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, 2021 .
As discussed in "Cautionary Note Regarding Forward-Looking Statements" elsewhere
in this Quarterly Report, 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" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2021 and 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
with an iconic brand and approximately 50,000 employees led by an experienced
executive team. We operate from over 400 offices in approximately 60 countries,
managing over 4.8 billion square feet of commercial real estate space on behalf
of institutional, corporate and private clients. We serve the world's real
estate owners and occupiers, delivering a broad suite of services through our
integrated and scalable platform. Our business is focused on meeting the
increasing demands of our clients through a comprehensive offering of services
including Property, facilities and project management, Leasing, Capital markets
and Valuation and other services.
Outlook and Recent Developments
Highlights from the first half and second quarter of 2022:
First Half Results:
•Revenue of$4.9 billion and service line fee revenue of$3.6 billion for the first half of 2022 increased 18% and 22%, respectively, from the first half of 2021.
•Growth momentum continued across all segments and service lines, led by the
•Net income and earnings per share for the first half of 2022 were
•Adjusted EBITDA of
•Liquidity as ofJune 30, 2022 was$1.6 billion , consisting of availability on the Company's undrawn revolving credit facility of$1.1 billion and cash and cash equivalents of$0.5 billion .
Second Quarter Results:
•Revenue of
•Leasing and Capital markets grew 22% and 30%, respectively.
•Property, facilities and project management grew 13%.
•Net income and earnings per share for the second quarter of 2022 were
•Adjusted EBITDA of
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Impact of COVID-19 and the Russia-Ukraine Conflict
The ongoing presence of COVID-19 and the continuing negative macroeconomic impacts of the global pandemic continue to present risks to the Company. To date, we have not experienced significant disruptions in our operations or ability to service our clients, and we have been able to respond quickly to our customers' changing business demands related to COVID-19. However, the circumstances surrounding COVID-19 at a global level remain fluid, especially given the uncertainty of the severity and incidence of potential future variants of the virus and potential future lockdowns acrossAsia . We continue to monitor the situation and may take actions in the future that could affect our business operations and performance. These actions may result from requirements mandated by governmental authorities or that we determine to be in the best interests of our employees, customers, and shareholders. In addition, theRussia -Ukraine conflict continues to affect global financial markets and has intensified ongoing economic challenges, including issues such as rising inflation and global supply-chain disruption. The degree to which the Company will be affected largely depends on the nature and duration of uncertain and unpredictable events, such as further military action, additional sanctions and reactions to ongoing developments by global capital markets. Political events and sanctions are continually changing and differ across the globe. In the first quarter of 2022, the Company disposed of its operations inRussia , which did not have a material impact to the Company's financial statements or future operations. Despite any uncertainty that persists related to COVID-19 and theRussia -Ukraine conflict, we believe that we have sufficient liquidity to satisfy our working capital and other funding requirements with internally generated cash flows and, as necessary, cash on hand and borrowings under our revolving credit facility. As discussed in "Liquidity and Capital Resources" below, the Company had liquidity of approximately$1.6 billion as ofJune 30, 2022 , comprising of cash and cash equivalents of$0.5 billion and an undrawn revolving credit facility of$1.1 billion .
Critical Accounting Policies and Estimates
Our unaudited interim Condensed Consolidated Financial Statements have been prepared in accordance withU.S. GAAP, which requires us to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience, current facts and circumstances, 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 and estimates, refer to the Company's Annual Report on Form 10-K for the year endedDecember 31, 2021 . There have been no material changes to these policies or estimates as ofJune 30, 2022 .
Recently Issued Accounting Pronouncements
Refer to recently issued accounting pronouncements within Note 2: New Accounting Standards of the Notes to the Condensed Consolidated Financial Statements.
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 and 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, inflation, 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 global COVID-19 pandemic, demand for commercial real estate, and the geopolitical environment including the uncertainty affecting global financial markets stemming from theRussia -Ukraine conflict. 22
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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 markets service lines. Nevertheless, adverse economic trends could 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, as well as joint ventures, 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 and partnerships will 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.
International Operations
Our business consists of service lines operating in multiple regions inside and outside of theU.S. Our international operations expose us to global economic trends as well as foreign government tax, regulatory and policy measures. Additionally, outside of theU.S. , we generate earnings in other currencies and are subject to fluctuations relative to theU.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-based operating expenses and Adjusted EBITDA, in "local" currency. The local currency change represents the year-over-year change assuming no movement in foreign exchange rates 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, and Adjusted EBITDA
margin. 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.
