NASDAQ:NMRK Newmark Group Q3 2024 Earnings Report $11.32 +0.15 (+1.30%) Closing price 03:59 PM EasternExtended Trading$11.32 0.00 (-0.04%) As of 04:05 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Newmark Group EPS ResultsActual EPS$0.33Consensus EPS $0.30Beat/MissBeat by +$0.03One Year Ago EPS$0.27Newmark Group Revenue ResultsActual Revenue$685.90 millionExpected Revenue$682.07 millionBeat/MissBeat by +$3.83 millionYoY Revenue Growth+11.30%Newmark Group Announcement DetailsQuarterQ3 2024Date11/5/2024TimeBefore Market OpensConference Call DateTuesday, November 5, 2024Conference Call Time10:00AM ETConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckPress Release (8-K)Quarterly Report (10-Q)Earnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Newmark Group Q3 2024 Earnings Call TranscriptProvided by QuartrNovember 5, 2024 ShareLink copied to clipboard.There are 8 speakers on the call. Operator00:00:00Ladies and gentlemen, good day, and welcome to the New Group 3Q 2024 Financial Results Call. Operator00:00:05Today'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. Speaker 100:00:15Thank you, operator, and good morning. Newmark issued its Q3 2024 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the 3 months ending September 30, 2024, with the year earlier period. Except as otherwise stated, we will be referring to results only on a non GAAP basis, including the terms adjusted earnings and adjusted EBITDA. Unless otherwise stated, any figures today with respect to cash flow from operations refer to net cash provided by operating activities excluding GSE FHA loan origination and sales. Speaker 100:00:46We may also use the term cash generated by the business, which is the same operating cash flow metric before the impact of cash used for employee loans. Please refer to today's press release, the supplemental tables in the quarterly results presentation on our website for complete and updated definitions of any non GAAP terms, reconciliation of these items to the corresponding GAAP results and how, when and why management uses them for additional information on our cash flow measures as well as relevant industry and economic statistics. The outlook discussed today assumes no mere material acquisitions or meaningful changes in our stock price. Our expectations are subject to change based on various macroeconomic, social, political and other factors. None of our targets or goals beyond 2024 should be considered formal guidance. Speaker 100:01:29I also remind you that information on this call contains forward looking statements, including without limitation, statements concerning our economic outlook and business. Such statements are subject to risks and uncertainties, which could cause actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward looking statements. For a complete discussion of risks and other factors that may impact these forward looking statements, see our SEC filings, including but not limited to the risk factors and disclosures regarding forward looking information in our most recent SEC filings, which are incorporated by reference. I'm now happy to turn the call over to our host, CEO, Barry Gustin. Speaker 200:02:05Good morning and thank you for joining us. Newmark's growth accelerated as every major business line improved during the quarter. We increased capital markets revenues by over 18%, the 4th consecutive quarter of double digit improvement. This performance was fueled by a 77% increase in our mortgage brokerage volumes. With approximately $2,000,000,000,000 of U. Speaker 200:02:28S. Commercial and multifamily mortgages maturing in the near term, our professionals are incredibly active finding new sources of debt and equity capital for our clients, including private credit, CMBS and insurance companies, while still matching borrowers with the GSEs and banks. Newmark's pipeline of capital markets transactions across debt, equity placement and investment sales is incredibly robust and we expect this to continue through 2025. In addition, we increased our Fannie Mae origination volumes by 58% over the trailing 12 months compared with a year earlier, which will fuel the future growth of our high margin primary servicing business. We generated an 11% revenue increase in management services and servicing. Speaker 200:03:19The broad based organic growth marked the 5th consecutive quarter, a strong improvement for these businesses. We expect continued growth of these service lines and target doubling them to over $2,000,000,000 within 5 years. We increased leasing fees by 6% led by growth across retail and industrial, which are businesses we have strategically grown over the past several years. We remain bullish on the fundamentals of retail leasing, where availability in the U. S. Speaker 200:03:49Remains at historic lows and asking rents continue to climb. We also expect industrial leasing to continue benefiting from the tailwinds provided by growing demand for data centers as well as reshoring and near shoring of North American manufacturing. Office leasing activity continues to increase as more companies commit to space and mandate returning to the workplace. We anticipate the recapitalization of properties at lower values to further drive leasing activity. Newmark continues to be the platform of choice for the industry's most talented professional as we continue to attract industry leaders across service lines and geographies. Speaker 200:04:30Following our recent expansions in France and the UK, we are now building Newmark in Germany With improved