Welcome to Cushman & Wakefield's Fourth Quarter Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during the time, simply press star one on your telephone keypad. If you would like to withdraw your question, press the pound key. It is now my pleasure to introduce Len Texter, Head of Investor Relations and Global Controller for Cushman & Wakefield. Mr. Texter, you may begin your conference.
Thank you, welcome to Cushman & Wakefield's Fourth Quarter and Full Year 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. The materials can be found on ir.cushmanwakefield.com. Please turn to the page labeled Forward Looking Statements. Today's presentation contains forward-looking statements based on our current forecasts and estimates for 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 tables of our earnings release and appendix of today's presentation.
Also, please note that throughout the presentation, comparison and growth rates are to the comparable periods of 2018 and are in local currency. For those of you following along with our presentation, we will begin on page 5. With that, I'd like to turn the call over to our Executive Chairman and CEO, Brett White.
Thank you, Len, and thank you all for joining us today. Today, we reported strong fee revenue growth in all three of our geographic segments for the full year and the fourth quarter. For the full year 2019, we reported fee revenue of $6.4 billion, an increase of 9% for both the full year and fourth quarter, led by our PMFM and capital markets service lines. Full year Adjusted EBITDA of $724 million was up $65 million, or 11%, from 2018, and was towards the upper end of our guidance range. Fourth quarter Adjusted EBITDA of $293 million was up $58 million, or 25%, from the same period in 2018. We also made progress on our stated goal to expand margin. Full year Adjusted EBITDA margin of 11.3% was up 25 basis points for the year.
In addition to our strong performance in 2019, we also passed the five-year milestone of the original strategic plan that led to the consolidation of organizations that would become the modern Cushman & Wakefield. With that milestone firmly behind us, we spent time in 2019 refreshing our strategy to align our business to what the most important clients in our industry need from service providers today, and more importantly, how they will prefer to buy services going forward. Our strategy focuses on these four priorities. Delivering services through a seamless, exceptional client experience, a continued disciplined focus on operational excellence, developing and maintaining a high-performance culture, and leveraging data and analytics to create value for our clients and our business. We'll provide more details around these priorities during our Investor Day on March 10th in New York.
We'll also talk more about our plans to align our business model to these priorities, focusing how we serve clients through a more efficient and nimble business model. The improvement in operating efficiency is expected to provide a strong benefit to Adjusted EBITDA and drive strong margin accretion in 2020, which Duncan will cover later in our guidance and which we will be discussing in more detail at the Investor Day on March 10th. Let me provide further highlights and details on our strong year-end and fourth quarter results. Our leading global brand continued to earn third-party recognition throughout the year, including being named the number one commercial real estate advisor in the world by Euromoney and the number two global commercial real estate brand by The Lipsey Company.
We received top honors for real estate outsourcing by IAOP, and Forbes named Cushman & Wakefield to its list of America's best large employers and best employers for diversity. Furthermore, we continue to expand our global platform through infill M&A and strategic recruiting throughout the year. We completed five acquisitions in 2019, strengthening our service offerings and recurring revenue mix globally. Additionally, in the fourth quarter, we formed a joint venture with Vanke Service, a Chinese facilities and property management leader, to provide facilities management and property management services to local, regional, and multinational organizations in Greater China. This new asset services company allows us to deliver better value for our clients and currently has more than 1,000 commercial property and facility management projects under management in over 80 cities across Greater China with more than 20,000 employees.
The market-leading scale, innovation, industry-specific solutions, enhanced reach across Greater China, and best-in-class team will allow the company to continue to be a premier provider of professional property and facility management in this very important market. In the fourth quarter, we continued to win new business due to our leading position, scale, and ability to service clients around the world. Our Global Occupier Services business continue to win new mandates and expand service offerings with existing clients as large corporate occupiers chose Cushman & Wakefield for real estate outsourcing. For example, we were assigned a new contract with Carrier to provide transaction management, Project and Development Services, portfolio administration, portfolio strategy, and space and occupancy planning for more than 1,200 sites totaling more than 35 million square feet across their global portfolio.
