Newmark Group Inc (NMRK) 2025 Q3 法說會逐字稿

Good day and welcome to the Newmark Group Third quarter 2025 financial results call. Today's call is being recorded. At this time, I'd like to turn the call over to Jason McGruder, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning. Newmark issued its third quarter 2025 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the three months ending September 30, 2025, with a year earlier period.

Except as otherwise stated, we will be referring to our results only on a non-GAAP basis, including the terms adjusted earnings and adjusted EBITDA unless otherwise stated, any figures discussed today with respect to cash flow from operations refer to net cash provided by operating activities, excluding the impact of GSE/FHA loan origination and sales.

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 quarter results presentation on our website for complete updated definitions of any non-GAAP turns, reconciliation of these items to the corresponding GAAP results, and how, when and why management uses them.

For additional information, our cash flow measures, as well as relevant industry or economic statistics. The outlook today. Discussed today assumes no material acquisitions are 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 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.

Here are 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 a reference. I'm now happy to turn the call over to our host and Chief Executive Officer Barry Gosin.

Good morning and thank you for joining us. Newmark again delivered strong quarterly top and bottom-line improvements. A record third quarter revenues included double-digit gains across every major business line. Newmark's growth was entirely organic. Earlier this month, we acquired real foundations which offers management consulting and outsourced managed services for institutional real estate clients across the US, Europe, and Asia Pacific.

We also recently launched a fund administration business. Newmark now has one of the most comprehensive sets of investor solutions to TRY to drive value for owners of commercial real estate, banks, and debt funds. Coupled with our best-in-class talent and client relationships, we believe Newmark is poised for growth across all of our investor and occupier focused businesses.

With respect to our international expansion this week we launched property and facility management services in India and the AIPAC region. Since the beginning of last year, we have opened 9 international offices and hired over 100 revenue generating professionals based outside the US. This includes expansions in France, Germany, the UK, Singapore, India, South Korea, as well as the UAE.

Newmark's client-centric approach, expanding global reach and our commitment to remaining agile, accountable, and adaptable is resulting in seeing and winning more global and occupier assignments. We are becoming the brand of choice.

This gives us increased confidence in our stated goal of producing more than $2 billion of recurring revenues annually by 2029. With that, I am happy to turn the call over to our CFO, Mike Rispoli.

Thank you, Barry, and good morning.

I'm pleased to report that for the fifth consecutive quarter, Newmark produced double-digit revenue and earnings growth. Total revenues were $863.5 million up 25.9% compared with $685.9 million. We increased management services, servicing and other by 12.6%, leading to the company's best ever quarter for these recurring businesses. This included 23.5% growth from valuation and advisory.

In addition, our high margin servicing and asset management platform grew by over 12% when excluding the impact of lower interest rates on escrow earnings. Leasing revenues were up 13.7%, resulting in a record third quarter for this service line.

This was led by strong activity in New York, Texas, and Northern California, where we generated growth in office and industrial. Capital markets revenues increased by 59.7%, which reflected an approximately 129% improvement in our total debt volumes, nearly 2.5 times faster than the industry.

We increased our investment sales volumes by 67%, also significantly outpacing the industry. Turning to expenses, total expenses were up by 24.9%, which reflected a 32.9% increase in our commission-based revenues, higher pass through costs, as well as investments in growth.

We are more confident than ever in meeting or exceeding our 2026 targets of generating record earnings of over $630 million in adjusted EBITDA and $1.75 per share of adjusted EPS. With respect to taxes, the company's tax rate for adjusted earnings was 12.1% in the quarter and 13.2% year-to-date. The lower rate was primarily driven by higher tax-deductible stock compensation. We have therefore adjusted our full year range to 13% to 15%.

Moving to earnings, we increased the adjusted EPS by 27.3% to $0.42 compared with $0.33. Adjusted EBITDA was $145.2 million up 28.9% versus $112.6 million. adjusted EBITDA margin on total revenues improved by 40 basis points to 16.8%. For the first 9 months of 2025, this margin improved by approximately 116 basis points to 15.2% compared with a year earlier. With respect to share account. Our fully deleted weighted average share count was down 1.3% to $251.7 million.

Turning to the balance sheet. We ended the quarter with $224.1 million of cash and cash equivalents and one times net leverage. The balance sheet changes from year 2024 reflected cash generated by the business of $325.5 million& $75 million of incremental borrowing under Newmark's revolving credit facility.

This was offset by $177.3 million of cash used mainly to hire revenue generating professionals, $125.5 million of share repurchases, and normal seasonal movements in working capital. Newmark continues to generate significant cash flow. Our adjusted free cash flow for the trailing 12 months was up 134% to $291.9 million.

