Newmark Group (NASDAQ:NMRK) Q4 2020 Earnings Call

0:00 Good morning. My name is Matt, and I'll be the conference operator today. At this time, I would like to welcome everyone to the Newmark fourth quarter 2020 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the call over to Jason Harbs, VP of Investment Relations. Sir, you may begin when you're ready. Thank you and good morning. We issued our fourth quarter and full year 2020 financial results press release and a presentation summarizing these results this morning.

0:48 The results provided on today's call compare only the fourth quarter of 2020 with the year earlier period unless otherwise stated. Any figures with respect to cash flow from operations discussed on today's call refer to net cash provided by operating activities excluding loan originations and sales. We will be referring to our results on this call only on an adjusted earnings basis unless otherwise stated. We may also refer to adjusted EBITDA. Please see today's press release for results under generally accepted accounting principles or GAAP. Please see the sections in the back of today's press release for the complete definitions of any such non-GAAP terms, reconciliations of these items for the corresponding GAAP results, and how, when, and why management uses them. Additional information with respect to our GAAP and non-GAAP results mentioned on today's call is available on our website and in our investment presentation.

1:37 Any outlook discussed on today's call assumes no material acquisitions, shareable purchases, or meaningful changes in the company's stock price. These expectations are subject to change based on various macroeconomic, social, political, and other factors, including the COVID-19 pandemic. I also remind you that information on this call regarding our business that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such statements involve risks and uncertainties. Thank you. Thank you. See Newmark's Securities and Exchange Commission filings, including but not limited to the risk factors set forth in our most recent Form 10-K, Form 10-Q, or Form 8-K filings.

2:44 With respect to the NASDAQ earn-out, the number of shares received by Newmark will depend on the timing of the closing of NASDAQ's recently announced sale of its U.S. fixed-income business and NASDAQ's stock price at the time. Nancek has stated that the closing is subject to the satisfaction of customary closing conditions, including the receipt of required regulatory approvals. Newmark can provide no assurance as to when or if the closing will occur. I'm now happy to turn the call over to our host, Barry Gosin, CEO of Newmark Group, Inc. Thank you, Jason. Good morning, and thank you for joining us for Newmark's fourth quarter 2020 conference call. Joining me virtually on the call today are Newmark's Chief Financial Officer, Mike Rispoli, our Chief Strategy Officer Jeff Day, and our Chief Revenue Officer Lou Alvarado.

3:31 Newmark's 2020 results demonstrate the resilience of our commercial real estate services platform. We reported record quarterly revenues in valuation and advisory, capital markets, and mortgage banking. Our capital markets and debt volumes totaled $32 billion. In 2020, Newmark gained 192 basis points of market share in U.S. investment sales and improved its ranking to third overall. We also gained 83 basis points in our GSE originations business and ranked fifth overall. Newmark's leadership position in alternative property types such as life science, Seniors Housing, Medical Office, Self Storage, and Student Housing helped propel our record-setting capital markets performance.

4:24 We continue to focus on the growth of our recurring revenue businesses such as evaluation advisory, mortgage servicing, global corporate services, and property management. We recently hired a head of global corporate services to expand this critical offering for occupiers as they formulate their plans for returning to the workplace. Additionally, we continue to expand their presence in key growth markets that are benefiting from demographic tailwinds. Based on the strong foundation we have built, Newmark expects to outperform as industry volumes recover. Newmark recently acquired all of the first and second lien debt of Notel. On January 31st, we announced an agreement to provide approximately $20 million of debtor and possession financing and acquire the assets of Notel through its Chapter 11 sales process. We believe that co-working and flexible offices will be an increasingly important offering to owners and occupiers in the post-pandemic world.

5:32 Newmark's financial position is strong, and Mike is going to discuss the NASDAQ transaction in a minute. But I would like to point out that we generated more than $100 million of cash from operations and paid down $200 million of debt in the quarter. With that, I'm happy to turn the call over to Mike. Thank you, Barry, and good morning. Commercial real estate services industry and certain of Newmark's businesses were adversely impacted by the COVID-19 pandemic in the fourth quarter and full year 2020, which resulted in lower transaction-related activity. Our revenues declined 4.9% to $601.4 million.

