Le Lézard
Classified in: Business
Subjects: EARNINGS, Conference Call, Webcast

Marcus & Millichap, Inc. Reports Results for First Quarter 2024


Marcus & Millichap, Inc. (the "Company", "Marcus & Millichap", or "MMI") (NYSE: MMI), a leading national real estate services firm specializing in commercial real estate investment sales, financing, research and advisory services, reported its first quarter results today.

First Quarter 2024 Highlights Compared to First Quarter 2023

"Operating in today's complex environment, we are strategically positioned to navigate the current climate as real estate markets gradually recover. Our first quarter results reflect both the ongoing industry-wide reduction in the number of transactions and our deliberate long-term investments in talent retention and acquisition as well as business development," stated Hessam Nadji, Marcus & Millichap's president and chief executive officer.

Mr. Nadji continued, "With record capital on the sidelines, once clarity and stability on inflation and interest rates emerge, real estate transactions are poised to rebound albeit with a delayed timeline. We are encouraged as appropriately priced assets that we bring to market are generating multiple offers despite the "higher-for-longer" interest rates. Our expanded talent pool, technology and strong brand position us to reach new milestones as the market recovers. Meanwhile, our healthy balance sheet enables strategic investments while consistently returning capital to our shareholders. We believe this balanced approach is allowing us to leverage the market dislocation, further enhance our market position and create long-term value for our shareholders."

First Quarter 2024 Results Compared to First Quarter 2023

Total revenue for the first quarter 2024 was $129.1 million, a decrease of 16.6% compared to $154.8 million for the same period in the prior year.

For real estate brokerage commissions, revenue was $109.5 million, a decrease of 18.9% compared to the same period in the prior year. The decline is primarily attributed to a 13.8% decrease in the number of transactions. This is reflective of the ongoing market disruption driven by the rapid rise in interest rates and constrained lending. The average transaction size and the average commission per transaction decreased by 7.9% and 5.9%, respectively, compared to the first quarter 2023. Private Client Market revenue decreased by 19.2%, and the combined Middle Market and Larger Transaction Market revenue decreased by 20.1%.

For financing fees, revenue was $14.4 million, a decrease of 9.1% compared to the same period in the prior year. The decline is primarily attributed to a 16.1% decline in the number of transactions, partially offset by average fee per transaction and average transaction size increases of 1.4% and 14.6%, respectively.

Total operating expenses for the first quarter 2024 were $149.2 million, compared to $170.9 million for the same period in the prior year. The change was primarily due to reductions of 19.4% in cost of services and 4.6% in selling, general and administrative expenses. Cost of services as a percentage of total revenue decreased by 210 basis points to 59.5% compared to the same period during the prior year.

Selling, general and administrative expenses for the first quarter 2024 were $68.9 million, compared to $72.2 million for the same period in the prior year. The change was primarily due to a reduction in marketing support and events attributable to the lower revenue level.

Net loss for the first quarter 2024 was $10.0 million, or $0.26 per common share, diluted, compared to $5.8 million, or $0.15 per common share, diluted, for the same period in the prior year. Adjusted EBITDA for the first quarter 2024 was $(10.1) million, compared to $(7.4) million for the same period in the prior year, primarily as a result of the decrease in operating income.

Capital Allocation

On February 8, 2024, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, or $10.1 million with a payment date of April 5, 2024, to stockholders of record at the close of business on March 12, 2024.

During the three months ended March 31, 2024, the Company repurchased 16,900 shares of common stock at an average price of $32.77 per share for a total price of $0.6 million.

After accounting for shares repurchased through May 3, 2024, Marcus & Millichap has approximately $71.0 million available to repurchase shares under its program. No time limit has been established for the completion of the program, and the repurchases are expected to be executed from time-to-time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.

Business Outlook

The market is still working through the ongoing price discovery, wider than normal bid/ask spreads, and a prolonged downturn in transaction volume due to the Federal Reserve's decision to delay interest rate reductions. While these conditions are likely to persist through much of 2024, price adjustments, distressed situations and maturing loans could drive additional transactions in the quarters ahead. Over the long term, real estate demand is expected to return sales and financing volumes to higher than current levels given the record capital on the sideline and key advantages of real estate investments. Accordingly, the Company believes it remains well-positioned to achieve long-term growth.

