NMRK - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to the Newmark Group Second Quarter 2020 financial results conference call [Operator instruction] Please note this event is being recorded. I would now like to turn the conference over to Mr. Jason Harbes, Vice President of Investor Relations. Please go ahead.

Jason Harbes

Thank you, and good morning. quarter these results results second a release our summarizing presentation this issued XXXX press financial and We morning. period. XXXX I today's stated the of call on year-earlier with compare only the the second results provided quarter on Any figures with from operating refer to cash loan by originations net provided excluding today's operations cash flow to activities, call from respect discussed activity and sales.

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

business law, results, to non-GAAP about meaning outlook effects Covid discussed with based Such involve of the our required and within include no estimated our currently the stock changes Any from These presentation. risks, Except are forward-looking which information in as the statements value our XXXX is XXXX or as risks results otherwise business investor X, any repurchases, Section website XXE and today's differ Unless are position, to obligation and to the the XX the GAAP Securities call impact Section statements as on share financial call not Act undertakes today's stated and uncertainties. respect XXA actual expected. closing of price. forward-looking NASDAQ materially no on of of material Securities earn-out on historical on are assumes available what Newmark company's Additional the meaningful the price forward-looking unspecified on in the mentioned and the our I remind that of Exchange of this acquisitions, pandemic you statements may company's regarding on Act and but call is also the facts XXXX. is amended. August on of by subject amended, that statements. constitute outlook, may liquidity the perhaps statements information

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

Barry Gosin

Conference on Lou second Mike Rispoli, Chief XXXX Thank our for and you, for and Call Officer Jeff joining us the Alvarado. Day, thank Jason. Newmark's are you our today Chief Strategy Chief Joining Newmark's quarter me call virtually Revenue morning Good Financial Officer, Officer,

The to well-being the our employees. industry. the protect second challenging company the was health and and rapidly We quarter of for moved

we reopen, working. support to continue slowly While our to begin offices remote

investment. million rights, professionals cash Our Newmark We work, generated like million advisor. significantly for $XX the I'd tireless and current and we advice take clients, applaud and earnings servicing our in are proceeds also of the equivalents, balance estate they've finished taken sheet. very Despite with cash leading our moment with These significant lower numerous expected cash the approximately real a of from operating attractive clients industry volumes, employees remain market million to strategic NASDAQ flow together like yet assets, our a trust would for million represent $XXX to the ingenuity. as on environment. to them quarter on of our needs $XXX their to over providing focused navigate transaction not in that thank operations. dedication, $XXX and reflected in help strategic nearly I consulting placed a analytics service, potential, mortgage

As advantages: our competitive strong originations, services, sales. we've we results our earnings our attribute release, to our in in outperformance our referenced and management strength three in in investment growth GSE

We our we markets coupled industry of the improve low discovery, of improved across interest continue of We strength other markets, half the outperform rate from a forward. US industry, believe in XX% quarter, revenues. to XXXX. half the industrial landscape second number estate our Taking three year. available nearly of a that our real to are types of the occurrence at improving Newmark's ranking expect with property capital activity number and estate, price to the These multi-family according data, credit the of capital represented the for real will RCA look historically in first in in investment and five first in second asset share half market and going have investment sales XXXX, the environment, classes significant the drive to our platforms

from several Newmark to our the significant and of and professionals of to the have platform, joined of that amount benefit disruptions, over the years. strength is periods market the well positioned firm talented past due its recovery

research prevalent Remote competitive us but is in economic to be collaborative Our as the working our environment favor that future, companies' provide with inventiveness, advantage more professionals' creativity, return accelerates. activity our employees shows the the of to most office. and drive a likely

for advice amount density lower increased environment, on seek office of of Regardless our expect the the We we remote clients. create to offset working. are prepared opportunities largely to out, an

prove and to culture skilled to and attracts continue generators. revenue market Newmark's future platform of strength retains that conditions. current and highly The We adaptable are we

believe to more to a specialization company see recruiting the workforce. that talent, and our redouble diversity diversity stronger time on we the inclusion this makes built enhance As and our We both efforts and further as of a us competitive.

the creates and support, initiatives train, company happy to this its advance to I'm We expanding turn the and that, Mike. to our shareholders. are With for We programs and employees. believe broadening call over growth committed organic to and sustainable

