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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM
10-Q
 
 
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
Commission File Number:
001-36155
 
 
MARCUS & MILLICHAP, INC.
(Exact name of registrant as specified in its Charter)
 
 
 
Delaware
 
35-2478370
(State or Other Jurisdiction of
 
(I.R.S. Employer
Incorporation or Organization)
 
Identification No.)
23975 Park Sorrento, Suite 400
Calabasas, California
 
91302
(Address of Principal Executive Offices)
 
(Zip Code)
(818)
212-2250
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
  
Trading Symbol(s)
  
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
  
MMI
  
New York Stock Exchange
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     
Yes  ☒    No  ☐
Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required to submit such files).     
Yes
  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer   ☒    Accelerated filer   ☐
       
Non-accelerated filer   ☐    Smaller reporting company   ☐
       
         Emerging growth company   ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes  ☐    No  
☒
Number of shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding as of November 2, 2021 was 39,667,728 shares.
 
 
 
Table of Contents
MARCUS & MILLICHAP, INC.
TABLE OF CONTENTS
 
 
  
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2
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for shares and par value)
 
 
  
September 30, 2021
(Unaudited)
 
  
December 31,
2020
 
Assets
                  
Current assets:
                  
Cash and cash equivalents
    $ 281,007      $ 243,152  
Commissions receivable, net
      15,377        10,391  
Prepaid expenses
      9,232        10,153  
Marketable debt securities,
available-for-sale
(includes amortized cost of $116,852 and $158,148 at September 30, 2021 and December 31, 2020, respectively, and $0 allowance for credit losses)
      116,902        158,258  
Advances and loans, net
      3,017        2,413  
Other assets
      4,436        4,711  
    
 
 
     
 
 
  
Total current assets
      429,971        429,078  
Property and equipment, net
      22,890        23,436  
Operating lease
right-of-use
assets, net
      85,250        84,024  
Marketable debt securities,
available-for-sale
(includes amortized cost of $128,788 and $45,181 at September 30, 2021 and December 31, 2020, respectively, and $0 allowance for credit losses)
      130,502        47,773  
Assets held in rabbi trust
      11,056        10,295  
Deferred tax assets, net
      24,410        21,374  
Goodwill and other intangible assets, net
      48,974        52,053  
Advances and loans, net
      108,709        106,913  
Other assets
      13,318        4,176  
    
 
 
     
 
 
  
Total assets
    $ 875,080      $ 779,122  
    
 
 
     
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
                  
Current liabilities:
                  
Accounts payable and other liabilities
    $ 20,025      $ 18,288  
Deferred compensation and commissions
      53,068        58,106  
Income tax payable
      5,658        3,726  
Operating lease liabilities
      19,745        19,190  
Accrued bonuses and other employee related expenses
      32,066        21,007  
    
 
 
     
 
 
  
Total current liabilities
      130,562        120,317  
Deferred compensation and commissions
      38,638        38,745  
Operating lease liabilities
      60,970        59,408  
Other liabilities
      12,641        13,816  
    
 
 
     
 
 
  
Total liabilities
      242,811        232,286  
 
 
 
 
 
 
 
 
 
Commitments and contingencies
      —          —    
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
                  
Preferred stock, $0.0001 par value:
                  
Authorized shares – 25,000,000; issued and outstanding shares – none at September 30, 2021 and December 31, 2020, respectively
      —          —    
Common stock, $0.0001 par value:
                  
Authorized shares – 150,000,000; issued and outstanding shares – 39,666,785 and 39,401,976 at September 30, 2021 and December 31, 2020, respectively
      4        4  
Additional
paid-in
capital
      118,974        113,182  
Retained earnings
      511,544        431,076  
Accumulated other comprehensive income
      1,747        2,574  
    
 
 
     
 
 
  
Total stockholders’ equity
      632,269        546,836  
    
 
 
     
 
 
  
Total liabilities and stockholders’ equity
    $ 875,080      $ 779,122  
    
 
 
     
 
 
  
See accompanying notes to condensed consolidated financial statements.
 
