Newmark Group, Inc. · NASDAQ:NMRK
Newmark — Q3 2022 Earnings Presentation
47 slides from Newmark's earnings presentation, Oct 28, 2022
Slide 1: Third Quarter Financial Results Presentation
Third Quarter Financial Results Presentation Newmark Group, Inc. (NMRK) October 28, 2022
Slide 2: Disclaimer and Other Useful Information
Disclaimer and Other Useful Information 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- lookin
Slide 3: Disclaimer and Other Useful Information (Continued)
Disclaimer and Other Useful Information (Continued) Industry Volumes Newmark’s investment sales figures include investment sales and equity advisory transactions, while mortgage brokerage figures include the Company’s non-originated debt placement transactions, all measured in notional terms. Invest
Slide 4: Highlights of Recent Consolidated Results
Highlights of Recent Consolidated Results HIGHLIGHTS OF CONSOLIDATED RESULTS ($ IN MILLIONS) 3Q22 3Q21 Change YTD 22 YTD 21 Change Revenues $664.6 $788.1 (15.7)% $2,098.2 $1,922.0 9.2% GAAP income before income taxes and noncontrolling interests ("GAAP pre-tax income") 51.2 217.1 (76.4)% 136.1 999.6
Slide 5: Leading Global Commercial Real Estate (CRE) Services Provider
Leading Global Commercial Real Estate (CRE) Services Provider Large Scale Player TTM Revenues TTM AEBITDA TTM Transaction Volume Professionals Global Client Service Locations $3.1B $633.9MM ~$1T ~6,700 ~180 Top 5 Global Public Acclaimed 55+ Companies acquired since 2011; CRE Services Company Industr
Slide 6: 3Q 2022 Highlights
3Q 2022 Highlights $0.35 18.4% $664.6MM $122.5MM POST-TAX ADJUSTED REVENUES ADJUSTED EBITDA ADJUSTED EBITDA EPS MARGIN - 10.8% increase in recurring fee revenues from management services, servicing fees, and other. - Gained further market share in U.S. investment sales, ranking number three year-to-
Slide 7: Management Commentary on Business Trends
Management Commentary on Business Trends Management Services, Leasing & Other Commissions Investment Sales Commercial Mortgage Servicing Fees and other Origination, net - Structural review of office design and - The U.S. office market has been - Approximately $413 billion of global dry - Approximate
Slide 8: 3Q 2022 Revenue Detail
3Q 2022 Revenue Detail1 Commercial mortgage Investment sales origination, net Commercial mortgage Management services, origination, net servicing fees, & other -12.3% -36.9% 13.6% $103.3 $90.6 $208.8 $131.7 33.5% 3Q 2021 3Q 2022 3Q 2021 3Q 2022 19.8% 3Q 2022 Revenue by Management services, Business
Slide 9: YTD 2022 Revenue Detail
YTD 2022 Revenue Detail1 Investment sales Commercial mortgage origination, net Commercial mortgage Management services, +8.9% origination, net servicing fees, & other +11.8% $452.6 $492.9 13.6% $284.5 $254.4 32.8% YTD 2021 YTD 2022 YTD 2021 YTD 2022 23.5% YTD 2022 Revenue Leasing and other Managemen
Slide 10: Newmark Quarterly Volumes
Newmark Quarterly Volumes ($ IN MILLIONS) 3Q22 3Q21 % Change YTD 22 YTD 21 % Change TTM 3Q22 TTM 3Q21 % Change Investment Sales 14,745 22,949 (35.7)% 59,769 51,060 17.1% 96,718 73,910 30.9% Mortgage Brokerage 9,614 9,391 2.4% 31,366 23,356 34.3% 49,334 27,996 76.2% Total Capital Markets 24,359 32,34
Slide 11: Mortgage Servicing Provides Recurring, High-Margin Revenues
Mortgage Servicing Provides Recurring, High-Margin Revenues Servicing Portfolio Composition as of 9/30/2022 Newmark Fannie Mae/Freddie Mac Portfolio Maturities by Year 47.3% FHA/Other Fannie Mae 8.2% 38.3% 36.9% Limited Servicing 19.2% $70.9 Billion 14.1% Special Freddie Mac 1.7% Servicing 31.8% 2.5
Slide 12: Strong Balance Sheet & Credit Metrics
Strong Balance Sheet & Credit Metrics AS OF 9/30/2022 ($ IN MILLIONS) Cash and Cash Equivalents1 $229.7 Credit Metrics as of 9/30/2022 Interest Rate Maturity $633.9 million TTM Adjusted EBITDA Senior Notes 6.125% 11/15/2023 $547.1 Credit Facility N/A 3/10/2025 - 0.5x Total Long-term Debt2 $547.1 Net
Slide 13: Strong Financial Position & Cash Generation to Support Growth
Strong Financial Position & Cash Generation to Support Growth Low Risk Variable Cost $450 MM+ of Annual Cash Generated Intermediary Structure by the Business2 - Virtually no balance sheet risk1 - Over 70% of expenses are variable - $2.3 billion of AEBITDA and $1.8 billion of cash generated by the bu
