Earnings Call: Q4 2018

Feb 27, 2019

Welcome to the Cushman and Wakefield's 4th Quarter 2018 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 Bill Knightly, EVP of Investor Relations and Treasurer for Cushman and Wakefield. Mr. Knightly, you may begin your conference. Thank you, and welcome again to Cushman and Wakefield's 4th quarter 2018 earnings conference call. Earlier today, we issued a press release announcing our financial results. This release can be found on our Investor Relations website along with today's presentation pages that you can use to follow along. Materials can be found at ir. Cushmanwakefield.com. Please turn to the page labeled Forward Looking Statements. Today's presentation contains forward looking statements based on our current forecast and estimates of future events. These statements should be considered estimates only, and actual results may differ materially. During today's call, we may refer to non GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non GAAP 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 other more detailed financial information in the tables of today's earnings release and the Form 10 ks. 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 Executive Chairman and CEO, Brett White. Thank you, Bill, and thank you all for joining us today. I like to begin this call by reminding everyone of our growth priorities and areas of focus as we continue to build 1 of the leading global commercial real estate services companies. These include a focus on revenue and share growth through the delivery of differentiated and best in class service to our clients, strategic recruiting and infill M and A to continue to expand our strong global platform, continuing to leverage our strength in our large and growing recurring revenue businesses and continuing to grow margin through operational discipline. When we review our performance against these measures, 2018 was an outstanding year. For the full year 2018, we saw strong growth at the top and bottom lines, growing fee revenue by 12% and adjusted EBITDA by 26%, setting all time highs in both. These results were led by notable performance in our Capital Markets and Leasing Service Lines. Adjusted EBITDA of $659,000,000 was above the high end of our guidance range. In the Q4, we grew fee revenue by 10% over a very strong 2017 Q4. Duncan will speak to the results in the Q4 in more detail later. We also made significant progress on our stated goal to expand margin. Our full year adjusted EBITDA margin was 11.1%, which is an increase of 115 basis points year over year. Since 2014, we have grown margins by almost 400 basis points and we continue to prioritize margin expansion as a key strategic objective across all of our businesses. In addition to our strong financial performance, 2018 was marked by many other notable highlights. As most of you know, in 2018, after more than a century of private ownership, Cushman and Wakefield successfully transitioned to a publicly traded company with 1 of the leading IPOs in 2018. This transition had a transformative impact on the business, adding robust financial strength and liquidity. Our leading global brand continues to resonate in the marketplace, earning strong third party recognition in 2018, including being named the number 2 global commercial real estate brand by the Lipsey Company, receiving top honors for real estate outsourcing by IAOP, and we were named the number 1 commercial real estate advisor in the world by Euromoney. In 2018, Cushman and Wakefield was also recognized as a great place to work by top publications such as Forbes. We're proud of these designations and hold them as proof that we're delivering on the promise we make each day to our many stakeholders around the world. We were very active in strategic recruiting throughout the year. Top feeders in major markets around the world continue to be drawn to our platform and culture. And as a result, in 2018, we saw strong share gains in many of our businesses around the world. This was very evident in our capital market service line, which saw impressive share accretion. For example, in 2018, we ranked 3rd overall in larger U. S. Sales, representing a 32% increase in market share year over year. In addition to holding the number one position in New York investment sales for the 2nd year in a row, our gains were balanced across multiple gateway markets and asset types. Furthermore, we continue to expand our global platform through infill M and A and completed 6 acquisitions in the year across nearly all segments. Most recently, we acquired Quality Solutions Inc, QSI, to expand our facility management capabilities across North American markets through a supplier network of more than 50,000 qualified facilities contractors. At an approximately $250,000,000 investment, this was one of the larger acquisitions we've made in the past few years. And we did so because it aligns very well with our stated priority to continue growing our recurring revenue PMFM service lines. There's also natural alignment