Welcome to Cushman & Wakefield's second quarter 2019 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'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. It is now my pleasure to introduce Bill Knightly, EVP of Investor Relations and Treasurer for Cushman & Wakefield. Mr. Knightly, you may begin your conference.
Thank you, welcome again to Cushman & Wakefield's second 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. The 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 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 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. In addition, I would like to note that throughout the presentation, comparisons and growth rates are to the comparable periods of 2018 and in local currency. For those of you following along with our presentation, we will begin on page five. 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 again today. We continue to see good momentum in the business with solid double-digit fee revenue growth year-to-date and in the second quarter. Our sustained strong performance is a result of our continued focus on our top growth priorities and an environment that remains favorable for commercial 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 second quarter continued to have quite good momentum.
We saw double-digit growth in fee revenue of 12% year-to-date and 11% in the second quarter, primarily led by stronger performance in our leasing, capital markets, and property facilities and Project Management service lines, which we call PMFM. We also saw strong growth in adjusted EBITDA by 9% year-to-date. Duncan is going to speak to the second 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. Our leading global brand continued to earn strong third-party recognition in the second quarter of 2019, including being named once again to Forbes list of America's Best Large Employers and receiving top honors again as the 2019 Energy Star Partner of the Year for sustained excellence.
Cushman & Wakefield also received a perfect score of 100 on the 2019 Corporate Equality Index, naming us a best place to work for LGBTQ equality. We're proud of these designations because they provide further evidence that we're creating value for our many stakeholders, including our clients, our people, and our shareholders. In the second quarter, we continued to expand our platform through infill M&A and strategic recruiting. We acquired the Austin, Texas, operations of Peloton Commercial Real Estate, one of Austin's leading full-service real estate brokerage, property management, and project management firms. Our Global Occupier Services business continued to win new mandates as large corporate occupiers chose Cushman & Wakefield for real estate outsourcing in the second quarter. For example, we extended our contract with H&R Block for Integrated Facilities Management, Transaction Management, Project and Development Services, and portfolio administration through 2024.
This year marks 20 years of H&R Block being a Cushman & Wakefield client. We renewed Honeywell's contract for transaction management and expanded their scope of services to include project management and workplace solutions for their 6 million sq ft portfolio, which consists of 150 sites across Asia Pacific. We won a new assignment to provide integrated facilities management services for Intuitive Surgical across the Americas, spanning more than 3 million sq ft. We are currently underway with strategic project management for the world's largest big box retailer, servicing more than 1,000 locations across the U.S. Similar examples of new outsourcing assignments in our facility services business include a nearly 2 million sq ft portfolio for MIT Lincoln Laboratory in Lexington. A 2.2 million sq ft portfolio for Rowe to provide facility services at the U.S. Air Force Academy in Colorado Springs.
In addition, our leasing and capital markets businesses continue to win and execute large assignments in the second quarter. For example, Cushman & Wakefield closed one of the largest ever single asset sale-leaseback transactions representing WarnerMedia and AT&T in their approximate $2.2 billion sale-leaseback to the related companies. We represented Jamestown in their $600 million sale of the Milk Building in New York. We represented Citigroup in the acquisition of their 1.2 million square foot EMEA headquarters, which is the largest single asset transaction in Europe in 2019. Our capital markets team in Hong Kong represented Mapletree Investments in the sale of a Grade A office building for $1.3 billion, the largest single office transaction ever in Hong Kong's Kowloon district. We represented Salesforce in an approximately 350,000 square foot lease in Tokyo, which became the first Salesforce Tower in Asia-Pacific.
Our Project and Development Services team in Greater China won an assignment for Project Management services for two notable Microsoft mandates in Shanghai, the new AI and Innovation Center and IoT lab, which are Microsoft's largest AI and IoT labs in the world to date. Now turning to page six, you'll see our dashboard on the global real estate market, which continues to remain largely favorable for commercial real estate services. These are among the primary metrics we monitor to assess commercial real estate supply and demand and to provide a foundation for our business forecast. You can see the economic backdrop that drives demand for commercial real estate remains healthy. Global economic growth remains solid. The IMF is currently forecasting global real GDP growth at 3.2% and 3.5% for 2019 and 2020, respectively.
