Earnings call transcript Q1 2023

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

Operator

Good day, and welcome to the Newmark First Quarter 2023 Earnings Call. Today's conference is being recorded. [Operator Instructions]

And at this time, I'd like to turn the conference over to Jason McGruder, Head of Investor Relations. Please go ahead, sir.

Jason McGruder

patience vendor dealt in. your difficulties some for the on you as with we technical Thank But morning. thank also you operator and good

non-GAAP its only results year-earlier otherwise be months provided ending financial adjusted period. XXXX today's call presentation Unless this first XX, on include to release for basis, on Unless earnings preparing issued three only morning. the a which results summarizing will XXXX results stated, stated, EBITDA. otherwise March a we compare and terms results these Newmark press quarter adjusted in the

the for how to and to non-GAAP the definitions refer terms section and/or any results GAAP when Please in and today's release of terms corresponding complete why press reconciliations management these of them. updated uses

information results respect and press with GAAP the tables today's in more from website and results our non-GAAP supplemental release Excel quarterly and to can You today's presentation. find

Unless the acquisitions cash by meaningful origination otherwise from impact discussed the call no to flow same The figures as well equity refer net of material is with share the outlook activities, cash excluding to the stock XXXX company's operating today assumes metric van. respect Cash stated repurchases or sale from as any cash excluding provided operations and on loan in business today's changes price. flow additional producers. or loan

political Our expectations are factors. other and social, various change based economic, subject to factor on

to also While assume with financial are acquisitions, subject same change long-term reasons. our and targets operating these they no

the Act XXA, Act facts as are Section information the None are historical business this statements XXE our of as Exchange XXXX guidance. of within call, that and considered formal Last remind our targeted amended. on of meaning you the that, be Security long-term amended goal Section XXXX should not of Securities of forward-looking but

except statements. by uncertainties, obligation update no to required Newmark statements any as and forward-looking law undertakes risks involve Such

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

Executive now call Barry I'm Newmark, host Gosin. Chief the hand of over Officer your happy to

Barry Gosin

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

Newmark's most talented industry-leading strategy professionals arm the is the industrial clients. analytics and our York, New markets of added and Phoenix in year, beginning Diego to science. industry's superior and San office focused with producers them for and we Dallas the on assemble data Since capital life multifamily

advisory We acquiring UK-based Gerald, continued real estate three our Newmark industrial capital expansion by a markets to platform. firm full-service top global bringing UK

further plan expand Now, UK, we revenues million across in the in generate and annual Europe. to $XXX nearly

us. Our Signature are $XX complex exemplifies exclusive history largest FDIC This portfolio Newmark. portfolio Bank's transactions. sell billion real large services depth advisory of strength for and the US capacity loan Loan increasingly sale our loan estate to and demonstrates becoming the and significant in mandate in managing represents

years Trust in owned trillion next almost the over banks. by and mature commercial five with $X.X US loans multifamily XX%

During size the servicing billion increasing overall of portfolio the the quarter, our $XXX to from Spring acquired we of remainder billion. $XX XX

to GSE businesses better commercial a with into insight Newmark Markets our which services practice, seeing solutions helps portfolio in us and is types property across loan increase banks Capital assessment multifamily FHA lending. significant together Our provides This provide and with advise origination clients, testing stress These service risk for combination and and activity. lines. tremendous

capital will funds, mortgages markets. uninvested and trillion of the which maturity five which drive prospects the Newmark's of because capital multifamily next will over of strong years, long-term closed-end remain $X.X billion The $XXX in fuel commercial and well-capitalized of services businesses like our full continuing real service our ongoing debt towards will of and which loan the industry estate business consolidation the service companies trend of drive and advisory Newmark. loan loan outsourcing sales

our increase expect capital the the remain significant XXXX. top strong quarter interest destination markets for With rates industry's financial stabilizing, growth global to activity professionals. continue through in preferred Given prospects, position we and growing of should fourth

client are As success a result deep industry positioned we XXXX. to pool as of our of our talent, benefit strong and in relationships similar uniquely to volumes are bound

