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Edited Transcript of CWK.N earnings conference call or presentation 5-Nov-19 10:00pm GMT

Full Year 2019 Cushman & Wakefield PLC Earnings Call

Nov 12, 2019 (Thomson StreetEvents) -- Edited Transcript of Cushman & Wakefield PLC earnings conference call or presentation Tuesday, November 5, 2019 at 10:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Bill Knightly

Cushman & Wakefield plc - COO of Global Occupier Services

* Brett White

Cushman & Wakefield plc - Executive Chairman & CEO

* Duncan J. Palmer

Cushman & Wakefield plc - Executive VP & CFO

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Conference Call Participants

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* Anthony Paolone

JP Morgan Chase & Co, Research Division - Senior Analyst

* HyungJun Choe

Crédit Suisse AG, Research Division - Research Analyst

* Mitchell Bradley Germain

JMP Securities LLC, Research Division - MD and Senior Research Analyst

* Stephen Hardy Sheldon

William Blair & Company L.L.C., Research Division - Analyst

* Vikram Malhotra

Morgan Stanley, Research Division - VP

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Presentation

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Operator [1]

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Welcome to the Cushman & Wakefield's Third Quarter 2019 Earnings Conference Call. (Operator Instructions) It is now my pleasure to introduce Bill Knightly, EVP of Investor Relations and Treasurer of Cushman & Wakefield. Mr. Knightly, you may begin the conference.

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Bill Knightly, Cushman & Wakefield plc - COO of Global Occupier Services [2]

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Thank you, and welcome again to Cushman & Wakefield's Third Quarter 2019 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. This release can be found on our Investor Relations website along with today's presentation pages that you can use to follow along. The materials can be found at ir.cushmanwakefield.com.

Please turn to the page labeled 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. 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 are found within the financial tables of our earnings release and appendix of today's presentation.

I'd like to remind you that the company uses fee revenue, adjusted EBITDA, adjusted earnings per share in local currency to improve comparability of current results and to assist our investors in analyzing the underlying performance of our business. You will find definitions of these non-GAAP financial measures and more detailed financial information in the tables of today's earnings release and the Form 8-K.

In addition, I would like to note that throughout the presentation, comparisons in growth rates are to the comparable periods of 2018 and in local currency.

Before I turn the call over to Brett, I'd like to announce that today will be my last earnings call as EVP of IR. I will be transitioning to a new role within the firm as Chief Operating Officer of our Global Occupier Services business. Len Texter will be the Head of Investor Relations going forward. For those of you following along with our presentation, we begin on Page 5.

And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White.

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [3]

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Good afternoon, and thank you, all, for joining us today, and thank you, Bill, for all your terrific work as our IR lead this past year.

Today, we reported solid growth in revenue in all 3 of our segments. Overall, we generated mid single-digit revenue growth for the third quarter and upper single-digit growth on a year-to-date basis. Adjusted EBITDA of $169 million for the third quarter and $431 million for the first 9 months of the year was consistent with our expectations. As we look at our third quarter results, we remind you that we manage our business on an annual basis. As you know, the transactional nature of our capital markets and leasing service lines creates evenness in our quarterly results. Last year, we had a particularly strong third quarter, led by 34% and 32% growth in our more profitable capital markets and leasing businesses. This significant prior year growth and resulting modest shift in service line revenue for 2019 was contemplated in our guidance for the year. Duncan will speak to this in our third quarter results in more detail later.

In addition to our financial performance, I'd like to share a few other notable highlights in the quarter. Our leading global brand continue to earn strong third-party recognition in the third quarter of 2019, including being named the #1 commercial real estate adviser in the world by Euromoney for the second consecutive year, and being named a Military Friendly Silver Employer for our hiring advancement and commitment to veterans here in the United States.

