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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 March 31, 2023
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)
__________________________
Delaware35-2478370
(State or Other Jurisdiction of
Incorporation or Organization)		(I.R.S. Employer
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 classTrading 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. o
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 May 2, 2023 was 38,476,404 shares.

Table of Contents
MARCUS & MILLICHAP, INC.
TABLE OF CONTENTS
Page
5
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)
March 31, 2023
(unaudited)		December 31,
2022
Assets
Current assets:
Cash, cash equivalents, and restricted cash$228,026 $235,873 
Commissions receivable9,782 8,453 
Prepaid expenses8,740 9,411 
Income tax receivable18,053 8,682 
Marketable debt securities, available-for-sale (includes amortized cost of $133,178 and $254,682 at March 31, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)
132,520 253,434 
Advances and loans, net3,045 4,005 
Other assets, current5,052 7,282 
Total current assets405,218 527,140 
Property and equipment, net28,223 27,644 
Operating lease right-of-use assets, net107,891 87,945 
Marketable debt securities, available-for-sale (includes amortized cost of $73,823 and $72,819 at March 31, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)
70,493 68,595 
Assets held in rabbi trust9,953 9,553 
Deferred tax assets, net37,427 41,321 
Goodwill and other intangible assets, net54,551 55,696 
Advances and loans, net179,443 169,955 
Other assets, non-current17,293 15,859 
Total assets$910,492 $1,003,708 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses$12,392 $11,450 
Deferred compensation and commissions46,253 75,321 
Operating lease liabilities16,911 16,984 
Accrued bonuses and other employee related expenses6,578 38,327 
Other liabilities, current20,781 9,933 
Total current liabilities102,915 152,015 
Deferred compensation and commissions34,422 64,461 
Operating lease liabilities82,768 65,109 
Other liabilities, non-current8,229 8,614 
Total liabilities228,334 290,199 
Commitments and contingencies— — 
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and outstanding shares – none at March 31, 2023 and December 31, 2022, respectively
— — 
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 38,876,354 and 39,255,838 at March 31, 2023 and December 31, 2022, respectively
4 4 
Additional paid-in capital132,905 131,541 
Retained earnings551,696 585,581 
Accumulated other comprehensive loss(2,447)(3,617)
Total stockholders’ equity682,158 713,509 
Total liabilities and stockholders’ equity$910,492 $1,003,708 
See accompanying notes to condensed consolidated financial statements.
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MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three Months Ended
March 31,
20232022
Revenue:
Real estate brokerage commissions$135,046 $286,909 
Financing fees15,868 26,453 
Other revenue3,878 6,102 
Total revenue154,792 319,464 
Operating expenses:
Cost of services95,427 196,768 
Selling, general and administrative72,219 74,535 
Depreciation and amortization3,207 3,911 
Total operating expenses170,853 275,214 
Operating (loss) income(16,061)44,250 
Other income, net4,810 450 
Interest expense(215)(160)
(Loss) income before (benefit) provision for income taxes(11,466)44,540 
(Benefit) provision for income taxes(5,633)11,757 
Net (loss) income$(5,833)$32,783 
(Loss) earnings per share:
Basic$(0.15)$0.82 
Diluted$(0.15)$0.81 
Weighted average common shares outstanding:
Basic39,20039,989
Diluted39,20040,474
See accompanying notes to condensed consolidated financial statements.





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MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(in thousands)
(Unaudited)
Three Months Ended
March 31,
20232022
Net (loss) income$(5,833)$32,783 
Other comprehensive income (loss):
Marketable debt securities, available-for-sale:
Change in net unrealized gains (losses)1,116 (2,357)
Less: reclassification adjustment for net losses (gains) included in other income, net— (84)
Net change, net of tax of $366 and $(838) for the three months ended March 31, 2023, and 2022, respectively
1,116 (2,441)
Foreign currency translation gain (loss), net of tax of $0 for each of the three months ended March 31, 2023 and 2022, respectively
54 (59)
Total other comprehensive income (loss)1,170 (2,500)
Comprehensive (loss) income$(4,663)$30,283 
See accompanying notes to condensed consolidated financial statements.