The Company benefits from its experienced management team, infrastructure investments, industry-leading market research and proprietary technology. The size and fragmentation of the Private Client Market continues to offer long-term growth opportunities through consolidation. This highly fragmented market segment consistently accounts for over 80% of all U.S. commercial property transactions and over 60% of the commission pool. The top 10 brokerage firms led by MMI had an estimated 20% share of this segment by transaction count in 2023.

Key factors that may influence the Company's business during 2024 include:

Webcast and Call Information

Marcus & Millichap will host a live webcast today to discuss the financial results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern Time. The webcast will be accessible through the Investor Relations section of Marcus & Millichap's website at ir.marcusmillichap.com and will be archived upon completion of the call. The Company encourages the use of the webcast due to potential extended wait times to access the conference call via dial-in.

For those unable to access the webcast, callers from the United States and Canada should dial 1-877-407-9208 ten minutes prior to the scheduled call time. International callers should dial 1-201-493-6784.

Replay Information

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 1:30 p.m. Eastern Time on Wednesday, May 8, 2024 through 11:59 p.m. Eastern Time on Wednesday, May 22, 2024 by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6671 internationally and entering passcode 13745195.

About Marcus & Millichap, Inc.

Marcus & Millichap, Inc. is a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research and advisory services. As of March 31, 2024, the Company had 1,722 investment sales and financing professionals in more than 80 offices who provide investment brokerage and financing services to sellers and buyers of commercial real estate. The Company also offers market research, consulting and advisory services to its clients. Marcus & Millichap closed 1,564 transactions during the three months ended March 31, 2024, with a sales volume of $9.7 billion. For additional information, please visit www.MarcusMillichap.com.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements, including our expectations regarding the long-term outlook of the commercial real estate transaction market, and our positioning within it, our belief relating to the Company's long-term growth, our assessment of the key factors influencing the Company's business outlook for 2024 and the execution of our capital return program, including a semi-annual dividend and stock repurchase program. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

In addition, in this release, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "goal," "expect," "predict," "potential," "should," and similar expressions, as they relate to our Company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this release. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We have not filed our Quarterly Report on Form 10-Q ("Form 10-Q") for the quarter ended March 31, 2024. As a result, all financial results described in this release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file our Form 10-Q.

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended
March 31,

 

 

2024

 

 

 

2023

 

Revenue:

 

 

 

Real estate brokerage commissions

$

109,475

 

 

$

135,046

 

Financing fees

 

14,427

 

 

 

15,868

 

Other revenue

 

5,202

 

 

 

3,878

 

Total revenue

 

129,104

 

 

 

154,792

 

Operating expenses:

 

 

 

Cost of services

 

76,868

 

 

 

95,427

 

Selling, general and administrative

 

68,916

 

 

 

72,219

 

Depreciation and amortization

 

3,422

 

 

 

3,207

 

Total operating expenses

 

149,206

 

 

 

170,853

 

Operating loss

 

(20,102

)

 

 

(16,061

)

Other income, net

 

5,568

 

 

 

4,810

 

Interest expense

 

(199

)

 

 

(215

)

Loss before benefit for income taxes

 

(14,733

)

 

 

(11,466

)

Benefit for income taxes

 

(4,746

)

 

 

(5,633

)

Net loss

$

(9,987

)

 

$

(5,833

)

 

 

 

 

Net loss per share:

 

 

 

Basic

$

(0.26

)

 

$

(0.15

)

Diluted

$

(0.26

)

 

$

(0.15

)

Weighted average common shares outstanding:

 

 

 

Basic

 

38,447

 

 

 

39,200

 

Diluted

 

38,447

 

 

 

39,200

 

 

MARCUS & MILLICHAP, INC.
KEY OPERATING METRICS SUMMARY
(Unaudited)

