Earnings Call: Q1 2021

May 6, 2021

Greetings. Welcome to Cushman and Wakefield's First Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. It is now my pleasure to introduce Mr. Lynn Textler, Head of Investor Relations and Global Controller for Cushman and Wakefield. Mr. Textler, you may begin the conference. Thank you, and welcome again to Cushman and Wakefield's Q1 2021 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. Cushmanwaitfield.com. Please turn to the page labeled Forward Looking Statements. Today's presentation contains forward looking statements based on 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 and definitions of non GAAP financial measures are found within the financial tables of our earnings release and appendix of today's presentation. Also, please note that throughout the presentation, comparison and growth rates are to comparable periods of 2020 and are in local currencies. 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. Brett? Thank you, Len, and thank you to everyone joining us today. Before starting with our Q1 performance, I'd like to again thank our team of Cushman and Wakefield professionals around the world for their continued determination and service to our clients throughout the pandemic. Since the beginning of COVID-nineteen, we've been recognized as a leader in the industry as companies continue to turn to Cushman and Wakefield for our expert advice to help them navigate these challenging times. We will continue to play that role as we help our clients through this recovery. We are pleased with our Q1 performance and are off to a very strong start to 2021. For the quarter, we reported fee revenue of $1,300,000,000 down 1% to prior year, but well ahead of expectations. Adjusted EBITDA was $100,000,000 for the quarter, 38% ahead of prior year as a result of our continued delivery of significant cost savings across the business. Revenue trends were better than expected across all segments and service lines. Brokerage revenue was down 7% for the quarter with leasing and capital markets down 5% and 10% respectively year over year. This is the lowest rate of year over year percentage decline we have seen since the trough in the Q2 of last year. EMFM service lines continue to be a source of stability. These contractual fee based revenue streams represent just over half of the toilet portfolio. Throughout the pandemic, our teams have been supporting our clients by keeping essential buildings open, reconfiguring offices and retail outlets for social distancing and providing enhanced cleaning and facility services to ensure buildings are safe for tenants. In addition, our Global Occupier Services business continues to win new assignments and renew existing client engagements for outsourcing services in the Q1. On balance, we expect to continue to benefit from these trends as Cushman and Wakefield is one of the 3 large firms that provides comprehensive and scaled outsourcing solutions on a global basis. As we stated on our last earnings call, property recovery continues to be uneven with strong performance in some sectors, weak performance in others and varying degrees in between. The industrial sector is one of the clearest examples of a strong performer. Continuing to benefit from the shift to online shopping, the U. S. Industrial sector absorbed more than 82,000,000 square feet of space in the Q1 of 2021. In fact, the last two quarters were among the highest readings on record in terms of demand for industrial warehouse space. In addition to industrial, data centers, life sciences, self storage, apartments are other sectors that are benefiting from secular shifts and accelerating trends. And we expect these strong trends to continue for the remainder of 2021 beyond. In office, near term fundamentals remain less clear as businesses continue to assess space requirements, which of course is difficult to do in the middle of a pandemic. That said, we do see green shoots emerging. The first is on office using employment, which is clearly rebounding as the economy gains strength. Since the low point in April 2020, the U. S. Has added back 1,900,000 office using jobs through March 2021 and most economists expect strong job growth to continue from this point forward. Now that the U. S. Economy is creating office jobs again, even assuming more people will work remotely post COVID, it is only a matter of time before office buildings repopulate. In other words, our thesis that the office sector will fully recover from this event remains intact. The second green shoot I'll mention is that as the vaccine gets rolled out to more people, we are clearly seeing an increase in tenant tour activity of office space. Our internal tracking shows that tenant tours were up significantly in March versus the beginning of the year. Granted tour activity is still down from pre pandemic levels, but it's definitely trending in the right direction. The increase in tour activity is a solid leading indicator for accelerated leasing activity. Also, as we noted at year end, we saw an abnormally high percentage of short term renewals as well as a disruption to the normal churn in leasing. These pent up demand dynamics should translate into an increase in leasing volume activity later this year and into 2022 as there is a broader return to the office. Following near record volume for the month of December, Capital Markets continues to show encouraging momentum with 1st quarter