Marcus & Millichap, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation Plans

Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

12.	Stock-Based Compensation Plans

2013 Omnibus Equity Incentive Plan

The Company’s board of directors adopted the 2013 Plan, which became effective upon the Company’s IPO. In February 2017, the board of directors amended the 2013 Plan, which was approved by the Company’s stockholders in May 2017. Grants are made from time to time by the compensation committee of the Company’s board of directors at its discretion subject to certain restrictions as to the number and value of shares that may be granted to any individual. In addition,

non-employee

directors receive annual grants under a director compensation policy. At December 31, 2019, there were 5,255,735 shares available for future grants under the 2013 Plan.

Awards Granted and Settled

Under the 2013 Plan, the Company has issued restricted stock awards (“RSAs”) to

non-employee

directors and restricted stock units (“RSUs”) to employees and independent contractors. RSAs vest in equal annual installments over a

one-year

or three-year period from the date of grant. All RSUs vest in equal annual installments over a five-year period from the date of grant or earlier as approved by the compensation committee of the Company’s board of directors. Any unvested awards are canceled upon termination as a service provider. Awards accelerate upon death subject to approval by the compensation committee. As of December 31, 201

, there were no issued or outstanding options, SARs, performance units or performance share awards under the 2013 Plan.

During the year ended December 31, 2019, 378,194 shares of RSUs were vested and 73,690 shares of common stock were withheld to pay applicable required employee statutory withholding taxes based on the market value of the shares on the vesting date. The shares withheld for taxes were returned to the share reserve and are available for future issuance in accordance with provisions of the 2013 Plan. During the year ended December 31, 2019, there were no DSUs that

settled

Outstanding Awards

Activity under the 2013 Plan consisted of the following (dollars in thousands, except weighted average per share data):


	RSA Grants to Non-employee Directors			RSU Grants to Employees			RSU Grants to Independent Contractors			Total			Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2017 (1)		30,732			500,859			450,264			981,855		$	23.90
Granted		12,852			142,760			102,466			258,078			34.94
Vested		(16,488	)		(146,122	)		(171,114	)		(333,724	)		22.31
Transferred		—			(23,755	)		23,755			—			30.69
Forfeited/canceled		—			(1,960	)		(12,674	)		(14,634	)		30.17

Nonvested shares at December 31, 2018 (1)		27,096			471,782			392,697			891,575		$	27.59
Granted		12,806			260,274			82,050			355,130			38.51
Vested		(22,422	)		(186,311	)		(191,883	)		(400,616	)		24.29
Transferred		—			(8,136	)		8,136			—			29.68
Forfeited/canceled		—			(12,494	)		(33,520	)		(46,014	)		30.65

Nonvested shares at December 31, 2019 (1)		17,480			525,115			257,480			800,075		$	33.91

Unrecognized stock-based compensation expense as of December 31, 2019 (2)	$	234		$	13,959		$	7,821		$	22,014

Weighted average remaining vesting period (years) as of December 31, 2019		0.39			3.61			3.34			3.48

(1)	Nonvested RSUs will be settled through the issuance of new shares of common stock.

(2)	The total unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.48 years.

The aggregate fair value of RSUs and RSAs that vested were $14.6 million, $11.1 million and $7.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.

The fair value of fully vested DSUs that settled was $0, $8.3 million and $10.2 million for the years ended December 31, 2019, 2018 and 2017, respectively. See “SARs and DSUs” section below and Note 15 – “Earnings per Share” for additional information. The remaining outstanding fully vested DSUs were 341,566 as of December 31, 2019 and 2018, and 578,618 as of December 31, 2017. Future share settlements of DSUs by year consisted of the following:


	December 31, 2019
2021		60,373
2022		281,193

		341,566

ESPP

In 2013, the Company adopted the ESPP. The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and provides for consecutive,

non-overlapping

6-month

offering periods. The offering periods generally start on the first trading day on or after May 15 and November 15 of each year. Qualifying employees may purchase shares of the Company stock at a 10% discount based on the lower of the market price at the beginning or end of the offering period, subject to IRS limitations. The Company determined that the ESPP was a compensatory plan and is required to expense the fair value of the awards over each

6-month

offering period.

The ESPP initially had 366,667 shares of common stock reserved, and 204,473 and 225,894 shares of common stock remain available for issuance for each of the periods at December 31, 2019 and 2018, respectively. The ESPP provides for annual increases in the number of shares available for issuance under the ESPP, equal to the least of (i) 366,667 shares, (ii) 1% of the outstanding shares on such date, or (iii) an amount determined by the compensation committee of the board of directors. Pursuant to the provisions of the ESPP, the board of directors has determined to not provide for any annual increases to date. At December 31, 2019, total unrecognized compensation cost related to the ESPP was $69,000 and is expected to be recognized over a weighted average period of 0.37 years.

SARs and DSUs

Prior to the IPO, certain employees were granted SARs. As of March 31, 2013, the outstanding SARs were frozen at the liability amount, and will be paid out to each participant in installments upon retirement or departure under the terms of the revised SARs agreements. To replace beneficial ownership in the SARs, the difference between the book value liability and the fair value of the awards was granted to plan participants in the form of DSUs, which were fully vested upon receipt and will be settled in actual stock at a rate of 20% per year if the participant remains employed by the Company during that period (otherwise all unsettled shares of stock upon termination from service will be settled five years from the termination date, unless otherwise agreed to by the Company). In the event of death or termination of service after reaching the age of 67, 100% of the DSUs will be settled.

Summary of Stock-Based Compensation

Components of stock-based compensation are included in selling, general and administrative expense in the consolidated statements of net and comprehensive income and consisted of the following (in thousands):


	Years Ended December 31,
	2019		2018		2017
ESPP	$	139	$	109	$	128
RSAs – non-employee directors		643		632		397
RSUs – employees (1)		5,419		4,233		3,750
RSUs – independent contractors (2)		3,077		7,009		4,870

	$	9,278	$	11,983	$	9,145

(1)	2019 includes expense related to the acceleration of vesting of certain RSUs.

(2)

The Company grants RSUs to independent contractors (i.e. investment sales and financing professionals), who are considered

non-employees.

Prior to the adoption of ASU No.

2018-07

on July 1, 2018, such awards were required to be measured at fair value at the end of each reporting period until settlement. Stock-based compensation expense was therefore impacted by the changes in the Company’s common stock price during each reporting period prior to the adoption. New awards after the date of adoption are measured based on the grant date closing price of the Company’s common stock consistent with awards made to the Company’s employees and

non-employee

directors.