Cushman & Wakefield plc — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; comparisons are with the three months ended March 31, 2023. The company is a global commercial real estate services firm operating across the Americas, EMEA and APAC. Results are unaudited and subject to seasonal variation.
Key financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $2,184.8 million | $2,249.3 million | Down 3% |
| Operating income (loss) | $18.8 million | $(18.3) million | Improved |
| Net loss | $(28.8) million | $(76.4) million | Loss narrowed 62% |
| diluted loss per share | $(0.13) | $(0.34) | Improved |
| Adjusted EBITDA | $78.1 million | $60.9 million | Up 28% |
| Adjusted EBITDA margin | 5.2% | 4.0% | Expanded 117 basis points |
| Net cash used in operating activities | $(125.1) million | $(221.5) million | Use decreased $96.4 million |
Revenue was $2,184.8 million, including $1,497.6 million of service-line fee revenue and $687.2 million of gross contract reimbursables, which the company says generate substantially no margin. GAAP operating margin was approximately 0.9%, compared with a loss margin of approximately 0.8% in Q1 2023; net loss margin improved to 1.3% from 3.4%. Adjusted EBITDA and its margin are non-GAAP measures.
Revenue and segment trends
- Americas revenue fell 6% to $1,621.0 million; segment Adjusted EBITDA rose 14% to $64.4 million.
- EMEA revenue rose 8% to $222.4 million; Adjusted EBITDA improved to $9.0 million from a $2.1 million loss.
- APAC revenue rose 5% to $341.4 million; Adjusted EBITDA fell 25% to $4.7 million.
- By service line, Leasing increased 5%, Valuation and other increased 1%, Services declined 3%, and Capital markets declined 1%.
Financial position and liquidity
- Cash and cash equivalents were $553.5 million at March 31, 2024, down from $767.7 million at December 31, 2023. Cash, cash equivalents and restricted cash totaled $585.8 million.
- Reported debt was $3,184.9 million, including finance lease liabilities; long-term debt, net, was $3,065.9 million. The revolving credit facility was undrawn, with $1.1 billion available. The company reported total liquidity of $1.7 billion.
- Current assets were $2,459.8 million and current liabilities were $2,179.4 million. Total liabilities were $5,865.7 million and total equity was $1,625.4 million.
- Operating activities used $125.1 million of cash. Investing activities used $10.8 million, principally reflecting $10.5 million of capital expenditures. Financing activities used $72.9 million, including $55.0 million of debt repayments.
- In March, the company prepaid $50.0 million of its 2025 term-loan tranche. At quarter end, it was in compliance with debt covenants. The revolver’s springing leverage covenant applies if borrowings exceed the specified threshold.
Changes, outlook and risks
- The narrower net loss reflected cost savings, lower expenses, stronger Leasing and Valuation and other results, and the prior-year period’s debt-extinguishment and refinancing costs. Interest expense declined 24% to $58.7 million, although higher variable rates partly offset the benefit of the absence of prior-year refinancing costs.
- Management cited elevated interest rates and ongoing volatility in global capital and credit markets as weighing on demand. It expected many macroeconomic challenges to persist through at least the first half of 2024. No specific numerical full-year earnings or revenue guidance is provided in the filing text.
- Management said cash on hand, operating cash flow and revolver availability should be sufficient for anticipated needs for the foreseeable future, and at a minimum the next 12 months, absent a large strategic acquisition or other extraordinary event. It also noted first-quarter cash flow is typically seasonally weak.
- In April 2024, the company repriced $1.0 billion of its 2030 Tranche-2 term loans, reducing the spread by 25 basis points, from Term SOFR plus 4.00% to Term SOFR plus 3.75%. The $100 million outstanding under the receivables securitization funding facility was repaid in full in April.
- Key risks include commercial real estate and capital-market conditions, variable-rate debt and interest costs, foreign currency movements, seasonality, and the ability to retain revenue-producing employees. The company disclosed a dispute with a non-U.S. tax authority over payroll taxes for 2015–2021; it recorded an immaterial estimated probable liability but said an additional potentially material liability is reasonably possible. It also described contingent claims and a Greystone JV indemnity tied to 39 brokered loans; potential future loss is considered remote, but could be material to the JV.
- The company reported no material changes to previously disclosed risk factors, no material subsequent events through April 29, 2024, and effective disclosure controls as of March 31, 2024.
Most important facts for investors to verify
- Whether the improvement in Adjusted EBITDA and operating income persists despite lower consolidated revenue and ongoing weakness in Services and parts of the Americas business.
- How interest rates, commercial real estate transaction activity and seasonal working-capital needs affect future earnings and operating cash flow.
- Debt maturities, variable-rate exposure, hedge coverage, covenant headroom and the effect of the April 2024 repricing.
- Developments in the payroll-tax dispute and any changes to contingent claims or the Greystone JV indemnity exposure.
- The basis and exclusions in the company’s non-GAAP Adjusted EBITDA measure and the adequacy of liquidity if operating conditions worsen.