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

Annual report pursuant to Section 13 and 15(d)

Selected Balance Sheet Data

Selected Balance Sheet Data

12 Months Ended

Dec. 31, 2023

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Allowances on Advances and Loans

Allowance for credit losses for advances and loans as of December 31, 2023 and 2022 was $680,000 and $791,000, respectively.

Other Assets

Other assets consisted of the following (in thousands):


	Current December 31,				Non-Current December 31,
	2023		2022		2023		2022
Security deposits	$	—	$	—	$	1,491	$	1,625
Employee notes receivable	37		6		26		—
Securities, held-to-maturity(1)	9,500		—		—		9,500
Loan performance fee receivable	1,725		766		7,885		4,261
Investments in convertible notes(2)	—		—		5,081		—
Other(3)	4,941		6,510		489		473
	$	16,203	$	7,282	$	14,972	$	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.
(2)			Convertible notes were purchased during the fourth quarter 2023 in connection with strategic alliances with companies in the real estate sector. The convertible notes accrue interest at rates between 6% and 10%, are convertible into equity for premiums and mature in a weighted average 1.7 years subject to extension at the option of the holders.
(3)			Other primarily includes customer trust accounts and prepaid lease costs.

Deferred Compensation and Commissions

Deferred compensation and commissions consisted of the following (in thousands):


	Current December 31,				Non-Current December 31,
	2023		2022		2023		2022
SARs liability (1)	$	2,480	$	2,323	$	11,418	$	13,137
Commissions payable to investment sales and financing professionals	52,689		72,247		28,198		45,156
Deferred compensation liability (1)	201		493		8,155		6,168
Other	399		258		—		—
	$	55,769	$	75,321	$	47,771	$	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, 2022 and 2021 were 5.79%, 3.63% and 2.93%, respectively. MMI recorded interest expense related to this liability of $761,000, $542,000 and $488,000 for the years ended December 31, 2023, 2022 and 2021, respectively.

Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. The Company made payments of $2.3 million and $2.2 million during the years ended December 31, 2023 and 2022, respectively, consisting of principal and accumulated interest.

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 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 years ended December 31, 2023 and 2022, the Company made total payments to participants of $0.5 million and $1.1 million 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):


	Years Ended December 31,
	2023		2022		2021
Increase (decrease) in the carrying value of the assets held in the rabbi trust (1)	$	1,526	$	(1,743)	$	1,445
(Increase) decrease in the net carrying value of the deferred compensation obligation (2)	$	(1,439)	$	1,743	$	(1,104)

(1)Recorded in other income, net in the consolidated statements of operations.

(2)Recorded in selling, general and administrative expense in the consolidated statements of operations.

Other Liabilities

Other liabilities consisted of the following (in thousands):


	Current December 31,				Non-Current December 31,
	2023		2022		2023		2022
Deferred consideration	$	1,178	$	3,633	$	393	$	1,486
Contingent consideration	819		1,726		4,663		5,341
Dividends payable	802		612		1,680		1,603
Stock repurchase payable	—		565		—		—
Loan guarantee obligation	725		2,040		3,194		—
Other	395		1,357		760		184
	$	3,919	$	9,933	$	10,690	$	8,614