Newmark Group Inc

NASDAQ:NMRK

Earnings Call Transcript 2020-Q3

[Operator]

Good morning and welcome to the Newmark Group, Inc. Reports Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Jason Harbes, Head of Investor Relations. Please go ahead.

[Jason Harbes, executive]

Thank you, and good morning. We issued our Third Quarter 2020 Financial Results Press Release and a presentation summarizing these results this morning. The results provided on today's call compare only the third quarter of 2020 with the year earlier period. Any figures with respect to cash flow from operations, discussed on today's call refer to net cash provided by operating activities, excluding loan originations and sales. 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 accounting -- 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. Any outlook discussed on today's call assumes no material acquisitions, share repurchases, or meaningful changes in the company's stock price. 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 statements involve risks and uncertainties. These include statements about the effects of the COVID-19 pandemic on the company's business results, financial position, liquidity and outlook, which may constitute forward-looking statements and are subject to the risks, but the actual impact may differ perhaps materially from what is currently expected. 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-K, Form 10-Q, or Form 8-K filings. I'm now happy to turn the call over to our host, Barry Gosin, CEO of Newmark Group, Inc.

[Barry Gosin, executive]

Thank you, Jason. Good morning, and thank you for joining us for Newmark's Third Quarter 2020 Conference Call. Joining me virtually on the call today are Newmark's Chief Financial Officer, Mike Rispoli; our Chief Strategy Officer, Jeff Day; and our Chief Revenue Officer, Lou Alvarado. I would like to begin by thanking our employees for the dedication and ingenuity they have shown throughout the pandemic. Our entrepreneurial culture, flat organizational structure and efficient decision-making processes have enabled us to quickly acclimate and to continue to provide best-in-class service to our clients.

Despite the challenges facing commercial real estate, we saw sequential improvement and market share gains in several key business lines. Our capital markets and debt volumes rebounded by 50% quarter-over-quarter. We increased our year-to-date market share in investment sales and GSE originations by 100 basis points and 50 basis points, respectively. Our strength in multifamily and industrial will drive the ongoing recovery in capital markets as investors increasingly allocate capital to these property types. We are focused on growth in businesses with solid margins and recurring revenue, such as global corporate services, property management, and valuation advisory. These businesses comprise 25% of our revenues in the third quarter and our near-term objective is to grow these businesses to 33% of our overall revenues.

Our expectation is that the low interest rate environment, significant capital available for real estate, improving real estate credit markets and the narrowing bid-ask gap between buyers and sellers in many parts of the market should drive capital markets activity going forward. Multifamily, life sciences, and industrial should outperform the property types in the fourth quarter and into 2021. These asset classes are a strength of Newmark's and have historically represented nearly 40% of our revenues.

On October '19, we unveiled our new brand, Newmark, which reflects the organization that we've become, a world leader in commercial real estate services on the forefront of industry trends. We maintain our global reach through our partnership with Knight Frank, augmented by our international capital markets and global fundraising capabilities. We continue to add to our best-in-class talent with key hires in industrial leasing, medical, academics and other attractive property types. The platform we have built positions us to outperform as the markets recover. With that, I'm happy to turn the call over to Mike.

[Michael Rispoli, executive]

Thank you, Gary, and good morning. In the third quarter, our revenues were down 25.7% due to the impact of the pandemic on industry volumes. Our leasing revenues were down 46.1%. We expect leasing activity to remain challenged through the end of the pandemic as clients continue to defer long-term decision making. Looking forward, we have a strong pipeline of lease renewals and corporate mandates, which we expect to reengage as the pandemic abates. Capital markets revenues, including gains from mortgage banking, were down 19.8%. Due to strong GSE originations, gains from mortgage banking increased 26.1%. Year-to-date, we have gained approximately 50 basis points of market share in GSE. While capital markets revenues fell, we outperformed industry investment sales volumes, as measured by real capital analytics. Management services, servicing fees and other declined by 6.1% due to lower interest income on escrow balances and yield maintenance fees in the company servicing business. But otherwise, these revenues remained stable.

