NMRK - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Jody and I'll be your conference operator today. At this time, I would like to welcome everyone to the Newmark’s Fourth 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. you. Thank Instructions] [Operator the to turn of McGruder, Investor Relations. call now Jason over Head I'll begin when may you Sir, ready.

Jason McGruder

a results We and financial and full morning. year summarizing Good issued XXXX results our press morning. this fourth quarter presentation these release

of of involve as undertakes Act the as these otherwise an the unless terms, Act call referring the not Unless when, XXXX also GAAP. to call with Accounting and You uses are within basis, why meaning management for how, amended. in reconciliations results stated, may earnings period. stated. press corresponding XXE complete the adjusted release to refer the update forward-looking by obligation XXA no press only fourth sections year provided or the adjusted historical non-GAAP such at We of full of Except Exchange Securities today's only the Such our statements. definitions of see be compare the release on quarter call Section and also statements earlier Principles today’s that any of otherwise and back as can Please GAAP to today's the year documents that EBITDA. results, this uncertainties. Generally statements are and Please risks our find you the these see business results information of on on Accepted I items them. the facts of to results Section remind Newmark regarding ir.ngkf.com. on and amended this required on Securities of XXXX law, forward-looking any We'll XXXX

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

Howard Lutnick

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

record XX% a post-tax declared for a in EBITDA. XX% I'm the generating growth, Directors to dividend improvement of the of common had in XX% share. fourth earnings-per-share, Newmark Company's revenue the $X.XX per improvement quarter, pleased quarter report that and Board qualified adjusted

call BGC the to at simplifying completed happy we end spinoff from that, Newmark's I'm addition, turn our over In the of successfully Barry. Partners, to structure. With November, corporate

Barry Gosin

Thanks, Howard. morning, Good everyone.

in pretax we the year and Our strong exceptional increases as of performance fourth earnings in double-digit strong revenues, XXXX. in a EBITDA quarter adjusted capped generated growth,

and the lines of virtually Newmark all lines. quarterly by XX% business industry professionals business market leading continued year-over-year the results XX% our attract share, a continued to our capture significantly topline of quarterly per all of across growth organic, we across robust as to in improvement quarter our was revenue by driven Nearly outpace for and producer.

capital housing in sales the multifamily have services; leasing; hotel markets, recently and valuation retail and senior of origination invested key areas industrial we include financing; advisory. Some which investment debt

addition, leasing Cooksey, representation In retail Jackson a acquisitions leading include Texas-based and a recent platform; firm. our tenant RKF,

our our in professionals. continued industry-leading We our and use also to invest both for by clients technology

held this in estimate record industrywide sales $XXX sales approximately volume strong rates conditions Multifamily vacancy X%. rental moving as view, continued were to the U.S. absorptions quarter of market originations attracted highest has type U.S. billion Industrywide We XXXX. up volumes the and overall our past rates of sales investment recorded U.S. quarters, higher seven and for in as steady now fourth during sales volumes. terms strengthened, property office the surpassing a remained office multifamily many In industrial market modestly markets. improve, investment

Newmark's overall and activity XX% to Industrywide origination brokerage compares therefore remained across leasing very sales, the favorably in XXXX. increase markets market. in full-year investment strong mortgage volumes in many

and commercial originations Research to investment to sales MBA Newmark the The expects leasing X% overall slightly XXXX. be XXXX, higher. For to be flat in expects overall up

We expect to technology. and year, Newmark's outperform culture very this embrace and led outstanding our these accomplishments of by of metrics. collaboration I'm partners strong who employees data-driven proud a

to momentum, We strong are significant growth, investments, shareholders that, well-positioned to for I'm profitable call driving clients. to value our Mike. over and on happy continue returns turn With the and our

