Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Newmark Second Quarter 2023 Earnings Call. Today's conference is being recorded.

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

Jason McGruder

good and operator, you, morning. Thank

only second Newmark the release provided year financial ended compare press earlier period. XXXX presentation issued on XX, this with call results its and the morning. results stated, months quarter Unless XXXX three the today's June otherwise

complete Except as to and earnings for referring how, reconciliation any press adjusted Please uses refer will management we section of to on of only release them. adjusted results and otherwise when to such updated basis, non-GAAP as specified, the non-GAAP today's these a why of and which corresponding be definition our and/or include terms EBITDA. results GAAP terms, items

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

impact otherwise and figures employee any from excluding reflected the the to loans today operating the metric, business as cash hires. and respect sales for same loan event. well the operations is cash excluding new with activities, stated, Unless flow by the XXXX provided equity of net Cash origination from producers cash flow discussed as

in no outlook or changes The repurchases, price. the material company's assumes share meaningful stock acquisitions discussed additional today

and to on change expectations our Our subject are other various political macroeconomic, factors. targets goals based considered beyond guidance. be formal social or and long-term of None XXXX should

are obligation and Exchange law, within required on that statements uncertainties. forward-looking Such of XXE as information involve the Newmark to are risks amended. about facts as Act statements. any by Securities Section our XXXX historical call the as of update of and amended you this undertakes remind no I'll Act Also, Section Except forward-looking XXXX XXA Securities that not the of business statements

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

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

Barry Gosin

us. Good morning, and excited I thank industry-wide headwinds, about for never more future. our you have been Despite the joining

dynamics higher provide new rates We are market. solutions and different equity complex creative shifting the interest of a across new both and dramatically cusp capital a and The and requires ingenuity level world. higher of to talent sources on in this debt of a

lenders borrowers. uniquely this Given changing. equity are dynamics and positioned the equity have the landscape. creating is challenging and shifting, environment a for have incumbent providers on of is changing investments we made, changed. increasing Market are requirement we capitalize which criteria is for for to demand The The

complex sophisticated the professionals are facing the Our required market problems market. ownership solve estate real to

professionals on choice best winning even develop solutions who execute of brightest are and is real larger the our the and the behalf of platform We the business. services important of estate assignments we are an most percentage in This clients. for can why

approximately billion approximately recently announced $XX to lead loans as portion sell their Storage. We agreement served Newmark, Blackstone's billion by the billion a FDIC a announced the sale $X.X self-storage to example, loan the recently on handling. representing $XX.X of portfolio to for For we're BREIT signature portfolio process adviser of a Public

U.S. the Brea, a recapitalization Newmark U.S. this largest the largest of science multifamily the building building single Freddie one Boston, of loan year. since Park originated in $XXX million arranged La the the XXXX. transactions a life on We Mac in single-asset in financing

$XXX currently equity well Newmark mandates. debt has billion and of over

in remember, estate. real own We is real not Please provider. Newmark a do estate invest services or

markets will The towards activity our in we significant be the XXXX. with the there platform higher-margin resurgence a expect robust our half begin made and to will revenue leasing, markets businesses As investments capital the expanding interest back of recurring rebound rates drive of strong combined we and end year, have growth. revenue business, of will capital our stabilize, and earnings

Additionally, the given term our of record through will trillion maturities XXXX. $X.X outsized world-class intermediate debt drive the growth platform over debt

sharp and interest in rates With large and to we increase of lenders, other banks the the and alternative by in owners believe will pullback rates need cap find a growing percentage and traditional solutions. and lending investors

