Good morning. My name is Sharon, and I will be your conference operator today. At this time, I would like to welcome everyone to the Newmark Second Quarter 2019 Earnings Conference Call. All lines will be placed on mute to prevent any background noise. I'll now turn the call over to Jason Harbs, VP of Investor Relations.
Sir, you may begin when ready.
Thank you. Good morning. We issued our Q2 2019 financial results, press release and a presentation summarizing these results this morning. You can find these documents at ir. Ngkf.com.
Unless otherwise stated, the results provided on today's call compare only the Q2 of 2019 with the year earlier period. We will be referring to our results on this call only on an adjusted earnings basis, unless otherwise stated. You may also refer to adjusted EBITDA. Please see today's press release for results under Generally Accepted Accounting Principles or GAAP. Please see the sections in the back of today's press release for the complete definitions of any such non GAAP terms, reconciliations of these items to the corresponding GAAP results and how, when and why management uses them.
Additional information with respect to our GAAP and non GAAP results mentioned on today's call is available on our website and in our investor presentation. I also remind you that information on this call regarding our business that are not historical facts are forward looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. Such securities involve risks and uncertainties. Except as required by law, Newmark undertakes no obligation to update any forward looking statements. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward looking statements, see Newmark's Securities and Exchange Commission filings, including, but not limited to, the risk factors set forth in our most recent Form 10 ks, Form 10 Q and Form 8 ks filings.
I'm now happy to turn the call over to our host, Barry Galson, CEO of Newmark Group Inc.
Thank you, Jason. Good morning and thank you for joining us for Newmark's Q2 2019 conference call. With me today are Newmark's Chairman, Howard Lutnick and our Chief Financial Officer, Mike Rispoli. Newmark generated 18% growth in both revenues and adjusted EBITDA as well as 20% growth in post tax adjusted earnings. I am pleased to report that the company's Board of Directors declared a qualified dividend of $0.10 per common share.
At yesterday's closing price, it translates into a yield of 4.1%. We grew across all of our major business lines. We continue to attract the industry's most talented professionals who are drawn to our entrepreneurial culture and industry leading technology and data. This is reflected by Newmark's 12% growth in front office headcount and 8% growth in revenue per producer in the quarter. Turning to the industry.
NKF Research estimates that investment sales volumes were up by 2% year over year. Overall commercial originations are expected to increase 1% in 2019 according to the Mortgage Bankers Association. Newmark's 34% increase in volumes across investment sales, mortgage brokerage and originations compares very favorably to these metrics. Our research team estimates that the average vacancy rate for office and industrial continue to improve across the country, while retail vacancies rose slightly. GDP and employment growth remained steady.
Our leasing revenues increased by 22% and exceeded industry metrics. We remain very excited about the prospects for Newmark and expect our hiring of top producers to continue. With that, I'm happy to turn the call over to Mike.
Thank you, Barry, and good morning, everybody. In the Q2, our revenues increased by 18.2 percent to $551,500,000 Our compensation expenses increased 18.8 percent primarily due to higher revenues and our continued hiring of leading industry professionals. Non compensation expenses were up 21%, largely due to higher ASC 606 pass through expenses. Exclusive of these additional expenses, our non compensation as a percentage of revenue remained unchanged. Turning to our quarterly earnings.
Our pretax adjusted earnings were up 24.1%, while adjusted EBITDA improved 18.2%. Our tax rate for adjusted earnings was 16.2% versus 13.2% a year earlier. Our year to date non GAAP tax rate of 15.5% remains consistent with our outlook of 14% to 16%. Our post tax adjusted earnings per share increased 15.4%. During the Q2 of 2019, Newmark repurchased 1,600,000 shares of Class A common stock for $13,900,000 at an average price of $8.61 per share.
These repurchases reduced our fully diluted share count by approximately 500,000 in the 2nd quarter with a balance of 1,100,000 expected to reduce our 3rd quarter share count. Our fully diluted period end share count was 269,800,000 for the Q2 of 2019 and our weighted average fully diluted share count was 271,000,000. Moving on to the balance sheet. We generated $125,100,000 of cash from operations in the 2nd quarter, excluding activity from loan originations and sales. Our total liquidity was $107,700,000 at June 30, 2019.
Our unsecured long term debt was $582,800,000 Our net debt was $475,100,000 and our net debt to trailing 12 month adjusted EBITDA remained at 0.9x. Given the strength of our balance sheet, our $250,000,000 credit facility, strong cash flow generation from the business and low leverage, we are well positioned to continue to invest for growth. Turning to guidance. Our outlook for 2019 remains unchanged from when we raised our full year guidance in May. We expect to generate revenues in the range of $2,200,000,000 to $2,300,000,000 up from $2,050,000,000 in 20.18.