6:20 Capital markets revenues increased by 15.3%, led by investment sales. Our investment sales business gained 192 basis points of market share in 2020. Gains from mortgage banking increased 103.2%. Overall, Newmark's GSE market share increased by 83 basis points in 2020. Management services, servicing fees, and other rose 3.7%, driven by higher valuation and advisory fees and pass-through revenues. These recurring revenues represented 33% of our total in 2020, up from 28% in 2019 as we continue our focus on growth.

7:08 Our leasing revenues declined 45%. This was largely a result of our significant presence in large urban markets such as New York City and the San Francisco Bay Area. We anticipate leasing will remain challenged until there is greater clarity around the return to the workplace. But we believe that demand will accelerate in these markets as the pandemic subsides. Moving on to expenses. Total expenses decreased in the quarter, reflecting lower commissions and other operating expenses due to cost savings initiatives. These declines were partially offset by increases related to the quarterly timing of recruiting costs and higher pass-through expenses.

7:53 For 2020, our expenses declined 12.2%, reflecting lower variable compensation and the company's cost savings initiatives. These actions will result in approximately $60 million of permanent savings in 2021. The company is planning to further reduce its expense base by $15 million by the end of 2021, resulting in total permanent savings of $75 million, or 10.5% of our pre-pandemic expense base. Turning to earnings. Adjusted earnings per share were 30 cents, down 43.4%, and adjusted EBITDA was $112.9 million, down 34.3%.

8:40 Moving on to the balance sheet. Newmark generated $112.4 million of cash flow from operations in the fourth quarter and repaid $200 million on a revolving credit facility. We maintain strong liquidity and credit metrics. As of December 31st, We had $191.4 million of cash and cash equivalents and $325 million of availability on our revolver. Our net leverage ratio was 1.4 times at year end. Our balance sheet does not yet reflect the NASDAQ earnout. On February 2nd, NASDAQ announced that it entered into a definitive agreement to sell its U.S. fixed income business. The closing will accelerate Newmark's receipt of NASDAQ shares a portion of which will be used to offset the remaining balance from the company's 2018 monetization transaction.

9:36 On a net basis, Newmark estimates that it will retain approximately 5 million shares of NASDAQ stock worth $723.5 million as of yesterday's closing price. If, as expected, the earn-out is accelerated into 2021, the company will exclude the NASDAQ earn-out from adjusted earnings and Recast its historical results for enhanced comparability. Our near-term capital allocation priorities are to return capital to stockholders through share repurchases and to invest in growth and margin expansion at attractive returns. We also intend to pay down our revolving credit facility. Newmark plans to continue with dividend and distributions at or near current levels through the balance of 2021.

10:29 After review of these priorities, Newmark's Board of Directors yesterday increased our repurchase authorization to $400 million. Newmark is not providing specific earnings guidance for 2021 due to current market uncertainty. However, we expect U.S. capital markets volumes to improve based on elevated multifamily, life science, and industrial activity. We expect GSE originations to remain strong. We anticipate leasing activity will remain challenged until there is greater clarity around the return to the workplace. But we believe demand will accelerate as the pandemic subsides. Based on these factors, we expect to generate double digit revenue growth in 2021.

11:17 We executed cost savings initiatives in 2020, which will result in approximately $60 million of permanent savings in 2021. The company is further planning to reduce its expense base to achieve an additional $15 million of savings by the end of 2021, resulting in total permanent savings of $75 million. This represents 10.5% decrease from our pre-pandemic expense levels. We anticipate adjusted EBITDA margins will expand to above 20% in 2021. And while we expect improvement in adjusted earnings and adjusted EBITDA in 2021, year-over-year comparisons in the first quarter will be challenging because our first quarter 2020 revenues were relatively unaffected by the pandemic, which was declared on March 11, 2020.

12:08 I would now like to turn the call back to Barry. We have built a company that has remained strongly profitable during a period of intense difficulty. Throughout the year, Newmark generated substantial cash flow and further strengthened its balance sheet. We've captured market share in a number of our major business lines. I am so proud of our team and what we've accomplished in 2020. Operator, we'd like to open the call for questions. We will now begin the question and answer sessions. To ask a question, you may press star one on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster.