with our existing Global Occupier Services business, which will integrate our existing platform and newly expanded supply chain to better serve our occupier clients. It's a business we're very excited about. In the Q4, we continue to win new business due to our leading position, scale and ability to serve clients around the world. Global Occupier Services finished the year with a strong win rate as large corporates continue to consolidate providers and outsource real estate services to Cushman and Wakefield. Representative assignments from the Q4 included a reappointment as the sole facilities management provider for Royal Mail Group's portfolio of nearly 32,000,000 square feet in the United Kingdom and a renewal of a 5 year full service contract for global communications technology company Avaya that includes strategic consulting, transaction management, project and development services and facilities management across our multimillion square foot portfolio in more than 50 countries. Finally, a new contract for Pearson Education, a multinational publishing company, was a good example of our brokerage business creating opportunities for our recurring revenue businesses. Pearson is a client that we represented in a one off lease transaction. This introduction by one of our brokerage teams to our FM Group led to us being awarded a Facilities Management contract across Pearson's multimillion square foot portfolio. Similarly, our Facilities Services business, which we call C and W Services, had a good year renewing their client accounts at a rate of more than 90%, while continuing to win new business like a recent 13,500,000 Square Foot portfolio mandate for Boston Properties across North America. As I mentioned earlier, our Capital Markets and Leasing businesses had outstanding performances in 2018. Recent marquee assignments in the Q4 included the biggest single retail asset trade in Europe in 2018, which was a disposal of 1 of Europe's largest shopping centers, approximately 1,000,000 square feet in Helsinki, Finland. Exclusive marketing for The Coca Cola Company at the landmark asset 711 5th Avenue in New York. The new international headquarters for Facebook, Richmond and Wakefield represented Facebook in their occupancy of an 870,000 square foot, 14 Acre Campus in Dublin, the largest single lease of space by an occupier ever in Ireland. Representation of Brookfield in the sale of 1012 Shelley Street in Sydney, which is one of the biggest capital markets deals in Australia in 2018 And finally, the disposal of a 12 property retail portfolio for Link REIT, a $1,530,000,000 sale in Hong Kong. Now turning to Page 6, you'll see a dashboard on the global real estate market, which continues to remain favorable for commercial real estate services. These are among the primary metrics we monitor to assess commercial and to provide a foundation for our business forecasts. First, you'll see the demand for real estate remains strong. Global GDP remains solid. The IMF is currently forecasting global GDP growth at 3.5% and 3.6% for 2019 2020 respectively. In the U. S, strong employment levels continue to create demand for office space and we see conditions overall in the U. S. Economy very favorable for real estate services. The watch status for APAC and EMEA recognized moderate risk in China and continued uncertainty due to Brexit. Supply metrics are overall on pace with demand. Regional variations and local market dynamics aside, we think demand and supply metrics look broadly balanced for 2019, which will lead to continued rent growth. Capital markets remain very active. U. S. Sales volume in the 4th quarter grew 20% over the same period in 2017 and full year volume in 2018 is at a near record high. Fundraising for commercial real estate investment remains robust and dry powder is at a record high as 2019 begins. In summary, industry fundamentals continue to be favorable and we enter 2019 with an optimistic bias. We're very pleased with our performance this year. 2018 strong revenue growth continued through the Q4, demonstrating that commercial real estate markets remain healthy and conducive for revenue, EBITDA and margin growth for Cushman and Wakefield. We're making excellent progress on our financial, operational and growth objectives and plan to translate that momentum into another successful year in 2019. Duncan Palmer, our Chief Financial Officer, will now discuss our financial results and share more on our outlook and guidance for the year. Thanks, Brett, and good afternoon, everyone. To start, let's turn to Page 8, which summarizes our key financial data for the full year and the Q4. As Brett said, we continue to deliver strong operating results. Today, we reported 2018 full year fee revenue of nearly $6,000,000,000 an increase in local currency of 12% compared to 2017. We reported strong growth across each of our three segments. Full year adjusted EBITDA was $659,000,000 a 26% increase from 2017 and above the high end of our guidance range. Our full year adjusted EBITDA margin of 11.1% represents a 115 basis point increase from 2017. We are very pleased with these results. The increase in margin was driven by the strong conversion of revenue growth across our service lines and our continued focus on cost efficiency, partly offset by higher year over year bonus accruals. We are very focused on increasing margins across our businesses, and we believe that we continue to have many opportunities to do this in the future. 