We estimate our adjusted EBITDA to be in the range of $550,000,000 to $585,000,000 up from $524,400,000 last year. We anticipate our 2019 tax rate for adjusted earnings to be in the range of 14% to 16% compared with 14.8% in 2018. We expect our year end 2019 fully diluted share count to increase by 0% to 1% from the 268,000,000 shares outstanding as of December 31, 2018. We anticipate our earnings per share to be between $1.60 $1.70 versus $1.50 in 2018. Our outlook assumes no material acquisitions or meaningful changes in the company's stock price.
Based on our visibility for the balance of the year, we expect our adjusted earnings will be between $0.55 $0.60 in each of the 3rd and 4th quarters of 2019. We expect 3rd quarter revenues of between 550 dollars and $575,000,000 as compared to $518,800,000 last year and we expect 4th quarter revenues between $680,000,000 $705,000,000 as compared to $631,700,000 a year earlier. Operator, we would now like to open the call for questions.
Your first question comes from Alexander Goldfarb with Sandler O'Neill.
Hey, good morning. How are you guys?
Good morning.
Just first, the buyback, obviously, great to see. So, just a 2 parter on this. First, before you guys had mentioned that there were some limitations on your ownership stakes with the tax free status to maintain that and you didn't want to violate. So curious, when you guys went back and looked at the ownership and the tax free status, how much room do you have to execute? Can you do the entire buyback program?
And then obviously, you had good pricing at 8.60. Dollars Now the stock is up. At 10.40 dollars are you still in the buyback mode? Is it still attractive?
So the first part I'll say, yes, it's still very attractive. But as you know, Alex, we do have a variety of tools to manage share count growth with buybacks of our public stock being one of them. And but we do remain constrained through December of 2020, as I think we said in the past. And as we stated in our guidance, we still expect our share count to grow between 0% and 1% for 2019. And I think we've said for the foreseeable future thereafter, we expect to be about 2% growth on average.
So that's the constraints are still there, but we still think it's very attractive at these prices.
Right. But Mike, in regards to the constraint you guys have laid out, I think it was a $200,000,000 buyback program. How much you bought back 1,600,000 shares. How much flexibility do you have within the ownership constraints and the tax free status? How much more buyback, even if it's not an exact number, maybe an approximate to give us a sense of what you guys could be out there buying versus this was just a one shot deal and in the next we won't see anything additional until after December 2020?
So Alex, we still have some room to do some buybacks, but I would say it's not a large amount. And certainly, if and when we do buyback more shares, we'll update everybody on our next earnings call.
Okay. And then the second question is on Street Retail. From some of the comments that we've heard from the REITs, there have been some challenges at the same time we've seen Alta take space, obviously, Puma. So can you just give us an update of what your street retail team is seeing? Are they seeing life coming back to this area?
Or is this still sort of a weak spot as far as capital markets and leasing activity?
The high street retail still rents, but the prices have adjusted. So in the period of uncertainty and price discovery, there's less trading. In a period of full acceptance of pricing, owners will reduce their price in rent. There are tenants for space. Some of the mix of tenants is different.
There's way more entertainment, food, health and lifestyle retail. There's a host of changes, but in general, we think it's also an opportunity to take the best talent in times when the market is either flat or questionable. The best talent is even more active. Companies need more advice and they still need to expand and roll out part of their business like ours is growth. So, good brands will grow and we think it's an opportunity to hire talent around the country and expand.
Okay. Thank you, Barry.
And we have a question from Henry Coffey with Wedbush.
Yes. Good morning and thanks for taking my question. As you look at your capital structure, particularly the various forms of equity ownership, have you do you have any thoughts about how to sort of simplify that for investors? And then my second question has more to do with the business.
Good morning, Henry. We do have a unique structure, equity structure in the company. And one of the things that it does is it provides a lot of retention for our producers. The ownership structure is very beneficial even with the 2017 Tax Act when you look at it, real estate partnerships get additional benefits above and beyond other partnerships in that act to get an additional tax deduction. And all of that drives a lot of retention and income to our partners, which we think is good for all of our stakeholders in the company.
Other brokers like the structure. It's not only retentive, but they feel like they're part of the company. They own a piece of the company. There's a level of comradeship around building something together and owning something that where they work. So that structure is both retentive because it gives them a piece of the company that they work at, but it also gives us the ability to retain by having some stickiness in the stock.
