Exhibit 99.1

 

LOGO

MARCUS & MILLICHAP, INC. REPORTS RESULTS FOR

FIRST QUARTER 2021

Net Income Increase of 14.9%

CALABASAS, Calif., May 7, 2021 — (BUSINESS WIRE) — Marcus & Millichap, Inc. (the “Company”, “Marcus & Millichap”, “MMI”) (NYSE: MMI), a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services, today reported financial results for the first quarter ended March 31, 2021.

First Quarter 2021 Results and Highlights

 

   

Compared to a record first quarter of 2020, total revenues decreased by 3.5% to $184.0 million

 

   

Net income increased by 14.9% to $15.0 million, or $0.37 per common share, diluted

 

   

Adjusted EBITDA increased by 14.8% to $25.7 million

 

   

Revenue from financing fees increased by 16.2% to $17.8 million

 

   

Private Client brokerage revenue decreased by 7.7% against a difficult comparison of 19.0% growth in the first quarter of 2020

 

   

Larger Transaction brokerage revenue increased by 5.1% compared to 45.7% growth in the first quarter of 2020

Hessam Nadji, President and CEO commented, “Our first quarter results set a positive tone for 2021 with net income and Adjusted EBITDA well ahead of last year. The strong quarter is noteworthy coming on the heels of a record revenue milestone in the first quarter of 2020 and a record fourth quarter, which reduced our pipeline and inventory. The results are a testament of our team’s ability to complete transactions in a challenging market as well as our expanded investor outreach from the outset of the pandemic. We have seen investor demand steadily rise in anticipation of a vaccine rollout, growing confidence in the economic recovery, still-low interest rates and ample liquidity. The market recovery, coupled with our cost containment efforts, led to a nearly 15% improvement in earnings and over a two hundred basis point expansion in our Adjusted EBITDA margin.”

Nadji continued, “Looking forward, all business segments are expected to show further strength at varying degrees with the most pandemic-impacted sectors still needing time for price discovery. Apartments and single-tenant net-lease, among the most stable sectors, are seeing pre-COVID pricing and investor demand in many markets. We believe we are well positioned for future growth and shareholder value creation given our expanded investor outreach capacity, leading brand, strategic acquisitions and continued investment in technology.”

First Quarter 2021 Results Compared to First Quarter 2020

Total revenues for the first quarter of 2021 were $184.0 million, compared to $190.7 million for the same period in the prior year, decreasing 3.5%. The reduction in total revenues was primarily driven by a decrease in real estate brokerage commissions, partially offset by an increase in financing fees. Other revenues were relatively comparable to prior year. Real estate brokerage commissions decreased 5.3% to $162.8 million from the same period in the prior year primarily due to a decrease in average commission rates, partially offset by an increase in sales volume. Financing fees increased 16.2% to $17.8 million primarily due to our recent acquisitions and other ancillary fees.

Total operating expenses for the first quarter of 2021 decreased 4.3% to $163.8 million, compared to $171.1 million for the same period in the prior year. The change was primarily driven by a 4.1% decrease in cost of services and a 5.8% decrease in selling, general and administrative expense. Cost of services as a percent of total revenues decreased 30 basis points to 59.3% compared to the same period in the prior year, primarily due to a higher proportion of transactions closed by our more senior investment sales and financing professionals at the start of the pandemic during the three months ended March 31, 2020. Traditionally, cost of services as a percent of total revenues is lower during the three-month period ended March 31 as certain investment professionals may earn a higher commission rate later in the year after meeting annual revenue thresholds.

 

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Selling, general and administrative expense for the first quarter of 2021 decreased 5.8% to $51.7 million, compared to the same period in the prior year. The decrease was primarily due to reductions in (i) the Company’s annual sales recognition event being cancelled due to ongoing concerns about the pandemic; and (ii) legal costs. These decreases were partially offset by increases in (i) operating costs related to acquired businesses in the last 12 months; (ii) compensation related costs, including variable employee incentive compensation as a result of our performance and deferred compensation obligations; and (iii) facilities expenses.

Net income for the first quarter of 2021 was $15.0 million, or $0.38 per common share, basic and $0.37 per common share, diluted, compared to $13.1 million, or $0.33 per common share, basic and diluted, for the same period in the prior year. Adjusted EBITDA for the first quarter of 2021 was $25.7 million, compared to $22.4 million for the same period in the prior year. As of March 31, 2021, the Company had 2,038 investment sales and financing professionals.

