NMRK - Earnings call transcript Q1 2020

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Operator

Good morning, my name is Ursula and I will be your conference operator today. At this time, I would like to welcome everyone to the Newmark First Quarter 2020 Earnings Conference Call.

[Operator Instructions]

I will now turn the call over to Jason Harbes, VP of Investor Relations. Sir, you may begin when you're ready.

Jason Harbes

for thanks and morning, joining us. Good your a few appreciate call patience large as by call participants. the delayed minutes of we number We to a accommodate a financial our press quarter issued these XXXX We release this first and presentation morning. summarizing results results extraordinary it the ongoing the on website Investor can COVID-XX be of a response to at pandemic, illustrates Relations deck, found which impact Newmark's created ir.ngkf.com. the supplemental to Due we slide crisis and our the only quarter provided on today's with Unless year-earlier of otherwise stated, the compare XXXX the results call first period.

sections or We will EBITDA. our We results back unless items these call when accepted and press this release may adjusted on see of principles results and see the stated. Please uses an definitions complete earnings why Please be results referring today's the for the such of otherwise non-GAAP adjusted to only reconciliations GAAP. any management how, generally corresponding GAAP release on to today's for the also refer terms, press under basis accounting to of in them.

on respect presentation. Additional mentioned non-GAAP results our on call and is GAAP available and with to our investor our website information today's in

the Section Such of of and of amended. Securities the risks XXE XXXX acquisitions, discuss Exchange XXXX you this the call XXA today's outlook amended the Section facts no repurchases our business also assumes regarding in historical uncertainties. are call Any meaningful statements or and meaning involve within that not changes forward-looking Company's Act material of I on price. on stock Act share remind statements as as Securities information are that of

turn Gosin. to like call the I'd Barry over that, to With

Barry Gosin

XXXX thank joining for Thank us you, Newmark's First for Conference Quarter you Good and Jason. Call. morning

our Mike are Revenue the Newmark's Chief Jeff on Rispoli, Officer, and Day; call Officer, virtually me Chief Alvarado. Luis Strategy Joining Officer, our Financial Chief today

like would wish suffered living and to also our vast We whom of to with COVID-XX. others health all and unprecedented their to in thank the to own would are putting to of has who from living We like to due medical help. now responders home working the professionals, challenges we are through our We first crisis. this an employees, everyone at time moment and sympathies thank risk majority the express clearly deepest

maintaining and employees While position. the focus clients, on taken steps quickly of to have health solidify our and our responded and well-being numerous financial our we have

We of have end operating reduced support fixed XXXX. million expenses our over through by and $XXX the

distributions. our In addition, have we reduced dividend

maintain structure strong when our abates. with potentially its variable prolonged the a changes implemented, Given downturn during expense financial and position Newmark highly coupled we thrive will have crisis the

Our in quarterly impacted the fell industry the significantly quarter. performance the volumes latter by was transaction as pandemic part of adversely

some Over occupiers leading of hired deep commercial estate the and several most have industry. the real last owners have of the the with years, Many sustained in and relationships brokers talented professionals. we of our

will leverage preparing in the difficult transaction to lower clients the we in them these near While term, them our be times knowledge market market. our volumes expertise help through while reenter deep to navigate expect to

advisory and providing owners for GCF office services overall need with For example, with and policies and to strategy. consulting assistance our repopulating teams portfolio are who implementing tenants respect

reopening footprint. social solutions also global and their the provide map technology We on manage to COVID-XX distancing for solutions density, of solutions providing heat are impact location to mitigate

create liquidity. investors assisting capital and by are We raising owners helping

values investors debt unleveraged and environment. in valuation advisory this business to is establish instruments Our helping

risk-adjusted also assets. for quantifying are with and investors investors We changes returns banks and assisting distressed in

also selling loans. are We

on website microsite is a of pandemic. which to the called COVID-XX impact accessible established We our insights into have provide Perspectives main the

over call Mike. With to that, I'm happy to turn the

Mike Rispoli

unprecedented healthcare echo who've I'm these dedicated times. adapted our to remotely sentiments about employees to Good and morning, working workers. our everyone. during for essential also Barry's like I'd grateful

will also revenues we led In have results addition up the growth were to quarter, to the by In through by focus discussing plans banking mortgage activity. gains capital pandemic. first that implemented in our the we on management and today, services for X.X% manage QX our markets,

gain by a continue with GCS XX% in project Management to markets part The market of which originations. advisory mix in increased growth. share and Services balanced of was mainly activities valuation volume mortgage from improvement is management, due capital We Gains platform. GSE and our led to banking more

also expenses. impact increased of Moving non-cash items producers amortization. related past of million management provision Non-compensation CECL $XX.X revenue services OMSR year. the higher hiring including Separately compensation. revenues in growth our on top and due during increased due The a to the drove direct COVID-X for and to to expenses net primarily compensation the MSR

