Q2 2026 Newmark Group Inc Earnings Call

July 29, 2026

Operator: Good day, welcome to the Newmark Q2 2026 Public Financial Results Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Jason McGruder, Head of Investor Relations. Please go ahead, sir.

Speaker #2: Thank you, operator, and good morning. Newmark issued its second quarter 2026 financial results press release earlier today. Unless otherwise stated, these results compare only the three months ending June 30, 2026, with the year earlier period.

Jason McGruder: Thank you, operator, and good morning. Newmark issued its Q2 2026 financial results press release earlier today. Unless otherwise stated, these results compare only the three months ending 30 June 2026, with the year-earlier period. Except as otherwise stated, we'll be referring to results only on a non-GAAP basis, including the terms adjusted earnings, adjusted EBITDA, and adjusted free cash flow. 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 GSE 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.

Speaker #2: Except as otherwise stated, we will be referring to results only on a non-GAAP basis, including the terms adjusted earnings, adjusted EBITDA, and adjusted free cash flow.

Speaker #2: 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 GSC-FHA loan origination and sales.

Speaker #2: We may also use the term "cash generated by the business," which is the same as operating cash flow measured before the impact of cash used for employee loans.

Speaker #2: Please refer to today's press release, as well as the supplemental tables and the quarterly results presentation on our website, for a complete and updated set of definitions for any non-GAAP items, terms, reconciliations, items to the corresponding GAAP results, and how, when, and why management uses them.

Jason McGruder: Please refer to today's press release, the supplemental tables, and the quarterly results presentation on our website for a complete and updated set of definitions for any non-GAAP items, terms, reconciliations items to the corresponding GAAP results and how, when, 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 excludes the potential impact of any future acquisitions and assumes no meaningful changes in Newmark's stock price compared with yesterday's close. Our expectations are subject to change based on various macroeconomic, social, political, and other factors. None of our targets or goals beyond 2026 should be considered formal guidance. We remind you that information on this call contains forward-looking statements, including without limitation, statements concerning our economic outlook and business.

Speaker #2: For additional information, our cash flow measures, as well as relevant industry or economic statistics. The outlook discussed today excludes the potential impact of any future acquisitions and assumes no meaningful changes in Newmark stock price compared with yesterday's close.

Speaker #2: Our various macroeconomic, social, political, and other factors. None of our targets or goals beyond 2026 should be considered formal guidance. Also, we remind you that information on this call contains forward-looking statements, including without limitations, statements concerning our economic outlook and business.

Speaker #2: 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.

Jason McGruder: 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 and Chief Executive Officer, Barry Gosin.

Speaker #2: For 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.

Speaker #2: I'm now happy to turn the call over to our host and Chief Executive Officer, Barry Gosin.

Speaker #3: Good morning, and thank you for joining us. With me today are Newmark's Chief Financial Officer, Mike Rispoli, along with our Chief Operating Officer, Lou Alvarado.

Barry Gosin: Good morning, and thank you for joining us. With me today are Newmark's Chief Financial Officer, Mike Rispoli, along with our Chief Operating Officer, Lou Alvarado. Newmark once again delivered strong financial results. We have now produced double-digit year-on-year revenue growth for 11 quarters in a row in Capital Markets, eight consecutive quarters in Management and Servicing, and seven straight quarters in Leasing. Our quarterly results also demonstrate the company's strong operating leverage as we increase total revenue 17% and adjusted EPS 26%. Our growth was led by Management and Servicing, which increased 18%, leading the company's fourth consecutive record quarter for these businesses. We remain confident in their producing more than $2 billion in annual revenue by 2029, which implies a mid-teen growth over that period. With respect to Leasing, we increased fees by 17% to an all-time best Q2.

Speaker #3: Newmark, once again, delivered strong financial results. We have now produced double-digit year-on-year revenue growth for 11 quarters in a row in capital markets. Eight consecutive quarters in management and servicing, and seven straight quarters in leasing.

Speaker #3: Our quarterly results also demonstrate the company's strong operating leverage as we increase total revenue 17% and adjusted EPS 26%. Our growth was led by management and servicing, which increased 18%, leading the company's fourth consecutive record quarter for these businesses.

Speaker #3: We remain confident in their producing more than $2 billion in annual revenue by 2029, which implies a mid-teens growth rate over that period. With respect to leasing, we increased fees by 17% to an all-time best second quarter.

Speaker #3: This was driven by significantly higher office volumes and key markets, including New York City, San Francisco Bay Area, and Los Angeles, as well as the ongoing expansion of our global footprint.

Barry Gosin: This was driven by significantly higher office volumes in key markets including New York City, San Francisco Bay Area, and Los Angeles, as well as the ongoing expansion of our global footprint. We increased Capital Markets revenues by 16%. This reflected a broad recovery across property types in US investment sales, as well as our investments in talent driving international growth. We are also gaining domestic market share as Newmark moved up one spot to number 2 in overall US investment sales for H1 2026, according to MSCI. Given Newmark's strong H1 results and healthy transaction pipeline, we continue to expect double-digit top and bottom-line growth for the third consecutive year in 2026.

Speaker #3: We increased capital markets revenues by 16%. This reflected a broad recovery across property types in U.S. investment sales, as well as our investments in talent driving international growth.

Speaker #3: We are also gaining domestic market share as Newmark moved up one spot to number two in overall U.S. investment sales for the first half of 2026, according to MSCI.

Speaker #3: Given Newmark's strong first-half results and healthy transaction pipeline, we continue to expect double-digit top- and bottom-line growth for the third consecutive year in 2026. With respect to artificial intelligence, we view the advent of AI not only as a defining economic force of our era, but also as the accelerant that will better enable our talented professionals across the company to efficiently bring new and innovative solutions to their clients and enhance productivity over time.