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MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for shares)
(Unaudited)
Three Months Ended March 31, 2023
Preferred StockCommon StockAdditional
Paid-in
Capital 		Retained
Earnings		Accumulated
Other
Comprehensive
(Loss) Income 		Total
SharesAmountSharesAmount
Balance at December 31, 2022— $— 39,255,838 $4 $131,541 $585,581 $(3,617)$713,509 
Net and comprehensive (loss) income— — — — — (5,833)1,170 (4,663)
Dividend— — — — — (10,284)— (10,284)
Stock-based award activity       
Stock-based compensation— — — — 5,011 — — 5,011 
Issuance of common stock for vesting of restricted stock units— — 293,873 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (113,434)— (3,647)— — (3,647)
Repurchases of common stock— — (559,923)— — (17,768)— (17,768)
Balance as of March 31, 2023— $— 38,876,354 $4 $132,905 $551,696 $(2,447)$682,158 
Three Months Ended March 31, 2022
Preferred StockCommon StockAdditional
Paid-In
Capital		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Total
SharesAmountSharesAmount
Balance at December 31, 2021— $— 39,692,373$4 $121,844 $573,546 $910 $696,304 
Net and comprehensive income (loss)— — — — — 32,783 (2,500)30,283 
Dividend— — — — — (52,136)— (52,136)
Stock-based award activity
Stock-based compensation— — — — 3,856 — — 3,856 
Issuance of common stock for vesting of restricted stock units— — 167,263 — — — — — 
Shares withheld related to net share settlement of stock-based awards— — (64,237)— (2,918)— — (2,918)
Balance as of March 31, 2022— $— 39,795,399$4 $122,782 $554,193 $(1,590)$675,389 
See accompanying notes to condensed consolidated financial statements.
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MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended March 31,
20232022
Cash flows from operating activities
Net (loss) income$(5,833)$32,783 
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization3,207 3,911 
Noncash lease expense6,003 5,961 
Credit loss recovery(1)(167)
Stock-based compensation5,011 3,856 
Deferred taxes, net3,529 1,104 
Unrealized foreign exchange losses (gains)65 (151)
Net realized gains on marketable debt securities, available-for-sale— (113)
Other non-cash items52 11 
Changes in operating assets and liabilities:
Commissions receivable(1,318)3,430 
Prepaid expenses671 2,850 
Advances and loans(8,271)(25,084)
Other assets(2,961)(794)
Accounts payable and accrued expenses2,390 1,308 
Income tax receivable and payable(9,371)10,189 
Accrued bonuses and other employee related expenses(31,750)(33,990)
Deferred compensation and commissions(57,605)(65,384)
Operating lease liabilities(4,571)(5,031)
Other liabilities(454)(2,224)
Net cash used in operating activities(101,207)(67,535)
Cash flows from investing activities
Acquisition of businesses, net of cash received— (12,500)
Purchases of marketable debt securities, available-for-sale(67,042)(40,551)
Proceeds from sales and maturities of marketable debt securities, available-for-sale187,258 61,970 
Issuances of employee notes receivable(10)(71)
Payments received on employee notes receivable13 18 
Purchase of property and equipment(2,863)(1,883)
Net cash provided by investing activities117,356 6,983 
Cash flows from financing activities
Taxes paid related to net share settlement of stock-based awards(3,647)(2,918)
Dividends paid(441)— 
Principal payments on stock appreciation rights liability(1,945)(1,761)
Principal payments on deferred and contingent consideration(1,283)(1,264)
Cash paid for stock repurchases(16,699)— 
Net cash used in financing activities(24,015)(5,943)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash19 50 
Net decrease in cash, cash equivalents, and restricted cash(7,847)(66,445)
Cash, cash equivalents, and restricted cash at beginning of period235,873 382,140 
Cash, cash equivalents, and restricted cash at end of period$228,026 $315,695 
Supplemental cash flow disclosures:  
Interest paid during the period$393 $499 
Income taxes paid, net$209 $464 
Supplemental disclosures of noncash investing and financing activities:  
Unpaid purchases of property and equipment$510 $406 
Right-of-use assets obtained in exchange for operating lease liabilities$25,910 $7,771 
Measurement period adjustment of acquisition related contingent consideration$— $66 
See accompanying notes to condensed consolidated financial statements.
