Good day, and welcome to the Newmark Group First Quarter 2025 Financial Results. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jason McGruder, Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning. Newmark issued its first quarter 2025 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the three months ending March 31, 2025, with the year earlier period. Except as otherwise specified, we will be referring to our results only on a non-GAAP basis, including 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 activity. We may also use the term cash generated by the business, which is the same operating cash flow measure before the impact of cash used for employee loans. 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 items to the corresponding GAAP results and when, how and why management uses them, for additional information on our cash flow measures as well as relevant industry or economic statistics. The outlook discussed today assumes no material acquisitions or meaningful changes to our stock price. Our expectations are subject to change based on various macroeconomic, social, political and other factors. None of our targets or goals beyond 2025 should be considered formal guidance. Also, I 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 the 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 on our most recent SEC filings, which are incorporated by reference. I'm 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 pleased to report another successful quarter, demonstrating robust growth and strong operational performance, which underscores our strategic vision and commitment to delivering value to our clients and stakeholders. Newmark's exceptional talent and industry-leading insight led to our 22% increase in revenues and approximately 40% growth in our earnings metrics. This included another quarter of double-digit gains across every major business line. We grew Capital Markets by 33%, as Newmark once again outpaced the industry across both investment sales and origination, while continuing to advise on an increasing number of portfolio and entity M&A deals. Leasing fees were up 31%, driven by increased activity in New York City, Boston, and a strong rebound in the San Francisco Bay Area. We increased management and servicing revenues by over 10%, which reflected strong valuation and advisory growth. We also benefited from the expansion of services across our recurring business lines, such as asset management and servicing, underwriting and due diligence, dedicated staffing solutions and outsourced lease administration and property accounting. Our continued focus on a strong balance sheet and cash flow generation has put the company in an excellent position to grow. We continue to enhance our capabilities in nearly all verticals and geographies, while broadening and diversifying into more service lines and alternative property types. We have built a platform that is engineered to excel. Given our deep relationships with clients and the strength of our brand, we anticipate further market share gains over time. We recognize, however, that there are potential geopolitical headwinds that may have a dampening effect on industry activity. Despite recent market turbulence, we are excited to come to work every day to continue this odyssey of building on the foundation we have created for a scalable and sustainable enterprise. With that, I'm happy to turn the call over to our CFO, Mike Rispoli.

Thank you, Barry, and good morning. We had a strong start to the year with 21.8% growth in revenues and approximately 40% growth in our earnings metrics. Revenues were $665.5 million compared with $546.5 million. We increased Management Services, Servicing, and Other by 10.5%, the seventh consecutive period of solid year-on-year improvement. Leasing revenues were up by 31%, driven by strong double-digit growth in office and retail leasing volumes. Capital Markets revenues grew by 32.7%, as we continue to gain market share. This reflected 62.5% volume improvement, with growth across every major property type, including 40% in our GSE/FHA origination volumes. Turning to expenses. Compensation increased by 21.8%, which reflected higher commission-based revenues and costs related to Newmark's growth initiatives. Non-compensation expenses included higher pass-through costs and other items related to increased revenues. The company's tax rate for adjusted earnings was 14.3%, in line with full year guidance. Moving to earnings. We increased adjusted EPS by 40% to $0.21 compared with $0.15. Adjusted EBITDA was $89.2 million, up 40.5% versus $63.5 million. Our adjusted EBITDA margin improved by approximately 180 basis points to 13.4%. With respect to share count, our fully diluted weighted average share count for adjusted earnings was down slightly to 255.3 million. Although we did not repurchase any shares during the quarter, we have $371.9 million remaining under our repurchase program. We continue to believe buybacks are a prudent allocation of capital and anticipate further share repurchases. Turning to the balance sheet. We ended the quarter with $157.1 million of cash and cash equivalents and 1.3 times net leverage. The changes from year-end 2024 reflected $100 million of incremental borrowing under our credit facility, offset by cash used with respect to the hiring of revenue-generating professionals and normal seasonal first quarter movements in working capital. Moving to guidance. Our 2025 outlook remains unchanged. While our revenue pipeline continues to show growth into the second quarter, it is difficult to predict the impact, if any, that tariffs and interest rate volatility may have on our results. For the full year, we expect Capital Markets revenues to outpace the 9% midpoint of our guidance range, Management and Servicing to perform roughly consistent with the first quarter, and our Leasing business to grow less than the midpoint of our revenue guidance range. Lastly, we want to take a moment to congratulate Lou Alvarado on his recent promotion to Chief Operating Officer. Lou has been with the company since 2015 and has helped us deliver strong growth over the past decade. As always, Lou will be joining us for Q&A. With that, I would now like to open the call for questions.

Thank you. We will now take your first question from Alex Goldfarb with Piper Sandler.

Hey, good morning. Morning down there. And first, Lou, congratulations. Mazel tov. That's awesome on the promotion.