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

Mike Rispoli

Thank you, morning. Barry, good and

new for approximately future During add ramp the investments quarter, annualized Newmark expect revenues. million made first our we up, producers growth. investments to significant Once $XXX these of

million down to our these investments. business from we portion XXXX, which revolver, using $XXX For anticipate $XXX year the we a generating first quarter and cash full used fund of pay million to to

were results compared in in record quarter but of quarter our the our expectations. first first performance Our down with line to XXXX,

to much XXXX, servicing down achieved We Leasing Total levels. leasing Research. than revenues retail million, sales down improvement mainly investment of more and despite rising these X.X%, pre-pandemic as XX%. revenues but well and to according with business. as US according as due continued produced on grew percentage Global the double-digit our results Services, fees industrial growth down US RCA to markets above with $XXX.X in activity industry-wide Corporate as year-on-year organic first We high-margin revenues were from being XX.X% volumes origination activity down Newmark XX.X%, XX% lower capital to versus declined by XX% quarter

cost and due our services, remain million or to during ahead expenses of due $XX management XXXX. realize annualized to target for structure. We least nature servicing at Total fees. cost with our lower and to schedule largely revenues fees of expect revenues and XX% respect fixed million variable $XX other, savings $XXX.X of valuation the declined Total to pass-through lower, million by X.X%

million. earnings. $XX.X versus EBITDA $XXX.X million was Adjusted to Turning

of higher compared margin interest was $X.XX These results EPS Our a in rise with markets reflect the impact $X.XX. rates capital on platform. the dramatic

diluted million. X.X% $XXX.X weighted count, share declined Our fully by average to

of quarter related cash $XXX.X corporate by Changes balance quarter the quarter XXXX primarily by in and to first $XXX.X the with position investors. offset in from to our of ended which of and strong debt. leverage cash first remain financial business, capital million movements Moving total normal $XXX We our and generated facility, times. cash to were year-end of under equivalents with sheet. the million were X.X fund We credit borrowings working million revolving net used a

our outlook. to Moving

near expect end We be range, full XX, the of XXXX. our issued to February low first on year was guidance which

quarter. Our full industry-wide rebound decline in assumes the to the in year will outlook that transactions begin fourth

year-on-year second We by sequentially, be quarter but first percentages expect our of similar XXXX. down quarter to the to results up

we For the year, expect balance continued of improvement. the sequential

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

Operator

Goldman Chandni go is ahead. first Thank Sachs. Please Our you. come Instructions] [Operator from question from going to Luthra

Chandni Luthra

give you in this as then, And a think the to billion taking Barry, of start to you Signature What the to XXXX? timing the perhaps you keep you geography? sell loan what's about and you asset Thank the what's the the of morning. question. like the age? my restrictions there in in them? economics, terms sale? $XX you complete Bank the When mind have do guys Good about like I'd impact of is How about the expect us portfolio class, the of Hi. talk sense talk any rate. do commission composition with Could sale. Are the

Barry Gosin

anything on is I in -- apologize, public beyond loan on we're we and Whatever can't comment not FDIC that. is website the comment the the prepared portfolio. on to

Chandni Luthra

Noted. Okay.

Barry Gosin

we way sales we are However, we note advisory in are seeing -- in are you space in activity doing other loan and and the should more debt. that that

So us well. serves very it

Chandni Luthra

Got it.

of after has a So let broader changed backdrop the say you. in there you pivot a different give Are anything capital sense please? almost of any markets Thank the seeing ago? that business then. market to me a you seeing? for more are question the macro Just industry of currently right shoots then landscape little in the green the bit And banking now? you're would months us How two events the

Barry Gosin

in the what for been rates. an -- And certainty signaled has interest opportunity is more

rates and when the interest So the of in can't rates interest what mean you underwrite Fed be. I pause raising trade it's good to hard the stabilizing properties rates is by a very thing. the a will interest

will shoots. of for world are that Fannie faster actually to of to Freddie are financing. the that uncertainty are parts we and financing There terms So period the the and in of opportunities has that There they're finance. a GSE, shortened the green time other lead see rebound

new are quotas under-allocated. CMBS some life in be cases there's of debt formation that And Our up. seems coming to

And ultimately the capitulation in on some then seller has I banking think delta what valuation. things. and we're is up seeing speeded crisis between the buyer made terms So the it of

trade. that's established start once to people So

Chandni Luthra

in portfolio recent quick announced? one any is this to any And your on outlook, And it. the is incremental Bank based Signature you impact be adjusted there we deals M&A EBITDA of think Mike. for that about as going embedded Got loan there just is the In there?