our to the million reduced over have fixed pandemic, $XXX response and by cost of we through XXXX. support the operations balance In

has to elevated declines to Newmark in pandemic. related XX%. by the our tandem approximately compensation analysts expenses market we to revenue factors variable change every our are through previously understanding assist for our like variable hypothetical Due highly scenario. a model, commission-based and investors expense fixed better for revenues, a compensation To just these reductions, structure I'd take in outlook you walk move mitigate uncertainty our to variable XXXX. with related issued moment Combined our withdrawing the in pandemic, and a

hypothetical is and However, just guidance. this keep scenario not please in mind a

of XXXX. EBITDA $XXX XXXX. commission-based and declined in XXXX earnings which actual adjusted and through the When In result $XXX compared Newmark's to million were EBITDA would including as for by levels, balance million XXXX XXXX million adjusted results, to QX year, this in pre-tax million declined the this adjusted the $XXX.X compared scenario, revenues $XXX in by in

Moving on balance to sheet. our

quarter. liquidity $XXX.X cash were million as first at to the $XXX.X the metrics and strong million compared continued and credit Total of year-end. with equivalents cash end have at Newmark

a to compensation in for the of we continue given recur income over employees. During and the on year-end million revenue to following taxes previously $XX.X $XX declared XXXX million $XX.X had to cash; items remainder dollars the producers; year Many quarter, first Newmark million expected dividends are not of $XX as million of first invest the and use for typically of XXXX. earnings; occur quarter these distributions; in and significant for the

the first its and million tenor under During to from pricing. credit increased revolving the $XXX Company $XXX facility increased lower million capacity with quarter,

Newmark precautionary $XXX during strong reflects quarter as uses measure to of March incremental of the drew down the borrowing capital position a uncertainty. ensure on remaining XXth, given liquidity months million outstanding. macroeconomic The On as was Company's $XXX discussed. a year previously The compared EBITDA trailing cash X.Xx to adjusted of end. had X.Xx March the debt total XXst, revolver net XX the to at million

shares XXXX to $X.XX $XXX after-tax X. NASDAQ as share un-monetized off-balance does on sheet value the of shares, receive end additional closing price represent May based the on the our present of net not as through million Newmark estimates, sheet balance first of reflect Based of Newmark's these per the we that expect quarter. of NASDAQ the

which value addition, as XXst, a was In share million, fully $XXX.X translates total book into March of of diluted $X.XX. per equity Newmark's

As book rights. value in servicing a reminder, this includes marketable $XXX.X million mortgage

sheet together, of present of value shares $X.XX, after-tax diluted off-balance as the Taken than fully substantially stock close. book plus NASDAQ net price per the our greater yesterday's our value was which is share

open Operator, we like to the would for questions. call now

Operator

question first Sandler. Alexander [Operator Goldfarb comes Instructions] from Piper with Your

Alexander Goldfarb

are guys you I Barry. well. hope

So just a quick few here. questions

we and transaction, How activity, management to clearly business the capital expect stable transaction We about flow servicing stuff about would the business, accounting, saw pretty variable markets business-- business? book. volumes pretty stable. more the obviously that think do source down bigger the is CECL property that pretty Presumably, the is to to is is is or as are mortgage that because mortgage with and servicing is First, revenue a you leasing that's recurring a impact ebb see we your business. something the think mortgage going

Jeff Day

Jeff Alexander, here. Day

but do a so be originations as investment fair amount seen because going suggests since stable the expect significant down our forward. activity that the we've end there the that markets sales we would some activity We have capital finance first we a and and of on to some of there pipeline be quarter goes or very mortgage impact acquisitions impact

Barry Gosin

is goals of and right a ago and What's adjustment liquidity it hard and and established actually now to last value happened predict in be life have differential offering and going CMBS the market. basis are that an The somewhere market. like over the weeks over pricing The to weeks but few it's spreads determine there banks their oversubscribed. between this was has points the are the loans XXX they been guard so XX risk lubricating there standing the in is Fed looks

markets. all to think up the is I all debt the in a market opening key

pricing the have some activity decided has sales side where financing are very capitulate see the active whether been areas enormous not we're which loan up. in to and seeing restructuring We're We're the open starting starting who up on have of sales there that mark-to-mark are to that refinancing loan as eased somewhat. distress both repos also we on originations side to is the on amount People note and market an sales. We've speak. and we do in area occurring in and

Jeff Day

that interest I little servicing is earnings income no escrow will recurring down. know as highly rates to so that was you maybe side are really servicing than going add some business to our impact the because of see other

