Record Annual Revenue of $1.3
Billion
Diluted Earnings Per Share of $0.20 for the
Fourth Quarter and $2.59 for the Full 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 financial results
for the fourth quarter and the year ended December 31, 2022.
Fourth Quarter 2022 Highlights Compared to Fourth Quarter
2021
- Total revenue was $262.4 million, compared to $495.1
million
- Net income was $7.9 million, or $0.20 per common share,
diluted, compared to $62.0 million, or $1.53 per common share,
diluted
- Adjusted EBITDA was $14.1 million compared to $88.2
million
- Brokerage commissions were $235.8 million, compared to $455.5
million
- Private Client brokerage revenue was $145.6 million, compared
to $247.4 million
- Middle Market and Larger Transaction brokerage revenue was
$85.1 million, compared to $198.6 million
- Financing fees were $21.6 million, compared to $34.2
million
Full Year 2022 Highlights Compared to Full Year 2021
- Total revenue was $1,301.7 million, compared to $1,296.4
million
- Net income was $104.2 million, or $2.59 per common share,
diluted, compared to $142.5 million, or $3.55 per common share,
diluted
- Adjusted EBITDA was $165.5 million compared to $213.0
million
- Brokerage commissions were $1,170.3 million, compared to
$1,171.0 million
- Private Client brokerage revenue was $682.0 million, compared
to $694.0 million
- Middle Market and Larger Transaction brokerage revenue was
$463.5 million, compared to $446.3 million
- Financing fees were $113.0 million, compared to $109.7
million
“Despite a challenging fourth quarter spurred by the Fed-induced
market disruption, MMI delivered record revenue in 2022 and the
second-best earnings in our 52-year history,” stated Hessam Nadji,
Marcus & Millichap’s President and CEO. “Last year’s Federal
Reserve actions to fight runaway inflation resulted in the most
aggressive financial tightening in 40 years, disrupting valuations
and reducing fourth quarter market sales by 57%, according to data
from Real Capital Analytics. Our fourth quarter financial results
were directly impacted by the market disruption and costs related
to investments in long-term growth initiatives. However, the
relative strength of the Marcus & Millichap platform was on
display as we outperformed the market with nearly 2,700 closings in
the quarter.”
Mr. Nadji continued, “Notwithstanding ongoing near-term market
headwinds, we expect clarity to emerge as the Fed nears the end of
its tightening cycle and real estate investors recalibrate
expectations on valuations. This will take time to emerge broadly
and lift trading volumes, but there is no shortage of capital or
buyer demand for appropriately priced assets. Our strategy to stay
focused on the long term, continue investing in technology,
market-leading talent and accretive acquisitions is unwavering. As
we have proven through many cycles, our client-driven, value-added
services are particularly sought after during times of disruption
and foster robust recovery as cycles turn. We continue to invest in
our business, which we believe will further enhance our market
position and enable us to create even more long-term value for our
shareholders.”
Capital Allocation
During the twelve months ended December 31, 2022, the Company
declared two semi-annual regular dividends and one special dividend
totaling $62.6 million, and repurchased 864,271 shares of common
stock for $29.6 million.
On February 9, 2023, the Board of Directors declared a
semi-annual regular dividend of $0.25 per share, or approximately
$10.4 million, payable on April 6, 2023, to stockholders of record
at the close of business on March 14, 2023.
Fourth Quarter 2022 Results Compared to Fourth Quarter
2021
Total revenue for the fourth quarter of 2022 was $262.4 million,
compared to $495.1 million for the same period during the prior
year, decreasing by 47.0%. Real estate brokerage commissions
decreased to $235.8 million, compared to $455.5 million from the
same period in the prior year primarily driven by lower transaction
volume resulting from a slowdown in market activity arising from
increasing interest rates and an uncertain economic outlook.
