NMRK - Earnings call 3 2023 | Newmark Group, Inc.

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Operator

Good day, and welcome to the Newmark Group 3Q '23 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jason McGruder, Head of IR. Please go ahead.

Jason McGruder

Thank you, operator, and good morning.

quarter results third presentation release its morning. this issued XXXX press financial and Newmark the on for results only stated, otherwise Unless provided months period. September earlier the today's ended XX, year XXXX, the X compare call Except as referring results and the on only adjusted includes will EBITDA. non-GAAP which adjusted to basis, our a terms specified, otherwise we be earnings how, of Please when GAAP of any definitions complete and/or refer to updated may corresponding we the why the section terms, and in these reconciliation use today's results to and press release for items non-GAAP them. from with Unless refer otherwise discussed by origination figures cash stated, loan operating net any respect and today to activities, sales. excluding cash flow to provided operations

this impact generated equity from other metric cash receivables flow impact of event. and loans Cash is before and partners the and the employees by XXXX the latter of business the loans, forgivable

the can the or assumes website on items share acquisitions current meaningful and information with today's results repurchases, the stock no supplemental changes in tables price. more press the You to non-GAAP discussed company's our material today GAAP The in outlook Excel find and on additional our in respect presentation. release and

are subject social, and long-term XXXX Securities Securities of facts based XXXX you statements remind the the within factors. call on to of various amended. Act Section this political amended XXE forward-looking of not are our as business be our beyond macro that targets the guidance. historical Act are about None economic, meaning of and Exchange XXA of as of Section XXXX goals also I'll change other or should expectations formal Our considered information on

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

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

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

Barry Gosin

Good morning, thank joining for you and us.

the and our of market Newmark's and seek during retaining Clients share quarter. to increasingly respond dynamics, professionals leasing to best the help attracting, capital us talent strategy the the across in to in navigate in enabled advice environment deep has our the industry. markets challenging bench, market empowering major gains significant global our shifting all resulted in footprint world-class expanding verticals industry's outpace

services the recurring management in as We property also during asset we well as management businesses our servicing high-margin double-digit and global generated businesses growth corporate quarter our our as to expand continue platforms. and

decline XX% to leasing, leasing and With year-to-date. the to industry for activity to a U.S. X.X% respect to third declining outperform Newmark the both compared with by the continued overall quarter XX%

with versus down same XXXX. last leasing X% period revenues Our and flat are in year-to-date the compared year

except Newmark's all drive of remain gains market the share remains in in Class industrial U.S., the types nearly strength in property properties. which Vacancies leasing and retail premium quarter. long-term additional averages are below for outside expected A challenged fourth office, to

XX%. up were revenues recurring Our

Eve expect the share as according RCA. market U.S., well the to platforms improvement businesses high-margin We This and of these points we percentage addition the to by in in our management our across during strong by where servicing businesses. their asset gained was corporate market management as quarter. and true Gerald solid We continue meaningful outperformed particularly sales property the XX services investment led materially growth global organic

originations. outpaced volumes debt Similarly, the our industry total

continue expect fourth outperformance activity. We our pipeline markets strong given this in of quarter the to capital

commercial that U.S. assets And approximately XX that mortgages the are level research outstanding capital at Newmark on in in and level of intermediate years. terms in the our of of highest markets, potentially the In multifamily and is estimates reports distressed view its $X.X long-term troubled. U.S. trillion MSCI

financial markets why are when changing financing innovative cap market continues sales, -- the traditional professionals leader which of investors on Higher Talent the solutions. capitalize is matters highest positions lead opportunity team enormous an banks and seek rising interest and rates to for Newmark. As other this more pullback Newmark our uniquely to and most is in lenders in owners and share to the gain quality rates industry loan landscape. difficult, lending the by

to trillion world-class debt maturing to U.S. debt brokerage our drive and commercial to businesses. platform of real maturities due XXXX. the We will growth part provide to We expect $X.X time, meaningful over tailwinds these long-term our mortgage origination debt in estate record anticipate

near to also bigger the XXXX part business. to in ever become significantly which in restructuring market of our XXXX and increase expect and our our an in and And our of peers financings outperformed We record peers professionals in challenging full-service market. a term, bespoke transactions of number the volumes continued in the Recapitalizations the expected innovative are we requiring specialize. expect more a outperform

Our and model to proven across has resilient the successful cycles. be

expect the share Adjusted fourth per in and continue the industry We in earnings of double-digit EBITDA. by adjusted XXXX to growth revenues. generating outpacing quarter

Our and strong earnings recover. capital incremental volumes margins will the industry markets outperformance drive when significant revenue

