Participants

Barry Gosin; Chief Executive Officer; Newmark Group Inc

Michael Rispoli; Chief Financial Officer; Newmark Group Inc

Presentation

Operator

Good day and welcome to the Newmark Group first quarter 2025 financial results. Today's conference is being recorded. At this time. I would like to turn the conference over to Mr. Jason McGruder, head of Investor Relations. Please go ahead.

Thank you, operator. Good morning. Newmark issued its first quarter 2025 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the three months ending March 31, 2025 with the year earlier period, except as otherwise specified, we will be referring to our results only on a non-gap basis, including the terms adjusted earnings and adjusted EBITA. Unless otherwise stated, any figures discussed today with respect to cash flow from operations refers to net cash provided by operating activities, including loan origination and sale activity.
We may also use the term cash generated by the business, which is the same operating cash flow measure before the impact of cash used for employee loans. Please refer to today's press release, the supplemental tables and the quarterly results presentation on our website for complete and updated definitions of any non-gap terms, reconciliations of these items to the corresponding GAAP results and when, how and why management uses them.
For additional information on the cash flow measures as well as relevant industry or economic statistics. The outlook discussed today assumes no material acquisitions are meaningful changes to 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 2025 should be considered formal guidance. Also I remind you that information on this call contains forward-looking statements.
Including without limitation statements concerning our economic outlook in business. Such statements are subject to risks and uncertainties which could cause our actual results to differ from expectations, except as required by law, we undertake no obligation to update any forward-looking statements for complete discussion of the risks and other factors that may impact these forward-looking statements.
The SEC filings, including but not limited to the risk factors and disclosures regarding forward-looking information on our most recent SEC filings, which are incorporated by reference. I'm now happy to send the call over to host and Chief Executive Officer, Barry Gosin.

Barry Gosin

Good morning and thank you for joining us. We are pleased to report another successful quarter, demonstrating robust growth and strong operational performance, which underscores our strategic vision and commitment to delivering value to our clients and stakeholders.
Newmark's exceptional talent and industry leading insight led to our 22% increase in revenues and approximately 40% growth in our earnings and metrics. This included another quarter of double digit gains across every major business line.
We grew capital markets by 33% as Newmark once again outpaced the industry across both investment sales and origination while continuing to advise on an increasing number of portfolio and entity M&A deals.
Leasing fees were up 31%, driven by increased activity in New York City, Boston and as well as a strong rebound in the San Francisco Bay Area.
We increased management and servicing revenues by over 10%, which reflected strong valuation and advisory growth. We also benefited from the expansion of services across our recurring business lines.
Such as asset management and servicing, underwriting and due diligence, dedicated staffing solutions and outsourced lease administration and property accounting, our continued focus on a strong balance sheet and cash flow generation has put the company in an excellent position to grow.
We continue to enhance our capabilities in nearly all verticals and geographies while broadening and diversifying into more service lines and alternative property types.
We have built a platform that is engineered to excel. Given our deep relationships with clients and the strength of our brand, we anticipate further market share gains over time. We recognize, however that there are potential geopolitical headwinds that may have a dampening effect on industry activity. Despite recent market turbulence, we are excited to come to work every day to continue this odyssey of building on the foundation we have created for a scalable and sustainable enterprise. With that, I'm happy to turn the call over to our CFO, Michael Rispoli.