Barry Gosin: With respect to artificial intelligence, we view the advent of AI not only as a defining economic force of our era, but as the accelerant that will better enable our talented professionals across the company to efficiently bring new and innovative solutions to their clients and enhance productivity over time. We believe our investment in recurring revenue businesses, ongoing international expansion, improving industry fundamentals, and our talented professionals will together drive Newmark's long-term growth and Newmark market share gains. With that, I'm happy to turn the call over to Mike.

Speaker #3: We believe our investment in recurring revenue businesses ongoing international expansion, improving industry fundamentals, and our talented professionals will together drive Newmark's long-term growth and Newmark market share gains.

Speaker #3: With that, I'm happy to turn the call over to Mike.

Speaker #4: Thank you, Barry. And good morning. Total revenues were up 17% to an all-time second quarter best of $888.4 million, compared with $759.1 million. We increased management services, servicing, and other by 17.7%.

Michael Rispoli: Thank you, Barry, and good morning. Total revenues were up 17% to an all-time Q2 best of $888.4 million, compared with $759.1 million. We increased Management Services, Servicing and Other by 17.7%. This was due to double-digit organic growth across our recurring revenue businesses, as well as recent acquisitions. Leasing was up 17.2%. This was led by significant office activity for clients across several major industry categories. Capital Markets grew by 16%, reflecting meaningfully higher multifamily sales volumes, particularly in senior housing and affordable housing. We also produced strong improvement in industrial and office sales. This was partially offset by lower origination activity, mainly due to several significant transactions in the prior year quarter. These helped drive Newmark's 134.8% year-on-year increase in total debt volumes in Q2 2025.

Mike Rispoli: Thank you, Barry, and good morning. Total revenues were up 17% to an all-time Q2 best of $888.4 million, compared with $759.1 million. We increased Management Services, Servicing and Other by 17.7%. This was due to double-digit organic growth across our recurring revenue businesses, as well as recent acquisitions. Leasing was up 17.2%. This was led by significant office activity for clients across several major industry categories. Capital Markets grew by 16%, reflecting meaningfully higher multifamily sales volumes, particularly in senior housing and affordable housing. We also produced strong improvement in industrial and office sales. This was partially offset by lower origination activity, mainly due to several significant transactions in the prior year quarter. These helped drive Newmark's 134.8% year-on-year increase in total debt volumes in Q2 2025.

Speaker #4: This was due to double-digit organic growth across our recurring revenue businesses, as well as recent acquisitions. Leasing was up 17.2%. This was led by significant office activity in major industry categories.

Speaker #4: Capital markets grew by 16%, reflecting meaningfully higher multifamily sales volumes, particularly in senior housing and affordable housing. We also produced strong improvement in industrial and office sales.

Speaker #4: This was partially offset by lower origination activity mainly due to several significant transactions in the prior year quarter. These helped drive Newmark's $134.8% year-on-year increase in total debt volumes in the second quarter of 2025.

Speaker #4: In the first half of 2026, we improved our total debt and investment sales volumes by 26.7% and 64.8%, respectively. Compared with a year earlier.

Michael Rispoli: In H1 2026, we improved our total debt and investment sales volumes by 26.7% and 64.8% respectively, compared with a year earlier, and we continue to have a strong pipeline. Moving on to expenses. Total expenses were up 16.6%. This reflected commission and pass-through expense growth generally in line with related revenue improvement, with the remaining increase largely attributed to our global growth initiatives. Excluding both pass-through items and the impact of our global growth initiatives, total expenses would have increased by 9.6%. Regarding taxes, the company's tax rate for adjusted earnings was 14.7% compared with 14% last year. Turning to earnings. We increased adjusted EPS by 25.8% to $0.39 compared with $0.31. Adjusted EBITDA was $139.2 million, up 22.1% versus $114 million.

Mike Rispoli: In H1 2026, we improved our total debt and investment sales volumes by 26.7% and 64.8% respectively, compared with a year earlier, and we continue to have a strong pipeline. Moving on to expenses. Total expenses were up 16.6%. This reflected commission and pass-through expense growth generally in line with related revenue improvement, with the remaining increase largely attributed to our global growth initiatives. Excluding both pass-through items and the impact of our global growth initiatives, total expenses would have increased by 9.6%. Regarding taxes, the company's tax rate for adjusted earnings was 14.7% compared with 14% last year. Turning to earnings. We increased adjusted EPS by 25.8% to $0.39 compared with $0.31. Adjusted EBITDA was $139.2 million, up 22.1% versus $114 million.

Speaker #4: And we continue to have a strong pipeline. Moving on to expenses, total expenses were up 16.6%. This reflected commission and pass-through expense growth generally in line with related revenue improvement.

Speaker #4: With the remaining increase, largely attributed to our global growth initiatives. Excluding both pass-through items and the impact of our global growth initiatives, total expenses would have increased by $9.6%.

Speaker #4: Regarding taxes, the company's tax rate for adjusted earnings was 14.7%, compared with 14% last year. Turning to earnings, we increased adjusted EPS by 25.8% to $39, compared with $31.

Speaker #4: Adjusted EBITDA was $139.2 million, up 22.1% versus $114 million. Our adjusted EBITDA margin on total revenues improved by 65 basis points, slightly ahead of the midpoint of our full-year guidance range.

Michael Rispoli: Our adjusted EBITDA margin on total revenues improved by 65 basis points, slightly ahead of the midpoint of our full year guidance range. Excluding the impact of pass-through items as well as recent M&A and international growth investments, our margin expansion would have been approximately 100 basis points higher. With respect to share count, our fully diluted weighted average share count was 251.9 million, roughly flat versus a year ago. Turning to the balance sheet. We ended the quarter with $259.7 million of cash and cash equivalents, $867.3 million of total corporate debt and 1 times net leverage. On a trailing 12-month basis, the company increased adjusted free cash flow by 71.6% to $391.1 million. This represented 85.3% of adjusted earnings, which is at the high end of our target range of 65% to 85%. In terms of outlook, our guidance remains unchanged.

