Earnings call transcript Q4 2022

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Operator

Greetings, welcome to the Newmark Group Fourth Quarter 2022 Financial Results. This time all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded.

At this time, I’ll now turn the conference over to Jason McGruder, Head of Investor Relations. Mr. begin. now may you McGruder,

Jason McGruder

Thank you, good morning. operator,

the issued and a fourth results the on only year XXXX XXXX unless December this quarter release press provided to compare call stated. results earlier financial today's months presentation with The ending XX, Newmark morning. its three otherwise summarizing period, results these

section of our uses include GAAP results them. a website unless otherwise the release, the in stated. We will results reconciliation today's our Please results basis, to tables in our and on and management this with the EBITDA. information non-GAAP for non-GAAP why to today's non-GAAP and/or the terms respect press and items adjusted presentation. release be referring these call earnings Excel quarterly adjusted results More GAAP only any the on definitions updated supplemental press These non-GAAP to on how, and available see complete corresponding and terms, when is of

stated the any refer to Unless the Event. call metric the cash excluding operating impact provided by excludes and operations cash excluding loan for flow with the Cash today's figures activities, from loans Equity also to otherwise business producers. of and on net same sales, discussed with cash XXXX respect origination by from flow employee

subject meaningful on other based call change and are Company discussed in changes repurchases, social, expectations to repurchases assumes macroeconomic, today's share the are outlook price. material The no additional on acquisitions share factors. political, stock various These

None or considered change acquisitions, for guidance. log of and reason. assume targets subject financial operational to driven are While or same targets formal they goals long-term our other our XXXX should do the also

update Securities any Section non-historical undertakes statements amended. as on forward-looking that Except that statements Act you to of law, of about forward no risks as required of of the Newmark within by Securities as looking remind facts, call Section business this Exchange XX-A meaning XXXX also XXXX Such I and Act and obligation amended the XX-E information our involve uncertainties. the statements. are

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

over now call to Gosin, our Newmark Barry Executive Inc. I'm Officer Chief to turn happy host, Group, of the

Barry Gosin

our With Chief Good us. Rispoli; me ourChief morning Officer, Day. Chief Strategy you and Newmark's Jeff Financial and thank for Revenue Mike joining are Officer, Lou Alvarado; today Officer,

the decade, talent Company to Newmark strived industry. the has For past become with in greatest the the

objectives States. near-term in one Our becoming United the markets capital in number include

based top took we Doug this Yesterday, estate New largest are markets major team, real the Adam by in adding Spies, capital and who towards goal world. the by York, in market a the step industry's Harmon led

real We growth have to extraordinary together top with in a local and commercial expertise. becoming strong an of and platform led incredible combination of has a advisors decade the over estate US. top the This services strategists

companies to with estate dislocation, real financial the hire market industry's over us attractive opportunities professionals. XX in This market our We created quarter, has creating current but as rose top for talent at the years. is conditions, its pace Newmark top solidify for also at for choice the believe fourth opportunity the coupled position, to acquire rates the valuations. led During platform to fastest position of interest strong challenging an and

volumes. rebound. markets Historically, are drives outperform the seen drives past have market had materially we the Newmar. share revenues earnings effect, expect multiplier Once sales and capital outside's significantly As a across which downturns and expect investment Fed our leads the higher rebounds, recoveries, we to our aligned, we market growth demand When industry. and the businesses pent have debt with and subsequent up activity industry

in our While our be short we remain the excited position market term, about challenging future. the environment macroeconomic and may

actively and Our assisting workplaces. portfolios, are environment, they clients professionals as restructure navigate the their redesign current their

advising financing, conversion are into we and on clients side, properties, investor science, other recapitalization, including underutilized debt our repurposing equity multi-family, and industrial, the On uses. life

expect also demand to hybrid for work consulting for We environments growing and workspace business. create our flexible the opportunities

transaction As office XX conversion of largest an the an represents a the financing ever conversions building the City. square sale in of in of United Street, million States. foot example, New we office, multi-family and recently arranged to Water York X.X This one

$XXX to years, funds The and of long of estate to multi-family end term deployed. trend fundamentals commercial the the waiting having outsourcing U.S. global than strong approximately billion closed over five with trillion secular and More real continuing like debt services of alone, companies be towards commercial of next capital remains maturing real estate $X.X Newmark.