Michael Rispoli

Thank you, Barry, and good morning. We had a strong start to the year with 21.8% growth in revenues and approximately 40% growth in our earnings metrics. Revenues were $665.5 million compared with $546.5 million.
We increased management services, servicing another by 10.5%, the seventh consecutive period of solid year on year improvement.
Leasing revenues were up by 31%, driven by strong double-digit growth in office and retail leasing volumes. Capital markets revenues grew by 32.7% as we continue to gain market share.
This reflected 62.5% volume improvement with growth across every major property type, including 40% in our GSE FHA origination volumes.
Turning to expenses. Compensation increased by 21.8%, which reflected higher commission-based revenues and costs related to Newmark's growth initiatives.
Non-compensation expenses included higher pass through costs and other items related to increased revenues. The company's tax rate for adjusted earnings was 14.3% in line with full year guidance.
Moving to earnings. We increased adjusted EPS by 40% to $0.21 compared with $0.15. Adjusted EBITDA was $89.2 million up 40.5% versus $63.5 million. Adjusted EBITDA margin improved by approximately 180 basis points to 13.4% with respect to share count.
Our fully diluted weighted average share count for adjusted earnings was down slightly to 255.3 million. Although we did not repurchase any shares during the quarter, we have $371.9 million remaining under our repurchase program.
We continue to believe buybacks are prudent allocation of capital and anticipate further share repurchases. Turning to the balance sheet. We ended the quarter with $157.1 million of cash and cash equivalents and 1.3 times net leverage.
The changes from year end 2024 reflected $100 million of incremental borrowing under our credit facility. Offset by cashews with respect to the hiring of revenue-generating professionals and normal seasonal first quarter movements in working capital.
Moving to guidance. Our 2025 outlook remains unchanged. While our revenue pipeline continues to show growth into the second quarter, it is difficult to predict the impact if any, that tariffs and interest rate volatility may have on our results.
For the full year we expect capital markets revenues. To be better than the 9% midpoint of our guidance range. Management and servicing to perform roughly consistent with the first quarter and our leasing business to grow less than the midpoint of our revenue guidance range.
Lastly, we want to take a moment to congratulate Luis Alvarado on his recent promotion to Chief Operating Officer. Luis has been with the company since 2015 and has helped us deliver strong growth over the past decade.
As always Luis will be joining us for Q&A. With that, I would now like to open the call for questions.

Operator

Thank you. And if you would like to ask a question, [Operator Instruction].
We will now take your first question coming from Alexander Goldfarb with Piper Sandler.

Question and Answer Session

Hey, Good morning down there. And first Luis congratulations, [Mazelov], that's awesome on the promotion.
Thank you. So the first question is just Barry, I mean obviously what everyone wants to know is what the what your clients your relationships what they're saying very strong first quarter we've seen from the office res, there doesn't seem to be any leasing slowdown we've heard the same on the retail res so far.
So how do we interpret sort of this macro uncertainty with what you're seeing in the business and do you have any anecdotes of people pulling back. Leasing deals or or stepping away from transactions, building sales, etc. Anything that gives color to what's going on in the market.

Barry Gosin

And we're seeing deals go through continue to go through. That's what we're seeing so far and same with leases we're not really seeing any firm change in making decisions. The CMBS market has slowed down.
Seems like the banks are putting out bridging the GAAP at this point. We're seeing some bank loans for the first time in some respects, but generally not. It's too early to tell. I mean, it's 100 days in, it's been an active 100 days.
We'll see what happens over the next 90 days.

And on the transaction front have you seen people pulling buildings from the market or I mean that would seem logical just given what's going on in the capital markets or your view is people are still putting product out on the market to transact.

Barry Gosin

Generally interest rates, if there was a perceived significant decline in interest rates, people might slow up putting things on the market, but we haven't really seen that.
If the FED indicated they drop interest rates by 50 basis points, you might see a change in the market because people will expect CAP rates to rise in light of a decline in interest rates, but not really. It's right now it's the uncertainty is annoying and concerning, but things are still trading.

And then Mike, just on the stock buybacks you mentioned that in your opening comments again just with the backdrop of this of the uncertain economy, the capital markets, etc. Do you feel comfortable engaging in stock buybacks in the current or you would say, hey we're better off to keep our cash on hand for the future rather than buying back stock?

Michael Rispoli

Short answer is I feel really comfortable buying back stock. I mean, you look at our balance sheet still really clean, low net leverage at 1.3 times and we're pretty careful about how we manage our balance sheet and how we manage our capital.
We made some investments in the first quarter into continuing to grow the business and you can see that in our cash flows and so we didn't buy back any stock, but I think you'll see us. A pivot to buying back stock as we move into the second quarter here.
Thank you.

Operator

Again, it's our one to ask a question, we'll now move to our next question coming from Jade Rahmani from KBW.

Thank you very much. You all have grown the management services part of the business and continue to do so. Can you talk about what differentiates Newmark in that business, what the core services are that you're providing and what's driving the growth there?