13:05 Our first question comes from Alexander Goldfarb from Piper Sandler. Please go ahead. Hey, good morning. Morning, Barry. So first, obviously really strong on the capital markets and mortgage, so kudos to you and the team for those results. Let me just, just a few questions here. First, on the NASDAQ proceeds, the $725 million, Is that, I guess, a two-part question here? One, should we think about you guys, you know, sort of getting $725 million in cash right away, or your view is that you'll get the shares and that you'll sell them over time? Yeah, hey, Alex, it's Mike. We'll get the shares.

13:53 The shares will be unrestricted, and then it just depends on, you know, how we monetize them into cash over time. We could certainly borrow against them as we have them on our balance sheet. So we think we'll have the liquidity access immediately once we receive the shares. Okay, but presumably, you know, Mike, you guys aren't going to become like a stockbroker and have the shares as an investment. The shares are being viewed as a monetization, or are you guys actually looking at these shares as something like, hey, NASDAQ's a great company, we want to be a shareholder of them? Well, I think you see we have uses for the capital.

14:38 We've announced a bigger stock buyback program. We're seeing a lot of opportunity to continue to invest in the business and so we have uses for the capital and we want to continue to invest and grow the business. We think NASDAQ is a great company, that's true, but we do have uses for the capital. And from a tax perspective, Does it matter if the tax triggered when you guys get the shares or when the shares are converted to cash? Sure. The trigger is when we receive the shares. But remember, Alex, we have a really favorable and unique corporate structure which allows us to use our stock and our units to generate taxable deductions.

15:28 So we think the tax payments against the NASDAQ income will be relatively minor. And we can use that capital to go do all the things we talked about, which are buying back stock and investing in attractive returns. Okay. And then the second question is, on no-tell, what are sort of your long-term plans for this? Is this just sort of a short-term, because you're an investor, you want to sort of help right-size them and then exit? Or is this a new business line that you're going to get involved with? For starters, we don't own it. There is a bankruptcy process with Stalking Horse Bitter. We believe in the co-working and flex-working space generally over the long haul.

16:14 This is going to be part of the entire narrative. In fact, that's certainly. But we don't own it yet. So we'll see how that plays out. We think there's a natural fit in terms of our infrastructure and its infrastructure, and it could be a service to our owners and our clients. Okay, so Barry, to that point, and more specifically on the building owners, so you don't see it as a conflict where you'd be competing for tenants with them. You see it as complementary where you'd be having no-tell space in your landlord buildings and where it sort of helps them with space that they may otherwise struggle to lease. Is that how we should think about it?

17:01 Yeah, we see it just the opposite. We see it as a benefit, an opportunity. Okay, cool. Listen, thank you. Our next question comes from Jade Romani with KBW. Please go ahead. Thank you very much and congratulations on the impressive results, particularly in capital markets. To start off with just a finer point on the NASDAQ sale, I think most investors have been projecting Organic Growth in NASDAQ. So they were looking at between 2023 and 2027, during which you would receive your annual share proceeds. And so projecting forward, growth in NASDAQ stock price, and then discounting that to the present, implying an NPV.

17:58 So as we compare that to the, you know, 700 plus 723 million of proceeds you expect, We were assuming a tax against that. So when you say relatively minor payment on a tax basis, does that imply new share issuance? I just want to make sure I'm not double counting or overlooking any potential differences between my NPV estimate and the $723.5 million in proceeds the company expects. Sure. How you doing, Jade? And thanks for the question. There's no new share issuance. These are shares and units that are already outstanding, which generate either deferred tax assets that sit on our balance sheet or just haven't been taxed at all or created a tax deduction for the company. Remember, the units and the shares we issue are largely compensatory.

19:04 So they are tax deductions for Newmark. And as those units convert into stock, the company can take the tax deductions and we believe we can largely offset the income from the receipt of the NASDAQ shares. Okay. So in terms of accretion relative to, I know recently you've been providing a book value estimate, but I guess relative to people's NAV estimate or estimate of bear market value, For Newmark, we should be taking that full $723.5 million. I think my prior net present value estimate was somewhere in the $525 million range, so in excess of $200 million from that pull forward. Does that seem reasonable to you?

19:53 I wouldn't say the full amount, but I would say a large part of it, which we can then use to execute on the part of our share buyback program. Great. Well, I think certainly that's a very positive development for the company in terms of potential reduction in leverage, reduction in risk. It should be accreted to the company's multiple. So good to see that happen. In terms of capital allocation opportunities, when you have this cash, how do you expect to deploy it in terms of mix of share buyback? Growth opportunities as well as reduced leverage. Should we assume that there's an equal weighting to all three of those, or is there some nuance we could put on that? Sure. Maybe I'll start with the leverage. We do expect to pay down the revolver.