Mike Rispoli: Our adjusted EBITDA margin on total revenues improved by 65 basis points, slightly ahead of the midpoint of our full year guidance range. Excluding the impact of pass-through items as well as recent M&A and international growth investments, our margin expansion would have been approximately 100 basis points higher. With respect to share count, our fully diluted weighted average share count was 251.9 million, roughly flat versus a year ago. Turning to the balance sheet. We ended the quarter with $259.7 million of cash and cash equivalents, $867.3 million of total corporate debt and 1 times net leverage. On a trailing 12-month basis, the company increased adjusted free cash flow by 71.6% to $391.1 million. This represented 85.3% of adjusted earnings, which is at the high end of our target range of 65% to 85%. In terms of outlook, our guidance remains unchanged.

Speaker #4: Excluding the impact of pass-through items, as well as recent M&A and international growth investments, our margin expansion would have been approximately 100 basis points higher.

Speaker #4: With respect to share count, our fully diluted weighted average share count was 251.9 million, roughly flat versus a year ago. Turning to the balance sheet, we ended the quarter with $259.7 million of cash and cash equivalents, $867.3 million of total corporate debt, and one times net leverage.

Speaker #4: On a trailing 12-month basis, the company increased adjusted free cash flow by $71.6% to $391.1 million. This represented 85.3% of adjusted earnings, which is at the high end of our target range of 65 to 85 percent.

Speaker #4: In terms of outlook, our guidance remains unchanged. At the midpoint for each metric, we expect total revenues to improve by approximately 16%, adjusted EPS to be up by approximately 19%, and adjusted EBITDA to grow by approximately 20%.

Michael Rispoli: At the midpoint for each metric, we expect total revenues to improve by approximately 16%, adjusted EPS to be up by approximately 19%, and for adjusted EBITDA to grow by approximately 20%. With that, I would now like to open the call for any questions.

Mike Rispoli: At the midpoint for each metric, we expect total revenues to improve by approximately 16%, adjusted EPS to be up by approximately 19%, and for adjusted EBITDA to grow by approximately 20%. With that, I would now like to open the call for any questions.

Speaker #4: With that, I would now like to open the call for any questions.

Speaker #2: If you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to allow everyone the opportunity to signal for a question. Our first question comes from Alexander Goldfarb with Piper Sandler.

Speaker #2: We'll pause for just a moment to allow everyone the opportunity to signal for a question. And our first question comes from Alexander Goldfarb with Piper Sandler.

Speaker #5: Good morning. Morning down there. Mike, first question is just going to the debt. I understand that a year ago you had some outsized transactions, but as we think about the peak back in ’21, ’22—when rates were really low and originations were really high—how are you guys thinking about your business this year, next year, etc., as those maturities mature?

Alexander Goldfarb: Good morning. Morning down there. Mike, first question is just going to the debt. Understand that a year ago had some outsized transactions, but as we think about sort of the peak back in 2021, 2022 when rates were really low and originations really high, how are you guys thinking about your business this year, next year, et cetera, as those maturities mature? Just trying to understand what we should expect as far as quarterly cadence.

Speaker #5: Just trying to understand what we should expect as far as quarterly cadence.

Speaker #4: Sure. I would say our debt pipeline remains really strong through the back half of the year. Hard to say what will be next year, but the market certainly has a significant amount of maturities over the next three years, so we would expect that to continue.

Luis Alvarado: Sure. I would say our debt pipeline remains really strong through the back half of the year. Hard to say what it'll be next year, but the market certainly has a significant amount of maturities over the next three years, we would expect that to continue. In the quarter, as you know, last year, we had one $7 billion transaction in the Q2 of last year. That affected the year-over-year comp in the Q2 of this year. Outside of that, the pipeline remains really healthy.

Mike Rispoli: Sure. I would say our debt pipeline remains really strong through the back half of the year. Hard to say what it'll be next year, but the market certainly has a significant amount of maturities over the next three years, we would expect that to continue. In the quarter, as you know, last year, we had one $7 billion transaction in the Q2 of last year. That affected the year-over-year comp in the Q2 of this year. Outside of that, the pipeline remains really healthy.

Speaker #4: In the quarter, as you know, last year we had a $1.7 billion transaction in the second quarter of last year. So that affected the year-over-year comp in the second quarter of this year, but outside of that, the pipeline remains really healthy.

Speaker #5: Okay. And then just bigger.

Alexander Goldfarb: Okay.

Speaker #3: We have a lot of large transactions in the pipeline. With data centers, digital infrastructure, and large deals, and large office coming back, there is a need for capital, and there is an enormous amount of liquidity.

Barry Gosin: Alex, we have a lot of large transactions in the pipeline. With data centers, digital infrastructure, large deals and large office coming back, there is a need for capital, there is enormous amount of liquidity.

Speaker #5: Okay. And then, Barry, as we think about the business overall, I mean, it seems like you guys are firing on all cylinders. Double-digit seems to be the permanently affixed in your press releases.

Alexander Goldfarb: Okay. Barry, as we think about the business overall, it seems like you guys are firing on all cylinders. Double-digit seems to be permanently affixed in your press releases. A little surprised that guidance wasn't increased, especially given the lack of supply and the acceleration that we're seeing from the REITs. Is there anything in the business that was holding you back? Otherwise, as I say, from what the REITs are saying, the real estate markets only seem to be getting better. Therefore, was a little surprised that the guidance wasn't bumped even just a small part.

Speaker #5: So a little surprised that guidance wasn't increased, especially given the lack of supply and the acceleration that we're seeing from the REITs. Is there anything in the business that was holding you back?

Speaker #5: Because otherwise, as I say, from what the REITs are saying, the real estate markets only seem to be getting better. And therefore, I was a little surprised that the guidance wasn't bumped, even just a small part.