Moving on to expenses. Total expenses decreased by 26.3%, exclusive of noncash OMSRs, reflecting lower commission-based revenues and a $43.3 million reduction in support and operation costs. We remain committed to achieving permanent reductions in our expense base through technology and process improvements, which will drive margin expansion as the markets recover. Turning to our earnings. Adjusted earnings per share were $0.44, down 27.2%, and adjusted EBITDA was $152.1 million, down 25.2%. Other income for adjusted earnings was $94.5 million and reflects the annual NASDAQ earn-out. We received the shares from NASDAQ in the fourth quarter of each year. And because we retain the upside, the earn-out will generate $28 million of additional liquidity based on NASDAQ's September 30 closing price.

Moving on to the balance sheet. We maintained strong liquidity and credit metrics. Total cash and cash equivalents were $273 million. During the third quarter, the company repaid $75 million on our revolving credit facility. And subsequent to quarter end, we repaid an additional $100 million. This brings us back to our pre-pandemic debt level. The company's net debt to trailing 12-month adjusted EBITDA was 1.5x.

Turning to our expectations for the fourth quarter. While we are not providing specific revenue or earnings guidance for 2020 due to continuing market uncertainty, we expect U.S. capital markets volumes to continue their sequential improvement, led by strength in multifamily and GSE originations. We expect our support and operational expenses to increase sequentially, consistent with an overall increase in activity. We expect continuing sequential improvement in our earnings, exclusive of other income. Additionally, for the full year 2020, we expect GAAP equity-based compensation and allocations of net income to decrease by approximately 50%. I would now like to turn the call back to Barry.

[Barry Gosin, executive]

Thank you, Mike. With respect to our capital return policy, we plan to update you on our next quarterly conference call. We have built a company that has remained strongly profitable during the quarter. Newmark generated substantial cash flow, and we continue to pay down debt. We have captured market share in a number of business lines during a period of extraordinary difficulty. I'm extremely proud of our team. Operator, we would now like to open the call for questions.

[Operator]

[Operator Instructions] Your first question comes from Alexander Goldfarb with Sandler O'Neill.

[Alexander Goldfarb, analyst]

First, thank you for the improved disclosure with the OMSRs and the breakout, so that's helpful for a go forward. Just a few questions here. First, Barry, just maybe start with the capital return that you just mentioned, on the next call, I guess you're going to outline some things that you may do. What should we be thinking about? Is this more buyback? Is this more dividend? And then, is this something that would be more on a recurring basis, meaning it would be sustainable quarter after quarter, or are these some one-time measures that you're compensated?

[Barry Gosin, executive]

All of the above? I think that we're considering and internally discussing how we're going to best serve our shareholders with respect to the use of our capital, which could include all of the above.

[Alexander Goldfarb, analyst]

Okay. The second question is, Mike, appreciate the comments on the $62 million of cash flow in the quarter. And it sounds like things are, as you said, getting better as far as certainly, capital markets, everyone loves industrial and multifamily. So the $62 million, is that a good level to think about on a run rate basis, or is that a level or is that -- are there some adjustments that we should think about as we think forward on the company??

[Michael Rispoli, executive]

Sure. Obviously, the cash flow from operations will depend on the earnings. We think earnings will be sequentially better in the fourth quarter when you take out the other income in the third quarter. We've done a really good job around our working capital management. I think you'll see it in our deck. We had a lot of cash flow improvements from really focusing on collection of receivables.

Our DSOs are down year-to-date, over 10 days. So we really stay focused on that. And given sequential improvement in our earnings, we do expect continued cash flow generation in the fourth quarter. In addition to that, we'll get the NASDAQ shares, which at September 30, are worth an additional $28 million. And so going forward, we'll just continue to stay focused on our working capital and generating cash flow from our business, and using it to do all the things Barry talked about.

[Alexander Goldfarb, analyst]

But Mike, just on that point, the balance sheet improvements that you took in the quarter that improved cash flow, are those all sustainable in that $62 million or that $62 million was enhanced by those measures, in which case we want to start with a lower run rate??

[Michael Rispoli, executive]

No, I think we can continue to generate cash flows from the business. As we stay focused on our working capital, we think that we continue to generate significant cash flow from the business. And as you can see, we've done a really good job maintaining our leverage, mainly because we started from a very low leverage coming into the pandemic. So I think it's okay.