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

Mike Rispoli

morning. good and Barry, you, Thank

U.S. revenues for sales investment down were were year. to originations spots, levels debt XX% million, capital bright Our the In pandemic industrial pre in $XXX.X particularly leasing, industry-wide down down total were and XX.X% were transaction due lower XX%. surpassing where retail and markets activity,

expenses. CoStar a activity quarter. of $XXX.X the expenses fourth in lower, However, Total variable due million to largely were challenging decline with the office XX% during nature of reporting remains XX% leasing U.S. our office

during cost to $XX We XXXX. fixed schedule realize million our are with at of ahead least target, $XX million annualized savings expect respect and to

Turning compare comparison. largely with compared on result fourth interest rise results dramatic year-over-year million. rates $XXX.X our fourth in EBITDA $XXX.X creating Adjusted XXXX record quarter million reflects capital business. the margin to earnings, This our to higher difficult quarter was earnings, a markets

X.X%. count X.X an million our with compared down shares, Our share weighted $X share reduced and at to EPS shares average million was XXX.X repurchased of average per $X.XX We $X.XX.

XXXX. diluted Our slightly year now is share count below end fully

few the years, and through shareholders past million to redemptions. Over returned have we repurchases $XXX share

in In after and dividends addition, we million distributions. tax have $XX.X returned

us the attractive talent valuations. which acquired high-quality capital We expect will market best although providing with due companies to rate to current returning share at near-term is repurchases hire is decline. our shareholders, the and of to continue opportunities This to dislocation, industry's

Moving from reflects earlier We sheet. and the sale balance cash cash change from operations million flows $XXX ended from of million year of year and We with of cash working for our share a proceeds to in of times. the $XXX.X equivalents. The X.X the shares, by in and position in used million remain capital. million repurchases, normal leverage cash movements of acquisitions NASDAQ at a remaining $XXX.X offset net $XX.X strong with financial cash

with cash available and Our and billion cash credit million equivalents of $XXX generation cash us capital. $X provides expected line revolving over flow

guidance. Turning to XXXX

businesses. We reflects volumes reduced We $XXX fee suite $XXX.X loan and million our and versus thereafter. in improvements first growth expect half guidance U.S. of $X.X anticipate and solid of revenues between million billion. of billion This the We also $X.X adjusted transaction million. EBITDA of total across services between and $XXX servicing $X.XXXX compared with anticipate billion XXXX management

share expect weighted flat X%. We tax the for to to XX% and rate down average count earnings and be adjusted between XX%

we that, guidance note first quarter also of press will our You included the XXXX in for release.

While first we thought we to expected given guidance, information, which not was half this normally do volumes are conditions, the it provide of to quarterly macroeconomic include through the XXXX. industry important dampen

for to open would that, questions. call I with like the And

Operator

Sachs. proceed comes we you. [Operator question will And conducting Goldman from your Please first Instructions] this with Luthra Thank with session. question. time, At line a today question-and-answer Chandni of be our

Chandni Luthra

you would on think you about perhaps the business how talk you but the first little and quarter as do of Very a think helpful guidance overall the guidance perform the in the bit Especially, different half you of there's markets? for guidance? are segments as revenue half, half could us about recovery to understand back way out kind parse in and embedding if a first and the help capital leasing for second what well,

Barry Gosin

Sure.

I the for think, a little bit is guidance bit our we gave if we into XXXX than hypothetical had a and model a little notice about this we put last hypothetical And better that you actually model. materials. earnings talked quarter

mid-teens. will Certainly, we believe down in and down management And investment less business our the still in particular. capital our the businesses but the to for business, grow certainly sales more down markets business to transactional continue for leasing low

guidance as the our through sort in we third with as of the and would quarter see capital for year is back transaction go world. each businesses would the We activity of and settle markets first incrementally stronger could bit a quarter these interest improve expect You comes being that fourth down. the rates

Chandni Luthra

you. to hirings pivot the like you've to little Very I'd that helpful. bit a And made Thank recently.