Barry Gosin

Well, we do a bunch of things that we think are different than our than our peers. We have a managed service program we provide staffing. We are moving in in into the fund administration and property accounting business which is is a little different, so it really puts us.
It puts us squarely in partnership with our investor clients, providing them with service and giving them the ability to provide variable support.
It fits with our strategy. It, we think it elevates our brand. It, it's a very sticky and value added piece of business. We're, we are still growing our property management and facility management as well.
And all that all that is is growing, we're a lot more focused on it. Look, our superpower has been our investment advisory sales and loan origination business. That's what gives us the gravitas and the reputation and the elevation of our brand over the last 10 years, in 2015 we had a 1.5% market share. We're now nine, pushing up to 10%.
I mean that's a significant increase in market share in a big segment. Of the business, which also has characteristics that make it incredibly advantageous to the same people that hire property managers, asset managers provide staffing all those things put us around the hoop with those clients.
And we think that now that we have, continued to elevate and build we think we're in a In a much more mature position to be able to take advantage of building more recurring revenue opportunities and it's, hiring the right people, going after the right business, having the right reputation, having good success and we think we're doing all those things and everything that we've done has indicated that and it continues to grow and it's going to build a head of steam.

Thanks very much. I wanted to ask about stock compensation, which was I think out outside in the quarter but may have included a one-time item, just the $21 million in GAAP charges related to him that is called out in the press release. Is that a one-time item? Do you expect any other charges related to him that investors should anticipate? Would be helpful to know about that. Thanks.

Michael Rispoli

Sure. Hi Jade, it's Mike. The stock comp in the quarter, I would say for the full year, we would expect it to be similar to last year. The Howard item is a one-time item converting his remaining units into the shares as he exited the company, so we don't expect that to recur and so that that's how we see the year playing out for Stockholm.

Thanks very much. We will now take your next question coming from Julian Bluin with Goldman Sachs.

Thank you and congratulations on the strong quarter. When I think about the decision to maintain guidance, despite what was a pretty strong first quarter. Granted, I know the back half of the year where you derive the vast majority of your earnings for the year, but is that decision to maintain guidance really down to the broader macroeconomic uncertainty? Is there anything in April that's sort of giving you pause or is it just sort of general conservatism at this point?

Michael Rispoli

Yeah hi Julien. Certainly we had a really strong start to the year and we're seeing our pipelines continue to build on a year over year basis. I would say, for Q2 we're seeing up about 10% or so in terms of our pipelines.
Had the macro environment been different, we certainly would have been considering guiding towards the higher end of the range or perhaps even increasing guidance, but the macro environment is what it is.
I would say that we have pretty good visibility through the first half of the year as Barry said, we're not seeing deals fall out of the pipeline at this point. We're seeing things close.
And when you think about the back half of the year, we now have 40% of our revenues and our earnings that are recurring, and we have very good visibility into that. And so really what that means is in the back half of the year our transaction business is up low single digits to get to the midpoint of our guidance range, which isn't a lot, but given the macro environment, I think we're just taking a more cautious approach right now.

That that's very helpful and on that point of the pipelines in the second quarter up 10% year over year, does that correlate pretty closely to what you would expect for transaction volumes or can there be a significant sort of spread between those two?

Michael Rispoli

Yeah, I think it's pretty consistent with what we would expect in terms of transaction volumes. We're seeing really strong capital markets activity continuing into the second quarter, particularly on the on the debt side where we continue to pick up market shares. So as of right now, everything continues to look good.

Barry Gosin

We also have a again, we are seeing opportunities in a segment of the market that we weren't playing it. We are now playing a new market, new categories, new types of business we continue to elevate the brand. People call us for things they might not have called us for two years ago and so that's an incredibly encouraging.
A scenario that is playing out over the next few years.

That's very helpful. Alright, thank you.

Operator

Your next question is coming from Pat Patrick O'Shaughnessy with Raymond James.

Hey, good morning. So Newmark hasn't done an acquisition in a while. I'm just curious, what's your current appetite for M&A versus continued broker team lift outs?