Mike Rispoli

were you, impact our by In originations morning including mix increased went business capital XX.X% Thank our to to down banking of good of overall a markets and quarter, down Leasing due revenues XX.X%. the second a XX.X% down was due XX.X% pandemic. balanced mortgage more Gains activities volume and the Barry, everybody. for the origination. GSE higher and

unaffected XX.X% maintenance in originations servicing our past lower were multifamily services, as income for mortgage revenues to servicing declined XX% yield balances non-fee otherwise the and business. pandemic. But due the on Management less Our fees up and compared to XX% fees by and others interest industry. by escrow were

revenues management fee resilient during We the and to be servicing more downturn. services expect

cost. Moving lower increased cost in is in and a our commission-based expenses. $XX.X XXXX. effort approximately by $XXX expenses on to Total reduction reduce and XX.X%, operations million and support part of This to million reflecting in operations revenues support,

presentation, variable challenging compensation quarter, profitability by contributed demonstrated expenses, compensation by the variable environment. As of nature our combined In Newmark a commission commission-based highly earnings with our XX%. based declined revenues has our despite structure. the to in the reductions, fell our The the XX% and cost

earnings. were down XX%. adjusted per our was $XX.X Adjusted share XX.X%, to $X.XX million down Turning earnings EBITDA,

and XXXX, providing We to real services. commercial or due uncertainty estate its are earnings impact ongoing for not COVID-XX to guidance on specific revenue related the

similar However, the to will we U.S. volumes second industry the quarter. expect in third be quarter

be million year-ago to compared the for fourth will $XXX million from Our lower expect the in approximately support quarter additional quarter cost which on be and liquidity the is closing second to quarter of million us the and the In adjusted similar XXXX. because NASDAQ, of $XX the yesterday's approximately and NASDAQ expected expense quarter year, generate each record third of the for as each receive price. earn income year, period savings. we in will retained of we the from third earnings operations to We in out upside, based shares $XX currently our

net revolving trailing fundamentally maintained and on multifamily established deteriorate. portfolio. $XX potential metrics to X.X% second compared strong EBITDA Despite to our sheet. to We times. modest from of delinquencies date, company's the million The the limit serious Subsequent debt million second the end servicing to remain market adjusted Mae of conditions XXst, very $XXX low and million at March at should we and year fund million cash advances the credit than $XX million, line cash Moving our $XXX XXX% were end credit of of we forbearance our In X.X the end. interest, up credit facility. servicing business, a XX-month on at to Fannie liquidity sub quarter. the equivalents principal Total quarter and forbearance at to was mortgage $XXX less repaid level and balance of

now would outstanding of our questions. we call Operator, approximately on XXth, we the like loans. have million June Fannie of to As forbearance for Mae advances open $X.X

Operator

you. Thank

[Operator the question We Instructions]. session now will begin answer and

first Goldfarb comes Sandler. from Alexander Piper question Your from go Please ahead.

Alexander Goldfarb

quick few just So a questions.

on we're you so be NASDAQ. page, just the that's Mike, to the side, is and excluding quarter second expense transaction on similar quarter First, side, the to expected said same obviously third

adjusted a about assumption? earnings is to similar quarter, the So fair being the think should we that second

Mike Rispoli

fair, it the expenses savings QX similar. that discussed, while the up, XXXX. million maybe, I have are from mention I of year-over-year Yes, think think the would otherwise, income Alex. that's in fair. But despite of The Plus QX you generally I $X NASDAQ were XXXX we sequentially that pretty

Alexander Goldfarb

from NASDAQ basis, third second should the pretty similar? quarter on apart just But quarter be linked XXXX, XXXX, quarter a

Mike Rispoli

I think that's fair.

Alexander Goldfarb

The feel was you call everyone question. comp people. that you second down ask XX%. let on your I for think the those could mentioned me question, Obviously, But

fair is One should does have does is we third share the if of it's assumption share how if and quarter was similar, count, the to the diluted guys about and had that quarter you so dilution increased that issues going a shares that from this like issuance year be sounds the mean fewer be down second interconnect, count? impact or that share thinking this modeling XX%,

Mike Rispoli

related it think I yes, be it to being shares is about think issued less will to way comp. the Sure,

As above rate you revenue, an that overall is pay XX% see on our in typically tables cash in commission about earnings our the our comp and XX% we presentation, of component basis. the is supplemental

shares think equity is historically, So compensation it's commissionable issuance been what down. if of you so about revenue. and in be will XX%, revenue can down about that the is That's

you look a the to little a expecting our bit that growth to, rate of in because at count are were where some and this took manage share share continue of if believe what down long-term our actually is actions we we we're year-over-year We year. count year last to in X%

Alexander Goldfarb

sounds But I you're and should less it share guess, Mike, like if X% be issuing that below the year this this year?