Speaker #4: Yeah, I'll take that one, Alex. So if you remember, we did increase guidance last quarter. We continue to see really strong pipeline of activity.

Luis Alvarado: Yeah, I'll take that one, Alex. If you remember, we did increase guidance last quarter. We continue to see really strong pipeline of activity. We continue to win management business. Everything looks pretty good. We're up against a little bit of a tougher comp in H2 of the year. We were up 20% in H2 last year. As Barry said, we have some pretty sizable transactions in the pipeline. It's a little bit difficult to determine the timing of that. Given the current macro environment, we just thought we wanted to see a little bit more data, and we'll update you on that next quarter.

Mike Rispoli: Yeah, I'll take that one, Alex. If you remember, we did increase guidance last quarter. We continue to see really strong pipeline of activity. We continue to win management business. Everything looks pretty good. We're up against a little bit of a tougher comp in H2 of the year. We were up 20% in H2 last year. As Barry said, we have some pretty sizable transactions in the pipeline. It's a little bit difficult to determine the timing of that. Given the current macro environment, we just thought we wanted to see a little bit more data, and we'll update you on that next quarter.

Speaker #4: We continue to win management business, so everything looks pretty good. But we're up against a little bit of a tougher comp in the second half of the year.

Speaker #4: We were up 20% in the second half last year. And as Barry said, we have some pretty sizable transactions in the pipeline. It's a little bit difficult to determine the timing of that.

Speaker #4: And given the current macro environment, we just thought we wanted to see a little bit more data and we'll update you on that next quarter.

Speaker #5: Thank you.

Alexander Goldfarb: Thank you.

Speaker #2: And we'll go to our next question from Julian Bluen with Goldman Sachs.

Operator: We'll go to our next question from Julien Blouin with Goldman Sachs.

Speaker #6: Yeah, thank you for taking my question. Just on investment sales, another really strong quarter. You significantly outperformed the industry in the US and, obviously, internationally, given the push there on hiring.

Julien Blouin: Yeah, thank you for taking my question. Just in investment sales, another really strong quarter. You significantly outperformed the industry in the US and obviously internationally, given the push there on hiring. I guess how much more ramp in productivity do you expect from US producers? I wouldn't have guessed that you would still be sort of outperforming the industry by this much at this point.

Speaker #6: But I guess, how much more ramp in productivity do you expect from U.S. producers? I want to guess that you would still be sort of outperforming the industry by this much at this point.

Speaker #4: Hey Julian, this is Lou. I think we still have a lot of running room in that sector, as well as in the international sector.

Luis Alvarado: Hey, Julian, this is Lou. I think we still have a lot of running room in that sector as well as in the international sector. As you know, right now we're primarily Europe, we're still looking to expand into Asia as well, which is very small for us right now. In the US, we still have some white space that we can continue to grow in, we don't see any real reason for a slowdown for us. Look, I think the things that we're doing, we will continue to pick up market share, as you've seen us grow from where we were to where we are today. We're very happy with where we are, and we're very excited about where I think it's going to go.

Lou Alvarado: Hey, Julian, this is Lou. I think we still have a lot of running room in that sector as well as in the international sector. As you know, right now we're primarily Europe, we're still looking to expand into Asia as well, which is very small for us right now. In the US, we still have some white space that we can continue to grow in, we don't see any real reason for a slowdown for us. Look, I think the things that we're doing, we will continue to pick up market share, as you've seen us grow from where we were to where we are today. We're very happy with where we are, and we're very excited about where I think it's going to go.

Speaker #4: As you know, right now we're primarily in Europe, but we're still looking to expand into Asia as well, which is very small for us right now.

Speaker #4: In the US, we still have some white space that we can continue to grow in. And so we don't see any real reason for a slowdown for us.

Speaker #4: And look, I think the things that we're doing will continue to help us pick up market share, as you've seen us grow from where we were to where we are today.

Speaker #4: And so we're very happy with where we are and we're very excited about where I think it's going to go.

Speaker #6: Okay, great. No, thank you. And then, on the data center financing piece—I know some of these are sort of larger financings that can be a little chunky and difficult to time.

Julien Blouin: Okay, great. No, thank you. On the data center financing piece, I know some of these are sort of larger financings that can be a little chunky and difficult to time. Overall, just at a sort of high level, how are you thinking about the opportunity set? It does feel like this year we've had a little less of these sort of large chunkier data center financing deals so far.

Speaker #6: But overall, just at a sort of high level, how are you thinking about the opportunity set? It does feel like this year, we've had a little less of these sort of large, chunkier data center financing deals so far.

Speaker #4: Well, we are involved in many of the large, visible, high-profile opportunities, as you guys know that. And we see a very robust pipeline. I mean, the need for compute is still enormous.

Luis Alvarado: Well, we are involved in many of the large, visible, high-profile opportunities, as you guys know that. We see a very robust pipeline. The need for compute is still enormous. There is not a sufficient amount of power for all of the compute requirements if AI proliferates the way everybody anticipates it to. There's going to be not only hyperscaler deals, there'll be infrastructure transactions. All of these need capital. We're in the middle of a lot of it. That's still going to continue. Even in spite of some of the NIMBYism that's occurring around the country, there are still plenty of states that will allow data centers that are looking for more chip manufacturing and advanced manufacturing and data centers. Also in the neo cloud and smaller data centers will be a place that people are going to invest.

Barry Gosin: Well, we are involved in many of the large, visible, high-profile opportunities, as you guys know that. We see a very robust pipeline. The need for compute is still enormous. There is not a sufficient amount of power for all of the compute requirements if AI proliferates the way everybody anticipates it to. There's going to be not only hyperscaler deals, there'll be infrastructure transactions. All of these need capital. We're in the middle of a lot of it. That's still going to continue. Even in spite of some of the NIMBYism that's occurring around the country, there are still plenty of states that will allow data centers that are looking for more chip manufacturing and advanced manufacturing and data centers. Also in the neo cloud and smaller data centers will be a place that people are going to invest.Distributed power is something that's going to be needed more closer to where the demand is. Every time we seem to see some moment where maybe there's a slowdown, there's more capacity required, another avenue that everybody's going to move to. This is still just at the beginning.