Though we do recognize economic growth has decelerated a bit in 2019, projected GDP growth rates are indicative of healthy demand for commercial real estate space. Because of that, we continue to see rent growth as supply-demand metrics are broadly balanced. In summary, we remain quite pleased with the continuing momentum in our business. Strong performance in the first half of the year, coupled with largely favorable economic conditions as it pertains to commercial real estate, including healthy labor markets, generally low interest rates, and record capital raised targeting real estate, creates a healthy environment to continue to drive results going forward. Duncan will now discuss our financial results and share more on our outlook for the year. Duncan?
Thanks, Brett, and good afternoon, everyone. To start, let's turn to page eight, which summarizes our key financial data for the second quarter and year to date. As Brett said, we continue to deliver strong operating results. Today, we reported second quarter fee revenue of nearly $1.6 billion, an increase of 11% over the same period in 2018. Year to date, fee revenue was $2.9 billion, a 12% increase, with double-digit growth across each of our three segments compared to the first half of last year. Second quarter adjusted EBITDA was $175 million, a 4% increase from the second quarter of 2018. Year to date, adjusted EBITDA was $263 million, a 9% increase from the first half of 2018. EBITDA growth was driven by our strong revenue performance. Year to date, EBITDA margin of 8.9% was about flat to prior year.
Our first half results reflect a modest shift in mix towards our property facilities and Project Management service line, which we call PMFM. This is generally a lower margin business than our brokerage service lines. In addition, we made investments in the second half of 2018, mainly in broker recruitment in the Americas, which are ramping up and expected to contribute in the second half of the year. We continue to expect margin accretion for the year as a whole. Second quarter adjusted earnings per share was $0.39, and year to date, adjusted earnings per share was $0.50. Moving on to pages nine and 10, where we show fee revenue growth rates by segment and by service line. All three segments grew strongly in the second quarter, with Americas and EMEA both up 9% and APAC up 20%.
In the second quarter, growth in our capital markets and PMFM service lines was particularly strong, with capital markets growing 19% and PMFM growing 15%. PMFM grew double digits in all three segments. With this growth, including the acquisition of QSI, there was a modest shift to PMFM revenue in the first half of 2018. We're very pleased with the performance of QSI so far this year. Within PMFM, facility services represents a significant portion of this service line's fee revenue. In facility 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. Fee revenue growth in facility services was in the high single digits for both the quarter and for the first half.
The rest of our PMFM service line, which comprises our occupier outsourcing, property management, and Project Management operations, grew at a strong double-digit rate. We expect continued double-digit revenue growth in the PM service line overall in 2019. With that, we'll start with a more detailed review of our segments, starting with the Americas on page 11. Our performance across the Americas segment was strong, driven by fee revenue growth of 9% for the quarter and 10% year to date. Our growth was driven by PMFM, which was up 14% for the quarter and 15% for the first half, and by leasing, which was up 4% for the quarter and 11% for the first half. capital markets also had a good second quarter, up 13%, and was about flat for the first half.
Within our Americas PMFM service line, our Facility Services operations represent a little over half of our fee revenue. Facility Services fee revenue was up double digits for the quarter and the first half, driven by growth at existing clients and new business wins. The rest of the PMFM service line grew at a strong double-digit rate. We expect double-digit growth in PMFM in 2019. Americas Valuation and other service line was flat for the quarter and first half. Americas' second quarter adjusted EBITDA of $123 million was flat for the quarter. First half adjusted EBITDA of $193 million was up 4% versus first half of 2018. First half EBITDA margin of 9.6% declined 50 basis points from the first half of 2018.
As I mentioned, we saw a modest shift in mix towards PMFM in the first half, driven by QSI and by the strong growth in Facility Services year to date. Our investments, including fee earner recruitment made in the second half of 2018, are on track and ramping up during 2019, and we expect them to be accretive to our business and margin as they reach full potential. Moving on to EMEA on page 12, second quarter fee revenue increased 9%, and year to date fee revenue is up 15%, driven by solid growth across all of our service lines. Our PMFM service line in EMEA represents less of our overall segment than in the other two regions, but grew 23% in the quarter and 30% year to date, again, driving a shift towards PMFM in the mix overall.
In the quarter, capital markets and leasing both grew 2%, and valuation and other grew 5%, while year-to-date, capital markets, leasing, and valuation and other grew 9%, 6%, and 9% respectively. Second quarter adjusted EBITDA of $15 million declined $5 million versus second quarter of 2018. First half adjusted EBITDA of $15 million was up $4 million versus the first half of 2018. EBITDA margin for the first half increased from 3.2% to 3.9%, driven by revenue growth. As a reminder, our business is seasonal, and in EMEA, the first half generally represents less than 20% of the full year EBITDA. Now for our Asia Pacific segment on page 13. Growth continues to be strong. Second quarter fee revenue grew 20%, and year-to-date fee revenue grew 17%. Capital markets grew 117% in the second quarter, bringing the year-to-date growth to 36%.