Moving to guidance, our updated outlook for 2025 is as follows. We now expect total revenues of between $3.175 billion and $3.325 billion an increase of 18.5% at the midpoint. We anticipate adjusted EPS between $1.53 and $1.63 up 24% to 33%. And we anticipate adjusted EBITDA in the range of $543 million to $579 million an increase of 22% to 30%, and an EBITDA margin improvement of approximately 100 basis points at the midpoint of the range.

With that, I would now like to open the call for questions.

(Operator Instructions)

Alexander Goldfarb, Piper Sandler.

Hey, morning down there, Barry, first two questions. The first question is on data centers. It's been a topic we've discussed before with you guys and certainly, just seems to show no slowdown in investor and capital enthusiasm as your team looks at the amount of capital that's been committed versus the ability to actually build data centers over the next, foreseeable future. Do you think all the capital can be put to work in the next 5, 10 years, or is there a lot more capital raised versus the physical ability to actually build data centers?

America is a big place. There is quite a bit of land and there's quite a bit of gas, and there's an effort long-term to build nuclear, both micro and large scale nuclear. We were just involved in a company going public, building a nuclear plant in Texas.

We did a, we were involved in a series C and then they were taken public. And we'll see a lot more of that. I mean, on the exit there'll be a lot of a lot of that in respect of some of these hyper scales figuring a way to exit and raise more capital. I mean, there is an endless amount of interest in data centers. I mean, we produce about 3 Gigs a year, I think. I believe that's the number, we've seen people and estimates as high as 100 to 200 Gigawatts of power.

So, the country's going to require an enormous amount of infrastructure, so it's not just data centers. It's infrastructure and infrastructure meaning nuclear plants and power plants and pipelines and data centers and quantum computing.

And a host of other things that surround it and support it on the industrial side of the business. So generally, I mean if you look at the GDP was primarily the investment in this kind of infrastructure. So, I think it has a lot of traction. And again, as I said before, probably 3 quarters ago if you believe in AI. You'll believe in the future, and so there is runway.

But do you think it's, I mean, but the point is, it sounds like there's, we all know there's a lot out there of potential needs, but it just sounds like physically building the infrastructure, the laying the utilities, building power plants, like all this stuff. It sounds like the capital has gotten ahead of itself. Do you think that's the case or you think that the capital raised can commensurately, basically go into production, in pretty quickly.

Well, there is a lot of production going on, but there will be a lot more. I mean the capital comes first. We're on the capital side, so that's good for us. Raising the capital, the bill is good for us. I mean just look at the numbers.

And and then the predictions are there's going to be a lot more capital required. I mean, on the end, when it's built, we'll be there with financing and going public and doing all those kind of things. So, we're following the continuum we'll be a be beneficiary of the future, but we're also right there in the beginning.

Okay, and then the second question is, years ago when you were investing in hiring a lot of different producers and expanding into new areas, acquiring smaller shops, there was a lot of drag initially from those hires. You spent the money on board them. It took a while for them to deliver. Recently, that seems to be a thing of the past and you guys have been expanding into Europe.

You mentioned the expansion in India, etc. Is all of that, drag that we experienced years ago when you were on boarding producers, is that just a thing of the past, or is the company gotten big enough or is it where the stock price is today? Just trying to understand because it's a pretty sharp contrast. Now as you grow and expand, it doesn't seem to have a slowdown to earnings, whereas years ago it did.

Morning, Alexa. It's Mike. I'll take that one. Of course, it still has a drag on earnings. We're going to grow nicely this year and expand our EBITDA margins by 100 basis points. Have we not been investing for the future, that could have been double the EBITDA expansion. What I would say is the investments we're making today, which are very purposeful, and you can see we've accelerated as we move throughout this year, are going to result in 10% earnings improvement next year.

And so that is our model. We're very intentional about it, and we can grow margin while expanding the business and continuing to invest and we'll continue to do that.

I mean we're going to we're going to continue to grow the company Alex and there are, there's still running room there's still white space and we're still putting all the pieces together to be a complete. To build a complete foundation, we're now winning more and seeing more like I just said. What does that mean? That means we're going to; we're just going to have more market share on the things that we have now put all the pieces together in whatever spectrum of activities that are required in that vertical.

And once we're there, we pitch the business, we are, we'll have a higher ratio of win rates, and our volume will go up without any capital requirements and that you could see in some of our businesses it's more apparent because we've already built it. It's happening. We're winning market share.