4th quarter fee revenue was nearly $1,800,000,000 an increase in local currency of 10% over the same period in 2017. Adjusted EBITDA for the Q4 was $236,000,000 a 9% decrease from the same period in 2017. Adjusted EBITDA margin declined 300 basis points in the quarter to 13.4%. As we have discussed before, 2017 was an unusual year in that adjusted EBITDA in the 3rd quarter was unusually weak and in the 4th quarter exceptionally strong. You will recall that margins for the Q3 of 2018 were up by 400 basis points. So with the 4th quarter results, overall margins were flat for the second half of the year. We had anticipated the effect of 2 discrete items in our guidance. Without these items, margins in the second half would have increased by over 100 basis points in line with the margin improvement for the full year. First, in the second half of twenty eighteen, we experienced significantly higher bonus accruals, reflecting our strong performance against financial targets in the year compared to a weaker performance in 2017. 2nd, in the Q4 of 2017, we had a non recurring benefit of about $10,000,000 arising from actions we took in our EMEA business to eliminate a pension liability, which was material to margins in the quarter in that segment. In summary, our strong execution generated significant growth in fee revenue, adjusted EBITDA and adjusted EBITDA margin. We will continue to focus on margin accretion from revenue growth and cost efficiency going forward. Full year adjusted EPS was $1.67 and 4th quarter adjusted earnings per share was $0.59 Moving on to Pages 9 and 10, we generated fee revenue growth of 12% 10% for the full year and 4th quarter respectively with strong growth in all segments. Looked at by service line, our Leasing and Capital Markets businesses generated strong growth in 2018 led by the Americas and APAC. Our property, facilities and project management service line, which we call PMFM, representing about half of our fee revenue, grew 6% for the year and 7% for the quarter. Facility Services represent about half of this service line's 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 with on average low single digit annual growth. Pre revenue growth in Facility Services was down 1% for the full year, but ended the year with strong momentum reporting 4% growth in the 4th quarter. The rest of our PMFM service line, which comprises our occupier outsourcing, property management and project management operations, grew double digits in 2018 and high single digits in the 4th quarter. Excluding facility services, we expect continued strong revenue growth in this service line overall in 2019. With that, we will start a more detailed review of our segments, starting with the Americas on Page 11. Performance across our Americas markets was strong as we grew fee revenue 13% for the full year and 10% in the Q4. Our growth was driven by Capital Markets, which was up 32% for the full year and 27% for the Q4 and by leasing, which was up 19% for the full year and 9% for the Q4. Within our Americas PMFM service line, our facility services operations represent a little over half of our fee revenue and facility services fee revenue was up 3% in 2018. The rest of the PMFM service line grew mid single digits on a full year basis and declined in the low single digits in the 4th quarter. We expect strong growth in this service line in 2019. Our valuation and other businesses returned to growth in Q4. Americas adjusted EBITDA was up 31% for the year. Adjusted EBITDA margin for the Americas for the year was 11.1%. This represents an improvement of 155 basis points versus the same period in 2017. Adjusted EBITDA and adjusted EBITDA margin accretion have been driven by the strong performance, particularly in our Capital Markets and Leasing Service Lines as well as management's continued focus on operating efficiency. For the Q4, Americas margin was 11.8%. Margins were up year over year in the second half by 70 basis points and over 150 basis points excluding the impact of higher bonus accruals. Moving on to EMEA on Page 12. Fee revenue increased 11% for the full year and 9% for the 4th quarter. This was driven by double digit growth in our PMFM and Capital Markets service lines. Our PMFM service line in EMEA represents less of our overall segment than in the other two regions, but grew 27% for the year. Capital Markets grew 11% for the year and 23% for the quarter. Leasing grew 2% for the year, but declined 7% in the 4th quarter. Leasing was up 4% for the second half of the year and Capital Markets 18% as the overall market remains healthy. Valuation and other has grown 5% for