Record First Quarter with Revenue Growing
73.6% to $319MM, and diluted earnings per share rising 118.9% to
$0.81 from same period last year
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 first quarter of 2022.
First Quarter 2022 Highlights Compared to First Quarter
2021
- Total revenues increased by 73.6%
to $319.5 million
- Net income increased to $32.8
million, or $0.81 per common share, diluted, compared to $15.0
million, or $0.37 per common share, diluted
- Adjusted EBITDA doubled to $51.9
million compared to $25.7 million
- Brokerage commissions increased to
$286.9 million
- Private Client brokerage revenue
increased by 52.7% to $161 million
- Middle Market and Larger
Transaction brokerage revenue increased 134.4% to $120.1
million
- Financing fees increased by 48.3%
to $26.5 million
MMI achieved a record first quarter
driven by our team’s effective execution as investors continued to
deploy capital into commercial real estate,” said Hessam Nadji,
President and CEO. “We are seeing increased equity rotation across
property types and geographic markets as investors reposition
assets and portfolios, and pivot to changing market conditions” he
added. “Internally, contributions from strategic initiatives
implemented over the past few years continued to build in the
quarter. These include investments in revenue-generating
technology, solid productivity among our most experienced
producers, and the addition of many market-leading professionals
and companies acquired in recent years.”
“Looking forward, strong fundamentals, above-trend rent growth,
and anticipation of interest rate increases are keeping investor
motivations elevated,” Nadji said. “Notwithstanding rising interest
rates and growth concerns, we believe strong capital demand from
private and institutional investors searching for inflation-hedged
yield will support an active marketplace. Our growth strategy is
unwavering and supported by our strong balance sheet. This includes
further enhancing the MMI platform, bringing more efficiency to our
sales force, adding experienced professionals, and the acquisition
of synergistic companies.
Dividends
On February 16, 2022, the Board of Directors declared a
semi-annual regular dividend of $0.25 per share and a special
dividend of $1.00 per share, payable on April 4, 2022, to
stockholders of record at the close of business on March 8, 2022.
The Company accrued a dividend payable of $52.1 million, including
dividend equivalents aggregating $2.5 million to be paid upon
vesting on unvested restricted stock and deferred stock units
granted under the Company’s 2013 Omnibus Equity Incentive Plan.
First Quarter 2022 Results Compared to First Quarter
2021
Total revenues for the first quarter of 2022 reached $319.5
million, compared to $184.0 million for the same period during the
prior year, an increase of 73.6%. The growth in total revenues was
driven by increases in real estate brokerage commissions and
financing fees. Real estate brokerage commissions increased 76.2%
to $286.9 million from the same period in the prior year primarily
due to an increase in overall volume of investment sales and
revenue growth of 134.3% in the combined Middle Market and Larger
Transaction Market and 52.7% in the Private Client Market.
Financing fees increased by 48.3% to $26.5 million due to overall
increase in volume of financing transactions and other ancillary
financing fees.
Total operating expenses for the first quarter of 2022 were
$275.2 million, an increase of 68% compared to $163.8 million for
the same period in the prior year. The change was primarily driven
by an 80.4% increase in cost of services and a 44.2% increase in
selling, general and administrative expense. Cost of services as a
percent of total revenues increased by 230 basis points to 61.6%
compared to the same period during the prior year, primarily due to
senior investment sales and financing professionals earning
additional commissions as certain annual revenue thresholds were
achieved earlier than in prior years.
Selling, general and administrative expense for the first
quarter of 2022 increased by $22.9 million to $74.5 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 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) recommencement of in-person agent and client
business events, conferences, and meetings; and (iv) expenses
related to our recent acquisitions.
Net income for the first quarter of 2022 was $32.8 million, or
$0.81 per common share, diluted, compared to $15.0 million, or
$0.37 per common share, diluted, for the same period in the prior
year. Adjusted EBITDA for the first quarter of 2022 was $51.9
million, compared to $25.7 million for the same period in the prior
year.
Business Outlook
Notwithstanding the potential continuing impact of the COVID-19
pandemic and additional interest rate increases 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 80% of all commercial property
sales transactions and over 59% of the commission pool. The top 10
brokerage firms, led by MMI, have an estimated 22% share of this
segment by transaction count.
Key factors that may influence the Company’s business during the
rest of fiscal year 2022 include:
- Volatility in sales and financing activity and investor
sentiment driven by:
- Slowdown in sales and financing activity of asset types
impacted by COVID-19, elevated inflation, interest rate
fluctuations, increasing bid-ask spread between buyers and sellers,
and economic trends
- Possible impact to investor sentiment related to economic
initiatives or potential tax law changes which may contribute to
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
- Increase in costs related to the recommencement of in-person
events, client meetings, and conferences
- Global geopolitical uncertainty, which may disrupt financial
markets or cause investors to refrain from transacting
- The potential for acquisition activity and subsequent
integration
Webcast and Call Information
Marcus & Millichap will host a live webcast today to discuss
the financial 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 the 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, May 6, 2022 through 11:59 p.m. Eastern Time
on Friday, May 20, 2022 by dialing 1-844-512-2921 in the United
States and Canada or 1-412-317-6671 internationally and entering
passcode 13728638.
