ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
Title of each class |
Trading Symbol (s) |
Name of each exchange on which registered | ||
, par value $0.0001 per share |
Large accelerated filer |
☒ |
Accelerated filer |
☐ |
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Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
Page |
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Item 1. |
4 |
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Item 1A. |
16 |
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Item 1B. |
29 |
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Item 2. |
29 |
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Item 3. |
29 |
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Item 4. |
29 |
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Item 5. |
30 |
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Item 6. |
32 |
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Item 7. |
34 |
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Item 7A. |
48 |
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Item 8. |
48 |
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Item 9. |
48 |
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Item 9A. |
48 |
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Item 9B. |
50 |
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Item 10. |
51 |
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Item 11. |
52 |
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Item 12. |
52 |
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Item 13. |
53 |
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Item 14. |
53 |
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Item 15. |
54 |
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Item 16. |
56 |
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57 |
• | market trends in the commercial real estate market or the general economy; |
• | our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals; |
• | the effects of increased competition on our business; |
• | our ability to successfully enter new markets or increase our market share; |
• | our ability to successfully expand our services and businesses and to manage any such expansions; |
• | our ability to retain existing clients and develop new clients; |
• | our ability to keep pace with changes in technology; |
• | any business interruption or technology failure and any related impact on our reputation; |
• | changes in interest rates, tax laws, employment laws or other government regulation affecting our business; and |
• | other risk factors included under “Risk Factors” in this Annual Report on Form 10-K. |
• | a 49-year history of providing investment brokerage and financing services through proprietary inventory and marketing systems, policies and culture of information sharing and in-depth investment brokerage training. These services are executed by our salesforce under the supervision of a dedicated management team focused on client service and growing the firm; |
• | market leading share and brand within the $1-$10 million private client market segment, which consistently represents more than 80% of total U.S. commercial property transactions greater than $1 million in the marketplace; |
• | investment sales and financing professionals providing exclusive client representation across multiple property types; |
• | a broad geographic platform in the United States and Canada powered by information sharing and proprietary real estate marketing technologies; |
• | an ability to scale with our private clients as they grow and connect private capital with larger assets through our Institutional Property Advisors (“IPA”) group; |
• | a financing team integrated with our brokerage sales force providing independent mortgage brokerage services by accessing a wide range of lenders on behalf of our clients; |
• | an experienced management team overseeing our offices, with an average of 11 years of real estate investment brokerage experience with our Company; |