the year and 2% in the quarter. Margins declined in the segment both of the full year and the 4th quarter, principally due to the discrete pension benefit experienced in 2017. Now for our Asia Pacific segment on Page 13. Fee revenue grew 9% for the full year and 13% for the Q4. Leasing and Capital Markets and Valuation and Other all grew very strongly for the full year, growing 17%, 38% and 21%, respectively. PMFM represents roughly 2 thirds of the fee revenue for the segment. The Facilities Services business in APAC declined for the full year and the 4th quarter owing to a change in the revenue accounting treatment of a contract in Australia with no impact to adjusted EBITDA. Excluding this discrete item, PMFM grew 8% for the full year and 13% in the 4th quarter. Facility Services operations in APAC were about flat for the full year and Q4 and the rest of the PMFM service line grew high double digits for the full year and low teens for the Q4. The strong revenue performance across the region drove a 35% increase in adjusted EBITDA for the year. Margin for the full year increased by 190 basis points, driven by revenue growth and cost efficiencies. In the 4th quarter, adjusted EBITDA margin of 11.1% declined versus the Q4 of 2017, driven by higher bonus accruals. Margins overall in the second half of the year were flat. Now I'd like to cover our full year guidance. Turning to Page 14. In summary, we are delighted with the performance of our businesses in 2018. The overall global economy continues to be conducive to growth across our businesses. Our momentum is strong and we expect to continue to grow profitably in 2019. We would expect to grow margins through the contribution of incremental revenue and our continued focus on operating efficiency. We have grown adjusted EBITDA margins almost 400 basis points over the past 4 years and see continued opportunity to improve margins going forward. In 2019, we expect margins to improve for the year as a whole, but at a lower rate of increase than we saw in 2018. We expect 2019 adjusted EBITDA to be in the range of $685,000,000 to $735,000,000 Our adjusted effective tax rate was 23% in 2018 and we would expect it to be at or around this rate in 2019. The cash tax rate was significantly lower at 13%, and we expect cash taxes to be lower than our adjusted effective tax rate for several years, improving our after tax free cash flow conversion. We expect our interest rate on gross debt in 2019 to be around 6%. Overall, the amount of add backs to arrive at adjusted EBITDA in 2018 was in line with our expectations, which we provided on the Q2 call. As we've said previously, 2018 was the last year of new nonrecurring Cushman, integration and IPO related costs. As expected, we settled the Cassidy Turley deferred payment obligation of $128,000,000 at the end of the year. We expect to continue to maintain our strong financial position. Our net leverage ratio at the end of 2018 was 2.7 times and we had $1,700,000,000 of available liquidity. We anticipate net leverage in the mid-2s as our business grows going forward. With that, I'll turn the call back to the operator for the Q and A portion of today's call. Your first question comes from the line of Vikram Malhotra from Morgan Stanley. Please go ahead. Your line is open. Thanks for taking the questions and congrats on a strong top line for 4Q. Just thinking more about on the expense side for 4Q into 2019. So I know you had baked in a lot of the discrete items into guidance, but it just seems like some of the cost items were higher than at least we were anticipating. So I'm wondering if you can maybe walk us through and give us more color on if there was anything that drove costs higher and how should we think about the your comments around margin growth into 2019 in terms of magnitude? Sure, Bikram. It's Brad. Thank you for the question. I'll turn the question over to Duncan. But before I do, just a couple of quick comments. First of all, as you saw, the full year 2018 numbers were really remarkable. We're very, very pleased with our performance. And as Duncan mentioned in his scripted comments, results in Q4 on the EBITDA line were really due to some discrete items that will not repeat. But with that, Duncan, I'll turn it over to you. Yes. So thanks, Brett. Yes. So 2 or 3 things about the year and about the cost run rate going into 2019 that you talked about. I mean, generally speaking, I mean, the year was great from a cost efficiency point of view. We benefited not only from the flow through of incremental revenue in the year, which is very strong, but we also benefited from cost efficiency in the year. So actually our costs, our run rate costs are in great shape in the 4th quarter. And really the effect on margin in the Q4, as I mentioned, was all about these discrete items, the pension benefit that we had in 2017 in the Q4 in Europe, which is about $10,000,000 which really had a big impact on the compare there. And then the bonus year over year, we had weaker than target performance in 2017, stronger than