Total sales volume was approximately $9.7 billion for the three months ended March 31, 2024, encompassing 1,564 transactions consisting of $5.7 billion for real estate brokerage (1,102 transactions), $1.6 billion for financing (234 transactions) and $2.4 billion in other transactions, including consulting and advisory services (228 transactions). As of March 31, 2024, the Company had 1,624 investment sales professionals and 98 financing professionals. Key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

 

Three Months Ended
March 31,

Real Estate Brokerage

 

2024

 

 

 

2023

 

Average Number of Investment Sales Professionals

 

1,638

 

 

 

1,782

 

Average Number of Transactions per Investment Sales Professional

 

0.67

 

 

 

0.72

 

Average Commission per Transaction

$

99,343

 

 

$

105,587

 

Average Commission Rate

 

1.93

%

 

 

1.89

%

Average Transaction Size (in thousands)

$

5,137

 

 

$

5,576

 

Total Number of Transactions

 

1,102

 

 

 

1,279

 

Total Sales Volume (in millions)

$

5,661

 

 

$

7,132

 

 

Three Months Ended
March 31,

Financing (1)

 

2024

 

 

 

2023

 

Average Number of Financing Professionals

 

99

 

 

 

92

 

Average Number of Transactions per Financing Professional

 

2.36

 

 

 

3.03

 

Average Fee per Transaction

$

47,178

 

 

$

46,548

 

Average Fee Rate

 

0.67

%

 

 

0.75

%

Average Transaction Size (in thousands)

$

7,094

 

 

$

6,189

 

Total Number of Transactions

 

234

 

 

 

279

 

Total Financing Volume (in millions)

$

1,660

 

 

$

1,727

 

(1)

Operating metrics exclude certain financing fees not directly associated to transactions.

The following table sets forth the number of transactions, sales volume and revenue by commercial real estate market segment for real estate brokerage:

 

Three Months Ended March 31,

 

 

 

2024

 

2023

 

Change

Real Estate Brokerage

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

<$1 million

186

 

$

103

 

$

4,764

 

183

 

$

116

 

$

5,038

 

3

 

 

$

(13

)

 

$

(274

)

Private Client Market

($1 ? <$10 million)

808

 

 

2,590

 

 

73,163

 

970

 

 

3,254

 

 

90,503

 

(162

)

 

 

(664

)

 

 

(17,340

)

Middle Market

($10 ? <$20 million)

59

 

 

802

 

 

15,093

 

66

 

 

900

 

 

17,368

 

(7

)

 

 

(98

)

 

 

(2,275

)

Larger Transaction

 

Market (?$20 million)

49

 

 

2,166

 

 

16,455

 

60

 

 

2,862

 

 

22,137

 

(11

)

 

$

(696

)

 

$

(5,682

)

 

1,102

 

$

5,661

 

$

109,475

 

1,279

 

$

7,132

 

$

135,046

 

(177

)

 

$

(1,471

)

 

$

(25,571

)

 

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)

 

 

March 31, 2024
(unaudited)

 

December 31,
2023

Assets

 

 

 

Current assets:

 

 

 

Cash, cash equivalents, and restricted cash

$

90,556

 

 

$

170,753

 

Commissions receivable

 

13,785

 

 

 

16,171

 

Prepaid expenses

 

7,546

 

 

 

8,813

 

Income tax receivable

 

9,461

 

 

 

9,299

 

Marketable debt securities, available-for-sale (amortized cost of $198,847 and $169,018 at March 31, 2024 and December 31, 2023, respectively, and $0 allowance for credit losses)

 

198,314

 

 

 

168,881

 

Advances and loans, net

 

7,861

 

 

 

3,574

 

Other assets, current

 

16,014

 

 

 

16,203

 

Total current assets

 

343,537

 

 

 

393,694

 

Property and equipment, net

 

27,832

 

 

 

27,450

 

Operating lease right-of-use assets, net

 

92,929

 

 

 

90,058

 