macroeconomic and monetary environment, sustained growth in demand for our services and our continued market share gains, we are more excited than ever about Newmark's future. With that, I'm happy to turn the call over to Mike Rispoli. Speaker 300:04:52Thank you, Barry, and good morning. Newmark's 3rd quarter results once again demonstrated our strong operating leverage. Our total revenues were $685,900,000 up 11.3%, which delivered adjusted EPS and EBITDA growth of 22.2% and 17% respectively. Revenues for management services, servicing and other improved by 11.4%. We generated organic growth across all of our businesses, including strong improvement from GCS, servicing and property management as well as higher valuation and advisory fees. Speaker 300:05:33Leasing revenues increased by 5.6% led by growth in retail and industrial. We improved capital markets revenues by 18.5%. Newmark's debt business once again gained considerable market share as we expanded fees from commercial mortgage origination by 45.2%. This outperformance was broad based across property types, reflecting volume growth of 76.8 percent for mortgage brokerage compared with approximately 25% for the U. S. Speaker 300:06:06Market. We also grew volumes from our GSE FHA origination platform by 27.5% compared with a 5% industry decline. Our investment sales fees rose by 4.8%, which included higher retail and office volumes. Turning to expenses, excluding pass through items. Total expenses were up 7%. Speaker 300:06:31Compensation expenses were up 6.3%, reflecting higher variable commissions. Non compensation expenses were up 9.3% tied to higher management and servicing fees. Our tax rate for adjusted earnings was 13.4% compared with 15.7% last year. Moving to earnings. Our adjusted EPS was $0.33 up 22.2 percent. Speaker 300:06:59Adjusted EBITDA was $112,600,000 up 17%. With respect to our share count, our fully diluted weighted average share count was 255,000,000 down slightly compared with the Q2 of 2024. View Mart's higher stock price accelerated the recognition of 3,700,000 RSUs, which was not related to the issuance of new shares. Accordingly, our fully diluted weighted average share count was up 3.1%. Excluding this RSU impact, our share count was only up 1.7%. Speaker 300:07:35During the quarter, we repurchased 7,600,000 shares and units for $100,800,000 at an average price of $13.30 and year to date 193,500,000 dollars at an average price of $11.69 Yesterday, our Board authorized increasing our share buyback program to $400,000,000 Turning to the balance sheet. We ended the quarter with $178,600,000 of cash and cash equivalents and $770,400,000 in corporate debt, resulting in 1.4 times net leverage amongst the lowest in the industry. The change in cash from year end reflects $266,200,000 of cash generated from the business and $223,100,000 of incremental corporate debt. This was offset by $209,800,000 used primarily for investments in revenue generating headcount, the return of $241,400,000 of capital to shareholders and normal movements in working capital. Turning to guidance. Speaker 300:08:46Our updated outlook for the full year 2024 compared with 2023 is as follows. We expect total revenues of between 2,620,100,000 dollars 2,680,000,000 dollars an increase of 6% to 9%. We anticipate adjusted EPS of between $1.11 1 $0.17 up 6% to 11%. We expect our adjusted earnings tax rate to be between 13% 15%. And we anticipate adjusted EBITDA in the range of $410,000,000 to $430,000,000 an increase of 3% to 8%. Speaker 300:09:27We've included more detail on our guidance in today's press release and investor presentation. And with that, I would like to open the call for questions. Operator00:09:38Thank Our first question comes from Connor Mitchell with Piper Sandler. Speaker 400:10:02Hey, good morning. Thanks for taking my question. You guys touched on a little bit in your opening remarks. The leasing was up 5.6 percent, just lower growth than some of the other revenue line items. And the leasing was driven by retail and industrial. Speaker 400:10:18It just seems that recently we've seen some pretty healthy leasing numbers coming from recent office reported earnings. So the first question I was just wondering is, is how should we think about Newmark's office leasing commissions contribution to the quarter? And then how should we think about the potential upside for leasing commission contribution for office along with, I guess, the strong performance of retail and industrial too? Speaker 300:10:51Sure. Good morning, Connor. Our office leasing pipeline continues to be strong. We're winning a lot of big mandates. And I think year over year, we'll have good leasing performance. Speaker 300:11:05If you remember last year we outperformed the market in leasing and we're up more than the average market particularly in the Q4. But we see office mandates coming back. We see strong leasing pipeline and we think that's going to continue into 2025. Speaker 400:11:26Okay. And then just a follow-up on that. For retail and industrial, it seems like it was a pretty good quarter for leasing in those property types. Do you also see some continued tailwinds for them as well and maybe on the data center side too? Speaker 500:11:44Yes. Hey, Connor, this is Lou Alvarado. Look, we're seeing on the industrial and the retail significant activity. Data center is definitely a big active sector of the market as well as this cold storage. We expect that activity to continue. Speaker 500:12:02The demand for that doesn't seem to be slowing down at all. And I think that