In the third quarter, our Global Occupier Services business continue to win new mandates as large corporate occupiers chose Cushion & Wakefield for real estate outsourcing. For example, we won a new assignment from Boeing to provide integrated solutions including transaction management, brokerage, strategy and consulting services across their 85 million square foot real estate portfolio in 43 countries. We also won a new mandate to provide integrated facilities management services to Kimberly-Clark's 20 million square foot administrative and manufacturing portfolio across North America. Similar examples of new outsourcing assignments in our facility services business included a 3-year expansion to manage a 13-building portfolio for Harvard University, and renewal of the contract providing services to nearly 800 locations for the companies of Ahold USA.

In addition, some of the large assignments in our leasing and in capital market businesses in the third quarter included representation of the Coca-Cola Company in their $907 million sale of 711 Fifth Avenue in Manhattan. In addition, we secured debt financing for the buyer, Nightingale Properties and Wafra.

We represented the landlord in a joint venture of Vision Real Estate Partners and Rubenstein Partners and leased 315,000 square feet in the Warren Corporate Center in New Jersey. We represented Nuveen Real Estate in the disposal of 290,000 square foot premium retail destination in Italy. We managed the sale of 242 Exhibition Street in Melbourne, Australia, a 47-story grade A commercial office tower, on behalf of Oxford Investa Property Partners, OIPP, and Investa Commercial Property Fund for $563 million. And finally, we brokered the sale of Bugis Junction Towers in Singapore at a sale price of $396 million.

Now turning to Page 6, you'll see our dashboard on the global real estate market. While we're continuing to monitor trade policy, Brexit and events in Hong Kong, commercial real estate leasing fundamentals remained stable against a weaker macroeconomic backdrop. Demand for space is still healthy, and occupancy levels are holding firm and generally are still improving in the U.S. 10-year government bond yields globally have generally declined over the last year, making commercial real estate spreads increasingly attractive according to recent RCA data. U.S. investment sales were down 6% in the third quarter compared to a year ago, but this level of activity is still strong. Leading indicators that correlate with commercial real estate services continue to point to growth. Labor markets are still creating jobs. U.S. consumer confidence levels are still higher today than at any point in the previous cycle.

So in summary, the first 9 months saw solid growth in revenue and EBITDA for Cushman & Wakefield. Real estate fundamentals remain stable. Overall, we remain on track with our guidance for the year, as Duncan will speak to in a moment.

And with that, Duncan Palmer, our Chief Financial Officer, will now discuss our financial results in detail.

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [4]

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Thanks, Brett, and good afternoon, everyone. To start, let's turn to Page 8, which summarizes our key financial data for the third quarter and year-to-date. We reported year-over-year fee revenue growth of 4% and 9% for the third quarter and year-to-date periods. We generated solid growth across each of our 3 segments, led by our PM/FM service line.

Third quarter adjusted EBITDA of $169 million was down $11 million or 5% from the prior year, primarily due to results in EMEA. Year-to-date adjusted EBITDA of $431 million was up $8 million or 3% from the same period in 2018, driven by improvement in APAC and the Americas. A reminder that we saw unusual strength in the third quarter of 2018 with 32% growth in leasing and 34% growth in capital markets, leading to a 77% growth in EBITDA for that period. Adjusted EBITDA margin for the third quarter and year-to-date was 10.9% and 9.6%, respectively. Our adjusted EBITDA margin performance for the third quarter and year-to-date reflects the impact of a very strong third quarter in 2018, broker investments made in the second half of 2018 and a modest shift in revenue towards property facilities and project management, which we call PM/FM. Generally, PM/FM is lower margin than our brokerage service lines.

In addition, as you may recall, we made investments in the second half of 2018 in broker recruitment in the Americas, which, as we mentioned on the last call, are ramping up and are expected to contribute in the fourth quarter. Third quarter adjusted earnings per share was $0.37 and year-to-date adjusted earnings per share was $0.87.

