Marcus & Millichap, Inc. (the “Company”, “Marcus &
Millichap”, or “MMI”) (NYSE: MMI), a leading national brokerage
firm specializing in commercial real estate investment sales,
financing, research and advisory services, today reported its third
quarter results.
Third Quarter 2023 Highlights Compared to Third Quarter
2022
- Total revenue of $162.0 million, compared to $323.8
million
- Brokerage commissions of $139.8 million, compared to $292.9
million
- Private Client Market brokerage revenue of $91.5 million,
compared to $165.5 million
- Middle Market and Larger Transaction Market brokerage revenue
of $42.8 million, compared to $120.1 million
- Financing fees of $17.3 million, compared to $28.1 million
- Net loss of $9.2 million, or $0.24 per common share, diluted,
compared to net income of $21.4 million, or $0.53 per common share,
diluted
- Earnings were impacted by both lower revenue and expenses
related to growth initiatives, including talent acquisition and
retention
- Adjusted EBITDA of $(6.6) million, compared to $36.6
million
Nine Months 2023 Highlights Compared to Nine Months
2022
- Total revenue of $479.7 million, compared to $1.0 billion
- Brokerage commissions of $415.2 million, compared to $934.5
million
- Private Client Market brokerage revenue of $278.2 million,
compared to $536.4 million
- Middle Market and Larger Transaction Market brokerage revenue
of $121.8 million, compared to $378.3 million
- Financing fees of $51.0 million, compared to $91.4 million
- Net loss of $23.8 million, or $0.61 per common share, diluted,
compared to net income of $96.3 million, or $2.39 per common share,
diluted
- Earnings were impacted by expenses related to growth
initiatives, including talent acquisition and retention
- Adjusted EBITDA of $(15.1) million, compared to $151.4
million
“MMI’s third-quarter results reflect the prolonged market
dislocation caused by the severe interest rate shock and financing
constraints,” said Hessam Nadji, president and chief executive
officer. “The widened bid/ask spread and high degree of uncertainty
is limiting trading activity despite record capital on the
sideline. Our strategy to focus on client service, support our team
through MMI’s signature training, best practices sharing and
culture of collaboration remains steadfast. Powered by our strong
balance sheet and leading brand, we are leveraging the current
period to attract leading professionals, pursue strategic
investments and acquisitions and enhance our technology and
brokerage tools.”
Mr. Nadji continued, “Looking ahead, we are positioning MMI to
lead in the recovery, which may be delayed due to the Fed’s “higher
for longer” stance on interest rates. Values are adjusting to
higher interest rates and the Fed is nearing the end of its
tightening cycle, two key factors in the transaction volume
recovery. Complementary services such as our loan sales and auction
divisions we have added in recent years are well-aligned to help
lenders and investors execute in the current market. Despite the
near-term challenges, our focus remains on fostering client
relationships and building for the long term.”
Third Quarter 2023 Results Compared to Third Quarter
2022
Total revenue for the third quarter 2023 was $162.0 million, a
decrease of 50.0% compared to $323.8 million for the third quarter
2022.
For real estate brokerage commissions, the average transaction
size and the average commission per transaction decreased by 31.6%
and 21.2%, respectively, compared to the third quarter 2022. The
number of transactions decreased by 39.4%, reducing real estate
brokerage commissions to $139.8 million, a 52.3% reduction from the
same period in the prior year. Compared to the third quarter 2022,
Private Client Market revenue decreased by 44.7%, and the combined
Middle Market and Larger Transaction Market revenue decreased by
64.3%.
For financing fees, the average fee per transaction and the
average transaction size increased by 11.9% and 8.7% respectively,
while the number of transactions decreased by 46.7%, resulting in a
decrease in financing fees to $17.3 million, a 38.6% reduction from
the same period in the prior year.
Total operating expenses for the third quarter 2023 were $177.5
million, compared to $293.3 million for the same period in the
prior year. The change was primarily due to reductions of 51.9% in
cost of services and 5.2% in selling, general and administrative
expenses, partially offset by a 24.4% increase in depreciation and
amortization expenses. Cost of services as a percentage of total
revenue decreased by 250 basis points to 64.6% compared to the same
period during the prior year.