[Alexander Goldfarb, analyst]

And then Barry, just one final question. On the office -- or not the office, on the leasing side, on the brokerage side, leasing side of the business, often, we speak to brokers. We'll hear about commission sharing where you get a big tenant who does a big deal, and then they say, "Hey, I want x percent of the leasing commission." In your view, the amount that these tenants are claiming or clawing back, however you want to term it, have those been pretty consistent over the years, or are you seeing tenants claw back more of those commissions? I'm trying to think about the business going forward, are we going to see brokers sort of earning less because the tenants are taking more of it, or those trends have been pretty consistent, and therefore, we shouldn't really expect any change?

[Barry Gosin, executive]

I don't expect any change. It's been pretty consistent.

[Operator]

Next question comes from Jade Rahmani with KBW.

[Jade Rahmani, analyst]

It's looking like investment sales for the year could be down 40% to 50% from the average over the last 5 years, which would imply a strong double-digit CAGR in the business once growth resumes. Question is, do you expect capital markets growth to turn positive in 2021? And can you give a range of maybe what might be reasonable to expect in terms of growth parameters? And secondly, over what time period do you think a recovery in volumes might take place, getting back to the average north of $500 billion that we've seen over the past 5 years??

[Barry Gosin, executive]

A Well, depending on the particular area, food group, I think low interest rates generally, historically have been an important aspect of activity. So there is a significant amount of low interest rates. There is -- we're already seeing an enormous amount of activity on the multi space, the industrial, the data centers, life science, etcetera. So some of that is coming back, invest -- as I've said on other calls, there's $200 billion of dry powder, $300-plus billion of dry powder.

Globally, there's still an enormous amount of capital available to invest. I think there'll be some level of price capitulation in certain of the categories where people accept the relationship of the market to values and we'll start repricing some of their assets. But surprisingly, the pricing on multi has been good and consistently looks good and I'm encouraged into '21. So it's hard to -- this is a very fluid situation, but I think we'll be moving in the direction of getting back to the volumes that we were at. And faster, I think that, that segment of the market -- capital markets piece of the business will probably come back sooner than some of the -- confusion in office leasing will take a little longer.

[Jade Rahmani, analyst]

Thank you very much. As you look at Newmark's overall valuation, its market capitalization, its total enterprise value, and think about potential opportunities to enhance value for all stakeholders, what are the biggest opportunities? Can you comment on M&A in the space? Are there increased opportunities there? Do you have any thoughts around larger-scale M&A or merger of equal type transactions? Do you think those create value? I'm curious in terms of how you're thinking strategically about the business and the best opportunities to grow shareholder value.

[Barry Gosin, executive]

We've kind of viewed ourselves in many respects, as although we've acquired 50 companies, smaller companies, we kind of consider ourselves more in the Navy Seal category. We've looked at specific areas to fill in white space to put members of the team on the field in things that help us on a holistic basis and create a multiplier. So we believe in talent. That is without question, that is not going to change. So, we will continue to look for talent. We will look for fill-ins and where opportunities for accretive acquisitions will occur. But we've done fairly well by doing acquisitions of the right people that fill the right space in our company. And we think we have a really still very good runway to do that.

[Lou Alvarado, executive]

And here, I would add -- This is Lou Alvarado, Jade. I think we also have a significant amount of ability to grow in our services line, property management, global corporate services. Those are, as we mentioned, those are areas that we feel we can grow from 25% of our revenue to 33% of our revenue. And that is a significant impact to us because it is the area where there's significant focus by our occupiers today. And it's a critical piece of getting people back to the offices and back to what we were before.

[Barry Gosin, executive]

Thank you, Lou. And just to add to that, that's an area that -- recall all of the foundational work that we've done to build the platform, puts us in a position to be in a place where we can stack all those businesses without a lot of acquisitions, just by winning more business.

[Jade Rahmani, analyst]

Okay. And…

[Lou Alvarado, executive]

Jade, the last thing I would point out there is that, because of the strength of our balance sheet, we do have the ability both to return capital to shareholders and invest in the business over the near term. So that's a really positive aspect for us.

[Jade Rahmani, analyst]

And just lastly, the comment around equity compensation on a GAAP basis, including allocations of net income. You said for the full year 2020, it will be down 50%. I just want to make sure that's for the full year 2020 and not the fourth quarter? And what would you expect for 2021??

