Newmark (NMRK) Q2 2025 Earnings Call Transcript

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DATE

Wednesday, July 30, 2025 at 12:00 a.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Barry Gosin

Chief Financial Officer — Michael Rispoli

Head of Investor Relations — Jason McGruder

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TAKEAWAYS

Total Revenues: $759.1 million (non-GAAP) total revenues for Q2 2025, up 19.9% (non-GAAP), driven by double-digit growth in each major business line (non-GAAP).

Adjusted EPS: Adjusted EPS was $0.31 for Q2 2025. Adjusted EPS increased by 40.9% to $0.31 compared with $0.22.

Segment Revenue Growth: Management services, servicing, and other (non-GAAP) rose 13.6% in Q2 2025, with valuation and advisory up approximately 30% (non-GAAP); Leasing revenues (non-GAAP) grew 13.8%, led by retail activity and improvement in office leasing; capital markets revenues (non-GAAP) advanced 37.9%.

Debt and Originations: Total debt volumes increased by 135% year over year for the three months ended June 30, 2025, while U.S. commercial and multifamily loan originations increased 38%.

Investment Sales Market Share: Investment sales volumes (non-GAAP) rose 26% in Q2 2025; Newmark was ranked number one U.S. office broker for 2025 by both MSCI and Real Estate Alert, and number three global sales broker for the first half of 2025, according to preliminary MSCI data.

Adjusted EBITDA: Adjusted EBITDA was $114 million for Q2 2025, up 32.1% (non-GAAP); adjusted EBITDA margin improved by 139 basis points to 15% (non-GAAP).

Share Repurchases: Repurchased approximately 10.8 million shares in Q2 2025 for $125.5 million of share repurchases at $11.58 per share.

Cash Position: Ended Q2 2025 with $195.8 million in cash and cash equivalents; $133.9 million in cash generated by the business from year-end 2024, $200 million of new borrowing, offset by $157.9 million of cash used with respect to the hiring of revenue-generating professionals, share repurchases, and normal seasonal movements in working capital from year-end 2024.

Adjusted Free Cash Flow: Trailing twelve months adjusted free cash flow was $228 million; management introduced this metric for clarity and comparability.

Full-Year Outlook Raised: Revenue guidance increased to $3.05 billion–$3.25 billion (up roughly 15% at midpoint) for 2025; adjusted EPS (non-GAAP) guidance raised to $1.47–$1.57 (up 20%–28%); adjusted EBITDA (non-GAAP) guidance to $523 million–$573 million (up 17%–29%) for 2025.

Commission-Based Revenues: Expenses for adjusted earnings rose 18.4% for Q2 2025 (non-GAAP), reflecting a 26% increase in commission-based revenues (non-GAAP) and higher pass-through and growth costs.

Tax Rate: Adjusted earnings tax rate (non-GAAP) reported at 14%, consistent with full-year expectations.

Geographic Expansion: Europe now represents over 13% of volumes; international platform continues to expand with significant new broker hires in Germany and ongoing development in Asia.

Pipeline & Growth Expectations: Management services and leasing businesses expected to grow high single digits to low double digits in H2 2025; capital markets anticipated mid- to high-teens growth, with upside indicated if current momentum continues.

SUMMARY

Management raised full-year revenue, adjusted EPS, and adjusted EBITDA guidance for 2025 after reporting double-digit top- and bottom-line growth on a non-GAAP basis. Newmark Group, Inc. achieved significant market share gains in office and data center brokerage, highlighting its elevated ranking from leading industry sources. Newmark launched a new metric, adjusted free cash flow, which significantly improved year over year for the twelve months ended June 2025; and This new adjusted free cash flow metric is expected to allow for easier comparability versus other companies.

CFO Rispoli said, "for the back half of the year, you will see us pivot to growth capital versus buybacks."

CEO Gosin noted ongoing talent acquisition and a broadened service platform.

Segment fee structures for data centers are comparable to the rest of the business, with sales fees averaging 70 basis points and debt fees averaging between 40 and 50 basis points.