Mike Rispoli

XX.X%. Thank In you, quarter, everybody. Newmark revenues an and the fourth Barry, of good generated million, increase morning, $XXX.X

to improved million by Our and points increased revenues. million. to expenses Non-compensation XX.X% to basis approximately of $XXX.X XXX XX.X% XX.X% compensation $XXX.X increased expenses

of a $XX.X are approximately revenue. million non-compensation to of of XXX. the XX%, variable expenses nature our percentage expenses additional unchanged More related expense at than despite As and annual pass-through XX% revenues, directly ASC to were tied in

our quarterly Turning earnings. to

EBITDA adjusted Our $XXX.X improved by to million. XX.X%

million. $XXX.X pretax Our for quarter earnings up by were adjusted XX.X% to the

and rate was for the versus quarter for year XX% full earnings XX% for Our adjusted XXXX. tax the for XX% year

than was While due rates, year outlook, outperformance. declined rate to full it tax our quarter previous largely lower higher earnings our corporate U.S. due tax to our fourth

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

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

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

units approximately share first limited BGC of count weighted quarter XX.X Newmark's exchangeable for Newmark due increased the average mainly XXXX sale $XXX to partnership of million to million. fully diluted

acquisitions. share rose equity-based front-office and due our count Additionally, to hires compensation,

a expect a to cash acquisitions, of reduce number new These forward, share hires. of include for steps employee to compensation and issuance. Going take greater percentage we

between last Newmark's count average increased by We share to count diluted year. units sold year-over-year by to expect fully weighted and excluding X% XXXX. the in XXXX, in X% BGC X% comparison, In our fully weighted average share diluted grow

buybacks, the Our share XXXX issuance outlook no price. to changes material acquisitions, for assumes Company's stock or meaningful

marketable sheet. cash Including was total balance Newmark's the cash and million. and onto liquidity $XXX.X Moving equivalents securities,

million. debt our $X,XXX debt long-term net unsecured million. equity Our $XXX.X Total million. $XXX.X was was Therefore, was

requirements, this issuance pay of issued by notes to To tax used million we $XXX the quarter, free XXXX. from senior in down to pre-existing due During guaranteed or proceeds unsecured BGC. were debt owed the spinoff meet

our facility, flexibility. $XXX improving We revolving also entered financial into a credit million

our greatly debt net XXXX improved As EBITDA strengthened yearend to X.X prior of a result sheet, X.X the has times balance year. Company's to versus in times adjusted as of the

gross sheet at on the $X.X yet reflect million additional approximately are $XXX of balance Nasdaq million billion basis. does contingent from $XX because not an in shares Nasdaq of XXXX generating XXXX. the Our payments gross approximately through in upon expected Nasdaq XXXX annual generated revenues revenues least

the we over facility, beginning invest as for earnings adjusted that, on Given I'm the definitions flow happy we a sections back and to believe will well-positioned growth. generation the our cash simplify business adjusted of from of leverage, we are and call reminder, EBITDA, “Simplifying in of to and the off-balance And today's strength assets, titled, Reporting XXXX. of credit million release that press the our strong XXXX” $XXX sheet for And Beginning Please our turn first see to Non-GAAP quarter additional with with details. Barry. low

Barry Gosin

you, Mike. Thank

estimate expect outlook adjusted for XXXX range to be our of for range earnings weighted share expect range average revenues expect of XX%; in XX% to we X%; million. our of XXXX full-year EBITDA be our of billion; We fully to rate $XXX our $XXX in to tax grow we the as follows: to is be $X.X share diluted earnings adjusted $X.X to Our per to X% and $X.XX; million anticipated in $X.XX range generate the the billion to count we and we in the

questions. to outlook would the we assumes no material like share investments open call or Our acquisitions, for repurchases. Operator,

Operator

go first question your And Lynch. Please line David comes of Instructions] [Operator Bank Ridley-Lane of from ahead. of America Merrill the

Your line is open.

