10-Q

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM

10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission File Number:

001-36155

MARCUS & MILLICHAP, INC.

(Exact name of registrant as specified in its Charter)


Delaware		35-2478370
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification No.)

23975 Park Sorrento, Suite 400 Calabasas, California		91302
(Address of Principal Executive Offices)		(Zip Code)

(818)

212-2250

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	MMI	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes

☒

☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required to submit such files). Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes

☐

☒

Number of shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding as of August 1, 2019 was 39,090,861 shares.


	June 30, 2019 (Unaudited)			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	206,758		$	214,683
Commissions receivable		5,768			4,948
Prepaid expenses		9,593			7,904
Income tax receivable		4,762			—
Marketable securities, available-for-sale		118,909			137,436
Other assets, net		6,233			6,368

Total current assets		352,023			371,339
Prepaid rent		—			13,892
Property and equipment, net		20,854			19,550
Operating lease right-of-use assets, net		93,090			—
Marketable securities, available-for-sale		80,329			83,209
Assets held in rabbi trust		9,119			8,268
Deferred tax assets, net		18,525			22,959
Goodwill and other intangible assets, net		14,889			15,385
Other assets		50,845			31,778

Total assets	$	639,674		$	566,380
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other liabilities	$	11,115		$	11,035
Notes payable to former stockholders		6,564			1,087
Deferred compensation and commissions		31,638			47,910
Income tax payable		—			4,486
Operating lease liabilities		17,400			—
Accrued bonuses and other employee related expenses		14,050			28,338

Total current liabilities		80,767			92,856
Deferred compensation and commissions		38,964			49,887
Notes payable to former stockholders		—			6,564
Operating lease liabilities		67,429			—
Deferred rent and other liabilities		2,001			7,499

Total liabilities		189,161			156,806

Commitments and contingencies		—			—

Stockholders’ equity:
Preferred stock, $ 0.0001 par value:
Authorized shares – 25,000,000 ; issued and outstanding shares – none at June 30, 2019 and December 31, 2018, respectively		—			—
Common stock, $ 0.0001 par value:
Authorized shares – 150,000,000 ; issued and outstanding shares – 39,090,861 and 38,814,464 at June 30, 2019 and December 31, 2018, respectively		4			4
Additional paid-in capital		100,098			97,458
Stock notes receivable from employees		(4	)		(4	)
Retained earnings		348,258			311,341
Accumulated other comprehensive income		2,157			775

Total stockholders’ equity		450,513			409,574

Total liabilities and stockholders’ equity	$	639,674		$	566,380

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Real estate brokerage commissions	$	188,680		$	181,640		$	333,617		$	344,165
Financing fees		17,742			15,563			31,474			25,287
Other revenues		3,171			2,199			5,209			4,491

Total revenues		209,593			199,402			370,300			373,943

Operating expenses:
Cost of services		127,847			119,869			219,535			221,518
Selling, general and administrative expense		52,836			49,080			101,754			97,133
Depreciation and amortization expense		1,932			1,503			3,764			2,878

Total operating expenses		182,615			170,452			325,053			321,529

Operating income		26,978			28,950			45,247			52,414
Other income (expense), net		3,119			1,724			6,494			2,933
Interest expense		(340	)		(352	)		(689	)		(712	)

Income before provision for income taxes		29,757			30,322			51,052			54,635
Provision for income taxes		8,478			8,155			14,135			14,457

Net income		21,279			22,167			36,917			40,178

Other comprehensive income (loss):
Marketable securities, available-for-sale:
Change in unrealized gains (losses)		856			(172	)		1,714			(664	)
Less: reclassification adjustment for net (gains) losses included in other income (expense), net		(9	)		8			(18	)		8

Net change, net of tax of $ 283 , $ (57) , $ 571 and $ (221) for the three and six months ended June 30, 2019 and 2018, respectively		847			(164	)		1,696			(656	)
Foreign currency translation (loss) gain, net of tax of $ 0 for each of the three and six months ended June 30, 2019 and 2018		(216	)		34			(314	)		73

Total other comprehensive income (loss)		631			(130	)		1,382			(583	)

Comprehensive income	$	21,910		$	22,037		$	38,299		$	39,595

Earnings per share:
Basic	$	0.54		$	0.57		$	0.94		$	1.03
Diluted	$	0.54		$	0.56		$	0.93		$	1.02
Weighted average common shares outstanding:
Basic		39,395			39,154			39,353			39,124
Diluted		39,527			39,385			39,524			39,298

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, Inc.