Trailing twelve-month adjusted free cash flow conversion was roughly 65% of post-tax adjusted earnings (non-GAAP), though management stated conversion may fluctuate depending on investment pace in talent or M&A.

The pipeline remains strong, with no material slowdown detected as of July; management noted increased confidence in achievement of 2026 targets set for adjusted EBITDA and EPS.

Management confirmed most M&A will focus on "bolt-ons" and businesses complementing recurring revenue and platform synergies.

INDUSTRY GLOSSARY

Adjusted Free Cash Flow: A company-specific metric defined as GAAP cash flow from operations minus capital expenditures and the impact of GSE FHA loan originations and sales, intended to reflect cash generation after major recurring investments.

GSE FHA Loan Originations: Government Sponsored Enterprise Federal Housing Administration loans originated and sold by the company, usually affecting reported cash flow.

Basis Point: One hundredth of one percent (0.01%), a unit of measurement used for interest rates and fee structures.

Full Conference Call Transcript

Jason McGruder: Thank you, operator. Good morning. Newmark Group, Inc. issued its second quarter 2025 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the three months ending June 30, 2025, with the year earlier period. Except as otherwise specified, we will be referring to 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, including the impact of GSD FHA loan origination and sales.

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 quarterly results presentation on our website for complete updated definitions of any GAAP terms, reconciliations of these terms to the corresponding GAAP results, as well as relevant industry or economic statistics. The 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 2025 should be considered formal guidance.

Also, I remind you that the 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 am now happy to turn the call over to our host, Chief Executive Officer, Barry Gosin.

Barry Gosin: Good morning, and thank you for joining us. Before we begin today's call, on behalf of everyone at Newmark Group, Inc., I want to take a moment to acknowledge Monday's tragic shooting in New York City. Our thoughts are with the families of the individuals who lost their lives, some of whom we know personally, as well as with our clients and friends and everyone impacted. In moments like these, we are reminded of the importance of community and unity throughout our cities. Now on to our results. We are pleased to report another outstanding quarter. Newmark Group, Inc. delivered strong revenue and earnings growth, validating our strategic vision and commitment to creating value for our clients and stakeholders.

The company increased total revenues by 20%, which again reflected double-digit gains across every major business line. Our adjusted EPS increased by 41%, demonstrating strong operating leverage. During the quarter, Newmark Group, Inc. advised on some of the largest office and retail leases in the San Francisco Bay Area. We continue to expand our occupier solutions and leasing footprint, providing corporations with comprehensive real estate solutions on a global scale in nearly 100 countries. Newmark Group, Inc. gained further market share in capital markets during the quarter and year to date. We increased our total debt volumes by 135%. U.S. commercial and multifamily originations were up by 38%.

In investment sales, Newmark Group, Inc. was ranked as the number one office broker in the U.S. in 2025 by both MSCI and Real Estate Alert. On a global basis across all property types, we improved to number three among sales brokers for the first half of 2025 based on preliminary figures from MSCI. This is noteworthy as we are in the early stages of building out our international platform. Given our strong first-half results and robust pipeline, we have raised our full-year outlook. With that, I am happy to turn the call over to our CFO, Mike Rispoli.

Mike Rispoli: Thank you, Barry. Good morning. Our strong start to the year continued through the second quarter with revenue growth of 19.9% and adjusted EPS improvement of 40.9%. As a result, we are increasing our full-year outlook for both revenues and earnings, which I will discuss later in more detail. Total revenues were $759.1 million, up 19.9% compared with $633.4 million. We increased management services, servicing, and other by 13.6%, which reflected approximately 30% growth from our valuation and advisory business, as well as continued improvement in our high-margin servicing and asset management platform. Leasing revenues were up by 13.8%, led by double-digit growth in our retail volumes and improving office activity in key gateway markets.