Total operating expenses for the fourth quarter of 2022 were
$256.6 million, a decrease of 37.9% compared to $413.2 million for
the same period in the prior year. The change was primarily driven
by a 45.8% decrease in cost of services and a 5.7% decrease in
selling, general and administrative expense. Cost of services as a
percent of total revenue increased by 160 basis points to 68.9%
compared to the same period during the prior year, primarily due to
more tenured agents achieving a larger share of revenue throughout
the year.
Selling, general and administrative expense for the fourth
quarter of 2022 decreased by $4.4 million to $72.6 million,
compared to the same period in the prior year. The change was
primarily due to a decrease in management performance
compensation.
Net income for the fourth quarter of 2022 was $7.9 million, or
$0.20 per common share, diluted, compared to $62.0 million, or
$1.53 per common share, diluted, for the same period in the prior
year. Adjusted EBITDA for the fourth quarter of 2022 was $14.1
million, compared to $88.2 million for the same period in the prior
year.
Full Year 2022 Results Compared to Full Year 2021
Total revenue for 2022 reached $1,302 million, compared to
$1,296 million for 2021, an increase of $5.3 million, or 0.4%.
Total operating expenses for 2022 were $1,164 million, compared to
$1,107 million for 2021, which represents an increase of 5.2%. Cost
of services as a percent of total revenue increased to 65.4% for
2022, up 60 basis points compared to 2021, primarily due to a
larger share of revenue generated by more tenured agents. Net
income for 2022 was $104.2 million, or $2.59 per common share,
diluted, compared with $142.5 million, or $3.55 per common share,
diluted, for 2021. Adjusted EBITDA for 2022 decreased to $165.5
million, from $213.0 million for 2021. As of December 31, 2022, the
Company had 1,904 investment sales and financing professionals, a
net reduction of 90 over the prior year.
Business Outlook
The economy and commercial real estate transaction market will
likely remain choppy for the first half of 2023 as interest rate
fluctuations and lender caution impair the price discovery process
and the buyer/seller expectation gap remains wide. However, the
Company believes it remains 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 21% share
of this segment by transaction count.
Key factors that may influence the Company’s business during
2023 include:
- Volatility in market sales and investor sentiment driven by:
- The elevated cost of debt capital
- Interest rate fluctuations and the heightened bid-ask spread
between buyers and sellers
- Risks of an impending recession and the resulting reduction of
CRE space demand that results from uncertainty
- Possible impact to investor sentiment related to potential tax
and other policy changes which may contribute to transaction
acceleration and/or future fluctuations in sales and financing
activity
- Rising operating costs driven by wages, insurance, taxes and
construction materials
- Volatility in each of the Company’s market segments
- Increase in costs related to in-person events, client meetings,
and conferences as the economy opens further
- Global geopolitical uncertainty, which may 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 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, February 17, 2023 through 11:59 p.m.
Eastern Time on Friday, March 3, 2023 by dialing 1-844-512-2921 in
the United States and Canada or 1-412-317-6671 internationally and
entering passcode 13735052.
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 December 31, 2022,
the Company had 1,904 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 12,272
transactions in 2022, with a sales volume of approximately $86.3
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 2023, the anticipation of further
interest rate increases and inflation, the execution of our capital
return program, 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:
- general uncertainty in the capital markets, 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 rising inflation and
higher interest rates;
- 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,” "goal,"
“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-K for the
year ended December 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-K.
