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. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press the pound key. I'll now turn the call over to Jason McGruder, VP of Investor Relations. Sir, you may begin when ready.
Thank you. Good morning. We issued our second quarter 2019 financial results, press release, and a presentation summarizing these results this morning. You can find these documents at ir.nmrk.com. Unless otherwise stated, the results provided on today's call compare only the second quarter 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. We 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 Securities and Exchange Commission filings, including, but not limited to the risk factors set forth in our most recent Form 10-K, Form 10-Q, and Form 8-K filings.
I'm now happy to turn the call over to our host, Barry Gosin, CEO of Newmark Group, Inc.
Thank you, Jason. Good morning, and thank you for joining us for Newmark's second quarter 2019 conference call. With me today are Newmark's Chairman, Howard Lutnick, and our Chief Financial Officer, Michael 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, this 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 continued 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. Good morning, everybody. In the second quarter, our revenues increased by 18.2% to $551.5 million. Our compensation expenses increased 18.8%, 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 pre-tax 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%-16%. Our post-tax adjusted earnings per share increased 15.4%. During the second quarter of 2019, Newmark repurchased 1.6 million shares of Class A common stock for $13.9 million at an average price of $8.61 per share.
These repurchases reduced our fully diluted share count by approximately 500,000 in the second quarter, with a balance of 1.1 million expected to reduce our third quarter share count. Our fully diluted period end share count was 269.8 million for the second quarter of 2019, and our weighted average fully diluted share count was 271 million. Moving on to the balance sheet. We generated $125.1 million of cash from operations in the second quarter, excluding activity from loan originations and sales. Our total liquidity was $107.7 million at June 30, 2019. Our unsecured long-term debt was $582.8 million. Our net debt was $475.1 million, and our net debt to trailing 12-month adjusted EBITDA remained at 0.9 times. Given the strength of our balance sheet, our $250 million 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 $2.2 billion-$2.3 billion, up from $2.05 billion in 2018. We estimate our adjusted EBITDA to be in the range of $550 million-$585 million, up from $524.4 million last year. We anticipate our 2019 tax rate for adjusted earnings to be in the range of 14%-16%, compared with 14.8% in 2018. We expect our year-end 2019 fully diluted share count to increase by 0%-1% from the 268 million shares outstanding as of December 31, 2018. We anticipate our earnings per share to be between $1.60 and $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 and $0.60 in each of the third and fourth quarters of 2019. We expect third quarter revenues of between $550 million and $575 million as compared to $518.8 million last year. We expect fourth quarter revenues between $680 million and $705 million as compared to $631.7 million a year earlier. Operator, we would now like to open the call for questions.
If you'd like to ask a question at this time, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from Alexander Goldfarb with Sandler O'Neill.
Oh, hey. Morning. How are you guys?
Morning.
Just first, the buyback, obviously, great to see. Just a two-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. 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? Obviously you had good pricing at $860. Now the stock is up. At $1,040, are you still in the buyback mode? Is it still attractive?
The first part I'll say yes, it's still very attractive. 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. We do remain constrained through December of 2020, as I think we said in the past. As we stated in our guidance, we still expect our share count to grow between 0% and 1% for 2019. I think we've said, for the foreseeable future thereafter, we expect to be about 2% growth on average. The constraints are still there, but we still think it's very attractive at these prices.
Right. Mike, in regards to the constraint, you guys have laid out, I think it was a $200 million buyback program. You bought back 1.6 million 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 year, we won't see anything additional until after December 2020.
Alex, we still have some room to do some buybacks, but I would say it's not a large amount. Certainly, if and when we do buyback more shares, we'll update everybody on our next earnings call.
Okay. 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 Ulta take space, obviously Puma. 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. 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 and rent. There are tenants for space. 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. Good brands will grow, and we think it's an opportunity to hire talent around the country and expand.
Okay. Thank you, Barry.
Once again, if you'd like to ask a question, please press star one on your telephone keypad. We have a question from Henry Coffey with Wedbush.
Yes. Good morning. Thanks for taking my question. As you look at your capital structure, particularly the various forms of equity ownership, do you have any thoughts about how to sort of simplify that for investors? My second question has more to do with the business.
Good morning, Henry. We do have a unique equity structure in the company. 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. They get an additional tax deduction. 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.
The 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 where they work. 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, and 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 first quarter 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? 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? If one is buying and the other's not, it doesn't really matter?
They're fairly indifferent, Freddie or Fannie. It ebbs and flows. Sometimes Fannie's 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 periods, 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 any of it. 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 from 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's best for our clients in that particular transaction. We think over time, similar to our past, we'll be more evenly weighted.
I just have to ask because there's 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 spate 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. It's creating opportunities for us in a variety of portfolios. 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. They reset. You'll have new players. There are some people actually coming in 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?
Yeah. I would say anything that has been impacted by the MCIs 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's 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's 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%. Munis may be a little higher. Most of the alternative investments are really not that great an opportunity. Real estate's still pretty good.
On the leasing side, what drove this quarter's growth? How much of it would you attribute to the tech sector? 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. That's good for us. The leasing business, however you play it, Mark, people look at it as cyclical. Companies lease space in good and bad markets. Regardless, companies have to move. A lot of tech companies have expanded. There are lots of startups and lots of growth opportunities. When people are growing, they're leasing space. That's part of it.
On the RKF side, how is that integration going in terms of the top producer talent?
Actually, it's going pretty well. We're about 30 days from moving their offices into Newmark and fully integrate them in the company. They're all excited. Everybody's pretty excited about the expansion and the domination of retail in the New York market. It's exciting for them.
Okay. 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. Would you consider putting that kind of disclosure out there to set a baseline for investors to make it more easy to compare the results with peers?
I think we provide pretty clear disclosure on what's in and what's not in our adjusted EBITDA. 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. 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'll 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.