20:43 It doesn't make sense to pay off the $550 million bond. It's just too expensive at this point, given it doesn't mature until 2023, and there's season penalties associated with that. I think how much we invest in growth capital, we certainly have announced a large share buyback program, and we'll have to see what the opportunities are in the market. We're still looking to invest in attractive returns, and so when we see those opportunities, we'll have the capital to certainly go invest and continue to build our EBITDA and grow our business. Thanks very much. In terms of the overall market, I think that investment sales volumes fell by about 19% year on year.

21:33 You know, we've seen JLL report, we've seen Walker Dunlop report their GSE multifamily. Seems like multifamily is doing extremely well, industrial surging, life sciences surging, office a laggard. But in terms of Newmark's own business, and the positive growth rate you posted, 15%, which was dramatically above what we projected. What were the main drivers? Were there effects of prior M&A or do you really believe on an organic basis that 15% is what the company delivered? Any nuance you could put on that would be helpful. We've spent the last five years hiring talent. So we have a lot of the talent that we are relatively new over the last couple of years are beginning to realize and normalize their capacity to perform.

22:35 We've established ourselves as a major player in the capital markets business. We've elevated our brand with respect to institutions, portfolios, and a number of others. will be a beneficiary of that. I mean, there are certain food groups that we have to fill in the white space. And as we continue to fill in the white space, as they continue to be integrated into the bigger, broader platform, we think that as a collective, it's just going to continue to get better and better.

23:41 Thank you very much. And lastly, there's been a number of Media reports about potential large-scale M&A in the sector. And Barry, I know you've been in this sector since the 70s, having started the company and clearly have grown the business successfully. What would be your interest in these mergers of equals type transactions, which historically have not really created value for shareholders? Do you expect Newmark to remain independent or do you have a strong interest in combining with another player that maybe has business lines that would be complementary or perhaps would provide economies of scale in the space?

24:32 I really wouldn't comment on a speculation about any merger or acquisitions. I'd say that we truly believe in what we've built. We continue to acquire talent. We continue to be in more and more and ever increasing platform that'll attract the talent as our brand elevates. So we think there's a lot of runway in that. But we're always interested in protecting our shareholders and achieving the most value we can. We are those shareholders, so we're going to do what's best for us and the company to continue to improve our value. This is a marathon.

25:22 There is a gestation period in building an enterprise that really works. We think we've demonstrated where we've focused on a particular food group. and we've put together the pieces of the puzzle that we can demonstrate that we can create value. And as such, we'll continue to build on our strengths and we'll continue to work on our weaknesses. And we think that as our brand improves, even in those spaces where we were not considered a necessary parameter, we'll continue to get better, attract more talent, and grow as an enterprise. We think we have a lot of room to grow. Thank you very much for taking the questions.

26:10 Our next question comes from Rick Skidmore with Goldman Sachs. Please go ahead. Good morning. Thank you. Barry, just following up on the investing for growth, can you talk about perhaps areas where there's white space that you're looking at, whether it be by business line or geography, or how you're thinking about that investment for growth? Thanks. We mentioned demographic tailwinds. It's well known that there is out-migration from a variety of low-growth markets, high-tax markets. So we're investing in those markets to grow our platform in those markets, you know, Southeast, Texas, middle of the country, etc., and in terms of food groups, we just hired a new head of global corporate services and we think that we have a good runway in that in concert with the great talent that we have in the tenant rep business and the multi-market transaction business.

27:17 We're increasing our offering and expanding our offering in that respect. Lou, you might have something to add to that? Yeah, I think, you know, in general, also property management. You know, property management has been a big focus of us, and it's been a good growth area for us, particularly during the pandemic, and we think will continue. So we, you know, a year ago, restructured that in order to address the needs of our clients and better service them. And so I think a combination of the growth in GCS, the growth in property management, and Growing through where we're already strong, we need to fill the white space and continue our organic growth that we have planned for the company. Thank you. Maybe just shifting, Mike, to the cost reduction that you mentioned, the $15 million of permanents by the end of year 2021.

