Newmark Group Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Connor Mitchell - Piper Sandler Companies - Analyst : Hey, good morning. Thanks for taking my question. You guys touched on it a little bit in your opening remarks. The leasing was up 5.6%, just lower growth than some of the other revenue line items, and the leasing was driven by retail and industrial. It just seems that recently we've seen some pretty healthy leasing numbers coming from some recent office reported earnings. So the first question I was just wondering is how should we think about Newmark's office leasing commissions contribution in 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 tool?

Question: Connor Mitchell - Piper Sandler Companies - Analyst : Okay. 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?

Question: Connor Mitchell - Piper Sandler Companies - Analyst : Okay. 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. Just 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 is there something else that might be changing the outlook for one versus the other in the divergence there?

Question: Connor Mitchell - Piper Sandler Companies - Analyst : Okay. 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? Are you kind of looking at deepening investments in the current countries and markets and 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?

Question: Connor Mitchell - Piper Sandler Companies - Analyst : Okay. Thanks, everyone.

Question: Jade Rahmani - Keefe, Bruyette & Woods Inc - Analyst : Thank 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?

Question: Jade Rahmani - Keefe, Bruyette & Woods Inc - Analyst : Thanks. 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?

Question: Jade Rahmani - Keefe, Bruyette & Woods Inc - Analyst : Within 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?

Question: Jade Rahmani - Keefe, Bruyette & Woods Inc - Analyst : Okay. But you all recognize revenue at rate lock rather than close. So that potentially could be a positive fourth quarter driver?

Question: Jade Rahmani - Keefe, Bruyette & Woods Inc - Analyst : Okay. Well, certainly, it does sound like that business has picked up. So thanks very much.

Question: Patrick O'Shaughnessy - Raymond James Financial Inc - Analyst : Hey, 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 million to $8 million versus your prior guidance. It was $418 million to $434 million, now it's $410 million to $430 million. And so that implies that your margins are going to be around 15% to 16% versus the prior of 16.4%. So what are you seeing in terms of this incremental revenue leading to a lower margin profile?

Question: Patrick O'Shaughnessy - Raymond James Financial Inc - Analyst : Okay. Thank you. And then I guess, maybe bigger picture, we're looking ahead to the fourth quarter and next year. How are you thinking about incremental margins for the business?

Question: Patrick O'Shaughnessy - Raymond James Financial Inc - Analyst : Great. Thanks Barry. And then last one for me. How do you characterize debt financing availability right now? And has there been a shift in sources of lending?

Question: Patrick O'Shaughnessy - Raymond James Financial Inc - Analyst : Great. Thank you.