Speaker #4: There is not a sufficient amount of power for all of the compute requirements if AI proliferates the way everybody anticipates it to. So you're going to need—so there's going to be not only hyperscaler deals.

Speaker #4: There'll be infrastructure transactions. And all of these need capital. And we're in the middle of a lot of it. And so that's still going to continue.

Speaker #4: Even in spite of some of the newism that's occurring around the country, there are still plenty of states that will allow data centers that are looking for more chip manufacturing, advanced manufacturing, and data centers.

Speaker #4: Also, in the Neocloud and smaller data centers will be a place that people are going to invest. Distributed power is something that's going to be needed.

Luis Alvarado: Distributed power is something that's going to be needed more closer to where the demand is. Every time we seem to see some moment where maybe there's a slowdown, there's more capacity required, another avenue that everybody's going to move to. This is still just at the beginning.

Speaker #4: More closely to where the demand is. So every time we seem to see some moment where maybe there's a slowdown, there's just another—there's more capacity required, another avenue that everybody's going to move to.

Speaker #4: But that's—this is still just at the beginning.

Speaker #6: Thank you. That's very helpful.

Julien Blouin: Thank you. That's very helpful.

Speaker #2: And we'll move to our next question from Mitch Jermaine with Citizens Bank.

Operator: We'll move to our next question from Mitch Germain with Citizens Bank.

Speaker #7: Thank you very much. I'm just curious if you could provide some perspective on the performance of the recent M&A, the firms you acquired, and maybe some ideas or thoughts around the cross-sell opportunity that you've been able to realize to date.

Mitch Germain: Thank you very much. I'm just curious if you could provide some perspective on performance of the recent M&A, the firms you acquired, and maybe some ideas or some thoughts around the cross-sell opportunity that you've been able to realize to date.

Speaker #4: Yeah. I mean, look, the most recent one was Real Foundations, right, that we acquired. And we've been able to do a significant amount of cross-selling with them, as well as growing them.

Luis Alvarado: Yeah. Look, the most recent one was RealFoundations that we acquired. We've been able to do a significant amount of cross-selling with them, as well as growing them. That was an area where as we continue to grow our managed services, they provide services that kind of augment that. We've integrated them into our consulting practices, and it's been a very successful, so far, transition and integration for us. We continue to look at other opportunities, primarily focused in that managed service sector. We believe that that is going to be one of the driving forces. As you know, we're looking to grow our managed service area to about $2 billion, and I think those M&As will help us get to that point over the period of time through 2029.

Lou Alvarado: Yeah. Look, the most recent one was RealFoundations that we acquired. We've been able to do a significant amount of cross-selling with them, as well as growing them. That was an area where as we continue to grow our managed services, they provide services that kind of augment that. We've integrated them into our consulting practices, and it's been a very successful, so far, transition and integration for us. We continue to look at other opportunities, primarily focused in that managed service sector. We believe that that is going to be one of the driving forces. As you know, we're looking to grow our managed service area to about $2 billion, and I think those M&As will help us get to that point over the period of time through 2029.

Speaker #4: That was an area where, as we continue to grow our managed services, they provide services that kind of augment that, and we've integrated them into our consulting practices.

Speaker #4: And it's been a very successful transition and integration for us so far. We continue to look at other opportunities, primarily focused in that managed services sector.

Speaker #4: And we believe that that is going to be one of the driving forces. As you know, we're looking to grow our managed service area to about $2 billion.

Speaker #4: And I think those M&As will help us get to that point over the period of time through 2029.

Speaker #7: That's helpful. And just one last question for me with regards to capital allocation. I think the majority of your buyback activity occurred in the first quarter.

Mitch Germain: That's helpful. Just one last question from me with regards to capital allocation. I think the majority of your buyback activity occurred in Q1. There really wasn't much done in the back part of the quarter. I think you did 1 million shares, which were announced when you announced your Q1 earnings already. Maybe just some thoughts about buybacks or kind of your allocation of capital on a go-forward basis.

Speaker #7: And there really wasn't much done in the back part of the quarter. I think you did a million shares, which were announced when you announced your first quarter earnings already.

Speaker #7: Just maybe just some thoughts about buybacks or kind of your allocation of capital on a go-forward basis.

Speaker #4: Sure. As you can see, Mitch, we continue to generate a lot of free cash flow. We're up 71%, almost 72% on a trailing 12-month basis.

Luis Alvarado: Sure. As you can see, Mitch, we continue to generate a lot of free cash flow. We're up 71%, almost 72% on a trailing 12-month basis. We did buy back a lot of stock mostly in Q1, but a little bit in Q2. I think what we said at that time is we were going to transition capital allocation to M&A. We have a nice pipeline of M&A transactions. If they close, that's where the capital will go. If they don't, then we'll pivot back to buying back more stock towards the latter part of the year.

Mike Rispoli: Sure. As you can see, Mitch, we continue to generate a lot of free cash flow. We're up 71%, almost 72% on a trailing 12-month basis. We did buy back a lot of stock mostly in Q1, but a little bit in Q2. I think what we said at that time is we were going to transition capital allocation to M&A. We have a nice pipeline of M&A transactions. If they close, that's where the capital will go. If they don't, then we'll pivot back to buying back more stock towards the latter part of the year.

Speaker #4: We did buy back a lot of stock—mostly in the first quarter, but a little bit in the second quarter. And I think what we said at that time is we were going to transition capital allocation to M&A.

Speaker #4: So, we have a nice pipeline of M&A transactions. If they close, that's where the capital will go. If they don't, then we'll pivot back to buying back more stock towards the latter part of the year.