28:09 Can you talk about where those might be coming from and how you think that layers through 2021? Sure. It's really becoming more efficient in how we deliver service to the front end of the business through use of technology, artificial intelligence, just being smarter about our processes and our procedures. We've grown more than 30% per year for many, many years. We've done a lot of acquisitions. I think the last year has given us an opportunity to step back and try and reorganize our processes and procedures and operations. to deliver a better product at a lower price point. And I think we started. We made a lot of progress in 2020, but we still have some more work to do, and that's what the remaining $15 million is.

29:02 Thank you. Again, if you have a question, please press star then 1. Our next question comes from Michael Funk with Bake of America. Please go ahead. Yeah, hi, good morning. Thank you for the question. So first, if I could, you know, focusing on the capital market revenue, obviously, you know, very good, very strong quarter there. Can you comment on the mix of buyers, either weather operators or financial buyers, and kind of to the latter, is that having an impact on the property management business? Well, the property management business certainly is impacted by capital markets.

29:53 The mix of buyers, they run the gamut. Money looks forward, so money anticipates where things are going, which is why we think that capital markets will come back and grow before some of the other business lines. So all that is, capital markets is a lead-in to property management and certainly other businesses. So I don't think it matters who's buying. Okay, I appreciate it. And then you commented on the renewal activity picking up. in leasing, which makes sense, more shorter-term renewals. Can you comment on how that might impact leasing revenue in 2021, having a greater mix of renewals versus new leases?

30:47 Historically, throughout any downturn, good brokers find ways of earning money during their downturns. The difference in this time is companies don't exactly know and aren't certain about what the footprint's going to look like. Normally what happens in a downturn, there's a reset in rents, there's a reset in valuation, there's a much more resolved by owners to renew, and the same resolved by tenants to extend and blend their leases early. Once there's clarity on what the workplace looks like and what remote working means to companies, there will be unquestionably an increase in activity because people will understand where they're going. And I think that's been the holdup, and I think it will become much more clear as people are vaccinated. Once the pandemic is taken care of, people will change.

31:54 and I think differently about how they want to occupy space. Maybe one more if I could please. So the allocation of capital, appreciate the color you gave, but investing for growth as well as returning capital to shareholders through stock repurchases. Focusing on investing for growth, can you just walk us through maybe how wide of a range that investment might be and the thought on timing? I know you mentioned earlier about investing more in growth areas like the Southeast and Texas and the middle of the country, but how large of a bucket of spending might that be? Well, I mean, it's a... Jeff?

32:41 Jeff? Well, I can tell you from the broker side and from the property management and GCS, It's not so much the capital as it is us getting our platform and everybody working together and collaborating and presenting our platform to the clients. We think the opportunities are definitely there. There's definitely some white space to fill from the standpoint of some talent in those markets, but I don't see those as huge material numbers. I see those more as finding the right people and creating the opportunity for them to join our firm. and be able to prosper better with us. So I don't, you know, it's not like we're looking at a large acquisition. I think we're looking at more filling in in certain holes that we have within the brokerage and within some of our other service lines.

33:34 Great. Thank you for the questions. Oh, sorry. No, that's okay. I think we did a good job. Okay. Thank you very much. Our next question is a follow-up from Alexander Goldfarb with Piper Sandler. Please go ahead. Hey, and thank you for taking the question. Just going back to the cost savings for $75 million in total, Mike, is that all cash savings, or are some of the savings going to be realized in fewer share issuances as part of comp incentive? Just trying to get a framework for how we should think about the cost savings. Yeah, I would say that it's a combination of people being more efficient around people, near-shoring and off-shoring opportunities. In non-comp, it's certainly, you know, looking at events and T&E and things of that nature. There's some asset impairments we took in 2020 which will benefit our numbers going forward.

34:47 assets that were no longer having value. Certainly some space consolidation is part of that. But I would say it's largely cash based. And, you know, we think we'll continue to just look for opportunities to be more efficient and more effective in the product that we deliver. Okay, so said differently, historically the company has generated strong top-line growth that's gotten neutered down at the bottom-line basis. So will this sort of go to further address that and make the two in sync, or is this more things that will be on the margin and overall we're still looking at that sort of disconnect between sort of double-digit top-line but then more single-digit bottom-line?