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 March 31, 2022,
the Company had 1,931 investment sales and financing professionals
in 81 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 2,904
transactions during the three months ended March 31, 2022, with a
sales volume of $21 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 2022, the potential continuing
impact of the COVID-19 pandemic, the execution of our capital
return program, including the semi-annual dividend, and
expectations for 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 economic, operational and
financial impact of the ongoing COVID-19 pandemic, including
uncertainties regarding the potential impact of new variants on our
workforce;
- 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, including the impact of inflation;
- 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, including
cyber and ransomware attacks, and any related impact on our
reputation;
- changes in interest rates, availability of capital, tax laws,
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 and Quarterly Report on Form
10-Q.
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. We have not filed our Form 10-Q for the
quarter ended March 31, 2022. As a result, all financial results
described in this earnings release should be considered
preliminary, and are subject to change to reflect any necessary
adjustments or changes in accounting estimates, that are identified
prior to the time we file our Form 10-Q.
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF NET AND COMPREHENSIVE INCOME
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended March 31,
2022
2021
Revenues:
Real estate brokerage
commissions....................................................................................................
$
286,909
$
162,796
Financing
fees.....................................................................................................................................
26,453
17,843
Other
revenues....................................................................................................................................
6,102
3,338
Total
revenues.........................................................................................................................................
319,464
183,977
Operating expenses:
Cost of
services...................................................................................................................................
196,768
109,103
Selling, general and
administrative.....................................................................................................
74,535
51,677
Depreciation and
amortization............................................................................................................
3,911
2,997
Total operating
expenses.........................................................................................................................
275,214
163,777
Operating
income....................................................................................................................................
44,250
20,200
Other income,
net....................................................................................................................................
450
1,044
Interest
expense.......................................................................................................................................
(160
)
(146
)
Income before provision for income
taxes.............................................................................................
44,540
21,098
Provision for income
taxes......................................................................................................................
11,757
6,086
Net
income..............................................................................................................................................
32,783
15,012
Other comprehensive (loss) income:
Marketable debt securities,
available-for-sale:
Change in net unrealized
gains/losses
...........................................................................................
(2,357
)
(621
)
Less: reclassification adjustment
for net gains included in other income,
net...............................
(84
)
—
Net change, net of tax of $838
and $(215) for the three months ended March 31, 2022 and 2021,
respectively....................................................................................................................................
(2,441
)
(621
)
Foreign currency translation
loss, net of tax of $0 for the three months ended March 31, 2022
and 2021,
respectively......................................................................................................
(59
)
(113
)
Total other comprehensive (loss)
income..............................................................................................
(2,500
)
(734
)
Comprehensive
income..........................................................................................................................
$
30,283
$
14,278
Earnings per share:
Basic....................................................................................................................................................
$
0.82
$
0.38
Diluted................................................................................................................................................
$
0.81
$
0.37
Weighted average common shares
outstanding:
Basic....................................................................................................................................................
39,989
39,757
Diluted................................................................................................................................................
40,474
40,124
MARCUS & MILLICHAP, INC. KEY OPERATING
METRICS SUMMARY (Unaudited)
Total sales volume was approximately $21.0 billion for the three
months ended March 31, 2022, encompassing 2,904 transactions
consisting of $17.2 billion for real estate brokerage (2,137
transactions), $2.7 billion for financing (520 transactions) and
$1.1 billion in other transactions, including consulting and
advisory services (247 transactions). As of March 31, 2022, the
Company had 1,846 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
March 31,
Real Estate Brokerage
2022
2021
Average Number of Investment Sales
Professionals.....................................................
1,856
1,959
Average Number of Transactions per
Investment Sales Professional...........................
1.15
0.81
Average Commission per
Transaction...........................................................................
$
134,258
$
102,517
Average Commission
Rate.............................................................................................
1.67
%
1.84
%
Average Transaction Size (in
thousands).......................................................................
$
8,051
$
5,582
Total Number of
Transactions.......................................................................................
2,137
1,588
Total Sales Volume (in
millions)...................................................................................
$
17,205
$
8,864
Three Months Ended
March 31,
Financing (1)
2022
2021
Average Number of Financing
Professionals................................................................
84
86
Average Number of Transactions per
Financing Professional......................................
6.19
5.74
Average Fee per
Transaction.........................................................................................
$
43,144
$
30,464
Average Fee
Rate...........................................................................................................
0.84
%
0.93
%
Average Transaction Size (in
thousands).......................................................................
$
5,115
$
3,263
Total Number of
Transactions.......................................................................................
520
494
Total Financing Volume (in
millions)...........................................................................