[Lou Alvarado, executive]

Sure. The comment was around the full year 2020, Jade. So that would imply a significant reduction in that line item year-over-year in the fourth quarter. 2021, I think it's a little too early to really project that at this point, but we'll try and give you more color as we get into 2021.

[Operator]

Your next question comes from Michael Funk with Bank of America.

[Michael Funk, analyst]

I have a couple this morning if I could. So, in thinking about fourth quarter and tying back to your comments on the expectation for transaction-based activity. Do you expect similar incremental margin to what you laid out in decremental margin a few quarters ago in the deck??

[Barry Gosin, executive]

So I think the improvement in the revenue line items will come, primarily in capital markets, as we move into the fourth quarter, Michael. That will come with some level of expenses sequentially going Q3 to Q4. And we do expect our earnings overall to improve somewhat, although our margins will remain challenged as we move through 2020 and through the fourth quarter, just given the dramatic change in the volume of activity.

While we've done a good job, and we have a variable expense structure, and we've done a good job on fixed expenses. We do see some decline in margin for the full year.

[Michael Funk, analyst]

Okay. And then on the strength in multifamily and in industrial, can you call out maybe some of the regions where you're seeing particular strength in multifamily and industrial, or was that pretty broad-based across the entire footprint??

[Barry Gosin, executive]

I'll take the multi and then Lou can comment on industrial. On the multifamily side, where we're seeing the strength predominantly is Sunbelt states in suburban markets. We have seen a little bit of stress in New York, for instance, San Francisco, but the preponderance of our portfolio actually matches very nicely with the performance of the market right now. And we're very pleased with the velocity of sale transactions and the contribution of low interest rates has really helped us there.

[Lou Alvarado, executive]

A Yes. And on the industrial--?

[Michael Funk, analyst]

And--oh, sorry?

[Lou Alvarado, executive]

Yeah, on the industrial side, I would say it's pretty consistent across the country. Companies with e-commerce are growing, and they're looking for distribution centers and so forth. And in areas where we typically, for example, in the Boston market, there's been substantial growth in the industrial where in the past, that wasn't a heavy food group area. And so that's just been very, very consistent across all markets across the country.

[Barry Gosin, executive]

We've also -- in the last quarter, we've hired 30 industrial brokers. And that's that -- and we have a pretty good industrial team that we inherited going as far back as Grubb & Ellis, which had a big industrial base, certainly on the West Coast. So we feel really confident and comfortable. We're also -- there's lots of people want to jump on the bandwagon.

[Michael Funk, analyst]

Got it. And then just keeping on the multifamily and industrial theme, is there enough inventory, either I guess either broadly industrial or kind of the sun belt, more suburban market or multifamily to maintain the velocity in those business lines, or do we need to see a pickup in some of the other more traditional property types like office to either maintain or show -- show improving revenue in sales in 2021??

[Barry Gosin, executive]

Look, we have a good runway. We have a good runway in industrial. We have a good runway in many of the other categories as well as multi, so we think there's -- we can ride that. We think where we are now is where office is going to get better. We're in a trough. And I've actually -- we've -- this is -- for the rest -- for the whole country, this has not been particularly fun, but the opportunity to design your business in the midst of a trough is one of those opportunities that you can take advantage of and use it for the long-term benefit of the company. And I think that we will be one of those winners that comes through this to the other side and in all of the categories and do better.

[Operator]

[Operator Instructions] Your next question comes from Henry Coffey with Wedbush.

[Henry Coffey, analyst]

Let me add my congratulations; you're hitting all the right strokes, doing all the right things, and it's encouraging to watch. When we talk about capital markets recovery, is it multifamily, industrial and nothing else, or is that just -- we know in talking to multiple parties that those are the 2 hot buttons, but --?

[Lou Alvarado, executive]

Yes. Henry, I would tell you, definitely, multifamily and industrial are -- happening along with that is life science. Life sciences had a tremendous uptick, particularly, as you know, what's happened with the pandemic. I think that retail people are going to repurpose. And we're working with clients now that as they repurpose, we're going to be doing transactions, but it may not be retail. It could be conversion to industrial, it could be a conversion to medical, it could be a conversion of multifamily.

