Good day, and welcome to the Newmark Group 2Q 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, sir.

Thank you, operator. Good morning. Newmark issued its second quarter 2025 financial results press release this morning. Unless otherwise stated, the results provided on today's call compare only the 3 months ending June 30, 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 the impact of GST, 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 and when and why and how management uses them for additional information under cash flow measures as well as relevant industry or economic statistics. The outlook discussed today assumes no material acquisitions or meaningful changes in 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 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 in our most recent SEC filings, which are incorporated by reference. I'm now happy to turn the call over to our host, Chief Executive Officer, Barry Gosin.

Good morning, and thank you for joining us. Before we begin today's call, on behalf of everyone at Newmark, 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 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 advised on some of the largest office and retail leases signed year-to-date in New York City and 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 gained further market share in capital markets during the quarter and year-to-date. We increased our total debt volumes by 135%. In comparison, U.S. commercial and multifamily originators were up by 38%. In investment sales, Newmark was ranked as the #1 office broker in the U.S. in the first half of 2025 by both MSCI and Real Estate Alert. On a global basis, across all property types, we improved to #3 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'm happy to turn the call over to our CFO, Mike Rispoli.

Thank you, Barry, and 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 26% improvement in our commission- based revenues, costs related to Newmark's growth initiatives and higher pass-through costs. The company's tax rate for adjusted earnings was 14%, in line with full year guidance. Moving to earnings. 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, our fully diluted weighted average share count was down 1.2% to 252.6 million. During the quarter, we repurchased approximately 10.8 million shares for $125.5 million at $11.58…

[Operator Instructions] We'll now take our first question from Mitchell Germain with Citizens.

Congrats on the quarter. Barry, obviously, you referenced the global investment sales #3. And obviously, you're making investments outside the U.S. I'm curious how the opportunity in Germany has been transpiring to date?

Well, we launched about a year ago, actually, at just about the time of Expo Real in Munich. Since that time, we've signed 70 brokers, many of whom are on garden leave, generally how it's done in Europe. So our real launch of that business is actually this Expo Real, which is in October. So there seems to be a clamoring of people who want to come to Newmark. They like our model. They like the platform. They like what we've done in France and U.K. and other parts of Europe. So I think, I mean it all bodes well for us here and we're excited.

Great. 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?

Yes. Let me just -- so you understand it, we've hired leasing people appraisal people, we're a fully integrated platform. So in all of our markets, we hire full boat of services for clients as we have in Germany. So it's a pretty diversified mix of people. That includes the U.K., includes France, includes what we're doing in Asia as well. We have, for the moment, a sided advantage, we have a lot of white space. We have an enormous runway. We -- a couple of years ago, we did virtually 0 business in Europe. It's now a 13% plus of our volume. We have -- we're building in Asia as well. And we think it's 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 we think there's 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 we're pretty bullish on our direction and where we go.

Great. 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've obviously seen a rallies 25% plus, since you did that. So where is investment dollars? Obviously, they're going to new broker acquisitions, but could we potentially see you guys consider some M&A here? Is buyback still on the table? Some thoughts around that, please?

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're looking at, and we think are very -- we can add a lot to those companies, and they can add a lot to our platform. So I would say for the back half of the year, you'll 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's probably around 6% yield versus the S&P 500, which is 2.8%. Our peer group, which is around 4.2%. So we still think there's a lot of upside to our stock, and that's why we'll continue to look at buybacks as well.

You should also -- it's important to note that 100% of our growth is organic.

We'll now take our next question from Alexander Goldfarb with Piper Sandler.

And Barry, thanks for the opening comments. Just obviously tragic. Mike, I appreciate the free cash flow emphasis in the slide, I think it's very helpful to help understand the economics of the business, which this quarter just really impressive. Along those lines, data centers have been huge in the news. Clearly, Barry, you've spoken before that it's 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 1 of your colleagues use 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's 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's more enduring in which case there's room to expand and invest further in your data center offering?

Well, we believe we're appropriately staffed. It's a center of excellence. There's 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 2 aspects of the business. There's a powered land play, which is, at some point, there will be less of the power land play, but our big -- our big emphasis has been on equity and finance and those are the areas which were the strongest. We think there's an enormous runway. There's a big runway in Europe. There's a big runway in Asia. AI is so relatively new. It's only really 2 years old. And a lot of people want to get into the game and the question for everyone is really what -- 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 as a more mature business that was just faced overbuilding oversupply. It's kind of like multifamily is a business that has enormous demand in the country and we'll 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's just too much supply to be absorbed. A lot of these transactions haven't come online, it's all coming online. So it will be 3, 4 years before we could see whether there is an oversupply, and it is pretty early.