target performance in 2018. And a lot of that ended up in the Q4 as we knew it would. So we factor both those things into our guidance range. And actually in the Q4, as you mentioned, thanks for mentioning it, the revenue growth performance in the 4th quarter was maybe a little stronger than we thought it might be in our guidance range. And so we came in on top of the guidance. And that's kind of the story. Okay. Yes. So the revenue, the top line was okay. That makes sense. And then just to follow on, you've had obviously a great 2018 and the setup for 2019 macro wise looks pretty positive. But if you look specifically for Cushman, you've made investments over the last 2 years in New York and parts of Australia, LA. Can you maybe just walk us through for 2019, given it's sort of a tough year, a tough comp, where do you expect sort of the most incremental progress maybe by business sign or geography? Sure. Let me start by saying that as we enter 2019, trends we saw in the business in 2018 remain in full force and effect. So as you referenced, the overall marketplace looks very favorable for commercial real estate services and our bias is for a very positive year. We have lots of opportunity to grow both top line and bottom line. We've talked about this on prior calls and on some of our meetings with investors. And I would just point to a few items. First is, you referenced investments we've made in discrete markets and that's exactly right. We set a strategy in place now a bit over 4 years ago to build a market leading global platform. That work is about now completed. Yet there remain areas of what we call white space in a variety of markets, either in individual service lines or in the overall market itself. The results that we saw in 2018 were really strong evidence that those investments have paid off. For example, you may recall that both Duncan and I had mentioned before that we had a specific objective of growing our market share and becoming a preeminent player in the Capital Markets business globally. I think we can consider that job completed and extremely well done and those numbers now are coming through the P and L. We talked about strengthening our Southern California business and I can tell you that in both Los Angeles, Orange County and San Diego, our leasing and capital markets growth rates were some of the highest we had anywhere in our global platform. But nonetheless, there still remain terrific opportunities for us to lean into areas that can take investment either through the recruiting of great people or through infill M and A, and we intend to remain very focused in that area as well. You heard us talk about the QSI acquisition. This is a very strong enabler to our Facility Management business here in the U. S. There are other great opportunities like that, that we watch very carefully every day. So we're quite excited about the opportunity to grow top line that way. And the last thing I'll mention on the bottom line is that we continue to find interesting areas to drive efficiency in the organization. As Duncan has mentioned many times, our focus on cost discipline and growing margins is unabated. Great. Thank you. Your next question comes from the line of Anthony Paolone from JPMorgan. Please go ahead. Your line is open. Yes. Thank you. So I just want to follow-up to the prior question on margins and revenue growth in 20 19. So if I just take the midpoint of your EBITDA guidance and you mentioned that that margin should go up in 2019, but not as much as they did in 2018. So if I just go to like the mid to high 11s, let's say, on margin, it implies about maybe 2% or so revenue growth. So we're I guess is that just A, is I guess the math right? Is that just being conservative? Because it sounds like the outlook is pretty good for the business lines. I'll let Duncan take a stab at that and I'll jump in if anything to add. Yes. So in 20 18, obviously, we had a great year top line and bottom line. We've added, as I think I said on the call, about 400 basis points of margin over the last few years. And I don't think and we've said this several times, I would be expecting to do that every year. So generally speaking, I would expect margin accretion. We're very focused on it, but at a lower level, we're not particularly guiding to exactly what that will be. We do have opportunities both on the cost side, but also we expect to see some revenue drop through as well. And obviously, we'll get some benefit from the infill M and A that we've done and continue to do. So those things will drive it. The actual balance what it will be during the year, a bit early to tell yet. As you know, it's going to be our practice to provide guidance on the year end call and also to update it on the Q3 call if there's an update to provide. And as revenue trends and as our business develops over the year, we'll see how that all plays out. At this stage, I think we're comfortable in saying that we should see some pretty good growth in EBITDA and I could express the range there. And that will also see some