• | our managers are in a support and leadership role as company executives and do not compete with or participate in investment sales professionals’ commissions; and |
• | industry-leading research and advisory services tailored to the needs of our clients and supporting our investment sales and financing professionals. |
• | Properties priced less than $1 million; |
• | Private client market: |
• | Middle market: |
• | Larger transaction market: |
2019 |
2018 |
Change |
||||||||||||||||||||||||||||||||||
Real Estate Brokerage: |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
|||||||||||||||||||||||||||
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
|||||||||||||||||||||||||||||||
<$1 million |
1,011 |
$ | 657 |
$ | 27,012 |
1,077 |
$ | 695 |
$ | 29,677 |
(66 |
) | $ | (38 |
) | $ | (2,665 |
) | ||||||||||||||||||
Private client market ($1-$10 million) |
5,311 |
17,239 |
487,528 |
5,230 |
16,645 |
483,967 |
81 |
594 |
3,561 |
|||||||||||||||||||||||||||
Middle market ( ≥ $10-$20 million) |
441 |
6,002 |
107,818 |
472 |
6,462 |
116,850 |
(31 |
) | (460 |
) | (9,032 |
) | ||||||||||||||||||||||||
Larger transaction market ( ≥ $20 million) |
279 |
12,960 |
106,998 |
300 |
12,268 |
116,861 |
(21 |
) | 692 |
(9,863 |
) | |||||||||||||||||||||||||
7,042 |
$ | 36,858 |
$ | 729,356 |
7,079 |
$ | 36,070 |
$ | 747,355 |
(37 |
) | $ | 788 |
$ | (17,999 |
) | ||||||||||||||||||||
Base Period 12/31/14 |
12/31/15 |
12/31/16 |
12/31/17 |
12/31/18 |
12/31/19 |
|||||||||||||||||||
Marcus & Millichap, Inc. |
100.00 |
87.64 |
80.36 |
98.08 |
103.25 |
112.03 |
||||||||||||||||||
S&P 500 |
100.00 |
101.38 |
113.51 |
138.29 |
132.23 |
173.86 |
||||||||||||||||||
Peer Group |
100.00 |
102.37 |
83.72 |
119.62 |
106.05 |
157.24 |
Years Ended December 31, |
||||||||||||||||||||
2019 |
2018 |
2017 |
2016 |
2015 |
||||||||||||||||
(in thousands except per share, investment sales and financing professional and sales volume amounts) |
||||||||||||||||||||
Statement of Income Data: |
||||||||||||||||||||
Total revenues |
$ | 806,428 |
$ | 814,816 |
$ | 719,700 |
$ | 717,450 |
$ | 689,055 |
||||||||||
Cost of services |
498,878 |
502,883 |
446,557 |
444,768 |
423,389 |
|||||||||||||||
Operating income |
96,423 |
112,287 |
96,132 |
106,501 |
114,651 |
|||||||||||||||
Provision for income taxes (1) |
30,582 |
29,963 |
47,702 |
42,445 |
47,018 |
|||||||||||||||
Net income |
$ | 76,930 |
$ | 87,257 |
$ | 51,524 |
$ | 64,657 |
$ | 66,350 |
||||||||||
Earnings per share: |
||||||||||||||||||||
Basic |
$ | 1.95 |
$ | 2.23 |
$ | 1.32 |
$ | 1.66 |
$ | 1.71 |
||||||||||
Diluted |
$ | 1.95 |
$ | 2.22 |
$ | 1.32 |
$ | 1.66 |
$ | 1.69 |
||||||||||
Weighted average common shares outstanding: |
||||||||||||||||||||
Basic |
39,404 |
39,149 |
38,988 |
38,899 |
38,848 |
|||||||||||||||
Diluted |
39,548 |
39,383 |
39,100 |
39,035 |
39,162 |
|||||||||||||||
Balance Sheet Data: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 232,670 |
$ | 214,683 |
$ | 220,786 |
$ | 187,371 |
$ | 96,185 |
||||||||||
Marketable securities, available-for-sale (2) |
$ | 211,561 |
$ | 220,645 |
$ | 125,659 |
$ | 104,929 |
$ | 134,255 |
||||||||||
Total assets |
$ | 709,034 |
$ | 566,380 |
$ | 459,664 |
$ | 394,016 |
$ | 321,225 |
||||||||||
Long-term liabilities |
$ | 112,322 |
$ | 63,950 |
$ | 61,517 |
$ | 56,986 |
$ | 57,224 |
||||||||||
Total liabilities |
$ | 214,127 |
$ | 156,806 |
$ | 144,776 |
$ | 135,162 |
$ | 132,235 |
||||||||||
Total stockholders’ equity |
$ | 494,907 |
$ | 409,574 |
$ | 314,888 |
$ | 258,854 |
$ | 188,990 |
||||||||||
Other Data: |
||||||||||||||||||||
Adjusted EBITDA (3) |
$ | 115,551 |
$ | 129,457 |
$ | 111,716 |
$ | 118,296 |
$ | 124,140 |
||||||||||
Investment sales and financing professionals |
2,021 |
1,977 |
1,819 |
1,737 |
1,607 |
|||||||||||||||
Sales volume (dollars in millions) |
$ | 49,706 |
$ | 46,355 |
$ | 42,191 |
$ | 42,312 |
$ | 37,847 |
(1) |
