Slide 1: Third Quarter Financial Results Presentation
Third Quarter Financial Results Presentation Newmark Group, Inc. (NMRK) November 1, 2023
Slide 2: Disclaimers
Disclaimers Discussion of Forward-Looking Statements Statements in this document regarding Newmark that are not historical facts are "forward-looking statements" that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements. T
Slide 3: Recent Consolidated Results
Recent Consolidated Results HIGHLIGHTS OF CONSOLIDATED RESULTS (USD millions, except per share data) 3Q23 3Q22 Change YTD 2023 YTD 2022 Change Total Revenues $616.3 $664.6 (7.3)% $1,722.9 $2,098.2 (17.9)% GAAP income before income taxes and 22.5 51.2 (56.0)% 21.1 136.1 (84.5)% noncontrolling interes
Slide 4: Leading Global Commercial Real Estate (CRE) Services Provider
Leading Global Commercial Real Estate (CRE) Services Provider TTM Revenues 2021 + 2022 Transaction Volume Professionals Global Client Service Locations ~$2.3B ~$1T ~7,400 ~170 Top Global Public Acclaimed Combination of recently hired professionals and CRE Services Company Industry Leader acquisition
Slide 5: Low Risk Real Estate Services Business with Diversified Revenue Base
Low Risk Real Estate Services Business with Diversified Revenue Base Leading CRE Services Platform Diversified Revenue Streams Covering a Broad Geography Recurring revenues from “Management services, Focused investments driving continued revenue Increasingly diversified by region, and the addition o
Slide 6: Third Quarter 2023 Highlights
Third Quarter 2023 Highlights1 $0.27 15.6% $616.3MM $96.3MM POST-TAX ADJUSTED REVENUES ADJUSTED EBITDA ADJUSTED EBITDA EPS MARGIN - On October 2, 2023, the FDIC closed on the sale of $18.5 billion of 201 Signature Bridge Bank loans made to private equity funds (representing the fund banking loan por
Slide 7: Management Commentary on Business Trends
Management Commentary on Business Trends Management Services, Servicing Fees Leasing & Other Commissions Investment Sales1 Commercial Mortgage Origination, net and other - Newmark generated 14% total - Our leasing revenues outperformed - The $13.3 trillion of assets held by - From 2023 to 2027, over
Slide 8: 3Q 2023 Revenue Detail
3Q 2023 Revenue Detail Management services, Leasing and other commissions servicing fees, and other Commercial mortgage -7.6% Investment origination, net 14.1% sales $253.7 $219.9 10.5% $203.3 $222.4 15.4% 41.2% 3Q 2022 3Q 2023 3Q 2022 3Q 2023 3Q 2023 Revenue by Investment sales Commercial mortgage
Slide 9: Servicing & Asset Management Provides Recurring, High-Margin Revenues
Servicing & Asset Management Provides Recurring, High-Margin Revenues Portfolio Composition as of 9/30/2023 Newmark Fannie Mae/Freddie Mac Portfolio Maturities by Year FHA/Other 4% 43.6% 37.2% Limited Servicing Fannie Mae 65% 16% $176.6 Billion 16.4% Freddie Mac 14% 2.86% Special Servicing 1% 2023-2
Slide 10: Strong Balance Sheet & Credit Metrics
Strong Balance Sheet & Credit Metrics AS OF 9/30/2023, UNLESS OTHERWISE STATED ($ IN MILLIONS) Cash and Cash Equivalents $143.3 Credit Metrics as of 9/30/2023 Interest Rate Maturity Senior Notes1 6.125% 11/15/2023 $549.7 $334.3 million TTM Adjusted EBITDA Credit Facility2 3/10/2025 $55.0 Total Debt
Slide 11: Strong Financial Position & Cash Generation to Support Growth
Strong Financial Position & Cash Generation to Support Growth Low Risk Variable Cost Average of $346 MM+ of Annual Cash Intermediary Structure Generated by the Business3 - Virtually no balance sheet risk1 - Approximately 70% of expenses are - $2.5 billion of AEBITDA and $2.1billion of variable2 cash
Slide 12: Updated Outlook for 2023
Updated Outlook1 for 2023 4Q 2023 4Q 2022 YoY FY 2023 FY 2022 YoY Metric Guidance Actual Change Guidance Actual Change Total Revenues (millions) $692 – $742 $607.3 14% - 22% $2,415 - $2,465 $2,705.5 (11% - 9%) Adjusted EBITDA (millions) $143 - $167 $102.2 40% - 63% $375 - $400 $510.7 (27% - 22%) Adj
Slide 13: We Expect to Generate Strong Adjusted EBITDA, Trough or Peak
We Expect to Generate Strong Adjusted EBITDA, Trough or Peak Over 2/3 of our revenues relatively stable in the current environment. 40%+ incremental margins. Hypothetical Hypothetical Var % Scenario 2: New Var % Illustrative Financial Model 2021 Actual 2022 Actual Scenario 1: Mid to Investments Ramp
Slide 14: Our Model has Proven to be Resilient and Successful Across the Cycles
