NMRK - Earnings call transcript Q1 2018

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Operator

Good morning. My name is Sharon and I will be your conference operator today. At this time, I would like to welcome everyone to the Newmark Group, Inc.

First Quarter 2018 Financial Results Earnings call. [Operator Instructions] Thank you. call Jason the Investor Head turn Relations. now over McGruder, to of I'll begin. you Sir, may

Jason McGruder

We morning. press summarizing morning. a results first release presentation this results Good our our and issued quarter XXXX financial

important whether to place. will is as or how law, it if the about I references of proposed statements any Section regarding forward-looking Act our the regard of We a documents can today's them. note any press release an on with as Act update also the and this also to on GAAP only may corresponding are XXXX the on at You today's today’s the of Securities earlier assurance accounting non-GAAP today's compare of uses otherwise earnings amended. the see how, spin-off Newmark spin-off of cannot are these that these ir.ngkf.com. facts accepted and With the otherwise call, and the of results basis, call that reconciliation We'll results call principles of of not provide stated, in GAAP. historical by required quarter for Except today’s of and risks the first adjusted XXA, remind on results Newmark period. when, statements. to XXXX items Newmark call adjusted undertakes uncertainties. EBITDA. see result to also to that the definition Unless unless why the the year business for management meaning release amended such Section only statements no provided complete Securities and the take XXXX forward-looking stated. on refer regarding referring of on Exchange Please we obligation the as generally find when be press to Such back XXE or within any information you involve section terms; Please

of to see in discussion not risks updates contained or forth could filings. factors actual to over XX-K, X-K which any I'm Commission results forward-looking a Form and statements, risk risk to Group. turn Securities Howard recent limited the For set filings, but Newmark to Newmark’s factors cause Exchange subsequent to those in from the additional XX-Q differ Form and uncertainties, the and the in contained Lutnick, happy Form host, most our Chairman of prospective call such including,

Howard Lutnick

you Operating Barry Newmark's Chief Thank you, me conference call. Officer, Jason. Chief Newmark's Mike and quarter are for Rispoli. Ficarro Gosin; first thank our and Jim CEO, for Good XXXX us morning Officer, our With joining today Financial

Newmark quarter, XX% had excellent revenues. growth another in over generating

post-tax EBITDA generated also and and by XX% adjusted strong We XX% which increased adjusted respectively. earnings,

expectation Directors dividend and the the $X.XX strong quarter a of of common per year success first our Board declared growth the Given full XXXX, of company's for share. for

We each of four I the expect over that, to call dividend our to am quarters of to XXXX. remain the happy consistent Barry. turn for With

Barry Gosin

Good Howard Thanks, and morning.

share double-digit Newmark's of capital services was XX% per of in in volume global for the revenue by our We revenue year-over-year XX% investment improvement growth and was services. leasing, performance our quarter market growth quarter organic. management and XX% markets, the Nearly driving corporate producer. a included This gained and in strong respectively. brokerage, sales mortgage revenue XX% from increases led

embedding cross producers, to of the continue our top them providing them data culture selling technology enable We industry. our expect strategy and to overall and us collaboration will in with outpace and of hiring

I'd our recent of to discuss like notable to take example a some success, moment an wins. As

technology, for One United World some around leasing tallest multiple world. Trade country, Internet, recently Newmark million healthcare, the significant building the financial was for law transactions recently in X.X awarded the the in and completed largest accounting advised the firms services, exclusive the agency We've including foot, States. leasing and of Center, the square