So, there's other verticals that we're working on, not to mention all of the recurring revenue businesses that are around the hoop and supporting all of the other businesses that we've created.

Thank you.

Jade Rahmani with KBW.

Thank you very much. The 2026 targets that Mike reiterated, when were those Conceived

Morning, Jade. We've had those targets out there for a while, as certainly we'll get through the fourth quarter and we'll get formal guidance for 2026, probably on our next earnings call, but we feel very confident and that's still double-digit growth from the midpoint of our guidance range this year. So, we'll certainly re-evaluate that next quarter.

It was a couple of years ago. We've been you just look back at the earnings calls. We've predicted that for a while.

Yes, well, what I'm trying to imply or suggest is that since they were created prior to the very robust growth that Neumark has demonstrated across its businesses, particularly capital markets, plus the data center fundraising wave in which Neumark is taking part, the outlook. 2026, as previously mentioned, seems quite conservative.

Growth coming out of Siri recoveries tends to be a lot stronger than that, and the recovery thus far, macro risks notwithstanding seems to be gaining momentum. So do you believe that those targets are conservative? And are you also seeing anything in the macroeconomy that would cause you to be erring on this side of caution?

I would say it's always good to be a little cautious. Certainly those are conservative targets and, we'll give you an update next quarter once we get through the full year.

Thank you very much. Great job.

Julien Blouin, Goldman Sachs.

Hi, thank you for the question and congrats on a strong quarter. Barry, I wanted to ask about New York City. I mean, third quarter, CRE transactions and leasing in the city looked really strong, but we continue to hear, signs from signs that institutional investors, especially abroad, are maybe beginning to worry about political risk in the city related to the mayoral race. I guess are you seeing any sign of impact or any cautiousness from buyers in the city?

Not really. I mean, there's a lot of noise around the mayor, but as I said, probably 2 calls ago. The mayor has limited power. The governor's race the governor really is the firewall for the city. That's really and the federal government on what you know what the what the federal how the federal government's going to treat New York, but that's New York state.

As well as New York, so I don't really, I believe it's a lot, it's just a lot of noise. New York is, the law firms are doing great. The financial institutions are all expanding, all of our clients are expanding. So, I don't really see it.

Got it. That that's helpful. And then Mike, can you help us understand maybe the cadence of capital markets across the quarter? Was September particularly strong given rates coming down, and did you see sort of a follow through of that activity into October and then maybe how do pipelines compare to this time last year?

I wouldn't say there was any particular. Anything within months that would stand out to me was a strong quarter across the board for us. The pipelines remain really strong into the fourth quarter. You can see that in our guidance, and we feel pretty good. We don't see anything in the market that is slowing transaction activity down at the moment.

Okay, great. Thank you.

Mitch Germain, Citizens Capital Markets.

Thank you and congrats on the quarter. Just maybe on the real foundation transaction, Barry, just maybe talk about, kind of your view of the fit and potential to expand or or cross sell that platform.

So, we've been, we look at ourselves as a pure play. For the most part, we're designing a business to be able to be a partner with institutional investors to help them. Execute on their strategy, and that means all things for them to help them leverage companies like us to be able to do more and what real foundation is both a consulting firm and a technology advisor, they implement and integrate.

For example, MRI and Yardi, which are the two biggest technology platforms for investors and how they manage, they can go in and advise a company on which tech, how to integrate it, and how to get the maximum out of it. Now that's a piece of all the other things that we've done real estate property accounting, staffing, due diligence, cost monitoring.

So, all those pieces fit neatly together and bridge the gaps between a holistic solution as a, as becoming the go to firm when a fund is thinking about how they want to operate and some would prefer to operate with, everything in house and some prefer to operate with some of this outsource.

We hire great people, we've bought great companies, our strategy. Is about centers of excellence and people who are excellent and if we continue to hire the kind of talent that our clients rely on, we think will be the go-to brand for that kind of business, and we think that has enormous traction. We launched fund administration as well.

And without real foundations, it would been much harder for us to deliver on fund administration. So, we put the pieces together. A very carefully we thought about it, and we think we now have an incredible array of services to provide a very comprehensive solution.

Great, that's super helpful.

And Mitch, oh yeah, I can. No, this is Lou Alvarado. The other value that we saw in real foundations is to augment our growth and occupy our solutions, right? So, they were primarily investor focused, but we saw a lot of the skills that they have and the talent that they bring.

Really blends well with our occupier platform as well. As we have significantly grown that and continue to focus on the growing that, we think real foundations will be an excellent match for us, and that was part of the reason why real foundations also picked us to be a partner with them in their growth as well as ours.