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Use of Non-GAAP Financial Measures
We have used the following measures, which are considered "non-GAAP financial
measures" under
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, and acquisition related costs and efficiency initiatives. Segment operating expenses 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,
unrealized (gains) / losses on investments, 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
The following table sets forth items derived from our Condensed Consolidated Statements of Operations for the three and six months endedJune 30, 2022 and 2021 (in millions): Three Months Ended June 30, Six Months Ended June 30, % Change in % Change in % Change in % Change in 2022 2021 USD Local Currency 2022 2021 USD Local Currency Revenue: Property, facilities and project management$ 868.8 $ 769.8 13 % 16 %$ 1,709.8 $ 1,537.9 11 % 13 % Leasing 552.8 453.5 22 % 24 % 1,007.5 745.2 35 % 37 % Capital markets 367.3 282.2 30 % 33 % 656.3 448.6 46 % 49 % Valuation and other 127.5 124.2 3 % 8 % 247.6 235.6 5 % 9 % Total service line fee revenue(1) 1,916.4 1,629.7 18 % 21 % 3,621.2 2,967.3 22 % 24 % Gross contract reimbursables(2) 696.2 618.6 13 % 14 % 1,322.4 1,204.8 10 % 11 % Total revenue$ 2,612.6 $ 2,248.3 16 % 19 %$ 4,943.6 $ 4,172.1 18 % 21 % Costs and expenses: Cost of services provided to clients$ 1,381.3 $ 1,163.8 19 % 22 %$ 2,615.6 $ 2,167.1 21 % 23 % Cost of gross contract reimbursables 696.2 618.6 13 % 14 % 1,322.4 1,204.8 10 % 11 % Total costs of services 2,077.5 1,782.4 17 % 19 % 3,938.0 3,371.9 17 % 19 % Operating, administrative and other 317.5 284.2 12 % 15 % 610.9 565.0 8 % 10 % Depreciation and amortization 39.7 42.5 (7) % (4) % 80.3 85.6 (6) % (4) % Restructuring, impairment and related charges 1.3 14.7 (91) % (90) % 2.5 32.3 (92) % (92) % Total costs and expenses 2,436.0 2,123.8 15 % 17 % 4,631.7 4,054.8 14 % 16 % Operating income 176.6 124.5 42 % 45 % 311.9 117.3 166 % 171 % Interest expense, net of interest income (46.1) (43.8) 5 % 8 % (89.3) (86.2) 4 % 6 % Earnings from equity method investments 17.5 5.1 n.m. n.m. 34.4 7.5 n.m. n.m. Other (expense) income, net (25.0) 10.1 n.m. n.m. (57.9) 12.1 n.m. n.m. Earnings before income taxes 123.0 95.9 28 % 31 % 199.1 50.7 n.m. n.m. Provision for income taxes 25.8 43.2 (40) % (39) % 56.4 15.2 n.m. n.m. Net income $ 97.2$ 52.7 84 % 88 % $ 142.7$ 35.5 n.m. n.m. Adjusted EBITDA$ 262.8 $ 219.9 20 % 23 % $ 477.1$ 319.6 49 % 53 % Adjusted EBITDA margin(3) 13.7 % 13.5 %
13.2 % 10.8 %
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 Total service line fee revenue
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Adjusted EBITDA is calculated as follows (in millions):
Three Months Ended June 30 ,
Six Months Ended
2022 2021 2022 2021
Net income $ 97.2 $ 52.7 $ 142.7 $ 35.5
Add/(less):
Depreciation and amortization 39.7 42.5 80.3 85.6
Interest expense, net of interest
income 46.1 43.8 89.3 86.2
Provision for income taxes 25.8 43.2 56.4 15.2
Unrealized loss (gain) on investments,
net(1) 27.3 (6.1) 48.8 (6.1)
Integration and other costs related to
merger(2) 4.3 5.6 7.9 21.8
Pre-IPO stock-based compensation(3) 1.0 1.5 1.7 3.1
Acquisition related costs and
efficiency initiatives(4) 17.8 33.3 35.0 73.5
Other(5) 3.6 3.4 15.0 4.8
Adjusted EBITDA $ 262.8 $ 219.9 $ 477.1 $ 319.6
(1) Represents net unrealized losses on fair value investments during the six
months ended June 30, 2022 primarily related to our investment in WeWork, which
closed during the fourth quarter of 2021. An unrealized gain on investments of
$6.1 million was recorded in the six months ended June 30, 2021 .