Speaker #7: I think what's important for you to recognize is that everything we acquire has to have a frame of reference and a connection to the rest of the business.

Barry Gosin: I think what's important for you to recognize is that everything we acquire has to have a frame of reference and a connection to the rest of the business. We're generally not focused on acquiring things that are outliers. We're putting together this puzzle and the point of how are we creating synergies, literally, that is part of our goal. Everything that we buy. Buying RealFoundations, they do implementation and integration of MRI and Yardi. All of the real estate funds and managers use either Yardi or MRI. Everything we can do to get us in front of the clients become a holistic solution in every part of the capital stack, every part of their business, partner with them to help leverage our resources to do a better job for their funds and their investors' investments we're doing.

Speaker #7: I mean, so we're not going to we're generally not focused on acquiring things that are outliers. So we're putting together this puzzle. And the point of how we creating synergies literally, that is part of our goal.

Speaker #7: Everything that we buy, buying Real Foundations—they do implementation and integration of MRI and Yardi. All of the real estate funds and managers use either Yardi or MRI.

Speaker #7: So everything we can do to get us in front of the clients, become a holistic solution in every part of the capital stack, every part of their business, partner with them to help leverage our resources to do a better job for their funds and their investors' investments.

Speaker #7: We're doing. So we think there are a lot of things that we can do over the next year that will fill in the gaps and create more recurring revenue.

Barry Gosin: We think there are a lot of things that we can do over the next year that will fill in the gaps, create more recurring revenue. We hope to get multiple expansion as a result of those efforts. We are very focused on it. We had a commitment to be in the top three in capital markets. We were two this year in the US. We're going to do the same thing around the country. That's our goal. As we build the gratitude machine of selling product to clients, we become an elevated brand, more important to our clients, and we're building around that and using the leverage of that to come up with acquisitions that fit like a glove into a whole puzzle.

Speaker #7: We hope to get multiple expansion as a result of those efforts. We are very focused on it. We had a commitment to be in the top three in capital markets.

Speaker #7: We were two this year in the US. We're going to do the same thing around the country. That's our goal as we build the gratitude machine of selling product to clients.

Speaker #7: We've become an elevated brand, more important to our clients. And we're building around that and using the leverage of that to come up with acquisitions that fit like a glove into the whole of a whole puzzle.

Speaker #7: Thank you.

Mitch Germain: Thank you.

Speaker #2: And we'll go next to Jade Rahmani with KBW.

Operator: We'll go next to Jade Rahmani with KBW.

Jade Rahmani: Thanks very much. I was wondering what you're seeing on the multifamily side. CBRE called out some weakness in volumes on the GSE business. Newmark seemed to buck that trend, and the press release noted strength in seniors and affordable housing. Any color on that?

Speaker #5: Thanks very much. I was wondering what you're seeing on the multifamily side. CBRE called out some weakness in volumes on the GSE business. Newmark seemed to buck that trend.

Speaker #5: And the press release noted strength in seniors and affordable housing. So, any color on that?

Speaker #7: Well, so we're building an incredible affordable housing platform. I mean, we're the number one investment sales platform in affordable, good chunk of that is section eight.

Barry Gosin: Well, we're building an incredible affordable housing platform. We're the number one investment sales platform in affordable. A good chunk of that is Section 8, and a part of that is LIHTC. The good news is that the country is very focused on affordability. It seems to be a popular word these days. There is no disagreement between the Democrats and the Republicans with respect to the importance of building affordable housing. We managed to pick that just as we got into data centers 2, 3 years ago ahead of the curve, which has given us some momentum. In terms of multifamily, we're hiring great people.

Speaker #7: And a part of that is LITECH. The good news is that the country is very focused on affordability. It seems to be a popular word these days.

Speaker #7: And there is no disagreement between the Democrats and the Republicans with respect to the importance of building affordable housing. So we managed to pick that, just as we got into data centers two, three years ago ahead of the curve, which has given us some momentum.

Speaker #7: In terms of multifamily, we're hiring great people. We're filling out the white space. We've managed to acquire — we have the deepest, widest bench of talented multifamily investment salespeople, coupled with Freddie and Fannie HUD, GSE business, along with affordable, which is part of the mission critical on the GSE business.

Barry Gosin: We're filling out the white space. We have the deepest, widest bench of talented multifamily investment salespeople, coupled with Freddie Mac and Fannie Mae HUD GSE business, along with affordable, which is part of the mission critical on the GSE business. All of those pieces are giving us a lot of wind in the sails.

Speaker #7: So all of those pieces are giving us a lot of wind in the sails.

Luis Alvarado: Jade, I'll add to that our GSE pipeline heading into the H2 is pretty robust, very strong, and we just see the business as being very good in the H2.

Speaker #6: And Jade, I'll add to that that our GSE pipeline heading into the back half of the year is pretty robust, very strong. We just see the business as being very good in the back half of the year.

Lou Alvarado: Jade, I'll add to that our GSE pipeline heading into the H2 is pretty robust, very strong, and we just see the business as being very good in the H2.

Speaker #5: And the follow-up is, how do you think rates are impacting that business? Because multifamily in general is a lower cap rate asset class, and so buyers are quite sensitive to where rates are.

Jade Rahmani: The follow-up is how do you think rates are impacting that business? Because multifamily in general is a lower cap rate asset class, buyers are quite sensitive to where rates are. Are you seeing any pullback in volume as a result, or are you seeing a pickup in refi but a slowdown in acquisitions? Any commentary there?

Speaker #5: So, are you seeing any pullback in volume as a result, or are you seeing a pickup in refi but a slowdown in acquisitions? Any commentary there?

Speaker #7: Well, it depends on the market. I mean, some markets have been overbuilt, and that's an impasse. It has had an impact on a variety of markets in terms of investment sales.

