Cushman & Wakefield plc — Q2 2022 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2022. Unaudited U.S. GAAP results; comparisons are with the same 2021 periods. The company provides global commercial real estate services across the Americas, EMEA and APAC.
Key financial results
| Metric | Q2 2022 | Q2 2021 | First half 2022 | First half 2021 |
|---|---|---|---|---|
| Revenue | $2,612.6 million (+16%) | $2,248.3 million | $4,943.6 million (+18%) | $4,172.1 million |
| Service line fee revenue | $1,916.4 million (+18%) | $1,629.7 million | $3,621.2 million (+22%) | $2,967.3 million |
| Operating income | $176.6 million | $124.5 million | $311.9 million | $117.3 million |
| Net income | $97.2 million | $52.7 million | $142.7 million | $35.5 million |
| Diluted EPS | $0.43 | $0.23 | $0.62 | $0.16 |
| Adjusted EBITDA (non-GAAP) | $262.8 million (+20%) | $219.9 million | $477.1 million (+49%) | $319.6 million |
| Adjusted EBITDA margin | 13.7% (+22 bps) | 13.5% | 13.2% (+240 bps) | 10.8% |
Margins are Adjusted EBITDA as a percentage of service line fee revenue. The company cautions that its non-GAAP measures may not be comparable with similarly titled measures at other companies.
Performance and changes versus prior year
- Q2 fee revenue growth was led by Capital markets (+30%) and Leasing (+22%); Property, facilities and project management increased 13%.
- For the first half, Leasing rose 35% and Capital markets 46%. Americas was the principal growth contributor; reported revenue increased 22% there, 4% in EMEA and 10% in APAC.
- Q2 net income grew 84%; first-half operating income rose to $311.9 million from $117.3 million. Lower restructuring charges supported comparability: $2.5 million for the first half versus $32.3 million a year earlier.
- APAC Adjusted EBITDA fell 45% in Q2 and 23% for the first half, with management citing COVID-related lockdowns in China. First-half EMEA and Americas Adjusted EBITDA rose 52% and 65%, respectively.
Cash flow, debt and liquidity
- Cash and cash equivalents were $476.7 million at June 30, down from $770.7 million at December 31, 2021. The cash-flow statement reports $582.7 million of cash, cash equivalents and restricted cash, including $106.0 million restricted cash.
- First-half operating cash flow was a use of $246.3 million, versus $86.9 million provided in 2021. Management attributed the reversal mainly to a $538.8 million net working-capital use, including higher receivables and contract assets and higher bonus and commission payments.
- Investing activities provided $2.6 million and financing activities used $45.3 million during the first half. Capital expenditures were $30.5 million.
- Long-term debt, net, was $3,212.2 million; short-term borrowings and current portion of long-term debt were $44.5 million. The $2,583.9 million first-lien loan had a 4.70% effective rate and matures in August 2025; $641.5 million of senior secured notes bear a fixed 6.75% coupon and mature in May 2028.
- Reported liquidity was approximately $1.6 billion: $0.5 billion cash and an undrawn $1.1 billion revolver. The company said it expected available cash, operating cash flow and revolver capacity to meet anticipated requirements for at least the next 12 months. It reported compliance with debt covenants.
Outlook, risks and unusual items
- No specific revenue or earnings guidance is provided. Management reported continued growth momentum but emphasized uncertainty from inflation, rising interest rates, economic and geopolitical conditions, foreign exchange movements, COVID-19 and possible further lockdowns in Asia. Results are seasonal, generally strongest in Q4; interim results may not indicate full-year performance.
- Other expense included net unrealized investment losses, primarily from the WeWork investment: $27.3 million in Q2 and $53.7 million in the first half, partly offset by gains on other investments. The filing also identifies a $13.8 million first-quarter loss on disposal of Russian operations; management said the disposal had no material impact on the company’s financial statements or future operations.
- The April 2022 credit amendment increased revolver commitments to $1.1 billion, extended maturity to April 2027, replaced LIBOR with Term SOFR and added sustainability-linked incentives. The receivables securitization facility was $80 million drawn against a $125 million limit at quarter-end. A subsequent amendment, effective August 22, increased the limit to $200 million and extended maturity to June 2023.
- Recorded contingent liabilities for claims were $167.6 million at June 30; the filing warns ultimate settlements could materially exceed recorded amounts. Guarantees had aggregate maximum potential future payments of approximately $47.8 million, with payment considered remote.
- Disclosure controls were assessed as effective; no material change in internal control over financial reporting was reported. The filing reported no material changes to previously disclosed risk factors or legal proceedings.
Most important facts for investors to verify
- Whether brokerage-driven Leasing and Capital markets growth continues, and how market conditions affect transaction volumes and margins.
- Whether working-capital cash use reverses as receivables and contract assets are collected; operating cash flow was negative despite higher earnings.
- How WeWork valuation changes, interest-rate exposure and currency movements affect earnings, cash flows and reported equity.
- Whether APAC performance recovers as China lockdown impacts ease, and whether the expanded receivables facility is sufficient for seasonal funding needs.
- The basis and sustainability of Adjusted EBITDA growth, including the effect of excluded investment losses, acquisition/efficiency costs and other adjustments.