Marcus & Millichap, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements (Tables)

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 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):


	September 30, 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	$	9,467	$	—	$	9,467	$	—	$	9,452	$	—	$	9,452	$	—

Cash equivalents (1) :
Commercial paper and other	$	2,950	$	—	$	2,950	$	—	$	5,087	$	—	$	5,087	$	—
Money market funds		130,045		130,045		—		—		185,513		185,513		—		—

	$	132,995	$	130,045	$	2,950	$	—	$	190,600	$	185,513	$	5,087	$	—

Marketable debt securities, available-for-sale:
Short-term investments:
U.S. treasuries	$	93,641	$	93,641	$	—	$	—	$	124,580	$	124,580	$	—	$	—
U.S. government sponsored entities		37,740		—		37,740		—		—		—		—		—
Corporate debt		38,132		—		38,132		—		26,172		—		26,172		—

	$	169,513	$	93,641	$	75,872	$	—	$	150,752	$	124,580	$	26,172	$	—

Long-term investments:
U.S. treasuries	$	3,689	$	3,689	$	—	$	—	$	24,423	$	24,423	$	—	$	—
U.S. government sponsored entities		1,269		—		1,269		—		1,355		—		1,355		—
Corporate debt		34,357		—		34,357		—		26,471		—		26,471		—
ABS and other		7,190		—		7,190		—		8,560		—		8,560		—

	$	46,505	$	3,689	$	42,816	$	—	$	60,809	$	24,423	$	36,386	$	—

Liabilities:
Contingent consideration	$	4,683	$	—	$	—	$	4,683	$	3,387	$	—	$	—	$	3,387

Deferred consideration	$	5,352	$	—	$	5,352	$	—	$	1,390	$	—	$	1,390	$	—

Deferred compensation liability	$	7,914	$	7,914	$	—	$	—	$	8,241	$	8,241	$	—	$	—

(1)	Included in cash and cash equivalents on the accompanying condensed 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):


	Nine Months Ended September 30,
	2020			2019
Beginning balance (1)	$	3,387		$	2,875
Contingent consideration in connection with acquisitions (2)		1,800			—
Change in fair value of contingent consideration		134			(11	)
Payments of contingent consideration		(638	)		—

Ending balance	$	4,683		$	2,864

(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
September 30, 2020

Valuation Technique

Unobservable inputs

Range

(Weighted Average)

(1)

Contingent consideration

4,683

Discounted cash flow

Expected life of cash flows

0.5-5.0 years

(2.0 years)

Discount rate

4.1%-4.4%

(4.2%)

Probability of achievement

62%-100.0%

(85.5%)

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
September 30, 2020

Valuation Technique

Unobservable inputs

Range

(Weighted Average)

(1)

MSRs

2,296

Discounted cash flow

Constant prepayment

rates

0.0%-20.0% (

10.0

Constant default rate

0.4%-5.1%

(1.5%)

Loss severity

24.2%-50.0% (30.1%)

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.