35:34 No, the objective, Alex, is that our incremental margins will follow the growth in the revenue. So, the bottom line will mirror the top line or maybe even outperform the top line as the businesses come back. Okay, okay. Yeah, that's good to hear. Obviously, we look forward to seeing that outcome. Thank you, Mike. Thanks, Alex. Our next question is also a follow-up from and Jade Bramani with KBW. Please go ahead. Thank you very much. Thinking about the avenues that Newmark has to maximize its value, one potential asset is the GSE multifamily business. There's a REIT called Arbor Realty which bifurcated itself into a REIT that got a federal tax treatment from the IRS on its MSR.

36:28 I'm wondering if You can consider the GSE multifamily lending business a long-term core strategy that should be part of Newmark as a C-corp or if there's potentially You know, an opportunity to sell that business or to sell an interest in the MSR that could create additional capital. I would think if people are speculating about M&A for Newmark, you know, there's a lot of low-hanging fruit that could be addressed prior to pursuing some kind of merger that might be more accretive to shareholders. Well, Jake, if you look at our multifamily business, you... And you look at the evolution of the way that investors have become more institutional, more global, and crossing multiple verticals, the multi-family business is really inextricably intertwined with the overall capital markets and other businesses like property management, et cetera.

37:26 So, you know, while we're always interested in evaluating opportunities, we do consider it a critical part of Newmark. Thank you very much. Regarding NoTel, if Newmark is ultimately the winner of that bidding, are there anticipated costs in addition to the $20 million in dip financing that has been stated that Newmark would provide? Yeah, not at this time, Jade. I think we just have to see how the bankruptcy plays out. You know, if we are the winning bidder, We'll certainly talk about our plans for the business and our plans for capital allocation for the business if and when that happens.

38:14 Thank you very much for taking the questions. Thanks, Gene. Our next question comes from Patrick O'Shaughnessy with Raymond James. Please go ahead. Pardon me, Patrick. Your line might be muted. All of you for that. Good morning. Barry, I was curious if we can get an update on your thoughts regarding international expansion, particularly in light of the expected improvement in Newmark's liquidity. Obviously, that is one big white space. We have a relationship with Knight Frank to execute on our global platform for GCS.

39:01 We do have positions in raising capital. We have done a really good job around raising foreign capital where we have offices in Dubai. We have other offices around the globe that are specifically ours. So we've done a pretty good job establishing ourselves with all of the foreign investors throughout the world. and we were taking things as we need to. I mean, we still have white space in the Americas and we're working on that each and every day and we're looking at opportunities. Got it. And as you're thinking about 2021, obviously you provided your outlook on some of the more transactional businesses. As you're thinking about the non-transactional businesses, evaluation advisory and consulting and management services, Where are you expecting relative strength in 2021 and where are you expecting perhaps some continued work?

40:10 What Jeff said is that all of our businesses work together. Our appraisal, our debt, our multifamily investment sales, it all feeds on itself and I think we do a pretty good job of integrating all the different food groups to work together. Consulting, supply chain, logistics, workplace strategy, site selection, tax incentives, appraisal, valuation, those kinds of things all work together. We think those are really good opportunities for us to grow. In our appraisal business, we really started with one hire and we now have 500 people in the U.S. in appraisal from one hire.

40:57 and much of that was done person by person, team by team, as well as some acquisitions. So we'll continue to expand all of our consulting, including property management. We think it's a good opportunity, but it also works in conjunction with the transactional activities because our clients want a differentiated product They want to create, you have to provide value for them. And in order to do that, you have to provide those services. And those are FIFA services as well. Got it. And then last one from me. Your servicing portfolio grew by 10% in 2020. That's a little bit above the typical pace of growth over the last few years. Would you expect that to moderate going forward into 2021, or do you think you can continue to grow the servicing portfolio at a high single digit, low double digit rate?

42:00 Well, if you obviously look at the GSE caps, it will be slightly more restricted in 2021 than it was in 2020 based on some commentary from FHFA last week. Having said that, we've proven our ability to year after year grow market share in the space. And so our expectation is that we'll continue to outperform the market and grow the servicing portfolio at generally the same pace. Great. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Barry Gosin for any closing remarks. I'd like to thank everyone for joining this call and we look forward to seeing you or hearing from you at our next quarterly call.

42:45 Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.