David Ridley-Lane

Good know reasonable to rate of of what's XX% debt to did the for finish XXXX? are investment in goal is kind your improvement Curious get XXXX? that XX% get brokerage to I to on the your mortgage time. And of thoughts from morning. sales. multifamily capture pace over a getting Where you you inside

Barry Gosin

last XX%; the were for quarter, Well, XX%? we closer the were year, we to actually

Mike Rispoli

year. for XX% the

Barry Gosin

XX%, sorry.

the of continue in about our mean, of rate we had capture was separate embed rises. three XXX%. billion rate the markets, capture we a quarter, the portfolio $X.X originators and brokers, sales As multifamily with our investment one in properties I to recently last the debt

broker towards to same client debt the and benefit the opportunity the service So, the the a the as to a of growing. industry step-ins be is nearby provide to using

that will improve. So, continue we to think

David Ridley-Lane

XXXX then, for you as for next and And quick be a out calling puts margins follow-up. Could takes that talk about you any would year?

Mike Rispoli

of and we a to value next because margin we puts XX% puts, stay So, expenses in to which Nasdaq, do -- XX% our when we lower the continue expect move revenue we the we about to margins as and got continue earnings We -- range as the of and will come our year-over-year our those think will down come revenue, earnings grow we above. non-comp have the of margin, adjusted forward. earnings percentage out and year. adjusted comp of our in as those

Operator

question next from comes go of Jade the line Rahmani KBW. of Please ahead. Your

open. Your line is

Jade Rahmani

terms Touching your January, or December saw in typical expectations? and on perhaps to transaction volatility can any volumes, in you comment market the you whether on seasonality of relative

Barry Gosin

We quarter. -- obviously, had a good

available optimistic there to continue of and to be We about And invest. is sales enormous amount share. capital market

feeling pricy, are pretty the we market. things are good but Some about

Jade Rahmani

transactions, end And at any any or any you of note, in lower seen have bid pricing terms of list the indicators? perhaps concentrations on of changes other

Barry Gosin

it’s and -- is still on pricing calls, is pay music, previous what still on depends As serious product end the bidders price assets. up the properties, there may on but the to If the in bidders somebody that multi, industrial, you there better; core for holding I of see proper said less investments, are the there less the there non-core is at is. on any

Jade Rahmani

tax much driven of and by of is terms In sector trends, co-working experiencing growth more how organic broadly? perhaps the you're the leasing

Barry Gosin

Do you have the… any terms in of numbers Mike

Mike Rispoli

a the and going take West both to Coast Coast. in a space East continue saw in see trend lot activity a we that of markets the and the XXXX. of They We to Yes. on continue in around the flex space lot do into co-working the U.S. And major of lot sector,

Barry Gosin

the there or to was owners that and capture build tenants, which place the affecting it’s most to in many The building worth. market -- prebuild smaller used

So, by market the the a working then, around grow. lot the space. the ability to markets think that it’s is that’s in that and the the that And that most to I impacted on the variable is But here market something market. having flex most for that space of is an And accepts country. have continues corporates and environment rapidly prebuild large growing a today pretty tech is major market impact of co-working

Jade Rahmani

Are of growth the the you're those driving majority leasing both sectors of seeing?

Barry Gosin

all a business our of is is you certain renewal remember, -- I lot No. consolidation. I mean, -- lot. have a over mean, and always -- there it’s the we

cases, some and lot So, lot they of of companies the picked may need law firms the we still do they in representing or be market, others to of business, a space. the In sign they downsizing to or our country just have still activity do moving leases, with by still space on up tenants. to has have and renewals. they around But, a their expand some renewing even downsized

Jade Rahmani

the mortgage to Turning business. brokerage

it emphasis aggressively, on placing debt grew whether XXX% Point, Any in business clients, outsized that to Berkeley placement fund recruiting brokerage? that's your driven debt as mortgage more almost debt looks any Excluding color perhaps by anything like driving growth year-on-year. or

