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, 2020

☐	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 ☒ No ☐

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 ☒ No ☐

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 ☐ No ☒

Number of shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding as of November 2, 2020 was 39,376,477 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, 2020 (Unaudited)		December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	173,112	$	232,670
Commissions receivable, net		6,846		5,003
Prepaid expenses		8,694		10,676
Income tax receivable		10,023		4,999
Marketable debt securities, available-for-sale (includes amortized cost of $169,239 and $150,517 at September 30, 2020 and December 31, 2019, respectively, and $0 allowance for credit losses)		169,513		150,752
Advances and loans, net		2,090		2,882
Other assets		3,013		3,185

Total current assets		373,291		410,167
Property and equipment, net		23,371		22,643
Operating lease right-of-use assets, net		82,202		90,535
Marketable debt securities, available-for-sale (includes amortized cost of $44,246 and $59,468 at September 30, 2020 and December 31, 2019, respectively, and $0 allowance for credit losses)		46,505		60,809
Assets held in rabbi trust		9,467		9,452
Deferred tax assets, net		15,839		22,122
Goodwill and other intangible assets, net		36,883		22,312
Advances and loans, net		104,248		66,647
Other assets		4,319		4,347

Total assets	$	696,125	$	709,034

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other liabilities	$	10,601	$	10,790
Notes payable to former stockholders		—		6,564
Deferred compensation and commissions		37,244		44,301
Operating lease liabilities		17,954		17,762
Accrued bonuses and other employee related expenses		10,238		22,388

Total current liabilities		76,037		101,805
Deferred compensation and commissions		33,921		45,628
Operating lease liabilities		57,002		63,155
Other liabilities		8,131		3,539

Total liabilities		175,091		214,127

Commitments and contingencies		—		—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and outstanding shares – none at September 30, 2020 and December 31, 2019, respectively		—		—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 39,376,477 and 39,153,195 at September 30, 2020 and December 31, 2019, respectively		4		4
Additional paid-in capital		110,625		104,658
Stock notes receivable from employees		—		(4	)
Retained earnings		407,454		388,271
Accumulated other comprehensive income		2,951		1,978

Total stockholders’ equity		521,034		494,907

Total liabilities and stockholders’ equity	$	696,125	$	709,034

See accompanying notes to condensed consolidated financial statements.

Table of Contents

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,
	2020			2019			2020			2019
Revenues:
Real estate brokerage commissions	$	140,844		$	180,198		$	416,044		$	513,815
Financing fees		15,620			16,013			43,674			47,487
Other revenues		2,111			2,009			6,974			7,218

Total revenues		158,575			198,220			466,692			568,520

Operating expenses:
Cost of services		99,707			124,147			287,207			343,682
Selling, general and administrative		49,722			48,091			148,101			149,845
Depreciation and amortization		2,606			1,910			7,822			5,674

Total operating expenses		152,035			174,148			443,130			499,201

Operating income		6,540			24,072			23,562			69,319
Other income (expense), net		1,615			2,573			4,224			9,067
Interest expense		(199	)		(329	)		(695	)		(1,018	)

Income before provision for income taxes		7,956			26,316			27,091			77,368
Provision for income taxes		1,916			7,024			7,875			21,159

Net income		6,040			19,292			19,216			56,209


Other comprehensive (loss) income:
Marketable debt securities, available-for-sale:
Change in net unrealized gains and losses		(30	)		160			687			1,874
Less: reclassification adjustment for net losses (gains) included in other income (expense), net		8			(23	)		32			(41	)

Net change, net of tax of $(7), $46, $246 and $617 for the three and nine months ended September 30, 2020 and 2019, respectively		(22	)		137			719			1,833
Foreign currency translation (loss) gain, net of tax of $0 for each of the three and nine months ended September 30, 2020 and 2019		(214	)		114			254			(200	)

Total other comprehensive (loss) income		(236	)		251			973			1,633

Comprehensive income	$	5,804		$	19,543		$	20,189		$	57,842


Earnings per share:
Basic	$	0.15		$	0.49		$	0.49		$	1.43
Diluted	$	0.15		$	0.49		$	0.48		$	1.42
Weighted average common shares outstanding:
Basic		39,681			39,441			39,617			39,383
Diluted		39,727			39,550			39,676			39,527

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for shares)

(Unaudited)