we've got some talented people working in those sectors and I think we'll benefit from that business. Speaker 400:12:17Okay. I appreciate the color there. And then maybe just switching gears. The updated guidance, it looks like pretty healthy increase in revenue, adjusted EPS. I think if you guys could just help me reconcile the change to adjusted EBITDA, it looks like the year over year change came down slightly versus the revenue and EPS was increased for the year over year change from the prior outlook. Speaker 400:12:45Just if there's anything you guys could help me reconcile there. I know there's the legal settlement that is treated differently between EPS and EBITDA, but if there's something else that might be changing the outlook for 1 versus the other and the divergence there? Speaker 300:13:03Sure, Conor. I'll take that. This is Mike. You're correct. Our increased revenue and adjusted EPS guidance is a result of our strong performance year to date and the growing pipeline of capital markets activity and leasing mandates. Speaker 300:13:19The adjusted EBITDA is really just a function of how we treat legal settlements and related costs for adjusted EPS versus how we treat it for adjusted EBITDA. And if you remember in the Q4 last year, we had a very large favorable litigation settlement for about $12,800,000 Speaker 400:13:41Okay. And then if I could just squeeze one more in. You guys continue to grow overseas. I think the revenue was about less than 1% in 2017 versus now it's 13%. Just curious what lessons have you guys learned so far about maybe continued growth? Speaker 400:13:57Are you kind of looking at deepening investments in the current countries and markets regions that you're currently operating in? Or is the focus a little bit more on continuing to expand to other regions and markets that Newmark hasn't really set up shop yet? Speaker 200:14:17Well, we bought 3 companies in the UK. We now have a significant presence in the UK. We've opened 5 months ago in France and we have 45 people in our Paris office and growing. We launched Germany 2 weeks ago, 3 weeks ago and we seem to be in incredible there is an enormous amount of interest to people wanting to join us. And then our goal is to be throughout Europe and we're doing it in an intentional, thoughtful, careful way. Speaker 200:14:56Same plan that we had in the United States, hire the best people in the verticals in every geography and we're going to continue along that plan. It seems to be working. We've learned that lesson. You hire great people and you will have great results. Speaker 400:15:15Okay. Thanks everyone. Operator00:15:19And our next question comes from Jade Rahmani with KBW. Speaker 600:15:27Thank you very much. In the quarter, investment sales came in slightly below my estimate, while commercial mortgage came in above. And I think that reflects the dynamic in the marketplace around where we are in the cycle and investors more interested in debt or perhaps that piece of the market coming back first. Can you give any color on how you're viewing capital markets and what you anticipate going forward? Speaker 200:15:56We see a very active pipeline of sales. Our debt market, we've just been fortunate enough to hire a significant amount of really great people. We're winning market share in more complex larger transactions. So we have a significant piece of the market in that area and that is serving us really well. On the sales side, you've had 4 years of headwinds. Speaker 200:16:30Once the pricing and discovery of pricing and the appropriate amount of capitulation on values, there will be a lot of trades and we're seeing that now. We think that it started over a couple of months ago, but the move in short term interest rates always puts a little bit of a damper on activity. So it's hard to predict exactly when, but we see a lot of activity. Speaker 600:16:58Thanks. Two follow ups. Firstly would be when might you expect growth in investment sales, new acquisitions to eclipse growth in the commercial mortgage business or maybe you don't? And then secondly, aside from cold storage data centers, are you seeing an increase in demand for traditional asset classes, multifamily and even office? Speaker 200:17:25Yes. I mean, we're seeing in every category. I mean, multifamily, there is going to be a shortage of multifamily housing, depends on the specific market that category is interest rate driven. Industrial continued near shoring will that will continue data centers, etcetera, retail. All those activities seem to be fine. Speaker 200:17:55The only complicated segment has been office, which certainly on the A quality top of the line properties are doing fine. Vacancy rate is almost at equilibrium in most of the gateway cities. And a bunch of these cities are starting to do conversions. In New York alone, we have probably 19,000,000 square feet in the queue of office buildings that are being converted to residential. So that will remove inventory, bring us closer to the right kind of vacancy rate and nothing is going to be put on the market for the next certainly for the next 3, 4 years. Speaker 200:18:38So I think the same thing is happening all over the country. So we're seeing every one of the categories start to create interest. People are investing in the United States and there is still the same there's a lot of liquidity and a lot of demand to acquire. Speaker 600:19:00Within the commercial mortgage debt business on the multifamily side, you had really strong growth with the GSE, Fannie Mae and Freddie Mac. Are you