volume of $97,000,000,000 according to RCA, which was well above the volume reported in the 2nd Q3 of 2020 despite Q1 being the seasonally slowest period of the year. Demand drivers remain favorable with low interest rates, attractive yield gap that is the cap rate spread over long term bonds, pent up demand for real estate assets and pent up demand from cross border capital. Additionally, while organizations continue to sort out the flexible work dynamic, it is evident that the need for strategic advice and problem solving has increased significantly, which bodes well both for our outsourcing and transactional businesses as companies navigate through these decisions. In short, volatility in a recovery is a very good thing for a business like ours. Last year, we hosted an Investor Day in early March just as COVID was becoming a global event. At that time, we unveiled the results of nearly 6 months of work that we had done to strategically realign the business to enable us to become a leaner, faster, more efficient organization. We identified a number of operating efficiency initiatives to optimize each of our businesses across our entire organization. These actions represent permanent savings that include initiatives ranging from streamlining our organization to better match our service delivery model to the optimization of business functions through automation and technology. In connection with these actions, we achieved $125,000,000 of permanent savings last year and are on track to achieve an additional $125,000,000 in 2021. These efforts are a key strategic advantage that will enhance our agility and speed in the marketplace as well as improve our profitability and build significant operating leverage in the business compared with even just 1 year ago. As we look forward and as we enter 2022, we will have executed a significant reduction of permanent cost in the range of $250,000,000 over the past 2 years. But more directly, a rising tide to lift every competitor in our business, but we firmly believe the significant actions we will have taken to optimize our operating model will disproportionately aid and accelerate our margin expansion in the coming years. Lastly, before I turn the call over to Neil, I'd like to emphasize one last point about Cushman and Wakefield that's been slightly overlooked the past year. We are on the forefront with industry leading capabilities in terms of acquisitions and integration. We have completed 27 infill M and A deals since the merger and have a demonstrated track record of accretive M and A and broker team onboarding. We have a distinct advantage of 1 of the few firms that can deploy solutions on a global scale, while also growing our platform as a result of the additional white space to fill across geographies and service lines. I bring this up because in our experience periods of volatility can drive opportunity for companies that are well capitalized and strategic. As you know, in 2020, we solidified an already strong liquidity position and currently have over $2,000,000,000 of available capital to augment our growth through acquisition as opportunities avail themselves during this recovery. Despite the near term challenges faced in the industry and what will likely be an uneven recovery, we believe there will be consolidation of share to firms like Cushman and Wakefield that have the capability, resources and scale to solve the challenges our clients face each day. I continue to be very proud of our team and our execution throughout this challenging period. Krishnan and Wakefield's holistic expertise, global market intelligence and thought leadership have never been more important to our clients. Thank you again. And with that, let me turn the call over to Neil to detail our quarter. Neil? Thanks, Brett, and good afternoon, everyone. Overall, we were very encouraged with the strong start to 2021. Fee revenue for the Q1 of $1,300,000,000 was down 1%, while adjusted EBITDA of 100,000,000 dollars was up 38% as compared to 2020. Our adjusted EBITDA margin of 7.5% expanded by 2 15 basis points compared to a year ago. This margin performance demonstrates our excellent operating performance as cost reductions more than offset the impact of our low brokerage revenues and higher year over year bonus expense for non fee earners in the Q1. Adjusted earnings per share was $0.11 up $0.08 over last year. Taking a look at our fee revenue by service line, our PMFM and valuation and other service lines were up 2% respectively for the quarter. Within PMFM, Facility Services represents just under half of the fee revenue. In Facility Services, we typically perform or subcontract a variety of services to our operations in both the Americas and APAC. This business generates solid cash flow on a stable revenue stream. In the Q1, facility services was up 7% compared to the Q1 of 2020, reflecting continued demand for COVID related cleaning services, primarily in the Americas. For the quarter, leasing and capital markets revenue declined 5% 10%, respectively, which was better than our expectations. On balance, the momentum we saw at year end 2020 carried into the Q1 of 2021, which is certainly encouraging. The industrial sector continues to be an area of ongoing strength in both leasing and capital markets across all three of our reportable segments, but particularly in the Americas. Further, we noted at year end an abnormally high number of short term leasing renewals. This