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

Michael Rispoli

capital activity. million, declined in the origination X.X%. and market sales Thank revenues you, as morning. XX.X%, Barry, industry overall to revenues more decline respectively, investment $XXX.X We and outperformed good and XX.X% Total markets in than down XX% compared mortgage our a by commercial were significantly

revenues in the the compared industry, for quarter XX% declining Our for to as X.X% a XX% X% and periods. industry to outperformed year-to-date the decline leasing also both

compared the XXXX. last grown for have Our with industrial and retail XX months over platforms levels pre-pandemic XX%

addition and Gerald servicing Newmark's fees. in by servicing of by growth XX.X%, from high-margin GCS the grew and business led improvement revenues other Eve services, management Our

which cost by acquisitions, were expenses to Compensation expenses. expenses. $X.X and initiatives. was pass-through compensation, professionals. excluding related to up variable by Turning offset X.X%, lower reflecting were largely down the our million new expenses increase acquired increase to revenue-generating companies Non-compensation X.X%, were partially expenses The in due offset savings

ahead cost quarter are increasing X fixed and million. savings now $XX our of initiative to reduction our target completed $XX schedule have We million

of XXXX. the expect million $XX We savings quarter this to complete of additional second by

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

Our earnings per $X.XX. compared with were share $X.XX

fully diluted count X.X [ shares quarter weighted X.X% shares $XX.X $XX.X million repurchased year-to-date. million during ] to and Our for X.X million by share the for increased We million. million average XXX.X

expect We average our for $XXX adjusted earnings fully diluted weighted quarter in approximately fourth year. for share be the $XXX to the million count million and

cash sheet. September equivalents. Turning $XXX.X We to ended the million cash of balance and with

a generated operations with During $XXX $XXX.X repay received million we period flow and ended the million this used cash the joint We on total million of to debt. of venture. from the and quarter, a $XXX.X redemption cash of $XX.X corporate from revolver million

was debt of our Newmark's net borrow X.Xx X.Xx, we our leverage revolver. repay million million million under to remaining November at an million $XXX $XXX the our To to the announced from plan $XXX maturity, recently credit $XXX improvement and end compared agreement June.

to Moving outlook.

XX%. We to and quarter and of in XX% the $X.XX, XX% to an total outperform year. expect and revenues, to XX% between of compared $XXX $X.XX $XXX XX% to with per the between increase generate up improvement and last to million earnings million, share industry to of Adjusted XX% fourth $XXX million a of $XXX million EBITDA

and full billion, $XXX EBITDA year, billion earnings the and million adjusted to $XXX between of between $X.XX. XXX $X.XXX and we per For $X.[ anticipate $X.XX million, ] revenues share

and outperformance earnings of driven our across has investing revenue long-term for model cycles. Newmark's the growth

for XX, markets on consensus midpoint today's the was guidance outperformed we Street year which capital our and based for we once investor outperform As in presentation a peers. the in significantly And in XXXX, demonstrate will Slide of our again XXXX, we our record industry industry volumes. on competitors,

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

Operator

[Operator Instructions]

Alexander our question And Sandler. with will first Goldfarb come Piper from

Alexander Goldfarb

clearly fourth guidance. quarter Just the first question is strong

So that's great to see.

is few that is drivers it that we are closing. enhanced just by a of XXXX particular, quarter fourth being few being closing? just up should a equally Just think one, setting transactions two, And in curious, robust? deals the as of that is that then Or

Michael Rispoli

Alex, will be see half. performance. it's we've in floor market. second an bottomed sort half perspective happens from would and earnings you're the And now challenging. We'll the year continue at to of difficult I is out that least company's see the next what Certainly, say of we be we a of earnings first the continue to in Mike. what seeing

Newmark win share. market more But we from to perspective, just continue a

management third be are the will up quarter. XX% fourth the up quarter, Our in in double businesses digits again

outperform continues market. better than quarter. I business fourth see leasing leasing business probably the to the you'll our to And continue Our up and in that the think be will market

the to a attributed win our business, of market. share the significant talent larger think our we platform. that's And In transactions on really we have I to in just the markets continue capital

for year to early So say us It's certainly, market. XXXX XXXX the will going up. to little wouldn't a significantly to be strong I be tell. But relative is a

Alexander Goldfarb

going obviously, fun I everyone that Okay. is would guidance, the in X%, be to it would a comments had. at you the that of And made end equity was you've and then low that the end, the little the to estate on business towards be investment I'm guys surprised the the real indicated positive -- X% topic. wins compensation it a is just given and always lower have -- finance compensation

range? relating altering far we you the Street? quarter the how equity fourth of should reducing ahead payout? EPS so compensation part the or why that the guidance of to also about are guidance reason compensation is So your the comments is adjusted Or And think

Michael Rispoli

comes think as previous will our we've monetization the in compensation our always unique overall said expenses equity and of become for have we earnings issued we've management a and I stock what our overall smaller GAAP grow, Look, shares Certainly, revenue a of compensation percentage or years. businesses of structure the that our through company.

the stock going what's a a P&L little just the lower. the price down coming through bit, fair bit value with so little of be is being to And

the in and be not end year. in the we any true bit but most to holds guidance changing a little markets, our this think just We're model X% lower towards X% way, we'll

Operator

Instructions] [Operator

with next KBW. Our Rahmani Jade comes question from

Jade Rahmani

specifically One the this is to Can strong the provide of that you quarter as comment growth? management what within driving outperformers services. any was

Barry Gosin

we do Well, to continue more servicing.