Business Outlook

Notwithstanding the continuing impact of the COVID-19 pandemic on the current business environment, we believe that the Company is positioned to achieve long-term growth by leveraging a number of factors. These include our leading national brand and market position within the Private Client Market segment, growth opportunities in the Middle Market and Larger Transaction Market segments, significant growth potential in our financing division, Marcus & Millichap Capital Corporation, and supplementing our organic growth through incremental strategic acquisitions. The Company’s growth plan also includes further expansion of investment brokerage services in office, industrial and various specialty property types such as hospitality, self-storage and seniors housing.

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 segment continues to offer long-term growth opportunities through consolidation. This market segment consistently accounts for over 80% of all commercial property sales transactions and over 60% of the commission pool and is highly fragmented. The top 10 brokerage firms led by MMI have an estimated 23% share of this segment by transaction count.

Key factors that may influence the Company’s business during the remainder of 2021 include:

 

   

Uneven recovery among markets we operate in and certain real estate asset types

 

   

Volatility in market sales and investor sentiment driven by:

 

   

Slowdown in market sales of asset types impacted by COVID-19, interest rate fluctuations, increasing bid-ask spread between buyers and sellers and economic trends

 

   

Boost to investor sentiment and sales activity based on favorable interest rates, easing cycle, increased COVID-19 vaccine supply and distribution and economic initiatives which may increase real estate investor demand, particularly in the second half of 2021

 

   

Possible impediment to investor sentiment related to regulatory and tax law changes at the local, state and national level

 

   

Experienced sales and financing professionals’ larger share of revenue production in a more challenging market environment, resulting in a higher cost of services

 

   

Volatility in each of the Company’s market segments

 

   

Global geopolitical uncertainty, which may cause investors to refrain from transacting

 

   

The potential for accretive acquisition activity and subsequent integration

Conference Call Details

Marcus & Millichap will host a conference call today to discuss the results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern Time. To participate in the conference call, callers from the United States and Canada should dial (855) 327-6837 ten minutes prior to the scheduled call time. International callers should dial (631) 891-4304. For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 10:30 a.m. Pacific Time/1:30 p.m. Eastern Time on Friday, May 7, 2021, through 8:59 p.m. Pacific Time/11:59 p.m. Eastern Time on Friday, May 21, 2021, by dialing (844) 512-2921 in the United States and Canada or (412) 317-6671 internationally and entering passcode 10013991.

 

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About Marcus & Millichap, Inc.

Marcus & Millichap, Inc. is a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of March 31, 2021, the Company had 2,038 investment sales and financing professionals in 84 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 our clients. Marcus & Millichap closed 2,332 transactions during the three months ended March 31, 2021, with a sales volume of approximately $12.0 billion. For additional information, please visit www.MarcusMillichap.com.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements, including the Company’s business outlook for 2021, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctuations) in market share growth. 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:

 

   

uncertainties relating to the continuing impact of the COVID-19 pandemic, including the timing and ultimate success of the vaccine rollout, the potential impact of the federal government’s recently approved stimulus response package, and the pace of recovery following such pandemic;

 

   

general uncertainty in the capital markets and a worsening of economic conditions and the rate and pace of economic recovery following an economic downturn;

 

   

changes in our business operations, including restrictions on business activities, resulting from the COVID-19 pandemic;

 

   

market trends in the commercial real estate market or the general economy;

 

   

our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals;

 

   

the effects of increased competition on our business;

 

   

our ability to successfully enter new markets or increase our market share;

 

   

our ability to successfully expand our services and businesses and to manage any such expansions;

 

   

our ability to retain existing clients and develop new clients;

 

   

our ability to keep pace with changes in technology;

 

   

any business interruption or technology failure and any related impact on our reputation;

 

   

changes in interest rates, tax laws, including potential increases in corporate taxes by the Biden Administration, employment laws or other government regulation affecting our business;

 

   

our ability to successfully identify, negotiate, execute and integrate accretive acquisitions; and

 

   

other risk factors included under “Risk Factors” in our most recent Annual Report on Form 10-K.

In addition, in this release, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “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.