is a trend we saw continue in the Q1 as owners push tenants away from month to month renewals and occupiers continue to assess longer term office requirements post COVID. In Capital Markets, in the non office sectors, we continue to see a favorable environment for capital investments where we've seen the spread between price expectations and return requirements hold up well. The outlook remains clear in the near term for office capital markets. While our first quarter results continue a positive trend, we do remain cautiously optimistic for the full year as the Q1 is the slowest quarter of the year and deal size and timing can impact results. Looking at our financial results by segment, revenue in the Americas was up 1% as strong growth in our PMFM service line of 8 percent more than offset the decline in brokerage. EMEA and APAC were both down 5% overall with PMFM in both segments down 9%. In EMEA, brokerage was down 4%, while APAC saw positive growth of 2%, primarily due to leasing activity in China and Hong Kong. Adjusted EBITDA was up significantly in all segments due to our efficiency initiatives. Turning now to operating efficiency, we are pleased with our continued strong execution. We delivered $60,000,000 of savings during the quarter, which includes both savings from operating efficiency initiatives as well as continued discipline in discretionary spending. Roughly half of these savings for the quarter represent permanent reductions, while the other half represent temporary cost savings, including reductions in travel, entertainment and events, spend on third party suppliers, staff seminars and part time work schedules. As we outlined on our Q4 call, efficiency initiatives within our 2021 operating budgets total $125,000,000 These savings will offset much of the unwind in temporary cost savings that will occur throughout the year as the recovery advances and activity picks up. But the impact of these initiatives will not be sufficient to completely cover the return to a more normal annual bonus expense, which will be a drag of about $50,000,000 this year. We anticipate this headwind to impact results in the second and third quarters, principally due to the slower unwind of temporary cost savings in the Q1. While we are not providing full year guidance at this point, I wanted to provide the following remarks to help frame directionally how we are thinking about the year, principally as it relates to the outlook for revenue. Given the fact that a significant portion of our fee revenue is earned in the second half of the year and that the near term business outlook environment remains uncertain, we continue to have limited line of sight to full year revenue trends in our brokerage service lines. That being said, we do expect brokerage revenue this year to be up versus 2020 for the full year. While we believe there will be a full recovery in brokerage revenue over time, we do not expect brokerage to cover to 2019 levels during any quarter in 2021. PMFM is expected to grow in the low to mid single digits for the year. Finally, turning to our balance sheet. Our financial position remains strong. We ended the Q1 with $2,000,000,000 of liquidity, consisting of cash on hand of $1,000,000,000 and availability on our revolving credit facility of $1,000,000,000 We had no outstanding borrowings on our revolver. We continue to be active in exploring info M and A opportunities to further enhance our portfolio of services globally. And given our liquidity, we are well positioned should opportunities arise. With that, I'll turn the call back to the operator for the Q and A portion of today's call. Operator? Thank you. Our first question comes from Anthony Paolone with JPMorgan. Please proceed. Thank you. My first question relates to the savings net against some of the drags. So you mentioned $60,000,000 of savings in the Q1, but $50,000,000 of net drag for the year. So should we think about 2Q to 4Q is having $110,000,000 dollars of headwinds? Or am I looking at it wrong? No, Shneur, the way to think about it is, first of all, look at the $60,000,000 in the Q1, that was 30 permanent 30 temporary, but basically half of that occurred in the Q1. As we look at the balance of the year, there will be a $50,000,000 headwind related to our bonus. So over the full year, there's $125,000,000 of permanent savings. There'll be $125,000,000 reversal of temporary savings. So those 2 offset each other. And then the $50,000,000 is a headwind related to the bonus coming back here. Okay. Okay. I'll think through that. And then as it relates to the top line, how should we think about just the sequential seasonality? Do you think that that is fairly normal as we think about how trends are looking right now, looking like from 1Q to 2Q or any thoughts on that front? Yes, sure. So, Q1 is always our smallest quarter. So, we do expect sequential growth from Q1 into Q2. It's difficult to say exactly what normal is based on prior year. But we do expect, as I say, brokerage, we have seen sequential growth in brokerage over the last 5 quarters. Okay. And then last question for Brett. As you think about coming out of COVID and looking out the next few years, what do you see as sort of the strategic priorities in terms of where you see the most opportunities? I think pre pandemic, you'd made some acquisitions on the residential side. It seems like I see your name more often these days associated with debt placement. There's co working. I guess what are sort of the key areas you see as your big opportunities? Yes. I would say, Tony, that our priorities, our strategic objectives are wholly unchanged from where they were pre COVID. 