the segments capital Help be to very do muscle strong pull So the the on of left you focus you've obviously you a geographies? little that sort least about do to on mentioned that within gaps you markets? brokerage those And bit that What building think you back given a filled us understand business? are compared share items. just please. How at or are different about think think repurchase how expect within acquisitions about you as moments potentially opportunity in as ago XXXX hiring to and

Barry Gosin

every So, vertical, the our in built business is geography. fundamental sector, talent, of foundation in best talent, every in around every the

So, and but not becomes all to we more capital us markets, the leasing. professionals to many elevate it talent brand, white be the have work the It here. space more now in on It have as board, helps we we but it top places, we just that bring everywhere. -- do more helps our want in

a follows that and there's management agencies multiplier And effect. to professionals tenant It goes follows. that business. follows. the multi-market in rep property thing fantastic follow, all is markets capital The management that. follow-on all tenant project gifted in the has business that and servicing rep leasing that there's business -- same There's the There's

you businesses build If great all you better. of the hire be we that great people, things, and other around, will it do

do, premium plan. revenue, the capital that business penetrate which into exist, and a recurring is is that visibility more our the really we of provided that and and because getting markets, because the markets because that we the delivering have the great many to tenants of those an our we talent by foundation things be may That opportunities expect. opportunity deeper of underlying is And

Operator

Goldfarb Our from of comes Piper line Alexander question Sandler. your Please question. next with with proceed the

Alexander Goldfarb

night guys And that after definitely last close. quite you the the headline made

Doug the I sort know cheap, long continuing I'm on building obviously, The term. that and that that, of first don't sure come for question are you is Adam but

done but You've good also a you're very cross, out a a building company. job public

and sort the So, you're you're to up verticals the platform new of balancing in long benefits market a company. public building of different the versus term

it's next we not now, environment, right expect but great and And current that know obviously obviously, year the a paybacks. all forward time, people in

how So, payback they cost trajectory? just whatever earn this the of on that? because normal on the take we'll return of sees Adam was? the think of Or of the sort it that Doug to line when the Is bottom and a do someone coming longer about headline board, see to will hiring

Barry Gosin

and to profitable desired return underwrite every to acquisition us be we we the returns. get Alex, that

not, attractive That's we if money. a So, because we're get it's foundation like of hire because there. People build lot don't for the great there's when out you for actually they would certainly But built, talent. more we've talent firm even mythology them. could anywhere move a any great

So, everything for talent not why isn't. gives less being because people do I be think about to move. money is to ability they its a creative own, other on where because we us just upfront want the is it also attract money this but is the It

Alexander Goldfarb

the higher certain over Barry cycle market, before? we now cap repricing years how Maybe rates only interest do decade Clearly, the went we interest us transaction trading your us higher of on markets. think lower at experiencing the second compressing Do And street incredible just to rates a estate perspective and next capital of your and then some decades rates, lower will question, real classes. versus cap transaction and it because changing give have known crazy of activity, tenure through is, of be? of prices. you interest just had what Based in retail, and rates sort compressing rates asset an envision be lot you we're

some perspective recovery think you like. what on look maybe So will the

Barry Gosin

bit And and was We and what performance. will look how then the Well, in 'XX, I've our is, strategy what our pandemic, In in talent pandemic, of you the built long last? found understanding everybody how been like relatively is, more that found is, back put we great this good. is than this interesting it little through a What's on this used hiring were out we are multi cycles. knowable which a deep we we if our five market pandemic. cycles up at the -- heels in

we found what back resided we So, hire, we pandemic people and the didn't it. in work, crushed were when to is and

hell. All a in of of those, in of investments 'XX came off all spades. those paid out out bat We like

the growing realized keep hiring have we that, what is we to will base. the It platform, beneficial talent, outperform talent be market. the So to you will and

more knowable what's Now are cycle. in we as a here way

induced And people a prices rates sort it's rates go starts over of are again. business is reset, different points. points, there makeup. bubble cycle. bank this in supply have to the we is begins, basis is to intermediary, If there have that or in there property XXX XXXX in a all all demand cycles, thing fed it Yes, in the nuances so a cycles, is an is they then the basis things, host RTC end. basis cap There every 'XX. in .com the But They are and common a know taste, we that of and case, crisis That up one XXX interest reset. XXX cycles a points XXX there go up sell different cycle cycle as

things away. never Inflation impact are other of purchasing go There will the that assets.

you It's constrained demand market, you product. more new have where a intensive. build supply So

a you So better need return.

higher You need rents.

always And long to period the of time so rents continue go over up.

