CUSHMAN & WAKEFIELD PLC
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited interim Condensed
Consolidated Financial Statements and related notes included elsewhere in this
Quarterly Report on Form 10-Q ("Quarterly Report") and with our audited
Consolidated Financial Statements included in our Annual Report on Form 10-K for
the year ended December 31, 2019 as filed with the Securities and Exchange
Commission .
As discussed in "Cautionary Note Regarding Forward-Looking Statements," the
following discussion and analysis contains forward-looking statements that
involve risks and uncertainties. Our actual results may materially differ from
those discussed in such forward-looking statements. Factors that could cause or
contribute to these differences include, but are not limited to, those
identified below and those discussed in "Risk Factors" under Part II, Item 1A in
this Quarterly Report. Our fiscal year ends December 31 .
Overview
Cushman & Wakefield is a leading global commercial real estate services firm,
built on a trusted brand and backed by approximately 53,000 employees and
serving the world's real estate owners and occupiers through a scalable
platform. We operate across approximately 400 offices in 60 countries, managing
over 4.1 billion square feet of commercial real estate space on behalf of
institutional, corporate and private clients. Our business is focused on meeting
the increasing demands of our clients across multiple service lines including
Property, facilities and project management, Leasing, Capital markets and
Valuation and other services.
Impact of COVID-19
The emergence and proliferation of a novel coronavirus (COVID-19) around the
world, and particularly in the United States , Europe and China , presents
significant risks to the Company. In response to the outbreak, many countries
reacted by instituting quarantine measures, mandating business and school
closure and restricting travel, all of which have had an adverse effect on the
Company's operations. While restrictions in some areas have been lifted or
relaxed, precautions and procedures remain in place in many countries which
could continue to impact the Company's operations for a significant period of
time. In addition, some locations have experienced, or may in the future
experience, resurgences in COVID-19 cases. The Company cannot reasonably
estimate with any degree of certainty the future impact COVID-19 may have on the
Company's results of operations, financial position, and liquidity, much of
which will depend on when and to what extent current restrictions are lifted and
economic conditions improve. In response to the global pandemic, the Company
created a COVID-19 executive task force that has implemented business continuity
plans and has taken a variety of actions to ensure the ongoing availability of
our services, while also undertaking appropriate health and safety measures.
This executive task force is comprised of representatives from every part of our
business, including Health, Safety, Security & Environment experts. The task
force has authority to make timely, informed decisions relating to our business
continuity planning and actions. As a result of these actions, the Company has
not experienced disruptions to date in its operations or ability to service our
clients. In addition, the Company has been able to respond quickly to our
customers' changing business demands related to the COVID-19 pandemic.
The impact of COVID-19 was significant in the third quarter of 2020, as demand
declined in our transaction-related brokerage service lines. In the third
quarter of 2020, Leasing revenue declined 32% and Capital markets revenue
declined 35%, compared to the third quarter of 2019.
Overall, the Company maintains sufficient liquidity to continue business
operations during these uncertain economic conditions. As discussed in
"Liquidity and Capital Resources" below, the Company had liquidity of
approximately $1.9 billion as of September 30, 2020 , comprising of cash on hand
of $916.8 million and an undrawn revolving credit facility of $1.0 billion .
The Company will continue to monitor the circumstances and may take further
actions that affect our business operations and performance. These actions may
result from requirements mandated by federal, state or local authorities or that
we determine to be in the best interests of our employees, customers, and
shareholders. The circumstances surrounding COVID-19 remain fluid, and the
potential for a material impact on the Company increases the longer the virus
impacts the level of economic activity in the United States and in other
countries. For these reasons, the Company cannot reasonably estimate with any
degree of certainty the future impact COVID-19 may have on the Company's results
of operations, financial position, and liquidity. See Part II, Item 1A - "Risk
Factors" for further information.
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Critical Accounting Policies
Our unaudited interim Condensed Consolidated Financial Statements have been
prepared in accordance with U.S. GAAP, which requires us to make estimates and
assumptions that affect reported amounts. The estimates and assumptions are
based on historical experience and on other factors that we believe to be
reasonable. Actual results may differ from those estimates. We review these
estimates on a periodic basis to ensure reasonableness. Although actual amounts
may differ from such estimated amounts, we believe such differences are not
likely to be material. For additional detail regarding our critical accounting
policies including business combinations, goodwill and indefinite-lived
intangible assets and income taxes, see our discussion for the year ended
December 31, 2019 included in the Company's 2019 Annual Report on Form 10-K.
There have been no material changes to these policies as of September 30, 2020 .
Recently Issued Accounting Pronouncements
See recently issued accounting pronouncements within Note 2: New Accounting
Standards of the Notes to the unaudited interim Condensed Consolidated Financial
Statements.
Leases
The Company adopted ASU No. 2018-11, Topic 842, effective January 1, 2019 , which
improves clarity and comparability by disclosing the recognition of lease assets
and lease liabilities on the balance sheet as well as key leasing arrangements.
Stock Compensation
The Company adopted ASU No. 2018-07, Topic 718, effective January 1, 2019 , which
improves clarity over equity-based payments to non-employees by aligning the
award measurement date with the grant date of an award.
