ALL-TIME RECORD QUARTERLY REVENUES, NET
INCOME AND EARNINGS PER SHARE
Marcus & Millichap, Inc. (the “Company”, “Marcus &
Millichap”, “MMI”) (NYSE: MMI), a leading national brokerage firm
specializing in commercial real estate investment sales, financing,
research and advisory services, today reported record financial
results for the third quarter and nine months ended September 30,
2021.
Third Quarter 2021 Highlights Compared to Third Quarter
2020
- Total revenues increased by 109.6%
to $332.4 million
- Net income increased to $33.9
million, or $0.84 per common share, diluted, compared to $6.0
million, or $0.15 per common share, diluted
- Adjusted EBITDA increased more than
fourfold to $51.0 million compared to $12.2 million
- Brokerage commissions more than
doubled to $299.8 million
- Private Client brokerage revenue
grew 87.0% to $183.0 million
- Middle Market and Larger
Transaction brokerage revenue increased nearly threefold to $109.3
million
- Financing fees nearly doubled to
$29.4 million
Nine Months 2021 Highlights
Compared to Nine Months 2020
- Total revenues increased by 71.7%
to $801.3 million
- Net income increased to $80.5
million, or $2.00 per common share, diluted, compared to $19.2
million, or $0.48 per common share, diluted
- Adjusted EBITDA increased more than threefold to $124.8 million
compared to $38.8 million
- Brokerage commissions increased by
72.0% to $715.5 million
- Private Client brokerage revenue
increased by 57.8% to $446.6 million
- Middle Market and Larger
Transaction brokerage revenue more than doubled to $247.7
million
- Financing fees increased by 72.8% to $75.4 million
“This was our second consecutive
milestone quarter by almost every measure. Our business is
performing exceptionally well with all product lines registering
solid growth throughout the year. As expected, our results are
substantially higher than last year’s disrupted market. Even more
relevant, compared to the same period in 2019, our year-to-date
revenues and Adjusted EBITDA were up 40.9% and 50.3%, respectively.
This is a direct reflection of our sales force’s ability to shift
from helping clients solve problems and navigate the uncertainty of
last year to maximizing opportunities amid this year’s market
recovery. Our expanded client outreach, steady stream of technology
enhancements and recent acquisitions all contributed to a record
quarter,” commented Hessam Nadji, Marcus & Millichap’s
President and CEO.
Mr. Nadji continued, “The
operating environment remains compelling with still low interest
rates, ample liquidity and increasing confidence in the recovery.
We are further building on our recent strategic acquisitions and
ongoing investments in the Company’s brokerage systems, training
and development, all of which are supported by our strong balance
sheet and leading market position. For example, our recent
strategic alliance with M&T Realty Capital Corporation
positions us to expand agency financing for our multi-family
clients while improving tools and resources for our originators. We
believe this will allow us to grow our Fannie Mae and Freddie Mac
market share in the coming years. We continue to work every day to
enhance our client services and create shareholder value by
building upon a solid foundation to achieve growth and
durability.”
Third Quarter 2021 Results Compared to Third Quarter
2020
Total revenues for the third quarter of 2021 reached $332.4
million, compared to $158.6 million for the same period during the
prior year, increasing by 109.6%. The outperformance in total
revenues was driven by increases in real estate brokerage
commissions, financing fees and other revenues. Real estate
brokerage commissions more than doubled to $299.8 million from the
same period in the prior year primarily due to an increase in
overall sales volume generated by the increase in the number of
investment sales transactions. The increase was partially offset by
a reduction in average commission rates due to a larger proportion
of closed transactions from the Larger Transaction Market segment.
Financing fees nearly doubled to $29.4 million.
Total operating expenses for the third quarter of 2021 increased
88.6% to $286.7 million, compared to $152.0 million for the same
period in the prior year. The change was primarily driven by a
119.8% increase in cost of services and a 30.1% increase in
selling, general and administrative expense. Cost of services as a
percent of total revenues increased by 300 basis points to 65.9%
compared to the same period during the prior year, primarily due to
our senior investment sales and financing professionals earning
additional commissions by meeting certain annual financial
thresholds and reaching their thresholds earlier than prior
years.
Selling, general and administrative expense for the third
quarter of 2021 increased by $15.0 million to $64.7 million,
compared to the same period in the prior year. The change was
primarily due to increases in (i) compensation related costs,
primarily driven by increases in management performance
compensation due to a significant year-over-year growth in
operating results; (ii) business development, marketing and other
support related to the long-term retention of our sales and
financing professionals; (iii) facilities expenses; and (iv) legal
costs.