Thank you.

So the first question is just Barry, I mean, obviously, what everyone wants to know is what your clients, your relationships, what they're saying. Very strong first quarter we've seen from the office REITs. There doesn't seem to be any leasing slowdown. We've heard the same on the retail REITs so far. So how do we interpret sort of this macro uncertainty with what you're seeing in the business? And do you have any anecdotes of people pulling back leasing deals or stepping away from transactions, building sales, et cetera, anything that gives color to what's going on in the market?

And we're seeing deals continue to go through. That's what we're seeing so far. And same with leases, we're not really seeing any firm change in making decisions. The CMBS market has slowed down. It seems like the banks are bridging the gap at this point. We're seeing some bank loans for the first time in some respects. But generally, it's too early to tell. I mean, it's 100 days in. It's been an active 100 days. We'll see what happens over the next 90 days.

Have you noticed any properties being withdrawn from the market? It seems reasonable considering the current conditions in the capital markets, or do you believe that people are still offering products for sale?

Generally, if there was a perceived significant decline in interest rates, people might slow up putting things on the market. But we haven't really seen that. If the Fed indicated they drop interest rates by 50 basis points, you might see a change in the market because people would expect cap rates to rise in light of a decline in interest rates. But not really, not really. Right now, the uncertainty is annoying and concerning, but things are still trading.

Mike, regarding stock buybacks, you mentioned this in your opening comments. Considering the uncertain economy and capital markets, do you feel confident proceeding with stock buybacks at this time? Or would you argue that it's wiser to conserve cash for future needs instead of repurchasing shares?

The short answer is, I feel really comfortable buying back stock. I mean, you look at our balance sheet, it's still really clean, low net leverage at 1.3 times. And we're pretty careful about how we manage our balance sheet and how we manage our capital. We made some investments in the first quarter into continuing to grow the business and you can see that in our cash flows. And so we didn't buy back any stock, but I think you'll see us pivot to buying back stock as we move into the second quarter here.

Thank you.

We'll now move to our next question coming from Jade Rahmani from KBW.

Thank you very much. You all have grown the management services part of the business and continue to do so. Can you talk about what differentiates Newmark in that business? What the core services are that you're providing? And what's driving the growth there?

Well, we do a bunch of things that we think are different than our peers. We have a managed service program. We provide staffing. We are moving into the fund administration and property accounting business, which is a little different. So it really puts us in partnership with our investor clients, providing them with service and giving them the ability to provide variable support. It fits with our strategy. We think it elevates our brand. It's a very sticky and value-added piece of business. We are still growing our property management and facility management as well. And all that is growing. We're much more focused on it. Look, our superpower has been our investment advisory sales and loan origination business. That's what gives us the gravitas and the reputation and the elevation of our brand over the last 10 years. In 2015, we had a 1.5% market share. We're now at 9%, pushing up to 10%. I mean, that's a significant increase in market share in a big segment of the business, which also has characteristics that make it incredibly advantageous to the same people that hire property managers, asset managers, provide staffing, all those things put us around the hoop with those clients. And we think that now that we have continued to elevate and build, we believe we're in a much more mature position to be able to take advantage of building more recurring revenue opportunities. It's about hiring the right people, going after the right business, having the right reputation, having good success, and we believe we're doing all those things. Everything that we've done has indicated that, and it continues to grow and it's going to build ahead of steam.

Thanks very much. I wanted to ask about stock compensation, which was, I think, outsized in the quarter, but may have included a one-time item. Just the $21 million in GAAP charges related to Howard Lutnick that is called out in the press release, is that a one-time item? Do you expect any other charges related to him that investors should anticipate? Would be helpful to know about that. Thanks.

Sure. Hi, Jade, it's Mike. The stock comp in the quarter, I would say for the full year, we would expect it to be similar to last year. The Howard item is a one-time item, converting his remaining units into shares as he exited the company. So we don't expect that to recur. And so that's how we see the year playing out for stock comp.

Thanks very much.

We will now take your next question coming from Julien Blouin with Goldman Sachs.

Thank you, and congratulations on the strong quarter. When I think about the decision to maintain guidance despite what was a pretty strong first quarter, granted I know the back half of the year is where you derive the vast majority of your earnings for the year. But is that decision to maintain guidance really down to the broader macroeconomic uncertainty? Is there anything in April that's sort of giving you pause? Or is it just sort of general conservatism at this point?

