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

Published Oct 31, 2023 06:15AM ET
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Cushman & Wakefield (NYSE:CWK) 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.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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

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