Barry Gosin

the Everybody winning are we synergy cooperative buildings The is opportunities a It’s collaborative, are share; of great generating opportunities. towards for combination really people. above. market brokers. for leasing more our have, the and working agents hired of the We more our that environment goal mortgage we’ve

just think, we winning market share. are I

Howard Lutnick

clear why or coming of now with search of to the percentage clear I market overall that Meaning, much in garner they insurance the business, possible to create the able the the product and larger whether market. get we Newmark days seen whether ecosystem now most will same the we old every those offer selling better in grown it lowest transaction, a multifamily just multifamily possible clients having agencies, rather been offer of is think, I’ve price a having clients you the has full the things your financing category, because got business to than to has being interesting And mortgage. a ability GSE for way, business able the it that’s a drive nothing. one you we clients. get a any for companies, our are that's that’s seeing outcome GSE that didn't And if

that helping ecosystem. you ways, are in and Now, get or insurance building the various of transaction, if ecosystem. with really don’t we the market company valuing we collective extraordinary job GSE And are think, this drive I place that's that seeing across value otherwise why

Barry Gosin

But mezzanine, across capital equity, are things. of also equity, it’s the the stack, track stack. every evolving level capital we And raising

property be to raise allow that recap a investor equity, We whether additional owner have programs able refinance, partners. its sale, it’s partner a an buyout to

have touch points provide to as we have we think, long And a be and we services. will to share do, have more market we I bigger prepared with all those the client. will as

Jade Rahmani

say, in to the it XXXX? that you placement the grow business suffice I And debt expect at to Berkeley Point business, assume

Barry Gosin

Yes, located; mean, we series they together. originators. we of I operations just -- We our which didn’t we a do. We've didn’t hired a two that hired investment team teams have now are debt hired embedded. where sales

sell to to going right looked underwrite to our mention accustomed a or in we to the it’s our clients in able not acquisition acquisition insurance Freddie two going to building alone, So, and so their sales the To how only importance just it’s capturing service markets, not the at it’s of ability be to onset the of Fannie know company the acquisition. and that in at to an separate the those be get brokerage interest but the markets benefit their clients, have or investment debt. by into

Mike Rispoli

those put transactions investment to the the and done is this, sales with we’ve lending multifamily said I the I brokerage the you and Howard we've mortgage of grown business business business, on think billion that and would other year-over-year the And side, add non-originated a GSE XX% that’s $XX across as categories. thing together

GSE investment more the or outgrow from that sales those together. market it we brokerage, will So, space. comes we Whether just put think mortgage more or we to continue just in

Jade Rahmani

value of X%, of value, the the million on you to terms you stock the current to which be about In equity $XXX said X% grow million compensation, $XXX price. share expect should based to count of

X% of that's revenue think, about fee I guidance. the

that accounting, not so earnings terms in revenues and impact of those XXX% you same sorry, your a or your -- that -- issue would it margin as of adjusted X%? to and to be decide be issue would to would if about of all So, by cash, were percentage shares that revenue fee fee expensed, your margin

Mike Rispoli

So, and think our employees, about that the hires it’s it’s for share small to compensation the growth, have of you horizon. on acquisitions we count compensation some when tuck-in new

we So, issue you have compensation. to and look equity categories across all where the

I compensation. accounting brokers acquisition the -- for some part of all of is their all it it just guess, that, is as accounting answer to the and is Some of as not wouldn’t it then is equity equity brokers employees. But, going or sign-ons of

Howard Lutnick

and do have the I in think have factored brokers substantial equity our we reduce issuance is Company. the we into we something can we the and That retentive as think our of that can guidance. the nature that keep scale

otherwise, the more -- we of while will our expensive, up So, would be I driving because we slightly that. margins scale think the of it think offset and we’re Company, just this

the the as offset flexibility offset now, reduce issuance share are will the before, grows, otherwise be our improvement. have and margin, margins our improvement balanced would So, that saying slight we margin by we by said to those to other are we pretty with each now comfortable -- and two equally, where will we as a Mike scale us have

Operator

of Your next the O'Neil. Please line Alexander question comes ahead. Sandler Goldfarb go from of

open. is line Your

Alexander Goldfarb

busy I just you. just I two have it’s a realize morning. for questions

on EBITDA. your is one The first

or that are You down your whether growth. do guys commensurate EPS double-digit growth match double-digit that independent things you and guys have be to you there we totally delivering? per growth, with Are various EBITDA EPS that guys looking it clearly lines the you boil mid-single-digits. of sort But, been for are EBITDA can to to driving it’s delivering now you revenue on revenue sort XXXX, growth when of producer topline are at

Mike Rispoli

up growth, So, as the that EPS and we we XX% mentioned and about X% X% count our in is know earlier. we and people around at revenue based you projecting guidance the what to say, tough upon seen in X% it’s have in we share house are is midpoint, that our have factoring dilution today, that

drive looking we at are all at to EPS are at share dilution continue to higher, ways lessen that we look looking time. the and always will to count ways We the

Alexander Goldfarb

like it’s that’s the sounds dilutive, count really offset share it the But, there.