$
2,660
$
1,612
(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 March 31,
2022
2021
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
206
$
128
$
5,787
227
$
149
$
6,138
(21
)
$
(21
)
$
(351
)
Private Client Market ($1 - <$10
million)
1,606
5,696
161,031
1,200
3,668
105,423
406
2,028
55,608
Middle Market ($10 - <$20 million)
184
2,503
46,760
78
1,067
20,601
106
1,436
26,159
Larger Transaction Market (≥$20
million)
141
8,878
73,331
83
3,980
30,634
58
4,898
42,697
2,137
$
17,205
$
286,909
1,588
$
8,864
$
162,796
549
$
8,341
$
124,113
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except for
shares and par value)
March 31, 2022
(Unaudited)
December 31, 2021
Assets
Current assets:
Cash and cash
equivalents..................................................................................................................................
$
315,695
$
382,140
Commissions receivable,
net..............................................................................................................................
13,854
17,230
Prepaid
expenses...............................................................................................................................................
10,373
13,220
Marketable debt securities,
available-for-sale (includes amortized cost of $220,015 and
$183,915 at March 31, 2022 and December 31, 2021, respectively, and
$0 allowance for credit
losses).........................................................
218,988
183,868
Advances and loans,
net.....................................................................................................................................
5,889
6,403
Other
assets......................................................................................................................................................
6,027
5,270
Total current
assets................................................................................................................................................
570,826
608,131
Property and equipment,
net....................................................................................................................................
23,249
23,192
Operating lease right-of-use assets,
net.....................................................................................................................
77,928
81,528
Marketable debt securities,
available-for-sale (includes amortized cost of $54,519 and $111,858
at March 31, 2022 and December 31, 2021, respectively, and $0
allowance for credit
losses)....................................................................
52,980
112,610
Assets held in rabbi
trust.........................................................................................................................................
10,916
11,508
Deferred tax assets,
net...........................................................................................................................................
33,470
33,736
Goodwill and other intangible assets, net
.................................................................................................................
59,434
48,105
Advances and loans,
net.........................................................................................................................................
139,087
113,242
Other
assets...........................................................................................................................................................
12,273
13,146
Total
assets............................................................................................................................................................
$
980,163
$
1,045,198
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and other
liabilities.................................................................................................................
$
24,388
$
24,271
Deferred compensation and
commissions............................................................................................................
54,994
114,685
Dividends
payable.............................................................................................................................................
50,694
—
Income tax
payable...........................................................................................................................................
28,042
17,853
Operating lease
liabilities...................................................................................................................................
18,276
18,973
Accrued bonuses and other employee related
expenses.........................................................................................
15,863
49,848
Total current
liabilities...........................................................................................................................................
192,257
225,630
Deferred compensation and
commissions.................................................................................................................
45,603
53,536
Operating lease
liabilities........................................................................................................................................
56,307
58,334
Other
liabilities......................................................................................................................................................
10,607
11,394
Total
liabilities.......................................................................................................................................................
304,774
348,894
Commitments and
contingencies.............................................................................................................................
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at March 31, 2022 and December 31, 2021,
respectively.................................................................................................................................................
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000;
issued and outstanding shares – 39,795,399 and 39,692,373 at March
31, 2022 and December 31, 2021,
respectively.........................................................................................................
4
4
Additional paid-in
capital.............................................................................................................................
122,782
121,844
Retained
earnings..............................................................................................................................................
554,193
573,546
Accumulated other comprehensive
income..........................................................................................................
(1,590
)
910
Total stockholders’
equity..................................................................................................................................
675,389
696,304
Total liabilities and stockholders’
equity..................................................................................................................
$
980,163
$
1,045,198
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. Considering 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
March 31,
2022
2021
Net
income............................................................................................................................
$
32,783
$
15,012
Adjustments:
Interest income and other
(1)..............................................................................................
(615
)
(531
)
Interest
expense.................................................................................................................
160
146
Provision for income
taxes................................................................................................
11,757
6,086
Depreciation and
amortization..........................................................................................
3,911
2,997
Stock-based
compensation................................................................................................
3,856
2,288
Non-cash MSR activity
(2).................................................................................................
-
(303
)
Adjusted
EBITDA(3)..............................................................................................................
$
51,852
$
25,695
(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 months ended
March 31, 2022 compared to the same period in 2021 is primarily due
to 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 three months ended March 31, 2022, we closed a
portfolio of large transactions in our real estate brokerage
business in excess of $300 million. Following are actual and as
adjusted metrics excluding these transactions compared to the three
months ended March 31, 2021:
Three Months Ended
March 31, 2022
(actual)
(as adjusted)
Total Sales Volume
Increase.....................................................
94.1
%
76.6
%
Average Commission Rate
Reduction.......................................
(9.2
)%
(4.1
)%
Average Transaction Size
Increase............................................
44.2
%
31.3
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220506005074/en/
Investor Relations Contact: Investor Relations
InvestorRelations@marcusmillichap.com
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