Mike Rispoli

fair. that's think I

Alexander Goldfarb

you do to a spin, free corporate And lot heading the guys the perspective will is, be and so free year-end, toward more. final then tax from a question

maybe be buybacks simplify can the So on always given maybe to stock you is us as of going that to guys you simplifying, are as what far just source are out that, accounting things that period. Strait. just the you'll a tax-free questions, talk P&L the thinking can of maybe side, maybe future EPS because

You'll have your lot flexibility in a activities. more corporate

So maybe you that? to talk just could

Mike Rispoli

with Maybe buyback share the I'll start question.

in we very of because tax-free shares the attractively. now in spinoff right material is buy still said, to you an more than stock, As we're But period, as back that any very plan however have think sort attractively way. value attachment know, can't the we a

have capital. sheet We lot balance of a

well We shares. have a as cash as sheet on balance NASDAQ in future of value lot the

proven can will. there's an to do that value we've in think I we think we and we that, if opportunity monetize past, certainly the

capital the at for look to use best going our the return always more of we're shareholders. So

as DNA. I part our think that's of

of and our make continue financial to statements clear. terms simplifying, In try we

detail. I are financials the our a breakdown supplemental website, out lot in table our on Excel that think which see we've excruciating you put of in

table, our and quarter, flow, revenues, going put Covid the in presentation the revenues, also how can out forward. how the pass-through that's where the and we you in for our our model simply you have We first business was very show the us the earnings supplement for commissionable expenses

steps continue value through and will your we input take course So make go things process. as we to easier of we to that simpler and

Operator

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

Unidentified Analyst

as Barry, your performed through in if you that and factors can have half we among year, in particularly the is cases pipelines, July, those into key of a the into differences seeing color any Ryan second what markets, transaction that and are more noticable any and seen pickup how pipelines are This drive a look Jade. for quarter on the in pickup COVID provide will second the recently. you're on mind

Barry Gosin

of future. to long buy People is generally Capital on an term. in the anticipation

So, is powder billion there dry $XXX U.S. in over in the

of had pent we the of more independent we're pipeline. think becoming to people that's Covid. in as I vaccine, better on markets all The certainly with anticipation the just getting multi pre-Covid. clears. there's same still that's the on the It's have that. therapy, Covid, space will are as some of view the of opinion a places And a memorandums light, debt anticipation in the is seeing more are anticipation recovery life. buy in those luck, see what that of actually It's We're and pipeline or behind we of pipeline up clear market full-fledged there. In start activities Value up there broker BOB's now already some terms

active, the Fannie obviously, In Freddie very terms that up. business been of is has very,

They're the all the CMBS clear up our market many risk is the As out prolific they'll and giving more as LifeCos a to bit is, be soon money of business. in what starting exactly lending. little the about figure

the as is combinations but will is vaccine feeling increasing. to or this, a except think are either starting there and clearer move pick be activity, activity recovery, toward that people activity will is there up So a we I

Unidentified Analyst

for multifamily outlook for reduction the the about and also on to on outlook the of on in thanks -- risk you're general potential GSE in your based a that second in for that’s Then stimulus volumes how the business government there. the half side, your year? thinking Curious then been the forbearance stats

Jeff Day

some two that because earners units Jeff. the We We're getting is we portfolio. like, roommates first we saw Ryan, still to business very do production and opinion forward. The a the see going that to in similar we're evidence bullish just the that the have of income many we've should couples. that model rates our going has anecdotal second that robust that be our in to performance is stay there in continue. our in because is looks believe from but portfolio prepared that to have the stimulus We that form steady. the It's this on is exactly occupancy of there not that pipeline The going remains clients is you expect what or seen think half been half. and

Unidentified Analyst

for of business, growth you do broader greater look potential as think Then those the term environment. that potential reacceleration have from platform a opportunities you the that Barry, across near areas this and

an up from just of that example, For your and mind see business, is and would area growth loan you comes one pipeline there to potential be volume shift distress? sales how in that of the

Barry Gosin

sales. have Well, selling selling Many need been very the good on have active the people of them par, been note we in who the been liquidity have stuff.