(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.
(4) Acquisition related costs and efficiency initiatives reflect costs incurred to implement operating efficiency initiatives 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 includes a loss of
Below is a summary of Total costs and expenses (in millions):
Three Months Ended June 30 ,
Six Months Ended
2022 2021 2022 2021
Americas Fee-based operating expenses
$ 2,306.4 $ 1,856.5 EMEA Fee-based operating expenses 213.9 199.2 414.4 391.5 APAC Fee-based operating expenses 239.0 217.4 461.8 413.5 Cost of gross contract reimbursables 696.2 618.6 1,322.4 1,204.8 Segment operating expenses 2,368.8 2,037.5 4,505.0 3,866.3 Depreciation and amortization 39.7 42.5 80.3 85.6 Integration and other costs related to merger(1) 4.3 5.6 7.9 21.8 Pre-IPO stock-based compensation(2) 1.0 1.5 1.7 3.1 Acquisition related costs and efficiency initiatives(3) 17.8 33.3 35.0 73.2 Other 4.4 3.4 1.8 4.8 Total costs and expenses$ 2,436.0 $ 2,123.8
(1) Integration and other costs related to merger include certain direct and incremental integration and restructuring efforts.
(2) Pre-IPO stock-based compensation represents non-cash compensation expense associated with our pre-IPO equity compensation plans.
(3) Acquisition related costs and efficiency initiatives reflect costs incurred to implement operating efficiency initiatives 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.
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Three months ended
Revenue Revenue of$2.6 billion , an increase of$364.3 million or 16% compared to the three months endedJune 30, 2021 , reflects strong revenue growth across all segments.Americas , EMEA and APAC revenue growth was 20%, 3% and 8%, respectively, compared to the three months endedJune 30, 2021 . Partially offsetting these trends were unfavorable foreign currency movements of$52.7 million or 3% as compared to the prior year. Service line fee revenue growth was led by our Leasing and Capital markets service lines which were up 22% and 30%, respectively. Leasing revenue growth was principally driven by steady momentum in the office sector, as well as the continued strength in the industrial sector. Capital markets revenue continued to demonstrate broad-based growth as investment fundamentals in commercial real estate assets remain favorable, including multi-family and industrial. Property, facilities and project management grew 13% driven by growth in our project management and facilities management businesses. Valuation and other and Gross contract reimbursables also grew 3% and 13%, respectively.
Costs of services
Costs of services of$2.1 billion increased$295.1 million or 17% compared to the three months endedJune 30, 2021 . Cost of services provided to clients increased 19% principally due to higher variable costs, including commissions, as a result of higher brokerage revenue. Cost of gross contract reimbursables increased 13% driven by the continued growth in our Property, facilities and project management service line.
Operating, administrative and other
Operating, administrative and other expenses of
Restructuring, impairment and related charges
Restructuring, impairment and related charges were$1.3 million , a decrease of$13.4 million compared to the three months endedJune 30, 2021 . This decrease principally reflects the reduction of severance-related costs and impairment charges in connection with the Company's previously announced strategic realignment of the business, which was substantially complete at the end of 2021.
Earnings from equity method investments
Earnings from equity method investments of
Other (expense) income, net
Other expense during the three months endedJune 30, 2022 reflects net unrealized losses on fair value investments of$27.3 million , primarily related to our investment in WeWork, which closed in the fourth quarter of 2021, partially offset by royalty income. Comparatively, other income recognized during the three months endedJune 30, 2021 reflects unrealized gains on fair value investments along with royalty income.
Provision for income taxes
Provision for income taxes for the second quarter of 2022 was$25.8 million on earnings before income taxes of$123.0 million . For the second quarter of 2021, the provision for income taxes was$43.2 million on earnings before income taxes of$95.9 million . The decrease in income tax expense from the prior period was primarily driven by a lower effective tax rate in the three months endedJune 30, 2022 compared to the same period last year, due to changes in the jurisdictional mix of earnings.