Our Model has Proven to be Resilient and Successful Across the Cycles FY 2021 FY 2023E Revenue AEBITDA AEPS 173% NMRK Midpoint of 136% -10% -9% Guidance Peer 100% Consensus -24% 79% Peer -29% 53% Average -36% NMRK 35% -50% Revenue AEBITDA AEPS - Newmark increased revenues and earnings significantly
Slide 15: Record Quantities of Debt Maturing in 2023-2025
Record Quantities of Debt Maturing in 2023-2025 Commercial Mortgage Maturities by Original Loan Term U.S. Commercial Mortgage Maturities ($B) 600 ~$1.9T 500 400 300 200 100 0 Bank Insurance CMBS GSE Debt Fund Other - Over $2.6T in CRE/MF mortgages mature over the next five years, of which a record $
Slide 16: Distress Will Create Demand for Newmark Services
Distress Will Create Demand for Newmark Services Valuation & Advisory Property Management — Property valuation and property-type specific strategic advisory — Receivership — Real estate property tax advisory — Building operations and maintenance — Loan documentation compliance audit — Property accou
Slide 17: GAAP Financial Results
GAAP Financial Results
Slide 18: Condensed Consolidated Statements of Operations
Newmark Group, Inc. Condensed Consolidated Statements of Operations (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) Three Months Ended September 30, Nine Months Ended September 30, Revenues: 2023 2022 2023 2022 Management services, servicing fees and other $ 253,749 $ 222,379 $ 706,70
Slide 19: Condensed Consolidated Statements of Operations (continued)
Newmark Group, Inc. Condensed Consolidated Statements of Operations (continued) (IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNDER GAAP) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Per share data: Basic earnings per share Net income available to common
Slide 20: Condensed Consolidated Balance Sheets
Newmark Group, Inc. Condensed Consolidated Balance Sheets (IN THOUSANDS) (UNAUDITED) (UNDER GAAP) September 30, 2023 December 31, 2022 Assets Current Assets: Cash and cash equivalents $ 143,343 $ 233,016 Restricted cash 89,932 79,936 Marketable securities 239 788 Loans held for sale, at fair value 6
Slide 21: Summarized Condensed Consolidated Statements of Cash Flows
Newmark Group, Inc. Summarized Condensed Consolidated Statements of Cash Flows (IN THOUSANDS) (UNAUDITED) (UNDER GAAP) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 Net cash provided by (used in) operating activities $ 413,540 $ (74,299) $ (485,938) $ 264,735 N
Slide 22: Appendix 1: Additional Information on Newmark
Appendix 1: Additional Information on Newmark
Slide 23: Newmark Volumes
Newmark Volumes1 ($ IN MILLIONS) 3Q23 3Q22 % Change YTD 2023 YTD 2022 % Change TTM 3Q23 TTM 3Q22 Investment Sales 9,179 14,745 (37.7)% 22,815 59,769 (61.8)% 34,630 96,718 Mortgage Brokerage 4,998 9,614 (48.0)% 13,038 31,366 (58.4)% 19,686 49,334 Total Capital Markets 14,177 24,359 (41.8)% 35,854 91,
Slide 24: Newmark Has a Long-Term Track Record of Gaining Share in Capital Markets
Newmark Has a Long-Term Track Record of Gaining Share in Capital Markets NMRK Total Debt Volume NMRK Investment Sales Volume NMRK Debt Market Share NMRK Investment Sales Market Share $100 12% $90 10% $80 Newmark Transaction Volume ($Bn) $70 Newmark Market Share (%) 8% $60 $50 6% $40 4% $30 $20 2% $1
Slide 25: Management Services and Leasing Equal or Surpass Pre-Pandemic Levels
Management Services and Leasing Equal or Surpass Pre-Pandemic Levels; Capital Markets Environment Remains Challenging ($ In millions) & as % of first nine months of 2019 Management services, servicing fees Leasing and Other Commissions Non-Capital Markets Total and other 1,320.9 1,306.9 631.7 603.1
Slide 26: Newmark Continues to Invest in Industrial and Retail Leasing
Newmark Continues to Invest in Industrial and Retail Leasing Newmark’s overall leasing revenues have remained relatively stable, led by our strength in retail and industrial. Our leasing revenues for these two property types were up by 45% in the TTM compared with 2019. Other Other Industrial Indust
Slide 27: Strong Growth in Recurring Revenues
Strong Growth in Recurring Revenues Provides Stable Base of Contractual Revenues ($ in millions) Pass through revenues Fees from management services, servicing, and other 14% & 16% Our fees from these businesses have respective grown 159% between 2017 and TTM Total & Fee Revenue CAGRs 32% 38% ended