Barry Gosin: Well, it depends on the market. Some markets have been overbuilt, that's an impact. It has had an impact on a variety of markets in terms of investment sales. Interest rates had the biggest impact on multi. When you have certainty in interest rates and the spreads are pretty secure, which they have been, that is a good market to transact in. We think that even though there was a slowdown in a variety of markets, I think we think that'll pick up.

Speaker #7: Interest rates were the biggest impact—had the biggest impact on multi. But when you have certainty in interest rates and the spreads are pretty secure, which they have been, that is a good market to transact in.

Speaker #7: And we think that even though there was a slowdown in a variety of markets, I think we think that'll pick up.

Speaker #5: Thanks very much.

Jade Rahmani: Thanks very much.

Speaker #2: And we'll go next to Brendan Lynch with Barclays.

Operator: We'll go next to Brendan Lynch with Barclays.

Speaker #1: Great, thanks for taking my questions. On the U.S. office leasing, can you talk a little bit about your runway for continued new leasing growth as the A-quality assets get leased up?

Brendan Lynch: Great. Thanks for taking my questions. On the US office leasing, can you talk a little bit about your runway for continued new leasing growth as the A-quality assets get leased up? Do you anticipate greater absorption in B-quality assets going forward, and how are you positioned to capture that demand?

Speaker #1: Do you anticipate greater absorption in B-quality assets going forward, and how are you positioned to capture that demand?

Speaker #4: Yeah, Brendan, this is Lou. Look, I think what you're seeing across the markets is people improving their assets to be competitive in order to lease, right?

Luis Alvarado: Yeah, Brendan, this is Lew. Look, I think what you're seeing across the markets is people improving their assets to be competitive in order to lease, right? B assets are being looked at and amenitized in order to compete with the A assets. Yes, the A assets is where the bulk of the activity is, so everybody's preparing to that. That's what we're spending a lot of time, whether it's on our property management side or on our brokerage side or on our project management side, is working with clients to reposition their assets in order to attract these folks. There still is some demand for B and C from those that can't afford to pay the A rates, right?

Lou Alvarado: Yeah, Brendan, this is Lew. Look, I think what you're seeing across the markets is people improving their assets to be competitive in order to lease, right? B assets are being looked at and amenitized in order to compete with the A assets. Yes, the A assets is where the bulk of the activity is, so everybody's preparing to that. That's what we're spending a lot of time, whether it's on our property management side or on our brokerage side or on our project management side, is working with clients to reposition their assets in order to attract these folks. There still is some demand for B and C from those that can't afford to pay the A rates, right?

Speaker #4: So, B assets are being looked at in minute ties in order to compete with the A assets. Yes, the A assets is where the bulk of the activity is.

Speaker #4: So everybody’s preparing for that. And that’s what we’re spending a lot of time on, whether it’s on our property management side, our brokerage side, or our project management side—working with clients to reposition their assets in order to attract these folks.

Speaker #4: There still is some demand for B and C from those that can't afford to pay the A rates, right? So those buildings will still do some volume.

Luis Alvarado: Those buildings will still do some volume, but obviously the bulk of the activity has been focused on the As, and the bulk of the focus by the clients has been to how do we reposition ourselves, or how do I purchase a building at a basis low enough so I can reposition it in order to compete with the As. I think you're going to continue to see that, and we're pretty well positioned to continue to work with clients related to addressing those needs.

Lou Alvarado: Those buildings will still do some volume, but obviously the bulk of the activity has been focused on the As, and the bulk of the focus by the clients has been to how do we reposition ourselves, or how do I purchase a building at a basis low enough so I can reposition it in order to compete with the As. I think you're going to continue to see that, and we're pretty well positioned to continue to work with clients related to addressing those needs.

Speaker #4: But obviously, the bulk of the activity has been focused on the As, and the bulk of the focus by the clients has been on how do we reposition ourselves?

Speaker #4: Or how do I purchase a building at a basis low enough so I can reposition it in order to compete with the As? And I think you're going to continue to see that.

Speaker #4: And we're pretty well positioned to continue to work with clients related to addressing those needs.

Speaker #1: Great. That all makes sense. Maybe one question for Mike. On the adjusted EBITDA margin in the second quarter, it's kind of tracking ahead of what is implied for the full year.

David Brown: Great. That all makes sense. Maybe one question for Mike on the adjusted EBITDA margin in Q2 is kind of tracking ahead of what is implied for the full year. I recognize Q1 was a little lower. Can you just walk us through some of the seasonal components and any other considerations for H2?

Brendan Lynch: Great. That all makes sense. Maybe one question for Mike on the adjusted EBITDA margin in Q2 is kind of tracking ahead of what is implied for the full year. I recognize Q1 was a little lower. Can you just walk us through some of the seasonal components and any other considerations for H2?

Speaker #1: But I recognize the first quarter was a little lower. Can you just walk us through some of the seasonal components and any other considerations for the back half of the year?

Speaker #6: Sure. Generally, our adjusted EBITDA margins grow in the back half of the year, particularly in the fourth quarter. That's pretty normal, and we saw that last year as well.

Michael Rispoli: Sure. Generally, our adjusted EBITDA margins grow in H2, particularly in Q4. That's pretty normal, and we saw that last year as well. We expect continued margin expansion through H2, somewhere in the neighborhood of what we expect for the full year. We're also investing while we're growing the business and expanding our EBITDA margin. I think I noted that were we not investing to the level we were, our 65 basis point margin improvement in the quarter would've been about 100 basis points better. We continue to see margin expansion through the balance of the year. We think we'll see margin expansion next year as well.

Mike Rispoli: Sure. Generally, our adjusted EBITDA margins grow in H2, particularly in Q4. That's pretty normal, and we saw that last year as well. We expect continued margin expansion through H2, somewhere in the neighborhood of what we expect for the full year. We're also investing while we're growing the business and expanding our EBITDA margin. I think I noted that were we not investing to the level we were, our 65 basis point margin improvement in the quarter would've been about 100 basis points better. We continue to see margin expansion through the balance of the year. We think we'll see margin expansion next year as well.