seeing them pick up their volumes and get more active or were there any specific transactions particular to Newmark that drove the growth? Speaker 200:19:22We continue to have a fairly robust multifamily investment sales business. We continue to hire people as we will continue over the next year. We've won more market share. We capture a lot of the sales that we do for debt. Our capture rate has increased. Speaker 200:19:44So we're a beneficiary of that kind of business. Speaker 300:19:50And Jade, I would add, we're seeing a big pickup in demand for the GSE business across the whole market as well as at Newmark. I think the biggest challenge is going to be how much can get closed this year and how much is going to get pushed out to next year. Speaker 600:20:07Okay. But you all recognize revenue at rate lock rather than close. So that potentially could be a positive 4th quarter driver? Speaker 300:20:18Yes, it could be. But again, getting to rate lock, there's just huge demand in the market. And how much can Fannie and Freddie push through the pipeline before year end remains to be seen. Speaker 600:20:31Okay. Well, certainly it does sound like that business has picked up. So thanks very much. Thank you. Operator00:20:40And our next question comes from Patrick O'Shaughnessy with Raymond James. Speaker 700:20:46Hey, good morning. I want to follow-up on the question with your updated adjusted EBITDA guidance. So I get the peculiarities of the year over year math with the settlement in the year ago period. But on an absolute dollar basis, your adjusted EBITDA guidance fell, I think $4,000,000 to $8,000,000 versus your prior guidance. It was $4.18 to $4.34 now it's $4.10 to $4.30 And so that implies that your margins are going to be around 15.5 percent to 16% versus the prior 16.4%. Speaker 700:21:22So what are you seeing in terms of this incremental revenue leading to a lower margin profile? Speaker 300:21:30Sure. The first thing I'll point out is the 16% plus last year included the 12,800,000 dollars favorable legal settlement. If you take that out, you're probably in the 15.5% range, maybe a little higher. So year over year, we would expect margins to improve. And then this year, year to date, and you could see it in the GAAP to non GAAP REX for adjusted EPS. Speaker 300:21:56There was favorable legal settlements last year for a few $1,000,000 and unfavorable for a few $1,000,000 this year. Nothing too material, but just moving the guidance on adjusted EBITDA for the full year. Speaker 700:22:11Okay. Thank you. And then I guess maybe bigger picture as we're looking ahead to the Q4 and next year. How are you thinking about incremental margins for the business? Speaker 200:22:23A lot relies on capital markets. We have the athletes on the field in all the geographies and all the verticals. As we said in the past, for every dollar that we add incrementally under the same footprint, it's $0.45 to the bottom line. So we expect our $40 to $45 to the bottom line. We expect that to happen when the market opens up. Speaker 200:23:01We've also stated that these are going to be sequentially improving over the next couple of years until the moment in time when the market stabilize, normalizes, they are back in the ecosystem of selling and buying property in a general robust market, which we think is happening between 202526. That's why we gave you the guidance for 2026 because we think it's going to come back and we think it's going to improve our margin and get us back to an earnings position where we had projected. Speaker 700:23:38Great. Thanks, Barry. And then last one from me. How do you characterize debt financing availability right now? And has there been a shift in sources of lending? Speaker 200:23:51There is a whole new category of lender, which is the debt funds are taking some of the energy from the banks who are concerned as to the size of their CRE books. So the debt funds are proliferating and many of the private equity firms are building captive insurance companies, which gives them the opportunity to have long term capital to invest in real estate. So that's replacing some of the other the older debt players. So we're seeing a lot of liquidity in the market. The CMBS market is out there. Speaker 200:24:36And fortunately for us it came back about a year ago. And we're not having a problem finding money in those markets for good quality real estate. Speaker 700:24:49Great. Thank you. Operator00:24:53And ladies and gentlemen, it appears there are no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks. Speaker 200:25:02Thank you for joining us today. I still remain excited about the company's future and look forward to updating you on the next quarterly call.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallNewmark Group Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckPress Release(8-K)Quarterly report(10-Q) Newmark Group Earnings HeadlinesPiper Sandler Issues Pessimistic Forecast for Newmark Group (NASDAQ:NMRK) Stock PriceMay 7 at 2:31 AM | americanbankingnews.comHarwood to Fuel Accelerated Expansion of Dallas' Y'all StreetMay 5 at 10:48 AM | prnewswire.comAltucher: Turn $900 into $108,000 in just 12 months?We are entering the final Trump Bump of our lives. But the biggest returns will not be in the stock market.May 8, 2025 | Paradigm Press (Ad)Newmark Group, Inc. (NASDAQ:NMRK) Q1 2025 Earnings Call TranscriptMay 2, 2025 | msn.comNewmark: Above-Expectations Results Overshadowed By Unchanged Guidance (Downgrade)May 1, 2025 | seekingalpha.comNewmark Group shares fall as guidance overshadows Q1 beatMay 1, 2025 | investing.comSee More Newmark Group Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Newmark Group? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Newmark Group and other key companies, straight to your email. Email Address About Newmark GroupNewmark Group (NASDAQ:NMRK) provides commercial real estate services in the United States, the United Kingdom, and internationally. The company offers capital markets consisting of investment sales and commercial mortgage brokerage; landlord or agency representation leasing; valuation and advisory; property management; commercial real estate technology platform and capabilities; the United Kingdom business rates services; due diligence, consulting, and other advisory services; GSEs and the Federal Housing Administration lending services comprising multifamily lending and loan servicing; asset management; and flexible workspace solutions for owners. It also provides tenant representation leasing; and global corporate services consisting of workplace and occupancy strategy, energy and sustainability services, technology, project management, real estate and lease administration, and facilities management. The company offers its services to commercial real estate tenants, investors, owners, occupiers, and developers; lenders; small and medium size businesses; and multi-national corporations. The company was formerly known as Newmark Grubb Knight Frank Capital Group and changed its name to Newmark Group, Inc. in October 2017. Newmark Group, Inc. was founded in 1929 and is based in New York, New York. 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There are 8 speakers on the call. Operator00:00:00Ladies and gentlemen, good day, and welcome to the New Group 3Q 2024 Financial Results Call. Operator00:00:05Today'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. Speaker 100:00:15Thank you, operator, and good morning. Newmark issued its Q3 2024 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the 3 months ending September 30, 2024, with the year earlier period. Except as otherwise stated, we will be referring to results only on a non GAAP basis, including the terms adjusted earnings and adjusted EBITDA. Unless otherwise stated, any figures today with respect to cash flow from operations refer to net cash provided by operating activities excluding GSE FHA loan origination and sales. Speaker 100:00:46We may also use the term cash generated by the business, which is the same operating cash flow metric before the impact of cash used for employee loans. Please refer to today's press release, the supplemental tables in the quarterly results presentation on our website for complete and updated definitions of any non GAAP terms, reconciliation of these items to the corresponding GAAP results and how, when and why management uses them for additional information on our cash flow measures as well as relevant industry and economic statistics. The outlook discussed today assumes no mere material acquisitions or meaningful changes in our stock price. Our expectations are subject to change based on various macroeconomic, social, political and other factors. None of our targets or goals beyond 2024 should be considered formal guidance. Speaker 100:01:29I also remind you that information on this call contains forward looking statements, including without limitation, statements concerning our economic outlook and business. Such statements are subject to risks and uncertainties, which could cause actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward looking statements. For a complete discussion of risks and other factors that may impact these forward looking statements, see our SEC filings, including but not limited to the risk factors and disclosures regarding forward looking information in our most recent SEC filings, which are incorporated by reference. I'm now happy to turn the call over to our host, CEO, Barry Gustin. Speaker 200:02:05Good morning and thank you for joining us. Newmark's growth accelerated as every major business line improved during the quarter. We increased capital markets revenues by over 18%, the 4th consecutive quarter of double digit improvement. This performance was fueled by a 77% increase in our mortgage brokerage volumes. With approximately $2,000,000,000,000 of U. Speaker 200:02:28S. Commercial and multifamily mortgages maturing in the near term, our professionals are incredibly active finding new sources of debt and equity capital for our clients, including private credit, CMBS and insurance companies, while still matching borrowers with the GSEs and banks. Newmark's pipeline of capital markets transactions across debt, equity placement and investment sales is incredibly robust and we expect this to continue through 2025. In addition, we increased our Fannie Mae origination volumes by 58% over the trailing 12 months compared with a year earlier, which will fuel the future growth of our high margin primary servicing business. We generated an 11% revenue increase in management services and servicing. Speaker 200:03:19The broad based organic growth marked the 5th consecutive quarter, a strong improvement for these businesses. We expect continued growth of these service lines and target doubling them to over $2,000,000,000 within 5 years. We increased leasing fees by 6% led by growth across retail and industrial, which are businesses we have strategically grown over the past several years. We remain bullish on the fundamentals of retail leasing, where availability in the U. S. Speaker 200:03:49Remains