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1.    Description of Business and Basis of Presentation
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 March 31, 2023, MMI operates 80 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 offering (“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 on November 5, 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, 2022 included in the Company’s Annual Report on Form 10-K filed on February 28, 2023 with the SEC. The results of the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, for other interim periods or for future years.
Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All 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, the related disclosures at the date of the condensed consolidated financial statements and the reported amounts of revenue 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, cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, security deposits (included under other assets, non-current) and commissions receivable, net. Cash, cash equivalents, and restricted cash 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
(Unaudited)
To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds that represent amounts recorded as cash, cash equivalents, and restricted cash. The Company historically has not experienced any significant losses related to cash, cash equivalents, and restricted cash.
In September 2021, the Company entered into a Strategic Alliance (“Strategic Alliance”) with M&T Realty Capital Corporation (“MTRCC”) pursuant to which the Company has agreed to provide loan opportunities that may be funded through MTRCC’s Delegated Underwriting and Servicing Agreement (“DUS Agreement”) with the Federal National Mortgage Association (“Fannie Mae”) that requires MTRCC to guarantee a portion of each loan funded. On a loan-by-loan basis, the Company, at its option, can indemnify a portion of MTRCC’s guarantee obligation of loan opportunities presented to and closed by MTRCC through the DUS Agreement. The Company manages and limits the concentration of risk related to the guarantees assumed by monitoring the underlying property type, geographic location, credit of the borrowers, underlying debt service coverage, and loan to value ratios.
The Company derives its revenue 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 months ended March 31, 2023 and 2022, no transaction represented 10% or more of total revenue. 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 the three months ended March 31, 2023 and 2022, the Company’s Canadian operations represented 2.9% and 2.2% of total revenue, respectively.
During each of the three months ended March 31, 2023 and 2022, no office represented 10% or more of total revenue.
Revenue Recognition
The Company generates real estate brokerage commissions by acting as a broker for real estate owners or investors seeking to buy or sell interests in commercial properties and generates financing fees from securing financing on purchase transactions, from refinancing its clients’ existing mortgage debt and other ancillary fees associated with financing activities, including, but not limited to, debt and equity advisory services, loan sales, due diligence services, guarantee fees, and loan performance fees.
Real Estate Brokerage Commissions
Contracts for representing buyers and sellers of real estate are usually negotiated on a transaction-by-transaction basis. The consideration associated with the successful outcome remains constrained until the completion of a transaction which occurs at the close of escrow. At that time, the Company's performance is complete, and revenue is recorded.
Financing Fees
Contracts for representing potential borrowers are usually negotiated on a transaction-by-transaction basis. The consideration associated with the successful outcome remains constrained until the completion of a transaction which occurs at the time the loan closes. At that time, the Company recognizes revenue related to the transaction. The Company’s fee arrangements, with an exception for guarantee obligations, do not include terms or conditions that require the Company to perform any service or fulfill any obligation once the loan closes.
Loan Performance Fees - For loans originated through the Strategic Alliance with MTRCC, the Company receives variable consideration in the form of loan performance fees based on a portion of the servicing fees expected to be received under the servicing contract for servicing the loan. As the Company is not obligated to perform any servicing functions and has no further obligations related to the transaction giving rise to the loan performance fees, the estimated value of the loan performance fees to be received is recorded at the time the loan closes and are collected over the estimated term of the related loan. Any changes in the estimate of loan performance fees to be received are recorded in revenue in the period the estimate changes.
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Guarantee Obligations - For certain loans originated through the Strategic Alliance with MTRCC, the Company may agree, at its option, to indemnify MTRCC for a portion of MTRCC’s obligations for loans sold to Fannie Mae. For these loans, the Company allocates a portion of the transaction price and records a loan guarantee obligation based on its fair value. Revenue for this stand-ready obligation is recorded on a straight-line basis over the term of the estimated guarantee period and is recorded in financing fees in the condensed consolidated statements of operations. The guarantee obligation is capped at 16.7% of any unpaid principal balance in excess of the collateral securing such loan. For these loans, the Company is required to pledge cash in a restricted bank account in support of the guarantee obligation. The Company records an allowance for estimated losses related to the loans subject to the guarantee considering the risk characteristics of the loan, the loan's risk rating, historical loss experience, potential adverse situations affecting individual loans and other forecasted information as appropriate.