Current Expected Credit Loss (CECL)
In June 2016 , the FASB issued ASU No. 2016-13, Financial Instruments - Credit
Losses (together with all subsequent amendments, (Topic 326)), which replaces
the current U.S. GAAP that requires an incurred loss methodology for recognizing
credit losses and delays recognition until it is probable a loss has been
incurred. Topic 326 replaces the incurred loss methodology with a methodology
that reflects expected credit losses and requires consideration of reasonable
and supportable information to estimate credit losses. The Company adopted Topic
326 on January 1, 2020 in accordance with the modified retrospective approach,
which resulted in an immaterial cumulative-effect adjustment to the opening
balance of Accumulated Deficit.
Derivatives and Hedging
The Company adopted ASU No. 2017-12, Topic 815, effective January 1, 2019 which
eliminates the requirement to separately measure and report hedge
ineffectiveness and is intended to reduce the complexity of applying hedge
accounting by simplifying the designation and measurement of hedging
instruments.
In March 2020 , the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):
Facilitation of the Effects of Reference Rate Reform on Financial Reporting.
This ASU provides temporary optional practical expedients for reference rate
reform related activities that impact debt, leases, derivatives and other
contracts and is effective through December 31, 2022 . In the second quarter of
2020, the Company elected to apply the hedge accounting expedients related to
probability of forecasted transactions and the assessments of effectiveness for
future LIBOR-indexed cash flows to assume that the index upon which future
hedged transactions will be based matches the index on the corresponding
derivatives. The application of these expedients preserves the presentation of
the derivatives with no impact to the financial statements and related
disclosures.
Income Taxes
In December 2019 , the FASB issued ASU No. 2019-12, Income Taxes (Topic 740):
Simplifying the Accounting for Income Taxes. The new guidance removes certain
exceptions related to the approach for intraperiod tax allocation, the
methodology for calculating income in an interim period, and the recognition of
deferred tax liabilities for outside basis differences. The new guidance is
effective for public companies for annual reporting periods and interim periods
within those annual periods beginning after December 15, 2020 . The Company
adopted the new guidance effective July 1, 2020 , with an immaterial impact to
its financial statements and related disclosures.
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Items Affecting Comparability
When reading our financial statements and the information included in this
Quarterly Report, it should be considered that we have experienced, and continue
to experience, several material trends and uncertainties that have affected our
financial condition and results of operations that could affect future
performance. We believe that the following material trends and uncertainties are
important to understand the variability of our historical earnings and cash
flows and any potential future variability.
Macroeconomic Conditions
Our results of operations are significantly impacted by economic trends,
government policies and the global and regional real estate markets. These
include the following: overall economic activity; changes in interest rates; the
impact of tax and regulatory policies; changes in employment rates; level of
commercial construction spending; the cost and availability of credit; the
impact of the COVID-19 global pandemic; and the geopolitical environment.
Our operating model helps to partially mitigate the negative effect of difficult
market conditions on our margins as a substantial portion of our costs are
variable compensation expenses, specifically commissions and bonuses paid to our
professionals in our Leasing and Capital market service lines. Nevertheless,
adverse economic trends pose significant risks to our operating performance and
financial condition.
Acquisitions
Our results include the incremental impact of completed transactions from the
date of acquisition, which may impact the comparability of our results on a
year-over-year basis. Additionally, there is generally an adverse impact on net
income for a period of time after the completion of an acquisition driven by
transaction-related and integration expenses. We have historically used
strategic and in-fill acquisitions to add new service capabilities, to increase
our scale within existing capabilities and to expand our presence in new or
existing geographic regions globally. We believe that strategic acquisitions
increase revenue, provide cost synergies and generate incremental income in the
long term.
Seasonality
A significant portion of our revenue is seasonal, especially for service lines
such as Leasing and Capital markets. This impacts the comparison of our
financial condition and results of operations on a quarter-by-quarter basis.
Generally, our industry is focused on completing transactions by calendar
year-end with a significant concentration of activity in the last quarter of the
calendar year while certain expenses are recognized more evenly throughout the
calendar year. Historically, our revenue and operating income tend to be lowest
in the first quarter, and highest in the fourth quarter of each year. The
Property, facilities and project management service line partially mitigates
this intra-year seasonality, due to the recurring nature of this service line,
which generates more stable revenues throughout the year.
Inflation
Our commission and other operating costs tied to revenue are primarily impacted
by factors in the commercial real estate market. These factors have the
potential to be affected by inflation. Other costs such as wages and costs of
goods and services provided by third parties also have the potential to be
impacted by inflation. However, we do not believe that inflation has materially
impacted our operations.
International Operations
Our business consists of service lines operating in multiple regions inside and
outside of the U.S. Our international operations expose us to global economic
trends as well as foreign government tax, regulatory, and policy measures.
Additionally, outside of the U.S. , we generate earnings in other currencies and
are subject to fluctuations relative to the U.S. dollar ("USD"). As we continue
to grow our international operations through acquisitions and organic growth,
these currency fluctuations, most notably the Australian dollar, euro and
British pound sterling have the potential to positively or adversely affect our
operating results measured in USD. It can be difficult to compare
period-over-period financial statements when the movement in currencies against
the USD does not reflect trends in the local underlying business as reported in
its local currency.