accretion to margins. So yes, that will back into some revenue. I wouldn't sort of tie it all together in sort of any particular outlook for revenue that we're guiding to. We're really not guiding to revenue, but we are seeing good momentum in the end of 2018 and frankly in the early weeks of 2019 that's continuing too. So momentum is good and we should expect to see some pretty good growth, as I said, in EBITDA. The only thing I'd add to that is that if you just keep in mind that 2018 at a 12% top line number is remarkable growth. We're certainly not projecting to do 12%. I can assure you we're also not projecting to do 2%. Okay. That's really helpful. And then just my follow-up question in terms of thinking about free cash flow in 2019. Can you just go through your priorities in terms of what to do with any retained earnings and how that ties with maybe what you're seeing out there in terms of infill opportunities versus recruiting versus other debt pay down perhaps? Sure. I'll let Duncan take that. Yes, thanks. So as you know, and we said and we've got a very consistent attitude to this, we generate good free cash flow. We're going to convert with very good cash tax rate, as I've said before. So we can convert quite well to free cash flow. In terms of sort of doing investing in the business, we would expect to be putting a decent amount of our free cash flow into infill and into recruitment, into adding opportunities. There won't be any new cash integration. We kind of made that very clear. That's kind of the end of that was kind of 2018. However, I would say that obviously, we have made one very significant use of free cash flow right at the beginning of the year, which is the purchase of QSI, which was round about $250,000,000 So you should be thinking that obviously is going to be one of the major uses of cash in the year, represents the largest infill, if you like, that we've done. But absent that, I would expect to see we did 6 deals, I think, last year and that's sort of in the zone of what we might see. And so I would expect no change really in our philosophy in terms of how to deploy capital. We see good returns, good opportunities to invest in the business, good opportunities to invest in infill and that will continue. One thing I'd add to that and just support what Duncan said is that we are seeing in the marketplace right now a more rational market for recruiting, which is good news I think for us and frankly for everybody. We have this outsized opportunity compared to our peers where we believe we can both recruit and conduct infill M and A to fill out the white space we've spoken about before. We're seeing in the M and A market for the infill size deals a bit of compression in the purchase multiples, which is good news as well. And we intend to take advantage of both of those dynamics. Great. Thank you. Your next question comes from the line of Stephen Sheldon from William Blair. Please go ahead. Your line is open. Hi. Thank you for taking my questions and congrats on the strong end to the year. I guess just first, appreciate the detail on QSI. I was just curious if you could help us frame, I think you said it was $250,000,000 purchase price. Can you help us frame how big that is from a revenue and adjusted EBITDA contribution standpoint? And then also maybe talk a little bit more about what that added strategically to your facility management operations? Why don't I take the latter half and I'll let Duncan take the first part of your question on the numbers. QSI is a market leading firm that provides a big enhancement to our U. S. Facilities Management business, 50,000 folks in the vendor managed network. And so these are folks who actually go out and perform the services at buildings for our Facilities Management customers. By the way, all of the 3 firms that are engaged in Facilities Management use folks like this. This firm in particular was extremely attractive to us on a number of levels. 1st, culturally, we felt it was an excellent fit with our U. S. FM platform and leadership. These folks have been talking for quite some time. 2nd, it fit our footprint very elegantly and we were very pleased with that. And third, we underwrote this business very carefully and had a very, very good integration plan, which is now in full force and effect and going very, very well. Duncan? Yes. On the numbers, it's early days in QSI. I think it's a great opportunity. It's largely it's all recurring revenue. So that's going to be that's attractive to us. It probably will end up being a deal that's at the higher end of our multiples range we've talked about, partly because of the nature of the revenue and the attractiveness of the range we've talked about, partly because of the nature of the revenue and the attractiveness of the cash flow streams that therefore come in. There will be an integration. That integration will probably take probably substantially complete by the end of the year. And we should see it therefore be a contributor there in a material way. So that's going to be good. I