Net income for the third quarter of 2021 was $33.9 million, or
$0.84 per common share, diluted, compared to $6.0 million, or $0.15
per common share, diluted, for the same period in the prior year.
Adjusted EBITDA for the third quarter of 2021 was $51.0 million,
compared to $12.2 million for the same period in the prior
year.
Nine Months 2021 Results Compared to Nine Months 2020
Total revenues for the nine months ended September 30, 2021,
were $801.3 million, compared to $466.7 million for the same period
in the prior year, an increase of $334.6 million, or 71.7%. Total
operating expenses for the nine months ended September 30, 2021
increased by 56.6% to $693.8 million compared to $443.1 million for
the same period in the prior year. Cost of services as a percent of
total revenues increased to 63.3%, up 180 basis points compared to
the first nine months of 2020. The Company reported net income for
the nine months ended September 30, 2021 of $80.5 million, or $2.00
per common share, diluted, compared with net income of $19.2
million, or $0.48 per common share, diluted, for the same period in
the prior year. Adjusted EBITDA for the nine months ended September
30, 2021 increased more than threefold to $124.8 million, from
$38.8 million for the same period in the prior year. As of
September 30, 2021, the Company had 1,982 investment sales and
financing professionals, a net loss of 17 over the prior year.
Business Outlook
Notwithstanding the potential continuing impact of the COVID-19
pandemic on the current macroeconomic environment, the Company
believes it is well positioned to achieve long-term growth.
The Company benefits from its experienced management team,
infrastructure investments, industry-leading market research and
proprietary technology. The size and fragmentation of the Private
Client Market segment continues to offer long-term growth
opportunities through consolidation. This highly fragmented market
segment consistently accounts for over 80% of all commercial
property sales transactions and over 60% of the commission pool.
The top 10 brokerage firms led by MMI have an estimated 23% share
of this segment by transaction count.
Key factors that may influence the Company’s business during the
remainder of 2021 include:
- Volatility in market sales and investor sentiment driven by:
- Slowdown in market sales of asset types impacted by COVID-19,
interest rate fluctuations, increasing bid-ask spread between
buyers and sellers and economic trends
- Changes to investor sentiment and sales activity based on
favorable interest rates and economic initiatives which may
increase real estate investor demand, for the remainder of
2021
- Possible impact to investor sentiment related to potential tax
law changes which maybe contribute to transaction acceleration
and/or future fluctuations in sales and financing activity
- Potential higher cost of services resulting from more
experienced investment sales and financing professionals closing a
larger share of revenue and surpassing revenue thresholds earlier
in the year
- Volatility in each of the Company’s market segments
- Global geopolitical uncertainty, which may cause investors to
refrain from transacting
- The potential for accretive acquisition activity and subsequent
integration
Webcast Information
Marcus & Millichap will host a live webcast today to discuss
the results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern Time. The
webcast will be accessible through the Investor Relations section
of Marcus & Millichap's website at ir.marcusmillichap.com and
will be archived upon completion of the call. The Company
encourages use of the webcast due to potential extended wait times
to access the conference call via dial-in.
For those unable to access the webcast, callers from the United
States and Canada should dial 1-877-407-9208 ten minutes prior to
the scheduled call time. International callers should dial
1-201-493-6784.
Replay Information
For those unable to participate during the live broadcast, a
telephonic replay of the call will also be available from 1:30 p.m.
Eastern Time on Friday, November 5, 2021 through 11:59 p.m. Eastern
Time on Friday, November 19, 2021 by dialing 1-844-512-2921 in the
United States and Canada or 1-412-317-6671 internationally and
entering passcode 13724201.
About Marcus & Millichap, Inc.
Marcus & Millichap, Inc. is a leading national brokerage
firm specializing in commercial real estate investment sales,
financing, research and advisory services. As of September 30,
2021, the Company had 1,982 investment sales and financing
professionals in 82 offices who provide investment brokerage and
financing services to sellers and buyers of commercial real estate.
The Company also offers market research, consulting and advisory
services to our clients. Marcus & Millichap closed 8,942
transactions during the nine months ended September 30, 2021, with
a sales volume of approximately $50.2 billion. For additional
information, please visit www.MarcusMillichap.com.
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This release includes forward-looking statements, including the
Company’s business outlook for 2021, the potential continuing
impact of the COVID-19 pandemic, and expectations for changes (or
fluctuations) in market share growth. We have based these
forward-looking statements largely on our current expectations and
projections about future events and financial trends affecting the
financial condition of our business. Forward-looking statements
should not be read as a guarantee of future performance or results
and will not necessarily be accurate indications of the times at,
or by, which such performance or results may be achieved.