Capital markets revenues increased by 37.9%, which reflected an approximately 135% improvement in our total debt volumes as compared to U.S. commercial and multifamily originations, which were up by 38%. Our investment sales volumes were up 26% as compared to U.S. industry investment sales volumes, which were up by approximately 11%. Our continued market share gains were led by significant data center growth as well as higher office and multifamily activity. Turning to expenses, total expenses for adjusted earnings increased by 18.4%, which reflected a 26% improvement in our commission-based revenues, costs related to Newmark Group, Inc.'s growth initiatives, and higher pass-through costs. The company's tax rate for adjusted earnings was 14%, in line with full-year guidance.

We increased adjusted EPS by 40.9% to $0.31 compared with $0.22. Adjusted EBITDA was $114 million, up 32.1% versus $86.3 million. Our adjusted EBITDA margin improved by 139 basis points to 15%. With respect to share count, we repurchased approximately 10.8 million shares for $125.5 million at $11.58 per share. We ended the quarter with $195.8 million of cash and cash equivalents. The balance sheet changes from year-end 2024 reflected cash generated by the business of $133.9 million and $200 million of incremental borrowing. This was offset by $157.9 million of cash used with respect to the hiring of revenue-generating professionals, share repurchases, and normal seasonal movements in working capital.

This quarter, we introduced a new reporting metric, adjusted free cash flow, which can be found in today's earnings materials. Adjusted free cash flow takes our GAAP cash flow from operations minus capital expenditures and the impact of GSE FHA loan originations and sales. We believe this new metric will provide further insight into the company's strong cash generation and allow for easier comparability versus other companies. While our adjusted free cash flow significantly improved year on year both in the quarter and year to date, we believe it is best to view this metric on an annual basis.

For the twelve months ended June 2025, Newmark Group, Inc.'s adjusted free cash flow was $228 million, a 121.4% improvement year over year. Moving to guidance, we are raising our outlook for 2025 as follows. We now expect total revenues of between $3.05 billion and $3.25 billion, an increase of approximately 15% at the midpoint. We anticipate adjusted EPS between $1.47 and $1.57, up 20% to 28%. We continue to expect our adjusted earnings tax rate to be between 14% and 16%. And we anticipate adjusted EBITDA in the range of $523 million to $573 million, an increase of 17% to 29%. With that, I would now like to open the call for questions.

Operator: Star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Once again, that is star one if you would like to ask a question. We will now take our first question from Mitchell Germain with Citizens.

Mitchell Germain: Thank you and congrats on the quarter. Barry, obviously, you referenced the global investment sales number three. And obviously, you are making investments outside the U.S. I am curious how the opportunity in Germany has been transpiring to date.

Barry Gosin: Well, we launched about a year ago, actually. At just about the time of Expo Real in Munich. Since that time, we have signed 70 brokers, many of whom are on garden leave, generally how it is done in Europe. So our real launch of that business is in October. So there seems to be a clamoring of people who want to come to Newmark Group, Inc. They like our model. They like the platform. They like what we have done in France and the UK and other parts of Europe. So I think it all bodes well for us there. We are excited.

Mitchell Germain: Great. Thanks for that. Do you think the capital markets activity is sustainable or are you seeing maybe a little bit of a pull forward given some of the future uncertainty?

Barry Gosin: Yeah. Just so you understand that we have hired leasing people, appraisal people. We are a fully integrated platform. So in all of our markets, we hire a full boat of services for clients as we have in Germany. So it is a pretty diversified mix of people that includes the UK, includes France, includes what we are doing in Asia as well. We have enormous runway. A couple of years ago, we did virtually zero business in Europe. It is now 13% plus of our volume. We are building in Asia as well. And we think it is a great opportunity to build a completely diversified integrated platform.

It will serve our corporate clients well to be in all of those markets. So we could be able to serve our corporate leasing clients on consulting and other aspects of our business, not only capital markets, but look, we think there is always going to be capital markets. We think the runway is pretty good in Europe, and some people think that Europe is a better opportunity right now. But you know, we are pretty bullish on our direction and where we go.

Mitchell Germain: Great. Thanks for that. And then just some thoughts on capital allocation. Mike, you talked about some of the free cash flow growth. You bought back shares, but we have obviously seen a rally 25% plus since you did that. So you know, where is investment dollars? Obviously, they are going to new broker acquisitions, but you know, could we potentially see you guys consider some M&A here? Is buybacks still on the table? Some thoughts around that, please.