Mike Rispoli

the for outlook Gerald include our year that. that's M&A pipeline pipeline includes any includes we not beyond the the does of Eve the know for remainder So and incremental year. everything the It in

as as be the said So quarter go last the year. But the in sequentially the year. a down first we'll should the quarter we quarter, results sequentially I percentage first better second of similar for than get while better through

Chandni Luthra

you Thank so much.

Operator

Please Jade our Keefe, from go And next Bruyette question ahead. & come Rahmani Woods. will from

Jade Rahmani

hear much. very -- this. wanted excuse you to me. you can I Hopefully, Thank just ask

Barry Gosin

We can you. hear Jade. Hi,

Jade Rahmani

your and clearly economics. seeing in you're would prior low wanted comments execution. the magnitude I I'm of and on and quite caps I large the impact? and investment side probably the business commission kind to for they're higher attractive you're some of portfolio like rates if than incentive sales very deal economic that on competitors what's HFF on But what that talk general volume the broke Great. one the sure side. sporadic on believe the But could know I would to placement the and health and portfolios around commission be seeing there look of place that you debt ask flow out maybe side

Barry Gosin

the of comment we have are on agreements topics. things These we We don't that generally do. confidentiality sensitive the on guidance specifics and

to going not just Jade, I comment are we Now apologize. on

Jade Rahmani

That's answer. good really actually that. appreciate I a

post the well place market capitulation the Dodd-Frank the banking to curtailment at debt GFC, in comprise liquidity difference it's on of ratios banks, in on and as cleaned regulations as that crisis pricing. CMBS as share you gain. the banks as real the share that put have retention, dramatically in Historically, of declined risk prior market the outsized You up commercial clear When mentioned the estate. has look terms the funds well the speeding

their real look estate. they you probably commercial the at in banks will today When shrink share

the And green downdraft so it unfolds? to think magnitude or volumes, be Could any in the how there extend of the that you seeing you this a this length lead would are would quarter and believe you transaction fourth potentially do pickup? in

Lou Alvarado

think where pricing I activity. We're the gotten more -- I think as Fed we clients have to we definitely as with Jade, to the XXXX, or impact things going now our we believe we from shake once what seeing over activity down trying right, get guidance stability on There's we've happened out similar right? we in It's will this see that pandemic have of rates. is what definitely really that we're I Lou. most time where very And picked up. activity the to saw the hit settle? year. out that in you find been -- got will Where think get some the

you're into going response similar get a to very year. later think the as I see we on

Jade Rahmani

And slide. you. included Thank in the

Sorry.

Barry Gosin

… GSE will The

Jade Rahmani

Thank you….

Barry Gosin

closer -- of The think -- and choice. to capture more They get we of activity. year lender will a some the -- in see of accelerate will, be will this sorry we'll back-end caps the it to GSE up The the GSE

starting as that life some million $XXX under-allocated see are respects the to are of out sweet in And some million $XX said, there. in spot we're goes And to I the in. SASB which the private which from there's step activity loans back see it will and And discussions. And CMBS ASP banks then, loans and come some markets. you'll loans the ultimately

Jade Rahmani

lastly, leasing quarter, stronger spot was what this we as just bright than And forecast. had a you. Thank significantly

XX%. than in notes X better some that slide office, across your what drove leasing strength platform the have of relative reported. can you color, comprises But Your peers clearly the give any

Lou Alvarado

Jade. is Lou. Yes. This

think I …

Barry Gosin

Go ahead, Lou.

