Good day, and welcome to the Newmark Group First Quarter 2024 Financial Results Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jason McGruder, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning. Newmark issued its first quarter 2024 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the three months ending March 31, 2024 with the year-earlier period. Except as otherwise stated, we will be referring to our results only on a non-GAAP basis, which includes the terms adjusted earnings and adjusted EBITDA. Unless 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. Please refer to today's press release, the supplemental tables and the quarterly results presentation on our website for complete and updated definitions of any non-GAAP terms, reconciliation of these terms to the corresponding GAAP results and how, when and why management uses them as well as relevant industry or economic statistics. Our outlook discussed today assumes no material acquisitions or meaningful changes in our stock price. Expectations are subject to change based on various macroeconomic, social, political and other factors. None of our targets or goals beyond 2024 should be considered formal guidance. I also remind you that information on this call contains forward-looking statements, including, without limitation, statements concerning our economic outlook and business. Such statements are subject to risks and uncertainties, which could cause our actual results to differ from expectations. Except as required by law, we undertake no obligation to update any forward-looking statements. For a complete discussion of risks and other factors that may impact these forward-looking statements, see our SEC filings, including, but not limited to, the risk factors and disclosures regarding forward-looking information in our most recent SEC filings, which are incorporated by reference. I am now happy to turn the call over to our host, and Chief Executive Officer, Barry Gosin.

Good morning, and thank you for joining us. We are at the beginning of a once-in-a-generation opportunity for Newmark to grow its business. There is a record $929 billion of U.S. commercial and multifamily mortgage maturities due in 2024 and $2 trillion over the next 3 years. We estimate that approximately one-third of these maturing loans are likely to result in a loan sale or property sale. One-third will need assistance with restructurings and/or recapitalizations, and one-third will likely require an adviser to help find new lenders. Our substantial investments in data, analytics and talent uniquely position us to capitalize on these macroeconomic trends and to continue outperforming the industry. Newmark's nearly 14% increase in capital markets revenues outpaced the industry for the third consecutive quarter. This strong performance was led by a 51% improvement in debt origination fees, multiple times greater than the industry. Our leading presence in capital markets will drive business across Newmark's other servicing lines, including leasing, management and servicing. We are making considerable gains toward a goal of becoming the #1 capital markets adviser in the U.S. while also expanding internationally across all service lines. During the quarter, Newmark opened a flagship office in France, Continental Europe's second largest transaction market. We attracted some of the most talented leasing and capital markets professionals in the industry, which further demonstrates the strength of our brand. Newmark's leasing results were impacted by industry-wide activity declines of more than 10% in the U.S. and over 20% in the U.K. We expect office leasing fundamentals to improve as the recapitalization of properties at lower values leads to a more attractive leasing market. We continue to expect solid fundamentals in industrial and retail leasing, which together represent 41% of Newmark's leasing revenues over our last 12 months. We increased revenues from management services, servicing fees and other by 21%, the third consecutive quarter of double-digit growth. This reflected the addition of Gerald Eve as well as strong organic growth from our high-margin servicing and asset management platform. Due to substantial investments in talent and the improving environment, our target is to generate over $3 billion in revenue and more than $630 million of adjusted EBITDA in 2026. With that, I'm happy to turn the call over to our CFO, Mike Rispoli.

Thank you, Barry, and good morning. Total revenues grew 4.9% to $546.5 million. Fees for management services, servicing and other grew by 22.7%. This improvement includes the addition of Gerald Eve as well as 21.4% organic growth from our high-margin servicing and asset management platform. Our leasing revenues declined by 17.9%, reflecting double-digit industry declines. For the full year, we expect leasing to be down modestly. Our investment sales revenues were down 1.6% compared to a 16% U.S. industry decline. We grew our debt origination fees by 50.5%, outperforming U.S. industry volumes, which were up by approximately 5%. Turning to expenses. Our compensation expenses were flat on higher revenues, but were down by 1.1%, excluding pass-through items, largely due to lower variable commissions and our cost savings initiatives. These expenses were partially offset by acquisitions and the recent hiring of revenue-generating professionals. Non-compensation expenses excluding pass-through items were up $10.6 million due to a $6 million increase in interest expense on our GSE warehouse lines, which was offset with interest income on the GSE loans held for sale. Non-compensation expenses also include the addition of Gerald Eve. We remain on track to complete our $75 million cost savings plan by the end of the second quarter. Turning to earnings. Adjusted earnings per share were $0.15, and our adjusted EBITDA was $63.5 million. Our fully diluted weighted average share count was 255.4 million, compared with 249.8 million in the fourth quarter of 2023. 1.9 million shares of this increase relates to the accelerated recognition under GAAP of RSUs due to the 38.5% increase in our average share price per share quarter-on-quarter. We expect our fully diluted weighted average share count to decline for the balance of the year and to grow by approximately 2% as compared to our 2023 weighted average of 246.3 million. Turning to the balance sheet. The company has no near-term debt maturities. In January, we issued $600 million of 7.5% senior notes due January 2029. And last week, we extended our $600 million credit facility through April of 2027. We ended the quarter with $140.9 million of cash and cash equivalents. The change from year-end included $59.8 million of cash generated by the business and $125 million of incremental corporate debt, offset by $161.1 million primarily related to the hiring of revenue-generating professionals. Moving to guidance. Our outlook for full-year 2024 remains largely unchanged. We continue to expect sequential and year-over-year improvement in earnings in the second and third quarters. And with that, I would like to open the call for questions.