Alexander Goldfarb

you soon lot come of New We're going elsewhere question the whether going country lot the people clients by like see Sunbelt face-timing or your the the sense sale stamp been brokers leasing is that Coast. second you a even country, in is is do and or West up lot clearly leasing other virtual, things the people resuming but that take apart seems in of here a York, versus picking it's to or is about parts it what's hearing of on like you as Then longer impacted to It parts New to a the York? New of basically their it's be market should in the but from COVID. speak in pretty person walking back in it's York face-timing in everything sounds less feel

Barry Gosin

in that view sidelines. is capital market shape, not banks powder markets, more on the far of a still It's better there crisis was The crisis. and liquidity, a much the there's dry in amount sitting are our this financial enormous health

assets. For year market, kind the particular at the from they ones that's and looking which invested might buying and multifamily It obviously the retail money those two sellers not entered step core over is means in some achieve market capitulation start they more maybe assets will the the who last then to new hotel. start first are and returns significant are industrial, anticipated for there had or look back harder but of and

operate? companies the remotely? Am Am I Do I On the have occupy a are I new lot about what space? workforce? distributed do of normal, working of How is more what's globe side, more changing the de-densifying? I across post-Corona? the I leasing thinking the Am I way a

still So in and look of is it doing the we flux as you may are at what a period site.

What What some think on the certainly to hired month, today them tertiary may won't from monitor of they to of of more and country having repopulate been space? are or space. may are Nashville's, the alternative a to weeks the but How of and new is suburbs? coming much to they the a distributed in do Pittsburgh's, some What rest a the last and how to manage doing trigger be Austins, the are cities one looking are benefit be impacted. environment they to So like? better we've in by move the that Denver's this the they look you remotely? still in degree in companies the know few certainly work markets? maybe companies do we provide and a their be offer I less Should does How months at certain an think points? a this technology and in million Should workforce. state is clients for few evolution activities? building? advise markets of The for Should up I other

Alexander Goldfarb

Thank you, Barry.

Operator

next comes KBW. Your question from with Jade Rahmani

Jade Rahmani

and and from safe doing you very to much. hear you're everyone all hope Thank well. Good

sufficient you on disclosed the wanted ask that remaining believe on starting cash is if I revolver? the or available the down you full you liquidity current anticipate drawing Just the front, to balance position

Mike Rispoli

Sure. down drew Hi, Jade, $XXX it's Mike. out of million $XXX We million.

sheet balance have of the first the the quarter. We close million end to $XXX on at

the need cash sort that's eye don't continue helped some it $XX keep have how we at the on want moment and it. point, model, sufficient obviously back, we a future. may decide we an extra on at eye some We'll business demonstrated down to monitor to we of to a in pull close and the million But so now. progress As think things of through our keep I see for it page we'll and

Jade Rahmani

you. Thank

there selling interest potential stake, back of there NASDAQ perhaps is directly? by to the any future that accelerate to NASDAQ earn-out, monetization On the is that

Mike Rispoli

we've interesting It's them in an it's we've historically forward explored monetize past, not to seen I think able the through concept, something structure. obviously shares the been you've

to very think capital, if look It's I and when we structure we valuable felt asset we near-term. for explore and be there at other that cash that again need certainly still more obviously it a needed We and exists ways. the could potentially us for I us. will think if

Jade Rahmani

CCRE? potentially And or Newmark has equity margin confirm, risk call just directly the well specialty debt the margin call on I Berkeley pressure and companies a on and been no there wanted lot business, placement as of stake risk indirectly there at to within as based through Point finance either is

Jeff Day

securities Point good margin and do, And we Newmark have any Brokerage. we then for think is loans there. businesses CCRE our other we pure the way Berkeley of position the at originations works that so is [indiscernible] very debt exposure in is lever the risk as don't of we No, any there all and And really process which well. no anticipate shape

Jade Rahmani

you. Thank

flow use, for that main of this a quarter to operations, the cash of do expect first on the noted of basis be operations you is significant most some In historically, from cash terms quarter, full-year from positive? flow the drivers you

Jeff Day

the to so I yes. make think you cash therefore from would through look expect expect would we and the of the business, generate balance to we if money year,

Jade Rahmani

Okay, that. thanks for

to the you as pick-up sell that perhaps Could significant? portfolio sales debt pipeline Turning funds in distressed or looking magnitude of perhaps quantify loans. you sales, the of mentioned either the mentioned to loan you the that,

Jason Harbes

it's mean, of garnered I we've the still market. Well, early, a but good chunk

market billion have in the dollars for We several sale.