Slide 14: Updated Outlook for 2022
Updated Outlook for 2022 Year-earlier Metric (in millions, except tax rate) Guidance Change YoY Prior Outlook Actual FY22 Total Revenues (7% - 4%) 3% - 7% $2,906.4 $2,700 - $2,800 FY22 Adjusted EBITDA (16% - 8%) 4% - 9% $597.5 $500 - $550 FY22 Adjusted Earnings Tax Rate 18.9% ~19% N/A 17% - 19% FY22
Slide 15: Newmark is on Track to Meet Its 2025 Targets
Newmark is on Track to Meet Its 2025 Targets Total Revenue (in $MM) Adjusted EBITDA (in $MM) 4,500 11.5% CAGR 10.8% 900 CAGR 3,081 16.2% 2,906 634 CAGR 597 22.5% CAGR 1,596 265 2017 2021 TTM 2025E Midpoint 2017 2021 TTM 2025E 3Q22 3Q22 - Newmark remains on track to continue industry-leading growth,
Slide 16: Illustrative Financial Model
Illustrative Financial Model . This is a hypothetical scenario intended to demonstrate the strength of earnings should current transaction activity continue. The demonstrated change in revenues should not be considered guidance. 2022 Mid Point of Guidance Range Hypothetical Hypothetical Scenario 1 %
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: 2022 2021 2022 2021 Management services, servicing fees and other $ 222,379 $ 244,469 $ 689,18
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, 2022 2021 2022 2021 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, 2022 December 31, 2021 Assets Current Assets: Cash and cash equivalents $ 229,673 $ 191,332 Restricted cash 77,865 75,168 Marketable securities 1,031 524,569 Loans held for sale, at fair v
Slide 21: Summarized Condensed Consolidated Statements of Cash Flows
Newmark Group, Inc. Summarized Condensed Consolidated Statements of Cash Flows (IN THOUSANDS) (UNAUDITED) (UNDER GAAP) For the Three Months Ended For the Nine Months Ended September 30, September 30, 2022 2021 2022 2021 Net cash provided by operating activities $ (74,299) $ (1,111,699) $ 264,735 $ (
Slide 22: Appendix 1: Additional Information on Newmark
Appendix 1: Additional Information on Newmark
Slide 23: Fully Diluted Period-End Share Count Summary
Newmark Group, Inc. Fully Diluted Period-End Share Count Summary AS OF SEPTMEBER 30, 2022 Fully-Diluted Shares (millions) Ownership (%) Class A owned by Public 126.9 53% Limited partnership units owned by employees 1 37.3 16% Class A owned by employees 23.7 10% Other owned by employees 3.6 2% Partne
Slide 24: Analysis of Adjusted EBITDA Relative to Cash Generated by the Business
Analysis of Adjusted EBITDA Relative to Cash Generated by the Business Adjusted EBITDA vs Cash Generated Analysis Adjusted EBITDA Employee loans for new hires Net cash provided by operating activities excluding activity from loan originations and (Left Axis, “A”) and producers (Left Axis, “B”) sales
Slide 25: Cash Generation Fuels Returns of Capital to Shareholders
Newmark Has Used its Significant Cash Generation to Fuel Returns of Capital to Shareholders Newmark's Shareholder Return by Category 600 23 500 400 294 300 87 200 210 281 100 105 203 88 7 0 42 2018 2019 2020 2021 YTD 2022 2021 Equity Event Share Repurchases Dividends and Distributions - Since our IP
Slide 26: Newmark Has A Proven Track Record of Gaining Market Share
Newmark Has A Proven Track Record of Gaining Market Share NMRK Total Debt Volume NMRK Investment Sales Volume NMRK Debt Market Share NMRK Investment Sales Market Share $120 12% $100 10% Newmark Transaction Volume ($Bn) Newmark Market Share (%) $80 8% $60 6% $40 4% $20 2% $0 0% 2015 2016 2017 2018 20
Slide 27: Appendix 2: Additional Industry Information
Appendix 2: Additional Industry Information
Slide 28: Capital Markets Volumes Grew Significantly Following Previous Recessions
Capital Markets Volumes Grew Significantly Following Previous Recessions - Post-recession recoveries in CRE have historically been driven by increased demand due to favorable relative returns, underinvestment in CRE, and inflation hedging strategies - Volumes for multifamily and industrial have grow
Slide 29: Record Quantities of Debt Maturing in 2023-2024