Okay. And...

Alex, I would add 1 thing to that, which is that -- there's also a tremendous opportunity in data center outside of the transactions on the management side, both the project management and facilities management. And those are areas we really haven't touched to date. But certainly...

And leasing -- leasing, people there won't -- I mean not everything is going to be just a handful of hyperscalers, you're going to still see the colocation facilities, not everything is going to be in the cloud. So it's going to be -- and we're also involved in very active in digital infrastructure as well, which includes chip manufacturing and things like that, which are proliferating. There's should be another host of things.

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

I mean we're told that San Francisco and the Bay. The entire Bay Area that has opened up that there is activity coming from every direction. Now that's -- that's based on what our brokers tell us and what we have in the pipeline. It's coming from all different places. A lot of that -- some of that's AI, but there's other tech -- tech companies as well that are growing. There's always 1 thing about the ecosystem in the Bay Area, there is a company born every 5 minutes in the Bay Area, it's part of the ecosystem.

We'll now take our next question from Jade Rahmani with KBW.

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're thinking about in terms of total revenue, capital markets leasing or adjusted free cash flow?

Yes. The target on the management business is about $2 billion. We put out, I think, a few quarters ago and we continue to believe in the strong opportunity across all of our management and servicing businesses. We don't 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 we feel that those are very achievable.

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're close to 10% in debt and 1.8% in sales, and now we're close to 10% and 9.5%, respectively. We're 1% of the property management business. So there's 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're looking for the smart ways to do it. We're looking at things that fit in with how our brand works, and we are getting really good traction in many of those areas.

Great. 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?

The fees are no different than the average fees that you see across the rest of our business. So typically, on average, it's 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's where you've seen our fees and data centers really are no different.

Great. And to pivot to capital markets and leasing. What growth rates do you expect are reasonable to see in the second half?

So if you look at the midpoint of our guidance, let's just 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 in the capital markets business, probably mid- to high- teens. And which would suggest maybe there's 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 we have a really good pipeline into the third quarter, very strong. And if things continue along the path they're going now, I would certainly expect us to perform above the midpoint of the range towards the higher end.

We'll now take our next question from Julien Blouin with Goldman Sachs.

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 re-acceleration in activity relative to what seemed to be a slower May and June for the industry?

It's interesting. Our pipelines have been pretty strong throughout the year. We didn't see any significant slowdowns as we move through the year. If anything, our pipelines continue to grow and get stronger. We certainly don't have full visibility into the fourth quarter at this point. It's still a little bit early, but everything at the moment looks pretty good.

Got it. That's helpful. And it sounds like there wasn't any change to sort of how you're thinking about the 2026 targets. I guess do you -- is it just that you feel even more confident that they're sort of what you've put out there of $1.75 and $630 million of adjusted EBITDA are achievable? Or was there any temptation to maybe increase those targets?

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're 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, it suggests probably high single-digit revenue growth and mid-teens earnings growth, which seems very achievable for 2026 at this point.

Got it. That makes sense. And maybe 1 last one. Just in New York City, I'm wondering if you're 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's anything to read into there.

It's too early to tell. Mamdani hasn't been elected yet. There's 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. We still have the City Council. The City Council is pretty -- has moved more moderate over the last couple of years, very few democratic socialists. And so it's not -- so New York is incredibly resilient. I don't believe it will have an impact for certain people, it may annoy them. But it's -- New York is New York. The pool of talent in New York is unparalleled. The level of excitement in New York City being here is unparalleled. So I'm not -- I'm pretty sanguine about it.

[Operator Instructions] We'll now take our next question from Patrick O'Shaughnessy from Raymond James.

So with the new disclosure, 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, to kind of 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?

Sure. Thanks for the question, Patrick. So on a trailing 12-month basis compared to our post-tax adjusted earnings, it's about 65% conversion. Remember, in that metric or taken out of the cash flow from operations, is all the money we invest in brokers for growth. So that on a trailing 12-month basis was about $184 million, so it's hard to put a target precisely on what the conversion ratio will be because you have to know how much we're 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 how much we invest in the business at any given time.

Got it. That's 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?

Well, it's never easy. But no, I think that we seem to be -- we seem to have struck a cord 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, so that we don't think that's going away. It's -- it doesn't -- it's always been hard in some respects, but we don't see it changing.

Got it. And then lastly for 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?

So generally, we've 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, et cetera? And it's 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's generally how we've done it. We think we'll do some more of that going forward because there are certain areas that we want to focus on and that we are looking at companies. We've been -- we've 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 don't consistently conflict with the brand, things that work very well and are synergistic with both our capital markets and our leasing business.

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

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

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