to business by markets volumes supply the and The of appreciation declined expects XX% through Last loan the The Mac well year XX% mile recently overall NKF up X% last new by volumes $X.X market notional the the more Skyworks, of many and apartment billion e-commerce team sales up markets the as warehouses Newmark to impressive sales investment notional remains industrial often first varies rise makes brand to retail. terms new Berkeley including as multi-family industry very Mae remain help compared by Universal, several our during by year-on-year by in assets in the period-to-period originations year-on-year service Fannie tremendous multifamily rent NKF price billion approximately Point’s including closed the US notional have comparisons leasing effective bolstered and years, timing Overall the with fundamentals activity. very capital over of which professionals. clients, originations down Multifamily up from and timeframe. total XXXX, NBC with industry rents global These Freddie digits. effective. in transactions over with $X.X X% We're research single of success same sales corporate Walgreens United According office, full in X.X% and continue of Transmerica, in rents levels and as respectively, talent seen were growing our new also Technologies. Our pleased quarter. illustrate last the off. iconic industrial robust. by was Research, were while low growth located and primary wins up strong year, quarter activity end quarter,

large comparison will the Point meaningful second quarter XXXX. not completed particularly very second the of transaction example, this quarter a Berkeley in because likely year be a For

to and over As mortgage to across and turn that, we growth the With our brokerage I'm investment origination combined platform. Mike. integrate call sales, we further markets capital multifamily expect businesses, continue to origination our happy

Mike Rispoli

and Barry you, everyone. Thank morning good

an Newmark $XXX.X million, generated revenues of of XX.X%. increase

of expenses were increased to XX% implementation the related expenses million nature compensation to million. expenses the while expenses are Non-compensation majority have $XX.X pass-through expenses change, million, of additional result X.X%. our non-compensation Our tied ASC in as directly quarterly for But increased risen would $XXX.X compensation this to a of XX.X% $XXX.X revenue. non-compensation to variable XXX. our of accounting The expenses higher and

our commercial non-compensation the the seasonality This largely third fourth us real estate are While of generally seasonality year. of because quarters the typically quarter revenues, for lowest reversed expenses more and quarter making of is profit. first in the fixed the margin them is

by our year-on allocations adjusted now year. Turning and XXX basis by to our improved of up earnings, $XX.X margin before to units was XX.X% EBITDA XX.X% approximately points which million, to

to pre-tax margin XXX expanded while up our adjusted by pre-tax basis $XX.X million, points to Our earnings approximately were the XX.X% XX.X%. for quarter by

XXXX. rate for tax for compared Our in to quarter as XX.X% the adjusted earnings first the quarter was XX% of

to declined the Tax recently enacted rate tax and Act. Cuts US Jobs Our due

Our post-tax increased XX.X% earnings $XX.X million. to

Our post-tax earnings per share increased $X.XX. XX.X% to

adjusted the average share GAAP for was for million. for and was earlier Newmark's fully weighted average million diluted XXX.X The share count quarter weighted both earnings. year count adjusted earnings XXX.X

no had share for IPO. the earnings GAAP to per prior Newmark statistics

units Our of to March XXXX, X, share was fully count exchangeable BGC sale previously XX.X diluted XXX.X XX, million as the approximately March million, reported of XXXX. on including Newmark

restricted and and proceeds Mae [indiscernible]. the sheet, unit largely remaining changing end cash received minimum part in equity $XXX.X balance. sale of excess adjusted year cash have and $XXX.X pledged was total balance the the the which is and excess the company improved our IPO, equity restricted Newmark's to as we credit balance to increase term chosen profile EBITDA strengthened company’s equity the million $XXX to cash loan. to to debt, above debt cash elective repay liquidity and of from million, equivalents improved in Fannie million an end, growing we of $XXX.X due term quarter including $XX.X long million, to and a The the was were adjusted Mae account the cash in total includes The to our of required for Newmark. is sheet debt has combination The long million the favorable $XX.X Fannie balance of restricted Since was credit has profile. debt and The as benefit the of EBITDA. term due million. The of was ratios total credit on has company's $XXX.X equity on million, cash converted our this use million lower $XXX since a the higher maintain Moving the the equivalents believe impact

are tax the Additionally, contingent $XX balance million the take of we upon in does of annually. like the sheet expected shares generated the to in $X generating million of years, stock discuss to To approximately take moment steps a revenues NASDAQ in over I'd $XXX to Newmark's gross not receipt additional Newmark. NASDAQ plan billion reflect to gross worth these contingency order NASDAQ put effect as next revenues in million key ten the over $XX XXXX. context, of re-spin-off

to pursue rating guaranteed would to back the free. to us credit BGC First, by after in our our has from credit rating, we in Separation own be that, objective, BGC. over to BGC's or spin-off turn term required investment call been debt our to Barry. I'm the long for An With is refinancing e million resolved. assist owed is which grade tax of $XXX.X order intend watch happy