Forward-looking statements are based on information available at
the time those statements are made and/or management’s good faith
belief as of that time with respect to future events and are
subject to risks and uncertainties that could cause actual
performance or results to differ materially from those expressed in
or suggested by the forward-looking statements. Important factors
that could cause such differences include, but are not limited
to:
- uncertainties relating to the continuing impact of the COVID-19
pandemic, including the potential impact of new variants and
vaccination rates, the impact of the federal government’s stimulus
response package, and the pace of recovery following such
pandemic;
- general uncertainty in the capital
markets and a worsening of economic conditions and the rate and
pace of economic recovery following an economic downturn;
- changes in our business
operations;
- market trends in the commercial real estate market or the
general economy;
- our ability to attract and retain qualified senior executives,
managers and investment sales and financing professionals;
- the effects of increased competition on our business;
- our ability to successfully enter new markets or increase our
market share;
- our ability to successfully expand our services and businesses
and to manage any such expansions;
- our ability to retain existing clients and develop new
clients;
- our ability to keep pace with changes in technology;
- any business interruption or technology failure and any related
impact on our reputation;
- changes in interest rates, tax laws, including potential
increases in corporate taxes by the Biden Administration,
employment laws or other government regulation affecting our
business;
- our ability to successfully identify, negotiate, execute and
integrate accretive acquisitions; and
- other risk factors included under “Risk Factors” in our most
recent Annual Report on Form 10-K.
In addition, in this release, the words “believe,” “may,”
“will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,”
“predict,” “potential,” “should” and similar expressions, as they
relate to our company, our business and our management, are
intended to identify forward-looking statements. In light of these
risks and uncertainties, the forward-looking events and
circumstances discussed in this release may not occur and actual
results could differ materially from those anticipated or implied
in the forward-looking statements.
Forward-looking statements speak only as of the date of this
release. You should not put undue reliance on any forward-looking
statements. We assume no obligation to update forward-looking
statements to reflect actual results, changes in assumptions or
changes in other factors affecting forward-looking information,
except to the extent required by applicable laws. If we update one
or more forward-looking statements, no inference should be drawn
that we will make additional updates with respect to those or other
forward-looking 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,
2021
2020
2021
2020
Revenues:
Real estate brokerage
commissions
$
299,759
$
140,844
$
715,458
$
416,044
Financing fees
29,391
15,620
75,448
43,674
Other revenues
3,233
2,111
10,400
6,974
Total revenues
332,383
158,575
801,306
466,692
Operating expenses:
Cost of services
219,194
99,707
506,882
287,207
Selling, general and
administrative
64,673
49,722
178,147
148,101
Depreciation and amortization
2,850
2,606
8,806
7,822
Total operating expenses
286,717
152,035
693,835
443,130
Operating income
45,666
6,540
107,471
23,562
Other income (expense), net
323
1,615
2,737
4,224
Interest expense
(144)
(199)
(436)
(695)
Income before provision for income
taxes
45,845
7,956
109,772
27,091
Provision for income taxes
11,921
1,916
29,304
7,875
Net income
33,924
6,040
80,468
19,216
Other comprehensive (loss) income:
Marketable debt securities,
available-for-sale:
Change in net unrealized
gains
(240)
(30)
(715)
687
Less: reclassification adjustment for net
losses included in other
income (expense), net
23
8
26
32
Net change, net of tax of $(75), $(7),
$(239) and $246 for the three
and nine months ended September 30, 2021
and 2020,
respectively
(217)
(22)
(689)
719
Foreign currency translation gain (loss),
net of tax of $0 for the three
and nine months ended September 30, 2021
and 2020,
respectively
192
(214)
(138)
254
Total other comprehensive (loss)
income
(25)
(236)
(827)
973
Comprehensive income
$
33,899
$
5,804
$
79,641
$
20,189
Earnings per share:
Basic
$
0.85
$
0.15
$
2.02
$
0.49
Diluted
$
0.84
$
0.15
$
2.00
$
0.48
Weighted average common shares
outstanding:
Basic
39,940
39,681
39,859
39,617
Diluted
40,241
39,727
40,148
39,676
MARCUS & MILLICHAP, INC. KEY
OPERATING METRICS SUMMARY (Unaudited)