1st and foremost, as you know and we've spoken about for some time now, we have a benefit, which is we still have white space in our platform, both geographically and by surface line, areas that we can fill with infill acquisitions. And we believe that many of these infill opportunities will come to us or to the market over the next year or 2 years. We're tracking a number of interesting opportunities in the market at the moment. So infill M and A remains a key priority for us. 2nd priority for us remains efficiency. So we are we think we're very good at using technology and creative solutions to build a more efficient organization. That should be a margin enhancement tool for us as it has been, it will continue to be so. In the I think the broader marketplace, there's definitely an evolution in the corporate outsourcing world, the business run by Bill Knightley for us, where property tech is playing an ever bigger role in how people think about workplace and how people think about driving value into the workplace. We see a lot of opportunity in that. We spent a lot of time the last 2 years on that topic and think there's great opportunity there as well. And as we said in our prepared comments, ourselves and our 2 large peers, we're just really well positioned right now to accrete share both in the corporate occupier side because of the investments we've all made in the systems and technology and people, but also on the institutional investor side where more and more of the marketplace is being controlled by fewer and fewer large institutional owners. So all of that plays really well into the core strategic principles we've laid out the last few years. Okay. Thanks, guys. You bet. Our next question comes from Stephen Sheldon with William Blair. Please proceed. Hey, thanks. I know you don't provide guidance, but just seems like transactional activity came in well above your expectations in the Q1. So curious how your level of optimism about the remainder of the year in the transactional lines right now, I guess, compares to where it would have stood a couple of months ago. I guess, have you become more optimistic about what type of activity you could see over the rest of the year? Sure, Steven. But let me hit it from a high level and then hand it to Neil to remind that we're not going to give any guidance. But I'd say from a high level, you're right. So what has changed over the last 3 months is that the pace of the recovery has certainly accelerated from what we were expecting near the end of last year. And that's wholly and entirely related, we believe, to the mass rollout of vaccine. So our thinking around 2021 is that, while there's still a lot of uncertainty across the marketplace globally and there's uncertainty across some of the product types as well, There's more certainty that recovery is on its way and in some sense already here. But as you know and as Neil has mentioned in his comments and mentioned a moment ago, there are headwinds and there are tailwinds in 2021. Those all come into play. And I would say that while, yes, we are certainly more optimistic about 2021 than we were 3 months ago, there's still a lot of uncertainty in the marketplace. Neil, anything you want to add to that? I think it was very comprehensive, Rick. Yes, nothing to add. Yes. Great. And then just on Capital Markets, I guess, we would be curious to know what you're seeing in terms of the pipeline there across the different regions. And what's your sense of how bid ask spreads maybe trended during the Q1, if you have visibility under that for property sales? Sure. Well, it's very clear and which we know and Tony and the rest of the callers know by watching the RCA data and hearing anecdotal data from the other regions that capital markets was the first of the nature business lines to come back. Q4 of last year, as we all know, was surprisingly strong. And Q1 this year was certainly better than we had projected, and I think the market had projected. So capital markets is doing relatively speaking well. And I think part of this is that, Stephen, is that institutional investors are and there's exceptions to this, of course, but institutional investors are beginning to look through COVID. And I think there's a growing consensus that as nasty as that short recession was and as tough as the pandemic was and the questions it's created around how people will use space, I think there's a much stronger growing consensus that this was a point in time event and that the markets will cure from this in a relatively short period of time. I don't think there's a lot of opinion out there today, and by the way, there was 6 months ago, as to what the future of office will hold. I think at this point, and you've heard this from our peers who have already reported, we all feel that all of the offices and job shed in the first half of twenty twenty will be regained by the end of this year. We generally all feel vacancy and rents will have been fully recovered by mid-twenty 22, if not a bit sooner. All of that then says to an investor, if you're looking at a high quality asset and a high quality location, there's not a lot of turnover in the rent roll over the next 18 months and yields are where they are, assets