XXXX estate-focused recently and U.S. their real of funds share XX% to XXXX. real originations estimated credit commercial Sachs estate that triple will Goldman private between

sophisticated portion refinancings, and We will resolved maturities to not through only and businesses, more debt help which but of significant mortgage recapitalization. and be origination expect through our restructurings complex a brokerage

recaps begun the equity many in pipeline, of arranging already has far and number thus clients process growing with for several solutions. best-in-class in financing Newmark to a and expect other investors we professionals our turn mandates and This our with joint for to ventures owners innovative XXXX,

and funds average. next ever-increasing the the significant other outstanding will institutional that significant sold volumes private will -- loan months mortgages to anticipate therefore loans sales percentage the real other banks be and distressed. years. expect banks become acquire four assisting of a XXXX to and by sell compared few portion XXXX commercial over XXX% credit And XXXX portion non-GSE over to we of other over lenders We anticipate an were U.S. lenders. of for loans $X We first the by investors up of of the trillion the estate to a

Newmark leader this and building. opportunities loan Growth which growth will its replaces clear from in sales, will distressed service sale of countercyclical in the dramatic partially to loans assets a Newmark generate other offsets business, for in across line. declines and near-term lead As

the to to office increased we leasing strong our to to led office ongoing industrial retail investments outperform return we made We're in business. and already the tenant to plans. office by addition, brokerage, starting which in market the augment due continue have leasing markets, demand in In see expect

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

Mike Rispoli

and you, Barry, good Thank morning.

industry-wide XX.X% previously our down line decline sequentially. to a stated year-over-year originations. with due and U.S. were in were reduction XX% The sales investment expectations. mainly Newmark's change was up in Total year-on-year second $XXX.X in a overall million, and revenues quarter results XX% XX.X%

year-on-year were but Our grew revenues X.X% down sequentially. leasing X.X% only

from We leasing continue which year-to-date volumes. XX% our to nearly represent retail, in investments and industrial of benefit our

and of servicing in fees related and also growth fees. grew GCS XX.X%, X.X% organic we other generated Our

services, management other servicing addition offset companies expenses from XX.X% reflect to variable correlates X.X% and decrease were fees increased revenues, that down A related commission-based in XX.X%. compensation by of Our partially million by with acquire professionals. of and expenses lower $XXX.X year-over-year Total revenue-generating compensation the expenses and at sequentially.

higher is was business. the higher and The and income to increase due latter offset expense. as interest to revenue interest of recorded Newmark's acquisitions by warehouse GSE, non-compensation growth The tied expenses of in which FHA

target respect We schedule in the second and half ahead annualized remain year. with $XX of expect of our to least during fixed at realize the which $XX be XXXX, cost of $XX savings million million million realized to will

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

EPS compared Our $X.XX with was $X.XX.

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

leverage We this Turning of repay X.X quarter the $XXX.X times. our of was corporate million equivalents balance redemption revolving to $XXX.X used Taking repayment to million cash July, from joint and cash the with of the facility. net million sheet. ratio cash we a and ended venture account, total debt. our $XXX into In credit of

Moving to outlook.

and full $XXX from $XXX and million million expect revenues to $XXX business. to million XXXX the to EBITDA $X.X and continue We cash of billion year generate approximately adjusted of

in we a markets included our our once have this detail year will lays levels and deck, in expectations We XXXX why revenues and normalize. investor more which peak earnings slide for out believe exceed

be we approximately time, of our billion acquisitions, over expect our to ever and Excluding would XXXX million, additional $XXX results. hires both $X nearly to EBITDA grow adjusted which to exceed revenues best and

compelling has XX% double. Newmark's then believe and by since outlook While with adjusted over more We XXXX lower for compared incredibly declined is our our low growth valuation investment opportunity. XX% than Newmark EBITDA make strong or prospects XXXX, a stock

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

Operator

Thank Instructions] KBW. we'll [Operator take from Rahmani you. now Jade with a question And

Jason Sabshon

This for Sabshon Jade. Hi. actually is Jason on

to do current to are seems driving stream steady leaving think Newmark. is that? be that producers a there What you of their firms join So

Barry Gosin

want a high-earning place We work. the we've brokers -- brightest, are. And We're hiring and here. best as the to best a talent-based the brokers good just to Plus where we plus get to other in momentum a best resources, other and best continue place brokers work. we're the be infrastructure brightest Well, It's good be the to provide the brokers research. for business. to want