Mortgage Servicing - The Company recognized mortgage servicing revenue upon the acquisition of a servicing contract. The Company recorded servicing fees when earned, provided the loans were current and the debt service payments were made by the borrowers. As of September 30, 2022, the Company no longer owns any mortgage servicing rights.
Other Revenue
Other revenue includes fees generated from consulting and advisory services, as well as referral fees from other real estate brokers, and fees are recognized when services are provided, or upon closing of the transaction.
2.    Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
March 31,
2023		December 31,
2022
Computer software and hardware equipment$44,786 $42,617 
Furniture, fixtures and equipment26,906 26,453 
Less: accumulated depreciation and amortization(43,469)(41,426)
$28,223 $27,644 
Depreciation expense for property and equipment was $2.0 million and $1.9 million for the three months ended March 31, 2023 and 2022, respectively.
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3.    Investments in Marketable Debt Securities, Available-for-Sale
Amortized cost, allowance for credit losses, gross unrealized gains (losses) in accumulated other comprehensive (loss) income and fair value of marketable debt securities, available-for-sale, by type of security consisted of the following (in thousands):
March 31, 2023
Amortized
Cost		Allowance
for Credit
Losses		Gross
Unrealized
Gains		Gross
Unrealized
Losses 		Fair
Value
Short-term investments:
U.S. treasuries$56,992 $— $8 $(561)$56,439 
Corporate debt75,935 — 5 (97)75,843 
Asset-backed securities (“ABS”) and other251 — — (13)$238 
$133,178 $— $13 $(671)$132,520 
Long-term investments:
U.S. treasuries$18,083 $— $— $(501)$17,582 
U.S. government sponsored entities586 — — (56)530 
Corporate debt45,869 — 72 (2,368)43,573 
ABS and other9,285 — 10 (487)8,808 
$73,823 $— $82 $(3,412)$70,493 
December 31, 2022
Amortized
Cost		Allowance
for Credit
Losses		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Short-term investments:
U.S. treasuries$135,688 $— $14 $(1,153)$134,549 
Corporate debt118,135 — 1 (95)118,041 
ABS and other859 — — (15)$844 
$254,682 $— $15 $(1,263)$253,434 
Long-term investments:    
U.S. treasuries$21,434 $— $— $(719)$20,715 
U.S. government sponsored entities602 — — (66)536 
Corporate debt44,214 — 21 (2,877)41,358 
ABS and other6,569 — — (583)5,986 
$72,819 $— $21 $(4,245)$68,595 
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company’s investments in marketable debt securities, available-for-sale, that have been in a continuous unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the following (in thousands):
March 31, 2023
Less than 12 months 12 months or greater Total
Fair
Value		Gross
Unrealized
Losses 		Fair
Value		Gross
Unrealized
Losses 		Fair
Value		Gross
Unrealized
Losses
U.S. treasuries$40,966 $(740)$10,973 $(322)$51,939 $(1,062)
U.S. government sponsored entities— — 528 (56)528 (56)
Corporate debt81,967 (500)22,814 (1,965)104,781 (2,465)
ABS and other2,222 (25)5,699 (475)7,921 (500)
$125,155 $(1,265)$40,014 $(2,818)$165,169 $(4,083)

December 31, 2022
Less than 12 months 12 months or greater Total
Fair
Value		Gross
Unrealized
Losses 		Fair
Value		Gross
Unrealized
Losses 		Fair
Value		Gross
Unrealized
Losses
U.S. treasuries$73,055 $(1,232)$66,144 $(640)$139,199 $(1,872)
U.S. government sponsored entities447 (46)87 (20)534 (66)
Corporate debt130,816 (1,909)10,681 (1,063)141,497 (2,972)
ABS and other4,710 (314)2,091 (284)6,801 (598)
$209,028 $(3,501)$79,003 $(2,007)$288,031 $(5,508)
Gross realized gains and losses from the sales of the Company’s marketable debt securities, available-for-sale, consisted of the following (in thousands):
Three Months Ended
March 31,
20232022
Gross realized gains (1)
$— $113 
Gross realized losses (1)
$— $— 
(1)Recorded in other income, net in the condensed consolidated statements of operations. The cost basis of securities sold were determined based on the specific identification method.