PMFM grew 14% in the quarter and 16% year-to-date. Leasing has grown 12% in the quarter and 11% year-to-date. Finally, Valuation and other grew 9% in the quarter and 14% year-to-date. PMFM represents roughly two-thirds of the fee revenue for the segment. Facility Services operations in APAC were up low single digits in the quarter and the first half of the year. The rest of the PMFM service line grew in the strong double digits. Capital markets in the quarter was very strong, in part a result of the Hong Kong Mapletree Investments transaction that Brett referenced earlier. Strong revenue performance across the region drove a 43% increase in adjusted EBITDA for the second quarter and 20% year-to-date. The impact of the strong revenue growth performance also resulted in first half adjusted EBITDA margin improving from 9.8% to 10.2%.
Turning now to page 14. We are delighted with the strong performance of our business throughout the first half of 2019. The overall global economy continues to be conducive to growth across our businesses. Our momentum is good, and we expect to continue to grow profitably in 2019 and to increase our overall margin. On our fourth quarter 2018 call, we provided guidance that we expect 2019 adjusted EBITDA to be in the range of $685 million-$735 million. Based on the first half, we are on track, consistent with our full year guidance. With that, I'll turn the call back to the operator for the Q&A portion of today's call.
Thank you. At this time, I'd like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. We also ask that you limit yourself to one question and one follow-up question. Please hold while I compile the Q&A roster. Your first question comes from the line of Tony Paolone with JP Morgan. Please go ahead. Your line is open.
Thank you. My first question is, you mentioned a number of times how hiring has been a little bit of a near-term drag, and you expect that to come to fruition. How should we think about that going into the second half of the year, especially when marrying it with the broader backdrop? Should we just expect the hiring to slow and thus the margins to catch up? Was there just a particularly high amount of hiring? What happened there?
This is Duncan. At the end of last year, we did some hiring in the Americas. You appreciate we do these kind of infill type hiring. We talked about that as an application of our free cash flow. Pretty good multiples on these things are performing just as we expect them to perform. The nature of these things, they ramp up. As you know, our business is seasonal, so they obviously tend to also ramp up with the seasonality. In the first half of the year, they're a bit of a drag on margin because there's cost associated with them and it's not covered by revenue. As those deals ramp and as the seasonality of those brokers also kicks in, we'd expect them to be accretive in the second half of the year.
Also we'd expect them, over time, to pay back within the kind of multiples ranges that we've talked about in the past, which is typically 2x-4x multiples for these kinds of recruits. That's exactly what we did at the back end of last year.
Okay. Second question on leasing, because the environment does seem pretty good. How do we think about the comps in the second half of the year? I know last year was pretty strong, but again, it sounds like you've done some recruiting and trends are pretty good. How do we think about that?
Well, leasing, as you see year to date, we're up kind of in the double digits for leasing year-over-year. We feel good about that. Obviously, last year we had very strong growth in all the quarters in leasing and not expecting to see quite such strong growth in leasing maybe as we did in some of those quarters last year. On the other hand, I do think the market is generally supportive of real estate services, and we'll continue to see growth in the leasing markets around the world.
Okay, thank you.
Your next question comes from the line of Vikram Malhotra with Morgan Stanley. Please go ahead. Your line is open. Your next question comes from the line of Vikram Malhotra with Morgan Stanley. Please go ahead. Your line is open.
I think Vikram stepped out for a glass of water. Let's go to our next question, please.
Certainly. Your next question comes from the line of Josh Lamers with William Blair. Please go ahead. Your line is open.
Great. Thanks, and good afternoon, gentlemen. Curious to get a little bit more feedback on the Fifth Wall partnership, essentially how it's structured. I'm wondering also if it reflects a bit of a change in your technology strategy by looking at some earlier stage CRE tech firms, or what your thoughts are on that.
Yeah, this is Brett. We've had a very good relationship with Fifth Wall for actually a number of years now. We've worked on a lot of things together. Fifth Wall has evolved into one of our strategic partners in sourcing and vetting technologies, both internally for the company, but also technologies that we can apply in the client environment. We are both investors in a couple of their funds. Really the primary impetus of this relationship is this ability to use Fifth Wall and their very large group of analysts and consultants to vet and look at the myriad of technologies coming forth every day in the property tech space. It's a good question, but no, it is not a change in our strategy. In fact, Fifth Wall, interestingly, they are as active in seasoned technology as they are in emerging technology.