A Fortune 500 manufacturing client expanded their services with us to include Integrated Facilities Management, and they expanded their North American portfolio from 2 million sq ft- 11 million sq ft with Cushman & Wakefield. Similar examples of new outsourcing assignments in our Facilities Services business include a contract to provide Facilities Services across 1.9 million sq ft in Texas and 1.5 million sq ft in Arkansas for the U.S. GSA. Contract with the Port Authority of Seattle to provide Facilities Services across 456,000 sq ft of Sea-Tac International Airport. In, addition, some of the large assignments in our Leasing and Capital Markets businesses in the fourth quarter included representation of Facebook for significant office leases of 1.5 million sq ft across three buildings at Hudson Yards in New York City.
We represented Goldman Sachs Asset Management and Lincoln Harris in their $436 million sale of the 843,000 square foot Bank of America Tower in Charlotte, North Carolina. We represented developer TMG Partners in leasing Oakland's 875,000 square foot Telegraph Tower. We represented Ponte Gadea in the $780 million sale of the Post Building in the U.K. and advised the client in a 300,000 square foot acquisition and retail development. We conducted IPO valuations of four properties totaling more than 3.1 million square feet owned by ESR Cayman in Japan, which later listed on the Hong Kong Stock Exchange. We brokered the sale of a freehold land site living mall for $1.24 billion on behalf of Core Pacific City Co., Ltd. in Greater China, which totaled almost 200,000 square feet. Turning to page 6, you'll see our dashboard on the global real estate market.
Conditions largely remain favorable for commercial real estate services. According to the IMF, global GDP growth is expected to be 3.3% and 3.4% for 2020 and 2021, respectively, after decelerating to an estimated 2.9% in 2019. According to IMF, risks to global activity are less tilted to the downside compared to last fall, and the odds of a recession remain generally low for the next 12 months. That said, we continue to monitor downside risks with recent emphasis on the coronavirus, which is still being priced in. Developments remain fluid right now, and this is something that we will monitor very carefully. Interest rates globally have generally remained low since our last earnings call, and there is continued strong investment appetite for commercial real estate. Fundraising remains near all-time record highs, indicating tremendous liquidity and demand for commercial real estate assets. Leasing fundamentals remain stable against a weaker macroeconomic backdrop.
Demand for space is still healthy, albeit slower, and occupancy levels are holding firm. U.S. commercial real estate remains very attractive as an asset class. We see continued rent growth as supply/demand metrics are broadly balanced. Leading indicators that correlate with commercial real estate continue to point to growth. For example, labor markets are still creating jobs, and U.S. consumer confidence levels are still higher today than at most points in the current and previous cycles. In summary, in 2019, we demonstrated continued solid growth in fee revenue, Adjusted EBITDA, and EBITDA margin. As we look to the year ahead, with continued strong real estate fundamentals, combined with the strength of our global brand and platform, we believe 2020 will be a strong year for Cushman & Wakefield.
I'm confident that as we begin the next chapter for our firm, we're aligning our business around the industry's most important clients and their evolving needs. I'm also confident that we'll continue to refine our operations to take advantage of modern efficiencies, technologies, and business models that allow us to remain nimble and agile while creating more capacity for investment into our service delivery platform. One thing you can count on from Cushman & Wakefield is that we will continue to drive our business with a focus on what's coming next instead of simply being comfortable with the way things have always been done in our industry. We look forward to sharing more with you at our Investor Day in two weeks. With that, I'll turn the call over to Duncan to discuss our financial results in detail, along with our guidance for 2020. Duncan?