But you're seeing a lot of people now looking at their assets and saying, okay, if office is going to be slow for a while, what's my alternative method? And if the alternative met itself, then they're going to go to the market with that. And so that's what we're seeing, where office is going to be slow until we can define what's going to happen with tenants. Tenants are still trying to figure out what their space is going to look like. But as soon as that discovery per se is there. I think we'll also have movement in the office sector as well.

[Barry Gosin, executive]

Yes. Let me just -- let me add to that. Thanks, Lou. For starters, we made a conscious effort to be a leader in the alternatives. So we have a very, very strong bench in the alternative: senior housing, self-storage, student housing, manufactured housing, data sci -- data and life science. So we are the #1 in senior housing, #1 in student housing, #1 in self-storage. We just announced -- I mean, you saw $1.5 billion sale for a portfolio of self storage.

And so there are alternatives, and some of the investors who've been reticent on office are turning to other forms of investing. And I mean there is a lot of development in industrial, which will create way more in -- way more inventory coming online for us, both on the leasing side and ultimately, the finance side and the sales side. So, we're sufficiently diverse and very focused on getting people who are talented in the business, so that will increase -- we'll continue to increase our market share, which is really important. And so we're encouraged by that.

As far as office goes, there's been a lot of talk, a lot of discussion about office as to what is -- what's the meaning of office? What is -- what's the impact of remote working? There is a wide spectrum of views on that. We don't -- we're not as pessimistic as some of our peers. We believe that the office is going to be here, and that the remote working will be a part of it. But I mean, when you look at office in the normalized world, the typical occupancy of an office building is generally around 64%, 65% of employees in at any one time.

So it's not -- we're not -- it's not too distant before we see 40% to 50%. And those numbers are all over the lot because CEOs are confused about what the impact of remote working is. Certainly CEOs, if they can reduce their cost in real estate, of course they will. The question is what's the impact on -- and what is the productivity slippage in respect of not being in the office and relying on remote working. And all those, there is no definitive answer on that, but we believe that ultimately, the business was moving towards a densification that overshot the mark. So there will be some de-densification, there will be some more remote working.

The question of whether people have their own desk, their own bench is still open, but we believe that CEOs are going to want to bring their office workers back to the office, better monitoring and more productivity. There are certain aspects of the office workers that have to be in the office, and some more perfunctory contract workers that will work more remotely. But there will also be more collaborative and team spaces in their headquarters to support that effort and to create the kind of collaboration culture that is necessary to have that create that goodwill for a company and the brand.

[Henry Coffey, analyst]

No, I agree. You can't build culture with everybody sitting at home. And without a culture, you don't really have a business. On a completely different topic, what is the -- and this was, obviously, an important part of the book value calculation -- what is your estimate of the current sort of additional gain that you could realize on your NASDAQ shares not captured in book value right now? I know there's always a -- there's not only the shares you haven't contracted to sell at a rate, plus there's the upside on the contracted rate.

[Lou Alvarado, executive]

Yeah. So Henry, if you remember, other than the 2020 tranche, which is now on our balance sheet, the remaining tranches through 2027 is off balance sheet. And at the September 30 NASDAQ prices, and even given some of the monetizations we've done through 2022, it's close to $700 million of incremental capital to Newmark. So it remains to be a pretty substantial off-balance sheet asset for us.

[Henry Coffey, analyst]

So that takes your tangible book value up to $3.75 or $4.00 a share, it's -- to be precise, it's 3.77. What are your thoughts about buying back stock? If you buy back stock, it's obviously going to be incremental to earnings, given where your shares are valued, but it will erode tangible book value. How does that factor into the equation??

[Lou Alvarado, executive]

Sure. So I think, as Barry mentioned, we're going to get into a little bit more detail on our thoughts around the capital distribution policy on our next earnings call. But certainly, with the stock trading where it is now, it is an attractive choice with respect to returning capital to investors. So, we're continuing to look at that. The 2-year window for the spin-off ends on November 30. And then we'll let you know where we're at on the next call.

[Operator]

Your next question comes from Patrick O'Shaughnessy with Raymond James.