Mike Rispoli: Sure. I would say buybacks are certainly still on the table. As I said, we did a pretty significant buyback in the second quarter. So I would see us, I would expect us to pivot to M&A in the back half of the year. We have a lot of interesting opportunities, particularly on the management services side that we are looking at that we think are very, we can add a lot to those companies. They can add a lot to our platform. So I would say for the back half of the year, you will see us pivot to growth capital versus buybacks. But longer term, we still think the stock is undervalued.

If you look at our adjusted free cash flow even relative to the current market cap, it is probably around a 6% yield versus the S&P 500, which is 2.8%. Our peer group is around 4.2%. So we still think there is a lot of upside to our stock, and that is why we will continue to look at buybacks as well.

Barry Gosin: You should also, it is important to note that 100% of our growth is organic.

Mitchell Germain: Thank you. I appreciate it and great quarter.

Mike Rispoli: Thanks.

Operator: We will now take our next question from Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb: Hey, good morning. Good morning down there. Just obviously tragic. Mike, appreciate the free cash flow emphasis in the slide. You know, I think it is very helpful to help know, understand the economics of the business, which, you know, this quarter, just really impressive. Along those lines, data centers have been, you know, huge in the news. Clearly, Barry, you have spoken before that it has been a focus of the company, but I think in prior comments, you talked about keeping it restrained like, using the example. I think it was you or one of your colleagues used the example of, like, life science, which boomed and then cooled off dramatically.

So as you look at data centers today, is the view still that it is akin to life science in the sense that right now that area is booming, but you want to keep your personnel appropriately staffed versus it is more enduring, in which case, there is room to expand and invest further in your data center offering?

Barry Gosin: Well, we believe we are appropriately staffed. It is a center of excellence. There is a lot of reach with a small amount of people if you are the best at it. And we think we are the best at it. We also, there are two aspects of the business which our big emphasis has been on equity and finance, and those are the areas which were the strongest. We think there is an enormous runway. There is a big runway in Europe. There is a big runway in Asia. AI is so relatively new. It is only really two years old. And a lot of people want to get into the game.

And the question for everyone is really what do you think about AI and the future of AI? And if you believe in the future of AI, then you have to believe there is a long runway. Life science has been a more mature business. That was just faced overbuilding, oversupply. It is kind of like multifamily is a business that has enormous demand in the country and will continue. We are underserved for housing. But there are markets where you just have too much supply. Life science is just a moment in time where there is just too much supply to be absorbed. A lot of these transactions have not come online. It is all coming online.

So it will be three, four years before we could see whether there is an oversupply, and it is pretty early.

Alexander Goldfarb: Okay. Another question is...

Mike Rispoli: Oh, so I would add one thing to that, which is that there is also tremendous opportunity in data centers outside of the transactions. On the management side, both project management and facilities management. And those are areas we really have not touched to date. But certainly...

Barry Gosin: And leasing opportunity. Leasing. You know, people there, they will not mean, not everything is going to be just a handful of hyperscalers. You are going to still see the colocation facilities. Not everything is going to be in the cloud. So it is going to be, and we are also involved in very active in digital infrastructure as well, which, you know, includes chip manufacturing and things like that, which are proliferating. There is, you know, there is a host of things.

Alexander Goldfarb: Okay. The second question is, in your leasing stats, San Francisco led more so than New York. And want to get some more perspective on that. Is that, you know, our sense of market visits is that, you know, AI is a small part but growing, but the larger tech companies still have too much space. So curious what is driving your business. Is it that you are advising tech in resizing their business, or is AI just booming a lot more than we anticipated? Just want to understand better, the drivers of the dramatic boom in your San Francisco leasing growth?

Barry Gosin: I mean, we are told that San Francisco and the Bay Area has opened up, that there is activity coming from every direction. Now that is based on what our brokers tell us and what we have in the pipeline. It is coming from all different places. A lot of that, some of that is AI, but you know, there are other tech companies as well that are growing. There is always one thing about the ecosystem in the Bay Area is, you know, there is a company born every five minutes in the Bay Area. It is part of the ecosystem.