Thanks, Brett, and good afternoon, everyone. To start, let's turn on page 8, which summarizes our key financial data for the full year and fourth quarter. As Brett said, we continue to deliver strong operating results. We reported 2019 full-year fee revenue of $6.4 billion, an increase of 9% for both the full year and fourth quarter. We generated solid growth across each of our three segments, led by our PMFM and Capital Markets service lines. Full-year Adjusted EBITDA of $724 million was up $65 million, or 11%, from 2018, and was towards the top of our guidance range. Fourth quarter Adjusted EBITDA of $293 million was up $58 million, or 25%, from the same period in 2018, driven by results in Americas and APAC. Full year Adjusted EBITDA margin of 11.3% was up 25 basis points for the year and 195 basis points in the fourth quarter.
The fourth quarter improvement was driven by fee revenue growth, especially in the Americas. Within the Americas, the broker investments we made in the second half of 2018 were, as expected, profitable in the fourth quarter and more than offset the modest shift in mix to our PMFM service line. Full-year adjusted earnings per share was $1.64, and fourth quarter adjusted earnings per share was $0.78. Moving on to pages 9 and 10, where we show fee revenue growth rates by segment and by service line. All three segments grew in the fourth quarter, with Americas up 11%, EMEA up 7%, and APAC up 6%, bringing their full-year growth rates to 9% for the Americas and EMEA and 12% for APAC. In 2019, growth was particularly strong in our PMFM service line, which was up 14%, including double-digit growth in all three of our segments.
This growth, including the acquisition of QSI, drove a modest revenue shift to PMFM in the year. We have substantially completed the integration of QSI. Within PMFM, Facilities Services represents a significant portion of this service line's fee revenue. In Facilities Services, we typically self-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. In 2019, fee revenue growth in Facilities Services was in the mid to high single digits for the year and the fourth quarter. The rest of our PMFM service line, which comprises our occupier, outsourcing, Property management, and Project management operations, grew at a double-digit rate in all three segments for both the quarter and year to date.
With that, we will start a more detailed review of our segments, starting with the Americas on page 11. Fee revenue performance in the Americas was strong at 9% for the year and 11% in the fourth quarter. Our growth was driven by PMFM, which was up 15% for the year and was up 17% for the quarter, and Valuation and other, which was up 11% for both the year and the quarter. Within our Americas PMFM service line, our Facilities Services operations represent a little over half of our fee revenue. Facilities Services fee revenue was up double digits for the quarter and the year, driven by growth at existing clients and new business wins. The rest of the PMFM service line grew at a double-digit rate.
Our leasing business was up 2% for the year and was flat for the quarter, and capital markets was up 6% for the year and was up 20% for the quarter. Trends in brokerage were consistent with our expectations. Americas' full-year Adjusted EBITDA of $500 million was up 11%, and fourth quarter Adjusted EBITDA of $182 million was up 34%. Adjusted EBITDA margin in the Americas for the year was 11.4%, an improvement of 30 basis points versus 2018. The recruitment investments made in the back half of 2018 ramped up as expected during the fourth quarter. We expect these investments to continue to be accretive in 2020. Moving on to EMEA on page 12. Full-year fee revenue was up 9%, and fourth quarter fee revenue increased 7%, driven by solid growth in our PMFM and capital markets service lines.
Our PMFM service line in EMEA represents less of our overall segments than in the other two regions, grew 23% for the year and 13% in the quarter. Capital Markets was up 9% for the year and 10% for the quarter. These trends were partially offset by Leasing activity, which was down 1% for the year and the quarter. These trends were consistent with our expectations and principally driven by weakness in the U.K. Fourth quarter Adjusted EBITDA of $65 million declined $2 million versus the fourth quarter of 2018, and full-year Adjusted EBITDA of $100 million was down $8 million versus the same period in 2018. Our performance in EMEA reflects the impact of weaker performance in our U.K. business, where Leasing activity, in particular, was weak. We also experienced a mix shift during the year driven by growth in PMFM.