3
Table of Contents
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)
(Unaudited)
 
 
  
Three Months Ended
September 30,
 
 
Nine Months Ended
September 30,
 
 
  
2021
 
 
2020
 
 
2021
 
 
2020
 
Revenues:
  
 
 
 
Real estate brokerage commissions
    $ 299,759     $ 140,844     $
 
 715,458     $
 
 416,044  
Financing fees
      29,391       15,620       75,448       43,674  
Other revenues
      3,233       2,111       10,400       6,974  
    
 
 
    
 
 
    
 
 
    
 
 
  
Total revenues
      332,383       158,575       801,306       466,692  
    
 
 
    
 
 
    
 
 
    
 
 
  
Operating expenses:
                                 
Cost of services
      219,194       99,707       506,882       287,207  
Selling, general and administrative
      64,673       49,722       178,147       148,101  
Depreciation and amortization
      2,850       2,606       8,806       7,822  
    
 
 
    
 
 
    
 
 
    
 
 
  
Total operating expenses
      286,717       152,035       693,835       443,130  
    
 
 
    
 
 
    
 
 
    
 
 
  
Operating income
      45,666       6,540       107,471       23,562  
Other income (expense), net
      323       1,615       2,737       4,224  
Interest expense
      (144 )      (199 )      (436 )      (695 ) 
    
 
 
    
 
 
    
 
 
    
 
 
  
Income before provision for income taxes
      45,845       7,956       109,772       27,091  
Provision for income taxes
      11,921       1,916       29,304       7,875  
    
 
 
    
 
 
    
 
 
    
 
 
  
Net income
      33,924       6,040       80,468       19,216  
    
 
 
    
 
 
    
 
 
    
 
 
  
         
Other comprehensive (loss) income:
                                 
Marketable debt securities,
available-for-sale:
                                 
Change in net unrealized gains
      (240 )      (30 )      (715 )      687  
Less: reclassification adjustment for net losses included in other income (expense), net
      23       8       26       32  
    
 
 
    
 
 
    
 
 
    
 
 
  
Net change, net of tax of $(75), $(7), $(239) and $246 for the three and nine months ended September 30, 2021 and 2020, respectively
      (217 )      (22 )      (689 )      719  
Foreign currency translation gain (loss), net of tax of $0 for each of the three and nine months ended September 30, 2021
and 2020, respectively
 
      192       (214 )      (138 )      254  
    
 
 
    
 
 
    
 
 
    
 
 
  
Total other comprehensive (loss) income
      (25 )      (236 )      (827 )      973  
    
 
 
    
 
 
    
 
 
    
 
 
  
Comprehensive income
    $ 33,899     $ 5,804     $ 79,641     $ 20,189  
    
 
 
    
 
 
    
 
 
    
 
 
  
         
Earnings per share:
                                 
Basic
    $ 0.85     $ 0.15     $ 2.02     $ 0.49  
Diluted
    $ 0.84     $ 0.15     $ 2.00     $ 0.48  
Weighted average common shares outstanding:
                                 
Basic
      39,940       39,681       39,859       39,617  
Diluted
      40,241       39,727       40,148       39,676  
See accompanying notes to condensed consolidated financial statements.
 
4
Table of Contents
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for shares)
(Unaudited)
 
 
  
Three Months Ended September 30, 2021
 
 
  
Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-In

Capital
 
 
Stock Notes
Receivable
From
Employees
 
  
Retained
Earnings
 
  
Accumulated
Other
Comprehensive
Income (Loss)
 
 
Total
 
 
  
Shares
 
  
Amount
 
  
Shares
 
 
Amount
 
Balance at June 30, 2021
      —        $ —          39,578,360     $ 4      $
 
 117,457     $ —        $ 477,620      $ 1,772     $ 596,853  
Net and comprehensive income
(loss)
      —          —          —         —          —         —          33,924        (25 )      33,899  
Stock-based award activity
                                                                              
Stock-based compensation
      —          —          —         —          2,703       —          —          —         2,703  
Issuance of common stock for settlement of deferred stock units
      —          —          60,373       —          —         —          —          —         —    
Issuance of common stock for vesting of restricted stock units
      —          —          58,411       —          —         —          —          —         —    
Shares withheld related to net share settlement of stock-based awards
      —          —          (30,359 )      —          (1,186 )      —          —          —         (1,186 ) 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of September 30, 2021
      —        $ —          39,666,785     $ 4      $ 118,974     $ —        $ 511,544      $ 1,747     $ 632,269  
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
 