Moving on to Pages 9 and 10 where we show fee revenue growth rates by segment and by service line. All 3 segments grew in the third quarter with Americas up 3%, EMEA up 4% and APAC up 7%, bringing their year-to-date growth rate to 8%, 11% and 14%, respectively. In the third quarter, growth was particularly strong in our valuation and other and PM/FM service lines, up 17% and 12%, respectively. PM/FM was up double digits in our Americas and EMEA segments. As mentioned, this growth, including the acquisition of QSI, represents a modest revenue shift to PM/FM this year. We continue to be pleased with the performance of QSI this year.

Within PM/FM, facility services represents a significant portion of this service line's fee revenue. In facility services, we typically self-perform or sub-contract a variety of services through our major operations in both the Americas and APAC. This business generates solid cash flow on a stable revenue stream, and on an annualized basis typically has low single-digit growth. Fee revenue growth in facility services was in the mid to high single digits for both the quarter and year-to-date. The rest of our PM/FM service line, which comprises of occupier outsourcing, property management and project management operations, grew at double-digit rate in all 3 segments for both the quarter and year-to-date.

With that, we will start a more detailed review of our segments, starting with the Americas on Page 11. Third quarter fee revenue increased 3% and year-to-date revenue increased 8%. Our growth was driven by PM/FM, which was up 13% for the quarter and 14% year-to-date, and valuation and other, which was up 35% for the quarter and 11% year-to-date. Within our Americas PM/FM service line, our facility services operations represent a little over half of our fee revenue. Facility services fee revenue was up high single digits for the quarter and year-to-date, driven by growth at existing clients and new business wins. The rest of the PM/FM service line grew at a double-digit rate.

Our leasing business was down 9% for the quarter, but was up 3% for the year, and capital markets was up 2% for the quarter and was flat for the year. As we have discussed, we had a very strong third quarter last year in both leasing and capital markets. Year-to-date trends in leasing have been consistent with our expectations. While there was some growth in capital markets in the quarter, year-to-date growth has been modestly below where we had expected against a strong 2018 comparable.

Americas Q3 adjusted EBITDA of $125 million was down 3%. Year-to-date adjusted EBITDA of $318 million was up 2%. Americas performance for the third quarter reflects the impact of a very strong third quarter in 2018. In addition, we experienced a modest shift in mix towards PM/FM, driven by QSI and by the strong growth in facility services. Our investments made in the back half of 2018 in fee earner recruitment, which we discussed on last quarter's call, remain on track and are ramping up during 2019. We expect them to be accretive to EBITDA in the fourth quarter and to continue to ramp in 2020.

Moving on to EMEA on Page 12. Third quarter fee revenue increased 4% and year-to-date fee revenue was up 11%, driven by solid growth in our PM/FM and capital market service lines. Our PM/FM service line in EMEA represents less of our overall segment than in the other 2 regions, which grew 25% in the quarter and 28% year-to-date. Capital markets was up 10% for the quarter and 9% year-to-date. These trends were partially offset by leasing activity which was down 13% for the quarter and down 2% year-to-date. In 2018, our EMEA leasing business also experienced a very strong third quarter, growing 25%. These trends are consistent with our expectations and principally driven by the U.K.

Third quarter adjusted EBITDA of $20 million, declined $9 million, versus the third quarter of 2018. Year-to-date adjusted EBITDA of $36 million was down $5 million versus the same period in 2018. Our performance in EMEA reflects the impact of a strong third quarter in 2018, slower leasing activity and unfavorable currency impact. We also experienced a mix shift in 2019, driven by growth in PM/FM.

Now for our Asia Pacific segment on Page 13. Growth continues to be strong with third quarter and year-to-date fee revenue up 7% and 14%, respectively. Valuation and other grew 29% in the third quarter and 19% year-to-date. Leasing grew 6% in the quarter and 9% year-to-date. Capital markets was down 9% in the quarter, but has grown 23% year-to-date. Finally, PM/FM grew 6% in the quarter and 13% year-to-date. PM/FM represents more than half of the fee revenue for the segment. Strong revenue performance across the region drove an 11% increase in adjusted EBITDA for the third quarter and 17% improvement year-to-date.