So lots a that whether even low only attracting population. it's state, new gets demand. in of look rate compression, supply reset, it's a cap It's it's -- and mobility market tax not

always good transactions, moment, the are are things demand up transactions impact that At generally larger and which And At more in freeze do moment, a we the in cycles. market. is greatly There are impacted debt the by down. we place.

incredibly done know forward a leaning So yield we result. going what we encouraged we better are to continue and have doing because it's to

Operator

Jade KBW. proceed with Please of line questions. the Rahmani from comes your with question next The

Jade Rahmani

seeing signs tone? some seeing top shoots? in sure clients, you is from market. institutional you few much. improving Not starting improvement green largest, liquidity is, of clients. in of any There it the Thank you be a but wondering to sustainable the Are your very most Are how your side any on

Jeff Day

property the just In Hi, XX best XX market. had We Jade. XX This one we Texas, We in so, or We on have finals. just actually had anecdote. last offers, investors had in active is seen Jeff. days increasingly signed. contracts the XX

are quarter. interested than the So, wanted at But people in property evaluating obviously to than sell transacting end the for first we for. price point did is and willing we of better step starting it where is to the transactions. where engage sell were to the less people here in is place owner which The a see the

Jade Rahmani

Go much. very you Thank ahead.

Lou Alvarado

Hey, Jade, this is Lou.

so market down, be to preparing to as fed we make time. can activity are and definitely I and industrial people is engaging There's market we go. are them trying best are On determine the definitely hit these and to activity the comfortable far decisions and the mean, at the BOVs, as lot and off-premise, more as to prepare understand to people going have for in understand retail really as position more seen -- see slow of sector, timing themselves things a where be they order where right? what's going We're this to the that getting and

Jade Rahmani

capital the just the number company Do that be in to color large stratifies space. much. to you a They're by come target scope size, Do the transactions business? make so the outtake to to Thank space, Maybe very them. some back markets we deals talk large to someone give you back? it around when look one you very deal the how need of Can happen? come you big large deal need the also The really like in at to CBRE.

Barry Gosin

in play clients deals. we'll private smaller Look, the

are we a that. have for We -- strategy

it's you're that when private the guys more the even much due for smaller do deals I attractive think deals. client big

down with elevate big play the the you create -- you and space of to brand, good if the But foundation levels start transaction. up going it's and but you all when do good and fully in the affordable well. smaller as we're multi So deals is as in to sides, we expect also and deals It's also a to be place small well. the

of sides that. in be all we'll So,

Operator

comes Raymond from question Please your proceed with The O'Shaughnessy line Instructions] Patrick of [Operator next question. the James. with

Patrick O'Shaughnessy

for for GSE Do to the did you Maybe and do was a that XXXX. not they'll caps? you look why their sense think you up as the to to XXXX, in have get closer Jeff. a question lend case, Jeff, caps the

Jeff Day

which have mission which is the increasingly business, evolution cetera. is call on et small business, GSEs what their seen The focused affordable, an loans, they affordable targeted

year they measured pressure as every it's their caps so, their to production. of used has and the is are And was as changed FHFA not how historically. to units, measured, which be percentage The same affordability hit as it now by by is but

affordability. shift, out capital greater to expect back last capital last off expect that slightly gap. to to a so the I fill sources what towards see And is the little debt focus we bit. market is already what countercyclical debt saw plentiful, of we as a And which on saw other expect the a slight are would would be year, So, When GSEs that's we GSEs then the we would year.

them it particularly relates rates, caps. year, I interest with their gaps to would expect to close expect the would this somewhere be as to I and them fill to So

Patrick O'Shaughnessy

Great. that they're kind you. then you And leaving the Newmark where Does that That's are as thank same upfront of Barry, because are or of upfront offering the signing cash brokers helpful, the move implications of indicated what don't imply you that bonus. that to statement?

