Cushman&Wakefield Financial Results For Second Quarter 2018

Cushman&Wakefield Financial Results For Second Quarter 2018

Cushman&Wakefield Financial Results For Second Quarter 2018

The FINANCIAL -- Cushman & Wakefield reported financial results for the second quarter 2018.

Revenue for the second quarter was $2.0 billion, up 16% (15% local currencyii). Fee revenue was $1.4 billion, up 11% (10% local currency).

Net loss decreased $15.1 million to $(32.2) million, while net loss per share decreased $0.11 to $(0.22) per share. Adjusted EPS was $0.46, an increase of $0.17 or 59%.

Adjusted EBITDA was $169.8 million, up 30% (28% local currency). Adjusted EBITDA margin of 11.8% was up 180 bps versus second quarter 2017 driven by Fee revenue mix and operating leverage.

Initial Public Offering and Private Placement were completed on August 6 and 7, 2018, resulting in net proceeds of approximately $1.0 billion.

Subsequent to quarter close, we entered into a new Credit Agreement, repaid the First Lien debt and expanded our revolving credit facility.

Second Quarter Results 

Revenue

Revenue was $2.0 billion, an increase of $273.7 million or 16%. Gross contract costs, primarily in the Property, facilities and project management service line, increased $130.8 million driven by the $84.0 million impact of the adoption of Topic 606. Foreign currency had a $17.9 million favorable impact on Revenue, driving approximately 1% growth.

Fee revenue was $1.4 billion, an increase of $127.1 million or 10% on a local currency basis, reflecting increases primarily in Leasing and Property, facilities and project management. Leasing fee revenue increased $74.2 million or 18% on a local currency basis, driven by an Americas increase of $68.2 million or 22% on a local currency basis, with the remainder primarily in APAC. Property, facilities and project management fee revenue increased $34.7 million or 6.0% on a local currency basis, driven by an Americas increase of $21.0 million or 5% on a local currency basis, with the remainder of the Fee revenue growth primarily in EMEA.

Operating expenses

Operating expenses were $1.9 billion, an increase of $205.1 million or 12%. The increase in operating expenses reflected increased cost associated with revenue growth and the $84.0 million increase to gross contract costs resulting from the adoption of Topic 606 discussed above.

Fee-based operating expenses, excluding Depreciation and amortization, integration and other costs related to acquisitions and stock-based compensation, were $1.3 billion, an 8% increase on a local currency basis. The growth in Fee-based operating expenses reflected higher cost of services associated with Fee revenue growth.

Interest expense

Interest expense, net of interest income increased by $8.0 million, driven by higher average annual borrowings during the period.

Income taxes

The provision for income taxes totaled $15.1 million, a change of $47.6 million. The change was driven by the effect of a lower loss before income taxes, as well as additional estimated unfavorable impact of certain sections of the H.R. 1, the Tax Cuts and Jobs Act (the "Tax Act") and a change in the mix of geographical earnings from the prior period.

Net loss and Adjusted EBITDA

Net loss was $32.2 million, a decrease of $15.1 million, primarily driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses, partially offset by the higher provision for income taxes.

Adjusted EBITDA was $169.8 million, an increase of $37.5 million or 28%, on a local currency basis, driven by the increase in Fee revenue exceeding the increase in Fee-based operating expenses and the $6.4 million local currency impact of the adoption of Topic 606. Adjusted EBITDA margin, calculated on a Fee revenue basis, was 11.8%, compared to 10.0% in the prior year, driven by Fee revenue mix and operating leverage.

 

Benefit from income taxes

The benefit from income taxes was $16.6 million, a decrease of $57.6 million. The decrease was driven by a lower net loss before taxes, as well as a lower effective tax rate as a result of the Tax Act which was partially offset by discrete tax benefits recorded in the first quarter of 2018.

 

Balance Sheet (unaudited)

The Company's outstanding First Lien and Second Lien debt, net of deferred financing fees, was $3.0 billion as of June 30, 2018, which net of cash and cash equivalents, provided for a net debt position of approximately $2.6 billion. The Company's net debt increased $34 million from last quarter, primarily driven by lower cash due to the seasonality of our business.

Total ending liquidity for the second quarter was $868 million with the majority of the balance being made up of a $486 million undrawn revolving credit facility, and $382 million of cash and cash equivalents.

In August 2018, the $450 million Second Lien Loan was repaid with IPO proceeds, a new Credit Agreement was raised to increase liquidity and extend maturity, and the revolving credit facility was expanded from $486 million to $810 million. The expanded revolving credit facility, along with cash to balance sheet of $403 million from IPO proceeds, increased liquidity, on a pro-forma basis, to $1.6 billion.