Net income and Adjusted EBITDA
Net income of$97.2 million increased 84% compared to the three months endedJune 30, 2021 , principally due to the strong performance of brokerage activity as Leasing and Capital markets fee revenue increased 22% and 30%, respectively, as well as an increase in earnings recognized from our equity method investment with Greystone in theAmericas . Adjusted EBITDA of$262.8 million increased by$42.9 million or 20%. Adjusted EBITDA margin, measured against service line fee revenue, of 13.7% for the three months endedJune 30, 2022 , increased 22 basis points as compared to 13.5% in the three months endedJune 30, 2021 . 27
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Six months ended
Revenue
Revenue of$4.9 billion , an increase of$771.5 million or 18% compared to the six months endedJune 30, 2021 , reflects strong revenue growth across all segments.Americas , EMEA and APAC revenue growth was 22%, 4% and 10%, respectively, compared to the six months endedJune 30, 2021 . Partially offsetting these trends were unfavorable foreign currency movements of$75.7 million or 2% as compared to the prior year. Service line fee revenue growth was led by Leasing and Capital markets service lines which were up 35% and 46%, respectively. Leasing revenue growth was principally driven by steady momentum in the office sector, as well as the continued strength in the industrial sector. Capital markets revenue grew as investment fundamentals in commercial real estate assets continued to be favorable across most sectors, including multi-family and industrial. Property, facilities and project management grew 11% driven by growth in our project management and facilities management businesses. Valuation and other and Gross contract reimbursables also grew 5% and 10%, respectively. Geographically,Americas , EMEA and APAC contributed 89%, 3% and 8%, respectively, of the consolidated revenue growth.
Costs of services
Costs of services of$3.9 billion increased$566.1 million or 17% compared to the six months endedJune 30, 2021 . Cost of services provided to clients increased 21% principally due to higher variable costs, including commissions, as a result of higher brokerage revenue. Cost of gross contract reimbursables increased 10% driven by the continued growth in our Property, facilities and project management service line.
Operating, administrative and other
Operating, administrative and other expenses of$610.9 million increased by$45.9 million or 8% compared to the six months endedJune 30, 2021 , principally driven by higher salaries and wages, as well as other compensation costs. Operating, administrative and other costs as a percentage of total revenue were 12% for the six months endedJune 30, 2022 as compared to 14% for the six months endedJune 30, 2021 .
Restructuring, impairment and related charges
Restructuring, impairment and related charges were$2.5 million , a decrease of$29.8 million compared to the six months endedJune 30, 2021 . This decrease principally reflects the reduction of severance-related costs and impairment charges in connection with the Company's previously announced strategic realignment of the business, which was substantially complete at the end of 2021.
Earnings from equity method investments
Earnings from equity method investments of
Other (expense) income, net
Other expense was$57.9 million in the six months endedJune 30, 2022 , compared to other income of$12.1 million recognized in the six months endedJune 30, 2021 . This decline is primarily due to the net unrealized losses on fair value investments of$54.9 million , principally related to our investment in WeWork, which closed in the fourth quarter of 2021. In addition, the Company recognized a loss of$13.8 million in the first quarter of 2022 related to the disposal of operations inRussia . Provision for income taxes Provision for income taxes for the six months endedJune 30, 2022 was$56.4 million on earnings before income taxes of$199.1 million . For the six months endedJune 30, 2021 , the provision for income taxes was$15.2 million on earnings before income taxes of$50.7 million . The increase in income tax expense from the prior year was primarily driven by higher pre-tax earnings, partially offset by a lower effective tax rate, due to changes in the jurisdictional mix of earnings. 28
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Net income and Adjusted EBITDA
Net income of$142.7 million increased by$107.2 million compared to the six months endedJune 30, 2021 , principally due to the strong performance of brokerage activity as Leasing and Capital markets fee revenue increased 35% and 46%, respectively, as well as an increase in earnings recognized from our equity method investment with Greystone in theAmericas .