In order to assist our investors and improve comparability of results, we
present the year-over-year changes in certain of our non-GAAP financial
measures, such as Fee revenue and Adjusted EBITDA, in "local" currency. The
local currency change represents the year-over-year change assuming no movement
in foreign exchange rates
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from the prior year. We believe that this provides our management and investors
with a better view of comparability and trends in the underlying operating
business.
Key Performance Measures
We regularly review a number of metrics to evaluate our business, measure our
progress and make strategic decisions. The measures include Segment operating
expenses, Fee-based operating expenses, Adjusted EBITDA, Adjusted EBITDA margin
and local currency. Certain of these metrics are non-GAAP measures currently
utilized by management to assess performance, and we disclose these measures to
investors to assist them in providing a meaningful understanding of our
performance. See "Use of Non-GAAP Financial Measures" and "Results of
Operations" below.
Use of Non-GAAP Financial Measures
We have used the following measures, which are considered "non-GAAP financial
measures" under SEC guidelines:
i.Segment operating expenses and Fee-based operating expenses;
ii.Adjusted earnings before interest, taxes, depreciation and amortization
("Adjusted EBITDA") and Adjusted EBITDA margin; and
iii.Local currency.
Our management principally uses these non-GAAP financial measures to evaluate
operating performance, develop budgets and forecasts, improve comparability of
results and assist our investors in analyzing the underlying performance of our
business. These measures are not recognized measurements under GAAP. When
analyzing our operating results, investors should use them in addition to, but
not as an alternative for, the most directly comparable financial results
calculated and presented in accordance with GAAP. Because the Company's
calculation of these non-GAAP financial measures may differ from other
companies, our presentation of these measures may not be comparable to similarly
titled measures of other companies.
The Company believes that these measures provide a more complete understanding
of ongoing operations, enhance comparability of current results to prior
periods, and may be useful for investors to analyze our financial performance.
The measures eliminate the impact of certain items that may obscure trends in
the underlying performance of our business. The Company believes that they are
useful to investors, for the additional purposes described below.
Segment operating expenses and Fee-based operating expenses: Consistent with
GAAP, reimbursed costs for certain customer contracts are presented on a gross
basis in both revenue and operating expenses for which the Company recognizes
substantially no margin. Total costs and expenses include segment operating
expenses as well as other expenses such as depreciation and amortization,
integration and other costs related to merger, pre-IPO stock-based compensation,
acquisition related costs and efficiency initiatives. Segment operating expense
includes Fee-based operating expenses and Cost of gross contract reimbursables.
We believe Fee-based operating expenses more accurately reflects the costs we
incur during the course of delivering services to our clients and is more
consistent with how we manage our expense base and operating margins.
Adjusted EBITDA and Adjusted EBITDA margin: We have determined Adjusted EBITDA
to be our primary measure of segment profitability. We believe that investors
find this measure useful in comparing our operating performance to that of other
companies in our industry because these calculations generally eliminate
integration and other costs related to merger, pre-IPO stock-based compensation,
acquisition related costs and efficiency initiatives and other items. Adjusted
EBITDA also excludes the effects of financings, income tax and the non-cash
accounting effects of depreciation and intangible asset amortization. Adjusted
EBITDA margin, a non-GAAP measure of profitability as a percent of revenue, is
measured against service line fee revenue.
Local currency: In discussing our results, we refer to percentage changes in
local currency. These metrics are calculated by holding foreign currency
exchange rates constant in year-over-year comparisons. Management believes that
this methodology provides investors with greater visibility into the performance
of our business excluding the effect of foreign currency rate fluctuations.
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Results of Operations
In accordance with Item 303 of Regulation S-K, the Company has excluded the
discussion of 2018 results in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," as this discussion can be found in our
Quarterly Report on Form 10-Q for the three months ended September 30, 2019
filed with the SEC under "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
The following table sets forth items derived from our unaudited Condensed
Consolidated Statements of Operations for the three and nine months ended
September 30, 2020 and 2019 (in millions):
Three Months Ended September 30, Nine Months Ended September 30,
% Change in % Change in % Change in % Change in