CONDENSED Consolidated StatementS of Stockholders’ Equity

(in thousands, except for shares)

(Unaudited)


	Three Months Ended June 30, 2019
		Preferred Stock			Common Stock					Additional Paid-In			Stock Notes Receivable From			Retained		Accumulated Other Comprehensive
		Shares	Amount		Shares			Amount		Capital			Employees			Earnings		Income		Total
Balance at March 31, 2019		—	$	—		39,042,434		$	4	$	97,587		$	(4	)	$	326,979	$	1,526	$	426,092
Net and comprehensive income		—		—		—			—		—			—			21,279		631		21,910
Stock-based award activity
Stock-based compensation		—		—		—			—		2,585			—			—		—		2,585
Shares issued pursuant to employee stock purchase plan		—		—		11,022			—		338			—			—		—		338
Issuance of common stock for vesting of restricted stock units		—		—		40,823			—		—			—			—		—		—
Issuance of common stock for unvested restricted stock awards		—		—		10,542			—		—			—			—		—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(13,960	)		—		(412	)		—			—		—		(412	)

Balance as of June 30, 2019		—	$	—		39,090,861		$	4	$	100,098		$	(4	)	$	348,258	$	2,157	$	450,513


	Three Months Ended June 30, 2018
	Preferred Stock				Common Stock					Additional Paid-In			Stock Notes Receivable From			Retained		Accumulated Other Comprehensive
	Shares		Amount		Shares			Amount		Capital			Employees			Earnings		Income (Loss)			Total
Balance at March 31, 2018		—	$	—		38,578,834		$	4	$	90,840		$	(4	)	$	242,095	$	474		$	333,409
Net and comprehensive income		—		—		—			—		—			—			22,167		(130	)		22,037
Stock-based award activity
Stock-based compensation		—		—		—			—		3,159			—			—		—			3,159
Shares issued pursuant to employee stock purchase plan		—		—		13,028			—		356			—			—		—			356
Issuance of common stock for vesting of restricted stock units		—		—		21,810			—		—			—			—		—			—
Issuance of common stock for unvested restricted stock awards		—		—		12,852			—		—			—			—		—			—
Shares withheld related to net share settlement of stock-based awards		—		—		(4,812	)		—		(64	)		—			—		—			(64	)

Balance as of June 30, 2018		—	$	—		38,621,712		$	4	$	94,291		$	(4	)	$	264,262	$	344		$	358,897

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, Inc.

CONDENSED Consolidated StatementS of Stockholders’ Equity

(continued)

(in thousands, except for shares)

(Unaudited)


	Six Months Ended June 30, 2019
	Preferred Stock				Common Stock					Additional Paid-In			Stock Notes Receivable From			Retained		Accumulated Other Comprehensive
	Shares		Amount		Shares			Amount		Capital			Employees			Earnings		Income		Total
Balance at December 31, 2018		—	$	—		38,814,464		$	4	$	97,458		$	(4	)	$	311,341	$	775	$	409,574
Net and comprehensive income		—		—		—			—		—			—			36,917		1,382		38,299
Stock-based award activity
Stock-based compensation		—		—		—			—		4,926			—			—		—		4,926
Shares issued pursuant to employee stock purchase plan		—		—		11,022			—		338			—			—		—		338
Issuance of common stock for vesting of restricted stock units		—		—		325,219			—		—			—			—		—		—
Issuance of common stock for unvested restricted stock awards		—		—		10,542			—		—			—			—		—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(70,386	)		—		(2,624	)		—			—		—		(2,624	)

Balance as of June 30, 2019		—	$	—		39,090,861		$	4	$	100,098		$	(4	)	$	348,258	$	2,157	$	450,513


	Six Months Ended June 30, 2018
	Preferred Stock				Common Stock				Additional Paid-In		Stock Notes Receivable From			Retained		Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Capital		Employees			Earnings		Income (Loss)			Total
Balance at December 31, 2017		—	$	—		38,374,011	$	4	$	89,877	$	(4	)	$	224,071	$	940		$	314,888
Cumulative effect of a change in accounting principle		—		—		—		—		—		—			13		(13	)		—

Balance at January 1, 2018, as adjusted		—		—		38,374,011		4		89,877		(4	)		224,084		927			314,888
Net and comprehensive income		—		—		—		—		—		—			40,178		(583	)		39,595
Stock-based award activity


	Page
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2019 (Unaudited) and December 31, 2018		3
Condensed Consolidated Statements of Net and Comprehensive Income for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)		4
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2019 and 2018 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018 (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		37
Item 4. Controls and Procedures		38

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		39
Item 1A. Risk Factors		39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		39
Item 3. Defaults Upon Senior Securities		39
Item 4. Mine Safety Disclosures		39
Item 5. Other Information		39
Item 6. Exhibits		40

SIGNATURES