Barry Gosin

metrics. remains I'm have happy Mike. while you, share credit same, outlook per our report the our that we Thank to improved

adjusted happy I'm for EBITDA. Additionally, to introduce guidance

follows. Our outlook as is

an or $X.X of between generate revenues to increase approximately to with last XX% and billion XX% $X.XX billion $X.X expect We year. compared of billion

anticipate earnings We XX% be to range to XX% in in for continue the adjusted XXXX rate versus to XX% our tax XXXX. of

compared and million last allocations We XXXX. an year adjusted to XX% XXXX with EBITDA million as approximately compared increase our generating per units $XXX between be of to to a and expect share XX% $X.XX earnings before or to million, anticipate of $XXX to increase between We $XXX $X.XX an $X.XX in XX% XX%. of

of We annual it to we'd to course Operator, to questions. the open over the up expect year. guidance our update like periodically

Operator

from first Rahmani Your of Jade comes [Operator the KBW. line Instructions] with question

Jade Rahmani

quarter, wondering was volatility how rate comment for the result you you interest whether as investment movements. Thanks. you any market characterize in and environment saw the can on a of volumes first I would sales in current

Barry Gosin

We're market. of seems lots incredibly active market. There the a are are be still to portfolios that premium. seeing There an portfolio in

so So, rate we significant to in to in from overrun enough we're been area. interest come environment that seeing money everywhere, seeing continue. liquidity The the of the it We're expect market. hasn't a lot in available activity

Jade Rahmani

but Point Do picking the lower ago think the did Berkeley the year’s you mentioned. do lending surged caps, and you view, the lower quarter what January, drove you aside Fannie's volumes as decline your what to Fannie anticipate prior side, Mae due On the leaving the Mae drove originations, up Fannie which through generally, year in volumes.

Barry Gosin

Berkeley business more the aggressive premium ebb It short year. continues the to and is we and that be activity. it some and up the will the unleash pools is to – we're brokers Freddie the based on last Freddie ARA always XX%. little sales spreads. based that improve Well, consistently are as Fannie. That's believe conversion the of due portfolio over We assets our was an and to lived into seeing Freddie are periods in of the now, likelihood decline statement, brokers cap flow up an the the the is Point the of and XX%, embed Berkeley by to that is the a ARA loosening see Right pools versus my likely X%, of next Fannie In and the -- pipeline XX%. market that it increased down continue more XX% up multifamily XX% is rate industry an in of decline there going together, conversion and was and blend environment and will we entering is

Jade Rahmani

flows, on disclosed. I cash Mike which think for Question operating you

that and Excluding you timing of have Berkeley be. and Point the number what would deliveries originations, do

Mike Rispoli

in is but $XX quarter. in press million it's the the release, Yeah, first it

Jade Rahmani

Point? operating of million Berkeley $XX excluding Okay, cash flow

Mike Rispoli

Yes, warehouse. including the

Operator

question comes with Goldfarb Alexander Sandler. from Next

Alexander Goldfarb

morning. Good

few concern first, you it's of little and the a we've appreciate color remain questions Mae concern, So, months. the been bit on main been investors’ of fielding the past does that timing the basically a provide for that spin. Fannie of it But

first us the can understand your increased how on on borrowings profile. two the Fannie So help credit you helps just points, Mae,

Barry Gosin

having our look when capital -- should own little our So the how Newmark, restricted and go intentions as liquidity of cost we talked look out cash account separate at to about more for rating for we Newmark in as at allow rating and and credit benefit agencies our I credit look maintain profile our we've lower over think a time grade there. bit credit investment