look pretty attractive. So we feel good about the capital markets. It's like it's not going to be back to where it was in a quarter, but we like the trend. Great. Appreciate the color. Thanks for taking my questions. You bet. Our next question comes from Vikram Malhotra with Morgan Stanley. Please proceed with your question. Thanks for taking the question. Maybe just first one, you mentioned the M and A that you've done over the last few years. I'm just wondering through the pandemic and as we emerge, where would you say Cushman's had sort of the greatest market share gain, maybe region or segments? And I ask that also because you talked about white space and you've been trying to fill that over the last few years. So I'm just wondering, as you emerge out, where would you say you've gained share? Okay. So let me answer the question absent the M and A component of your question, but at least answer the question in terms of where we think we're gaining share or have gained share the last few years. I would say 1st in the global capital market space. This company 4 years ago was a player in capital markets, but by no means a leader in the major markets today we are. And so capital markets market share has certainly grown quite a bit over the last few years. We also 4 or 5 years ago were relatively new to the party on large complex global corporate outsourcing. We're not new to the party anymore. And to a great extent, any large multinational corporate outsourcing bid that comes to market, we're at the table. And we are gaining share there as well. We also though, as you know, we have a very large, very strong global brokerage transaction business. And the structural trends in the industry, the structural trends in the marketplace, the Vennix stand for a number of years are even as true today as they were before, which is share as an investor or as an analyst, I think we can all agree that share across the business lines is going to accrete to those few firms that have a truly global platform, a full suite of services deliverable whatever a multinational client may need it with a track record of quality outcomes for their clients. And that really narrows the field down to 3 firms of which we are 1. And I think that the share gains that you've seen in the past few years across our 2 large peers and ourselves are certainly indicative of what we would expect to see for a very long time. It's just very difficult in the marketplace today to be a half built firm and compete against these 3 powerhouses. Fair enough. On the topic of the PMFM, as you kind of alluded to now that you're competing with 2 of your peers. I'm curious to get your sense on we talk a lot about PMFM as it pertains to large office corporate users. I'm wondering on the industrial side, as you see more automation in warehouses and obviously the growth in the industrial space, What's the opportunity to grow in that segment in PMFM? It's a great question and it's an answer I would love to give you, which is simply this. We historically, we have had a higher percentage of our PM work and our FM work in industrials than those firms. And that is it wasn't deliberate. It's a result of the legacy of the companies we put together and one in particular Cassie Turley was and we are now very strong in the industrial space for PMFM here in the U. S. Industrials have been so they've been a sweet spot for us for some time. Now that having been said, the trends towards the growth of industrial space over the last 4 years is not a trend that was ignored by any of the major firms in the business. So we have been like others heavily focused on growing out our industrials business. We have but what is interesting to me and what it was different here at Cushman and Wakefield for me was the strength that the company has had and does currently have in manufacturing, in industrial and in logistics. So that's an area that, of course, everyone on the phone knows is growing very rapidly right now. The good news for us is we've had a strong foothold in that vertical for some time and intend to continue to expand it. And we are I should say just finally, we are investing materially in our industrial logistics businesses across the globe. It's one of our 3 vertical priorities that our 3 major regions are pursuing together. That makes sense. And then just last one, you talked a little bit about 6 months ago there was debate around return to work and kind of just the office prospects. Fundamentally, as you say, office is likely to recover by mid-twenty 2 in terms of rents. But I'm curious to get your thoughts on two topics. One is just the use of the office as it may change and maybe updated thoughts on what you're hearing from some of your large tenants? And then second, related to that, the flex office topic, some of your peers have certainly been a lot more active or taking actually integrating in some of those businesses. What's your view on Cushman's desire or ability to do that? Right. So let me take those in order. So it's very clear, I think, to certainly to you and to the folks on the call and to us that the house view on the future of office has materially changed for the more positive the past 3 months, past 4 months. Anecdotally, I was with a CEO of a very, very large global office occupier last week. And this individual asked us to begin cataloging Class A space that has been shed into the sublease market by other occupiers the past 12 months, because