Provision for income taxes for 2017 includes a one-time charge in the amount of $11.6 million in connection with the remeasurement of deferred tax assets, net due to enactment of the Tax Cuts and Jobs Act, which reduced the U.S. federal statutory corporate tax rate from 35% to 21% starting in 2018. In addition, we adopted Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting non-employee directors’ vesting of equity awards granted under our Amended and Restated 2013 Omnibus Equity Incentive Plan. Prior to 2017, windfalls tax benefits, net were recorded directly to additional paid in capital. |
(2) |
Includes both short-term and long-term marketable securities, available-for-sale. |
(3) |
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Non-GAAP Financial Measure.” |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Real Estate Brokerage: |
||||||||||||
Average Number of Investment Sales Professionals |
1,843 |
1,726 |
1,649 |
|||||||||
Average Number of Transactions per Investment Sales Professional |
3.82 |
4.10 |
3.98 |
|||||||||
Average Commission per Transaction |
$ | 103,572 |
$ | 105,574 |
$ | 98,963 |
||||||
Average Commission Rate |
1.98 |
% | 2.07 |
% | 2.13 |
% | ||||||
Average Transaction Size (in thousands) |
$ | 5,234 |
$ | 5,095 |
$ | 4,644 |
||||||
Total Number of Transactions |
7,042 |
7,079 |
6,562 |
|||||||||
Total Sales Volume (in millions) |
$ | 36,858 |
$ | 36,070 |
$ | 30,475 |
Years Ended December 31, |
||||||||||||
2019 |
2018 |
2017 |
||||||||||
Financing (1) : |
||||||||||||
Average Number of Financing Professionals |
102 |
100 |
95 |
|||||||||
Average Number of Transactions per Financing Professional |
19.06 |
16.78 |
17.97 |
|||||||||
Average Fee per Transaction |
$ | 32,680 |
$ | 33,176 |
$ | 28,960 |
||||||
Average Fee Rate |
0.88 |
% | 0.89 |
% | 0.88 |
% | ||||||
Average Transaction Size (in thousands) |
$ | 3,693 |
$ | 3,716 |
$ | 3,299 |
||||||
Total Number of Transactions |
1,944 |
1,678 |
1,707 |
|||||||||
Total Financing Volume (in millions) |
$ | 7,180 |
$ | 6,236 |
$ | 5,632 |
(1) |
Operating metrics calculated excluding certain financing fees not directly associated to transactions. |
Year Ended December 31, 2019 |
Percentage of Revenue |
Year Ended December 31, 2018 |
Percentage of Revenue |
Change |
||||||||||||||||||||
Dollar |
Percentage |
|||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Real estate brokerage commissions |
$ | 729,356 |
90.4 |
% | $ | 747,355 |
91.7 |
% | $ | (17,999 |
) | (2.4 |
)% | |||||||||||
Financing fees |
66,293 |
8.2 |
57,817 |
7.1 |
8,476 |
14.7 |
||||||||||||||||||
Other revenues |
10,779 |
1.4 |
9,644 |
1.2 |
1,135 |
11.8 |
||||||||||||||||||
Total revenues |
806,428 |
100.0 |
814,816 |
100.0 |
(8,388 |
) | (1.0 |
) | ||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Cost of services |
498,878 |
61.9 |
502,883 |
61.7 |
(4,005 |
) | (0.8 |
) | ||||||||||||||||
Selling, general and administrative expense |
203,110 |
25.1 |
193,349 |
23.7 |
9,761 |
5.0 |
||||||||||||||||||
Depreciation and amortization expense |
8,017 |
1.0 |
6,297 |
0.8 |
1,720 |
27.3 |
||||||||||||||||||
Total operating expenses |
710,005 |
88.0 |
702,529 |
86.2 |
7,476 |
1.1 |
||||||||||||||||||
Operating income |
96,423 |
12.0 |
112,287 |
13.8 |
(15,864 |
) | (14.1 |
) | ||||||||||||||||
Other income (expense), net |
12,477 |
1.5 |
6,333 |
0.8 |
6,144 |
97.0 |
||||||||||||||||||
Interest expense |
(1,388 |
) | (0.2 |
) | (1,400 |
) | (0.2 |
) | 12 |
(0.9 |
) | |||||||||||||
Income before provision for income taxes |
107,512 |
13.3 |
117,220 |
14.4 |
(9,708 |
) | (8.3 |
) | ||||||||||||||||
Provision for income taxes |
30,582 |
3.8 |
29,963 |
3.7 |
619 |
2.1 |
||||||||||||||||||
Net income |
$ | 76,930 |
9.5 |
% | $ | 87,257 |
10.7 |
% | $ | (10,327 |
) | (11.8 |
)% | |||||||||||
Adjusted EBITDA (1) |
$ | 115,551 |
14.3 |
% | $ | 129,457 |
15.9 |
% | $ | (13,906 |
) | (10.7 |
)% | |||||||||||
(1) |
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.” |
Years Ended December 31, |
||||||||||||||||||||
2019 |
2018 |
2017 |
2016 |
2015 |
||||||||||||||||
Net income |
$ | 76,930 |
$ | 87,257 |
$ | 51,524 |
$ | 64,657 |
$ | 66,350 |
||||||||||
Adjustments: |