Turning now to Page 14. We are confirming our full year adjusted EBITDA guidance of $685 million to $735 million as well as our expectation of margin accretion for the full year. Consistent with what we have seen so far this year, we are anticipating global brokerage revenue growth in the low single digits for the full year.

With that, I'll turn the call back to the operator for the Q&A portion of today's call.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question comes from the line of Anthony Paolone.

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Anthony Paolone, JP Morgan Chase & Co, Research Division - Senior Analyst [2]

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My first question relates to your full year guidance for EBITDA. You kept it the same, and so it implies like a fairly wide range for the fourth quarter now. Can you talk about where you see the risks or opportunities given the line of sight at this point on the quarter? And what may swing that up or down?

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [3]

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Yes, this is Duncan. I'll comment on the full year guidance. I mean, obviously, our full year guidance has not changed. I don't think anything really so far in our performance year-to-date gives any reason to change that guidance. As you heard, global brokerage growth has been sort of low single digits year-to-date and we kind of expect that for the full year. Obviously, the biggest uncertainty in the fourth quarter is exactly what transactions close and when they close and how they close, so that's probably always going to be the largest item of uncertainty on the upside and on the downside. In terms of things we expect to benefit us in the fourth quarter on a year-on-year basis because, obviously, from a guidance point of view, you can tell, we're expecting Q4-over-Q4 to be up quite materially. Obviously, there's QSI, that's -- and acquisitions in general, but specifically QSI.

We talked about the investment in broker recruits we did in the back end in the Americas last year. We expect that to be accretive in EBITDA in the fourth quarter. It's been a bit of a drag in the rest of the year. So that's going to be an element. And in general -- generally speaking, in terms of just overall accruals in the fourth quarter in the last year, for example, bonuses we accrue because we blew away our targets last year. We accrued quite a bit more bonus in the fourth quarter last year than planned. We don't expect necessarily to do quite that level of accrual this year. So those kind of elements will drive year-over-year to be quite a bit of growth, but the biggest uncertainty always in the fourth quarter is going to be in transaction volumes and what closes. So we haven't changed our guidance because nothing really so far in the year has given us a specific reason to do so.

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Anthony Paolone, JP Morgan Chase & Co, Research Division - Senior Analyst [4]

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Okay. And then my follow-up is as it relates to EBITDA margins. I understand the mix shift year-over-year and some other investments being a drag, but if we start to look out, whether it's a year or 2 years forward in capital markets and leasing, doesn't put up blazing growth and it's kind of a more normalized growth. How should we think about just your ability to push margins up and whether that opportunity will still be there if leasing and capital markets aren't growing quite as quickly?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [5]

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Anthony, it's Brett. I'll give you a quick answer, and I'll turn to Duncan to give you a bit more detail. But as Duncan has talked about in the past, we have multiple levers to grow margin. In robust transactional years, they grow nicely because of the high-margin transactional businesses. If in future quarters, future years, we see a slowdown in leasing and capital markets, we would exercise other levers we have to grow margin. But Duncan, I'll let you comment on that.

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [6]

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Yes. So I mean, just to kind of reiterate what we've said before, and I think it still stays intact. There are 3 basic mechanisms by which we're going to be able to continue to focus very heavily on operating margins growing on a sort of annual basis. One of them is to be very focused on operating efficiency. As Brett said, we were able to do a lot of that, obviously, in the integration, relatively less of that, probably now that this is what was in the integration, but still a very big focus for us, and it's something which we spend a lot of time focusing on projects to do. Secondly, we're able to benefit from some accretion to margin that generally comes from the infill acquisitions that generally accounts for maybe about 1/3 of our overall top line revenue growth and is generally accretive to margins when we do it, particularly given our track record and being able to take synergies out.