Alexander Goldfarb

if restricted you're in Right. borrowing to But put more money it account. a

seems the credit -- how give increasing would worried just you -- capital can is access more money help that how for rating does I they a don't So now are you your the side. borrowings. it leverage up, agencies does so going on check mark odd borrowing guys that think plus

Barry Gosin

credit the any profile, will term. interest of think Yeah. of When cost our short we lower benefits that we a look at additional long far having expense capital term away in

Alexander Goldfarb

if the that question can't Newmark separate then obviously getting its its an does first that that impact spinout Newmark's own the entity. of is and judged [indiscernible] And second of why How does rating, Newmark with. have a has trying and the sort get if parent why deal independent metrics, they're watch on credit Okay. to BGCP own Newmark have be understand is to resolved timing

Barry Gosin

parent their The rating and to look it the influences outcome. agencies tend at

BGC investment the the rating agencies optimistic so to for grade things BGC expect credit improved or credit the rating, the has standards metrics will the So from this credit done it has the watch agencies, existing quarter. positively meet does is resolve rating that necessary its and

So to to itself. have it's that positively really Newmark resolve beneficial

off And and grade in the positives so it's when parent there nothing to itself. with spinning assist therefore and from investment its likely but there, is rating would a it respect goes more out getting rating agencies, into

Alexander Goldfarb

Okay.

get like is then get second get in quarter you're grade quarter, if your it and your that So or will a an Newmark investment quarters also this take sounds view view will rating. that that second IG more it BGC, few quarter meaning saying rating is resolved the the to they

Barry Gosin

that get rating it grade and is that as pursue soon management grade that has the the watch Newmark investment is resolved. of said would -- would to rating it credit investment objective BGC as it Well,

surely things then this someone begin of And get a the of credit so would hopefully -- part those so its it's credit long been and does It that for rating been resolved quarter, take is would when not has expectation a not after not process time. if and of rating the group. it our already already part it's BGC BGC on depending of quarter to a that that credit watch soon who's Newmark occur, period pursuing

Alexander Goldfarb

resolved business this Investors the hopefully like Fannie due it's sound. obviously course, business, I in Okay. mean separation everything are the causing concern. because is the and stuff, the that gets the but

resolved your So quickly, it sounds thank like you Hopefully, for there's but there. some hopeful it's time. progress

Operator

with comes Pete Citi. from question Next Christiansen

Pete Christiansen

was aggressively a there. seems of question. know breakout Hi, call take any management services are notable It to if us guys. through valuation Thanks there for the wondering like in could you I the the there are areas I line. but services, ramping that was out. in are some puts takes other and you

Barry Gosin

facilities to our increased the We've on our services do our services of All valuation ramp up property management, and -- management we've increased management business. we continue areas management. exponentially we

Pete Christiansen

Okay.

outperforming So investment out sales of you're than valuation a certainly regionally and leasing position broad guess some put from is on taking And like or other asset the what you market the where ramp. I industry. base, that’s there from. It you anecdotally, where the do you was that are players then share side. by class yourself guess share, was some you’re services the you’re compares versus helpful this of and taking seems if or think seeing it of some function in coming I the

Barry Gosin

been that much Having attracting we're more geographies, of where it underserved and tools represented we it's selling giving smaller, also an in to have we're succeed. business where great some collaborative little -- and winning to we're under because the -- was Hiring great a able talent. recreate in people, in a it's cross culture in people environment respects a categories

Operator

from Lynch. America David question comes Merrill next of Your with Bank Ridley-Lane Instructions] [Operator

David Ridley-Lane

Thank you.

great comment what's X% in broker additions on up the that to hiring we following your Just Should keep expect XXXX? outlook last for of talent, growth with first quarter? the headcount in here pace

Mike Rispoli

Yes.

