Newmark Group (NMRK) Q4 2019 earnings summary

Executive summary

• FY19 revenue rose 8% to a record $2.218B, with growth across all major businesses; more than 85% of revenue growth was organic.

• Adjusted EBITDA increased 8% to $565.8M; post-tax Adjusted Earnings rose 12% to $434.9M.

• Before COVID-19 disrupted markets, management expected 2020 to be the best earnings year on record; the pandemic later prompted expense cuts and withdrawal of 2020 guidance.

Financial highlights

• FY19 revenue was $2.218B, up 8% YoY; GAAP operating income was $246.2M, down 26%, while net income available to common stockholders was $117.3M, up 10%.

• FY19 pretax Adjusted Earnings were $511.9M, up 12%; excluding Nasdaq-share income, pretax Adjusted Earnings increased 11%.

• Q4 revenue was $632.4M vs. $631.7M YoY; GAAP operating loss was $8.3M and net loss available to common stockholders was $11.0M, vs. income of $91.1M and $17.8M, respectively.

• FY19 total operating expenses rose 11% to $2.053B; compensation and benefits increased 11% to $1.535B, reflecting hiring and higher equity-based compensation.

Outlook and guidance

• Before the pandemic, management believed the business was on track for its best earnings year in 2020; hiring continued across multifamily, senior housing, industrial, medical, office, valuation and mortgage banking.

• Integration and streamlining initiatives were expected to generate over $20M in annualized savings by end-2020; $15M was achieved in Q4 2019.

• In May 2020, 2020 financial guidance was withdrawn amid elevated uncertainty; support and operating expenses were targeted for reductions of at least $100M during 2020.

• February 2020 amendment expanded the revolving credit facility to $425M and extended maturity to February 2023.