Good day, and welcome to Cushman and Wakefield's second quarter 2025 earnings conference call. All participants will be in a listen-only mode. If you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one, on a touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Megan McGrath, Head of Investor Relations. Please go ahead, ma'am.

Thank you, and welcome to Cushman & Wakefield's second quarter 2025 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. This release, along with today's presentation, can be found on our Investor Relations website at ir.cushmanwakefield.com. Please turn to the page in our presentation labeled Cautionary Note on Forward-Looking Statements. Today's presentation contains forward-looking statements based on our current forecasts and estimates of future events. These statements should be considered estimates only and actual results may differ materially. During today's call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures, and other related information are found within the financial tables of our earnings release and the appendix of today's presentation. Also, please note that throughout the presentation, comparisons and growth rates are to the comparable periods of 2024 and in local currency unless otherwise stated. All revenue figures refer to fee revenue unless otherwise noted, and any reference to organic growth excludes the impact of last year's divestiture of our non-core services business. And with that, I'd like to turn the call over to our CEO, Michelle McKay.

Thank you, Megan. Good morning, everyone, and thank you for joining us today. Two years ago, we set a new course for Cushman and Wakefield, grounded by three clear pillars, protecting our core strengths, operating with discipline, and cultivating avenues for growth. We have now achieved the majority of our three-year targets in that two-year window, well ahead of plan, by staying focused, disciplined, and action-oriented. Today, we're pleased to share measurable progress on multiple fronts, outcomes made possible by our collective commitment, resilience, and dedication to our clear vision. We have rebuilt the company from the inside out, and now you will see us take flight. Our results in the first half of this year demonstrate the impact and success of our transformational strategy. We drove top-line growth in nearly every region and service line in both the first and second quarters. Year-to-date, we have driven more than 90 basis points of improvement in adjusted EBITDA margin versus the prior year and increased adjusted earnings per share by 95% to $0.39 per share. And excluding the immediate period post-COVID recovery in 2021, this is the strongest first-half earnings growth we have experienced since going public in 2018. And as Neil will discuss in more detail, we are meaningfully raising our full-year EPS guidance. Our capital markets business is expanding at an accelerating pace, bolstered by improving market dynamics as well as our internal talent initiatives. Capital markets revenue grew by an impressive 26% in the second quarter, and we achieved this level of growth while only being in the very early stages of our talent expansion. Year-to-date in the Americas, we have recruited capital markets brokers with annual average revenue that is 200% higher than we recruited in all of 2024. We are adding professionals across all product types, and we are very enthusiastic about what they will bring to our business once fully ramped. Our leasing business continues to run on all cylinders. We grew revenue in all major asset classes in 2Q, including industrial, which was up 8% in the Americas. our strength in leasing lies in the superior advice and execution we provide our clients regardless of the economic backdrop we see this acutely in our multi-market occupier group where mandate complexity is increasing driving average contract revenue up 45 percent in the first half of this year and the turnaround in our services business is in full swing We achieved 6% fully organic growth in the quarter and acceleration from first quarter's growth as our teams continue to drive positive momentum. We are winning new business and driving incremental growth within our portfolio of existing customers as we more consistently bring to them the full suite of capabilities of the Cushman platform. And our intensified focus on client retention is seeing results, with a 96% annualized retention rate in our GOS business year-to-date. Alongside our strong second quarter earnings performance, we are announcing that today we have prepaid an additional $150 million in debt, bringing our total debt repayments in the last 18 months to $400 million. Our gross debt has now been reduced from $3.2 billion to $2.8 billion. And the combination of this deleveraging with five successful repricings over that same period has resulted in total interest savings of more than $45 million annually. In terms of the overall market, what began to emerge in the second half of 2024 is now clear. Leaders of companies, both large and small, are navigating their businesses through market noise and volatility and are making long-term strategic decisions about how they occupy and manage their real estate and infrastructure portfolios. In addition, lender appetites to deploy capital continues to provide borrowers with increasing optionality, better terms, and more flexibility, providing a boost to capital markets activity. Looking ahead, we anticipate continued growth in global leasing markets, ongoing progress in capital markets activity, and increased opportunity to gain market share in our services businesses. Now, I'll hand it over to Neil to go through our second quarter results in more detail.