2020 2019 USD Local Currency 2020 2019 USD Local Currency
Revenue:
Property, facilities and project
management $ 747.2 $ 723.1 3 % 3 % $ 2,172.8 $ 2,169.7 - % 1 %
Leasing 321.6 470.5 (32) % (32) % 886.9 1,332.5 (33) % (33) %
Capital markets 155.5 238.0 (35) % (35) % 450.4 664.9 (32) % (32) %
Valuation and other 104.6 117.8 (11) % (12) % 308.9 330.4 (7) % (6) %
Total service line fee revenue(1) 1,328.9 1,549.4 (14) % (15) % 3,819.0 4,497.5 (15) % (14) %
Gross contract reimbursables(2) 602.7 569.4 6 % 5 % 1,751.6 1,646.0 6 % 7 %
Total revenue $ 1,931.6 $ 2,118.8 (9) % (9) % $ 5,570.6 $ 6,143.5 (9) % (9) %
Costs and expenses:
Cost of services provided to clients $ 996.9 $ 1,122.8 (11) % (11) %
(12) % (11) % Cost of gross contract reimbursables 602.7 569.4 6 % 5 % 1,751.6 1,646.0 6 % 7 % Total costs of services 1,599.6 1,692.2 (5) % (6) % 4,652.3 4,944.1 (6) % (5) % Operating, administrative and other 254.3 315.2 (19) % (20) % 810.4 908.9 (11) % (10) % Depreciation and amortization 64.9 75.0 (13) % (14) % 211.5 222.8 (5) % (5) % Restructuring, impairment and related charges 13.1 (0.6) n.m. n.m. 45.0 3.5 n.m. n.m. Total costs and expenses 1,931.9 2,081.8 (7) % (8) % 5,719.2 6,079.3 (6) % (5) % Operating income (loss) (0.3) 37.0 (101) % (100) % (148.6) 64.2 (331) % (335) % Interest expense, net of interest income (44.9) (37.4) 20 % 20 % (120.2) (112.8) 7 % 7 % Earnings from equity method investments 2.8 0.7 300 % 305 % 5.8 2.0 190 % 194 % Other income, net 0.5 0.4 25 % (29) % 31.0 3.2 869 % 722 % Earnings (loss) before income taxes (41.9) 0.7 n.m. n.m. (232.0) (43.4) (435) % (427) % Benefit from income taxes (4.6) (11.0) (58) % (60) % (38.8) (40.5) (4) % (5) % Net income (loss) $ (37.3) $ 11.7 (419) % (450) %$ (193.2) $ (2.9) n.m. n.m. Adjusted EBITDA $ 117.1 $ 168.5 (31) % (31) % $ 306.2 $ 431.4 (29) % (28) %
Adjusted EBITDA margin(3) 8.8 % 10.9 % 8.0 % 9.6 %
n.m. not meaningful
(1) Service line fee revenue represents revenue for fees generated from each of
our service lines
(2) Gross contract reimbursables reflects revenue from clients which have
substantially no margin
(3) Adjusted EBITDA margin is measured against service line fee revenue
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--------------------------------------------------------------------------------Adjusted EBITDA is calculated as follows (in millions):
Three Months Ended September 30 ,
Nine Months Ended
2020 2019 2020 2019
Net income (loss) $ (37.3) $ 11.7 $ (193.2) $ (2.9)
Add/(less):
Depreciation and amortization(1) 64.9 75.0 211.5 222.8
Interest expense, net of interest income 44.9 37.4 120.2 112.8
Benefit from income taxes (4.6) (11.0) (38.8) (40.5)
Integration and other costs related to
merger(2) 12.8 29.9 47.6 74.1
Pre-IPO stock-based compensation(3) 4.5 11.4 16.7 33.6
Acquisition related costs and efficiency
initiatives(4) 28.3 8.0 114.7 17.7
Other(5) 3.6 6.1 27.5 13.8
Adjusted EBITDA $ 117.1 $ 168.5 $ 306.2 $ 431.4
(1) Depreciation and amortization includes merger and acquisition-related
depreciation and amortization of $41.6 million and $52.8 million for the three
months ended September 30, 2020 and 2019 and $140.1 million and $159.1 million
for the nine months ended September 30, 2020 and 2019, respectively.
(2) Integration and other costs related to merger include certain direct and
incremental integration and restructuring efforts.
(3) Pre-IPO stock-based compensation represents non-cash compensation expense
associated with our pre-IPO equity compensation plans. Refer to Note 9:
Stock-based Payments of the Notes to unaudited interim Condensed Consolidated
Financial Statements for the three and nine months ended September 30, 2020 for
additional information.
(4) Acquisition related costs and efficiency initiatives reflect costs incurred
to implement operating efficiency initiatives in 2020 to allow the Company to be
a nimbler and more agile partner to its clients, as well as incremental costs
related to in-fill M&A.
(5) Other principally reflects COVID-19 related items including contributions to
the Global Employee Assistance Fund and preparation costs for employee return to
office, which totaled $2.8 million and $14.4 million for the three and nine
months ended September 30, 2020 , respectively, and other items including
accounts receivable securitization.
Below is a summary of Total costs and expenses (in millions):
Three Months Ended September
30,
Nine Months Ended
2020 2019 2020 2019
Americas Fee-based operating expenses
190.2 190.0 541.9 567.2
APAC Fee-based operating expenses 187.9 234.9 551.0 721.6
Cost of gross contract reimbursables 602.7 569.4 1,751.6 1,646.0
Segment operating expenses: 1,819.1 1,951.4 5,277.4 5,717.3
Depreciation and amortization 64.9 75.0 211.5 222.8
Integration and other costs related to
merger(1) 12.8 29.9 47.6 74.1
Pre-IPO stock-based compensation 4.5 11.4 16.7 33.6
Acquisition related costs and efficiency
initiatives(2) 27.0 8.0 138.5 17.7
Other 3.6 6.1 27.5 13.8
Total costs and expenses $ 1,931.9 $ 2,081.8
(1) Integration and other costs related to merger include certain direct and
incremental integration and restructuring efforts.
(2) Acquisition related costs and efficiency initiatives reflect costs incurred
to implement operating efficiency initiatives in 2020 to allow the Company to be
a nimbler and more agile partner to its clients, as well as incremental costs
related to in-fill M&A.