would say that maybe to give you some color in 2018, I would say over time we sort of said that infill might be on average roughly a third of revenue growth we see in 2018 is probably a little less actually. So that 12% is probably a little less than a third that turned out to be infill in 2018. But in 2019, partly driven by QSI, I would probably expect revenue growth to be a little bit more than a third generated by infill, including QSI. So without giving you specific guidance on the EBITDA contribution and revenue growth, I hope that was useful. That was very helpful. Appreciate that. And then I guess second, how are you thinking about you talked about this maybe a little bit, but how are you thinking about your ability to grow in 2019 in both leasing and capital markets, just given the tough comparisons from the really strong performance in those businesses in 2018. Is there room for productivity to go higher here? Or would growth mostly be dependent upon continuing to add to headcount and doing infill M and A? Thanks. We have a lot of room to grow with the folks that we have in place right now. Keep in mind that we've been on a fairly aggressive hiring posture now for 3 years. And in the leasing business and the capital markets business, the tail revenues stay with the prior firm and it takes a while for these individuals to contribute their revenues to the firm they join, which in this case is Cushman and Wakefield. So that lift will continue from folks that we hired in 2018 late 2017. We are every day becoming a stronger business globally in Capital Markets and Leasing. And as we become a stronger business and our brand gets recognized as number 1 or number 2 in many of the major world markets, we will just win more share and we are winning more share. Then add to that, finally, the fact that rents will be increasing in 2019. Right now, the projection is that U. S. Rents will increase about 2.1% in the year, which is an automatic lift to our commission income. So we feel quite good about the position of our Global Leasing and Capital Markets businesses. We will be continuing to hire in those businesses and those will be the dynamics that increase revenue in those two business lines. Great. Thank you. Your next question comes from the line of David Ridley Lane from Bank of America. Please go ahead. Your line is open. Good evening. I wanted to ask a bit about the industry dynamics of the FM business where you've obviously made a pretty nice infill acquisition there. Renewal rates in that FM business, I think you said 90 plus percent, if I'm right. How do you win new business? Is this a marketplace where you're still seeing people new logos, people who haven't outsourced ever before? Where do you think you are in the stage of evolution on that particular service line? Sure. Great question. And it's a question we hear quite often. First of all, where are we in the evolution of corporate outsourcing? There are all types of numbers that you'll hear in the marketplace. I think that we would probably land on that question by saying that something in the neighborhood of 40%, 45% of what could be outsourced among major U. S. Multinational corporate has been outsourced, maybe a bit less than that. So we're still, I think, in relatively early days of seeing the full potential of what could be put into the services fee bucket for the firms that do this work. As it pertains to the types of clients from whom we're receiving RFPs, it's a mixture of both. We're seeing 2nd, 3rd, 4th generation rebids on existing large contracts. We're also seeing entrants into the marketplace who have not outsourced their work before. I would think the if I were to weight those on percentages, there's more firms either rebidding or expanding the scope of services that they are bidding coming into marketplace and there are new entrants. But nonetheless, there are definitely new entrants in the marketplace. And for us, we really like the position we're in at the moment as it pertains to the corporate outsourcing world for a couple of reasons. First is, there is a redistribution of share occurring in the corporate outsourcing market, which is occurring simply because Cushman and Wakefield today is a firm that is absolutely capable of responding to any RFP anywhere in the corporate outsourcing world and that wasn't the case 5 years ago. So corporates like the idea of having competition among the bidders in their work. They like the idea of spreading the work among more than 1 or 2 firms. And so we provide, in our view, a third highly competitive, very viable choice for those corporate outsources. And then I'd say that among the 3 firms who do the majority of this work, we all have areas where we are particularly good, very strong. We have areas where we might not be the best in the marketplace and we will win those a high percentage of those bids that come out in those particular verticals. For us, for instance, we have a particular expertise for large technology firms and we spend a lot of time doing work for some of the