Thank you, Michelle, and good morning, everyone. Before I get started, as a quick reminder, all comparisons are to the prior year and in local currency. And organic growth figures exclude the impact of last year's divestiture of our non-core services business. Unless otherwise noted, all revenue figures refer to fee revenue. We're very pleased to report another strong quarter with solid top line and bottom line performance fueled by broad momentum across our service lines and continued progress on our growth initiatives. Our capital markets business delivered double digit year over year revenue growth for the third straight quarter, while leasing maintained its positive momentum with high single-digit revenue gains. Organic services revenue growth accelerated to 6%, exceeding our expectations once again. Second quarter fee revenue reached $1.7 billion, growing by 7%, with organic revenue up 8%. Adjusted EBITDA rose 15% to $162 million, and our adjusted EBITDA margin expanded 75 basis points to 9.5%, reflecting our ability to drive operating leverage while effectively managing expenses to support continued growth. Adjusted EPS grew year-over-year for the fourth consecutive quarter, rising 50% to 30 cents from 20 cents a year ago. Now, turning to revenue performance by ServiceLine. Leasing, a core strength of our platform, grew 8% this quarter. In the Americas, leasing was 9% with strong demand across all asset types. Office activity remained robust, driven by return to office momentum and new business formation. In industrial, demand remained strong across multiple sectors, including e-commerce, retail, and manufacturing. In EMEA, leasing returned to growth, with revenue up 8%, as we experienced notable strength in Germany and Ireland. While APEC saw a 3% decline in revenue, growth in India and Australia helped offset the impact of a tough year-over-year comparison in greater China due to the timing of a few large deals. Overall, investment in the APEC region remains persistent, and the underlying outsourcing and development trends that have propelled the region's success remain intact, giving us confidence in a near-term return to growth. Turning to capital markets, the Americas delivered 30% growth, driven by healthy fundamentals and strength across asset classes and deal sizes. Multifamily and office transactions were particularly active, and we benefited from an increase in larger deals. Our targeted hiring strategy is paying off, and we're encouraged by the sustained momentum in this business. Internationally, capital markets also performed well, with EMEA up 16%, driven by strength in Spain and Germany, while APAC capital markets grew 4%, with strength in India and Australia. year. In our services segment, we remain on track to meet our guidance of mid-single-digit organic growth for the full year. The Americas posted 5% organic growth driven by client wins and expansion of current mandates in facilities management and facility services. In EMEA, services grew 11% as our retooled project management business won new contracts in France and Italy. APAC posted 5% services growth, supported by expansion in India, new business in Singapore, and growing project management work in China. Equity method investments were down $4.1 million for the quarter, mainly due to lower performance from our Greystone joint venture. Our one-way partnership in China performed largely in line with last year. As noted in our press release this morning, starting this quarter, our adjusted net income and adjusted EBITDA now exclude non-cash items related to Greystone, specifically gains recognized from the retention of mortgage servicing rights, or MSRs, changes in fair value of MSRs, and credit loss provisions related to mortgage loans. We believe this change will accurately represent the performance of the underlying business and better aligns with industry practices. On the balance sheet, we ended the quarter with net leverage of 3.7 times, Training 12-month free cash flow was $126 million, representing an approximately 50% conversion rate. We continue to expect to exit the year at approximately 60% in line with our free cash flow conversion target of 60 to 80%. We've made significant progress in reducing our interest burden. We repaid $25 million of 2030 debt during the quarter, and shortly after quarter end, we repriced approximately $950 million of term loan debt, lowering our applicable interest rate by 50 basis points to SOFA plus 275, the most favorable credit spread we've had since our IPO in 2018. As Michelle mentioned, today we paid down an additional $150 million of term loan debt using cash on hand. Including this repayment, our gross debt is now down to $2.8 billion. We remain committed to investing in the business while continuing to reduce debt and achieving our net leverage target of two to three times. Our capital structure remains strong and resilient with no material debt maturities until 2028 and liquidity of $1.7 billion, positioning us well to drive long-term value for shareholders. Turning now to our outlook for the year, we are raising our outlook as follows. We now expect full-year leasing revenue to grow 6% to 8%, slightly above our previous forecast. Capital markets revenue is expected to grow in the mid to high teens for the year, also an increase versus our previous expectations. Services remain on track for mid-single-digit organic top-line growth, consistent with our updated guidance last quarter. We anticipate full-year 2025 adjusted EPS growth of 25% to 35%, well ahead of our initial expectations. In summary, we are very pleased with our financial performance and momentum this quarter. We're confident in our strategy and excited about the opportunities ahead. With that, I'll turn the call back over to Michelle.

