Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Newmark Group Inc (NMRK, Financial) reported an 11.3% increase in total revenues, reaching $685.9 million.
- Capital markets revenues increased by over 18%, marking the fourth consecutive quarter of double-digit improvement.
- Fannie Mae origination volumes rose by 58% over the trailing 12 months, supporting future growth in high-margin primary servicing.
- Leasing fees increased by 6%, driven by growth in retail and industrial sectors.
- The company repurchased 7.6 million shares and units for $100.8 million, with an increased share buyback program authorized to $400 million.
Negative Points
- Leasing growth of 5.6% was lower compared to other revenue line items.
- Adjusted EBITDA guidance was slightly reduced, implying a lower margin profile than previously expected.
- Office leasing remains complicated, with challenges in the segment despite some positive trends.
- The commercial mortgage business outperformed investment sales, reflecting market dynamics that may not favor sales growth in the short term.
- The adjusted earnings tax rate increased to 13.4% from 15.7% last year, indicating higher tax expenses.
Q & A Highlights
Q: How should we think about Newmark's office leasing commissions contribution in the quarter, and what is the potential upside for leasing commission contribution for office along with the strong performance of retail and industrial?
A: Michael Rispoli, CFO: Our office leasing pipeline is strong, and we expect good performance year-over-year. We see office mandates returning and anticipate continued strength into 2025. Retail and industrial leasing also show significant activity, with data centers and cold storage being particularly active sectors.
Q: Can you help reconcile the change to adjusted EBITDA guidance, given the increase in revenue and EPS?
A: Michael Rispoli, CFO: The adjusted EBITDA guidance reflects how we treat legal settlements differently between EPS and EBITDA. Last year's fourth quarter included a large favorable litigation settlement, which affects year-over-year comparisons.
Q: How is Newmark approaching international growth, and are there plans to expand into new regions?
A: Barry Gosin, CEO: We have expanded significantly in the UK, France, and recently Germany. Our strategy is to hire top talent in each geography and vertical, similar to our approach in the US. We plan to continue this strategy throughout Europe.
Q: What is your view on capital markets, and how do you anticipate the market evolving?
A: Barry Gosin, CEO: We have a strong pipeline in sales and debt markets, gaining market share in complex transactions. We expect increased activity as pricing stabilizes and values adjust, despite short-term interest rate fluctuations.
Q: How do you characterize debt financing availability, and have there been shifts in lending sources?
A: Barry Gosin, CEO: There's a new category of lenders, with debt funds and private equity firms creating captive insurance companies for long-term capital. This is replacing some traditional lenders, providing liquidity in the market, particularly for quality real estate.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
