Newmark Group, Inc.

Good day, and welcome to the Newmark Group 3Q23 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jason McGruder, Head of IR. Please go ahead.

Thank you, Operator, and good morning. Newmark issued its third quarter 2023 financial results press release and presentation this morning. Unless otherwise stated, the results provided on today's call compare only the three months ended September 30, 2023, with a year-earlier period. Except as otherwise specified, we will be referring to our results only on a non-GAAP basis, which includes the terms adjusted earnings and adjusted EBITDA. Please refer to the sections in today's press release for complete and or updated definition of any non-GAAP terms, reconciliation of these items, the corresponding GAAP results, how, when, and why management uses them. As otherwise stated, any figures discussed today with respect to cash flow from operations refer to net cash provided by operating activities, excluding loan origination and sales. cash generated by the business is this latter cash flow metric before the impact of loans, forgivable loans, and other receivables from employees and partners, and the impact of a 2021 equity event. You can find more information on these items and with respect to our GAAP and non-GAAP results on our website, in today's press release, in the supplemental Excel tables, and the presentation. The outlook discussed today assumes no additional share repurchases Material acquisitions are meaningful changes in the company's stock price. Our expectations are subject to change based on various macroeconomic, social, political, and other factors. None of our long-term targets or goals beyond 2023 should be considered formal guidance. I'll also remind you of information on this call about our business that are not historical facts or 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. Except as required by law, Newmark undertakes no obligation to update any forward-looking statements. For complete discussion of additional risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Newmark's Securities and Exchange Commission filings, including but not limited to the risk factors in our most recent Form 10-K, Form 10-Q, or Form 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.

Good morning and thank you for joining us. Newmark's strategy of attracting, retaining, and empowering the industry's best talent resulted in significant market share gains in leasing and capital markets during the quarter. Clients increasingly seek our advice to help navigate the challenging environment and respond to shifting market dynamics. Our deep bench of world-class professionals in all major verticals across our expanding global footprint has enabled us to outpace the industry. We also generated double-digit growth in our recurring businesses during the quarter as we continue to expand our property management and global corporate services businesses, as well as our high-margin servicing and asset management platforms. With respect to leasing, Newmark continued to outperform the industry with a 7.6% decline compared to overall U.S. leasing activity declining by 15% to 20% for both the third quarter and the year to date. Our year-to-date leasing revenues are down 5% versus last year and flat compared with the same period in 2019. Newmark's industrial and retail leasing strength are expected to drive additional market share gains in the fourth quarter. Vacancies remain below long-term averages in nearly all property types in the U.S., except for office, which remains challenged outside of premium Class A properties. Our recurring revenues were up 14%. We expect these businesses to continue their strong growth, led by the addition of Geraldine and solid organic improvement across our global corporate services, and property management platforms, as well as our high margin asset management and servicing businesses. We gained meaningful market share in investment sales during the quarter. This was particularly true in the U.S., where we materially outperformed the market by 19 percentage points, according to RCA. Similarly, our total debt volumes outpaced the industry originations. We expect this outperformance to continue in the fourth quarter, given our strong pipeline of capital markets activity. In terms of our intermediate and long-term view on capital markets, MSCI reports that the level of distressed assets in the U.S. is at its highest level in 10 years, and Newmark Research estimates that approximately $1.2 trillion of outstanding commercial and multifamily mortgages in the U.S. are potentially troubled. As the industry leader in loan sales, this is an enormous opportunity for Newmark. Higher interest rates, rising cap rates, and the pullback in lending by banks and other traditional lenders continues to lead more investors and owners to seek innovative financing solutions. Talent matters most when markets are difficult, which is why our team of the highest quality professionals uniquely positions Numark to gain market share and capitalize on the changing landscape. We expect our world-class debt platform to drive meaningful growth over time. due in part to the record $1.9 trillion of U.S. commercial real estate debt maturing to 2025. We anticipate these debt maturities will provide long-term tailwinds to our mortgage brokerage and origination businesses. In the near term, we expect a continued increase in the number of financings requiring the more bespoke and innovative transactions in which our professionals specialize. Recapitalizations and restructuring volumes are expected to become an ever bigger part of our business. We significantly outperformed our full-service peers in the record market of 2021 and also expect to outperform our peers in the challenging 2023 market. Our model has proven to be resilient and successful across the cycles. We expect to continue outpacing the industry in the fourth quarter of 2023 by generating double-digit growth in revenues, adjusted earnings per share, and adjusted EBITDA. Our strong incremental margins will drive significant revenue and earnings outperformance when the industry capital market volumes recover. With that, I'm happy to turn the call over to our CFO, Mike Crespoli.