We use them not just to bring us new ideas of technologies we've not seen before. We also use Fifth Wall to help us think about technologies that have been extant in the marketplace for a period of time. As you know, our technology strategy involves both investment in technologies for the business that we develop on our own, but also partnership and subscription to what we think are best-in-class technologies for the client set and our own use. Fifth Wall is a very important piece of that equation, as is MetaProp.
others that we work with in that environment.
Sure. That helps. Thanks. Secondly for me, in the last couple of quarters, you've called out some larger wins on the leasing and sales side. I'm just wondering if, given some of the volatility in both of those service lines kind of globally, if you could just talk to the extent of how the pipeline looks in any region, the potential for some larger wins in the back half of the year. Thanks.
Sure. Well, I would say first and foremost, 2019 is shaping up to be another good year. There is a lot of strength in both the capital markets and among corporate occupiers to lease new space. We like, obviously, those trends. I'll give you an example. We had a very strong first half last year in Asia Pacific on the capital markets side, and we lapped that-
strong first half. When you think about all of the headwinds that have been in the marketplace, trade tensions between the U.S. and China.
Brexit and so forth, to see capital markets up in the U.K., to see capital markets up strongly in Asia Pacific, I think is indicative of the fundamental strength and dynamics behind the business at the moment. While I can't reference specific deals that we may see getting closed in the second half of the year, I can tell you that our pipelines look quite good, and we're excited about the back half of the year.
Mm-hmm. Okay, thanks.
Your next question comes from the line of Mitch Germain with JMP Securities. Please go ahead. Your line is open.
Hey, it's Corey DeVito here for Mitch. I was just wondering how the QSI integration is going and how it's performing relative to your underwriting.
It's going very well. As you know, QSI was a important transaction for us in our facility management, Facility Services business. As we do with all of our acquisitions, small and large, we spend an awful lot of time on integration planning pre-close. When we hit the close date, we are off and running with our integration. QSI is no different than the other transactions that we have closed in the last three years. The integration was well-planned. It's being well executed. It's performing quite well against its underwriting.
All right. That's it from me. Thank you.
You bet.
Your next question comes from the line of Douglas Harter with Credit Suisse. Please go ahead. Your line is open.
Hi, this is actually Sam Cho filling in for Doug. I was just wondering if you had an updated view on how you're seeing expected growth and whether, I guess, what % will come from the organic versus acquisitions?
I'll let Duncan take that.
Yeah. As you've heard, we think the market is very supportive of real estate services, our business is growing well in the first half, as you've seen. We expect to see some of those trends continue through the second half. You've heard Brett talk about the strength of our pipelines. That's pretty good from an organic, inorganic perspective. Over time, what we've said is infill acquisitions typically over time will maybe make up about a third of our revenue growth, obviously it'll be a bit clumpy year-over-year and all that kind of stuff. Generally speaking, I would've thought that this year would not be much dissimilar to that.
Got it. That's it for me. Thank you.
Your next question comes from the line of Jason Weaver with Compass Point. Please go ahead. Your line is open.
Hi, good afternoon. Thanks for taking my question. In the U.S., we've seen you and your peers post some pretty strong capital markets growth in the second quarter. I was curious about your visibility into the second half, given that we have the lower interest rate tailwind behind us.
Yeah. Look, it's a great question, and you've answered it, I think, or you've begun to answer it yourself. Spreads are very favorable right now. Liquidity is plentiful in the marketplace. A lot of transactions getting done. Nothing we see at the moment would imply any diminution of that pace of transaction closing in the capital market space, either here or in Asia Pacific, to that extent, in much of Europe.
Okay. Just a quick follow-up, you may have mentioned it in your prepared remarks, and I might have missed it, but the proportion of that 114% growth in Asia Pacific, what was the Mapletree transaction? How much did that represent of that growth?
We don't break that down. I will tell you that the Asia Pacific region in capital markets, we tend to do very large deals, particularly in Australia and in Hong Kong and Mainland China. Certainly, the Mapletree deals were of that ilk. We don't break down revenue by transaction. That's as much as I think I'll say on that.
Okay. Well, congrats on the quarter. Thank you.
Yeah. Welcome to call. Thanks.
There are no further questions at this time. I now turn the call back over to the presenters.
Great. Well, thanks everybody. Looking forward to a good year here in 2019. We'll talk to you at the end of the third quarter.