their house view, this is a very large occupier, is that the work from home model will be in the rearview mirror to a great extent fairly soon and they would like to start acquiring high quality Class A space in major markets and warehouse space because it's so inexpensive in the sublease market. You never would have heard that 6 months ago. And so as we sit here today, I would tell you that the majority view among major corporate occupiers right now is that work from home doesn't really work well. There is certainly a component of their workforce, there's a component of our workforce, and a higher percentage of the workforce that will be allowed to work remotely permanently, maybe from 5% pre pandemic to 10% or 12% post pandemic. And there's a higher percentage of office workers who I think will be given permission to work remotely occasionally. But I have to say that the talk in the market from corporate users has really moved, the last 4 to 6 months from work from home is working really well. Now to work from home really doesn't work very well. We're going to be more agile in how we allow people to have choice around where they work and how many days they're in the office versus being somewhere else. But I think it's very clear to us now that office space is here to stay, office buildings are here to stay. We are not going to see ghost towns of Class A high rises in Midtown Manhattan or other major cities. So in terms of then getting to the second part of your question on flex space. So we've seen in the last 3 months, 2 of our peers make investments into flex companies. And I think those are smart investments. The flex space, co working has been redefined through COVID. The model of long dated leases in Class A buildings, sublet to small tenants, that model I think is very troubled and I think that the market has opined on that and the model has changed. And so what we see now are a smaller number of high quality Flex Providers that are really focused more on the client experience inside buildings, maybe through property tech or through other things they do. And also and more importantly to us, helping institutional owners redefine the way a building is viewed by a tenant, not just the co work space, but the entire client experience. And corporate occupiers, I think now are beginning to and this started some years ago, but it's accelerated a bit. Corporate occupiers are beginning to look at variable lease term space as a component, a small one, but a component of their footprint. So I think what we're going to see going forward is that when you look at large corporate occupiers, there will be a percentage of their footprint that will always be in flex space and flex space has really shorter term, leased term space. So we admire what some of our peers did. I think they were smart moves. We also are very focused on how we provide variable lease opportunity to our clients. And that is something that we've done for some time now and it's something we're very focused on right now. So you should expect us to be very active in that area and bringing to our clients flexible solutions on how they look at their footprints including Flex Office. Great. Thanks so much for all the color. Our next question comes from Doug Harter with Credit Suisse. Please proceed with your question. Thanks. Can you talk about the environment for recruiting fee owners now that transaction volume and capital markets have started to recover? Sure. So for the past 12 months, which is typical in a recession, The market for funerals certainly cooled off and that's what happens in every recession. It tends to cool off for two reasons. One is, fee earners in a recession are much more reluctant to change firms. It's just another risk factor in an already very risky environment when we're in recession. And as you emerge out of recession, that market should and is right now beginning to heat up a little. I would say it's still the movement of scanners is still depressed from what we saw perhaps 3 years ago or 2.5 years ago. But in the marketplace, look, in a fully functioning normal operating environment in the brokerage business, there's always a material amount of movement among firms. The more robust the marketplace is, typically the more movement you see, because firms are willing to pay a bit more for that talent. Right now, as we get into a what looks to be over the next 2 or 3 years a fairly robust recovery, I would expect to see an active market for a few unit recruiting. For Cushman and Wakefield, we're not really in the business of just blanket recruiting. For us, our recruiting is very, very specific to either verticals that we want to build out. So product type brokers that we think fit into a strategic option that we have and to white space where we feel that our share in brokerage is not what it should be. So for us, it's great that there's some movement in the marketplace and we can see opportunities to hire people. But we really we're really not in the business of just blanket recruiting brokers. It's a very specific targeted activity to fill a very specific need. And I would expect that in 2021, in 2022, that market will be relatively active. Great. Thank you. Our next question comes from Michael Funk with Bank of America. Please proceed. Yes. Hi, good evening. Thank you for the questions. Couple if I could. So your earlier comments about M and A and the track record and then the $2,000,000,000 in capital