29-------------------------------------------------------------------------------- Three months endedSeptember 30, 2020 compared to three months endedSeptember 30, 2019 Revenue Revenue was$1.9 billion , a decrease of$187.2 million or 9% versus the three months endedSeptember 30, 2019 . This decrease was primarily attributed to lower brokerage activity in the third quarter due to the impact of the COVID-19 pandemic. This decline was also driven in part by the impact of contributing the Company's China Property, facilities and project management business into the Cushman & Wakefield Vanke Service joint venture in the first quarter of 2020. Leasing declined$148.9 million or 32% on a local currency basis. In addition, Capital markets declined$82.5 million or 35% on a local currency basis. Partially offsetting these trends was the continuing stability of the Company's Property, facilities and project management service line including the increase of$33.3 million in Gross contract reimbursables revenue. Cost of services Cost of services of$1.6 billion decreased$92.6 million or 5%. Costs of services provided to clients declined 11% principally due to revenue trends described above resulting in lower variable costs including direct labor, compensation and commissions as well as the Company's operating efficiency initiatives and cost savings actions. This decrease was partially offset by higher Cost of gross contract reimbursables primarily related to the Property, facilities and project management service line. Operating, administrative and other Operating, administrative and other of$254.3 million decreased by$60.9 million principally due to lower revenue as well as the Company's operating efficiency initiatives and cost savings actions, including reduced spending on travel and entertainment, third-party contractors and marketing. Operating, administrative and other costs as a percentage of total revenue was 13% for the third quarter of 2020 as compared to 15% for the third quarter of 2019. Depreciation and amortization Depreciation and amortization was$64.9 million , a decrease of$10.1 million . This reflected a decrease in amortization costs of$10.7 million , partially offset by an increase in depreciation of$0.6 million . Restructuring, impairment and related charges Restructuring, impairment and related charges were$13.1 million , an increase of$13.7 million , principally due to operating efficiency initiatives implemented inMarch 2020 as part of the Company's previously announced strategic realignment of the business. Interest expense, net Net interest expense was$44.9 million , an increase of$7.5 million . This increase was principally attributed to the incremental interest incurred as a result of the issuance of 2020 senior secured notes in the second quarter of 2020. Other income, net Other income was a net loss of$0.5 million , a decrease of$0.1 million year over year, which principally reflects losses incurred from the disposal of holding companies in connection with the Company's strategic realignment of the business. Benefit from income taxes The Company's income tax provision for the third quarter of 2020 was a benefit of$4.6 million on the loss before taxes of$41.9 million . For the third quarter of 2019, the Company's income tax provision was a benefit of$11.0 million on income before taxes of$0.7 million . The Company's estimated effective tax rate was lower in the three months endedSeptember 30, 2020 compared to the same period last year primarily due to higher interest deduction as a result of the 2020 U.S. CARES Act. The tax provision for the three months endedSeptember 30, 2019 , includes a discrete tax benefit due to a partial release of valuation allowance, resulting in a greater tax benefit. 30 -------------------------------------------------------------------------------- Net loss and Adjusted EBITDA The net loss of$37.3 million principally reflects the impact of COVID-19 on brokerage activity experienced during the third quarter as Leasing and Capital markets revenue declined 32% and 35%, respectively, partially offset by cost savings actions and operating efficiencies. Adjusted EBITDA of$117.1 million declined$51.4 million or 31%, on a local currency basis, primarily due to the lower brokerage activity resulting from COVID-19, partially offset by savings generated by cost reduction actions and operating efficiency initiatives. As a result, Adjusted EBITDA margin, measured against service line fee revenue, was 8.8% for the three months endedSeptember 30, 2020 , compared to 10.9% in the three months endedSeptember 30, 2019 . Nine months endedSeptember 30, 2020 compared to nine months endedSeptember 30, 2019 Revenue Revenue of$5.6 billion decreased$572.9 million or 9% versus the nine months endedSeptember 30, 2019 . This trend was primarily attributed to lower brokerage activity due to the impact of the COVID-19 pandemic. This decline was driven in part by the impact of contributing the Company's China Property, facilities and project management business into the Cushman & Wakefield Vanke Service joint venture. Leasing declined$445.6 million or 33% on a local currency basis. In addition, Capital markets declined$214.5 million or 32% on a local currency basis. Partially offsetting these trends was the stability of the Company's Property, facilities and project management service line including the increase of$105.6 million in Gross contract reimbursables revenue. Cost of services Cost of services of$4.7 billion decreased$291.8 million or 6%. Cost of services provided to clients declined 12% principally due to revenue