Adjusted EBITDA of
Segment Operations
We report our operations through the following segments: (1)Americas , (2) EMEA and (3) APAC. TheAmericas consists of operations located inthe United States ,Canada and key markets inLatin America . EMEA includes operations in theUnited Kingdom ,France ,Netherlands and other markets inEurope and theMiddle East . APAC includes operations inAustralia ,Singapore ,China and other markets in theAsia Pacific region. For segment reporting, Service line fee revenue represents revenue for fees generated from each of our service lines. Gross contract reimbursables reflect revenue paid by clients which have substantially no margin. Our measure of segment results, Adjusted EBITDA, excludes depreciation and amortization, as well as integration and other costs related to merger, pre-IPO stock-based compensation, unrealized (gains) / losses on investments, acquisition related costs and efficiency initiatives, and other items. 29
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Americas Results
The following table summarizes our results of operations by ourAmericas operating segment for the three and six months endedJune 30, 2022 and 2021 (in millions): Three Months Ended June 30, Six Months Ended June 30, % Change in % Change in % Change in % Change in 2022 2021 USD Local Currency 2022 2021 USD Local Currency Revenue: Property, facilities and project management$ 605.3 $ 533.0 14 % 14 %$ 1,196.5 $ 1,073.8 11 % 12 % Leasing 446.0 341.0 31 % 31 % 814.2 560.7 45 % 45 % Capital markets 308.9 239.6 29 % 29 % 550.3 373.0 48 % 48 % Valuation and other 53.1 44.6 19 % 19 % 100.3 81.9 22 % 23 % Total service line fee revenue(1) 1,413.3 1,158.2 22 % 22 % 2,661.3 2,089.4 27 % 28 % Gross contract reimbursables(2) 598.1 522.0 15 % 15 % 1,135.5 1,015.7 12 % 12 % Total revenue$ 2,011.4 $ 1,680.2 20 % 20 %$ 3,796.8 $ 3,105.1 22 % 22 % Costs and expenses: Americas Fee-based operating expenses$ 1,219.7 $ 1,002.3 22 % 22 %$ 2,306.4 $ 1,856.5 24 % 24 % Cost of gross contract reimbursables 598.1 522.0 15 % 15 % 1,135.5 1,015.7 12 % 12 % Segment operating expenses$ 1,817.8 $ 1,524.3 19 % 19 %$ 3,441.9 $ 2,872.2 20 % 20 % Adjusted EBITDA$ 210.5 $ 157.1 34 % 34 % $ 386.5$ 234.9 65 % 65 % Adjusted EBITDA margin(3) 14.9 % 13.6 %
14.5 % 11.2 %(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 Total service line fee revenue
Americas revenue in the second quarter of 2022 was$2.0 billion , an increase of$331.2 million or 20% from the second quarter of 2021. Revenue across all service lines increased, led by Leasing and Capital markets growth of 31% and 29%, respectively. Fee-based operating expenses of$1.2 billion increased 22% principally due to higher variable costs, including commissions, associated with brokerage revenue growth and higher wages. Adjusted EBITDA of$210.5 million increased$53.4 million or 34%, and resulted in margin expansion of 133 basis points, principally driven by earnings from our equity method investment with Greystone and strong brokerage activity.
Americas revenue for the six months endedJune 30, 2022 was$3.8 billion , an increase of$691.7 million or 22% from the six months endedJune 30, 2021 . Revenue across all service lines increased, led by Capital markets and Leasing growth of 48% and 45%, respectively. Property, facilities and project management and Gross contract reimbursables grew of 11% and 12%, respectively, as a result of growth in our facilities management and project management businesses. Fee-based operating expenses of$2.3 billion increased 24% principally due to higher variable costs, including commissions, driven by higher brokerage revenue. As a result of disciplined cost management, Fee-based operating expenses as a percentage of Total service line fee revenue was 87% in the six months endedJune 30, 2022 , compared to 89% in the six months endedJune 30, 2021 . Adjusted EBITDA of$386.5 million increased$151.6 million or 65%, and resulted in margin expansion of 328 basis points, principally driven by earnings from our equity method investment with Greystone and strong brokerage activity and disciplined cost management. 30
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EMEA Results
