth opportunities, has placed the company in a strong financial position with $1.7 billion of liquidity.

Despite a 32% decrease in capital markets revenue, the company reported robust performance in the APAC region, with brokerage revenue up 15% YoY in countries such as Australia, India, and Japan. Adjusted EBITDA in APAC grew 44% due to improvements in capital markets, offsetting declines in the Americas and EMEA due to lower brokerage activity.

Looking ahead, Cushman & Wakefield expects PM/FM revenues to grow in the low single digits for the full year 2023. However, they anticipate a market recovery in brokerage to be delayed until the second half of 2024. The company is focused on creating flexibility and optionality for long-term sustainable growth, including diversifying revenue and providing data-driven advice and solutions. They also addressed the potential impact of a WeWork bankruptcy, stating that it would not pose any tangible risks to their revenue streams.

In terms of their investment in Greystone, Cushman & Wakefield expressed confidence in the multifamily platform, viewing it as a long-term asset, despite a decline due to reduced lending volumes. The company remains optimistic about their production capacity for potential recovery in 2024 and is focused on the return of investment in producers.

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