Now for our Asia Pacific segment on page 13. Growth continues to be strong with full-year and fourth quarter fee revenue up 12% and 6% respectively. Capital Markets was up 22% in the year and has grown 20% for the quarter. Leasing grew 7% for the year and 4% for the quarter. Valuation and Other grew 21% in 2019 and 29% for the fourth quarter. Finally, PMFM grew 10% for the year and 2% for the quarter. PMFM represents more than half of the fee revenue for the segment. Adjusted EBITDA grew 26% for the full year and 45% for the fourth quarter, driven by strong revenue growth. Turning to page 14, in summary, we are pleased with the performance of our businesses in 2019.
The overall global economy continues to be supportive of growth across our businesses. Our momentum is strong, and we expect to continue to grow profitably in 2020. We expect 2020 Adjusted EBITDA to be in the range of $810 million-$860 million. We anticipate margin improvement of more than 75 basis points at the midpoint of the range, driven by operating efficiency initiatives consistent with the strategic realignment that Brett mentioned earlier. We will discuss these initiatives in more detail at our Investor Day in New York on March 10th. Our adjusted effective tax rate was 24% in 2019, and we would expect it to be at or around this rate in 2020. The cash tax rate was 12%, contributing positively to our free cash flow conversion.
Since the last call, we have expanded our revolving credit facility from 810 to $1.02 billion, and we have successfully repriced our first lien debt to improve the interest rate by 50 basis points. As a result, in 2020, our interest rate on gross debt is expected to be at around 5.5%, down from 6% in 2019. We ended the year with a net leverage ratio of 2.5 times, down from 2.7 times last year. Our financial position and liquidity are strong, with $1.8 billion of available liquidity. Before I hand the call back to Brett, I would like to make an announcement. Cushman & Wakefield is the third public company where I have been CFO, and after many years, many earnings calls, and leading large finance organizations, I have made the decision to retire to spend more time with my family and more time pursuing personal interests.
When I joined the company in 2014, my objective was to support and lead our business through a period of rapid growth and transformation. I'm very proud of all that we have accomplished, particularly taking the company public in 2018. Today, Cushman & Wakefield holds a robust financial position amongst major firms in our industry and is poised for continued sustainable growth and success. I'm very grateful for the partnership I've enjoyed with Brett, my Cushman & Wakefield colleagues, and my finance team, and with many of you listening to this call. I will continue to partner with Brett and will remain as CFO throughout the search process until my successor is on board. With that, I will hand the call back to you, Brett.
Thank you, Duncan. On that sad note, let me provide some good news. We've been able to convince Duncan to stick around for a few more earnings calls. I'm going to defer a bit lengthier comments around Duncan's tenure to a later call. I would like to say that the very first person that we hired when we bought DTZ, now five years ago, was Duncan, and by far, the most important hire we made as an executive team was hiring Duncan. He's been a terrific partner to me, has added massive value to Cushman & Wakefield and to you, our investors. Again, we'll talk a bit more about that, Duncan, on a later call. With that, I'll hand the call back to the operator for Q&A.
To ask a question, please press star one on your telephone keypad. The first question comes from Anthony Paolone of J.P. Morgan. Please go ahead. Your line is open.
Okay. Thank you. My first question relates to the EBITDA guidance and drivers behind it. It's a pretty strong number. I'm wondering if you can talk about how much of that is coming from acquisitions organically, and also how much might come from some of these initiatives that you alluded to.
All right, Duncan?
Thanks, Tony. Well, yeah. Thank you for the question. I think if you break it down, I think it's reasonable to assume that we would continue to see sort of similar trends in revenue growth that we saw in 2019, sort of similar level economy, similarly supported. Maybe 2019 had a bit of help from the fact that we did an unusually large amount of infill with QSI being right at the beginning of the year. Otherwise, on an underlying basis, I think 2020 looks sort of similar. The organic growth is producing a good contribution to that. Then, as we talked about, we've got the operating efficiency improvement coming from the strategic alignment, which we expect to be quite significant, which would drive most of the rest, along with a couple of other operating efficiency projects.
We're very focused on operating efficiency and on margin, and I think you saw a lot of that in 2018. You saw us grow margin 2019, and we continue to be very focused on it. Probably 2020 is a bigger year for it than 2019 was. That will be a big contributor to our ability to grow margin and EBITDA in 2020.