Great, thanks for that perspective. Barry, and obviously you've been making a lot of hires outside the US, opening new offices. I'm curious about your views about organically growing services platform facilities management and other services versus more traditional brokerage and, kind of how you view that organic growth and the timeline to augment those capabilities on a global scale.

Well, we, it's accelerating our, we, we're putting all the pieces together the same way we're doing what we did on the investor side. We're doing it. The same way on the facility management and the occupier solution side loses absolutely right. I mean, when you know we have clients on the occupier side who use the same technology and to be able to help them implement a technology strategy to manage their real estate better will give us a leg up on the competition.

We need to be in the in the geographies, we need to be in the all the verticals, and we need to be out there. I think that our reception in Europe has been incredible, the same, the talented people want to be with us. And they're joining the firm because of how we approach the business. They said agile, accountable, nimble, we provide customized solutions. It's easier for us to provide customized solutions for clients and not just a black box.

We're not overly pregnant in certain areas, so it gives us the ability to be adaptable for our clients. So, all the things are coming together and as we continue to put in, hit a geography and have that geography when we were invited to many more parties.

Jade Rahmani, KBW.

Thank you very much. I just wanted to ask if there's anything in the fourth quarter 24 comp period that you want to call out, for example, leasing commissions were up 15.1%, so that's a tougher comp than what you dealt with this quarter. Capital markets of course was very strong last year, but given the strength this quarter, it seems achievable to exceed that. And then anything on the expense side, just so we're aware.

Sure, I think generally Q4 is going to be a tougher comp for us. We're up 17% last year in 24 in the fourth quarter, but that's all been thought through and reflected in the guidance that we provided both in terms of top-line and bottom line.

The pipeline continues to remain strong and really it just comes down to when the transactions close and as there's always some that are going to push out, some that are going to pull in. And we thought through that as we as we gave you the guidance range that we put out today.

Thanks very much.

Julien Blouin with Goldman Sachs.

Thank you. Just a quick follow-up, Barry, following on from Alex's question on data centers, your data center capital market volumes have been really impressive this year, particularly on the financing side. Can you just maybe talk through the team you've built there, how you've been able to build such a dominant early foothold in the space, and then how should we think about the growth in data center financing volumes and investment sales going forward.

It's, what's interesting, a couple of years ago we brought in, experts in our evaluation group that it's risk assessment and stress testing for banks the idea is to be early and early as often as you can, we saw signs of the data center business we acted quickly that's goes into the definition of nimble.

We hired people quickly and we got in front of it, and we have incredibly good people that can adapt as well. So, we put together an incredible team of people and we're still building it actually, we're building more on the leasing side of it.

And the Because you're still going to have cloud computing, you're going to still have some of the old co-location facilities that are going to change out the racing systems to have better cooling and more capability for the new AI chips that that provide much more heat and much higher level of computing. So, you know there is a, there's a whole business of adapting some of the old colocation facilities for the new environment.

And we'll be involved in that kind of stuff. So, we're still, we still continue to have good people. It's just all about talent. I mean, everything in all of our verticals, it's about getting the right people in the right place. And not overcrowding.

Alexander Goldfarb, Piper Sandler.

Hey, thank you, and Barry, I just want to continue that a while back, if my recollection is right, when you and I discussed this, there was a comparison to life science and how you didn't want to overcommit from an investment to data centers just given that real estate tends to follow boom bust cycles, doesn't mean it's out. It just means, hey, there's a big boom and then there's a cooling and then it grows.

There obviously life science, went crazy, during COVID and you know now it's dealing with the consequences. So, from a staffing level, are you now feeling more bullish that this has longer legs to hire more or you're still of that restraint mentality which is, hey, we don't want to get too far over our skis on this. It's a great sector, but every sector that has huge growth eventually has a cooling period and we just want to maintain staffing appropriately.

We're always, we always doing more with less. That's just just our operating model. If you have great people, you can flex up and down when you get overly committed on anything, it's hard to go the other way. So we think we're appropriately staffed to scale now. We think there are parts of it that we could expand.

In the geography is more on the probably more on the leasing side of the data center business, but money is fungible. It travels everywhere. We can do it with our team and flexing our team the way it is our strategy is more with less, not more.

Thank you.

Thank you. With no additional questions in you at this time, I'd like to turn the call back over to Barry Gosin for any additional or closing remarks.

Once again, I'd like to thank everybody for joining and I look forward to updating you next quarter.

That will conclude today's call. We appreciate your participation.