biggest names at global technology space. So we feel good about the marketplace. We feel good about the dynamics that support our growth in that market. Your next question comes from the line of Doug Harter from Credit Suisse. Please go ahead. Your line is open. Thanks. Brett, just following up on one of the comments you just made about the competitive nature. Can you talk about sort of price competition that you're seeing kind of on bidding for fee pressures as you're bidding for new contracts? Sure. In the we were referring specifically to the very large corporate outsourcing world. And I would say that in that space, the price pressure and the price compression in that space has occurred. But I would say for all intents and purposes is over. Why is that? A couple of reasons. First of all, the way these bids are now run, the criteria for awarding the bid is very much as much about your specific capabilities in that particular space, that particular industry type as it is anything else. And I think corporates have come to the conclusion that they need their vendors to make a reasonable profit on the work they're doing and continue to invest in those contracts. And they need vendors who are providing a unique and differentiated service for the work that they need conducted on their behalf. So when we are out in the marketplace competing for these contracts, quite frankly, price is more or less well known as the bidding gets going. It isn't something that there's not a lot of examples I could give you where you see competitors beating each other up and trying to find the lowest possible price to do the work. It's very much about trying to differentiate the services you're offering those clients against the products and services that they need. Thank you. Your next question comes from the line of Mitch Germain from JMP Securities. Please go ahead. Your line is open. Hey, Duncan, did you quantify the impact of those items on EBITDA? If you did, I apologize, I missed it. Yes. I think well, I didn't specific quantify them in dollar terms. I think I actually mentioned that the EMEA one time was sort of in pension benefit in Q4 2017 was about $10,000,000 in round numbers. And then the I think I said in the second half of the year, had we not had the discrete items, the bonus and the pension effect in EMEA instead of flat margins roughly over the second half of the year, we'd have been up over 100 basis points. So that gives you that probably gives you enough to kind of quantify to the extent that you want to do so. And was this a one time or could this be based on your financial performance next year something that impacts your numbers again? Well, I think what you should think of it is in 2017, our financial results versus our bonus targets were low and therefore the accrual for bonus was low in 2017. And in 2018, our financial performance by any measure was high and better than our financial targets. And that means the bonus accrual was higher. Therefore, the you get a 2 further, you get like a sort of 217 below 2018 high number, right? And a lot of that showed up in the accruals made in the second half of the year, particularly in the Q4. And we knew that and that's what we built into our guidance. If you don't mind, I can sneak one more in. A lot of your peers have been investing a lot of money in productivity measures, specifically technology. It seems that you guys have a bit of a different approach. Is anything changing with regards to the way that you believe technology will evolve and impact the business going forward? Yes. Our thesis on the manner which we utilize and invest in technology has not changed. We believe that the business is being transformed through technology today more than at any other time in my history in the industry. That being said, we do not believe that purchasing technology companies and building large proprietary platforms is a wise use of our capital. Our belief is that a great technology today can be outdated and out of use tomorrow. And therefore, being able to very carefully and with the best possible advisors survey the property technology markets to identify those technologies that best allow us to create more efficiency in our organization, make our people better at what they do and provide a differentiated service to their clients and technologies that we bring to clients, those are things that we are very careful about and watch and bring on board every single day. And we like the idea that we can shift a technology platform or a system very, very quickly without worrying about the fact we may have spent 100 of 1,000,000 of dollars buying it the year before. So thesis hasn't changed. We like where we sit. I mentioned earlier, one of our most successful verticals in corporate outsourcing are large technology companies who seem to feel that the platform that we provide, the way in which we use technology is very, very good for what they need from us. So we see that as a validation of our strategy. And there are no further questions at this time. I will now turn