for depending an office if and back rents, demand and continues where shows. time business, office the where, As coming stress of extended period on the the of to side

sold will You par to and note below things see sales. are that begin more

tech market opportunity last the of of think talking we a position, all four the people good have sales in last busy are in come to speak. market, take as going and know very a they're time better acceleration company, come as the and of that and we our really into people the the other. this one getting and and capital and think three, forward. few we company other few one to the a extensive prime a of the each get everybody how we're of have recruited we over of billions much who everybody to given opportunity out market other dollars all markets of We business, I and note the the years, us our period, what certainly sales group does, get the That's to getting has leasing our know to out of tech and know our to months of this have thing they're to advantage our in We know gate for aspects we robust out other clients this many years interesting the an each in business to business note

Lou Alvarado

area for business the expertise, plans, that this, has for to want come people is also been following as of and our costs for look reduce at of and looking an smaller clients. to the out competitors, but will in them as And on frankly continue -- us, is for into an and past we'll significant, to believe service everybody add, our come there of growth our property been looking and corporate this than management opportunity area our of us. I if an has this you that be with -- area out been problems we as growth it be had for is we pandemic and grows right we solving the

Operator

Wedbush. from The you. Henry Thank ahead. go Please question Coffey from comes next

Henry Coffey

exact large anniversary let when is. I past stupid this know a date audience. the exact be call front distribution you're on So, of of year To sound me in two it's the the

Mike Rispoli

This the of is end of Mike. It's year. November this

Henry Coffey

your then and have way recruiting for stock? is gain if everything a this way. wrong or kind offsetting capital bit, another December back a have I'm to that's to either assets loans be liability, look your sheet, and at in held me go versus that else rights, easily And it's there essentially use little any funded. thinking but so, capacity, capital, seems is right everything which of tool to else financed the about if mortgage sale, principal again, tell the to call then buy there we'll wrong, When I X. it, to about really fashion investments thinking ability that your I'm and balance an your or well It's correct Is loans be the needs seems offsetting forgivable servicing and up could or of, it's and one me so which

Jeff Day

characterization tap shares. related fair $XXX about to million now of we today's of or the have that flow we our NASDAQ potential the Henry. at remember, into value cash Yes, could balance But I yesterday's think sheet,

Henry Coffey

in in plus million $XXX stock? it's $XXX cash So NASDAQ million

Jeff Day

I that's fair. think

Henry Coffey

big it's all it's we're Yes, a number, to. what getting

Jeff Day

with at capacity the certainly we'll very to lot come capital and the thinking comfortable resumes capital and year and something on. activity we're we as on two be a now and We're as will where sheet passed we'll to it business focus our starts a about back allocation the right balance period, lot be

Henry Coffey

How much cash. Right.

you much the you business. to retain to need how sheet balance operate the comfortably was actually do going I to on cash So, say think

a $XXX very $XXX You and that's went cash is of lot do How need? a that cash. difficult you during to million what excess period much from million of obviously

Jeff Day

that's is the of part the reasons the at down million of a and the we lot, of $XXX the one quarter. or pay end end Certainly the of revolver after quarter

I QX to So and and cash of ways have quarters. even look left, sheet We $XXX half generate think revolver cash been as to particularly flow Historically, if continue the the you pay a our down QX the the cash revolver, has we'll through at biggest capacity have down of the the year. for that look discussed. back we we've we assets after generation pay off-balance on still million flow

good balance pretty the financial on of the company. about feel sheet position the we So

Operator

Thank you.

comes America the Your of Merrill ahead. Lynch. Bank go Please next from question from Funk Michael

Michael Funk

just quick could. a So for us. if I

of One occupancy property visibility recovery if of agree that. rents, into didn't a recover that that sequencing revenue and your so you and leasing see until to there said sales competitors we earlier recovery with curious for expect is

Jeff Day

this is resetting buildings a recruited to to there concept The much We level or be know Group they to visibility many this is seeing to whether that living pronouncement rents and back from trained. to Productivity there CEO the more Recruiting cash thinking realization more that now value of that of are depends than will have people, coming is price But are company, They they markets working whole mean, need and touring not term, are once need of a what think There discovery place come of called calls investors Microsoft demand. work. CEOs more People to the of and those been mentored. people it is Food already be to properties. thinking the be Capital thinking for to was in a grand recovery the depending I and don't And where work. realize not particular have They'll who rents to They're of be rent virtual far in come how a remote to have getting what determine we're I'm markets the has what The they're make more we're there more would there there Those off some other properties, CEOs and are billion reservoir of tomorrow. I the a to the into be faster themselves. back is. that markets. about go. work. their the the and that down. $XXX back lot reset Yes, to want some long office will on by sold. market companies be Social There'll accelerate productivity people Boston, is Well, thinking it with normal, can't not invest selling those. goodwill, say they're could doesn't I as markets. to they're acceptance going into back, visibility decline. of the the be realization of that. will to