at historic lows and asking rents continue to climb. We also expect industrial leasing to continue benefiting from the tailwinds provided by growing demand for data centers as well as reshoring and near shoring of North American manufacturing. Office leasing activity continues to increase as more companies commit to space and mandate returning to the workplace. We anticipate the recapitalization of properties at lower values to further drive leasing activity. Newmark continues to be the platform of choice for the industry's most talented professional as we continue to attract industry leaders across service lines and geographies. Speaker 200:04:30Following our recent expansions in France and the UK, we are now building Newmark in Germany With improved macroeconomic and monetary environment, sustained growth in demand for our services and our continued market share gains, we are more excited than ever about Newmark's future. With that, I'm happy to turn the call over to Mike Rispoli. Speaker 300:04:52Thank you, Barry, and good morning. Newmark's 3rd quarter results once again demonstrated our strong operating leverage. Our total revenues were $685,900,000 up 11.3%, which delivered adjusted EPS and EBITDA growth of 22.2% and 17% respectively. Revenues for management services, servicing and other improved by 11.4%. We generated organic growth across all of our businesses, including strong improvement from GCS, servicing and property management as well as higher valuation and advisory fees. Speaker 300:05:33Leasing revenues increased by 5.6% led by growth in retail and industrial. We improved capital markets revenues by 18.5%. Newmark's debt business once again gained considerable market share as we expanded fees from commercial mortgage origination by 45.2%. This outperformance was broad based across property types, reflecting volume growth of 76.8 percent for mortgage brokerage compared with approximately 25% for the U. S. Speaker 300:06:06Market. We also grew volumes from our GSE FHA origination platform by 27.5% compared with a 5% industry decline. Our investment sales fees rose by 4.8%, which included higher retail and office volumes. Turning to expenses, excluding pass through items. Total expenses were up 7%. Speaker 300:06:31Compensation expenses were up 6.3%, reflecting higher variable commissions. Non compensation expenses were up 9.3% tied to higher management and servicing fees. Our tax rate for adjusted earnings was 13.4% compared with 15.7% last year. Moving to earnings. Our adjusted EPS was $0.33 up 22.2 percent. Speaker 300:06:59Adjusted EBITDA was $112,600,000 up 17%. With respect to our share count, our fully diluted weighted average share count was 255,000,000 down slightly compared with the Q2 of 2024. View Mart's higher stock price accelerated the recognition of 3,700,000 RSUs, which was not related to the issuance of new shares. Accordingly, our fully diluted weighted average share count was up 3.1%. Excluding this RSU impact, our share count was only up 1.7%. Speaker 300:07:35During the quarter, we repurchased 7,600,000 shares and units for $100,800,000 at an average price of $13.30 and year to date 193,500,000 dollars at an average price of $11.69 Yesterday, our Board authorized increasing our share buyback program to $400,000,000 Turning to the balance sheet. We ended the quarter with $178,600,000 of cash and cash equivalents and $770,400,000 in corporate debt, resulting in 1.4 times net leverage amongst the lowest in the industry. The change in cash from year end reflects $266,200,000 of cash generated from the business and $223,100,000 of incremental corporate debt. This was offset by $209,800,000 used primarily for investments in revenue generating headcount, the return of $241,400,000 of capital to shareholders and normal movements in working capital. Turning to guidance. Speaker 300:08:46Our updated outlook for the full year 2024 compared with 2023 is as follows. We expect total revenues of between 2,620,100,000 dollars 2,680,000,000 dollars an increase of 6% to 9%. We anticipate adjusted EPS of between $1.11 1 $0.17 up 6% to 11%. We expect our adjusted earnings tax rate to be between 13% 15%. And we anticipate adjusted EBITDA in the range of $410,000,000 to $430,000,000 an increase of 3% to 8%. Speaker 300:09:27We've included more detail on our guidance in today's press release and investor presentation. And with that, I would like to open the call for questions. Operator00:09:38Thank Our first question comes from Connor Mitchell with Piper Sandler. Speaker 400:10:02Hey, good morning. Thanks for taking my question. You guys touched on a little bit in your opening remarks. The leasing was up 5.6 percent, just lower growth than some of the other revenue line items. And the leasing was driven by retail and industrial. Speaker 400:10:18It just seems that recently we've seen some pretty healthy leasing numbers coming from recent office reported earnings. So the first question I was just wondering is, is how should we think about Newmark's office leasing commissions contribution to the quarter? And then how should we think about the potential upside for leasing commission contribution for office along with, I guess, the strong performance of retail and industrial too? Speaker 300:10:51Sure. Good morning, Connor. Our office leasing pipeline continues to be strong. We're winning a lot of big mandates. And I think year over year, we'll have good leasing performance. Speaker 300:11:05If you remember last year we outperformed the market in leasing and we're up more than the