Slide 28: Fully Diluted Period-End Share Count Summary
Newmark Group, Inc. Fully Diluted Period-End Share Count Summary As of September 30, 2023 Fully-Diluted Shares (millions) Ownership (%) Class A owned by Public 131.8 54% Limited partnership units owned by employees1 45.9 19% Class A owned by employees 19.6 8% Other owned by employees 2.0 1% Partners
Slide 29: Newmark's Commitment to ESG
Newmark’s Commitment to ESG Learn More about our ESG Initiatives at www.nmrk.com/esg. For Our Company For Our Clients Our ESG policies and practices generate sustainable Newmark’s property and facility management teams long-term value for Newmark as a global citizen. improve client’s workplace susta
Slide 30: Certain Revenue Terms Defined
Certain Revenue Terms Defined Fee and non-fee revenues The Company’s total revenues include certain management services revenues that equal their related expenses. These revenues represent fully reimbursable compensation and non-compensation costs recorded as part of Newmark's Global Corporate Servi
Slide 31: Other Useful Information
Other Useful Information The Impact of Nasdaq The receipt of shares from Nasdaq may also be referred to as the “Earn-out”. In the second quarter of 2021, Newmark recorded a gain of $1,093.9 million related to the final Earn-out, based on the June 30, 2021, closing price of $175.80. Between that date
Slide 32: Other Useful Information
Other Useful Information For additional information about key hires in 2023, see the Company's investor relations website for press releases including "Newmark Launches Data Center and Digital Infrastructure Capital Markets Business, Attracts Top Talent", "Newmark Hires Norm Taylor as President for
Slide 33: Other Useful Information (Continued)
Other Useful Information (Continued) Other Industry Data According to RCA, the amount of U.S. distressed commercial and multifamily real estate assets was $79.7 billion at the end of September 2023, which was an increase of 11% compared with three months earlier. The amount of potentially distressed
Slide 34: Appendix 2: Additional Industry Information
Appendix 2: Additional Industry Information
Slide 35: Investors Garnered High Returns Following Prior Resets in Values
Investors Garnered High Returns Following Prior Resets in Values There is strong latent investor demand for real estate investment, waiting for an indication that values have reset. This has historically been the signal for a period of above-average returns. Real Estate Closed-End Fund Returns by Vi
Slide 36: Interest in Loan Sales near Record Highs
Interest in Loan Sales near Record Highs While it is difficult to estimate the volume of loan dispositions given their opacity, interest in the topic has clearly increased, matching the levels seen in mid-2020 and during the GFC. CRE Loan Sales Story Frequency* 100 90 87 80 70 60 Percentile 50 40 30
Slide 37: Return to Workplace Continues to Improve Year-Over-Year
Return to Workplace Continues to Improve Year-Over-Year While workplace utilization has not reached pre-pandemic levels, year-over-year change suggests improvement As a % of 2019 levels 75% 74% 69% 67% 65% 61% 62% 55% 50% 47% Kastle U.S. Freespace (Americas) Freespace (EMEA) Freespace (APAC) SWAA* 3
Slide 38: Appendix 3: Financial Tables & Reconciliations
Appendix 3: Financial Tables & Reconciliations
Slide 39: Non-GAAP Financial Measures
Non-GAAP Financial Measures NON-GAAP FINANCIAL MEASURES This document contains non-GAAP financial measures that differ from the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). Non-GAAP financial mea
Slide 40: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) - Charges with respect to preferred units. Any preferred units would not be included in the Company’s fully diluted share count because they cannot be made exchangeable into shares of common stock and are entitled only to a fixed distribution. Preferred units
Slide 41: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) Excluded Compensation-Related Items with Respect to the 2021 Equity Event under Adjusted Earnings and Adjusted EBITDA Newmark does not view the cash GAAP compensation charges related to 2021 Equity Event (the "Impact of the 2021 Equity Event") as being reflect
