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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