trends described above resulting in lower variable costs including direct labor, compensation and commissions as well as the Company's operating efficiency initiatives and cost savings actions. This decrease was partially offset by higher Cost of gross contract reimbursables primarily related to the Property, facilities and project management service line. Operating, administrative and other Operating, administrative and other of$810.4 million decreased by$98.5 million due to lower revenue as well as the Company's operating efficiency initiatives and cost savings actions, including reduced spending on travel and entertainment, third-party contractors and marketing. Overall, as a percentage of total revenue, operating, administrative and other costs was flat for the nine months endedSeptember 30, 2020 as compared to the first nine months of 2019. Depreciation and amortization Depreciation and amortization was$211.5 million , a decrease of$11.3 million . This decrease reflected lower amortization totaling$21.5 million , partially offset by an increase in depreciation of$9.8 million from theAmericas , driven by a larger asset base. Restructuring, impairment and related charges Restructuring impairment and related charges were$45.0 million , an increase of$41.5 million , primarily due to operating efficiency initiatives implemented as part of the Company's previously announced strategic realignment of the business, which resulted in charges of$42.1 million for severance and other separation benefits. Interest expense, net Net interest expense of$120.2 million , increased 7% compared to the nine months endedSeptember 30, 2019 principally due to interest associated with the issuance of 2020 senior secured notes in the second quarter of 2020. Partially offsetting this increase was the impact of theJanuary 2020 repricing of the Company's term loan to a lower effective interest rate. 31 -------------------------------------------------------------------------------- Other income, net Other income was$31.0 million , an increase of$27.8 million , reflecting a$36.9 million gain as a result of the formation of the Cushman &Wakefield Vanke Service joint venture inChina , partially offset by losses incurred from the disposal of holding companies in connection with the Company's previously announced strategic realignment of the business. Benefit from income taxes The Company's income tax provision for the first nine months of 2020 was a benefit of$38.8 million on the loss before taxes of$232.0 million . For the first nine months of 2019, the Company's income tax provision was a benefit of$40.5 million on the loss before taxes of$43.4 million . The Company's effective tax rate was lower in the nine months endedSeptember 30, 2020 compared to the same period last year primarily due to higher interest deduction as a result of the 2020 U.S. CARES Act. The tax provision for the nine months endedSeptember 30, 2019 , includes a discrete tax benefit due to a partial release of valuation allowance, resulting in a greater tax benefit. Net loss and Adjusted EBITDA Net loss of$193.2 million principally reflects the impact of COVID-19 on brokerage activity experienced during the first nine months of 2020, as Leasing and Capital markets revenue declined 33% and 32%, respectively, partially offset by cost savings actions and operating efficiencies. Adjusted EBITDA of$306.2 million declined$125.2 million or 28%, on a local currency basis, primarily due to the impact of the lower brokerage activity due to COVID-19 experienced in the first nine months of 2020 partially offset by savings generated by cost reduction actions and operating efficiency initiatives. As a result, Adjusted EBITDA margin, measured against service line fee revenue, was 8.0% for the nine months endedSeptember 30, 2020 , compared to 9.6% in the nine months endedSeptember 30, 2019 .
Segment Operations
We report our operations through the following segments: (1)Americas , (2)Europe ,Middle East andAfrica ("EMEA") and (3)Asia Pacific ("APAC"). TheAmericas consists of operations located inthe United States ,Canada and key markets inLatin America . EMEA includes operations in theUnited Kingdom ,France ,Netherlands and other markets inEurope and theMiddle East . APAC includes operations inAustralia ,Singapore ,China and other markets in theAsia Pacific region. For segment reporting, Service line fee revenue represents revenue for fees generated from each of our of service lines. Gross contract reimbursables reflect revenue paid by clients which have substantially no margin. Our measure of segment results, Adjusted EBITDA, excludes depreciation and amortization, as well as integration and other costs related to merger, pre-IPO stock-based compensation, and other items. In accordance with Item 303 of Regulation S-K, the Company has excluded the discussion of 2018 results in "Management's Discussion and Analysis of Financial Condition and Results of Operations," as this discussion can be found in our Quarterly Report on Form 10-Q for the three months endedSeptember 30, 2019 filed with theSEC under "Management's Discussion and Analysis of Financial Condition and Results of Operations." 32 -------------------------------------------------------------------------------- Americas Results The following table summarizes our results of operations by ourAmericas operating segment for the three and nine months endedSeptember 30, 2020 and 2019 (in millions): Three Months Ended September 30, Nine Months Ended September 30, % Change in % Change in % Change in % Change in 2020 2019 USD Local Currency 2020 2019 USD Local Currency Revenue: Property, facilities and project management $ 512.5 $ 480.8 7 % 7 %$ 1,501.4 $ 1,428.4 5 % 6 % Leasing 243.8 372.3 (35) % (34) % 671.8 1,056.1 (36) % (36) % Capital markets 123.8 181.6 (32) % (32) % 345.8 492.0 (30) % (30) % Valuation and other 38.6 47.7 (19) % (18) % 110.8 124.1 (11) % (10) % Total service line fee revenue(1) 918.7 1,082.4 (15) % (15) % 2,629.8 3,100.6 (15) % (15) % Gross contract reimbursables(2) 497.4 430.4 16 % 16 % 1,429.6 1,252.7 14 % 14 % Total revenue$ 1,416.1 $ 1,512.8 (6) % (6) %$ 4,059.4 $ 4,353.3 (7) % (6) % Costs and expenses: Americas Fee-based operating expenses $ 838.3 $ 957.1