average market particularly in the Q4. But we see office mandates coming back. We see strong leasing pipeline and we think that's going to continue into 2025. Speaker 400:11:26Okay. And then just a follow-up on that. For retail and industrial, it seems like it was a pretty good quarter for leasing in those property types. Do you also see some continued tailwinds for them as well and maybe on the data center side too? Speaker 500:11:44Yes. Hey, Connor, this is Lou Alvarado. Look, we're seeing on the industrial and the retail significant activity. Data center is definitely a big active sector of the market as well as this cold storage. We expect that activity to continue. Speaker 500:12:02The demand for that doesn't seem to be slowing down at all. And I think that we've got some talented people working in those sectors and I think we'll benefit from that business. Speaker 400:12:17Okay. I appreciate the color there. And then maybe just switching gears. The updated guidance, it looks like pretty healthy increase in revenue, adjusted EPS. I think if you guys could just help me reconcile the change to adjusted EBITDA, it looks like the year over year change came down slightly versus the revenue and EPS was increased for the year over year change from the prior outlook. Speaker 400:12:45Just if there's anything you guys could help me reconcile there. I know there's the legal settlement that is treated differently between EPS and EBITDA, but if there's something else that might be changing the outlook for 1 versus the other and the divergence there? Speaker 300:13:03Sure, Conor. I'll take that. This is Mike. You're correct. Our increased revenue and adjusted EPS guidance is a result of our strong performance year to date and the growing pipeline of capital markets activity and leasing mandates. Speaker 300:13:19The adjusted EBITDA is really just a function of how we treat legal settlements and related costs for adjusted EPS versus how we treat it for adjusted EBITDA. And if you remember in the Q4 last year, we had a very large favorable litigation settlement for about $12,800,000 Speaker 400:13:41Okay. And then if I could just squeeze one more in. You guys continue to grow overseas. I think the revenue was about less than 1% in 2017 versus now it's 13%. Just curious what lessons have you guys learned so far about maybe continued growth? Speaker 400:13:57Are you kind of looking at deepening investments in the current countries and markets regions that you're currently operating in? Or is the focus a little bit more on continuing to expand to other regions and markets that Newmark hasn't really set up shop yet? Speaker 200:14:17Well, we bought 3 companies in the UK. We now have a significant presence in the UK. We've opened 5 months ago in France and we have 45 people in our Paris office and growing. We launched Germany 2 weeks ago, 3 weeks ago and we seem to be in incredible there is an enormous amount of interest to people wanting to join us. And then our goal is to be throughout Europe and we're doing it in an intentional, thoughtful, careful way. Speaker 200:14:56Same plan that we had in the United States, hire the best people in the verticals in every geography and we're going to continue along that plan. It seems to be working. We've learned that lesson. You hire great people and you will have great results. Speaker 400:15:15Okay. Thanks everyone. Operator00:15:19And our next question comes from Jade Rahmani with KBW. Speaker 600:15:27Thank you very much. In the quarter, investment sales came in slightly below my estimate, while commercial mortgage came in above. And I think that reflects the dynamic in the marketplace around where we are in the cycle and investors more interested in debt or perhaps that piece of the market coming back first. Can you give any color on how you're viewing capital markets and what you anticipate going forward? Speaker 200:15:56We see a very active pipeline of sales. Our debt market, we've just been fortunate enough to hire a significant amount of really great people. We're winning market share in more complex larger transactions. So we have a significant piece of the market in that area and that is serving us really well. On the sales side, you've had 4 years of headwinds. Speaker 200:16:30Once the pricing and discovery of pricing and the appropriate amount of capitulation on values, there will be a lot of trades and we're seeing that now. We think that it started over a couple of months ago, but the move in short term interest rates always puts a little bit of a damper on activity. So it's hard to predict exactly when, but we see a lot of activity. Speaker 600:16:58Thanks. Two follow ups. Firstly would be when might you expect growth in investment sales, new acquisitions to eclipse growth in the commercial mortgage business or maybe you don't? And then secondly, aside from cold storage data centers, are you seeing an increase in demand for traditional asset classes, multifamily and even office? Speaker 200:17:25Yes. I mean, we're seeing in every category. I mean, multifamily, there is going to be a shortage of multifamily housing, depends on the specific market that category is interest rate driven. Industrial continued near shoring will that will continue data centers, etcetera, retail. All those activities seem to be fine. Speaker 200:17:55The only complicated segment has been office, which certainly on the A quality top of the line properties are doing fine. Vacancy rate is almost at equilibrium in most of the gateway cities. And a bunch of these cities are