 
  
Three Months Ended September 30, 2020
 
 
  
Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-In

Capital
 
 
Stock Notes
Receivable
From
Employees
 
  
Retained
Earnings
 
  
Accumulated
Other
Comprehensive
Income (Loss)
 
 
Total
 
 
  
Shares
 
  
Amount
 
  
Shares
 
 
Amount
 
Balance at June 30, 2020
      —        $  —          39,328,017     $ 4      $
 
 108,308     $  —        $ 401,414      $ 3,187     $ 512,913  
Net and comprehensive income
 
(loss)
      —          —          —         —          —         —          6,040        (236 )      5,804  
Stock-based award activity
                                                                              
Stock-based compensation
      —          —          —         —          2,383       —          —          —         2,383  
Issuance of common stock for vesting of restricted stock units
      —          —          50,912       —          —         —          —          —         —    
Shares withheld related to net share settlement of stock-based awards
      —          —          (2,452 )      —          (66 )      —          —          —         (66 ) 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of September 30, 2020
      —        $ —          39,376,477     $ 4      $ 110,625     $ —        $ 407,454      $ 2,951     $ 521,034  
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
 
See accompanying notes to condensed consolidated financial statements.
 
5
Table of Contents
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for shares)
(Unaudited)
 
 
  
Nine Months Ended September 30, 2021
 
 
  
Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-In

Capital
 
 
Stock Notes
Receivable
From
Employees
 
  
Retained
Earnings
 
  
Accumulated
Other
Comprehensive
Income (Loss)
 
 
Total
 
 
  
Shares
 
  
Amount
 
  
Shares
 
 
Amount
 
Balance at December 31, 2020
      —        $ —          39,401,976     $ 4      $
 
 113,182     $ —        $ 431,076      $ 2,574     $ 546,836  
Net and comprehensive income (loss)
      —          —          —         —          —         —          80,468        (827 )      79,641  
Stock-based award activity
                                                                              
Stock-based compensation
      —          —          —         —          7,653       —          —          —         7,653  
Shares issued pursuant to employee stock purchase
plan
      —          —          11,635       —          369       —          —          —         369  
Issuance of common stock for settlement of deferred stock units
      —          —          60,373       —          —         —          —          —         —    
Issuance of common stock for vesting of restricted stock units
      —          —          241,726       —          —         —          —          —         —    
Issuance of common stock for unvested restricted stock awards
      —          —          12,492       —          —         —          —          —         —    
Issuance of common stock for stock settled deferred consideration
      —          —          27,481       —          1,000       —          —          —         1,000  
Shares withheld related to net share settlement of stock-based awards
      —          —          (88,898 )      —          (3,230 )      —          —          —         (3,230 ) 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
Balance as of September 30, 2021
      —        $ —          39,666,785     $ 4      $ 118,974     $ —        $ 511,544      $ 1,747     $ 632,269  
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
     
 
 
     
 
 
    
 
 
  
 
 
  
Nine Months Ended September 30, 2020
 
 
  
Preferred Stock
 
  
Common Stock
 
  
Additional
Paid-In

Capital
 
 
Stock Notes
Receivable
From
Employees
 
 
Retained
Earnings
 
 
Accumulated
Other
Comprehensive
Income
 
  
Total
 
 
  
Shares
 
  
Amount
 
  
Shares
 
 
Amount
 
Balance at December 31, 2019
      —        $  —          39,153,195     $ 4      $
 
 104,658     $
(4
)
   $ 388,271     $ 1,978      $ 494,907  
Cumulative effect of a change in accounting principle, net of tax
      —          —          —         —          —         —         (33 )      —          (33 ) 
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
     
 
 
  
Balance at January 1, 2020, as adjusted
      —          —          39,153,195       4        104,658       (4 )      388,238       1,978        494,874  
Net and comprehensive income
      —          —          —         —          —         —         19,216       973        20,189  
Stock-based award activity
                                                                             
