Newmark Group, Inc.

Greetings and welcome to the Newmark Group, Inc. Report's Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jason McGruder, Head of Investor Relations. Thank you, Jason. You may begin.

Thank you, operator, and good morning. Newmark issued its third quarter 2022 financial results press release and a presentation summarizing these results this morning. The results provided on today's call compare only the three months ending September 30th, 2022 with the year earlier period, unless otherwise stated. We will be referring to results on this call only on a non-GAAP basis, unless otherwise stated. These non-GAAP terms include adjusted earnings and adjusted EBITDA. Please see the sections in today's press release for the complete and or updated definitions of any non-GAAP terms, reconciliation of these items' corresponding GAAP results, and how, when, and why management uses them. More information with respect to our GAAP and non-GAAP results is available on our website in today's press release, the supplemental Excel tables, and the quarterly results presentation. 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, as well as the impact of the 2021 equity bank. Cash from the business is the same cash flow metric, but excluding employee loans for producers. The outlook discussed on today's call assumes no material acquisitions, sharing 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. While the 2025 financial and operational targets do assume acquisitions, they are also subject to change for the same reasons. None of our targets or goals through 2025 should be considered formal guidance. I also remind you that the information on this call about our business that are not historical facts, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended, Section 21E of the Securities Exchange Act of 1934 as amended. Such statements involve risks and uncertainties. This is required by law. Newmark undertakes no obligation to upstate any forward-looking statements. complete discussion of additional risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statement, see Newmark Securities and Exchange Commission files, including, but not limited to, the risk factors set forth in our most recent forms, 10-K, 10-Q, or 8-K filings, which are incorporated by reference. I'm now happy to turn the call over to our host, Barry Gossin, Chief Executive Officer of Newmark Group, Inc.

Good morning, and thank you for joining us. With me today are Newmark's Chief Financial Officer, Mike Rispoli, our Chief Strategy Officer, Jeff Day, and our Chief Revenue Officer, Lou Alvarado. The rapid rise of global interest rates has materially impacted transaction volumes. As a result, our total revenues declined by 16%. This environment has created confusion with respect to seller and buyer expectations regarding market pricing. We expect a decline in volumes to continue until interest rates and cap rates stabilize. We anticipate lower volumes well into next year while we continue to generate solid adjusted EBITDA and cash flow due to our diversified revenue streams and variable cost structure. Fee revenues from management services, servicing fees, and other increased by 11%, led by strong improvements in our servicing business as well as continued growth in flexible workspace and global corporate services. We expect these recurring revenue businesses to grow throughout the cycle. While we produce stronger leasing activity in industrial and retail during the quarter, this was offset by lower office volumes. Office leasing remains more active in the Sunbelt regions compared to the traditional core metro areas. In nearly all markets, Class A office space commands a growing premium to Class B and C. Our professionals are actively collaborating with clients identifying opportunities to differentiate or repurpose underutilized properties and maximizing returns for our clients. Revenues for commercial mortgage originations improved year over year for Fannie Mae and mortgage brokerage in office, industrial, and lodging. However, they were offset by reduced activity in other areas. Investment sales volumes for all property types were down for the entire industry. Debt-driven transactions were particularly impacted, with the office sector most affected. Multifamily and retail, where Newmark is strong, performed comparatively better. With over $410 billion of global institutional real estate capital waiting to be deployed and $2.5 trillion of commercial and multifamily debt maturing over the next five years, we expect industry volumes to bounce back relatively quickly once U.S. interest rates are no longer rising and have stabilized. We have experience generating cash flow under challenging market conditions and have a strong long-term track record of growth and improving our fundamentals. Since our IPO in 2017, Newmark has doubled its revenues and more than doubled its adjusted EBITDA, while generating $1.4 billion of cash flow from operations and $1.5 billion from NASDAQ. We also returned nearly $1.3 billion of capital to shareholders, reduced our net leverage by nearly 90% and continue to invest in our business. The company has steadily gained market share. They're now number three in the U.S. investment sales compared with number four last year and number five in 2017. We have continuously added the most talented professionals in the industry, have grown their productivity. which has driven our market share gains. Our meaningful scale, low leverage, and strong cash flow, together with our $600 million revolving credit facility, leaves us well positioned to invest in growth as we execute our 2025 plan. We see great opportunities as the industry continues to consolidate around well-capitalized, full-service providers like Numark. Additional growth opportunities include expanding our international footprint, raising capital for our clients, expanding our servicing and asset management platform, and growing our management services. With that, I'm happy to turn the call over to Mike.