NEWMARK GROUP, INC. Q3 FY2026 earnings call

• Leadership Transition: CEO Barry Gosin will step down at the end of 2026 after 47 years with the company; the board is evaluating internal and external candidates for the new CEO role.
• Strategic Growth Drivers: Recurring revenue businesses have grown from 24% of total revenue in 2017 to approximately 40% year-to-date, supported by expansion in property management, loan servicing, and consulting.
• International Expansion: The firm aims to significantly increase its international footprint over the next 18-24 months, noting that current non-US revenue (13%) lags behind peers who derive double or triple that percentage internationally.
• Market Share Gains: Newmark has increased its U.S. commercial and multifamily origination share from under 2% in 2014 to around 10% currently, and moved to number two in U.S. investment sales for the first nine months of 2026.
• Operational Resilience: Despite macroeconomic volatility, the company continues to invest in talent acquisition and cross-selling opportunities across its managed services platform.

Total revenues reached an all-time high of $973.2 million, representing a 12.7% increase year-over-year. Management services, servicing, and other segments grew by 18.3%, driven by organic growth in outsourcing businesses and acquisitions. Leasing revenue surged by 26.5%, reflecting strong demand in industrial, office, data center, and technology sectors. Conversely, capital markets revenues declined by 4.4%, as a 33.4% rise in investment sales volumes was offset by lower origination activity due to difficult comparisons and reduced GSE industry activity.

• 2026 Full-Year Outlook Revised: Due to macroeconomic challenges affecting deal timing and certainty, the company revised its 2026 guidance upward compared to prior expectations but maintains confidence in record annual results.
• Revenue Expectations: Total revenues are expected between $3.7 billion and $3.8 billion, representing a 12% to 15% increase year-over-year.
• Profitability Metrics: Adjusted EBITDA is projected to be between $629 million and $667 million (12% to 19% increase), and adjusted EPS is anticipated to be between $1.80 and $1.90 (11% to 17% increase).
• Tax Rate: The adjusted earnings tax rate is expected to remain between 13% and 15%.
• 2027 Preliminary View: While formal guidance is not provided, management anticipates 2027 earnings could range plus or minus 10% relative to record 2026 results, depending heavily on capital market conditions.

• Macroeconomic Volatility: Rising interest rates and cap rates create uncertainty regarding deal timing, valuation gaps between buyers and sellers, and potential declines in transaction volumes.
• Capital Market Sensitivity: A sustained volatile interest rate environment could drive capital markets revenues down by 20% to 30%, significantly impacting overall earnings.
• Regulatory and Political Factors: Political shifts and local opposition (NIMBYism) may temporarily impact project pipelines, particularly in the data center sector.
• Deal Execution Uncertainty: Larger institutional M&A deals take longer to close in volatile markets, leading to lumpiness in revenue recognition.

Q: Analyst asked about the 2027 earnings outlook, specifically what scenarios would result in a 10% downside. / A: CFO Rispoli explained that while recurring businesses continue to grow double-digit, the primary risk lies in capital markets. A downside scenario involving sustained interest rate volatility and higher 10-year treasuries could reduce capital markets revenue by 20-30%. However, the base case assumes improvement in the second half of the year, potentially leading to better-than-expected performance.

Q: Analyst inquired about October activity levels and whether the rate spike is causing pauses in deal flow. / A: COO Alvarado noted that deals are taking longer to close due to cap rate spikes and value adjustments. He emphasized that while the market is choppy, there is no mass withdrawal from transactions; rather, clients are waiting for price discovery. The team advises clients that current rates represent a viable entry point despite the volatility.

Q: Analyst questioned if the challenging capital markets environment changes the company's reinvestment strategy into the business. / A: Alvarado stated that investment plans remain unchanged, with continued focus on growing managed services which benefit from cross-selling with leasing and capital markets. He highlighted that fixed costs in managed services mean margins improve as revenue grows, making this segment resilient even if capital markets face headwinds.

Q: Analyst asked how leasing contributions might shift given tight Class A availability and growing data center demand. / A: Alvarado indicated that data center leasing is ramping up, but the broader leasing challenge is a shortage of Class A product, with vacancy rates in single digits. He expects leasing growth to slow compared to previous double-digit gains because the bottleneck is finding suitable inventory rather than lack of tenant demand.

Q: Analyst asked why the capital allocation philosophy shifted from hiring to M&A. / A: CFO Rispoli clarified that the U.S. platform is largely built out with sufficient talent to execute across major asset classes. Consequently, capital is now directed toward M&A, specifically targeting recurring revenue businesses. Six recent acquisitions were all in management and servicing, confirming this strategic pivot.