Stock-based compensation
      —          —          —         —          7,551       —         —         —          7,551  
Shares issued pursuant to employee stock purchase plan
      —          —          15,923       —          371       —         —         —          371  
Issuance of common stock for vesting of restricted stock units
      —          —          248,391       —          —         —         —         —          —    
Issuance of common stock for unvested restricted stock awards
      —          —          19,516       —          —         —         —         —          —    
Shares withheld related to net share settlement of stock-based awards
      —          —          (60,548 )      —          (1,955 )      —         —         —          (1,955 ) 
Reduction of stock notes receivable from employees
      —          —          —         —          —         4       —         —          4  
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
     
 
 
  
Balance as of September 30, 2020
      —        $ —          39,376,477     $ 4      $ 110,625     $  —       $ 407,454     $ 2,951      $ 521,034  
    
 
 
     
 
 
     
 
 
    
 
 
     
 
 
    
 
 
    
 
 
    
 
 
     
 
 
  
See accompanying notes to condensed consolidated financial statements.
 
6
Table of Contents
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
     Nine Months Ended
September 30,		  
     2021     2020  
Cash flows from operating activities
                 
Net income
    $ 80,468     $ 19,216  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
                 
Depreciation and amortization
      8,806       7,822  
Amortization of
right-of-use
assets
      17,773       16,883  
Credit loss recovery
      25       55  
Stock-based compensation
      7,653       7,551  
Deferred taxes, net
      (2,847 )      6,050  
Unrealized foreign exchange (gains) losses
      (298 )      276  
Net realized gains on marketable debt securities,
available-for-sale
      (78 )      (180 ) 
Other
non-cash
items
      361       930  
Changes in operating assets and liabilities:
                 
Commissions receivable
      (5,297 )      (1,928 ) 
Prepaid expenses
      925       1,988  
Advances and loans
      (2,434 )      (36,905 ) 
Other assets
      (1,076 )      (1,087 ) 
Accounts payable and other liabilities
      4,020       (1,373 ) 
Income tax receivable/payable
      1,932       (5,024 ) 
Accrued bonuses and other employee related expenses
      11,223       (12,145 ) 
Deferred compensation and commissions
      (4,499 )      (17,593 ) 
Operating lease liabilities
      (15,889 )      (13,504 ) 
Other liabilities
      (1,175 )      702  
    
 
 
    
 
 
  
Net cash provided by (used in) operating activities
      99,593       (28,266 ) 
    
 
 
    
 
 
  
Cash flows from investing activities
                 
Acquisition of businesses, net of cash received
      229       (11,821 ) 
Purchases of marketable debt securities,
available-for-sale
      (291,063 )      (179,221 ) 
Proceeds from sales and maturities of marketable debt securities,
available-for-sale
      248,540       175,226  
Purchases of securities,
held-to-maturity
      (9,500 )      —    
Issuances of employee notes receivable
      (40 )      (243 ) 
Payments received on employee notes receivable
      290       90  
Purchase of property and equipment
      (4,238 )      (5,412 ) 
    
 
 
    
 
 
  
Net cash used in investing activities
      (55,782 )      (21,381 ) 
    
 
 
    
 
 
  
Cash flows from financing activities
                 
Taxes paid related to net share settlement of stock-based awards
      (3,230 )      (1,955 ) 
Proceeds from issuance of shares pursuant to employee stock purchase plan
      369       371  
Principal payments on notes payable to former stockholders
      —         (6,564 ) 
Principal payments on stock appreciation rights liability
      (1,481 )      (1,251 ) 
Principal payments on contingent and deferred consideration
      (1,739 )      (420 ) 
    
 
 
    
 
 
  
Net cash used in financing activities
      (6,081 )      (9,819 ) 
    
 
 
    
 
 
  
Effect of currency exchange rate changes on cash and cash equivalents
      125       (92 ) 
    
 
 
    
 
 
  
Net increase (decrease) in cash and cash equivalents
      37,855       (59,558 ) 
Cash and cash equivalents at beginning of period
      243,152       232,670  
    
 
 
    
 
 
  
Cash and cash equivalents at end of period
    $ 281,007     $ 173,112  
    
 
 
    
 
 
  
     
Supplemental disclosures of cash flow information
                 
Interest paid during the period
    $ 734     $ 1,208  
    
 
 
    
 
 
  
Income taxes paid, net
    $ 30,168     $ 6,849  
    
 
 
    
 
 
  
See accompanying notes to condensed consolidated financial statements.
 