Lou Alvarado

go Yeah. to me want you Do back?

is continuing what about Class flight flight We quality to and happen think the and amount Class across represent the of you've what we've products to product. A I markets. a a to A there's a been seen fair spoken

face some commitment plan deals have return make to did to forward also a move that sizable the office. did to We a people pretty of people with and tenant

three still and week, increase think people going we I three believe It move not an still there's days overtime be be that days you back may it's need the office. days five bringing it five week, could whether to or to the a days be but to a space.

what fortunate was The the be sector. we Retail different, right seeing. in up. were were will we're but was up. Industrial space that's We that

sector well whole the product as the So well, we did have. office but office, mix of weren't just because very that

Jade Rahmani

very Thanks much.

Operator

Sandler. Alexander And is Instructions] ahead. [Operator now Goldfarb Please from Piper go

Alexander Goldfarb

morning. the of the credit loans that remember appreciate GSE, monster CMBS about. efforts we your I GDXX sold Good you everyone all understand. market. stuff morning's the to I its the boom really these there are that look condos that worried due, all all way blend Chorus when I distress like with wasn't tactical mean went was Hey. when like out. back at worked that Barry, we -- if was difficulties. all peak right, Well, basically into apart from There And any extend. was this the we coming

credit going doesn't talked going in of there but my the but guys of resolved an your the you the this one just and trillion -- and really for current blend a looking and is be question do this is view, that wave, see no to way issue. a be is, two year to actionable the be So or it's loan, the loans It's stuff, be few extend one is, it's seem lot really may wants a so $X.X between rightsizing loans much you borrowers. next that's is, and office actionable at about servicers $X.X this going to it that

Barry Gosin

for the choice. that so for in raising Well, actionable. looking they blend be partners, maturities new and opportunity, with. extend no -- have looking really refinancing is equity, dealt to drive where There's recaps

So at every every way. we're of in in piece it

provide advisory on to us of going side that's on side, for the replacement side So and opportunities raise, drive the all the on loan those. equity

Alexander Goldfarb

seem sale lucrative generate I of goes But it's getting versus and deal. it if owners that, same the -- would and would new restructuring just doesn't mean, fees would borrowers amount I that be be. think to same the be and wise fee doesn't that the auction that to auction lenders wholesale that Wouldn't seem and and re-cutting together and sale owners if stream a an blend more like an to extend, the extent -- fee that through to and restructuring new blended much

Barry Gosin

this with is Well recap all and to going blend the If and probably extend of going to be above. short-term sale. is be there's a a a

stuff re-sales just and -- there's so And of resets. along and comes with there's and loan a sales recaps lot that

big a and term of that amount In of on enormous still And disruption rise capital there that is But an market are maturities. up is dates happening. that's opportunities we There are don't the a sitting sidelines. of on it market. there think

investing of becoming the funds States around $XXX in billion was investors lots dry a closed-end more interested world. There's of seeing reasons. We're powder available. It that are of in foreign host United for different

were the world XX We've in. some raises of they're domestic in They'll other one opportunity not where available, investors, buyers that projects market and equity equity in no ago. and anticipate see parts foreign finding first-time of out the us, were jumping months even from an done recent the

Alexander Goldfarb

leverage So about then all to sectors office, that to is the industrial, certain I my We leads because is talk would tougher. and it's imagine question. much second easy growth like pencil negative there

the we do new, leverage about Barry, transaction transaction if let's it So on and office or has for a leverage or this return, in recover, need market office, reopen, to talk positive see trades? is still more order negative -- market to can

Barry Gosin

really think in to some return move have order you, right market. leverage the see to, I positive

will much all premium. obviously, smaller marketplace. the well where I asset, as also where amenitized, are in as and core B I fact, where you're But out we're Class areas to trade to And on the see going is going obsolete think A, the right? that demand The will and I market that C a are the depend the some competitive will shift. no there will the by shrink, struggle, viewed that's of think created it think the that at products the the right? I be think, longer product, of quality Class the Those

Alexander Goldfarb

Thank Okay. you.

Operator

-- have O'Shaughnessy Raymond And -- go we James. Please Patrick from ahead.