Record Quantities of Debt Maturing in 2023-2024 Commercial Mortgage Maturities by Original Loan Term U.S. Commercial Mortgage Maturities ($B) 700 $1.2T of Debt Maturing 600 500 400 300 200 100 0 Bank Insurance CMBS GSE Debt Fund Other - More than $2.5 trillion in commercial mortgage maturities from
Slide 30: Industry Activity Concentrates in Apartment and Industrial Sectors
Industry Activity Continues to Concentrate In The Apartment and Industrial Sectors, Though Retail Investment Has Also Outperformed—Office Share Continues to Decline Share of U.S. Industry Investment Sales Volume 45% 42% 41% 40% 40% 35% 35% 33% 32% 31% 30% 28% 25% 24% 24% 24% 20% 21% 20% 20% 20% 19%
Slide 31: A Robust Return to Office Could Change Expectations
A Robust Return to Office Could Change Expectations Kastle Office Physical Occupancy vs. Pre-Pandemic: Wednesday Value 120% 100% 80% 60% 40% 20% 0% Average Max Min Source: Kastle, Newmark Research. NEWMARK 31
Slide 32: Appendix 3: Financial Tables & Reconciliations
Appendix 3: Financial Tables & Reconciliations
Slide 33: 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 34: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) The amount of certain quarterly equity-based compensation charges is based upon the Company’s estimate of such expected charges during the annual period, as described further below under “Methodology for Calculating Adjusted Earnings Taxes”. Virtually all of N
Slide 35: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) Non-Cash Adjustment Related to Originated Mortgage Servicing Rights for Adjusted Earnings Newmark's calculation of pre-tax Adjusted Earnings excludes non-cash GAAP gains attributable to OMSRs. Beginning in the fourth quarter of 2020, OMSRs are no longer includ
Slide 36: 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 37: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) MANAGEMENT RATIONALE FOR USING ADJUSTED EARNINGS Newmark’s calculation of Adjusted Earnings excludes the 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 38: 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 39: Non-GAAP Financial Measures (continued)
Non-GAAP Financial Measures (continued) TIMING OF OUTLOOK FOR CERTAIN GAAP AND NON-GAAP ITEMS Newmark anticipates providing forward-looking guidance for GAAP revenues and for certain non-GAAP measures from time to time. However, the Company does not anticipate providing an outlook for other GAAP res
Slide 40: 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 41: 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 42: 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) (2) Primarily represents Cantor’s pro-rata p
Slide 43: 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, 2022 2021 2022 2021 GAAP net income available to common stockholders $ 27,964 $ 128,548 $ 76,848 $ 601,398 Adjustments: (1) Net income attributable to noncontr
Slide 44: Reconciliation of GAAP pre-tax income excluding the Impact of Nasdaq
Reconciliation of “GAAP pre-tax income” to “GAAP pre-tax income excluding the Impact of Nasdaq” (in Thousands) (Unaudited) Three months ended September 30, Nine months ended September 30, 2022 2021 2022 2021 GAAP income before income taxes and noncontrolling interests ("GAAP pre-tax income") 51,204
Slide 45: Liquidity Analysis Table and Operating Cash Flow Reconciliation
Liquidity Analysis Table (in Thousands) (Unaudited) September 30, 2022 December 31, 2021 Cash and cash equivalents $ 229,673 $ 191,332 Marketable securities 1,031 524,569 Repurchase agreements and securities loaned - (140,007) (1) Total $ 230,704 $ 575,894 (1) Undrawn availability on the Credit Faci
Slide 46: Other Income
Other Income ($ in Millions) 3Q22 3Q21 Change YTD 22 YTD 21 Change Nasdaq Impact - $74.9 (100.0)% ($87.4) $1,157.0 (107.6)% Mark-to-market gains on non-marketable investments, net - - NMF (13.9) 2.5 (656.0)% Other items, net (0.1) 27.8 (100.4)% (0.1) 27.8 (100)% Other income (loss), net under GAAP (
Slide 47: Media and Investor Contacts
M EDIA CONTACT INVESTOR CONT ACT Find out more about Newmark For additional insights from Newmark Research, at the following sites: please go to the following websites: Karen Laureano-Rikardsen Jason McGruder t 212-829-4975 t 212-829-7124 nmrk.com nmrk.com/insights investors@nmrk.com twitter.com/new