Mike Rispoli

our growth, our flow continue of grow between EPS, just to difference. EPS the revenue cash that we cash and lot from continue EBITDA. to the generating growth And business that's We are Yes, invest into continue grow of to plan back flow course, a business. to to the to

significant and year invested of the have We amount we do continue next XXXX. to XXXX plan in same to

Barry Gosin

is we a doing invested much lot -- still have also are money of gestated. what where has of We

that So, that earnings, it ramping we up that are full and be that we things have and are haven’t of our hit blown. developing organically will lots expect

the You also up we look aspect to But, multifamily add have, at the and the the have looks portfolios. talk continue to if about capture as we other debt. more at space, we you solid multifamily, of ramping pieces it, the of

platform. the a the and an get opportunity business in space office number And of all of do below So, industrial business. platform we're the And the national production And multifamily being in our we we more growing investment is same what is and that as not categories. portfolio those to goes amount in should -- there be. that has two

to the obvious on as as an field, we that to to in large, continue we institution build transactions to structured share As athletes institution, need continue production full, today. global put going not that representative the in the that’s they a market the on locations be are are

Mike Rispoli

additional to additional that those synergies growth growth, we to to and EPS time. opportunities to translate selling will cross topline, over add drive would I EBITDA that continue So, the as the

Alexander Goldfarb

as feel sufficient cash guys you have are wise if just to raise do shares for second acquisitions, capital you the going to you you point, that internally to for capital external, to not And want have you do to or feel to do? issue that then, back capital you to acquisitions come much Okay. markets that the

Mike Rispoli

I million significant line the of credit So, look we of we think revolver from to million sheet, $XXX of balance in our XXXX. business flow us. you liquidity, have have $XXX cash amounts at generated available if We

XXXX. that to continue into expect We

So, we business. to continue capital invest think grow we and this have to adequate

Operator

comes from Raymond Please Your James. O'Shaughnessy of line next of question Patrick ahead. go the

line is Your open.

Patrick O'Shaughnessy

the Obviously, you in that do How GSEs. Newmark? about rule I unfolding? of ask the to Trump of And wanted intangible potential see DC maybe started administration you for to take steps. ramifications how changes potential and think privatization process currently has do the the

Barry Gosin

don’t ecosystem. We multifamily We changes class and we things strength term near across that business see any business, Freddie. this And growth broad change. the and grow operate affect Fannie the platform, given the GSE of our expect to irrespective that of entire strength across the may asset and how

Patrick O'Shaughnessy

how guys. the space on question that? workspace describe your how you Knotel strategy A investment in your does flexible you flexible would work no strategy? for into And fit

Barry Gosin

Look, structural of lot corporations. of industry. early. on and we’ve all We aspect and pretty changing players recognized for with a of variability the large as other the Spaces business the do invested Knotel Industrious the We in same the well and and space early with importance WeWork

think add-on do. the tenants our to think we co-working what it’s put for that We paid that. We brokers commissions small in get So, facilities. an we

good it’s the the think real So, a And of estate part one. lifecycle. of it’s just continuum we

Patrick O'Shaughnessy

last for And then, one me. one maybe

was ratings to getting potentially So, -- a progress and credit up think with obviously has guys working S&P spin getting rating the grade. the complete, couple your get you’ve I any quarters and that been after you now investment agencies to it of in put up