And then the third is getting benefit from accretion of organic revenue growth to the bottom line, which occurs across PM/FM, PJM, valuation, leasing and capital markets, so we're able to get quite a lot of benefit from some of those, even if 1 or 2 of those service lines is not growing organically, maybe as fast as we saw maybe in 2018. In 2018, we had a monstrously good growth year, particularly on the brokerage service line. So we've got a lot of leverage from that. We also have noticed from last year we got pretty good benefits to margin accretion from operating efficiency, and we also got pretty decent PM/FM growth. So all those things stay intact and nothing about the thesis of our ability to grow margins is specifically linked to having to see very high growth rates in brokerage service line specifically.

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Operator [7]

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And our next question comes from the line of Stephen Sheldon from William Blair.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [8]

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Congrats on the new role, Bill. So first, clearly, a tough comparison in leasing this quarter that we probably didn't account for well enough. But just looking more broadly, you've had 2 competitors report third quarter results already in both decelerating leasing trends. Does it seem like the market is broadly slowing some on the leasing side? And are you seeing any cautiousness from companies about signing longer term leases, just given the length of the current cycle?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [9]

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Sure. This is Brett. Let me begin by saying that the fundamentals underpinning leasing, both in Americas and more broadly globally, remain solid. As you mentioned, and you're right, 2018 through Q3, that year, year-to-date, we were up 25% in the Americas and 21% globally. Answering your question about the year and how we think about things going forward, we beat even those heady numbers from 2018 year-to-date. We expect to beat them for the year. I don't know that we've seen much change in the complexion of the type of transactions that are being completed this year or that we expect to be completed in the fourth quarter from what we've seen in prior quarters and prior years, a good mix by vertical and a good mix by size and term. It's probably fair to say that given the economic friction expand in the broader global economies, we are seeing folks a bit more cautious, but that can, of course, change on a moment's notice. But again, the way we are looking at our leasing performance, we are up for the year against a very, very difficult comp last year.

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Stephen Hardy Sheldon, William Blair & Company L.L.C., Research Division - Analyst [10]

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Okay, that's helpful. And then maybe just a quick update on the recruiting environment. You hired aggressively in the second half of 2018 in the Americas. I'm guessing you didn't call out recruiting again, so I'm guessing you're not maybe ramping it as much. But are you planning to do -- I mean, are you still planning to grow producer head count as we start to think about 2020? And maybe just talk about the broader recruiting environment and how easy or hard it might be at this point to find and recruit talent?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [11]

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Sure. Well, first of all, the way we think about recruiting is really based on the objective of raising revenue per producer first and foremost. So that would be -- think of that as a regeneration of the sales force. So we're hiring higher producing folks. That is our goal every year. I think that you should expect that regardless of market cycle, we will always be a recruiter of high quality talent. I would say that as it pertains to our ability to recruit or for that matter any firm's ability to recruit, the -- I think the heady days of 2016, '17 and '18, a very, very competitive marketplace for broker recruiting are now behind us. And I think all the firms are taking a bit more coherent approach to recruiting, we are as well.

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Operator [12]

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And our next question comes from the line of Vikram Malhotra from Morgan Stanley.

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Vikram Malhotra, Morgan Stanley, Research Division - VP [13]

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Just wanted to drill into just the capital markets and leasing businesses in both the Americas and EMEA, and maybe more so just the leasing business. I know timing always is tricky, but apart from just comps, which were tough, I know, is there anything specific going on in both those regions? Leasing was down 17% in EMEA, [and then 9%]. Is there anything else that you noticed apart from this tough comps?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [14]

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Well, I think EMEA specifically is very much driven by the U.K. It's no secret to anybody that the U.K. is a very tough marketplace right now. I'll restate what I just said a moment ago, which is we expect our leasing revenues to be up year-over-year over a very difficult comp. So we feel good about the big picture in leasing. But you're right, Vikram, the U.K. EMEA is a tough place right now, and transactions are reflecting that in that jurisdiction. APAC and Americas are showing good growth.

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [15]

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I would point out -- I would point to currency too, right? So you stated that EMEA leasing is down 17%. That's in dollars. So one of the factors that I think I mentioned that has impacted Europe is currency. So it's best probably to look in local currency growth rates, and it's still down quite a bit, but it's certainly a factor in the quarter.