Speaker #6: So, we expect continued margin expansion through the back half of the year—somewhere in the neighborhood of what we expect for the full year.

Speaker #6: But we're also investing while we're growing the business and expanding our EBITDA margin. So I think I noted that, were we not investing to the level we were, our 65 basis point margin improvement in the quarter would have been about 100 basis points better.

Speaker #6: So, we continue to see margin expansion through the balance of the year. We think we'll see margin expansion next year as well.

Speaker #1: Great. Thank you.

David Brown: Great. Thank you.

Brendan Lynch: Great. Thank you.

Speaker #2: And once again, if you'd like to ask a question, please press star one. We'll go next to Patrick O'Shaughnessy with Raymond James.

Operator: Once again, if you'd like to ask a question, please press star one. We'll go next to Patrick O'Shaughnessy with Raymond James.

Speaker #5: Good morning. Curious if you're seeing any evidence of commission compression in sales or leasing, or if things remain pretty stable on that front.

Patrick O'Shaughnessy: Good morning. Curious if you're seeing any evidence of commission compression in sales or leasing, or if things remain pretty stable on that front.

Speaker #4: Yeah. Patrick, this is Lou. I would say things remain pretty stable on that front. Obviously, when assets are trading 25 to 35 percent lower than they traded the last time, the fees are lower because of that, not because there's fee compression, but because the asset value has gone down.

Luis Alvarado: Yeah. Patrick, this is Lew. I would say things remain pretty stable on that front. Obviously, when assets are trading 25% to 35% lower than they traded the last time, the fees are lower because of that. Not because there's fee compression, but because the asset value's gone down. I think what is demonstrated to us and to you guys is that even in spite of that market, because of our continued pickup in market share, we continue to grow, right? That is the proof of the strength of our capital markets teams.

Lou Alvarado: Yeah. Patrick, this is Lew. I would say things remain pretty stable on that front. Obviously, when assets are trading 25% to 35% lower than they traded the last time, the fees are lower because of that. Not because there's fee compression, but because the asset value's gone down. I think what is demonstrated to us and to you guys is that even in spite of that market, because of our continued pickup in market share, we continue to grow, right? That is the proof of the strength of our capital markets teams.

Speaker #4: I think what is demonstrated to us, and to you guys, is that even in spite of that market, because of our continued pickup in market share, we continue to grow.

Speaker #4: And that is the proof of the strength of our capital markets teams.

Speaker #5: And you already have years of fee compression. That ship has sailed. There's been a lot of fee compression over years, but that's years ago.

Barry Gosin: You already had years of a fee compression. A lot of that ship has sailed. There's been a lot of fee compression over years, but that's years ago.

Speaker #5: Yeah, I appreciate that. Thank you. And then, just curious about an update on the office-to-multifamily conversion pipeline. What does that look like at the moment?

Patrick O'Shaughnessy: Got it. Appreciate that. Thank you. Just curious about an update on the office-to-multifamily conversion pipeline. What does that look like at the moment, and how actively are you guys participating in that?

Speaker #5: And how actively are you guys participating in that?

Speaker #7: Well, the most robust market for conversions is really New York, because the rental market is high enough to justify the conversions. It's a very costly process to take an office building and convert.

Barry Gosin: Well, the most robust market for conversions is really New York because the rental market is high enough to justify the conversions. It's a very costly process to take an office building and convert. The recent New York buckling of two steel girders was not helpful. They've shut down two jobs in New York. There's about 11 million square feet under construction of conversions. There's $19 million in the pipeline. It is enormously beneficial for office because it takes inventory, and in reverse, it creates demand for the existing inventory. It's one way to retrofit our obsolete office, and that should be done in the rest of the market. The government and most of these cities, especially in the Midwest, should figure out how to create some better tax incentives to convert these office buildings.

Speaker #7: I mean, the recent New York buckling of two steel girders was not helpful. They have shut down two jobs in New York. There's about 11 million square feet under construction of conversions.

Speaker #7: There's $19 million in the pipeline. It is enormously beneficial for office because it takes inventory, and by reverse—and reverse—it creates demand for the existing inventory.

Speaker #7: So, it's one way to retrofit our obsolete office, and that should be done in the rest of the market. The government, and most of these cities—especially in the Midwest—should figure out how to create some tax incentives, better tax incentives, to convert these office buildings.

Barry Gosin: In New York, certainly before the present administration, they had something called the 467-m, which is a great program for converting office building, and at the same time, it provides 25% affordable, of which 90% of the 25%, half of it's 90% AMI, the other half is 40% AMI. It's an incredibly productive way to convert office buildings to add to the affordable housing mix and improve neighborhoods. There are lots of cities around the country that should take note from what's going on in New York, and these should be done around the country, and it's a great way to eliminate inventory and create more housing.

Speaker #7: In New York, certainly before the present administration, they had something called the 467M, which is a great program for converting office buildings. And at the same time, it provides 25% affordable, of which 90% of the 25% is at 90% AMI, and the other half is at 40% AMI.

Speaker #7: It's an incredibly productive way to convert office buildings to add to the affordable housing mix and improve neighborhoods. So there are lots of cities around the country that should take note from what's going on in New York.

Speaker #7: And these should be done around the country. It's a great way to eliminate inventory and create more housing.

Speaker #5: All right. Terrific. Thank you.

Patrick O'Shaughnessy: All right, terrific. Thank you.

Speaker #2: It appears there are no further questions at this time. I'll turn the conference back over to Barry Gosin for closing remarks.

Operator: It appears there are no further questions at this time. I'll turn the conference back over to Barry Gosin for closing remarks.

Speaker #7: Thank you again for joining us. I look forward to speaking with you next quarter.

Barry Gosin: Thank you again for joining us. I look forward to speaking to you next Q.

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

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