Mike Rispoli

of more than they And grow capital maybe coverage, lot and to want will EBITDA, times initial after They with had year XX think pretty the see, the net continue to operate X.X are ratings. to available business. invest to Company a metrics interest the this record S&P Company. of at we track continue I a to look times at our to credit superb. Obviously, so continue just debt indicated that a

the of at though this So, agencies an over will but effect it answer really us rating time, to doesn’t of have on point. come much they the we think

We place that’s are and paying five debt long-term X.XXX% years. for our in for

Operator

comes question next of Your Christiansen go from ahead. Citi. line Please the Peter of

open. is line Your

Peter Christiansen

wondering talk Nice of could trends, in about you drivers I was leasing the gentlemen. the if market. some

roughly to growing You three there quarters. have been high-XXs for last the mid

and deals portion So, you us know can I up there. was had year. of I two But of this there seasonality you slight some what is a step you know in sense give organic? that QX, growth had

Barry Gosin

XX%. group mean, organic We our said, growth I a we of young relatively athletes. have was

that are have recruited enormously that We over we’ve talented years. people

the our improve brand. improve to platform, continue We

Our brokers get continue to better.

client. provided the with differentiate them We them infrastructure, technology, that have to information helps themselves

it significant. our P&L balance understanding Company I think, rules and impacts how new of capital the sheet our FASB business, markets the is and for

of are all better of think, different market's understanding I sophisticated clients. aggregating product, on most to future aspects the and of including the a data providing focused the our the the business information our for and provide market

Peter Christiansen

cash Mike, loan see it exclude of then, EBITDA. might it it percent think if factors? XXish is of those improving around looks if And flow ‘XX? look we the in what Do year, conversion like sales portion, be rate some you we was and that And -- at originations conversion this I

Mike Rispoli

really million to Nasdaq and that, business. quarter. flow $XXX producers we two $XXX things operations. added the would the like And But, to came there that of the $XX into So, in million money point generated is over million another back XXXX, which cash fourth there. a in, in I One, from we out invested

So, Nasdaq, cash those if million from investments business EBITDA. of flow including the cash flow our million a look you and $XXX $XXX at on before it’s

to continue cash companies of that in believe in are the investments. acquisition continue to from producers, And significant We amounts and we and in to business. generate business, reinvest strategic the we going of will flow

Peter Christiansen

Is think how XXish And of about should roughly that we kind then, it? interest expense year-over-year million. were

Mike Rispoli

we at million debt, and $XXX we’re mid-XXs; is Yes, undrawn. of the revolver, $XXX X.XXX% which on have million

Peter Christiansen

Do environment, of view? the there last you see how in out are still the a I you for discuss one me. in what could in valuations you M&A of it’s months? or opportunities Gentlemen, are couple last seeing then, trending how your hoping number And changed was

Barry Gosin

we’ve a or We incredibly one equal is four. so effect, said of are to a has to have everything It’s for as still and before. important lot seeing one fragmented, we opportunities. do market The multiplier three

have So, of -- lots have we more more we we what more and companies want careful creating But, interest we here, interest are of as bigger, what accepted lots very that’s are of about be of from we we get we and what way institutions, buy. better, that are differentiated, to part by the exciting part doing.

Operator

Instructions] question line of from ahead. David the [Operator Merrill America Lynch. Ridley-Lane go of of next comes Your Please Bank

open. is line Your

David Ridley-Lane

impacts Just could a your that stock of new quick follow-up be? the free of quantify versus on recruiting brokers, and have in what that you cash Could mix flow. reported sort potentially change [indiscernible] might cash and on

Mike Rispoli

of all year we gave So, as for for that growth. growth really count guidance built for was share earnings that EBITDA as the and into for next well

more and call opportunistic and obviously, acquisitions, and have queue. a over in bit we to may be to cash There feel target, good turn the questions get on we just past. are Barry I'll Gosin. the than we little -- further the no back able in that’s So, equity less

Barry Gosin

And I joining for soon. everybody us forward we thank speaking you look to would to today. again like

Howard Lutnick

good day. a Have everyone. Thanks

Operator

for call. concludes Thank This you today's the call. much joining very conference

Newmark (NMRK) 12 Feb 192018 Q4 Earnings call transcript