starting to do conversions. In New York alone, we have probably 19,000,000 square feet in the queue of office buildings that are being converted to residential. So that will remove inventory, bring us closer to the right kind of vacancy rate and nothing is going to be put on the market for the next certainly for the next 3, 4 years. Speaker 200:18:38So I think the same thing is happening all over the country. So we're seeing every one of the categories start to create interest. People are investing in the United States and there is still the same there's a lot of liquidity and a lot of demand to acquire. Speaker 600:19:00Within the commercial mortgage debt business on the multifamily side, you had really strong growth with the GSE, Fannie Mae and Freddie Mac. Are you seeing them pick up their volumes and get more active or were there any specific transactions particular to Newmark that drove the growth? Speaker 200:19:22We continue to have a fairly robust multifamily investment sales business. We continue to hire people as we will continue over the next year. We've won more market share. We capture a lot of the sales that we do for debt. Our capture rate has increased. Speaker 200:19:44So we're a beneficiary of that kind of business. Speaker 300:19:50And Jade, I would add, we're seeing a big pickup in demand for the GSE business across the whole market as well as at Newmark. I think the biggest challenge is going to be how much can get closed this year and how much is going to get pushed out to next year. Speaker 600:20:07Okay. But you all recognize revenue at rate lock rather than close. So that potentially could be a positive 4th quarter driver? Speaker 300:20:18Yes, it could be. But again, getting to rate lock, there's just huge demand in the market. And how much can Fannie and Freddie push through the pipeline before year end remains to be seen. Speaker 600:20:31Okay. Well, certainly it does sound like that business has picked up. So thanks very much. Thank you. Operator00:20:40And our next question comes from Patrick O'Shaughnessy with Raymond James. Speaker 700:20:46Hey, good morning. I want to follow-up on the question with your updated adjusted EBITDA guidance. So I get the peculiarities of the year over year math with the settlement in the year ago period. But on an absolute dollar basis, your adjusted EBITDA guidance fell, I think $4,000,000 to $8,000,000 versus your prior guidance. It was $4.18 to $4.34 now it's $4.10 to $4.30 And so that implies that your margins are going to be around 15.5 percent to 16% versus the prior 16.4%. Speaker 700:21:22So what are you seeing in terms of this incremental revenue leading to a lower margin profile? Speaker 300:21:30Sure. The first thing I'll point out is the 16% plus last year included the 12,800,000 dollars favorable legal settlement. If you take that out, you're probably in the 15.5% range, maybe a little higher. So year over year, we would expect margins to improve. And then this year, year to date, and you could see it in the GAAP to non GAAP REX for adjusted EPS. Speaker 300:21:56There was favorable legal settlements last year for a few $1,000,000 and unfavorable for a few $1,000,000 this year. Nothing too material, but just moving the guidance on adjusted EBITDA for the full year. Speaker 700:22:11Okay. Thank you. And then I guess maybe bigger picture as we're looking ahead to the Q4 and next year. How are you thinking about incremental margins for the business? Speaker 200:22:23A lot relies on capital markets. We have the athletes on the field in all the geographies and all the verticals. As we said in the past, for every dollar that we add incrementally under the same footprint, it's $0.45 to the bottom line. So we expect our $40 to $45 to the bottom line. We expect that to happen when the market opens up. Speaker 200:23:01We've also stated that these are going to be sequentially improving over the next couple of years until the moment in time when the market stabilize, normalizes, they are back in the ecosystem of selling and buying property in a general robust market, which we think is happening between 202526. That's why we gave you the guidance for 2026 because we think it's going to come back and we think it's going to improve our margin and get us back to an earnings position where we had projected. Speaker 700:23:38Great. Thanks, Barry. And then last one from me. How do you characterize debt financing availability right now? And has there been a shift in sources of lending? Speaker 200:23:51There is a whole new category of lender, which is the debt funds are taking some of the energy from the banks who are concerned as to the size of their CRE books. So the debt funds are proliferating and many of the private equity firms are building captive insurance companies, which gives them the opportunity to have long term capital to invest in real estate. So that's replacing some of the other the older debt players. So we're seeing a lot of liquidity in the market. The CMBS market is out there. Speaker 200:24:36And fortunately for us it came back about a year ago. And we're not having a problem finding money in those markets for good quality real estate. Speaker 700:24:49Great. Thank you. Operator00:24:53And ladies and gentlemen, it appears there are no further questions at this time. I'd like to turn the conference back over for any additional or closing remarks. Speaker 200:25:02Thank you for joining us today. I still remain excited about the company's future and look forward to updating you on the next quarterly call.Read morePowered by