	Three Months Ended September 30, 2020
	Preferred Stock				Common Stock					Additional Paid-In Capital			Stock Notes Receivable From Employees		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Stock Notes Receivable From Employees		Retained Earnings		Accumulated Other Comprehensive Income (Loss)			Total
Balance at June 30, 2020		—	$	—		39,328,017		$	4	$	108,308		$	—	$	401,414	$	3,187		$	512,913
Net and comprehensive income (loss)		—		—		—			—		—			—		6,040		(236	)		5,804
Stock-based award activity
Stock-based compensation		—		—		—			—		2,383			—		—		—			2,383
Shares issued pursuant to employee stock purchase plan		—		—		—			—		—			—		—		—			—
Issuance of common stock for vesting of restricted stock units		—		—		50,912			—		—			—		—		—			—
Issuance of common stock for unvested restricted stock awards		—		—		—			—		—			—		—		—			—
Shares withheld related to net share settlement of stock-based awards		—		—		(2,452	)		—		(66	)		—		—		—			(66	)
Reduction of stock notes receivable from employees		—		—		—			—		—			—		—		—			—

Balance as of September 30, 2020		—	$	—		39,376,477		$	4	$	110,625		$	—	$	407,454	$	2,951		$	521,034


	Three Months Ended September 30, 2019
	Preferred Stock				Common Stock					Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings		Accumulated Other Comprehensive Income		Total
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings		Accumulated Other Comprehensive 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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)

(in thousands, except for shares)

(Unaudited)


	Nine Months Ended September 30, 2020
	Preferred Stock				Common Stock					Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings			Accumulated Other Comprehensive Income		Total
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings			Accumulated Other Comprehensive Income		Total
Balance at December 31, 2019		—	$	—		39,153,195		$	4	$	104,658		$	(4	)	$	388,271		$	1,978	$	494,907
Cumulative effect of a change in accounting principle, net of tax		—		—		—			—		—			—			(33	)		—		(33	)

Balance at January 1, 2020, as adjusted		—		—		39,153,195			4		104,658			(4	)		388,238			1,978		494,874
Net and comprehensive income		—		—		—			—		—			—			19,216			973		20,189
Stock-based award activity
Stock-based compensation		—		—		—			—		7,551			—			—			—		7,551
Shares issued pursuant to employee stock purchase plan		—		—		15,923			—		371			—			—			—		371
Issuance of common stock for vesting of restricted stock units		—		—		248,391			—		—			—			—			—		—
Issuance of common stock for unvested restricted stock awards		—		—		19,516			—		—			—			—			—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(60,548	)		—		(1,955	)		—			—			—		(1,955	)
Reduction of stock notes receivable from employees		—		—		—			—		—			4			—			—		4

Balance as of September 30, 2020		—	$	—		39,376,477		$	4	$	110,625		$	—		$	407,454		$	2,951	$	521,034


	Nine Months Ended September 30, 2019
	Preferred Stock				Common Stock					Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings		Accumulated Other Comprehensive Income		Total
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings		Accumulated Other Comprehensive Income		Total

Balance at December 31, 2018		—	$	—		38,814,464		$	4	$	97,458		$	(4	)	$	311,341	$	775	$	409,574
Net and comprehensive income		—		—		—			—		—			—			56,209		1,633		57,842
Stock-based award activity
Stock-based compensation		—		—		—			—		7,040			—			—		—		7,040
Shares issued pursuant to employee stock purchase plan		—		—		11,022			—		338			—			—		—		338
Issuance of common stock for vesting of restricted stock units		—		—		366,476			—		—			—			—		—		—
Issuance of common stock for unvested restricted stock awards		—		—		12,806			—		—			—			—		—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(72,532	)		—		(2,694	)		—			—		—		(2,694	)

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


PART I. FINANCIAL INFORMATION
	Page

Item 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 2020 (Unaudited) and December 31, 2019		3
Condensed Consolidated Statements of Net and Comprehensive Income for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)		4
Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited)		5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2020 and 2019 (Unaudited)		7
Notes to Condensed Consolidated Financial Statements (Unaudited)		8

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
Item 3. Quantitative and Qualitative Disclosures About Market Risk		43
Item 4. Controls and Procedures		44

PART II. OTHER INFORMATION
Item 1. Legal Proceedings		45
Item 1A. Risk Factors		45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3. Defaults Upon Senior Securities		46
Item 4. Mine Safety Disclosures		46
Item 5. Other Information		46
Item 6. Exhibits		46

SIGNATURES