Total sales volume was $20.8 billion for the three months ended
September 30, 2021, encompassing 3,325 transactions consisting of
$16.5 billion for real estate brokerage (2,456 transactions), $3.3
billion for financing (600 transactions) and $1.0 billion in other
transactions, including consulting and advisory services (269
transactions). Total sales volume was $50.2 billion for the nine
months ended September 30, 2021, encompassing 8,942 transactions
consisting of $38.9 billion for real estate brokerage (6,374
transactions), $7.8 billion for financing (1,778 transactions) and
$3.5 billion in other transactions, including consulting and
advisory services (790 transactions). As of September 30, 2021, the
Company had 1,897 investment sales professionals and 85 financing
professionals. Key metrics for real estate brokerage and financing
activities (excluding other transactions) are as follows:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Real Estate Brokerage
2021
2020
2021
2020
Average Number of Investment Sales
Professionals
1,909
1,917
1,934
1,911
Average Number of Transactions per
Investment Sales Professional
1.29
0.80
3.30
2.21
Average Commission per Transaction
$
122,052
$
92,236
$
112,246
$
98,659
Average Commission Rate
1.82%
2.01%
1.84%
1.99%
Average Transaction Size (in
thousands)
$
6,721
$
4,581
$
6,108
$
4,947
Total Number of Transactions
2,456
1,527
6,374
4,217
Total Sales Volume (in millions)
$
16,507
$
6,995
$
38,931
$
20,861
Three Months Ended
September 30,
Nine Months Ended
September 30,
Financing (1)
2021
2020
2021
2020
Average Number of Financing
Professionals
86
82
86
86
Average Number of Transactions per
Financing Professional
6.98
5.39
20.67
15.13
Average Fee per Transaction
$
42,319
$
33,531
$
36,126
$
31,607
Average Fee Rate
0.77%
0.88%
0.82%
0.89%
Average Transaction Size (in
thousands)
$
5,503
$
3,828
$
4,390
$
3,533
Total Number of Transactions
600
442
1,778
1,301
Total Financing Volume (in millions)
$
3,302
$
1,692
$
7,806
$
4,597
(1)
Operating metrics exclude certain
financing fees not directly associated to transactions.
The following table sets forth the number of transactions, sales
volume and revenues by commercial real estate market segment for
real estate brokerage:
Three Months Ended September
30,
2021
2020
Change
Real Estate Brokerage
Number
Volume
Revenues
Number
Volume
Revenues
Number
Volume
Revenues
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
267
$
183
$
7,419
241
$
156
$
6,290
26
$
27
$
1,129
Private Client Market ($1 - <$10
million)
1,894
6,296
183,033
1,168
3,592
97,856
726
2,704
85,177
Middle Market ($10 - <$20 million)
136
1,940
35,353
70
945
17,643
66
995
17,710
Larger Transaction Market (≥$20
million)
159
8,088
73,954
48
2,302
19,055
111
5,786
54,899
2,456
$
16,507
$
299,759
1,527
$
6,995
$
140,844
929
$
9,512
$
158,915
Nine Months Ended September
30,
2021
2020
Change
Real Estate Brokerage
Number
Volume
Revenues
Number
Volume
Revenues
Number
Volume
Revenues
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
791
$
532
$
21,175
649
$
410
$
16,550
142
$
122
$
4,625
Private Client Market ($1 - <$10
million)
4,861
15,639
446,592
3,203
10,207
282,937
1,658
5,432
163,655
Middle Market ($10 - <$20 million)
370
5,141
97,699
204
2,785
51,902
166
2,356
45,797
Larger Transaction Market (≥$20
million)
352
17,619
149,992
161
7,459
64,655
191
10,160
85,337
6,374
$
38,931
$
715,458
4,217
$
20,861
$
416,044
2,157
$
18,070
$
299,414
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands,
except for shares and par value)
September 30, 2021
(Unaudited)
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
281,007
$
243,152
Commissions receivable, net
15,377
10,391
Prepaid expenses
9,232
10,153
Marketable debt securities,
available-for-sale (includes amortized cost of $116,852 and
$158,148 at September
30, 2021 and December 31, 2020,
respectively, and $0 allowance for credit losses)
116,902
158,258
Advances and loans, net
3,017
2,413
Other assets
4,436
4,711
Total current assets
429,971
429,078
Property and equipment, net
22,890
23,436
Operating lease right-of-use assets,
net
85,250
84,024
Marketable debt securities,
available-for-sale (includes amortized cost of $128,788 and $45,181
at September 30,
2021 and December 31, 2020, respectively,
and $0 allowance for credit losses)
130,502
47,773
Assets held in rabbi trust
11,056
10,295
Deferred tax assets, net
24,410
21,374
Goodwill and other intangible assets,
net
48,974
52,053
Advances and loans, net
108,709
106,913
Other assets
13,318
4,176
Total assets
$
875,080
$
779,122
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other liabilities
$
20,025
$
18,288
Deferred compensation and commissions
53,068
58,106
Income tax payable
5,658
3,726
Operating lease liabilities
19,745
