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 | ||
☒ | Accelerated filer | ☐ | ||||
Non-accelerated filer |
☐ | Smaller reporting company | ||||
Emerging growth company |
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uncertainties relating to the economic, operational and financial impact of the ongoing COVID-19 pandemic, including uncertainties regarding the potential impact of new variants, vaccination rates and vaccine mandates on our workforce; |
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general uncertainty in the capital markets and a worsening of economic conditions and the rate and pace of economic recovery following an economic downturn; |
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changes in our business operations; |
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market trends in the commercial real estate market or the general economy, including the impact of inflation; |
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our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals; |
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the effects of increased competition on our business; |
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our ability to successfully enter new markets or increase our market share; |
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our ability to successfully expand our services and businesses and to manage any such expansions; |
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our ability to retain existing clients and develop new clients; |
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our ability to keep pace with changes in technology; |
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any business interruption or technology failure, including cyber and ransomware attacks, and any related impact on our reputation; |
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changes in interest rates, availability of capital, tax laws, employment laws or other government regulation affecting our business; |
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our ability to successfully identify, negotiate, execute and integrate accretive acquisitions; and |
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other risk factors included under “Risk Factors” in this Annual Report on Form 10-K. |
• | a 51-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 sales 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”) division; |
• | 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; |
• | a sales management team, who serves in a support and leadership role as company executives and who does not compete with or participate in investment sales or financing 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: |
2021 |
2020 |
Change |
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Real Estate Brokerage: |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
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(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
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<$1 million |
1,087 | $ | 732 | $ | 30,681 | 944 | $ | 600 | $ | 24,456 | 143 | $ | 132 | $ | 6,225 | |||||||||||||||||||||
Private client market ($1 - <$10 million) |
7,300 | 24,339 | 693,996 | 4,773 | 15,115 | 421,767 | 2,527 | 9,224 | 272,229 | |||||||||||||||||||||||||||
Middle market ($10 - <$20 million) |
643 | 8,874 | 170,230 | 316 | 4,311 | 81,621 | 327 | 4,563 | 88,609 | |||||||||||||||||||||||||||
Larger transaction market (≥$20 million) |
622 | 33,562 | 276,062 | 255 | 12,026 | 105,320 | 367 | 21,536 | 170,742 | |||||||||||||||||||||||||||
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9,652 | $ | 67,507 | $ | 1,170,969 | 6,288 | $ | 32,052 | $ | 633,164 | 3,364 | $ | 35,455 | $ | 537,805 | ||||||||||||||||||||||
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• | Any impairment in value of our investments in marketable debt securities, available-for-sale |
• | A potential negative impact on the health of our employees and investment sales and financing professionals, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during a disruption. |
• | If significant portions of our workforce are unable to work effectively, including because of government restrictions, office closures, ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted. |
Base Period 12/31/16 |
12/31/17 |
12/31/18 |
12/31/19 |
12/31/20 |
12/31/21 |
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Marcus & Millichap, Inc. |
100.00 | 122.04 | 128.48 | 139.41 | 139.33 | 192.59 | ||||||||||||||||||
S&P 500 Index |
100.00 | 121.83 | 116.49 | 153.17 | 181.35 | 233.41 | ||||||||||||||||||
Peer Group |
100.00 | 138.72 | 120.19 | 177.84 | 165.11 | 289.15 |
Years Ended December 31, |
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2021 |
2020 |
2019 |
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Real Estate Brokerage: |
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Average Number of Investment Sales Professionals |
1,925 | 1,920 | 1,843 | |||||||||
Average Number of Transactions per Investment Sales Professional |
5.01 | 3.28 | 3.82 | |||||||||
Average Commission per Transaction |
$ | 121,319 | $ | 100,694 | $ | 103,572 | ||||||
Average Commission Rate |
1.73 | % | 1.98 | % | 1.98 | % | ||||||
Average Transaction Size (in thousands) |
$ | 6,994 | $ | 5,097 | $ | 5,234 | ||||||
Total Number of Transactions |
9,652 | 6,288 | 7,042 | |||||||||
Total Sales Volume (in millions) |
$ | 67,507 | $ | 32,052 | $ | 36,858 | ||||||
Years Ended December 31, |
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2021 |
2020 |
2019 |
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Financing (1) : |