(12) % (12) %
(13) % (12) % Cost of gross contract reimbursables 497.4 430.4 16 % 16 % 1,429.6 1,252.7 14 % 14 % Segment operating expenses$ 1,335.7 $ 1,387.5 (4) % (3) %$ 3,862.5 $ 4,035.2 (4) % (4) % Adjusted EBITDA $ 81.2 $ 125.2 (35) % (35) % $ 199.1 $ 318.0 (37) % (37) %
Adjusted EBITDA Margin(3) 8.8 % 11.6 % 7.6 % 10.3 % (1) Service line fee revenue represents revenue for fees generated from each of our service lines (2) Gross contract reimbursables reflects revenue from clients which have substantially no margin (3) Adjusted EBITDA margin is measured against service line fee revenue Three months endedSeptember 30, 2020 compared to three months endedSeptember 30, 2019 Americas revenue was$1.4 billion , a decrease of$96.7 million or 6%. This decline was principally driven by lower brokerage activity as a result of the impact of the COVID-19 pandemic. Leasing and Capital markets were down 34% and 32%, respectively, on a local currency basis for the quarter. Partially offsetting these trends was the growth of the Company's Property, facilities and project management service line including the increase of$67.0 million in gross contract reimbursables. Fee-based operating expenses of$838.3 million were down 12% year over year principally due to lower service line fee revenue for the quarter as well as the impact of the Company's costs savings actions and operating efficiency initiatives. Adjusted EBITDA was$81.2 million , a decrease of$44.0 million or 35% on a local currency basis principally driven by lower Leasing and Capital markets service line fee revenue. Nine months endedSeptember 30, 2020 compared to nine months endedSeptember 30, 2019 Americas revenue was$4.1 billion , a decrease of$293.9 million or 7%. This decline was principally driven by lower brokerage activity as a result of the impact of the COVID-19 pandemic. Leasing and Capital markets were down 36% and 30%, respectively, on a local currency basis for the first nine months of 2020. Partially offsetting these trends was the growth of the Company's Property, facilities and project management service line as well as gross contract reimbursables of$1.4 billion . 33 -------------------------------------------------------------------------------- Fee-based operating expenses of$2.4 billion were down 12% on a local currency basis principally due to lower service line fee revenue as well as the impact of the Company's cost savings actions and operating efficiency initiatives. Adjusted EBITDA was$199.1 million , a decrease of$118.9 million or 37% on a local currency basis principally driven by lower Leasing and Capital markets service line fee revenue. EMEA Results The following table summarizes our results of operations by our EMEA operating segment for the three and nine months endedSeptember 30, 2020 and 2019 (in millions): Three Months Ended Nine Months Ended September 30, September 30, % Change in % Change in % Change in % Change in 2020 2019 USD Local Currency 2020 2019 USD Local Currency Revenue: Property, facilities and project management$ 94.8 $ 71.4 33 % 27 %$ 262.7 $ 214.7 22 % 23 % Leasing 43.8 55.6 (21) % (24) % 126.0 161.3 (22) % (21) % Capital markets 24.0 41.6 (42) % (44) % 69.6 101.1 (31) % (31) % Valuation and other 37.7 40.5 (7) % (11) % 114.4 121.8 (6) % (6) % Total service line fee revenue(1) 200.3 209.1 (4) % (8) % 572.7 598.9 (4) % (4) % Gross contract reimbursables(2) 22.9 26.4 (13) % (15) % 65.6 68.1 (4) % (2) % Total revenue$ 223.2 $ 235.5 (5) % (9) %$ 638.3 $ 667.0 (4) % (4) % Costs and expenses: EMEA Fee-based operating expenses$ 190.2 $ 190.0 - % (5) %$ 541.9 $ 567.2 (4) % (4) % Cost of gross contract reimbursables 22.9 26.4 (13) % (15) % 65.6 68.1 (4) % (2) % Segment operating expenses$ 213.1 $ 216.4 (2) % (6) %$ 607.5 $ 635.3 (4) % (4) % Adjusted EBITDA$ 11.5 $ 20.3 (43) % (44) %$ 34.2 $ 35.5 (4) % - % Adjusted EBITDA Margin(3) 5.7 % 9.7 % 6.0 % 5.9 % (1) Service line fee revenue represents revenue for fees generated from each of our service lines (2) Gross contract reimbursables reflects revenue from clients which have substantially no margin (3) Adjusted EBITDA margin is measured against service line fee revenue Three months endedSeptember 30, 2020 compared to three months endedSeptember 30, 2019 EMEA revenue was$223.2 million , a decrease of$12.3 million or 5%. This decline was principally driven by lower brokerage activity as a result of the impact of the COVID-19 pandemic. Leasing and Capital markets were down 24% and 44%, respectively, on a local currency basis for the quarter. This decline was partially offset by an increase in Property, facilities, and project management, which was up 27% on a local currency basis. Foreign currency had a$10.1 million or 4% favorable impact on revenue. Fee-based operating expenses of$190.2 million were down 5% on a local currency basis principally due to lower service line fee revenue as well as the impact of the Company's cost savings actions and operating efficiency initiatives.