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share amounts) (Unaudited)
Three Months Ended December
31,
Year Ended December 31,
2022
2021
2022
2021
Revenue:
Real estate brokerage commissions
$
235,827
$
455,511
$
1,170,310
$
1,170,969
Financing fees
21,615
34,242
112,978
109,690
Other revenue
5,007
5,381
18,422
15,781
Total revenue
262,449
495,134
1,301,710
1,296,440
Operating expenses:
Cost of services
180,724
333,327
850,894
840,209
Selling, general and administrative
72,629
77,007
300,009
255,154
Depreciation and amortization
3,239
2,915
13,406
11,721
Total operating expenses
256,592
413,249
1,164,309
1,107,084
Operating income
5,857
81,885
137,401
189,356
Other income, net
4,368
1,790
5,336
4,527
Interest expense
(161
)
(144
)
(708
)
(580
)
Income before provision for income
taxes
10,064
83,531
142,029
193,303
Provision for income taxes
2,153
21,529
37,804
50,833
Net income
$
7,911
$
62,002
$
104,225
$
142,470
Earnings per share:
Basic
$
0.20
$
1.55
$
2.61
$
3.57
Diluted
$
0.20
$
1.53
$
2.59
$
3.55
Weighted average common shares
outstanding:
Basic
39,461
39,977
39,893
39,888
Diluted
39,678
40,419
40,186
40,187
MARCUS & MILLICHAP, INC. KEY
OPERATING METRICS SUMMARY (Unaudited)
Total sales volume was $16.4 billion for the three months ended
December 31, 2022, encompassing 2,698 transactions consisting of
$13.1 billion for real estate brokerage (2,043 transactions), $2.4
billion for financing (408 transactions) and $0.9 billion in other
transactions, including consulting and advisory services (247
transactions). Total sales volume was $86.3 billion for the year
ended December 31, 2022, encompassing 12,272 transactions
consisting of $68.1 billion for real estate brokerage (9,111
transactions), $12.8 billion for financing (2,143 transactions) and
$5.4 billion in other transactions, including consulting and
advisory services (1,018 transactions). As of December 31, 2022,
the Company had 1818 investment sales professionals and 86
financing professionals. Key metrics for real estate brokerage and
financing activities (excluding other transactions) are as
follows:
Three Months Ended
December 31,
Years Ended December
31,
Real Estate Brokerage:
2022
2021
2022
2021
Average Number of Investment Sales
Professionals
1,799
1,899
1,817
1,925
Average Number of Transactions per
Investment Sales
Professional
1.14
1.73
5.01
5.01
Average Commission per Transaction
$
115,431
$
138,960
$
128,450
$
121,319
Average Commission Rate
1.80
%
1.59
%
1.72
%
1.73
%
Average Transaction Size (in
thousands)
$
6,407
$
8,718
$
7,473
$
6,994
Total Number of Transactions
2,043
3,278
9,111
9,652
Total Sales Volume (in millions)
$
13,090
$
28,576
$
68,088
$
67,507
Three Months Ended
December 31,
Years Ended December
31,
Financing (1):
2022
2021
2022
2021
Average Number of Financing
Professionals
86
83
86
85
Average Number of Transactions per
Financing
Professional
4.74
8.39
24.92
29.11
Average Fee per Transaction
$
45,325
$
42,639
$
44,546
$
37,959
Average Fee Rate
0.78
%
0.78
%
0.74
%
0.81
%
Average Transaction Size (in
thousands)
$
5,823
$
5,458
$
5,984
$
4,691
Total Number of Transactions
408
696
2,143
2,474
Total Financing Volume (in millions)
$
2,376
$
3,799
$
12,823
$
11,605
(1) Operating metrics exclude certain financing fees not directly
associated to transactions.