19,190
Accrued bonuses and other employee related
expenses
32,066
21,007
Total current liabilities
130,562
120,317
Deferred compensation and commissions
38,638
38,745
Operating lease liabilities
60,970
59,408
Other liabilities
12,641
13,816
Total liabilities
242,811
232,286
Commitments and contingencies
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at September 30, 2021 and
December 31, 2020,
respectively
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued
and outstanding shares – 39,666,785 and 39,401,976 at
September 30, 2021 and December
31, 2020, respectively
4
4
Additional paid-in capital
118,974
113,182
Retained earnings
511,544
431,076
Accumulated other comprehensive income
1,747
2,574
Total stockholders’ equity
632,269
546,836
Total liabilities and stockholders’
equity
$
875,080
$
779,122
MARCUS & MILLICHAP, INC. OTHER
INFORMATION (Unaudited)
Adjusted EBITDA Reconciliation
Adjusted EBITDA, which the Company defines as net income before
(i) interest income and other, including net realized gains
(losses) on marketable debt securities, available-for-sale and cash
and cash equivalents, (ii) interest expense, (iii) provision for
income taxes, (iv) depreciation and amortization, (v) stock-based
compensation, and (vi) non-cash mortgage servicing rights (“MSRs”)
activity. The Company uses Adjusted EBITDA in its business
operations to evaluate the performance of its business, develop
budgets and measure its performance against those budgets, among
other things. The Company also believes that analysts and investors
use Adjusted EBITDA as a supplemental measure to evaluate its
overall operating performance. However, Adjusted EBITDA has
material limitations as a supplemental metric and should not be
considered in isolation or as a substitute for analysis of the
Company’s results as reported under U.S. generally accepted
accounting principles (“U.S. GAAP”). The Company finds Adjusted
EBITDA to be a useful management metric to assist in evaluating
performance, because Adjusted EBITDA eliminates items related to
capital structure, taxes and non-cash items. In light of the
foregoing limitations, the Company does not rely solely on Adjusted
EBITDA as a performance measure and also considers its U.S. GAAP
results. Adjusted EBITDA is not a measurement of the Company’s
financial performance under U.S. GAAP and should not be considered
as an alternative to net income, operating income or any other
measures calculated in accordance with U.S. GAAP. Because Adjusted
EBITDA is not calculated in the same manner by all companies, it
may not be comparable to other similarly titled measures used by
other companies.
A reconciliation of the most directly comparable U.S. GAAP
financial measure, net income, to Adjusted EBITDA is as follows (in
thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Net income
$
33,924
$
6,040
$
80,468
$
19,216
Adjustments:
Interest income and other (1)
(503)
(889)
(1,470)
(4,090)
Interest expense
144
199
436
695
Provision for income taxes
11,921
1,916
29,304
7,875
Depreciation and amortization
2,850
2,606
8,806
7,822
Stock-based compensation
2,703
2,383
7,653
7,551
Non-cash MSR activity (2)
(54)
(26)
(407)
(312)
Adjusted EBITDA(3)
$
50,985
$
12,229
$
124,790
$
38,757
(1)
Other includes net realized gains (losses)
on marketable debt securities available-for-sale.
(2)
Non-cash MSR activity includes the
assumption of servicing obligations.
(3)
The increase in Adjusted EBITDA for the
three and nine months ended September 30, 2021 compared to the same
period in 2020 is primarily
due to an increase in total revenues and a
lower proportion of operating expenses compared to total
revenues.
Glossary of Terms
- Private Client Market segment:
transactions with values from $1 million to up to but less than $10
million
- Middle Market segment: transactions
with values from $10 million to up to but less than $20
million
- Larger Transaction Market segment
(previously Institutional Market segment): transactions with values
of $20 million and above
- Acquisitions: acquisitions of teams
and/or acquisitions as business combinations under accounting
standards
Certain Adjusted Metrics
Real Estate Brokerage
During the nine months ended September 30, 2021, we closed a
large portfolio of transactions in our real estate brokerage
business in excess of $300 million. Following are actual and as
adjusted metrics excluding this transaction:
Nine Months Ended
September 30, 2021
(actual)
(as adjusted)
Total Sales Volume Increase
86.6%
83.6%
Average Commission Rate
(Reduction) Growth
(7.9)%
(6.7)%
Average Transaction Size
Increase
23.5%
21.6%
View source
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Marcus and Millichap (NYSE:MMI)
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