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Average Number of Financing Professionals |
85 | 86 | 102 | |||||||||
Average Number of Transactions per Financing Professional |
29.11 | 22.59 | 19.06 | |||||||||
Average Fee per Transaction |
$ | 37,959 | $ | 33,747 | $ | 32,680 | ||||||
Average Fee Rate |
0.81 | % | 0.85 | % | 0.88 | % | ||||||
Average Transaction Size (in thousands) |
$ | 4,691 | $ | 3,948 | $ | 3,693 | ||||||
Total Number of Transactions |
2,474 | 1,943 | 1,944 | |||||||||
Total Financing Volume (in millions) |
$ | 11,605 | $ | 7,672 | $ | 7,180 |
(1) |
Operating metrics calculated excluding certain financing fees not directly associated to transactions. |
Year Ended December 31, 2021 |
Percentage of Revenue |
Year Ended December 31, 2020 |
Percentage of Revenue |
Change |
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Dollar |
Percentage |
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Revenues: |
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Real estate brokerage commissions |
$ | 1,170,969 | 90.3 | % | $ | 633,164 | 88.3 | % | $ | 537,805 | 84.9 | % | ||||||||||||
Financing fees |
109,690 | 8.5 | 70,538 | 9.8 | 39,152 | 55.5 | % | |||||||||||||||||
Other revenues |
15,781 | 1.2 | 13,204 | 1.9 | 2,577 | 19.5 | % | |||||||||||||||||
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Total revenues |
1,296,440 | 100.0 | 716,906 | 100.0 | 579,534 | 80.8 | % | |||||||||||||||||
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Operating expenses: |
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Cost of services |
840,209 | 64.8 | 447,879 | 62.5 | 392,330 | 87.6 | % | |||||||||||||||||
Selling, general and administrative |
255,154 | 19.7 | 204,514 | 28.5 | 50,640 | 24.8 | % | |||||||||||||||||
Depreciation and amortization |
11,721 | 0.9 | 10,899 | 1.5 | 822 | 7.5 | % | |||||||||||||||||
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Total operating expenses |
1,107,084 | 85.4 | 663,292 | 92.5 | 443,792 | 66.9 | % | |||||||||||||||||
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Operating income |
189,356 | 14.6 | 53,614 | 7.5 | 135,742 | 253.2 | % | |||||||||||||||||
Other income (expense), net |
4,527 | 0.3 | 6,650 | 0.9 | (2,123 | ) | (31.9 | )% | ||||||||||||||||
Interest expense |
(580 | ) | (0.0 | ) | (900 | ) | (0.1 | ) | 320 | (35.6 | )% | |||||||||||||
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Income before provision for income taxes |
193,303 | 14.9 | 59,364 | 8.3 | 133,939 | 225.6 | % | |||||||||||||||||
Provision for income taxes |
50,833 | 3.9 | 16,526 | 2.3 | 34,307 | 207.6 | % | |||||||||||||||||
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Net income |
$ | 142,470 | 11.0 | % | $ | 42,838 | 6.0 | % | $ | 99,632 | 232.6 | % | ||||||||||||
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Adjusted EBITDA (1) |
$ | 213,002 | 16.4 | % | $ | 75,699 | 10.6 | % | $ | 137,303 | 181.4 | % | ||||||||||||
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(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, |
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2021 |
2020 |
2019 |
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Net income |
$ | 142,470 | $ | 42,838 | $ | 76,930 | ||||||
Adjustments: |
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Interest income and other (1) |
(2,496 | ) | (5,048 | ) | (10,322 | ) | ||||||
Interest expense |
580 | 900 | 1,388 | |||||||||
Provision for income taxes |
50,833 | 16,526 | 30,582 | |||||||||
Depreciation and amortization |
11,721 | 10,899 | 8,017 | |||||||||
Stock-based compensation |
10,361 | 9,905 | 9,278 | |||||||||
Non-cash MSR activity (2) |
(467 | ) | (321 | ) | (322 | ) | ||||||
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Adjusted EBITDA (3) |
$ | 213,002 | $ | 75,699 | $ | 115,551 | ||||||
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(1) |
Other includes net realized gains (losses) on marketable debt securities, available-for-sale. |
(2) |
Non-cash MSR activity includes the assumption of servicing obligations. |
(3) |
The increase in Adjusted EBITDA for the year ended December 31, 2021 compared to the same period in 2020 is primarily due to an increase in total revenues and a lower proportion of operating expenses compared to total revenues. |
Years Ended December 31, |
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2021 |
2020 |
2019 |
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Net cash provided by operating activities |
$ | 255,903 | $ | 38,088 | $ | 25,287 | ||||||
Net cash used in investing activities |
(108,356 | ) | (17,228 | ) | (3,422 | ) | ||||||
Net cash used in financing activities |
(5,919 | ) | (10,330 | ) | (3,878 | ) | ||||||
Effect of currency exchange rate changes on cash and cash equivalents |
(2,640 | ) | (48 | ) | — | |||||||
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Net increase in cash and cash equivalents |
138,988 | 10,482 | 17,987 | |||||||||
Cash and cash equivalents at beginning of year |
243,152 | 232,670 | 214,683 | |||||||||
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Cash and cash equivalents at end of year |
$ | 382,140 | $ | 243,152 | $ | 232,670 | ||||||
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Total |
Less than 1 Year |
1-3 Years |
3-5 Years |
More Than 5 Years |
Other (7) |
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Operating lease liabilities, including imputed interest (1) |
$ | 82,740 | $ | 20,901 | $ | 32,952 | $ | 22,149 | $ | 6,738 | $ | — | ||||||||||||
SARs liability (principal and interest) (2) |
21,019 | 2,241 | 4,752 | 5,266 | 8,760 | — | ||||||||||||||||||
Deferred commissions payable (3) |
69,256 | 37,559 | 31,697 | — | — | — | ||||||||||||||||||