Okay. If I take your EBITDA guidance, it'll be up nicely. You have some free cash flow if I just think through adjusted EPS and work down. Your leverage looks like it's going to stay about the same. It suggests that you'll still be using a bunch of cash. How much of that is likely to be used for acquisitions versus some of these strategic initiatives? Is there a bunch of cost that comes with that that you have to put up upfront?
A couple of things in there. I think from a leverage point of view, I think we're in the mid-2s, and I think we're saying we're going to be in the mid-2s. We're not guiding so specifically on where net leverage is going to be. I wouldn't be saying we're saying it's going to be exactly flat or anything like that, but in the mid-2s. I think that's sort of on that. In terms of how we spend capital, I think our capital allocation philosophy has not changed. It continues to be that we take the free cash flow that we generate, which as you correctly infer, will be healthy, particularly given the growth that we see in Adjusted EBITDA, and that will be used both to make investments in operating efficiency.
We did put out I think in 8-K that we expect the GAAP restructuring charge to be $40 million-$60 million almost mainly spent this year, which will obviously be enabling some of those operating efficiencies we just talked about. That'll be a use, and that, for us, typically is a very good use of investment and pays back pretty well. We would continue to see opportunities for us to invest in the business, and we've said over time that we expect to do infill, and recruitment are probably normally, half to two-thirds, three-quarters of our free cash flow. That would typically drive in a typical year about a third of our fee revenue growth, and I don't think 2020 would be a particularly different year in our theory on that. Obviously, it depends on the actual nature of the pipeline there. That's how we think about it.
Okay, thanks. I'll get back in the queue for follow-up.
Again, to ask a question, please press star one on your telephone keypad. The next question comes from Steven Sheldon of William Blair. Please go ahead. Your line is open.
Thanks. This is actually Josh Lamers on for Stephen. Thanks for your time over the years, Duncan.
No problem.
It's an exciting announcement. Wanted to actually ask first about the Pinnacle acquisition. It seems to have flown under the radar a little bit, but to me, it stands out as sort of an acquisition and a move into a territory that's sort of a non-traditional space in which you would provide kind of PMFM services. If you could talk a bit about the strategy there. Why the move into that asset type, and I guess what's the outlook?
Sure. This is Brett. I'll take that question. As you know, and I think all the callers know, we've been in the business of managing properties since the first days of the firm. It's a business we know exceptionally well. The multi-family space is an area that we've had our eyes on for quite some time. We didn't do this earlier, frankly, because we've been quite busy on other initiatives and other projects with the integration and other areas that we were pressing for growth. With Pinnacle, we finally found an asset that we felt was a best-in-class manager in this vertical, one that could be scaled with an excellent management team, a terrific client base, and we felt it was the right entry into what is a vast marketplace that is really relatively untapped by folks in our particular services vertical.
We're very excited about the opportunity. We're very excited about that particular space for us, and it's an adjacency that I think is probably fairly obvious and one that we're probably a bit late getting to, but glad we got there.
Okay. Really strong investment sales growth globally in the quarter, and I know you called out some larger deals globally. It also seems that you're seeing some earlier benefits from the producer hiring in late 2018. I guess could you talk about what your outlook is in sales for 2020? I guess if the underlying of guidance assumes continued strong growth in sales, how do we think about that in the context of the margin? I should say the Adjusted EBITDA guide. Should we expect stronger growth here to sort of weigh on margins, or just how do we think about that? Thanks.
Well, yeah, sure. The capital markets business is a very high-margin business. If it were to grow more quickly, that would be very accretive to margin. In fact, I think the outlook for 2020, which we've set, is fairly modest. As Duncan said, 2020 feels to us at the moment a lot like 2019, and our overall growth, for instance, in the Americas capital markets was mid upper single digits. I think it feels about right for the year. There are some enablers out there that are interesting to us, certainly, and let's put coronavirus to the side for the moment. That seems to be an issue of the moment. It certainly isn't an issue forever. We do have more certainty in Europe and the U.K. around Brexit, which is a good thing.