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Vikram Malhotra, Morgan Stanley, Research Division - VP [16]

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Okay, fair enough. And then just maybe another question on just the guidance range for EBITDA. You're through kind of early November now. And I know it's always tough to figure out which transactions are closing. I'm assuming, as you've referenced, it's a timing issue from 3Q to 4Q, but does the fact that you've kept the guidance range intact and maybe not narrowed it a reflection of the uncertainty around whether transactions close in 4Q and maybe not get pushed out to next year? I'm just -- I am wondering like, at this point, why not narrow the guidance range?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [17]

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Right. So -- this is Brett. I'll take a shot at it and then I'll let Duncan add what he will. So our approach to revisions of guidance is that we will revise guidance if we see anything that causes a material change in our guidance range. We're not in the practice of narrowing the guidance range at the end of the third quarter. So again, if we see anything that would materially change guidance, we would tell you, and we don't. Duncan, anything you want to add to that?

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [18]

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I think you pretty much answered it. I don't think you should infer too much in the guidance range staying the same, means that we have like more uncertainty in transactions than we had before. I think you should see it more as a reflection of there's really been no new news and, therefore, the guidance range has stayed the same, if that helps you nuance that.

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Operator [19]

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And our next question comes from the line of Sam Choe from Crédit Suisse.

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HyungJun Choe, Crédit Suisse AG, Research Division - Research Analyst [20]

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I'm on for Doug today. Well, you guys really touched on this, but I just wanted to go back to it. So you talked about the stable leasing environment despite the macro headwinds. Are there certain macro areas that you're more concerned about adding volatility to certain service lines and geographies?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [21]

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It's a good question. As I mentioned before, I think the U.K. has been a jump ball now for some years. And the resolution of the specific issues in the U.K. around Brexit remains somewhere down the road. And as our head of -- former Head of EMEA and our President, John Forrester, told me, any resolution is a good resolution at this point. And we think that would be, when it occurs, probably supportive to the marketplace. But certainly, political issues in the U.K. continue to be a headwind that have not gone away. At the moment, our folks in Greater China believe that the issues in Hong Kong are probably not structural and long term, as pertains to transaction volumes, but certainly, a headwind at the moment. And so we're watching that quite carefully. And then we have the final issue with global trade issues, which remain in the marketplace. I think most folks' expectation is that there will be resolution of some sort between the U.S. and in Greater China in the near to midterm and that would be supportive of the marketplace as well.

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HyungJun Choe, Crédit Suisse AG, Research Division - Research Analyst [22]

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Okay, that's really helpful. Another one for me. You guys talked about Fifth Wall partnership last quarter. Just interested in hearing about the integration of recent technology and where new opportunities might come from?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [23]

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Sure. So let me just remind the folks on the phone that we look at technology, first and foremost, as an enabler of growing margin and creating efficiency in the business. Second, we look at technology as a tool for our fee earners and our revenue facing employees to use with clients and to differentiate our services to clients. And our relationship with Fifth Wall really drives both of those. The efficiency side, as you know, we've spent a lot in prior years on building what we consider to be a best-in-class technology infrastructure in the firm. We're very proud of that infrastructure, and it's paying dividends as we speak. As it pertains to the client-facing technology, Fifth Wall has been a great help in that, as has MetaProp, and both those firms help us screen technology and technology firms in the marketplace that we might be able to use in our business, and we are actively engaged with both those firms on a daily basis, looking at ways to further differentiate the firm with clients and to create more efficiency within the business.

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Operator [24]

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And our next question comes from the line of Mitch Germain from G -- JP -- JMP Securities.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [25]

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I'm just -- in terms of the EBITDA margin, I know -- I guess, you suggested you'll have some accretion on the full year. I think you're down about 50 basis points so far. I guess, you're implying a pretty notable pickup in transaction activity, is that the way we should think about it in the fourth quarter?