7
Table of Contents
MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
1.
Description of Business, Basis of Presentation and Recent Accounting Pronouncements
Description of Business
Marcus & Millichap, Inc. (the “Company”, “Marcus & Millichap”, or “MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of September 30, 2021, MMI operates 82 offices in the United States and Canada through its wholly-owned subsidiaries, including the operations of Marcus & Millichap Capital Corporation.
Reorganization and Initial Public Offering
MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) to
spin-off
its majority-owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”). Prior to the initial public off
e
ring (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result, MMREIS became a wholly-owned subsidiary of MMI. Thereafter, MMC distributed 80.0% of the shares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of indebtedness of MMC. MMI completed its IPO in November 2013.
Basis of Presentation
The financial information presented in the accompanying unaudited condensed consolidated financial statements, has been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form
10-Q
and
Article 10-01
of
Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto, including the Company’s accounting policies for the year ended December 31, 2020 included in the Company’s Annual Report on Form
10-K
filed on March 1, 2021 with the SEC. The results of the nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, for other interim periods or for future years.
Considerations Related to the
COVID-19
Pandemic
T
he Company may continue to experience operational and financial impacts due to the ongoing
COVID-19
pandemic. Actual results may differ from the Company’s current estimates and historical trends due to the uncertainty around the economic impact and spread of
COVID-19,
as well as the impact of vaccine mandates on our workforce.
See Note 5 – “Acquisitions, Goodwill and Other Intangible Assets” and Note 8 – “Fair Value Measurements” for further discussions on the potential impacts of
COVID-19.
Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and cash equivalents, investments in marketable debt securities,
available-for-sale,
security deposits (included under other assets,
non-current)
and commissions receivable, net. Cash and cash equivalents are placed with high-credit quality financial institutions and invested in high-credit quality money market funds and commercial paper. Concentrations and ratings of marketable debt securities,
available-for-sale
are limited by the approved investment policy.
 
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds that represent amounts recorded as cash and cash equivalents. The Company historically has not experienced any significant losses related to cash and cash equivalents.
The Company derives its revenues from a broad range of real estate investors, owners, and users in the United States and Canada, none of which individually represents a significant concentration of credit risk. The Company maintains allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For the three and nine months ended September 30, 2021 and 2020, no transaction represented 10% or more of total revenues. Further, while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk.
During each of the three and nine months ended September 30, 2021, the Company’s Canadian operations represented 2.2% of total revenues, respectively. During the three and nine months ended September 30, 2020, the Company’s Canadian operations represented 1.50% and 1.9% of total revenues, respectively.
During each of the three and nine months ended September 30, 2021 and 2020, no office represented 10% or more of total revenues.
Recent Accounting Pronouncements
Pending Adoption
In March 2020, the FASB issued Accounting Standards Update (“ASU”)
No. 2020-04,
Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
(“ASU
2020-04”).
ASU
2020-04
provides temporary optional exceptions to the guidance in U.S. GAAP on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). ASU
2020-04
is effective for all entities upon issuance and may be applied prospectively to contract modifications through December 31, 2022. The guidance applies to the Company’s Credit Agreement (see Note 13 – “Commitments and Contingencies”), which references LIBOR, and will generally allow it to account for and present a modification as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. As of September 30, 2021, the Company has not drawn funds from the credit facility. The Company continues to evaluate the impact of this new standard but does not expect ASU
2020-04
to have a material effect on its condensed consolidated financial statements.
 