Michael Funk

just office that. could break ask hypothetically one generally assume or I'll rates I I and more, do cap agree would If back up. that not, with check

I lower for a How that revenue sales potential headwind in have prices. about stream you like-for-like you. think as to recovery that So should

Jeff Day

they take property at our the I today, to in markets, relatively It's are borrow back. mean business work. those and industrial place missed mean we to mean you I workers, can failed quickly that's rates X.X%. a there I come The are they're can you at think longer brokers a need cap space, multi are going a I there beat. something and industrial very people to active a if doing and mention long-term that back and doing markets now is live multi-industrial. hasn't certain we bounce buy

around that's and a opportunity I globe. growing. trillion still negative good great considering It think yields if long you with pretty $XX buy to there you the is offers a a Times have cap look, investment the XXXX is with a country pandemic. in X.X% if a about invest article term money, still that five So And

If pandemic. we roaring a a we had XXs. have we And war, had you the then then, remember

after So more proportion as war from have think the boom had And died devastation Europeans XX, one of of they and thing people XXXX a common of in in came just way to all downturns we we that cetera, and the back. a population nine that disruptions where off years XXXX. for The we et but come these end. crisis is have

Michael Funk

did mechanics just lower the And comment you or on revenue? relevant a prices have the of sales on relative impact and

Jeff Day

where as With We're there rates is going certain categories. up the some. prices as cases are, low in interest seeing actually are they

Operator

Thank you Instructions]. [Operator

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

Patrick O'Shaughnessy

How invested? that's remains before patient be. that generally before how to there those powder can it on work sidelines capital be dry long that proceeds committed on the years being Could waiting constraints are or put are

Jeff Day

to or Lot the of be whether funds have which pension or equity some to it's funds returned investments investor. these where, have private sovereign wealth. time-frame upon they on depends It

to obviously of money they to on amount market and but is it have to resources a the buying the human segment investment opportunities for is work funds realization sell the put on that out. the people wealth been with some whether then devote the that of they They term, community, even that price in focus can long those Sovereign job see of the they're put question out the there discovery, it's going the and get come new already going forward. to portfolios they that

fund So, the and one fund new ends starts. a

cure that either is will of is into the the activity this there or on people life. to visibility of into we're have visibility going economy where as the and see where regeneration which go normal, with goes acceptance a So, is, new

Patrick O'Shaughnessy

bad up of current in that are some Is for try brokers by now? pick to talent. share may smaller right environment off a taking now time the Curious market count in the about terms be way to attracting

Jeff Day

a is this good time mean always to to it's I time recruit good a talent.

should talent generators, And it's base best discussed It companies, are cash our at want doesn't by right company. business company the are is small they encouraged to all to of a have good have by I what We for you being the high and best see. it's getting companies, as we that's and world the the considering be choice platform aspect DNA. revenue fundamental are us, the it be mean we and our where of capital but way really for and custodian the it's we the we of doing people,

Patrick O'Shaughnessy

maybe then think progressing spoke plans. expansion generally in to international And also global past expansion maybe guys on getting think the strategic about more a environment more in potential dimension,you those you be have I about do on hold in due disruptions Will this market or and with aggressive attractive purchase prices?

Jeff Day

and a Asia. is always us in great East Middle at There Europe, for opportunities. looking We're opportunity

are quite in it. We're a opportunity. talk about great it It's often. that, we conscious of We interested

great we've in to and have Americas to and what also build created. fill on the opportunities We space platform in the our wide grow

us. So, it is an opportunity for

Patrick O'Shaughnessy

from of outlook one advisory for streams? me. last then the And valuation, revenue type appraisal and What's near-term

Jeff Day

bit a very has seen The little steady year. last a larger institutional seen actually shifted a mix its relative revenue. we've portfolio business, VNA But of assignments. to drop and valuations our role In we off haven't existing to

Operator

closing Thank I would our you. conclude for any to remarks. like hand and question answer back That does session,

Mike Rispoli

healthy. this I'd and to we on and here for safe that remains to And you speaking look hope next we forward thank all So like everyone quarter. to again you Thanks. call joining us

Operator

does This today. for concludes our participating. for you. conference Thank Thank you

now many You disconnect.

Newmark (NMRK) 9 Aug 202020 Q2 Earnings call transcript