The following table summarizes our results of operations by our EMEA operating segment for the three and six months endedJune 30, 2022 and 2021 (in millions): Three Months Ended June 30, Six Months Ended June 30, % Change in % Change in % Change in % Change in 2022 2021 USD Local Currency 2022 2021 USD Local Currency Revenue: Property, facilities and project management$ 95.3 $ 91.4 4 % 18 %$ 188.9 $ 175.1 8 % 18 % Leasing 64.3 59.7 8 % 21 % 113.6 102.3 11 % 22 % Capital markets 45.5 33.0 38 % 56 % 74.3 55.3 34 % 49 % Valuation and other 43.5 45.4 (4) % 8 % 87.1 89.9 (3) % 6 % Total service line fee revenue(1) 248.6 229.5 8 % 22 % 463.9 422.6 10 % 21 %
Gross contract reimbursables(2) 23.3 34.6 (33) %
(25) % 45.6 65.4 (30) % (24) %
Total revenue $ 271.9 $ 264.1 3 % 16 % $ 509.5 $ 488.0 4 % 15 %
Costs and expenses:
EMEA Fee-based operating
expenses $ 213.9 $ 199.2 7 % 21 % $ 414.4 $ 391.5 6 % 16 %
Cost of gross contract
reimbursables 23.3 34.6 (33) % (24) % 45.6 65.4 (30) % (24) %
Segment operating expenses $ 237.2 $ 233.8 1 % 14 % $ 460.0 $ 456.9 1 % 10 %
Adjusted EBITDA $ 35.3 $ 31.9 11 % 29 % $ 52.0 $ 34.3 52 % 76 %
Adjusted EBITDA margin(3) 14.2 % 13.9 % 11.2 % 8.1 %
(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 Total service line fee revenue
EMEA: Three months ended
EMEA revenue in the second quarter of 2022 was$271.9 million , an increase of$7.8 million or 3% from the second quarter of 2021. Excluding the unfavorable impact of foreign currency of$32.7 million , EMEA revenue grew by 16% on a local currency basis. Revenue growth was principally driven by Capital markets and Leasing growth of 56% and 21%, respectively, on a local currency basis, as well as Property, facilities and project management of 18% on a local currency basis. Gross contract reimbursables declined 25% on a local currency basis driven by changes in our customer mix from the prior year. Fee-based operating expenses of$213.9 million increased 21% on a local currency basis principally due to higher variable costs associated with service line fee revenue growth. Adjusted EBITDA of$35.3 million increased$3.4 million , resulting in margin expansion of 30 basis points, principally driven by Capital markets and Leasing revenue growth.
EMEA: Six months ended
EMEA revenue for the six months endedJune 30, 2022 was$509.5 million , an increase of$21.5 million or 4% from the six months endedJune 30, 2021 . Excluding the unfavorable impact of foreign currency of$46.2 million , EMEA revenue grew by 15% on a local currency basis. Revenue growth was principally driven by Capital markets and Leasing growth of 49% and 22%, respectively, on a local currency basis, as well as Property, facilities and project management of 18% on a local currency basis. Gross contract reimbursables declined 24% on a local currency basis driven by changes in our customer mix from the prior year. Fee-based operating expenses of$414.4 million increased 16% on a local currency basis principally due to higher variable costs associated with revenue growth in our Project, facilities and project management service line. As a result of disciplined cost management, Fee-based operating expenses as a percentage of Total service line fee revenue was 89% in the six months endedJune 30, 2022 compared to 93% in the six months endedJune 30, 2021 . Adjusted EBITDA of$52.0 million increased$17.7 million , resulting in margin expansion of 309 basis points, principally driven by Leasing and Capital markets revenue growth and disciplined cost management. 31
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Table of Contents APAC Results The following table summarizes our results of operations by our APAC operating segment for the three and six months endedJune 30, 2022 and 2021 (in millions): Three Months Ended June 30, Six Months Ended June 30, % Change in % Change in % Change in % Change in 2022 2021 USD Local Currency 2022 2021 USD Local Currency Revenue: Property, facilities and project management$ 168.2 $ 145.4 16 % 22 %$ 324.4 $ 289.0 12 % 17 % Leasing 42.5 52.8 (20) % (15) % 79.7 82.2 (3) % 0 % Capital markets 12.9 9.6 34 % 47 % 31.7 20.3 56 % 67 % Valuation and other 30.9 34.2 (10) % (6) % 60.2 63.8 (6) % (4) % Total service line fee revenue(1) 254.5 242.0 5 % 11 % 496.0 455.3 9 % 13 % Gross contract reimbursables(2) 74.8 62.0 21 % 29 % 141.3 123.7 14 % 21 % Total revenue$ 329.3 $ 304.0 8 % 14 %$ 637.3 $ 579.0 10 % 15 % Costs and expenses: APAC Fee-based operating expenses$ 239.0 $ 217.4 10 % 16 %$ 461.8 $ 413.5 12 % 16 % Cost of gross contract reimbursables 74.8 62.0 21 % 29 % 141.3 123.7 14 % 21 % Segment operating expenses$ 313.8 $ 279.4 12 % 19 %$ 603.1 $ 537.2 12 % 17 % Adjusted EBITDA $ 17.0$ 30.9 (45) % (40) %$ 38.6 $ 50.4 (23) % (20) % Adjusted EBITDA margin(3) 6.7 % 12.8 % 7.8 % 11.1 %