Our first question will come from Alexander Goldfarb with Piper Sandler.

Just a few questions. First off, if you could just give a little bit more color about the leasing. And maybe in REIT land, we're clouded by a small subset. But a number of the companies had some really good leasing metrics. And just curious, how your leasing compares to what we're seeing on the REIT side, which would be accounting for the significant drop off?

Alex, this is Lou Alvarado. Look, a lot of this is timing, right? We had a really solid fourth quarter. We closed a lot of large transactions in that quarter. In the first quarter, we had fewer transactions and some slipped. We expect sequential improvement as we go throughout the year, and our pipeline and activity is solid. So I just see this as a timing issue for us for the first quarter.

The second question, Barry, it always seems like you have to go back to the RTC days to see a deluge of distressed products strewn on the street for people to transact in. Since the GFC, we haven't really seen large-scale distress in the market; it's been a transaction here or there. Lately, at least from what the REITs are talking about, the transaction market has been really thin because a lot of banks, it seems, aren't forcing owners to transact. With all the money on the sidelines, it seems those who may want to transact realize there's a strong bid for their product, even if it's negative leverage. So how do you envision the world playing out on the transaction front? Do you think regulators are really going easy on the owners of the banks and therefore they're not forcing deals to come to market? Or what do you think has to happen for us to start seeing more transactions come about?

Well, every cycle is different. This one is different. The playbook of the Fed has been uniquely designed for each cycle. At the bank level, there's a concern inside banks as to whether they would want to open up the hood and say, 'Okay, we want to sell these loans,' because if there is a focus or magnifying glass on some of their riskier loans, they're concerned about deposits. So it's sort of a little bit of a kabuki dance around that. But ultimately, it all plays out. There is, as I said, $929 billion of maturities and $2 trillion over the next few years. And all those are going to play into—you'll see the specialist services continue to pick up business. As maturities come due, the question for any owner that is either underwater is how much money you can invest in re-tenanting and growing or keeping the building versus whether you should give the keys back, refinance, or sell. And that's going to all play out. We're seeing it. We're seeing more loan sales, we're seeing more discussions about properties that are distressed and creative solutions for the borrowers to be able to live and extend and for the lenders to keep their properties from hitting the open market. There are many ways to do that, and we're seeing all of it. So there is no one fix. But the volume of business is there, the opportunity is there, and it is just a question of exactly when and how, but it will happen.

So let me follow up on that. I'm assuming you'll say yes: you're positioned not only to handle outright transactions, whether properties or loans, but also to advise banks and owners so that even if there isn't a transaction, you can step in and advise on restructuring. Even if the loan or the building doesn't trade, you have a team that does that internal advisory work, correct?

Absolutely. We have a team that specializes in looking at risk assessment and stress testing within banks. We have lots of different parts of our business—servicing, loan screening, asset management—that could help institutions that are lending money to flex up and flex down. We built this company for this moment. And a lot of that requires infrastructure and people who are experts at being able to navigate that. So it's a combination of more bespoke, unique, creative solutions, from the borrower's perspective, to avoid recapture, keep the building, and get new fresh money, and for the lenders to be able to restructure the deals, get new money into the equation. There are some indications. The CMBS market on a floating rate is opening up, which indicates that there is money, and it's more in the private sector. Once there is money available and you hit a place where maybe it's not negative leverage but even with the opportunity for interest rates to decline and cap rates to move, there are so many triggers and levers that create moments of opportunity. But there also is that wall of money on the positive side that is ready and sitting there, looking for the moment when the opportunity arises.

Our next question comes from Jade Rahmani with KBW.

This is actually Jason Sabshon on for Jade. It would be great to hear you touch on interesting growth areas that you're looking at beyond capital markets.

Well, we've hired some great leasing talent in the last six months. I mean if you saw in the report, we've spent $161 million in the quarter, our largest ever in the acquisition of talent, and it's not all capital markets. There was a reason we pivoted to capital markets. The follow-on business that comes along with it, in every aspect, will bring leasing business, and we'll bring financing business. We have had some really good wins in Corporate Services. We are adding to our global footprint, which then makes us more accessible to the large global corporate clients. So we're doing all the things. As we focus on capital markets, to build that with a determined intentional goal to be #1, we have the same goal with leasing and tenant rep and multi-market occupier advisory business. So it's like everything we've done, it's basically a work-in-progress. We continue to elevate the brand. It's a good place for the talented brokers. We know the interest around the system, we're seeing a lot of people who are interested in coming to us. As the brand elevates, it actually is easier and better and less costly for us to bring in talent. So it's all a work-in-progress.

Thank you. And it does appear that there are no further questions at this time. Mr. Gosin, I will turn the conference back to you for any closing or additional remarks.

Thank you all for joining us this quarter. I'm very excited about the prospects of our future and look forward to seeing you in the next quarter.

This concludes today's call. Thank you for your participation. You may now disconnect.