Thank you, Neil. Our results for the first half of the year demonstrate that our business and operational performance has kicked into another gear. We are driving strong top-line growth and margin and earnings expansion while simultaneously ramping up growth investments and reducing our leverage. We should continue to expect more from us. Enhanced operational performance, continued market share gains, ongoing reduction of debt and interest expense, all contributing to continued momentum as we look forward to 2026 and beyond. If you were waiting to see if we could get it done, you have your answer now. This progress, this quickly, with this many achievements, is all because of the people who work at Cushman and Wakefield. They are not just rowing together, they are competing together to win more, win bigger. And at the heart of this is listening to the client and delivering what they need. A big thank you to everyone at Cushman and Wakefield. We are a group that never settles, sharing a culture of high-performance expectations and execution for ourselves and for our clients. Let me now hand the call back to the operator for questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. In the interest of time, we ask that you please limit yourself to one question and one follow-up. We will now pause momentarily to assemble the roster. And your first question today will come from Stephen Sheldon with William Blair. Please go ahead.

Hey, thanks, and really nice job here. So first, it seemed like things in EMEA picked up nicely in the quarter. So how much of that is being driven by operational improvements, especially under new leadership, versus easier comps and any changes, I guess, in the broader demand environment? So how much is it being driven by you guys versus things in the backdrop?

Thanks for the question, Stephen. We're seeing similar themes play out in Europe as in the U.S. The management change is pretty recent, although it is starting to drive some progress. Despite ongoing macro uncertainty, activity is improving across that region in Q2, particularly strong, as Neil mentioned, and was observed for us in a couple of countries in particular in Ireland, Netherlands, Germany, and Spain. During 2Q, we were the broker for the largest single-asset office leasing deal in the EU since 2020 in Ireland and the largest ever office leasing deal in Barcelona. The office continues to trend higher in EMEA for us and vacancy remains relatively low, under 10% as of Q2 in 2025. And on the capital market side, momentum is building as well. There's pretty good labor market resilience, inflation returning to target. They've had multiple rate cuts over there, as I'm sure you know, bringing the key policy rate down under 2 percent, effectively back to neutral. So all in all, what we're seeing is growing investor confidence across Europe. But then you compound that with a lot of the operational work and efficiency work that we've been doing around how we run the company, how we manage information and data. And when you start to bring these things together, you get the multiplier effect that you're starting to see now.

Yeah, that's great to hear. In services, just as we think about the setup for growth in the back half of the year, just So, you'll be past the drag from the divestiture. And so, does the guidance kind of assume you'll be back to mid-single-digit growth in 3Q and 4Q, even on a reported basis? Am I thinking about that right?

Yeah, you are, Stephen. That's exactly the right way to think about it.

Okay. And then on, I think, Michelle, you talked about 96% annualized retention in GOS so far this year, seemed very strong. Any sense how that metric has looked in the past few years? And I guess that's another way. Is that a notable improvement from what you've seen historically there?

Yeah, it's a notable improvement. It's also given us some tools to apply across the services business in general. People have believed historically that something even in the low 90s was compelling, but we're proving that we can really create a much stickier environment for our clients and services. And as you can imagine, on the increment, every 100 basis points that we add to that is pretty profitable.

And your next question today will come from Anthony Pallone with J.P. Morgan.

Please go ahead. uh yeah thanks good morning a nice quarter um first question relates to leasing can you maybe give us a little bit more context around the various property types and how much runway you see for further uh growth maybe in the back half of the year um it seems like we've had a few mixed messages on industrial in particular as it relates to you know what some of the landlords have been saying versus the brokers. And so just, you know, if you could dig a little bit further into leasing in the back half of the year, that'd be great.