(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 Total service line fee revenue
APAC: Three months ended
APAC revenue in the second quarter of 2022 was$329.3 million , an increase of$25.3 million or 8% from the second quarter of 2021. Excluding the unfavorable impact of foreign currency of$17.7 million , APAC revenue increased 14% on a local currency basis. Revenue growth was principally driven by Capital markets and Property, facilities and project management of 47% and 22%, respectively, on a local currency basis. This growth was offset by declines in Leasing and Valuation and other of 15% and 6%, on a local currency basis, respectively. These declines were primarily due to COVID-19 related lockdowns inChina . Fee-based operating expenses of$239.0 million increased 16% on a local currency basis principally due to higher variable costs associated with service line fee revenue growth.
Adjusted EBITDA of
APAC: Six months ended
APAC revenue for the six months endedJune 30, 2022 was$637.3 million , an increase of$58.3 million or 10% from the six months endedJune 30, 2021 . Excluding the unfavorable impact of foreign currency of$26.9 million , APAC revenue increased 15% on a local currency basis. Revenue growth was principally driven by Capital markets and Property, facilities and project management of 67% and 17%, respectively, on a local currency basis. Fee-based operating expenses of$461.8 million increased 16% on a local currency basis principally due to higher variable costs associated with service line fee revenue growth. Fee-based operating expenses as a percentage of Total service line fee revenue was 93% in the six months endedJune 30, 2022 , compared to 91% in the six months endedJune 30, 2021 .
Adjusted EBITDA of
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Table of Contents
Liquidity and Capital Resources
Our primary sources of liquidity are cash flows from operations, available cash reserves and debt capacity under our available credit facilities. Our primary uses of liquidity are operating expenses, acquisitions, investments and debt payments. While the continued impacts of COVID-19 and theRussia -Ukraine conflict remain uncertain, we believe that we have maintained sufficient liquidity to satisfy our working capital and other funding requirements, including capital expenditures, and expenditures for human capital and contractual obligations, 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 our debt, 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. We have historically relied on our internally generated cash flow to fund our working capital needs and ongoing capital expenditures on an annual basis. Our internally generated cash flow is seasonal-typically lowest in the first quarter of the year, when revenue is lowest, and greatest in the fourth quarter of the year, when revenue is highest. The seasonal nature of our internally generated cash flow can result in a mismatch with funding needs, which we manage using available cash on hand and, as necessary, borrowings under our revolving credit facility. In the absence of a large strategic acquisition or other extraordinary events, we believe our cash on hand, cash flow from operations and availability under our revolving credit facility will be sufficient to meet our anticipated cash requirements for the foreseeable future, and at a minimum for the next 12 months. We may seek to take advantage of opportunities to refinance existing debt instruments, as we have done in the past, with new debt instruments at interest rates, maturities and terms we consider attractive.
As of
As a professional services firm, funding our operating activities is not capital intensive. Total capital expenditures for the three and six months endedJune 30, 2022 was$30.5 million . The Company is party to an off-balance sheet A/R Securitization arrangement whereby it continuously sells trade receivables to an unaffiliated financial institution, which has an investment limit of$125.0 million . Receivables are derecognized from our balance sheet upon sale, for which we receive cash payment and record a deferred purchase price receivable. As ofJune 30, 2022 , the Company had$80.0 million drawn on the investment limit. The A/R Securitization terminates onAugust 20, 2022 , unless extended or an earlier termination event occurs. Refer to Note 12: Accounts Receivable Securitization of the Notes to the Condensed Consolidated Financial Statements for further information.
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