Selling, general and administrative expenses for the third
quarter 2023 were $69.2 million, compared to $73.0 million, for the
same period in 2022. The change was primarily due to a reduction in
compensation-related costs, specifically performance-based bonuses
for the third quarter 2023, partially offset by an increased
investment in business development, marketing and other support
related to the long-term talent acquisition and retention of sales
and financing professionals.
Net loss for the third quarter 2023 was $9.2 million, or $0.24
per common share, diluted, compared to a net income of $21.4
million, or $0.53 per common share, diluted, for the same period in
2022. Adjusted EBITDA for the third quarter 2023 was $(6.6)
million, compared to $36.6 million for the same period in the prior
year, primarily as a result of the decrease in operating
income.
Nine Months 2023 Results Compared to Nine Months 2022
Total revenues for the nine months ended September 30, 2023 were
$479.7 million, compared to $1.0 billion for the same period in the
prior year, a decrease of $559.6 million, or 53.8%. Total operating
expenses for the nine months ended September 30, 2023 decreased by
42.5% to $521.9 million compared to $907.7 million for the same
period in the prior year. Cost of services as a percent of total
revenues decreased to 62.8%, down 170 basis points compared to the
nine months of 2022. The Company’s net loss for the nine months
ended September 30, 2023 was $23.8 million, or $0.61 per common
share, diluted, compared to a net income of $96.3 million, or $2.39
per common share, diluted, for the same period in the prior year.
Adjusted EBITDA for the nine months ended September 30, 2023
decreased to $(15.1) million, from $151.4 million for the same
period in the prior year. As of September 30, 2023, the Company had
1,820 investment sales and financing professionals, compared to
1,880 at the end of the same period last year.
Capital Allocation
On August 1, 2023, the Board of Directors declared a semi-annual
regular dividend of $0.25 per share, with a payment date of October
6, 2023, to stockholders of record at the close of business on
September 15, 2023.
During the nine months ended September 30, 2023, the Company
repurchased 1,098,561 shares of common stock at an average price of
$31.28 per share for a total price of $34.4 million.
After accounting for shares repurchased through October 31,
2023, Marcus & Millichap has approximately $71.5 million
available to repurchase shares under its program. No time limit has
been established for the completion of the program, and the
repurchases are expected to be executed from time-to-time, subject
to general business and market conditions and other investment
opportunities, through open market purchases or privately
negotiated transactions, including through Rule 10b5-1 plans.
Business Outlook
The economy and commercial real estate transaction market are
expected to remain choppy through the remainder of 2023 as
political and geopolitical instability together with higher
interest rates and lender caution lengthen 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 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 20% share of this
segment by transaction count.
Key factors that may influence the Company’s business during the
remainder of 2023 include:
- Volatility in market sales and investor sentiment driven by:
- The elevated cost and availability of debt capital
- Higher interest rate fluctuations and the heightened bid-ask
spread between buyers and sellers
- Risks of potential 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 real estate markets
- Increase in costs related to in-person events, client meetings,
and conferences
- 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 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, November 3, 2023 through 11:59 p.m. Eastern
Time on Friday, November 17, 2023 by dialing 1-844-512-2921 in the
United States and Canada or 1-412-317-6671 internationally and
entering passcode 13740771.
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,
2023, the Company had 1,820 investment sales and financing
professionals in more than 80 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 5,599 transactions during the nine months ended
September 30, 2023, with a sales volume of $31.7 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, expectations for future
interest rates and inflation, the execution of our capital return
program, and expectations for a return to 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-Q for the
quarter ended September 30, 2023. 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 OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Revenue:
Real estate brokerage commissions
$
139,817
$
292,889
$
415,193
$
934,483
Financing fees
17,257
28,099
51,021
91,363
Other revenue
4,952
2,852
13,470
13,415
Total revenue
162,026
323,840
479,684
1,039,261
Operating expenses:
Cost of services
104,628
217,360
301,218
670,170
Selling, general and administrative
69,192
73,004
210,321
227,380
Depreciation and amortization
3,637
2,924
10,312
10,167
Total operating expenses
177,457
293,288
521,851
907,717
Operating (loss) income
(15,431
)
30,552
(42,167
)
131,544
Other income, net
4,422
978
14,122
967
Interest expense
(241
)
(229
)
(672
)
(547
)
(Loss) income before (benefit) provision
for income taxes
(11,250
)
31,301
(28,717
)
131,964
(Benefit) provision for income taxes
(2,010
)
9,939
(4,915
)
35,651
Net (loss) income
$
(9,240
)
$
21,362
$
(23,802
)
$
96,313
(Loss) earnings per share:
Basic
$
(0.24
)
$
0.53
$
(0.61
)
$
2.40
Diluted
$
(0.24
)
$
0.53
$
(0.61
)
$
2.39
Weighted average common shares
outstanding:
Basic
38,492
40,086
38,740
40,038
Diluted
38,492
40,302
38,740
40,358
MARCUS & MILLICHAP, INC.