 

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MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2021     2020  

Revenues:

    

Real estate brokerage commissions

   $ 162,796     $ 171,829  

Financing fees

     17,843       15,351  

Other revenues

     3,338       3,537  
  

 

 

   

 

 

 

Total revenues

     183,977       190,717  
  

 

 

   

 

 

 

Operating expenses:

    

Cost of services

     109,103       113,757  

Selling, general and administrative

     51,677       54,860  

Depreciation and amortization

     2,997       2,464  
  

 

 

   

 

 

 

Total operating expenses

     163,777       171,081  
  

 

 

   

 

 

 

Operating income

     20,200       19,636  

Other income (expense), net

     1,044       (366

Interest expense

     (146     (283
  

 

 

   

 

 

 

Income before provision for income taxes

     21,098       18,987  

Provision for income taxes

     6,086       5,917  
  

 

 

   

 

 

 

Net income

     15,012       13,070  
  

 

 

   

 

 

 

Other comprehensive (loss) income:

    

Marketable debt securities, available-for-sale:

    

Change in net unrealized – (losses) gains

     (621     (497

Less: reclassification adjustment for net losses included in other income (expense), net

     —         11  
  

 

 

   

 

 

 

Net change, net of tax of $(215) and $(168) for the three months ended March 31, 2021 and 2020, respectively

     (621     (486

Foreign currency translation (loss) gain, net of tax of $0 for the three months ended March 31, 2021 and 2020

     (113     891  
  

 

 

   

 

 

 

Total other comprehensive (loss) income

     (734     405  
  

 

 

   

 

 

 

Comprehensive income

   $ 14,278     $ 13,475  
  

 

 

   

 

 

 

Earnings per share:

    

Basic

   $ 0.38     $ 0.33  

Diluted

   $ 0.37     $ 0.33  

Weighted average common shares outstanding:

    

Basic

     39,757       39,541  

Diluted

     40,124       39,646  

 

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MARCUS & MILLICHAP, INC.

KEY OPERATING METRICS SUMMARY

(Unaudited)

Total sales volume was $12.0 billion for the three months ended March 31, 2021, encompassing 2,332 transactions consisting of $8.9 billion for real estate brokerage (1,588 transactions), $1.6 billion for financing (494 transactions) and $1.5 billion in other transactions, including consulting and advisory services (250 transactions). As of March 31, 2021, the Company had 1,953 investment sales professionals and 85 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    2021     2020  

Average Number of Investment Sales Professionals

     1,959       1,889  

Average Number of Transactions per Investment Sales Professional

     0.81       0.85  

Average Commission per Transaction

   $ 102,517     $ 106,396  

Average Commission Rate

     1.84     2.04

Average Transaction Size (in thousands)

   $ 5,582     $ 5,227  

Total Number of Transactions

     1,588       1,615  

Total Sales Volume (in millions)

   $ 8,864     $ 8,442  
     Three Months Ended
March 31,
 
Financing (1)    2021     2020  

Average Number of Financing Professionals

     86       89  

Average Number of Transactions per Financing Professional

     5.74       5.37  

Average Fee per Transaction

   $ 30,464     $ 30,900  

Average Fee Rate

     0.93     0.84

Average Transaction Size (in thousands)

   $ 3,263     $ 3,670  

Total Number of Transactions

     494       478  

Total Financing Volume (in millions)

   $ 1,612     $ 1,754  

 

(1) 

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

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

 

    Three Months Ended March 31,        
    2021     2020     Change  
Real Estate Brokerage   Number     Volume     Revenues     Number     Volume     Revenues     Number     Volume     Revenues  
          (in millions)     (in thousands)           (in millions)     (in thousands)           (in millions)     (in thousands)  

<$1 million

    227     $ 149     $ 6,138       216     $ 136     $ 5,742       11     $ 13     $ 396  

Private Client Market ($1 - <$10 million)

    1,200       3,668       105,423       1,242       4,001       114,264       (42     (333     (8,841

Middle Market ($10 - <$20 million)

    78       1,067       20,601       91       1,222       22,668       (13     (155     (2,067

Larger Transaction Market (³$20 million)

    83       3,980       30,634       66       3,083       29,155       17       897       1,479  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,588     $ 8,864     $ 162,796       1,615     $ 8,442     $ 171,829       (27   $ 422     $ (9,033
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)