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [26]

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Mitch, it's Duncan. Yes, I'll go back and maybe clarify what I said earlier. And I think, as you can tell, the EBITDA on the fourth quarter growth year-over-year is going to be quite significant, right? So QSI is an element to that. Obviously, the fourth quarter from a margin point of view is more heavy transaction volume. So it tends to be the best quarter from a margin point of view. So that will cause some pickup. The investments we made in the second half of last year will be accretive to EBITDA, which they've not been year-to-date, which is going to be a driver of margin and then the year-end accruals that we saw last year, which we won't necessarily see this year, things like bonus accrual, are going to be quite accretive to margin too. So from the point of view what's going to drive EBITDA, there's going to be similar things to what drives margin. The margin year-to-date has been driven by the investments which won't be there in the fourth quarter and that's been driven by the shift to PM/FM, and there's a much more transaction-rich environment in the fourth quarter. We've guided that we expect transaction volumes, if you like, brokerage revenue globally to be in the sort of low single digits for the year as it has been year-to-date. So we're not surmising that there's going to be necessarily big growth there. Hopefully, that was wholesome.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [27]

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That's very helpful. The increase in the transaction activity among the professionals that have been recruited, is this based on pipeline that your confidence is increasing? Or is there anything else that's driving that change now?

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Duncan J. Palmer, Cushman & Wakefield plc - Executive VP & CFO [28]

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To be honest, it's driven by the fact that when you hire brokers, brokers, by their nature, are more accretive in terms of revenue in the fourth quarter, just like -- that's the nature of the brokerage business, it is much more heavy to the fourth quarter than it is to the early 3. So they ramp -- they're going to ramp in their first year heavily in the fourth quarter almost by definition because that's -- over a number of brokers, that's where transaction activity is the highest.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [29]

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Got you. And then, Brett, I'm curious about your thoughts about M&A. It's been, obviously, a fairly robust start to the year and things required it a little bit. And I'm curious if there's been -- is it maybe a lack of appetite from you guys to just kind of organically delever? Is it pricing? Is it just the population of transactions or firms that are available? Anything that's kind of impacting your decision to deploy capital here?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [30]

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Sure. First -- it's a good question. First of all, I'll just remind everyone, the QSI transaction was sizable. So in one transaction, we did a lot. That infill M&A will always be lumpy for all the reasons that you would expect. Opportunities remain in the marketplace, we are engaged with a number of those, but when they close is never predictable. But I would say that you should expect that each year we are going to be pretty active in the infill market. As you know, we have an abundance of liquidity on the balance sheet and much of that is earmarked for accretive infill M&A transactions.

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Mitchell Bradley Germain, JMP Securities LLC, Research Division - MD and Senior Research Analyst [31]

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Great. Can I sneak 1 more in? You mentioned QSI. I'm curious about cross-sell opportunity there? And, a, if has any been realized? And how do you potentially make that materialize, given the fact that I'm assuming that it introduced you to potentially some customers that weren't using our platform before?

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [32]

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Sure. Well, I think, first and foremost, any acquisition we make by definition is going to be integrated into the greater business, and that integration should drive in the midterm and long term some pretty decent cross-selling. We don't leave them stand-alone. We put them in the business, and so they are managed by or managed with existing business lines here. For QSI, in particular, goal #1 on that acquisition this year was to get it bedded down, that's done. It's performing quite well, certainly up to our expectations for the business. And I would expect that we will see cross-selling from QSI and into QSI as the quarters unfold. It's early days there. I couldn't tell you because I don't know how much cross-selling has occurred year-to-date, but I think that that's something we would look for in the subsequent quarters.

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Operator [33]

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Thank you. And there are no further questions at this time. I'd now like to turn the conference back to management for closing remarks.

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Brett White, Cushman & Wakefield plc - Executive Chairman & CEO [34]

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Thank you very much. Thanks, everyone, for your time this afternoon and this evening. Look forward to talking to you at the end of the fourth quarter.

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Operator [35]

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And this concludes today's conference call. You may now disconnect.