asset continue We do management. to

strong our opportunities With that really our We the build, a manage give we property to are opportunity also better a us property. things look getting increasing business, the business. relationships at sell, markets those closer capital we and management

to continues grow. that So

Michael Rispoli

Eve said plus about earlier X we in of Gerald they business, the year, there, we've minus their mentioned do is revenue remember Jade, million that of the item and annually, And business. about if $XXX bought about U.K., Yes. X/X of we the in management or X/X is you in other

contributing also to that's So the line. management

Jade Rahmani

I wondering XXXX. to respect with comment second capital they has broad you if would the half about in any is would recovery to markets. expect earliest said be CBRE the was begin could that make Okay. that and

before, were the there's clear that and they leasing on Also leases on to -- side, on smaller it's office, are rents. respect with some pressure new than revenue

to to would you're from it XXXX. how be So hear helpful you starting think about

Barry Gosin

it's how being As we The premium retail we The better. get we to there has as well, leasing, cities. Mike good better. in office We've are think transactions the fairly are done market -- much is at and pretty leasing, in most leasing done only said, going well generally industrial question think office high-quality to bottom, made. pretty

to get decisions But I are think whether Companies of to space. better. the what of we'll really hybrid in it's could environment anybody a hard don't is. exactly of it's at I say we determining that XX, the 'XX, closer to what get And making it's end occupying like, middle looks clearer around think decision the predict. going And get as

Jade Rahmani

And positive broadly in to would you XXXX? to absolute expect speaking, be year-on-year, be follow-up growth a that

Barry Gosin

to our been would We the brokers productive This from quarter very people. great -- almost we public beginning. went plan like stated the to company is view do. really platform. and highest is best hiring bring this professionals the be. hiring where that been our we've That's most we every since We've We've a our

best the and rise. We in We market been cycles. results share. the the well We've the better have the highest all do done the think proven market trough. that will We doing recovery. in well in has across We're

said have time what been think there's to true. over plan been has plan our is of that what evaluate period I you enough and guys So has the proven our results time of we for this

Operator

our from question will with And Patrick next come James. O'Shaughnessy Raymond

Patrick O'Shaughnessy

an you it the big in And portfolio markets earlier we on tough Maybe you sizing about to revenue is to capital Bank benefit up to impact this year of in create quarter Signature should think How for the the a comp a fourth sales. question. enough XXXX. follow in

Barry Gosin

hired share an before, business consistent we're will market just forward. great new market signature of ] our we've As people. [ on outperformance and talent, portfolio. to the itself of have outsized will as going transacted. proportion resolves not said we to But -- gets We've get we believe we going the comment We've that sequentially that continue the size acquired the

Patrick O'Shaughnessy

looks in a And Okay. Can I correctly, your it strategy? if portfolio the you you [ servicing it recall just on grew remainder quarter. update this then the an year. third earlier provide limiting bought like ] And decent of amount your SpringXX

Barry Gosin

book. we've of own a mean, XXX% I management, the as nice which integrated integrated servicing $XXX better together built We've billion Well, we that. servicing with we business. SpringXX. servicing, does loan screening, have asset now SpringXX business, We've

position enterprise management puts flexibility So platform work of time. who a that in all in run the like management, what to really moment services leasing can in management, that and good capability this, gamut project a the having this combined very of adds us to those servicing, X asset property through market within people

Michael Rispoli

-- $XXX to just clarify. Just to clarify billion. sorry, It's

operator. ahead, Go Sorry.

Operator

additional We Sandler. an with Piper Goldfarb question do Alexander from have

Alexander Goldfarb

Just want the building that up going brokerage appreciate guys just general, M&A you sort outline clearly, of of traditional transaction. I investment the have Blackstone mean, you complement that details. can to I would verticals. -- bank Barry, more term I that, back, the I But you don't your advised what, advised on guess, revenues you're in on FDIC

the a try new just about to addition we think holistically as there company. about sort the is the way of So revenue think can that streams we of

Barry Gosin

were up time, more the -- as in business. last we've -- that as Well, advisory we you said we heavily we picked getting

bankers. on brought we -- we're So

complex, to in business, starting that. more providers REIT debt kinds a to new we good more recaps whole are do array we're do and think real of investors M&A we a continuations, of opportunity REIT see where in-depth place in to total the investors in new transactions and We a as

we from placement. another self-storage did As quarter, -- a to $X.X a million debt institution. a billion sale was institution $XXX -- major last you Park Brea saw, we major to major a La

respect these We just were of from. feet out Texas be these cases, to multivalent all come [ yesterday these cases, up more go-to that In the just And multifamily the square ] of yesterday. of million largest or across the office office are we incumbents there the office, X.X other in opportunities more continue picking we in most creative wire, creative that the solutions. company will of traded providing

wider real a and right So we just our of business the talent will to spectrum bring the first see Basta We're now a and the things table. estate in step. that in room, that's the

Operator

the Barry And I'll conclude additional turn does over closing for back that the session. to Gosin now question-and-answer or conference remarks.

Barry Gosin

Well, to next forward you. to look everybody want for us Thank thank and joining I quarter.

Operator

you does you. conference. your day. excellent conclude participation. an for We Thank do thank That today's Have

Newmark (NMRK) 1 Nov 232023 Q3 Earnings call transcript