Patrick O'Shaughnessy

speak morning, acquisition, revenue revenue full the this your Can And year good to year the Eve? you would lower to expected absent contribution you have Hi, Gerald outlook? had from

Mike Rispoli

morning. Good

million announced did we So, £XX year. revenue in the fiscal when we acquisition about of they the said, prior

So we'll get of nine business, management revenue services majority of a it. more months of their that. than A is lot recurring type

pro-rata the see on it's said, in we to continues think we'll and improve. pretty a our we this So results that think steady year. revenue as market And basis, we

we through get guidance currently move around feel Our of the end and the we range. our results will year, sequentially as better comfortable low

Patrick O'Shaughnessy

appreciate that. And I for another I then question, think Okay. Michael you.

You might coming this have that? of you the any notes senior refinancing preliminary kind look expectations, November. guys have How on due you about your what Do thinking are rate like? refinancing

Mike Rispoli

what be than great look, balance we low that. about have I'm and clean will But sheet, ratings. pretty higher, leverage currently It sure great we pay.

think go we which little pay we'll refinance. advance be November more. execute certainly maturity, we market, issue, on in of to is able see we'll bit and don't than really in so, We'll And a so the other much well to

Patrick O'Shaughnessy

remainder for me. time, And of Okay. that to now And why your the SpringXX it? was then guys one, business? aspirations, Can last speak with you to maybe one buy right the

Jeff Day

increase felt velocity that was surprised businesses, us. the pleasantly us an for important, in to saw we point to date. spectrum business And entry asset for Spring servicing The services Jeff. businesses SpringXX The our business, support that and the is crosses clients, -- this and is broad particularly a of actually has a servicing we're going but management we special need. And

this some these the resets portfolio business bank grow So, rapidly. of large because marketplace in and sales some we're the of expecting these because failures, to of of

Patrick O'Shaughnessy

you. Thank Great.

Operator

Keefe Jade from & ahead. come next Woods. go Rahmani our from question And Please Bruyette will

Jade Rahmani

Thank that Do performance interest caps very as be decent rate I rate multifamily think ask a wanted amount What through, given today, there? much. year. credit. maybe there'll are well about Jeff this expectations as issues, you to loans going for expiring you your loans of floating

Jeff Day

XX set X/XX. where the the through we build of are book with had some my level went let's our Yes, our are versus Expenses We along those And So I've GFC. through in terms of is rapidly a where Top privilege particularly more distress. little are slower. last went to to for credit although today revenues prior We downturns. bit insurance. we the team. previous years little in nothing are increasing a line periods still today multifamily growing compared

overall, cap But the if distress. little very approach We, we see expect to this our Barry book not as the year. And said, pro-seen. hit is certainly GSEs

performance better of and Our better competitors. significantly marketplace significantly the than has our always been than any

don't be to I issue. expect an So, that even

Jade Rahmani

office prominence, I right And sector, the in now they said, lender. the the is lender only think office current the in

expect terms door in brought like the carved the of Clearly most opens how transactions active. clearly that and how cushion the involved notes, team terms likely and out? be modifications preferred downfall, of seeing have look they'll the for B they're office debt what in the been you into What's to in So notes. A probably as route office and they've that do loans being the cycle with? your plays to capitalization But extensions to equity

Barry Gosin

multi-office the lenders, owners go-to which market, we've hiring complicated talking recapitalizing restructuring to in been is every in the on recaps, complex, do. MAS, equity, which that. I from notes, best all firm mean doing We're for of things, talent category what the industrial, to raising a one every restructuring, the the talking to includes quest of by

raising amount with those of business parts the where seeing with we're and the our other other of salable enormous owners, and selling a those that may good in they bit may sort assets they're And potentially support wall assets -- have book sparkling. the a -- their stress the average solid -- of have assets, are good owner are weighted that who to an term, on activity a in of are and lease capital many

are different what places -- from we're And lot different lot we've work built. come and so for of a activity well of a ways really seeing that

Jade Rahmani

Thank you.

Operator

remarks. in And questions have call the for I no queue. I further Barry will the Gosin the over turn back closing to

Barry Gosin

today. excited Thank on Thank company's you. extremely you look about still and joining us our to future for you call. forward next I’m updating quarterly the

Operator

your And participation. Thank concludes this today's call. you for

now may disconnect. You

Newmark (NMRK) 5 May 232023 Q1 Earnings call transcript