Deferred compensation liability (4) |
8,001 | 1,080 | 316 | 259 | 119 | 6,227 | ||||||||||||||||||
Contingent consideration (5) |
9,312 | 2,681 | 2,923 | 3,473 | 235 | — | ||||||||||||||||||
Deferred consideration (5) |
9,801 | 5,112 | 4,290 | 399 | — | — | ||||||||||||||||||
Other (6) |
18,489 | 10,193 | 2,089 | 550 | 350 | 5,307 | ||||||||||||||||||
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$ | 218,618 | $ | 79,767 | $ | 79,019 | $ | 32,096 | $ | 16,202 | $ | 11,534 | |||||||||||||
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(1) |
See Note 4 – “Operating Leases” of our Notes to the Consolidated Financial Statements. |
(2) |
Forecasted principal payments are based on each participant’s estimated retirement age and current contractual interest rate of 3.630% as of January 1, 2022 and reflect required payments that resulted from the retirement of certain executives. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. |
(3) |
Includes short-term and long-term deferred commissions payable. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. |
(4) |
Represents current estimated payouts for participants currently receiving payments based on their elections at the time of deferral. We hold assets in rabbi trust of $11.5 million to settle outstanding amounts when they become due. Amounts assume no increase or decrease in the liability due to future returns or losses. |
(5) |
Relates to contingent and deferred consideration in connection with our business acquisitions. See Note 6 – “Acquisitions, Goodwill and Other Intangible Assets” and Note 9 – “Fair Value Measurements” of our Notes to the Consolidated Financial Statements. |
(6) |
Relates to amounts that may be advanced to sales and financing professionals and uncertain tax positions. See Note 12 – “Income Taxes” and Note 15 – “Commitments and Contingencies” of our Notes to the Consolidated Financial Statements. |
(7) |
Amounts in Other represent amounts where payments are dependent on future events, which may occur at any time from less than 1 year to more than 5 years and relates to our deferred compensation liability and uncertain tax positions. Payments for deferred compensation liability are based on the participants’ elections at the time of deferral. The net liability for uncertain tax positions may be payable by us in the future. The ultimate resolution depends on many factors and assumptions; accordingly, we are not able to reasonably estimate the timing of such payments, if any. |
Change in Interest Rates |
Approximate Change in Fair Value of Investments Increase (Decrease) |
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2% Decrease |
$ | 3,244 | ||
1% Decrease |
$ | 2,163 | ||
1% Increase |
$ | (3,088 | ) | |
2% Increase |
$ | (6,176 | ) |
Name |
Age |
Position(s) | ||||
Hessam Nadji |
56 | President, Chief Executive Officer and Director | ||||
Steven F. DeGennaro |
58 | Executive Vice President and Chief Financial Officer | ||||
John David Parker |
41 | Executive Vice President and Chief Operating Officer, Eastern Division | ||||
Richard Matricaria |
43 | Executive Vice President and Chief Operating Officer, Western Division | ||||
Gregory A. LaBerge |
51 | Senior Vice President, Chief Administrative Officer |
• | From our main web page, click on “NYSE:MMI” at the top of the main web page. |
• | Next click on “Governance” in the middle navigation bar. |
• | Then click on “Governance Documents.” |
• | Finally, click on “Code of Ethics.” |
Plan Category |
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights (1) |
Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (2) |
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (3) (4) |
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(a) |
(b) |
(c) |
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Equity compensation plans approved by security holders |
1,248,806 | $ | — | 4,823,866 | ||||||||
Equity compensation plans not approved by security holders |
— | — | — | |||||||||
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1,248,806 | $ | — | 4,823,866 | |||||||||
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(1) |
Consists of deferred stock units (“DSUs”) and restricted stock units (“RSUs”) granted under our Amended and Restated 2013 Omnibus Equity Incentive Plan (“2013 Plan”). Excludes restricted stock awards granted under the 2013 Plan, purchase rights granted under our 2013 Employee Stock Purchase Plan (“ESPP”) and cash settled SARs. |
(2) |
Outstanding DSUs and RSUs have no exercise price. |
(3) |
Includes 4,667,141 shares available for future issuance under the 2013 Plan. Includes 156,725 shares available for future issuance under the ESPP, including shares subject to purchase during the current offering period, which commenced on November 15, 2021 (the exact number of which will not be known until the purchase date on May 15, 2022). Subject to the number of shares remaining in the share reserve, the maximum number of shares purchasable by any participant on any one purchase date for any purchase period, including the current purchase period may not exceed 1,250 shares. |
(4) |
Pursuant to the terms of the ESPP, on the first day of each fiscal year, beginning with the 2015 fiscal year, the number of shares authorized for issuance under the ESPP is automatically increased by the lesser of: (i) 366,667 shares of our common stock; (ii) 1% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Board may determine. Pursuant to the provisions of the ESPP, the Board has determined to not provide for any annual increases to date. |
(a) |
The following documents are filed as part of this Report: |
(1) |
Consolidated Financial Statements |