Sure. Let me hit on industrial for you because you're right. There's been some mixed messages out there. We didn't come into the year, I think as a lot of people didn't come into the year with high expectations for industrial leasing. We anticipated mild growth, but the sector continues to surprise to the upside. Year to date for us, it's up in the high single digits. And here's what we're seeing and why we think that's happening. The demand remains solid while the industrial market cooled from that pandemic fuel boom. It's still growing in Q2 alone. And the sector recorded almost 30 million square feet of net absorption. So although the pace has moderated a bit, industrial users are still expanding and taking space. Second thing is lease rollovers unlocking higher transaction values. So industrial Ego rents have really soared, like we all know, since the pandemic, up roughly 50% in the U.S. and even higher in markets like New Jersey, Philly, Inland Empire, places where we're particularly strong. And then there's just been this flight to quality. So as we're all thinking about technologies and AI and things of that nature, what we've seen in the office space, which was a flight to quality, is also true in industrial. There's a flight to quality there, new industrial space, space that's been coming on the market in the last few years, causes people to take a look and realize that if they want to compete, they need to have some of the latest technology and features, so they're also making moves. In the very near term, we still think that even with the macro uncertainty, the outlook is pretty solid for the industrial community mid to longer term. We feel great about the business overall.

Okay. Thank you for that. And then just the second question for me is on the services side. Now that you got it back to that sort of mid single digit that you talked about, it's hard for us to see profitability though. Can you maybe comment on just how that's going? Because you did strategically seem to make some shifts there to not only kind of stabilize the growth rate, but also make more money. And so any context around that would be great.

Sure, Tony. You're right. We're very focused on profitability and margins in the services business. We were particularly focused in Europe, especially around project management, where we restructured that business, and we've seen a nice improvement in margins there. Overall, we see continued expansion of margin in services through two things. First of all, as the revenue goes, we're going to see operating leverage. And then we remain focused on driving efficiency. Some of our investment on the services side is all around the infrastructure to support services. And what that will do is it'll make the business more efficient. So we are focused both on growth, but then also, as you say, profitability underlying that.

And your next question today will come from Ronald Camden with Morgan Stanley. Please go ahead.

Hey, great. Congrats on a great execution. I think last quarter we talked about maybe some margin headwinds as you reinvested in the business, but you were still sort of expecting growth to reaccelerate, you know, next year versus this year. I guess I would just love some updated commentary about maybe a little bit more about some of the investments you're making for the long term and your thoughts on sort of that margin and growth reacceleration.

Okay. So let me just refresh everybody on our capital allocation and then maybe turn it over to Neil. So from the first conference call a few years ago, I discussed the importance of us finding our optimal capital allocation strategy, which gets your point on organic investing. And you've seen us focus a lot on debt reduction, and then this year also leaning more heavily into internal growth investments, like talent, like organic investments that do cause potentially some headwinds. But we're always toggling that capital allocation model between those two universes. And we've just been doing, honestly, such a great job operationally that we're already seeing expansion in this quarter in the margin from the work that we've done resetting the operations of the organization. Neil, do you want to add anything to that?

Just on a very specific note in terms of guidance, as Michelle said, we're building off a very, very strong first half. We do expect that top-line momentum to continue as a result of the investments we're making. We will see the margin in the second half, slightly below the margin we saw in the first half as a result of a slight increase in investment spend in the back half of the year. But I'm still expecting margin expansion for the full year.

And then my second follow-up would just be going back to sort of the capital markets reacceleration in the quarter. Maybe you comment on trends in July at this point and what you're hearing in terms of potential tariff impact, or do they even matter anymore?

Yeah, I think tariffs have been disruptive, but they've yet to show that they are destructive. Capital market flow over the month of July was still compelling and driving us in the same direction.

And your next question today will come from Seth Bergey with Citi. Please go ahead.

Hi, thanks for taking my question. You know, just, you know, kind of following up on that, you know, in your conversations with clients, You know, what are they thinking about as they think about, you know, their leasing needs for additional space or underwriting transactions? Are they looking through tariffs or expecting, you know, Fed rate cuts or, you know, just trying to understand kind of the puts and takes of, you know, what clients are, what your clients are thinking about kind of for the back half of the year?

Yeah, business leaders, as I said in my pre-recorded script, continue to make decisions. And I think for anyone out there running the company, the macro uncertainty has now been a constant throughout the year. And our business has performed really well under it because people continue to make decisions. So what we see for the second half of the year is just a lot of the same. Our pipelines are strong. That gives us confidence heading into the second half of the year. and those same uncertainty forces that supported performance in the first half remain in place. And as I said, I think the tariffs have been disruptive. They create volatility, but you haven't seen destruction from them yet. And leaders of the businesses have been tuned into the fact that they have to be able to make decisions through the noise. So how does that impact leasing? Well, they're still striking leasing deals. They're still doing capital markets deals, and we believe this is going to continue.