it leaders and and expect in of the the throughout platform, key the the of lead together, pace industry, better resonates we're that are We elevates the industry high the work revenue spectrum have the to do elevates brand, hiring entire we revenue people the fact producers strategy hiring right clients producers and it a hiring by services. that they Newmark's that high get

David Ridley-Lane

did origination Okay. you comparison volumes range XX% mortgage looking And second call the the tough in up quarter, in are still the you mortgage out to noted in XXXX. in for origination be

Mike Rispoli

A lot has with do to Freddie and Fannie.

conversion people barring doing the So we we to very Berkeley, in we you increase ARAs, believe strongly that, at We're hiring as look more if increase. is well. expect incredibly that to ARA ARA

optimistic of really So has the do of Berkeley. and still it we're Freddie with a lot about outside But Fannie. forces to

David Ridley-Lane

mean is XX, grower more you market. talking maybe be about I should throwing this that the context, it, conceptualizing think to outperform let's single comfortable way previously does out? relative it. by, Point XX% call one the Got we something points Berkeley expect XX were in to of the I in digit Is you'd

Mike Rispoli

I'd comfortable with absolutely. be that

Operator

Next from Raymond question with Patrick comes O'Shaughnessy James.

Patrick O'Shaughnessy

to wondering to if pipeline debt. speak for M&A the Newmark's timing of Newmark might what refinancing and the acquisitions could the upon was dependent any of be extent you I

Barry Gosin

The to the a allow robust. were back We company there we buy company, the pipeline I would incredibly are those held buy to and the we mean just buy who whole is when process. people, by brokers IPO the believe sign brokers, we a is When company that that contracts a sign we be non-sellers will to there. to up we we the work result. lead and buy more When both work, better and term company, long owners all more obligate seller his but in

Patrick O'Shaughnessy

tend those markets. to leasing little should you And lower grow then Got think businesses, than be about rather and how modeling thinking in margins be management you margin your as about historically bit talk capital we can I it. services a

about you Newmark's time? think margin profile do changing how over that So

Mike Rispoli

businesses such not to in we're time and continue valuation, margins the over the than our seen much different as business. you've expand that that necessarily think I it's leasing

still growing continuing little expand margin year-over-year. see we're over So margins that in bit time I to businesses technology. consulting, our being up have them, and

Patrick O'Shaughnessy

And my target then can what was transactions since one me, and you're then, last spoke Berkeley can of top percentage that. remind the the it. acquisition you ARA to I at a target the financing total time of Point Got Point off and don't but for on that of broker tracking Berkeley towards the of us and how think you what I that the provide remember head,

Mike Rispoli

Well, so and year, XX% we first close, XX% were it, we were we XX%. fully quarter, I were and followed we last guess before were

Our in There industry that. -- would categories target is as will and to and more ARA a there to runway good amount we have team originators, more sales origination. as brokers of them the even to hired hire a continue XX% both just good a the more story follow and lead combination we other hire increases we debt a metrics of have great think we those and are in increase We're higher increase and investment and ARA there's penetration think penetration. we glide path a business, the the that we've we of tell good to Philly, hire we not plan

Operator

comes Next Ridley-Lane Merrill America question Lynch. of Bank from with David

David Ridley-Lane

Sure.

on Just Mike. was provide that? you Could quick the step-up interest. just little a in color There a non-controlling one for drivers behind the a

Mike Rispoli

particular to were really related partnership Newmark units that allocated line directly issued gets Sure. income limited And that it separation time, to runs the partnership limited through units from item. Newmark and BGC. the That's of and at

new and resulting change directly from the that's in structure. So

David Ridley-Lane

going what's Okay. about similar that way forward to think And or right level a should we going expect forward? the

Mike Rispoli

Yeah.

a earnings. of level, to think the think similar fair as as I percentage a about that’s

Operator

I'll over At presenters. call the turn this time, the to

Howard Lutnick

much. very of all again. to We seeing look you Thank forward you

Operator

call. conference today's concludes This

You may disconnect. now

Newmark (NMRK) 6 May 182018 Q1 Earnings call transcript