KEY OPERATING METRICS SUMMARY
(Unaudited)
Total sales volume was approximately $11.4 billion for the three
months ended September 30, 2023, encompassing 1,846 transactions
consisting of $7.4 billion for real estate brokerage (1,361
transactions), $1.9 billion for financing (276 transactions) and
$2.1 billion in other transactions, including consulting and
advisory services (209 transactions). Total sales volume was $31.7
billion for the nine months ended September 30, 2023, encompassing
5,599 transactions consisting of $22.1 billion for real estate
brokerage (4,062 transactions), $5.3 billion for financing (839
transactions) and $4.3 billion in other transactions, including
consulting and advisory services (698 transactions). As of
September 30, 2023, the Company had 1,723 investment sales
professionals and 97 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
2023
2022
2023
2022
Average Number of Investment Sales
Professionals
1,733
1,792
1,757
1,823
Average Number of Transactions per
Investment Sales Professional
0.79
1.25
2.31
3.88
Average Commission per Transaction
$
102,731
$
130,405
$
102,214
$
132,213
Average Commission Rate
1.88
%
1.63
%
1.88
%
1.70
%
Average Transaction Size (in
thousands)
$
5,462
$
7,981
$
5,442
$
7,781
Total Number of Transactions
1,361
2,246
4,062
7,068
Total Sales Volume (in millions)
$
7,433
$
17,926
$
22,107
$
54,999
Three Months Ended September
30,
Nine Months Ended September
30,
Financing (1)
2023
2022
2023
2022
Average Number of Financing
Professionals
96
87
95
86
Average Number of Transactions per
Financing Professional
2.88
5.95
8.83
20.17
Average Fee per Transaction
$
50,062
$
44,751
$
49,606
$
44,363
Average Fee Rate
0.73
%
0.70
%
0.79
%
0.74
%
Average Transaction Size (in
thousands)
$
6,904
$
6,350
$
6,288
$
6,021
Total Number of Transactions
276
518
839
1,735
Total Financing Volume (in millions)
$
1,906
$
3,289
$
5,276
$
10,447
(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 September
30,
2023
2022
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
$
122
$
5,511
243
$
154
$
7,252
(35
)
$
(32
)
$
(1,741
)
Private Client Market ($1 – <$10
million)
1,014
3,344
91,466
1,658
5,885
165,534
(644
)
$
(2,541
)
$
(74,068
)
Middle Market ($10 – <$20 million)
75
1,002
18,647
188
2,527
46,901
(113
)
$
(1,525
)
$
(28,254
)
Larger Transaction
Market (≥$20 million)
64
2,965
24,193
157
9,360
73,202
(93
)
$
(6,395
)
$
(49,009
)
1,361
$
7,433
$
139,817
2,246
$
17,926
$
292,889
(885
)
$
(10,493
)
$
(153,072
)
Nine Months Ended September
30,
2023
2022
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
600
$
358
$
15,214
728
$
450
$
19,711
(128
)
$
(92
)
$
(4,497
)
Private Client Market ($1 – <$10
million)
3,054
10,169
278,207
5,285
18,929
536,433
(2,231
)
$
(8,760
)
$
(258,226
)
Middle Market ($10 – <$20 million)
218
2,923
53,440
581
7,849
150,117
(363
)
$
(4,926
)
$
(96,677
)
Larger Transaction
Market (≥$20 million)
190
8,657
68,332
474
27,771
228,222
(284
)
$
(19,114
)
$
(159,890
)
4,062
$
22,107
$
415,193
7,068
$
54,999
$
934,483
(3,006
)
$
(32,892
)
$
(519,290
)
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except for
shares and par value)
September 30, 2023
(unaudited)
December 31, 2022
Assets
Current assets:
Cash, cash equivalents, and restricted
cash
$
224,174
$
235,873
Commissions receivable
14,751
8,453
Prepaid expenses
6,457
9,411
Income tax receivable
9,404
8,682
Marketable debt securities,
available-for-sale (amortized cost of $116,989 and $254,682
at September 30, 2023 and December 31, 2022,
respectively, and $0 allowance for credit
losses)
116,713
253,434
Advances and loans, net
3,567