The Company invests its excess cash in a diversified portfolio of fixed and variable rate debt securities to meet current and future cash flow needs. All investments are made in accordance with the Company’s approved investment policy. As of March 31, 2023, the portfolio had a weighted average credit rating of AA and a weighted term to contractual maturity of 1.9 years, with 209 securities in the portfolio representing an unrealized aggregate loss of $4.1 million or 2% of amortized cost, and a weighted average credit rating of AA.
As of March 31, 2023, the Company performed an impairment analysis and determined an allowance for credit losses was not required. The Company determined that it did not have an intent to sell and it was not more likely than not that the Company would be required to sell any security based on its current liquidity position, or to maintain compliance with its investment policy, specifically as it relates to minimum credit ratings. The Company evaluated the securities with an unrealized loss considering severity of loss, credit ratings, specific credit events during the period since acquisition, overall likelihood of default, market sector, potential impact from the current economic environment, including interest rates, geopolitical unrest and a review of an issuer’s and securities’ liquidity and financial strength, as needed. The Company concluded that it would receive all scheduled interest and principal payments. The Company, therefore, determined
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
qualitatively that the unrealized loss was related to changes in interest rates and other market factors and therefore no allowance for credit losses was required.
Amortized cost and fair value of marketable debt securities, available-for-sale, by contractual maturity consisted of the following (in thousands, except weighted average data):
March 31, 2023December 31, 2022
Amortized
 Cost		Fair ValueAmortized
 Cost		Fair Value
Due in one year or less$133,179 $132,520 $254,683 $253,434 
Due after one year through five years55,922 54,034 56,507 54,169 
Due after five years through ten years14,067 12,867 13,435 11,850 
Due after ten years3,833 3,592 2,876 2,576 
$207,001 $203,013 $327,501 $322,029 
Weighted average contractual maturity1.9 years1.1 years
Actual maturities may differ from contractual maturities because certain issuers have the right to prepay certain obligations with or without prepayment penalties.
4.    Acquisitions, Goodwill and Other Intangible Assets
Goodwill is recorded as part of the Company’s acquisitions and primarily arose from the acquired assembled workforce and brokerage and financing sales platforms. The Company expects all of the goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent and deferred consideration to be determined once the cash payments are made to settle any contingent and deferred consideration. The goodwill resulting from acquisitions is allocated to the Company’s one reporting unit.
Goodwill and intangible assets, net consisted of the following (in thousands):
March 31, 2023December 31, 2022
Gross
Carrying
Amount		Accumulated
Amortization 		Net Book
Value		Gross
Carrying
Amount		Accumulated
Amortization 		Net Book
Value
Goodwill and intangible assets:      
Goodwill$37,931 $— $37,931 $37,914 $— $37,914 
Intangible assets (1)
32,304 (15,684)16,620 32,287 (14,505)17,782 
$70,235 $(15,684)$54,551 $70,201 $(14,505)$55,696 
(1)
Total weighted average amortization period was 4.1 years and 4.5 years as of March 31, 2023 and December 31, 2022, respectively.
The Company recorded amortization expense for intangible assets of $1.2 million for both the three months ended March 31, 2023 and 2022.
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The changes in the carrying amount of goodwill consisted of the following (in thousands):
Three Months Ended March 31, 2023
Beginning balance$37,914 
Additions from acquisitions — 
Impact of foreign currency translation17 
Ending balance$37,931 
In the three month period ended March 31, 2022, the Company recorded $4.0 million of goodwill in connection with an acquisition.
Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the following (in thousands):
March 31, 2023
Remainder of 2023$3,435 
20244,091 
20253,873 
20262,156 
20271,736 
Thereafter1,329 
$16,620 
The Company evaluates goodwill for impairment annually in the fourth quarter. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing, which indicate that it is more likely than not an impairment loss has occurred. The Company evaluates its intangible assets that have finite useful lives whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable.