We have exceptionally low interest rates at the moment, which are an enabler for these types of transactions. At the moment, as we look at 2020, I think we feel pretty good about the Capital Markets business. I wouldn't say that you should expect higher growth rates or materially lower growth rates in 2020 than you saw in 2019.
Okay, thanks for your time.
Sure.
Your next question comes from Michael Funk of Bank of America. Please go ahead. Your line is open.
Hey, good evening, guys. Thank you for taking the questions. I appreciate it. Maybe some more commentary on the capital markets activity expectation for 2020. You just noted with the last caller you saw a lot larger deals in 2019, especially exiting the year. In your expectation, is it that the larger deals will still be dominant, or are you expecting just more smaller deals? Maybe even just kind of thoughts on the geographic mix of the transactions in 2020.
Okay, this is specifically for investment property sales, capital markets?
Correct, please.
Sure. Capital markets in 2019, if you look at our business, let's talk about Americas, which is where I think your question is most focused.
Probably most relevant, yeah.
Yeah. We had very good performance in capital markets, as you know, in 2019. The markets that showed strength were broad-based. I was going through, actually before this call, I was going through all of our U.S. markets, looking at the growth rates for capital markets. But for New York City, almost every major market in the U.S. was up solid double-digit. New York City as a marketplace was down. We retained our number one position in New York City, which I think is the evidence that we followed the market. There weren't as many large deals or as many deals done in New York City in 2019 as 2018. As we look forward into 2020, as I mentioned a moment ago, we don't see anything particularly different about 2020 than we saw in 2019.
Those large deals, the billion-plus transactions, those are lumpy, hard to say when they will come in, and frankly, how they fall year to year is very hard to predict. At the moment, I would just stick with what I said a moment ago. We don't see anything materially different in 2020 than we saw in 2019. I'd just leave it with that. Again, that growth in 2019 was broad-based across every major market in the U.S. but for New York City.
Sure. In this opportunity to kind of comment on the kind of the broader economic activity concerns about coronavirus. In your experience, I guess, what is the sensitivity in leasing to economic shocks like we could be experiencing right now? How quickly do you see C-level executives pull back on leasing activity? Are you hearing concern when you speak to any of your larger clients?
Yeah. Well, first of all, I would say it's early days, and well, hopefully it's late days, and this will all be behind us very soon. It is early days. If you look back to SARS, you look back to other issues of this type in the marketplace, what you tend to see is there's a lot of noise in the market during that moment in time, and you can see in areas that are particularly affected. Let's look at Hong Kong. At the moment, our transaction activity in Hong Kong was down in the fourth quarter. That doesn't surprise us, both with the protests and then with the issue with the coronavirus. What you always see in these situations, and we would expect to see here, is a strong snapback when the issue goes away.
Unlike some other economic drivers that are, I think, more structural, we would expect that what you lose, if you lose activity during the issue, that activity comes back incremental to normal activity in the subsequent quarters. At the moment, I wouldn't say we're sanguine. We're not. There's a lot of work we're doing right now to make sure our employees are safe and well taken care of, and our clients are well taken care of. We are not seeing, other than in Hong Kong, and I think that's both, as I mentioned, the protests and coronavirus, we're not seeing any impact on activity right now. I would also say that our business is one where transactions are worked on for a very long time, both in the leasing and in the capital markets space. People don't tend to stop those transactions over issues like this.
People will slow down transactions in a real economic decline. What we watch for is really the impact on GDP, and that is unknown at the moment. If coronavirus has a material, sustained impact on GDP, we're going to see a slowdown in transaction activity. At the moment, that is not what's being forecast into the marketplace.
That was great color. Thank you very much.
You're welcome.
There are no further questions at this time. I would now like to turn the call over to Brett White for closing remarks.
Thank you, operator. Thanks everyone for dialing in, and we'll talk to you in a quarter.