Welcome to Cushman & Wakefield's First Quarter 2019 Earnings Conference Call [Operator Instructions]. It is now my pleasure to introduce Bill Knightly, EVP of Investor Relations and Treasurer for Cushman & Wakefield. Mr. Knightly, you may begin the conference.

Thank you, and welcome again to Cushman & Wakefield's First Quarter 2019 Earnings Conference Call. Earlier today, we issued a press release announcing our financial results for the period. This release can be found on our Investor Relations website, along with today's presentation pages that you can use to follow along. These materials can be found at ir.cushmanwakefield.com. Please turn to the page labeled Forward-Looking Statements. Today's presentation contains forward-looking statements based on our current forecast and estimate of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we may refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures are found within the financial tables of our earnings release and Appendix of today's presentation. I'd like to remind you that the company uses fee revenue, adjusted EBITDA, adjusted earnings per share and local currency to improve comparability of current results and to assist our investors in analyzing the underlying performance of our business. You will find definitions of these non-GAAP financial measures and more detailed financial information in the tables of today's earnings release and the Form 8-K and our annual report on Form 10-K. In addition, I would like to note that throughout the presentation, comparisons and growth rates are to the comparable period of 2018 and in local currency. For those of you following along with our presentation, we will begin on Page 5. And with that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White.

Thank you, Bill, and thank you all for joining us today. I'm pleased to report we continue to see good momentum in our business with strong double-digit growth in fee revenue and adjusted EBITDA in the first quarter. Our sustained strong performance is a result of our continued focus on our top growth priorities and an environment that remains favorable for real estate services. As a reminder, here are our areas of strategic focus: revenue and share growth through the delivery of differentiated and best-in-class service to our clients, strategic recruiting and infill M&A to continue to expand our strong global platform, leveraging our strength in our large and growing recurring revenue businesses and continued margin growth through operational discipline. By these measures, the first quarter was a good continuation of the momentum we experienced throughout 2018. We saw double-digit growth at the top and bottom lines in the first quarter growing fee revenue by 13% and adjusted EBITDA by 19%, led by strong performance in our leasing and in our property facilities and project management service lines. We also continued our focus on margin improvement through operational efficiency. Duncan will speak to the first quarter results in a bit more detail later. In addition to our strong financial performance, I'd like to share a few other notable highlights in the quarter. In March, we announced a secondary offering of shares from some of Cushman & Wakefield's principal shareholders. Further detail and documentation around that offering can be found in our Investor Relations site. Our leading global brand continued to earn strong third-party recognition in the first quarter of 2019, including being named again as the number 2 Global Commercial Real Estate Brand by the Lipsey Company, receiving top honors for real estate outsourcing by IAOP and being recognized by…

Thanks, Brett, and good afternoon, everyone. To start let's turn to page 8, which summarizes our key financial data for the first quarter. As Brett said, we continued to deliver strong operating results. Today, we reported 2019 first quarter fee revenue of nearly $1.4 billion, an increase of 13%. We reported double-digit growth across each of our three segments. First quarter adjusted EBITDA was $88 million, up 19%. Our adjusted EBITDA margin of 6.4% represents a 45 basis point increase. Margin expansion was driven by strong revenue performance and continued focus on operating efficiency. First quarter adjusted earnings per share was $0.10. Adjusted earnings per share performance was driven by strong operating results and lower interest expense. Recall we paid off our second lien in the third quarter of last year. Moving on to Pages 9 and 10 where we show fee revenue growth rates by segment and by service line. Our leasing service line and property facilities and project management service line, which we call PM/FM, grew particularly strongly in the quarter with all 3 segments growing double digits. Globally, leasing grew 19%. Americas leasing grew 21%, representing strong performance across our key markets. Globally, our PM/FM service line grew 18%, in part driven by the acquisition of QSI, which Brett mentioned earlier. We're very pleased with the progress we have made to-date on the integration of this acquisition. Within PM/FM, facilities services represents just under half of the fee revenue. In facilities services, we typically perform or subcontract a variety of services through our major operations in both the Americas and APAC. This business generates solid cash flow on a stable revenue stream, and on an annualized basis typically has low single-digit growth. Fee revenue growth in facilities services was 10% in the first quarter. The rest of…

[Operator Instructions] Your first question comes from the line of Anthony Paolone from JPMorgan.