Yes. Hi, Julien. Certainly, we had a really strong start to the year and we're seeing our pipelines continue to build on a year-over-year basis. I would say, for Q2, we're seeing up about 10% or so in terms of our pipelines. Had the macroenvironment been different, we certainly would have been considering guiding towards the higher end of the range or perhaps even increasing guidance. But the macroenvironment is what it is. I would say that we have pretty good visibility through the first half of the year. As Barry said, we're not seeing deals fall out of the pipeline at this point. We're seeing things close. When you think about the back half of the year, we now have 40% of our revenues and our earnings that are recurring. We have very good visibility into that. So, really what that means is, in the back half of the year, our transaction business is up low-single-digits to get to the midpoint of our guidance range, which isn't a lot. But given the macroenvironment, I think we're just taking a more cautious approach right now.

That's very helpful. And on that point of the pipelines in the second quarter up 10% year-over-year, does that correlate pretty closely to what you would expect for transaction volumes? Or can there be a significant sort of spread between those two?

Yes, I think it's pretty consistent with what we would expect in terms of transaction volumes. We're experiencing strong capital markets activity that is continuing into the second quarter, especially on the debt side, where we are gaining market share. Everything looks positive at this moment. Additionally, we are discovering opportunities in market segments we did not previously engage in. We are now venturing into new markets, categories, and types of business. We have elevated our brand, and people are reaching out to us for services they might not have considered two years ago. This is a very encouraging scenario that we expect to unfold over the next few years.

That's very helpful. All right. Thank you.

Your next question is coming from Patrick O'Shaughnessy with Raymond James.

Hey, good morning. So Newmark hasn't done an acquisition in a while. I'm just curious, what's your current appetite for M&A versus continued broker team lift-outs?

Yes, we haven't indicated that all of our growth is organic. We are cautious about our acquisition strategy, as it varies depending on the companies involved. Acquiring a large company can lead to complications with integrating diverse teams and overlapping activities, which makes it a risky move. In contrast, when we look at smaller companies, we find that most of the costs are related to retirements, and we can retain the core talent essential for the business. We are strategic in how we approach these acquisitions. Although there are accounting implications for talent acquisition, we find that the cost of directly acquiring sales talent is lower, and we've successfully brought on board strong individuals. We believe that once everything stabilizes, our team will be richer in terms of quality. This doesn't rule out acquisitions; there are opportunities we are considering. We see gaps in the market that we can address to expand our global platform, and we are actively pursuing this. We will buy if it makes sense, and we will acquire talent when it's beneficial. We remain flexible in this regard.

Okay. Great. And then can I get your current thoughts on the outlook for multifamily? And then, I guess, Fannie and Freddie, in particular, given some of the leadership changes there?

The information coming from the FHFA indicates that the government, regardless of political affiliation, recognizes the need for more housing and is aware of the housing shortage in the United States. Therefore, it seems unlikely that they will hinder housing development. This narrative appears to be prevalent in Washington. Regarding the potential privatization of Fannie and Freddie, the process would likely take three to four years, meaning any benefits would occur beyond the current administration's time. Historically, as long as the government maintains its implicit guarantee to support housing creation, there will be no significant impact. Thus, we do not anticipate any changes in the foreseeable future, specifically in '26 or '27.

Yes. And I would add to that, that we certainly had a strong year-over-year performance in terms of volumes and origination in the first quarter. On the debt side, we continue to see that building. We don't really see any slowdown in those markets at this point.

Yes. Multifamily demand remains strong. There is a housing shortage, and the same trends observed over the past decade persist. People are purchasing homes later, experiencing more mobility, and renting for longer periods. The reliance on a 30-year mortgage and using home equity for retirement is not as common as it was in the past. We believe that multifamily properties will continue to be a vital asset class and remain robust. While there may be certain areas with oversupply, overall, multifamily housing is expected to perform well for the foreseeable future.

All right. Terrific. Thank you.

We'll take your next question coming from Jade Rahmani with KBW.

Thank you. I'm not sure if the tariff environment has impacted this, but the competitive environment for recruiting has seemingly picked up quite a lot. I think Cushman & Wakefield outlined their plans and some of the teams they're hiring. I know Eastdil is also active as well. So I just wanted to get your comment on the competitive environment, recruiting and Newmark's plans. I believe you do still plan to grow in terms of your commission-driven revenue-producing staff.

We are the preferred company that people want to join at Newmark. This reflects in everything we say and do. While we continue to hire, we are mindful not to overstaff. There are areas where we see opportunities. Our focus is on achieving high revenue per employee, aiming to do more with less as part of our strategy. This strategy is not solely about increasing numbers. We keep hiring, and our recruitment process is vital. It’s essential to continuously refresh and train our talent while promoting from within. We believe we are highly competitive, and the majority of our recruiting efforts are successful. We expect this trend to continue and even accelerate, as we've seen in Europe. We launched our operations in Germany five months ago and have already secured our 54th contract. The market is promising, and there's enthusiasm about our presence in Europe as a company that values talent, respects professionals, and offers a great workplace.

Thank you.

And it appears there are no additional questions at this time. I'll now turn the call back to you for your closing remarks.

Well, thank everyone for joining us today. We hope to see you in the next quarter.

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