think told-- we're contacted to-- I and have-- those loans. are-- investors loans in we we putting XXX I out we've So we're mean, those

to And so, have we a this market. targeted very response active

seeing we're very loans encouraged note are and by We sales. of what in respect

Jade Rahmani

Do what any for bids you are sense of par in? have to discounts kind coming

Jeff Day

par. the quickly. at when you there sell the Maybe really What mean, referenced in loans We're the I slightly good category are and repo loans lines, depends food loans, It Jade, and you have are portfolios, distressed you selling will ones group. you on what might to on best there and that that most closest I'll-- need going some discounted. distress. those leveraged Conversely, are finance of you at repo and experiencing to And you're often are are those going to sell can par, were trade lines the see be you're that discount. par. then, liquidity sell situation, in their the there situations see, where

little at pattern than trade because, is that different Barry now every as bit early. slightly we're it's consistent there is So, looking no still a real said, right

Jade Rahmani

Thanks.

mix quantify gateway market, business LA, of a you lot gateway wondering Austin represents? secondary of perform how there's top speculation New San like been as cities lastly, York and the if those mentioned, relative could some to was New I Just of about York, cities you Francisco that

Mike Rispoli

all the had includes we out of way to build and geographies start business or York country all rest to and to So New percent to time, and as our Silicon Southern out XX to over that down decrease the all historically of Valley, of in around maybe Northern, the up internationally. the we as our continues California, XX% build San so XX% Diego, in maybe which way we've

Jade Rahmani

taking for Thanks question. my

Jason Harbes

our a just that's and fact their is restructuring part leases about quite there Let a talk in are doubling in remotely, actually, going as despite of cases, de-densifying, the are and much a big company me employee. getting tenants square place advising that per is add so mixed company. as from companies to of bit accustomed working foot some some Companies business and think the I to

home to to go remote working require space a presently the in whether they are locations workforce accomplish they distributed shifts, leasing will or they a or people. So more more less in for working

the in with willing rate environment interest success their the low renewing longer in are have base. and and good professionals landlords leases the tenant going So and out best who markets, and particular solidifying down restructuring talented

Jade Rahmani

you Thank taking the questions. for

Operator

Paulson. Your Kim from with next comes question Andrew

Andrew Kim

Hey gentlemen, morning. good

I flow your question your some cash a in servicing on commentary Just gave impact supplement. portfolio. quick the know on forbearance helpful you of

was X%. it think for million $X.X I every

that? residential, you Can more talk that no commercial, that? cash you million just about So have can but terms of give in color it's all of It's make XX%, advances does flow? on there's just you'd $XX if mean to

Jeff Day

warehouse should which our that through that, And of of three lenders, yes. their math, book. Mae XXth, we-- the likely and be finance with with we're others would to request various rate is term advance. be any of not forbearance projecting our have now granted our are two as to our would we That lenders right working forbearance expect below Fannie from sheets us need competitors, what required it. We have To-date for to April

is Although, early, night through it or April than we've velocity last the in tracked April. but payment actually still better our is book as payments February-March

remain fairly it and in we forbearance the So August. does situation optimistic end about

for think we're financing and believe positioned we that So we we'll well have available.

Mike Rispoli

GSEs, Mike. is say these just fairly we was facility financeable a a are are credit guaranteed that confident going have that This from highly Jeff assets I we'll available. have so mentioned, repayment the to

Andrew Kim

And residential exposure you have at multifamily, no all correct?

Mike Rispoli

single family. No That's correct.

Andrew Kim

when have last XX following it the any would And after you on advances, months repaid forbearance? the would be

Jeff Day

weighted for days of us works we're Fannie required months reason whatever and will since four that In Fannie the calculation advance we of and to The on basis they monthly that reimburses Mae use believe reimbursements if a within than would the months, that the but way the that in months then, advances allowable that more come then, Mae with XX% be $XX practice, four on average it's we outside contemplates outstanding the is reimburse months those calculation after quickly end forbearance XX million four trailing.So for the to that, it for six agreement and would timeframe. continue, extent the that book.

Andrew Kim

you. Thank it. Got

Operator

time. further There are call Relations, over turn I Harbes. to at back the questions no of will this Investor VP now Jason

Jason Harbes

you will all hope we everyone to joining through look forward today healthy Thank to and you next and safe us remains quarter. will get this for this. again and We we Thank end speaking and you. that

Jeff Day

comments. bit additional little I a Thank wanted a a had just you, technical Barry. few make to We glitch. of

forward-looking So the that call the call the effects everybody and is on statements the constitute any and are subject update law, on differ, Newmark about required to the COVID-XX from that the results, statements forward-looking we outlook, so what business currently may as is on may possibly no position, this the impact expected. made Company's obligation Except aware, statements. risks just liquidity actual of to pandemic materially by financial undertakes

differ For uncertainties set Commission XX-K, most Form Exchange and cause forward-looking in Securities which a in those recent from Newmark's discussion not XX-Q additional to including X-K Form actual our of filings, or contained filings. and forth risks results limited the Form statements, risk factors the to could the but

joining. much a Thank you for great Have very day.

Operator

Thank you for call. participating in today's conference

You may disconnect. now

Newmark (NMRK) 9 May 202020 Q1 Earnings call transcript