 

     March 31,
2021
(Unaudited)
     December 31,
2020
 

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 221,708      $ 243,152  

Commissions receivable, net

     8,205        10,391  

Prepaid expenses

     10,084        10,153  

Marketable debt securities, available-for-sale (includes amortized cost of $134,460 and $158,148 at March 31, 2021 and December 31, 2020, respectively, and $0 allowance for credit losses)

     134,494        158,258  

Advances and loans, net

     2,106        2,413  

Other assets

     5,642        4,711  
  

 

 

    

 

 

 

Total current assets

     382,239        429,078  

Property and equipment, net

     22,931        23,436  

Operating lease right-of-use assets, net

     81,105        84,024  

Marketable debt securities, available-for-sale (includes amortized cost of $65,114 and $45,181 at March 31, 2021 and December 31, 2020, respectively, and $0 allowance for credit losses)

     66,931        47,773  

Assets held in rabbi trust

     10,574        10,295  

Deferred tax assets, net

     20,629        21,374  

Goodwill and other intangible assets, net

     50,817        52,053  

Advances and loans, net

     111,781        106,913  

Other assets

     4,075        4,176  
  

 

 

    

 

 

 

Total assets

   $ 751,082      $ 779,122  
  

 

 

    

 

 

 

Liabilities and stockholders’ equity

     

Current liabilities:

     

Accounts payable and other liabilities

   $ 18,919      $ 18,288  

Deferred compensation and commissions

     33,199        58,106  

Income tax payable

     8,512        3,726  

Operating lease liabilities

     19,209        19,190  

Accrued bonuses and other employee related expenses

     11,478        21,007  
  

 

 

    

 

 

 

Total current liabilities

     91,317        120,317  

Deferred compensation and commissions

     28,745        38,745  

Operating lease liabilities

     57,134        59,408  

Other liabilities

     12,217        13,816  
  

 

 

    

 

 

 

Total liabilities

     189,413        232,286  
  

 

 

    

 

 

 

Commitments and contingencies

     —          —    

Stockholders’ equity:

     

Preferred stock, $0.0001 par value:

     

Authorized shares – 25,000,000; issued and outstanding shares – none at March 31, 2021 and December 31, 2020, respectively

     —          —    

Common stock, $0.0001 par value:

     

Authorized shares – 150,000,000; issued and outstanding shares – 39,500,966 and 39,401,976 at March 31, 2021 and December 31, 2020, respectively

     4        4  

Additional paid-in capital

     113,737        113,182  

Retained earnings

     446,088        431,076  

Accumulated other comprehensive income

     1,840        2,574  
  

 

 

    

 

 

 

Total stockholders’ equity

     561,669        546,836  
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 751,082      $ 779,122  
  

 

 

    

 

 

 

 

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MARCUS & MILLICHAP, INC.

OTHER INFORMATION

(Unaudited)

Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash equivalents, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-cash mortgage servicing rights (“MSRs”) activity. 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 an analytical tool 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 tool to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of 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,
 
     2021     2020  

Net income

   $ 15,012     $ 13,070  

Adjustments:

    

Interest income and other(1)

     (531     (2,003

Interest expense

     146       283  

Provision for income taxes

     6,086       5,917  

Depreciation and amortization

     2,997       2,464  

Stock-based compensation

     2,288       2,632  

Non-cash MSR activity(2)

     (303     15  
  

 

 

   

 

 

 

Adjusted EBITDA(3)

   $ 25,695     $ 22,378  
  

 

 

   

 

 

 

 

(1) 

Other includes net realized gains (losses) on marketable debt securities available-for-sale.

(2) 

Non-cash MSR activity includes the assumption of servicing obligations.

(3) 

The increase in Adjusted EBITDA for the three months ended March 31, 2021 compared to the same period in 2020 is primarily due to a lower proportion of operating expenses compared to total revenues.

Glossary of Terms

 

   

Private Client Market segment: transactions with values from $1 million to up to but less than $10 million

 

   

Middle Market segment: transactions with values from $10 million to up to but less than $20 million

 

   

Larger Transaction Market segment (previously Institutional Market segment): transactions with values of $20 million and above

 

   

Acquisitions: acquisitions of teams and/or acquisitions as business combinations under accounting standards

 

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