I mean the whole issue of voting and non voting stock and partnership units, that seems to be the number one question we get from people when they start looking at the business instead of talking about the business, which is doing really well. On that front, just a real simple item. I was looking at your Fannie, Freddie and other multifamily originations. Fannie kind of accelerated things in the Q1 and then seemed to pull back a little bit. Is there any specific messages you're getting from the GSEs about their appetite for multifamily for the rest of the year?
And is there from your clients' point of view, is there general indifference as to who they go with? Is it always just, hey, what's the best rate? And if one is buying and the other is not, it doesn't really matter?
They're fairly indifferent, Freddie or Fannie. It ebbs and flows. Sometimes Fannie is more aggressive in the market. Sometimes Freddie is more aggressive in the market. It changes at various times.
If you look over a couple of year period, you'll see there are moments when we're doing a lot more Fannie and then moments when we're doing way more Freddie. I don't think that there's any implication in of it. I think it's we're still we still feel really good about multifamily and we feel really good about our debt business on the multifamily side.
Who has the biggest appetite right now Fannie or Freddie?
It's about the same. We're seeing a lot of activity both through Fannie and Freddie. What you'll see in our numbers this year is we've been more heavily weighted towards Freddie, but that just is what our what's best for our clients in that particular transaction. We think over time similar to our past will be more evenly weighted.
And I just have to ask because there has been so much discussion around it. In talking to your clients or looking at the business, have you had any real definitive insights into how the New York rent control rules are going to play out over the next couple of years?
Interesting, it has created a whole new state of buyers around the country. There are a lot of New York investors that are strolling in the Southwest and the Southeast. They're very interested in looking for alternatives to invest. So it's creating opportunities for us in a variety of portfolios. So we're seeing new players.
In the luxury, it doesn't really have an impact in that on the rent control. It has an impact on values. So they reset. You'll have new players and there are some people actually coming in and thinking and buying, taking advantage of the opportunity in New York and they're interested in accumulating multi
under this environment. Has there been a drop in value in the New York City environment that you can kind of quantify?
Yes, I would say anything that has been impacted by the MAIs and the IAIs and the rent control has had a diminution of value.
Great. Thank you very much.
Next question comes from Jade Rahmani with KBW.
Thanks very much. In terms of capital markets and leasing, there was a nice sequential acceleration and pickup suggesting that Newmark gained market share. On Capital Markets, can you just talk to the outlook for transactions velocity for the remainder of the year, the pipeline is building healthy, would you expect continued growth in capital markets?
We could continue to expect market share increase. We continue to attract more talent to the platform. The pipeline looks pretty good. Interest rates are remaining low. That's generally a good environment for investing.
There's an enormous amount of global capital sitting on the sidelines to invest in real estate, looking for opportunities, trying to figure out where to put it. I would say, as someone who might think about where I'm investing my cash, as much as I'm invested in real estate, I think real estate is a good investment now. What's the alternative? Treasuries are 2.2%, munis maybe a little higher. Most of the alternative investments are really not that great an opportunity.
Real estate is still pretty good.
And on the leasing side, what drove this quarter's growth? How much of it would you attribute to the tech sector? And can you also give an update on the RKF acquisition?
We continue to win market share. 76% of our business was organic, which tells you that our brokers are ramping up and growing their business. So that's good for us. The leasing business, however you play it, Mark, people look at it as cyclical, So, there are lots of start ups and lots of growth opportunities. So there are lots of start ups and lots of growth opportunities.
And when people are growing their leasing space, so that's part of
it. And on the RKF side, how is that integration going in terms of the top producer talent?
It's going pretty well. We're about 30 days from moving their offices into Newmark and fully integrate them in the company. So they're all excited. Everybody is pretty excited about the expansion and the domination of retail in the New York market. So it's exciting for them.
Okay. And then just lastly about adjusted EBITDA. I was wondering if you would consider or if you have an estimate of what adjusted EBITDA would look like if you adopted a firm like JLL or CBRE's accounting? And would you consider putting that kind of disclosure out there to set a baseline with for investors to make it more easy to compare the results with peers?
Well, I think we provide pretty clear disclosure on what's in and what's not in our adjusted EBITDA. And Jade, I know in the past you've taken some things in and put some things out to try and compare it to other companies. But we're comfortable with how we report adjusted EBITDA and we're certainly generating a lot of cash flow from the business, which is in line with our adjusted EBITDA.
Thanks very much.
At this point, there are no further questions. I will now turn it over to Barry Gosin for closing remarks.
I'd like to thank you all for joining this call and look forward to our conversations in the next quarter.
This concludes today's conference call. You may now disconnect.