4,005
Other assets, current
14,796
7,282
Total current assets
389,862
527,140
Property and equipment, net
28,088
27,644
Operating lease right-of-use assets,
net
96,878
87,945
Marketable debt securities,
available-for-sale (amortized cost of $74,776 and $72,819 at
September 30, 2023 and December 31, 2022,
respectively, and $0 allowance for credit
losses)
70,510
68,595
Assets held in rabbi trust
10,065
9,553
Deferred tax assets, net
46,009
41,321
Goodwill and other intangible assets,
net
52,087
55,696
Advances and loans, net
178,952
169,955
Other assets, non-current
9,662
15,859
Total assets
$
882,113
$
1,003,708
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
9,151
$
11,450
Deferred compensation and commissions
46,143
75,321
Operating lease liabilities
18,272
16,984
Accrued bonuses and other employee related
expenses
15,342
38,327
Other liabilities, current
14,450
9,933
Total current liabilities
103,358
152,015
Deferred compensation and commissions
45,151
64,461
Operating lease liabilities
73,924
65,109
Other liabilities, non-current
10,327
8,614
Total liabilities
232,760
290,199
Commitments and contingencies
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at September 30, 2023
and December 31, 2022, respectively
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued
and outstanding shares – 38,546,059 and
39,255,838 at September 30, 2023 and December 31,
2022, respectively
4
4
Additional paid-in capital
145,220
131,541
Retained earnings
507,045
585,581
Accumulated other comprehensive loss
(2,916
)
(3,617
)
Total stockholders’ equity
649,353
713,509
Total liabilities and stockholders’
equity
$
882,113
$
1,003,708
MARCUS & MILLICHAP, INC.
OTHER INFORMATION
(Unaudited)
Adjusted EBITDA Reconciliation
Adjusted EBITDA, which the Company defines as net (loss) income
before (i) interest income and other, including net realized gains
(losses) on marketable debt securities, available-for-sale and
cash, cash equivalents, and restricted cash, (ii) interest expense,
(iii) (benefit) provision for income taxes, (iv) depreciation and
amortization, and (v) stock-based compensation. 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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net (loss) income
$
(9,240
)
$
21,362
$
(23,802
)
$
96,313
Adjustments:
Interest income and other (1)
(4,721
)
(2,365
)
(13,201
)
(3,959
)
Interest expense
241
229
672
547
(Benefit) provision for income taxes
(2,010
)
9,939
(4,915
)
35,651
Depreciation and amortization
3,637
2,924
10,312
10,167
Stock-based compensation
5,446
4,544
15,808
12,675
Adjusted EBITDA
$
(6,647
)
$
36,633
$
(15,126
)
$
151,394
(1)
Other includes net realized gains (losses)
on marketable debt securities available-for-sale.
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: acquisition of businesses accounted for as a
business combination in accordance with generally accepted
accounting standards
Certain Adjusted Metrics
Real Estate Brokerage
Following are actual and as adjusted metrics excluding any large
transactions in our real estate brokerage business in excess of
$300 million:
Three Months Ended
September 30, 2023
Nine Months Ended
September 30, 2023
(actual)
(as adjusted)
(actual)
(as adjusted)
Total Sales Volume Decrease
(58.5
)%
(54.7
)%
(59.8
)%
(56.6
)%
Average Commission Rate Increase
15.3
%
11.2
%
10.6
%
5.6
%
Average Transaction Size Decrease
(31.6
)%
(25.4
)%
(30.1
)%
(24.6
)%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231103391020/en/
Investor Relations: Investor Relations InvestorRelations@marcusmillichap.com
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