My first question is if you can talk about just what you're seeing in the environment for capital markets folks given what's kind of been happening on the M&A front with a couple of the larger shops there, and how that plays into your either recruiting or infill acquisition strategy?

Sure, and hi, Anthony. First of all, I think it's become clear to everyone that the capital markets business where we compete has clearly moved to -- and the good business has clearly moved to the full service platform. And I think that we all realize it as the years had gone by, having the ability to talk to investor, owner clients about everything involving their asset, not just an equity trade, is a distinct competitive advantage for the firms that can offer these full services. What we saw in the market announced a while back is just another indication of that very clear dynamic. So what does that mean for us? It's terrific. It makes it, frankly, easier to retain and easier to recruit the best talent because the market has spoken about which platforms are going to win and which platforms are going to lose, and we are clearly on the winning side of that ledger. The capital markets remain active. First quarter is small numbers, and I wouldn't draw too many conclusions from the first quarter. But certainly, the activity that we're seeing is good. We were very pleased with what we saw out of EMEA in their first quarter. And as I mentioned in the prepared comments, we closed an extremely large transaction in New York -- or we are closing, I should say, an extremely large transaction in New York that shows that even the largest transactions are active in the marketplace. So at the moment, we think pricing is -- seems reasonable to buyers and sellers. The 10-year is projected to be under 3% this year and next year. It's a good environment, Anthony.

Okay. And then my other question is as it relates to tariffs, if that were to become more prominent headwind economically around the globe, where do you think we'd see that first in your business either by business line or geography?

So the threat of tariffs, and actually tariffs themselves have been in the market now for a while. And as we mentioned last year when this question came up and I'll just reiterate today, we haven't seen any impact on our business either in greater China or anywhere else for that matter really based on the existence of increased tariffs or the threat of increased tariffs. I think that probably the impact of tariffs long term, Anthony, is going to be more insidious than me being able to say, look at China or look at the West Coast of U.S. or Australia, I think the -- a long-standing environment of steep tariffs would just lower GDP growth in many places and we would probably see that come through on the leasing numbers more than anywhere else. But I just want to underscore that this is not a new thing. It's been in the market now for some time. The threats have been in the market for some time, and at the moment, we see no impact.

Your next question comes from the line of Vikram Malhotra from Morgan Stanley.

You had quite amount of strength and momentum on the PM/FM side. It's certainly something you've talked about in the past. Just sort of wondering as you look forward, can you talk about incremental opportunities from here in terms of maintaining the momentum? And then also just the cross-sell opportunity, that seems something you've emphasized in the past as well. I'm just curious sort of how that could impact the other business lines.

Sure. So as it pertains to momentum, look, I think that for our firm and for the industry as a whole, this trend on the corporate side of continuing to outsource core activities around their real estate footprint is not going to change. And that trend, as we talked about before, clearly benefits the large three players -- or the largest three players in this industry, and it benefits them differentially. So we are happy to operate in an environment where corporates everyday make the decision to outsource either for the first time or more of their real estate activities to either us or our two larger competitors. Cross-selling at Cushman & Wakefield, we're in the early days here, and we are beginning to mine the opportunities across the platform to cross sell all of the services to all of the other services. I've mentioned before and I'll underscore again, every business line we have definitely has the opportunity to provide cross-sell opportunities to every other business line in the firm. It's very, very important to our model that, that be true. I think it's fair to say that it will always be true. We won't invest in businesses, buy businesses or build businesses that can't support the rest of the family of businesses that we have here at Cushman & Wakefield. So as we think about Cushman & Wakefield, or as you think about us and you think about the industry, those firms that have full services platforms globally are going to benefit from the trends in the marketplace permanently. And we're seeing the benefit of those trends now, but we should see continued and more benefit from this family of services as we get better and better at cross-selling across our platform.

