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

September 30, 2019

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

For the transition period from to

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 Incorporation or Organization)		(I.R.S. Employer 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 su

bmitte

d 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

October

, 2019 was 39,132,236 shares.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)


	September 30, 2019 (Unaudited)			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	226,081		$	214,683
Commissions receivable		6,316			4,948
Prepaid expenses		9,330			7,904
Income tax receivable		7,786			—
Marketable securities, available-for-sale		124,475			137,436
Other assets, net		12,352			6,368

Total current assets		386,340			371,339
Prepaid rent		—			13,892
Property and equipment, net		21,609			19,550
Operating lease right-of-use assets, net		90,165			—
Marketable securities, available-for-sale		70,785			83,209
Assets held in rabbi trust		9,102			8,268
Deferred tax assets, net		18,513			22,959
Goodwill and other intangible assets, net		14,647			15,385
Other assets		53,432			31,778

Total assets	$	664,593		$	566,380

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other liabilities	$	11,003		$	11,035
Notes payable to former stockholders		6,564			1,087
Deferred compensation and commissions		32,450			47,910
Income tax payable		—			4,486
Operating lease liabilities		17,500			—
Accrued bonuses and other employee related expenses		16,964			28,338

Total current liabilities		84,481			92,856
Deferred compensation and commissions		41,695			49,887
Notes payable to former stockholders		—			6,564
Operating lease liabilities		64,316			—
Deferred rent and other liabilities		2,001			7,499

Total liabilities		192,493			156,806

Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and outstanding shares – none at September 30, 2019 and December 31, 2018, respectively		—			—
Common stock, $ 0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 39,132,236 and 38,814,464 at September 30, 2019 and December 31, 2018, respectively		4			4
Additional paid-in capital		102,142			97,458
Stock notes receivable from employees		(4	)		(4	)
Retained earnings		367,550			311,341
Accumulated other comprehensive income		2,408			775

Total stockholders’ equity		472,100			409,574

Total liabilities and stockholders’ equity	$	664,593		$	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 September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Real estate brokerage commissions	$	180,198		$	191,980		$	513,815		$	536,145
Financing fees		16,013			15,947			47,487			41,234
Other revenues		2,009			2,663			7,218			7,154

Total revenues		198,220			210,590			568,520			584,533

Operating expenses:
Cost of services		124,147			132,896			343,682			354,414
Selling, general and administrative expense		48,091			48,659			149,845			145,792
Depreciation and amortization expense		1,910			1,651			5,674			4,529

Total operating expenses		174,148			183,206			499,201			504,735

Operating income		24,072			27,384			69,319			79,798
Other income (expense), net		2,573			2,127			9,067			5,060
Interest expense		(329	)		(342	)		(1,018	)		(1,054	)

Income before provision for income taxes		26,316			29,169			77,368			83,804
Provision for income taxes		7,024			8,315			21,159			22,772

Net income		19,292			20,854			56,209			61,032

Other comprehensive income (loss):
Marketable securities, available-for-sale:
Change in unrealized gains (losses)		160			(115	)		1,874			(779	)
Less: reclassification adjustment for net (gains) losses included in other income (expense), net		(23	)		—			(41	)		8

Net change, net of tax of $ 46 , $(38), $617 and $(259) for the three and nine months ended September 30, 2019 and 2018, respectively		137			(115	)		1,833			(771	)
Foreign currency translation gain (loss), net of tax of $0 for each of the three and nine months ended September 30, 2019 and 2018		114			(29	)		(200	)		44

Total other comprehensive income (loss)		251			(144	)		1,633			(727	)

Comprehensive income	$	19,543		$	20,710		$	57,842		$	60,305

Earnings per share:
Basic	$	0.49		$	0.53		$	1.43		$	1.56
Diluted	$	0.49		$	0.53		$	1.42		$	1.55
Weighted average common shares outstanding:
Basic		39,441			39,191			39,383			39,147
Diluted		39,550			39,484			39,527			39,359

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 September 30, 2019
										Additional Paid-In			Stock Notes Receivable From			Retained		Accumulated Other Comprehensive
	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 June 30, 2019		—	$	—		39,090,861		$	4	$	100,098		$	(4	)	$	348,258	$	2,157	$	450,513
Net and comprehensive income		—		—		—			—		—			—			19,292		251		19,543
Stock-based award activity
Stock-based compensation		—		—		—			—		2,114			—			—		—		2,114
Shares issued pursuant to employee stock purchase plan		—		—		—			—		—			—			—		—		—
Issuance of common stock for vesting of restricted stock units		—		—		41,257			—		—			—			—		—		—
Issuance of common stock for unvested restricted stock awards		—		—		2,264			—		—			—			—		—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(2,146	)		—		(70	)		—			—		—		(70	)

Balance as of September 30, 2019		—	$	—		39,132,236		$	4	$	102,142		$	(4	)	$	367,550	$	2,408	$	472,100


	Three Months Ended September 30, 2018
	Preferred Stock				Common Stock					Additional Paid-In		Stock Notes Receivable From			Retain ed		Accumulated Other Comprehensive
	Shares		Amount		Shares			Amount		Capital		Employees			Earnings		Income (Loss)			Total
Balance at June 30, 2018		—	$	—		38,621,712		$	4	$	94,291	$	(4	)	$	264,262	$	344		$	358,897
Net and comprehensive income		—		—		—			—		—		—			20,854		(144	)		20,710
Stock-based award activity
Stock-based compensation		—		—		—			—		3,147		—			—		—			3,147
Issuance of common stock for vesting of restricted stock units		—		—		31,235			—		—		—			—		—			—
Shares withheld related to net share settlement of stock-based awards		—		—		(1,587	)		—		(63


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			Page

Condensed Consolidated Balance Sheets at September 30, 2019 (Unaudited) and December 31, 2018			3

Condensed Consolidated Statements of Net and Comprehensive Income for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)			4

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2019 and 2018 (Unaudited)			5

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 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			38

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			41