Adjusted EBITDA of
34-------------------------------------------------------------------------------- Nine months endedSeptember 30, 2020 compared to nine months endedSeptember 30, 2019 EMEA revenue was$638.3 million , a decrease of$28.7 million or 4%. This decline was principally driven by lower brokerage activity as a result of the impact of the COVID-19 pandemic. Leasing and Capital markets were down 21% and 31%, respectively, on a local currency basis. This decrease was partially offset by an increase in Property, facilities and project management, which was up 23% on a local currency basis. Foreign currency had a$2.0 million or less than 1% unfavorable impact on revenue. Fee-based operating expenses of$541.9 million were down 4% on a local currency basis principally due to lower service line fee revenue as well as the impact of the Company's cost savings actions and operating efficiency initiatives. Adjusted EBITDA of$34.2 million declined$1.3 million as the impact of lower Leasing and Capital markets service line fee revenue was partially offset by the impact of the Company's cost savings actions and operating efficiency initiatives. APAC Results The following table summarizes our results of operations by our APAC operating segment for the three and nine months endedSeptember 30, 2020 and 2019 (in millions): Three Months Ended September 30, Nine Months Ended September 30, % Change in % Change in % Change in % Change in 2020 2019 USD Local Currency 2020 2019 USD Local Currency Revenue: Property, facilities and project management$ 139.9 $ 170.9 (18) % (19) %$ 408.7 $ 526.6 (22) % (20) % Leasing 34.0 42.6 (20) % (22) % 89.1 115.1 (23) % (21) % Capital markets 7.7 14.8 (48) % (49) % 35.0 71.8 (51) % (51) % Valuation and other 28.3 29.6 (4) % (5) % 83.7 84.5 (1) % - % Total service line fee revenue(1) 209.9 257.9 (19) % (19) % 616.5 798.0 (23) % (21) % Gross contract reimbursables(2) 82.4 112.6 (27) % (28) % 256.4 325.2 (21) % (18) % Total revenue$ 292.3 $ 370.5 (21) % (22) %$ 872.9 $ 1,123.2 (22) % (20) % Costs and expenses: APAC Fee-based operating expenses$ 187.9 $ 234.9 (20) % (21) %$ 551.0 $ 721.6 (24) % (22) % Cost of gross contract reimbursables 82.4 112.6 (27) % (28) % 256.4 325.2 (21) % (18) % Segment operating expenses$ 270.3 $ 347.5 (22) % (23) %$ 807.4 $ 1,046.8 (23) % (21) % Adjusted EBITDA$ 24.4 $ 23.0 6 % 4 %$ 72.9 $ 77.9 (6) % (4) % Adjusted EBITDA Margin(3) 11.6 % 8.9 % 11.8 % 9.8 % (1) Service line fee revenue represents revenue for fees generated from each of our service lines (2) Gross contract reimbursables reflects revenue from clients which have substantially no margin (3) Adjusted EBITDA margin is measured against service line fee revenue Three months endedSeptember 30, 2020 compared to three months endedSeptember 30, 2019 APAC revenue was$292.3 million , a decrease of$78.2 million or 21%. The decline in Property, facilities and project management of 19% on a local currency basis was primarily due to the Company's contribution of its China Property, facilities and project management business into the Cushman &Wakefield Vanke Service joint venture in the prior quarter. Leasing and Capital markets were down 22% and 49%, respectively, on a local currency basis principally due to the impact of the COVID-19 pandemic. Foreign currency had a$5.1 million or 1% favorable impact on revenue. 35
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Fee-based operating expenses of$187.9 million were down 21% on a local currency basis principally due to lower service line revenue as well as the impact of the Company's cost savings actions and operating efficiency initiatives. Adjusted EBITDA of$24.4 million increased$1.4 million or 4% on a local currency basis, principally due to the impact of the Company's cost savings actions and operating efficiency initiatives which more than offset the impact of lower Leasing and Capital Markets service line revenue. Nine months endedSeptember 30, 2020 compared to nine months endedSeptember 30, 2019 APAC revenue was$872.9 million , a decrease of$250.3 million or 22%. The decline in Property, facilities and project management of 20% on a local currency basis was primarily due to the Company's contribution of itsChina Property, facilities and project management business into the Cushman & Wakefield Vanke Service joint venture. Leasing and Capital markets were down 21% and 51%, respectively, on a local currency basis principally due to the impact of the COVID-19 pandemic. Foreign currency had a$25.3 million or 2% unfavorable impact on revenue. Fee-based operating expenses of$551.0 million were down 22% on a local currency basis principally due to lower service line fee revenue as well as the impact of the Company's cost savings actions and operating efficiency initiatives. Adjusted EBITDA of$72.9 million decreased$5.0 million or 4% on a local currency basis principally driven by lower Leasing and Capital markets service line fee revenue. Liquidity and Capital Resources While uncertainty exists as to the full impact of the COVID-19 pandemic on our liquidity and capital resources, we believe that we have maintained sufficient liquidity to satisfy our working capital and other funding requirements with internally generated cash flow and, as necessary, cash on hand and borrowings under our revolving credit facility. We continually evaluate opportunities to obtain, retire, or restructure credit facilities or financing arrangements for strategic reasons or obtain additional financing to fund investments, operations and obligations, as we have done in the past, to further strengthen our financial position. As ofSeptember 30, 2020 , the Company had$1.9 billion of liquidity, consisting of cash on hand of$916.8 million and an undrawn revolving credit facility of$1.0 billion . The Company's outstanding 2018 First Lien debt and 2020 Notes were$2.6 billion and$639.0 million , respectively as ofSeptember 30, 2020 , which net of cash on hand, provided for a net debt position of approximately$2.3 billion . The increase in net debt of approximately$516.6 million fromDecember 31, 2019 principally reflects normal annual bonus payments, acquisitions completed earlier this year and funding of the Company's strategic realignment and operating efficiency initiatives.
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