Great. Thank you.

And your next question, Zay, will come from Julian Bluwen with Goldman Sachs. Please go ahead.

Thank you for taking my question, and congrats on the quarter team. So in terms of the turnaround in EMEA services, it sounds like project management saw some real wins in France and Italy. Just want to get a sense of, like, how much of that is improvements you've made, kind kind of going back to a question I was asked earlier, and how much of visibility do you have in sort of continued wins in EMEA going forward?

Yeah, look, project management and services in general in Europe has been a focus area for us. We see a lot of opportunity there. We have a very strong team there. Project management does tend to be slightly shorter term in nature than the long contracts we see in some of our other services businesses. But we're very pleased with the progress we're making there.

Thank you. And maybe on the margin side, again, in EMEA, I mean, margins doubled year over year. I guess how much of that was driven by incrementals on the brokerage side versus how much of that was the services side and some of the changes that you've made to sort of unprofitable services contracts?

Here in EMEA, we've worked very hard on margins and efficiency. We've got that platform to where we want it. I think going forward, the focus is going to turn from really restructuring the platform to growth on the top line. So, you know, you will see continued margin expansion, but less around platform costs. I think we've done that hard work, which means we can then create operating leverages as we grow that business.

I would also just add with the restructuring and putting new teams in place, we have a different mindset around drive and growth versus just one of, say, operational rigor. And now we've put ourselves in a position to have both skill sets. So as we grow, that margin expansion will happen naturally.

And your next question today will come from Peter Abramovich with Jeffries. Please go ahead.

Yes, thank you.

I just wanted to dig into the listing for a second. And I know maybe you're kind of catching up in terms of the office leasing growth here. But do you hit tough comps at any point in the back half of the year? And I guess just how does that factor into your outlook for the rest of the year?

Sure. We did see the pickup in leasing again in Q3 last year. We had a very strong Q3 in leasing. I think we're up around 13%. So we will face those comps as we look to the back half of the year. But at the same time, the momentum we're seeing in leasing, the very early revenue numbers for July all look good. And so, you know, we feel pretty good about our guidance of seeing the same sort of momentum in the second half that we saw in the first half.

Okay, got it. And then also on the office side, I guess, could you just comment? I think there's a lot of headlines and a lot of news stories out there about certain markets kind of running out of trophy space and top-end space. Does it seem like the leasing recovery has kind of proliferated to the rest of the market, kind of sub-trophy or sub-topline space? Kind of what's your view on that?

Yeah, exactly what you're saying. So we're also seeing, like, if you talk about something like New York is the original kind of place of strength, you're seeing it now in Boston, Dallas, Miami, Houston, non-gateway markets like Phoenix, San Diego, and Toronto were also strong for us. So the regional strength is broadening as well. And yes, you're seeing the move into what you would consider a AAA class A space to what you might consider A minus space as the best space in the market has been absorbed.

And your next question today will come from Mitch Germain with Citizens. Please go ahead.

Thank you. Congrats on the quarter. I think, Michelle, I think you termed it early stages of talent expansion. So I'm curious, you know, how broad-based is some of the hiring effort from maybe a business line or a global perspective?

Yeah, it's broad-based in every direction, frankly. We've been both reshuffling inside our own house, putting different talent in different positions. We reorganized, we did a complete reorganization in the fall of the America's advisory business to better connect the organization and pull up talent and new leaders into many senior level seats, individuals who are now drivers of growth. In addition to that, in terms of brokers, as I shared in my prepared remarks, we've hired capital markets brokers with 200% more average revenue than we did in the entirety of 24. And for leasing, that number is also 150% higher. And in terms of the number of teams there, this equates to 10 more capital markets teams for a total of 28 new teams since we started to ramp up our hiring. And what I should also mention here, which you didn't ask, is that we're getting more productivity per existing broker as well. So we're focusing, yes, on capital markets, yes, on leasing, but also on services talent and talent across the board.

Great. That's it for me. Thanks.

This will conclude our question and answer session. I would like to turn the conference back over to Michelle McKay for any closing remarks.

Thank you, everyone, and we look forward to speaking to you again on our third quarter earnings call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.