Barry Gosin

anybody because the of than in offer money the else. places have to more any of offer nature don't platform. We And some more

people don't because So, of we choose money. Newmark believe the

Patrick O'Shaughnessy

ahead. just -- maybe go a And then

Barry Gosin

use accommodation And we our at our term cash long producers. that sign I of we equity and end. and was have contracts top with going remember, forfeitable add the to we is equity

and the a differentiated long time. better bit So, builds the a little of is in way we period and it think it, over market a we a brand little do bit

Patrick O'Shaughnessy

kind stimulate existing opportunities. market cause to market you the tend of that, people follow-up And attractive satisfied in Does dislocated less then for them case? kind do maybe adjacent some pastures? that dislocations what situations? just greener Or an look their of become Why is that indicated to to employer maybe with hiring it would

Mike Rispoli

exists time Usually that there to take market, a in move. people very a up more a is make makes know slowdown, that's between active with usually when transactions. existing. this to in like there it when make and can when you immersed that that prior, a your it's them time space time head pick are it's don't a move. And their hard very I a And when -- the moment is unhappy in more occurs but

Barry Gosin

I lot market's think where to the also recover, period want partnering with things of they say, be And before. capture and over where I the happening. who production people they make better. do join are when in than more of why want and well, money are look when they they look times going as contract? I a We We these be can these who to successful? that's be people order so and to we look want I And had my and say, that to us make the higher market share And like have really look that's to be to were do I really do that's of do. the more teammates one -- people when more make are they're really

Operator

question Rahmani question. your next with the follow-up is Please with of from KBW. The proceed line Jade

Jade Rahmani

Just technical questions. a few

we hires, do that? the you increase material and when of in start result Cushman account a the would seeing a expect As share

Mike Rispoli

I we fact. X% based be won't down share that our about today, think things guidance account we've changing so Obviously, 'XX. we know we on 'XX to to all considered compared be guided So, flattened for

Jade Rahmani

What for an came On low the pretty for on what's it that the rate, rate the fourth the of in basis tax tax driver adjusted quarter. XXXX? adjusted and drove low like looked it

Mike Rispoli

It's simple earnings. actually really less

So, is roughly your bit. earnings, below our a lower tax compensation, to in X% X% the which tax down But bit a rate for just on the guided for deductible drives that to little that came stock we Company around XXXX. range actually

'XX, for range on XX% based around we're XX% XX% the XX. in came guiding we for to So, guidance

Mike Rispoli

based for stock do compensation expect you XXXX? for What

Barry Gosin

our within the of X% same of commissionable range revenues. to It's X%

I it for million $XXX So XXXX. came around think in

You range, bit different. in can roughly do but a more, be will the bit little less, nothing math. materially It a that maybe little

Jade Rahmani

should revenues, basically on exclude investment commissionable MSR markets, then And take should we services? we And should we also gains. management capital exclude sales,

Mike Rispoli

part you valuation. it's a valuation in basis. is management the only are markets, business, without leasing, The is as falls than MSR said because on Yes. the that of that, that But they and sales other services which commission its into capital debt,

Jade Rahmani

Okay. running amortization And employee P&L? expense there then through is loan the

Mike Rispoli

running through and non-GAAP. Yes. GAAP It's

already numbers. reflected our in it's So

Jade Rahmani

that? What's the of magnitude

Mike Rispoli

add we disclosed that, I'm a there have to in but we prepare will we would not be it's see take maybe helpful XX-K, sure if can or if and you. the as that look we something

Operator

Thank you.

question-and-answer end I'll of the closing now over We Officer call for Barry have turn Mr. Chief to reached the session. remarks. Executive Gosin, the

Barry Gosin

excited Company's for and future all updating quarterly the you I about next today. joining you Thank call. extremely us am forward the on to look

So thank you.

Operator

today's This conference. you. Thank concludes

You participation. may you disconnect for at Thank your lines time. this your

Newmark (NMRK) 16 Feb 232022 Q4 Earnings call transcript