Alexander Goldfarb: Thank you.

Operator: We will now take our next question from Jade Rahmani with KBW.

Jason Sabshon: Hi. This is actually Jason Sabshon on for Jade. First, I just want to say congrats on the strong quarter. In your presentation, you provided a revenue target for management services for 2029. We applaud the long-term view. And are there any other 2029 targets that you are thinking about in terms of total revenue, markets, leasing, or adjusted free cash flow? Thanks.

Mike Rispoli: Yeah. Hi. The target on the management business is about $2 billion. You know, we put out, I think, a few quarters ago, and we continue to believe in the strong growth across all of our management and servicing businesses. We do not have similar targets out there for capital markets or leasing, but we do have targets out there for 2026 in terms of the adjusted EBITDA of $630 million and adjusted EPS of $1.75, and, you know, we feel that those are very achievable.

Barry Gosin: And last quarter, we pointed to a couple of metrics. In 2014, we were 1.1% of the market in respect of the sales, and now we are close to 10%.

Mike Rispoli: Yeah. 1.5% and 1.8% in sales, and now we are close to ten. And nine and a half respectively. We are 1% of the property management business. So there is an enormous runway to connect with the relationships and the things we are doing. We are very focused on things that will provide us with recurring revenue. We are looking for the smart ways to do it. We are looking at things that fit in with how our brand works. And we are getting really good traction in many of those areas.

Jason Sabshon: Great. Thank you. And to touch on data centers, first, could you provide more color on what your deal flow looks like? And as well as fee ranges on those deals? Specifically, if you broker a new development capitalization, what are fees earned, and are those negotiated in dollars or as a commission rate?

Mike Rispoli: The fees are no different than the average fees that you see across the rest of our business. So you know, typically, on average, it is based on deal size, but our average sales has been around 70 basis points, and our average debt fee has been in the 40 to 50 basis point range. As deals get larger, those basis points go down. As deals get smaller, they go up. But on average, that is where you have seen our fees, and data centers really are no different.

Jason Sabshon: Great. Thank you. And to pivot to capital markets and leasing, what growth rates do you expect are reasonable to see in the second half?

Mike Rispoli: So if you look at the midpoint of our guidance, which is start there, we would expect the management and the leasing businesses to grow, say, high single digits to low double digits in the back half of the year, and the capital markets business probably mid to high teens. And which, you know, would suggest maybe there is a slowdown from the first half. But I think really, we put the range out there because there could be some macro events that affect the market and affect the activity. But if, you know, we have a really good pipeline into the third quarter, very strong.

And if things continue along the path they are going now, I would certainly expect us to perform above the midpoint of the range towards the higher end.

Jason Sabshon: Great. Thank you.

Operator: We will now take our next question from Julien Blouin with Goldman Sachs.

Julien Blouin: Thank you for the question. And congrats on another strong quarter. I guess digging into a little bit more into those comments around the pipeline, I guess, as we look into July, does it feel like there was sort of a reacceleration in activity relative to what seemed to be a slower May and June for the industry?

Mike Rispoli: You know, it is interesting. Our pipelines have been pretty strong throughout the year. We did not see any significant slowdowns as we move through the year. If anything, our pipelines continue to grow and get stronger. We certainly do not have full visibility into the fourth quarter at this point. It is still a little bit early, but everything at the moment looks pretty good.

Julien Blouin: Got it. That is helpful. And it sounds like there was not any change to sort of how you are thinking about the 2026 target. I guess, is it just that you feel even more confident that they are sort of what you have put out there of $1.7 and $630 million of adjusted EBITDA are achievable? Or was there any temptation to maybe increase those targets?

Mike Rispoli: Probably a little early to increase the targets. I think we put those targets out more than a year ago. And we felt pretty confident about the targets when we put them out based on the people we hired and the businesses that we are building. And I would say, we certainly feel more confident today as we get closer and closer to those targets. If you just take the midpoint of our guidance for the rest of this year, or for 2025 full year, you know, it suggests probably high single-digit revenue growth and mid-teens earnings growth. Which seems very achievable for 2026 at this point.