Slide 42: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) Calculation of Other income (loss) for Adjusted Earnings and Adjusted EBITDA Adjusted Earnings calculations also exclude certain other non-cash, non-dilutive, and/or non-economic items, which may in some periods include: – Unusual, non-ordinary or non-recurrin
Slide 43: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) METHODOLOGY FOR CALCULATING ADJUSTED EARNINGS TAXES Although Adjusted Earnings are calculated on a pre-tax basis, Newmark also reports post-tax Adjusted Earnings to fully diluted shareholders. The Company defines post-tax Adjusted Earnings to fully diluted sha
Slide 44: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) The share count for Adjusted Earnings excludes certain shares and share equivalents expected to be issued in future periods but not yet eligible to receive dividends and/or distributions. Each quarter, the dividend payable to Newmark’s stockholders, if any, is
Slide 45: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) ADJUSTED EBITDA DEFINED Newmark also provides an additional non-GAAP financial performance measure, “Adjusted EBITDA”, which it defines as GAAP “Net income (loss) available to common stockholders”, adjusted for the following items: – Net income (loss) attribut
Slide 46: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) MANAGEMENT RATIONALE FOR USING ADJUSTED EBITDA Newmark’s calculation of Adjusted EBITDA excludes certain items discussed above because they are either non-cash in nature, because the anticipated benefits from the expenditures are not expected to be fully reali
Slide 47: Reconciliation of GAAP Net Income to Adjusted Earnings
Reconciliation of GAAP Net Income Available to Common Stockholders to Adjusted Earnings Before Noncontrolling Interests And Taxes And GAAP Fully Diluted EPS to Post-Tax Adjusted EPS (in Thousands, Except per Share Data) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 202
Slide 48: Reconciliation of GAAP Net Income to Adjusted Earnings (continued)
Reconciliation of GAAP Net Income Available to Common Stockholders to Adjusted Earnings Before Noncontrolling Interests And Taxes And GAAP Fully Diluted EPS to Post-Tax Adjusted EPS (continued) (in Thousands, Except per Share Data) (Unaudited) (Continued) Three Months Ended September 30, Nine Months
Slide 49: Reconciliation of GAAP Net Income to Adjusted Earnings (continued)
Reconciliation of GAAP Net Income Available to Common Stockholders to Adjusted Earnings Before Noncontrolling Interests And Taxes And GAAP Fully Diluted EPS to Post-Tax Adjusted EPS (continued) (in Thousands, Except per Share Data) (Unaudited) (Continued) Three Months Ended September 30, Nine Months
Slide 50: Reconciliation of GAAP Income to Adjusted EBITDA
Reconciliation of GAAP Income to Adjusted EBITDA (in Thousands) (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 GAAP net income available to common stockholders $ 9,947 $ 27,964 $ 6,027 $ 76,848 Adjustments: Net income attributable to noncontrolling i
Slide 51: Reconciliation of GAAP pre-tax income to GAAP pre-tax income excluding other income
Reconciliation of “GAAP pre-tax income” to “GAAP pre-tax income excluding other income” (in Thousands) (Unaudited) Three months ended September 30, Nine Months Ended September 30, 2023 2022 2023 2022 GAAP income (loss) before income taxes and noncontrolling interests ("GAAP pre-tax income") 22,509 5
Slide 52: Liquidity Analysis Table; Reconciliation of Adjusted EBITDA to Operating Cash Flows
Liquidity Analysis Table (in Thousands) (Unaudited) September 30, 2023 December 31, 2022 Cash and cash equivalents $ 143,343 $ 233,016 Marketable securities 239 788 Total (1) $ 143,582 $ 233,804 (1) In addition to the total liquidity figures shown above, Newmark's undrawn amount on the Credit Facili
Slide 53: Other Income
Other Income ($ in Millions) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Nasdaq Impact $- $- $- ($87.4) Mark-to-market gains (losses) on non-marketable investments, net - - - (13.9) Other items, net 3.2 (0.1) 4.1 (0.1) Other income (loss), net under GAAP 3.2
Slide 54: Newmark Group, Inc. media and investor contacts
MEDIA CO NT ACT INVEST O R CO NT ACT Find out more about Newmark For additional insights from Newmark Research, at the following sites: please go to the following websites: Deb Bergman Jason McGruder t 303-260-4307 nmrk.com nmrk.com/insights John Brennan t 212-829-7124 twitter.com/newmark nmrk.com/s