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

Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2020

Schedule of Assets and liabilities at Fair Value on Recurring Basis

Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):


	December 31, 2020								December 31, 2019
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets:
Assets held in rabbi trust	$	10,295	$	—	$	10,295	$	—	$	9,452	$	—	$	9,452	$	—

Cash equivalents (1) :
Commercial paper	$	9,399	$	—	$	9,399	$	—	$	5,087	$	—	$	5,087	$	—
Money market funds		158,271		158,271		—		—		185,513		185,513		—		—

	$	167,670	$	158,271	$	9,399	$	—	$	190,600	$	185,513	$	5,087	$	—

Marketable debt securities, available-for-sale:
Short-term investments:
U.S. treasuries	$	75,970	$	75,970	$	—	$	—	$	124,580	$	124,580	$	—	$	—
U.S. government sponsored entities		32,447		—		32,447		—		—		—		—		—
Corporate debt		49,841		—		49,841		—		26,172		—		26,172		—

	$	158,258	$	75,970	$	82,288	$	—	$	150,752	$	121,580	$	26,172	$	—

Long-term investments:
U.S. treasuries	$	3,641	$	3,641	$	—	$	—	$	24,423	$	24,423	$	—	$	—
U.S. government sponsored entities		1,152		—		1,152		—		1,355		—		1,355		—
Corporate debt		36,287		—		36,287		—		26,471		—		26,471		—
ABS and other		6,693		—		6,693		—		8,560		—		8,560		—

	$	47,773	$	3,641	$	44,132	$	—	$	60,809	$	24,423	$	36,386	$	—

Liabilities:
Contingent consideration	$	5,572	$	—	$	—	$	5,572	$	3,387	$	—	$	—	$	3,387

Deferred consideration	$	15,248	$	—	$	15,248	$	—	$	1,390	$	—	$	1,390	$	—

Deferred compensation liability	$	8,287	$	8,287	$	—	$	—	$	8,241	$	8,241	$	—	$	—

(1)	Included in cash and cash equivalents on the accompanying consolidated balance sheets.

Schedule of Reconciliation of Contingent Consideration Measured at Fair Value on Recurring Basis

A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):


	December 31,
	2020			2019
Beginning balance (1)	$	3,387		$	1,474
Contingent consideration in connection with acquisitions (2)		2,918			2,382
Change in fair value of contingent consideration		101			202
Payments of contingent consideration		(834	)		(671	)

Ending balance	$	5,572		$	3,387

(1)	Beginning balance for 2020 reflects the reclassification of $1,401 from contingent consideration related to deferred consideration. See Note 7 – “Selected Balance Sheet Data – Other Liabilities” for additional information.

(2)	Contingent consideration in connections with acquisitions represents a noncash investing activity.

Fair Value Liabilities Measured On Recurring Basis Valuation Techniques

Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in thousands):


	Fair Value at December 31, 2020		Valuation Technique		Unobservable inputs		Range (Weighted Average) (1)
Contingent consideration	$	5,572		Discounted cash flow		Expected life of cash flows		2.4-6.8 years	(4.4 years	)
						Discount rate		2.6%-4.3%	(3.4%	)
						Probability of achievement		50.0%-100.0%	(86.1%	)

	Fair Value at December 31, 2019		Valuation Technique		Unobservable inputs		Range (Weighted Average) (1)
Contingent consideration	$	3,387		Discounted cash flow		Expected life of cash flows		0.4-5.8 years	(2.4 years	)
						Discount rate		3.6%-4.9%	(4.1%	)
						Probability of achievement		33.0%-100.0%	(74.3%	)

(1)	Unobservable inputs were weighted by the relative fair value of the instruments.

Fair Value Liabilities Measured On NonRecurring Basis Valuation Techniques

Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial assets measured at fair value on a nonrecurring basis consisted of the following (dollars in thousands):


	Fair Value at December 31, 2020		Valuation Technique	Unobservable inputs	Range (Weighted Average) (1)
MSRs	$	2,135	Discounted cash flow	Constant prepayment rates	0.0%-20.0% (10.0%)
				Constant default rate	0.3%-4.1% (1.1%)
				Loss severity	26.2%-31.4% (28.0%)
				Discount rate	10.0%-10.0% (10.0%)

	Fair Value at December 31, 2019		Valuation Technique	Unobservable inputs	Range (Weighted Average) (1)
MSRs	$	2,204	Discounted cash flow	Constant prepayment rates	0.0%-20.0% (10.0%)
				Constant default rate	2.0%-2.0% (2.0%)
				Loss severity	40.0%-40.0% (40.0%)
				Discount rate	9.5%-9.7% (9.7%)

(1)	Weighted average is based on the 10% constant prepayment rate scenario which the Company uses as the reported fair value.