2.
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
 
     September 30,
2021		      December 31,
2020		  
Computer software and hardware equipment
    $ 32,766      $ 30,955  
Furniture, fixtures and equipment
      23,946        23,418  
Less: accumulated depreciation and amortization
      (33,822 )       (30,937 ) 
    
 
 
     
 
 
  
     $ 22,890      $ 23,436  
    
 
 
     
 
 
  
During the nine months ended September 30, 2021 and 2020, the Company
wrote-off
approximately $2.5 million and $968,000, respectively, of fully depreciated computer software and hardware equipment and furniture, fixtures and equipment.
As of September 30, 2021 and 2020, property and equipment additions incurred but not yet paid included in accounts payable and other liabilities were $786,000 and $430,000, respectively.
 
3.
Operating Leases
The Company has operating leases for all of its facilities and autos. As of September 30, 2021 and December 31, 2020, operating lease
right-of-use
(“ROU”) assets were $143.3
 million and $126.9
 million, respectively, and the related accumulated amortization was $58.0
 million and $42.9
 million,
respectively.
 
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
The operating lease cost, included in selling, general and administrative expense in the condensed consolidated statement of net and comprehensive income, consisted of the following (in thousands):
 
 
  
Three Months Ended
September 30,
 
  
Nine Months Ended
September 30,
 
 
  
2021
 
  
2020
 
  
2021
 
  
2020
 
Operating lease cost:
  
  
  
  
Lease cost
(1)
    $
 
 6,549      $
 
 6,355      $
 
 19,650      $
 
 18,959  
Variable lease cost
(2)
      1,355        1,485        3,996        4,096  
Sublease income
      (206 )       (50 )       (258 )       (216 ) 
    
 
 
     
 
 
     
 
 
     
 
 
  
     $ 7,698      $ 7,790      $ 23,388      $ 22,839  
    
 
 
     
 
 
     
 
 
     
 
 
  
 
(1)
Includes short-term lease cost and ROU asset amortization.
(2)
Primarily relates to common area maintenance, property taxes, insurance, utilities and parking.
Maturities of lease liabilities by year consisted of the following (in thousands):
 
 
  
September 30,
2021
 
Remainder of 2021
    $ 5,958  
2022
      20,560  
2023
      17,256  
2024
      14,769  
2025
      12,462  
Thereafter
      15,603  
    
 
 
  
Total future minimum lease payments
      86,608  
Less imputed interest
      (5,893 ) 
    
 
 
  
Present value of operating lease liabilities
    $ 80,715  
    
 
 
  
Supplemental cash flow information and noncash activity related to the operating leases consisted of the following (in thousands):
 
 
  
Nine Months Ended
September 30,
 
 
  
2021
 
  
2020
 
Operating cash flow information:
  
  
Cash paid for amounts included in the measurement of operating lease liabilities
    $
 
 17,697      $
 
 15,566  
Noncash activity:
                  
ROU assets obtained in exchange for operating lease liabilities
    $ 18,003      $ 7,771  
Tenant improvements owned by lessor related to ROU assets
(1)
    $ 1,005      $ 949  
 
(1)
Reclassification from other assets current.
Other information related to the operating leases consisted of the following:
 
 
  
September 30, 2021
 
 
December 31, 2020
 
Weighted average remaining operating lease term
      4.71 years       4.70 years  
Weighted average discount rate
      2.9 %      3.1 % 
 
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
4.
Investments in Marketable Debt Securities, Available for Sale
Amortized cost, allowance for credit losses, gross unrealized gains/losses in accumulated other comprehensive income/loss and fair value of marketable debt securities,
available-for-sale,
by type of security consisted of the following (in thousands):
 
 
  
September 30, 2021
 
 
  
Amortized
Cost
 
  
Allowance
for Credit
Losses
 
  
Gross
Unrealized
Gains
 
  
Gross
Unrealized
Losses
 
 
Fair
Value
 
Short-term investments:
  
  
  
  
 
U.S. treasuries
    $ 19,984      $ —        $ 7      $ —       $ 19,991  
Corporate debt
      96,868        —          43        —         96,911  
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
     $ 116,852      $ —        $ 50      $ —       $ 116,902  
    
 
 
     
 
 
     
 
 
     
 
 
    
 
 
  
Long-term investments:
                                            
U.S. treasuries
    $ 86,893      $ —        $ 190      $ (26 )    $ 87,057  
U.S. government sponsored entities
      797        —          27        (2 )      822  
Corporate debt
      33,845        —          1,422        (33 )