As of March 31, 2023, the Company considered the impact of economic conditions and evaluated its goodwill and intangible assets for impairment testing. The Company estimated the recoverability of the intangible assets by comparing the carrying amount of each asset to the future undiscounted cash flows that the Company expects the asset to generate. The sum of the undiscounted expected future cash flows was greater than the carrying amount of the intangible assets. The Company concluded that as of March 31, 2023, there was no impairment of its intangible assets or goodwill.
5.    Selected Balance Sheet Data
Allowances on Advances and Loans
Allowance for credit losses for advances and loans as of March 31, 2023 and December 31, 2022 was $848,000 and $791,000, respectively.
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MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other Assets
Other assets consisted of the following (in thousands):
CurrentNon-Current
March 31,
2023		December 31,
2022		March 31,
2023		December 31,
2022
Security deposits$— $— $1,645 $1,625 
Employee notes receivable1 6 — — 
Securities, held-to-maturity(1)
— — 9,500 9,500 
Loan performance fee receivable1,063 766 5,670 4,261 
Prepaid lease costs and other3,988 6,510 478 473 
$5,052 $7,282 $17,293 $15,859 
(1)Securities, held-to-maturity, are expected to mature on September 1, 2024 and accrue interest based on the 1-year treasury rate.
Deferred Compensation and Commissions
Deferred compensation and commissions consisted of the following (in thousands):
CurrentNon-Current
March 31,
2023		December 31,
2022		March 31,
2023		December 31,
2022
Stock appreciation rights (“SARs”) liability (1)
$2,480 $2,323 $10,847 $13,137 
Commissions payable to investment sales and financing professionals42,648 72,247 16,384 45,156 
Deferred compensation liability (1)
527 493 7,191 6,168 
Other598 258 — — 
$46,253 $75,321 $34,422 $64,461 
(1)The SARs and deferred compensation liabilities become subject to payout at the time the participant is no longer considered a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to participants within the next twelve months have been classified as current.
SARs Liability
Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for the SARs was frozen as of March 31, 2013 and was transferred to MMI through a capital distribution. The SARs liability will be settled with each participant in ten annual installments in January of each year upon retirement or termination from service, or in full upon consummation of a change in control of the Company.
Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014, at a rate based on the 10-year treasury note, plus 2%. The rate resets annually. The rates at January 1, 2023 and 2022 were 5.79% and 3.63%, respectively. MMI recorded interest expense related to this liability of $190,000 and $135,000 for the three months ended March 31, 2023 and 2022, respectively.
Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During the three months ended March 31, 2023 and 2022, the Company made total payments of $2.3 million and $2.2 million, respectively, consisting of principal and accumulated interest.
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Table of Contents
MARCUS & MILLICHAP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Commissions Payable
Certain investment sales and financing professionals can earn additional commissions after meeting certain annual revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned as they relate to specific transactions closed. The Company may defer payment of certain commissions, at its election, for up to three years. Commissions that are not expected to be paid within twelve months are classified as long-term.
Deferred Compensation Liability
A select group of management is eligible to participate in the Marcus & Millichap Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a non-qualified deferred compensation plan that is intended to comply with Section 409A of the Internal Revenue Code and permits participants to defer compensation up to the limits set forth in the Deferred Compensation Plan. Amounts are paid out generally when the participant is no longer a service provider; however, an in-service payout election is available to participants. Participants may elect to receive payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred Compensation Plan through Company-owned variable life insurance policies. The Deferred Compensation Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company asset in a rabbi trust, which is recorded in assets held in rabbi trust in the accompanying condensed consolidated balance sheets. The assets in the trust are restricted unless the Company becomes insolvent, in which case the trust assets are subject to the claims of the Company’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next twelve months for participants that have separated from service or elected an in-service payout have been classified as current. During the three months ended March 31, 2023 and 2022, the Company made total payments to participants of $48,000 and $365,000 respectively.
The assets held in the rabbi trust are carried at the cash surrender value of the variable life insurance policies, which represents its fair value. The net change in the carrying value of the assets held in the rabbi trust and the net change in the carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust expenses, consisted of the following (in thousands):
Three Months Ended
March 31,
20232022
Increase (decrease) in the carrying value of the assets held in the rabbi trust (1)
$458 $(525)