Julien Blouin: Got it. That makes sense. And maybe one last one. Just in New York City, I am wondering if you are sort of expecting or seeing any impacts from the mayoral race there. When you talk to your teams or your clients, are you seeing any signs of caution from buyers in Manhattan? It looked like New York City property sales volumes were maybe a little subdued in June. Wondering if there is anything to read into there.

Barry Gosin: It is too early to tell. Mandami has not been elected yet. There is a lot of noise. Unfortunately, I think we have a firewall in our governor. If people are concerned. The mayor has a limited amount of power to do stuff. You still have the city council. The city council has moved more moderate over the last couple of years. Very few Democratic socialists. And so it is not so I, you know, New York is incredibly resilient. I do not believe it will have an impact. For certain people, it may annoy them. But it is, you know, New York is New York. The pool of talent in New York is unparalleled.

You know, the level of excitement in New York City being here is unparalleled. So I am not, I am pretty sanguine about it.

Julien Blouin: Okay. Great. Thank you.

Operator: And as a final reminder, that is star one if you would like to ask a question. We will now take our next question from Patrick O'Shaughnessy from Raymond James.

Patrick O'Shaughnessy: Hey. Good morning. So with the new disclosure of your adjusted free cash flow, do you, what are your expectations in terms of adjusted free cash flow in 2025? And I guess bigger picture or longer term, do you have a framework in terms of, like, targeted conversion ratio, what that free cash flow should look like as compared to your adjusted net income?

Mike Rispoli: Sure. Thanks for the question, Patrick. So on a trailing twelve-month basis, compared to, you know, our post-tax adjusted earnings, it is about 65% conversion. Remember, in that metric, we are taking out of the cash flow from operations all the money we invest in brokers for growth. So that on a trailing twelve-month basis was about $184 million. So it is hard to put a target precisely on what the conversion ratio will be. Because you have to know how much we are going to be investing into the business, and how much of that investment will go towards talent versus go towards companies.

And as you know, if you just buy a company, it goes through cash outflow from investing. Versus hiring a broker, which comes out of operations. But certainly, 65% to 85% depending on, you know, how much we invest in the business at any given time.

Patrick O'Shaughnessy: Yeah. That is very helpful. Speaking of hiring talent, with industry brokerage revenues generally trending better, is it getting any harder to poach top talent away from competitors?

Barry Gosin: Well, it is never easy. But, no, I think that we seem to be, we seem to have struck a chord in the industry. In terms of what the industry needs. In respect of talent. And I think we fit the bill for many people that are high production, high revenue professionals. We do not think that is going away. It is always been hard. In some respects. But we do not see it changing.

Patrick O'Shaughnessy: Got it. Thank you. And then lastly from me, you spoke about the likelihood of doing some M&A in the back half of the year. Can you remind us both strategically and financially what your criteria is for M&A?

Barry Gosin: So generally, we have done mostly bolt-ons. Tuck-ins. We think that strategy works really well for us. Less friction, less disturbance, less disruption. You never know what you get when something is too big. The amount of change, people leaving, etcetera. And it is more targeted towards the talent and the needs and how we fit and curate the entire platform together. As a puzzle. So that seems to be going well. That is generally how we have done it. We think we will do some more of that going forward. There are certain areas that we want to focus on and that we are looking at companies.

We have been focusing on our superpower, which is hiring great talent, and we also have turned our attention to management services and things that will provide more recurring revenue that do not consistently conflict with the brand, things that work very well and are synergistic with both our capital markets and our leasing business.

Patrick O'Shaughnessy: All right. Thank you.

Operator: And it appears there are no further telephone questions. I would like to turn the conference back to our presenters for any additional or closing comments.

Barry Gosin: Well, I would like to thank everybody for joining us today, and we look forward to updating you on our next quarterly call. Thank you.

Operator: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.

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