[Patrick O'Shaughnessy, analyst]

So given your decision to pay down your credit facility by a further $100 million so far this quarter, it kind of seems like you guys already internally have a view as to Newmark's capital return philosophy. And then as you just mentioned, the 2-year post-spin restriction on repurchases does expire at the end of this month. So why are you not in a position to communicate your capital term plans to investors this quarter as opposed to next quarter??

[Barry Gosin, executive]

Yes, Patrick, that's a great question. We're obviously thinking about it a lot internally. There are continued restrictions around the 2-year window. And we'll see how things play out over the next month or so, and we will provide a lot more detail on our capital return policy, whether it's dividends or stock buybacks and how we think about allocation of capital in general. And we'll get into some more details on that.

[Patrick O'Shaughnessy, analyst]

Is there any consideration being given to accelerating the monetization of the remaining NASDAQ shares to fund share repurchases??

[Lou Alvarado, executive]

Well, we have $273 million of cash on the balance sheet. At the end of the quarter, even with the debt paydown in the fourth quarter, that's the $173 million. We'll continue to generate cash flow from the business through the end of the year, plus we'll get close to $30 million out of the NASDAQ share. So, we have sufficient capital on the balance sheet. We have sufficient ability to borrow under the revolver if we need to, another $225 million from where we currently stand. NASDAQ commoditization is always an option. It's just at what price or what cost.

And if we think we needed the capital, we could certainly go that route. At this time, I think we have sufficient capital on the balance sheet, draw availability, both to return capital to investors and continue to invest in our business. But should we need more, NASDAQ monetization is always an option.

[Patrick O'Shaughnessy, analyst]

Got it. So how are you guys thinking about the impact of urban flights and the resulting boom and single-family housing on your multifamily business? I think in response to a previous question, kind of given the geographic dispersion of the multifamily business, it sounds like you're not really concerned about urban flight as a structural headwind, but what are you thinking about that right now?

[Lou Alvarado, executive]

Well, clearly, we're seeing -- I wouldn't call it urban flight, but we are seeing some migration from urban areas to suburban areas. But it's as much renters making that transition as it is homeowners. And as we said before, because we have a disproportionate concentration in Sunbelt states and suburban markets, we're actually seeing some markets where occupancies are increasing and rents are going up. So right now, we don't view that as a headwind or a structural challenge for the multifamily business.

[Barry Gosin, executive]

We'll likely see suburban office come back quicker. But still, at the end of the day, this is -- we're in the middle of the pandemic, where we're sort of at a second wave of this pandemic. So, I don't think anyone can make a final determination of what happens. I think we're pretty well positioned for either. And we will adjust to whatever happens.

[Patrick O'Shaughnessy, analyst]

Got you. Can you provide some color on your nontransactional revenue during the quarter? So areas like valuation advisory and the management services fee revenue, what are you guys seeing like right now? And what are your expectations as you move forward in those areas?

[Lou Alvarado, executive]

So on the property management side, we have had pretty significant growth so far year-to-date, as we have had a lot of clients that have -- previously, there's some self-preformed that looked for this, as well as we've picked up some market share as we have continued our focus in that area. Jeff, I'll let you address valuations.

[Jeffrey Day, executive]

Sure. Valuation and advisory has continued to perform quite well. We see a lot of velocity from lenders that have portfolios that need to be revalued. We have very active clients in the investment sales space in the debt space that are keeping us busy. And by virtue of the expense cuts and some restructuring that we've done, we've improved margins as well.

[Patrick O'Shaughnessy, analyst]

Great. And then last one for me, so your leasing revenues were down, I think it was 46% year-over-year. That's a little bit worse than some of your publicly traded competitors who have already reported. Is that just a function of geographic mix? Is it share losses? What are you seeing right now in leasing that would have maybe -- that you'd attribute that to underperformance, too?

[Barry Gosin, executive]

I would say it's a little -- it's just really some timing, some geographic mix. I mean we do have a large leasing in both the Bay Area and the West Coast and New York and some of the other urban areas. So I think that was probably hurt a little bit more. And those things, again, where those things are addressable and where we continue to address, kind of a continued effort to diversify the geographic distribution of all of our food groups.

[Operator]

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Barry Gosin for any closing remarks.

[Barry Gosin, executive]

I want to thank everybody for being on this call. Where despite -- I wish everybody health and safety and look forward to speaking to you in the next quarter. Thank you.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.