Barry Gosin

Yeah, I guess we haven't said that 100% of our growth has been organic. We're careful about how we buy companies you, it depends on the companies you buy. You buy a really big company, then you spend a lot of time with the friction involved in integrating lots of personalities, lots of duplicate activity, so you get that on a big, it's a that's a risky acquisition on a bolt on, if you get smaller companies, you're getting. The bulk of the spend is is gone to people who are retiring.
And the real talent that drives the business. So we navigate very carefully in how we bolt on and tack on. So we have found, although it has some implications on an accounting basis for acquiring talent. That you know the cost of sales acquisition of sales for us is much lower by going directly to talent and we've hired great talent.
So in some respects what we think is when the dust settles we will have a higher quality professional in our business. Now that doesn't mean that we are not going to buy. There are things we are looking at and we think when the pipeline is appropriate.
We, there is a white space that we can continue to fill to build out the platform on a global basis and we're doing it and if buying makes sense we'll buy. If acquiring talent makes sense, we'll acquire. We are very [nimbl]e in that respect.

Okay, great. And then can I get your current thoughts on the outlook for multi-family and then I guess Danny and Freddie in particular given some of the leadership changes there.

Barry Gosin

I mean, the word coming out of the FHFA is generally consistent that the government, regardless of what side of the aisle you're on, wants more housing needs and understands the shortage of housing in the United States.
So I don't think they're going to want to get in the way of creating housing. So that seems to be the narrative coming out of out of Washington. The talk about privatization of Fannie and Freddie, it would be a three to four year process to get it done.
It'll be outside the realm of this administration before the benefits of doing it really happen and so that's and there's a history and a precedent of that before. As long as the guarantee from the government to create housing is continues, it will have no impact but nothing for the foreseeable future, '26, '27.

Michael Rispoli

Yeah, and I would add to that that we certainly had a strong year over year performance in terms of volumes and origination in the first quarter. On the debt side, we continue to see that building. We don't really see any slowdown in those markets at this point.

Barry Gosin

Yeah, a multi-family has not missed the beat in terms of demand. You have a shortage of housing. You also have the same metrics that that have been happening for the last 10 years. People are buying houses later, there's more mobility, people rent for longer and that's and the ability to rely on a 30 year mortgage, paying down your mortgage and retiring off the value of the house is not really something that happens the way it used to happen in the 60s and 70s and 80s.
So we think multifamily is going to continue to be an important asset class and continue to be strong. There'll be pockets where there'll be oversupply. But like any market that has an oversupply, but it's in general, multi-family is really a good category for we think a long time to come.
All.

All. Right. Terrific thank you.

Operator

We'll take your next question coming from Jade Romani with KBW.

Michael Rispoli

Thank you.

I'm not sure if the tariff environment has impacted this, but competitive environment for recruiting has seemingly picked up quite a lot. I think Cushman and Wakefield, outlined their plans and some of the teams they're hiring.
I know E-Still is also active as well, so I just wanted to get your comment on the competitive environment recruiting and Newmark's plans. I believe you do still plan. To grow in terms of your commissioner driven revenue producing staff.

Barry Gosin

Oh, so I mean we we're the go to company. People want to be at Newmark. That is that's, look at everything we say and everything we do. We continue to hire but we're not going to overcrowd ourselves. There are places where we have white space. We believe in high revenue per capita.
More with less that's part of our strategy. Our strategy isn't just more one word and so we continue to hire. I mean you just look at the people we hire and you know it's everyone has to hire. You have to constantly replenish your talent.
And train your talent and bring talent up from the bottom up. So we don't, we think we're incredibly competitive and most of the recruiting is going our way. And that's, we think that's going to continue and it's going to continue to accelerate, which has had we've had in Europe. I mean, we opened Germany five months ago, we we've signed our fifty-fourth contract.
We're incredibly competitive. It's a, it's an exciting market. People are excited to see us in Europe. As a, the kind of company that recognizes talent, respects professionals and is a good place to work.

Thank you.

Operator

And it appears there are no additional questions at this time. I'll now turn the call back to you for your closing remarks.

Barry Gosin

Well, thank you everyone for joining us today. We hope to see you in the next quarter.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.