Newmark Group (NMRK) Q4 2018 earnings summary

Executive summary

• FY 2018 revenue reached a record $2.05B, up 28% YoY; GAAP pretax income before noncontrolling interests rose 39% and Adjusted EBITDA increased 55%.

• The tax-free spin-off from BGC closed November 30, 2018; acquisitions and hiring supported expansion, while nearly 90% of 2018 revenue growth was organic.

Financial highlights

• Revenue: $2.048B vs. $1.596B in 2017; leasing and other commissions $817.4M (+32%), capital markets $468.9M (+18%), mortgage banking gains $182.3M (-12%), management services and servicing fees $579.0M (+54%).

• GAAP income before taxes and noncontrolling interests was $282.4M (+39%); consolidated net income was $191.9M vs. $145.1M, while fully diluted-share net income was $105.6M vs. $117.2M.

• Pre-tax Adjusted Earnings reached $459.0M (+33%); post-tax Adjusted Earnings were $389.2M (+38%); Adjusted EBITDA was $524.4M (+55%).

• FY 2018 GAAP pretax income, pre-tax Adjusted Earnings and Adjusted EBITDA included $87.5M of other income related to Nasdaq shares.

Outlook and guidance

• Expected continued revenue and earnings growth over time from hiring producers, cross-selling services, expanding client share and using data-driven technology to improve productivity.

• Revenue-generating headcount rose 10% YoY in 2018 and 11% in Q1 2019; total headcount increased 8% and 9%, respectively, with investments expected to support future organic growth.

• Growth plans include profitable hiring, selective accretive acquisitions, deeper service cross-selling and technology investment; multifamily lending and servicing are expected to benefit from apartment demand and loan maturities.

• Beginning Q1 2019, Adjusted Earnings and Adjusted EBITDA definitions were to include all equity-based compensation; Adjusted EBITDA would no longer add back employee-loan amortization and reserves.