Jason Sabshon

And that you my it. business sizable next Thank specifically for of question, Got point where gaps areas offering you. have to? there you the could any a are

Barry Gosin

well. we Well, people bought three We into. expanding in adding space and we're that We're UK expanding white we're companies internationally. as the do have

have we we that in, And We rest some to -- various of -- there opportunity in are which plan space us we there. the for markets a we're we it's specific grow. where to have have have other an white already and verticals Europe, expand

for can many the in the significantly to United around even globe. are more and there us opportunities We So grow grow. States significantly

Jason Sabshon

you. Thank think And you what follow-up what deals you that, I to size if are opportunities as And you targeting? a M&A M&A, it. guess, any, do Got what consider?

Barry Gosin

merge nature generally significantly friction tuck-ins. you Well, bolt-ons two not and people a like because of overlap. any of when transactions with amount we of significant large the We're at looking

need that with support. where on really additional really at it's we be things might worked focus So well and weak we laser the target to a and help

we're to adding And we're we able And so do and where been need talent. we've markets going into that.

Mike Rispoli

We opportunities grow to also have lot capital. in businesses require don't a of that

it's management capital would of that be property examples clients where same with. markets So the that business do we

our more what grow opportunity we GCS management together we them better we of an manage better together as rep tenant to things and assets better. put have well work it's because do These to more and our time, business, clients our their really over We you'll see doing infrastructure are our just expand continue help just that for our business. as to businesses

Jason Sabshon

Thank my Great. you taking questions. for

Mike Rispoli

Thank you.

Operator

with We'll question from next our Sandler. take Alexander Goldfarb Piper now

Alexander Goldfarb

Hey, good morning.

So here. two questions

a a mood not still side, lot and thrown to to to is, said, keys are capital, does are coming seem there's markets still it having going to like Barry, lot be readjust slow; everyone, real feels the the go that the first Newmark's. are two, lending of people seems especially realizing leasing of estate we're people have seems on like that one, Japan. there the out of earlier seems like equity is this this a it especially, yet like remains footing through, to But The than in to It better year. office definitely being back finding wave

think the view that So own, opportunity capital and Or that people tap when it of that you they do especially hoping more that truly this realize in that these that materialize takes course? care guys of you're just all of and fruition? restructuring, to will your that get their distressed you do is blend loans stuff want pent-up fact involved doesn't in to come to together, that normal you put see of market you and into because to on some need sort the the extend it that equity

Barry Gosin

The to you do retain There's try go less of basis Yeah. to are a enormous interest going XXX provide XX%-XX% to coverage. XX% different still in amount to theory, if If up a equity value, banks rates financing. you're going there's And debt to a points, want loan be of to going in reduction requirements. value. level

going they're temporary to need extend, to only will these of of existing due, but capital, are If as not also new need So sources they to want debt. which from come lenders, new they're equity. be their sources more debt people going need and blend loans

it given be back. will some And of

the Some will back. keys be given of

the on the they're eventually, capital. get And actually existing level. in if us to opportunities be specific to spreads, degree that's The lenders to once think cap but place normalize still great make eventually work There allowed be back the hold as new with new interest a out. and good be. They'll place will they're for more to rates borrowers. will they to a 'XX in rates once there need taking I their will banks, the to estate, real But that and lenders a they'll learned stabilize money going

a you Fed the it's basis coming and in. moment basis back and until another -- settle soon As points, XX everyone for it's to points XX think as going down just it raises shuts

once shortly. So the -- you and debt and know I going it's start think stop can you very can trading certainty markets, have equity And it's we in again. you to