Okay, great. And then just second question on the margin front. You referenced sort of operating leverage and you gave us the EBITDA guidance. I'm just sort of wondering relative to your own internal expectations has anything changed on the margin front. And should we be aware of -- can you remind us of any nuances intra-quarter in the remainder of the year.

Yes, it's Duncan. I think on the margin front, I think what we've said, and I think what we continue to believe, is that we are very focused and will continue to be very focused on growing margin, really, on a -- and we think of it on a year-over-year basis because of the seasonality of the business. I think intra-quarter stuff is not particularly a good way of looking at it. But on an annual basis, we've improved margins, turning the page 2014 to '18, roughly 400 basis points, I think. And while I'm not sure we'll do it at that kind of clip going forward, we do expect to see margin expansion this year. We factored that in. We did see some margin expansion in the first quarter year-over-year, that's good to see. I would expect us to see margin expansion in the year. So really, it was kind of in line with what we had expected to see, and what we'll continue to drive operating efficiency. We'll continue to drive getting good incrementals, more incremental revenue. We'll continue to get operating leverage as we do infill acquisitions. We did six last year. We've done QSI this year. They should all contribute to margin expansion over time.

Your next question comes from the line of Stephen Sheldon from William Blair.

First on QSI facilities, it sounds like the integration is progressing. Curious if you can provide some more detail on that process. And then additionally, roughly how much of the revenue acceleration in PM/FM in the quarter was driven by the inclusion of QSI?

Yes. So the integration's going well. I mean as you'd expect, the businesses -- the business -- when we buy a businesses like that, we try and bring it as quickly as we can into our operations, into our systems, into our financial systems. Make sure that the business and its flow and its momentum continues uninterrupted by transaction. The management team is brought onboard and that we have a successful transition of clients and make sure that goes well and that's all going well right now. And so we're very pleased with that. Good momentum, and feel very optimistic about how it will contribute to our numbers. Obviously, we'll be looking for some benefits from that, maybe some synergies from that as the year progresses and as we progress over time, and that will continue be our focus. We haven't disclosed specifically, as I'm sure you're aware, in exactly how much revenue or EBITDA we expect to see from QSI this year. We did talk about it I think on the last call as being probably at the higher end typically of the multiples that we expected to pay. But in terms of first quarter, we haven't disclosed specifically how much it is. But you can see from this very strong growth we saw in the PM/FM service line overall, and you can assume that some of that was driven by QSI in the Americas. It's mainly obviously an FM-oriented business.

Got it. Okay. And then the follow-up within leasing. Can you talk some about how the pipeline there looked as of the end of the quarter? And just with more challenging comparisons there over the next few quarters, how are you thinking about potential growth in leasing?

Sure. This is Brett. I would start to answer that question by saying we're in a very good moment now in this industry. And that benefits of course everybody. But when you think about our primary business lines around the world, virtually every one of them showed double-digit growth in the quarter. And that's a very, very good operating environment. Leasing is a critical business for us and for our competitors because so much of what we do, and the other business lines depends on an active leasing market. As you saw in our leasing business, we had exceptionally strong growth in the first quarter across our leasing business. And what I would say is without talking about pipelines because I really don't want to do that, I would say that those dynamics we saw in place, we talked about throughout 2018 continue at pace and in place through the first quarter of 2019 and through the month of April. So we're quite pleased with the durability of the leasing business and we're pleased with what we see ahead of us in leasing across all three geographies.

There are no further questions at this time. Mr. Brett White, I turn the call back over to you.

Terrific. Thanks everybody for your time. We look forward to talking to you at the end of the second quarter.

This concludes today's conference call. You may now disconnect.