to potentially deploy there. Would love to get your thoughts on what the right target mix is by service line going forward if there are areas that you want to beef up? And then even by capabilities, if there are additional capabilities maybe that Cushman doesn't have today that you believe could be useful to meet the market in the next couple of years? Sure. Well, let me answer the question this way. Because the areas we are currently focused on for M and A that would be very competitive information, which I am not going to disclose. I will tell you this, there are 5 verticals right now that we are very focused on or 5 food groups we're very focused on to lean into over the next few years. And we are actively looking in the marketplace for infill opportunities in those 5 verticals. I would say that what's different today from say 3 years ago is we've completed the work we wanted to do in a number of verticals and we've identified some additional verticals to now do work in either that weren't as high of a priority 3 years ago or are relatively new to the party. Opportunities we see in the marketplace today and going forward that weren't as attractive 2 or 3 years ago. So our capital deployment strategy and our M and A strategy is very, very focused, very, very targeted. Each year, we take a look at the portfolio of verticals. We make very deliberate decisions about where we're going to try to deploy capital. And as you know, that deployment of capital can be either in teams of fear nurse who work in marketplace. So for instance, I don't think it's any secret that industrial logistics is and we mentioned this earlier, a very high growth vertical. And so we're very focused in that area, looking at teams of theaters that might be very good in that. We can also do it through infill M and A, and we can also do it through joint venture. And all of those opportunities are available to us, and we're very focused on, as I mentioned, 5 discrete areas right now that we believe provide outsized opportunity for the firm. Understood. Thank you. And then going back to the temporary cost unwind, I think you called out $125,000,000 of temporary cost reversal for 2021. Can you help us think about the timing of that, the sequencing throughout the year? I mean, I assume it's more back end loaded, certainly with T and E portion, but can you help us think about the sequencing of that 125? Sure. I think the easiest way to think about it, Michael, is really just to think about it will be fairly even. We did see a delay in temporary costs coming back. So it will depend to a certain extent on how quickly we see brokerage recover. So I would say the majority of it will be in the second and the third quarter. And then in terms of the bonus that will also the $50,000,000 headwind that will be in the 2nd and third quarter as well. So, I would say over the year, the 125,000,000 the 2 125,000,000 balance each other with the bulk of it happening in that middle half. Understood. And then one more if I could please. You mentioned the pace of recovery accelerated much faster than maybe you expected even a few months ago. Are there any specific areas to call out that were particularly surprising with the pace of recovery so far, property side or service lines? Yes. And I want to be as clear as possible on this point. So what has changed in the last 3 months from our perspective is our outlook on the pace of the recovery going forward. So what we saw in the Q1 was really stabilization of the market and some incremental improvement across almost all of our service lines. That was great. It was better than what we expected, But I would not describe that as a wild recovery. I'd call it a stabilization of marketplace and incremental improvement in revenues. Because we did such a great job on efficiency last year, that incremental improvement basically flat in revenues went straight to the bottom line. And you saw that across the industry in the Q1. What is different for us is as we think about the year and we thought about how 2021 would play out, we were hopeful that Q3 and Q4 would show some recovery. I think we feel more optimistic now that that will indeed be the case. Your specific question, because when you look across the portfolio of our businesses, you don't see wild increases across any of the businesses. What you see is improvement across almost all of them. And so specifically to answer your question is almost all of our businesses, almost with the exception of project management showed real improvement in the Q1 from what we expected. One more point I'll make, it might be helpful. In the leasing business, still down over prior year, but what we did see for Green Chutes was more property tours. We're seeing a lot more interest by corporate occupiers in looking at space. It's not back to what it was, it's not back to normal, but there's no doubt that property tours are well up from the pace they were at the end of last year and in Q3. And that, of course, is a leading questions. Thank you. We have come to the end of our question and answer session today. I would like to turn the call back over to Mr. Brett White for closing comments. Perfect. Well, thanks everyone for dialing in. We're real happy with Q1, excited about the year and look forward to talking to you in 3 months. This does conclude today's teleconference. You may disconnect your lines at this time. And thank you for your participation and have a great day.