Alexander Goldfarb

P&L. investments, guys people your gave A the and then different the that to of is, And years of number Okay. second you on of teams question for purposes of ago, restructured think, amortization the the I pre-COVID, acquisitions the issuance equity such. you

the you all was way, it, of shares so the vest. instead getting like a brokers coupon that vesting staggered at think So the four-year it day and one I along

all guessing all into we're sort vesting now of year. I'm four So every way the years

for how hopefully So as of are on? looking you prepare to what and was do a at the going buy growth upcycle you direct bottom top that that there ensure the there's guys definitely line, such that from more you was around, correlation new doing the teams -- dilution before is this whereas some coming, line time

Mike Rispoli

Yeah.

to So have we growth are keep from basis, this we flat year-over-year. year, within stated today. a a be we weighted share And where target our on X% count expect to average

and to have manage we can plan. a the We time. watching the X% it So all know we we're it

manage to that expectation. able within be to expect we So

Alexander Goldfarb

you. Thank

Operator

James. [Operator Instructions] our next take from question Raymond We'll with O'Shaughnessy now Patrick

Patrick O'Shaughnessy

morning. good Hey,

these in owner competitive wins? are on out earnings customer occupier wins Are or Your generally called side more side the Management. Property and and property Facilities the they release wins

Barry Gosin

I both. do well. facility generally the facilities it's other generally property winning win money facility on to business. up earn of make aspects pure-play on assignment. We winning don't as management management matched opportunities where mean in side to -- and the we're They're side we're We the with

Patrick O'Shaughnessy

business, grow about it. commission continue company's margin and that the rate, of your Property Got to of you of Management implications the the If profile? does faster than things? part growing margin the on we do weigh growing how business think side a faster that at overall Facilities And certainly

Barry Gosin

-- $X.XX. margin, in every margin the for opportunity for dollar is our mean markets you capital I if incremental

we earnings market when our to normalizes, are So margin have amount high increase in of capital going a markets. in disproportionate the

a So of opportunity, lot we that have in growth a lot of area.

a of corporations a management. other that reasonably usually unless project -- is workplace, But management with need, management and aspects other business. business: and business. rep kinds lower-margin the it is tenant relatively leasing, Property good margin of businesses Facility consulting, comes

facility when why a play. brokerage low we margin. that's If it's significant where with So a I a pure very of facility management amount it's that's a say play, it's opportunity management business,

much is bespoke on a Companies facility they're integrated more are a a basis hired. on where solution-driven suited commodity innovative, pure to global to we just hire us outsource when creative, -- want they best looking a where it it's that not when fully be representation management completely,

Mike Rispoli

better are the we'll the business, that Yeah. keep to even operationally I add given more would operationally to expectations out efficient, our to the take -- continue that, we And costs we get costs. of to margin continue can of mix grow fixed as time changes. some flat it over

Patrick O'Shaughnessy

you. from Thank helpful. you provide That's quarter? revenue in it. the Got Eve Can Gerald contribution second the

Mike Rispoli

I an basis. it's $XXX around a recurring. million large of $XXX million is majority their to what announced annual we've is And on think business

more comes somewhat transactional. businesses do in So evenly. it some They that are have

great time. have industrial For in a over really example, which they capital we grow have UK, to business great markets the opportunity a

So generally -- year. but throughout in comes the it evenly

Patrick O'Shaughnessy

senior notes refinancing terms do for fourth about Curious Got timing the what pay. in that might your have quarter. to you it. current that coupon have of due guys in the me, are of expectations last you then and And coming

Mike Rispoli

of We bit. refinance so. expect from five-year it probably you when transaction basis to they're we XXX treasuries until maturity. if advance now, initially did look have or a I well points just up the think widened the Spreads in And at

can't we handle within but situation. will that the nothing higher So rate financial be our

Patrick O'Shaughnessy

Thank Hey, great. you.

Operator

I'd to to or will for That our question-and-answer comments. today. conference additional session back like conclude for presenters any our over closing the hand

Barry Gosin

updating next thank look want joining And Thanks. quarter. you for forward to I the today. in I to everybody us

Operator

participation. for today's conference. And thank once you conclude again, all your We that does

disconnect. now may You

Newmark (NMRK) 28 Jul 232023 Q2 Earnings call transcript