Marketable debt securities, available-for-sale (amortized cost of $59,302 and $69,538 at March 31, 2024 and December 31, 2023, respectively, and $0 allowance for credit losses)

 

57,400

 

 

 

67,459

 

Assets held in rabbi trust

 

11,467

 

 

 

10,838

 

Deferred tax assets, net

 

51,725

 

 

 

46,930

 

Goodwill and other intangible assets, net

 

50,041

 

 

 

51,183

 

Advances and loans, net

 

175,604

 

 

 

175,827

 

Other assets, non-current

 

16,116

 

 

 

14,972

 

Total assets

$

826,651

 

 

$

878,411

 

Liabilities and stockholders' equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

9,359

 

 

$

8,126

 

Deferred compensation and commissions

 

40,511

 

 

 

55,769

 

Operating lease liabilities

 

17,535

 

 

 

18,336

 

Accrued bonuses and other employee related expenses

 

7,264

 

 

 

19,119

 

Other liabilities, current

 

17,923

 

 

 

3,919

 

Total current liabilities

 

92,592

 

 

 

105,269

 

Deferred compensation and commissions

 

27,304

 

 

 

47,771

 

Operating lease liabilities

 

73,935

 

 

 

69,407

 

Other liabilities, non-current

 

7,265

 

 

 

10,690

 

Total liabilities

 

201,096

 

 

 

233,137

 

Commitments and contingencies

 

?

 

 

 

?

 

Stockholders' equity:

 

 

 

Preferred stock, $0.0001 par value:

 

 

 

Authorized shares ? 25,000,000; issued and outstanding shares ? none at March 31, 2024 and December 31, 2023, respectively

 

?

 

 

 

?

 

Common stock, $0.0001 par value:

 

 

 

Authorized shares ? 150,000,000; issued and outstanding shares ? 38,633,603 and 38,412,484 at March 31, 2024 and December 31, 2023, respectively

 

4

 

 

 

4

 

Additional paid-in capital

 

155,157

 

 

 

153,740

 

Retained earnings

 

471,670

 

 

 

492,298

 

Accumulated other comprehensive loss

 

(1,276

)

 

 

(768

)

Total stockholders' equity

 

625,555

 

 

 

645,274

 

Total liabilities and stockholders' equity

$

826,651

 

 

$

878,411

 

 

MARCUS & MILLICHAP, INC.
OTHER INFORMATION
(Unaudited)

Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net (loss) income before (i) interest income, (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. The Company uses Adjusted EBITDA in its business operations to evaluate the performance of its business, develop budgets and measure its performance against those budgets, among other things. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate its overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under U.S. generally accepted accounting principles ("U.S. GAAP"). The Company finds Adjusted EBITDA to be a useful management metric to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. Considering the foregoing limitations, the Company does not rely solely on Adjusted EBITDA as a performance measure and also considers its U.S. GAAP results. Adjusted EBITDA is not a measurement of the Company's financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures calculated in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.

A reconciliation of the most directly comparable U.S. GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands):

 

Three Months Ended
March 31,

 

 

2024

 

 

 

2023

 

Net loss

$

(9,987

)

 

$

(5,833

)

Adjustments:

 

 

 

Interest income

 

(4,765

)

 

 

(4,390

)

Interest expense

 

199

 

 

 

215

 

Benefit for income taxes

 

(4,746

)

 

 

(5,633

)

Depreciation and amortization

 

3,422

 

 

 

3,207

 

Stock-based compensation

 

5,795

 

 

 

5,011

 

Adjusted EBITDA

$

(10,082

)

 

$

(7,423

)

Glossary of Terms

Certain Adjusted Metrics

Real Estate Brokerage

Following are actual and as adjusted metrics excluding any large transactions in our real estate brokerage business in excess of $300 million:

 

Three Months Ended

March 31, 2024

(actual)

(as adjusted)

Total Sales Volume Decrease

(20.6

)%

(20.6

)%

Average Commission Rate Increase

2.1

%

2.1

%

Average Transaction Size Decrease

(7.9

)%

(7.9

)%

 


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