The following table sets forth the number of transactions, sales
volume and revenue by commercial real estate market segment for
real estate brokerage:
Three Months Ended December
31,
2022
2021
Change
Real Estate Brokerage
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
208
$
111
$
5,098
296
$
200
$
9,506
(88
)
$
(89
)
$
(4,408
)
Private Client Market
($1 – <$10 million)
1,565
5,546
145,586
2,439
8,700
247,404
(874
)
(3,154
)
(101,818
)
Middle Market
($10 – <$20 million)
154
2,131
38,476
273
3,733
72,531
(119
)
(1,602
)
(34,055
)
Larger Transaction
Market (≥$20 million)
116
5,302
46,667
270
15,943
126,070
(154
)
(10,641
)
(79,403
)
2,043
$
13,090
$
235,827
3,278
$
28,576
$
455,511
(1,235
)
$
(15,486
)
$
(219,684
)
Year Ended December 31,
2022
2021
Change
Real Estate Brokerage
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
936
$
560
$
24,809
1,087
$
732
$
30,681
(151
)
$
(172
)
$
(5,872
)
Private Client Market
($1 – <$10 million)
6,850
24,474
682,019
7,300
24,339
693,996
(450
)
135
(11,977
)
Middle Market
($10 – <$20 million)
735
9,980
188,593
643
8,874
170,230
92
1,106
18,363
Larger Transaction Market
(≥$20 million)
590
33,074
274,889
622
33,562
276,062
(32
)
(488
)
(1,173
)
9,111
$
68,088
$
1,170,310
9,652
$
67,507
$
1,170,969
(541
)
$
581
$
(659
)
MARCUS & MILLICHAP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands,
except for shares and par value)
December 31,
2022
2021
Assets
Current assets:
Cash, cash equivalents, and restricted
cash of $15,800
$
235,873
$
382,140
Commissions receivable
8,453
17,230
Prepaid expenses
9,411
13,220
Income tax receivable
8,682
—
Marketable debt securities,
available-for-sale (includes amortized cost of $254,683
and $183,915 at December 31, 2022 and
2021, respectively, and $0 allowance for
credit losses)
253,434
183,868
Advances and loans, net
4,005
6,403
Other assets, current
7,282
5,270
Total current assets
527,140
608,131
Property and equipment, net
27,644
23,192
Operating lease right-of-use assets,
net
87,945
81,528
Marketable debt securities,
available-for-sale (includes amortized cost of $72,818 and
$111,858 at December 31, 2022 and 2021,
respectively, and $0 allowance for credit
losses)
68,595
112,610
Assets held in rabbi trust
9,553
11,508
Deferred tax assets, net
41,321
33,736
Goodwill and other intangible assets,
net
55,696
48,105
Advances and loans, net
169,955
113,242
Other assets, non-current
15,859
13,146
Total assets
$
1,003,708
$
1,045,198
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
11,450
$
15,487
Deferred compensation and commissions
75,321
114,685
Income tax payable
—
17,853
Operating lease liabilities
16,984
18,973
Accrued bonuses and other employee related
expenses
38,327
49,848
Other liabilities, current
9,933
8,784
Total current liabilities
152,015
225,630
Deferred compensation and commissions
64,461
53,536
Operating lease liabilities
65,109
58,334
Other liabilities, non-current
8,614
11,394
Total liabilities
290,199
348,894
Commitments and contingencies
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at
December 31, 2022 and 2021,
respectively
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued
and outstanding shares – 39,255,838
and 39,692,373 at December 31, 2022 and
2021, respectively
4
4
Additional paid-in capital
131,541
121,844
Retained earnings
585,581
573,546
Accumulated other comprehensive income
(3,617
)
910
Total stockholders’ equity
713,509
696,304
Total liabilities and stockholders’
equity
$
1,003,708
$
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. 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 December
31,
Year Ended December 31,
2022
2021
2022
2021
Net income
$
7,911
$
62,002
$
104,225
$
142,470
Adjustments:
Interest income and other (1)
(3,992
)
(1,026
)
(7,951
)
(2,496
)
Interest expense
161
144
708
580
Provision for income taxes
2,153
21,529
37,804
50,833
Depreciation and amortization
3,239
2,915
13,406
11,721
Stock-based compensation
4,637
2,708
17,312
10,361
Non-cash MSR activity (2)
—
(60
)
—
(467
)
Adjusted EBITDA
$
14,109
$
88,212
$
165,504
$
213,002
(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.
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: 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 twelve months ended December 31, 2022, 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 these transactions:
Three Months Ended
December 31, 2022
Year Ended
December 31, 2022
(actual)
(as adjusted)
(actual)
(as adjusted)
Total Sales Volume Increase (decrease)
(54.2
) %
(50.4
) %
0.9
%
(1.0
) %
Average Commission Rate Increase
(decrease)
13.2
%
5.9
%
(0.6
) %
(1.1
) %
Average Transaction Size Increase
(decrease)
(26.5
) %
(20.5
) %
6.8
%
4.9
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230217005094/en/
Investor Relations:
InvestorRelations@marcusmillichap.com
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