Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Investor Presentation (September 2020)
37 slides from Marcus & Millichap's investor presentation, Sep 16, 2020
Slide 1: Investor Presentation September 2020
INVESTOR PRESENTATION September 2020 Exhibit 99.1
Slide 2: Forward-Looking Statements
Certain statements in this presentation are “forward-looking statements” within the meaning of the federal securities laws, including our business outlook for 2020 and beyond and expectations for market share growth. Statements about our beliefs and expectations and statements containing the words “
Slide 3: Company Overview
COMPANY OVERVIEW NATIONAL PLATFORM FOCUSED ON REAL ESTATE INVESTMENT BROKERAGE 49-year old platform dedicated to perfecting real estate investment brokerage Designed to maximize real estate value, facilitate investment options by geography and property type and create liquidity for investors MARKET
Slide 4: Largest Investment Real Estate Brokerage Firm in the U.S.
LARGEST INVESTMENT REAL ESTATE BROKERAGE FIRM IN THE U.S. Over 80 offices throughout the United States and Canada Over 2,000 investment sales and financing professionals Top broker in the United States based on number of transactions over the last 10 years Closed 9,726 transactions in 2019, with a s
Slide 5: Business Model Differentiation: Bringing Wall Street to Main Street
BUSINESS MODEL DIFFERENTIATION: BRINGING WALL STREET TO MAIN STREET MAXIMIZING SELLERS’ VALUE Critical mass of investment specialists and national platform (large local and national sales force) Information sharing culture and systems necessary to increase property exposure Marketing process that at
Slide 6: Maximizing Value for Each Property
MAXIMIZING VALUE FOR EACH PROPERTY DIRECT MARKETING Postcards E-Brochure Executive Summary Offering Memorandum E-Presentation EXTERNAL MARKETING Advertising Cooperating Brokers E-Brochure Executive Summary Investor Symposium Offering Memorandum Property Tours INTERNAL MARKETING MNET = 1,900+ agents
Slide 7: Private Client Market Segment
Market segment consists of sales $1 million - $10 million. Largest and most active market segment, accounting for 80%+ of transactions. Primarily driven by high-net worth individuals, partnerships and smaller private fund managers. Influenced by personal drivers that result in buying/selling/refinan
Slide 8: Executing on Strategic Growth Plan
EXECUTING ON STRATEGIC GROWTH PLAN Increase Market Share in Private Client Market Segment Dominant segments (apartment, retail) still offer room for growth Significant growth opportunity in office and industrial Share increases resulting from growing sales force, higher productivity Grow Specialty S
Slide 9: Executing on Strategic Growth Plan (Continued)
EXECUTING ON STRATEGIC GROWTH PLAN (Continued) Accretive Acquisitions – Complementary Businesses and Established Brokerage Teams Pursuing complementary and adjacent business acquisitions Completed 5 transactions over the last 24 months, full pipeline of opportunities being vetted Pinnacle Financial
Slide 10: Business Continuity and Recent Business Trends
Business Continuity and Recent Business Trends
Slide 11: Proactive Pandemic Response
Proactive pandemic response Priorities Business Continuity Business Development / Platform Enhancement Immediately focused on retention and productivity of team Activated extended financing network to facilitate transactions amid initial market disruption in March/April Reduced expenses and took mea
Slide 12: Leading Through the Global Health Crisis
Leading through the global health crisis Strategy and Actions Executed Since March 15, 2020
Slide 13: Empowering Our Agents: Information Sharing and Strategies for Success
Empowering our agents: information sharing and strategies for success Sales Force Education Series: Tactical Skills in a market disruption. Featuring the most skilled professionals in the industry Rapid Gathering and Distribution of Real-Time Market Intelligence COVID-19 Investor Survey: Sentiment a
Slide 14: Maximizing Client Touchpoints and Business Development
Maximizing client touchpoints and business development: real-time data, market intelligence and forecasts 1031 Exchange Sales Aid: An Unprecedented Opportunity for Generating Business Case Studies: Stories of Client Success in a Changing Market Market Overview and Outlook Webcasts Post-COVID Mar
Slide 15: Growing Through the Market Disruption: Attracting Top Talent
Growing through the market disruption: Attracting TOP TALENT With the industry's leading brokerage platform 18 Experienced Agents Since March 15, we increased the tools and campaigns to engage both new and experienced agents: 200+ Gross New Agents Joining the Firm 12 Years, Average Experience Virtua
Slide 16: Recent Business Trends – Macro Conditions Remain Fluid
Recent Business Trends – Macro conditions remain Fluid, Headwinds persist Transaction Activity Still Subdued Financing Availability Improving Visibility on Forward Activity Limited Market-wide transaction volume down 60% YOY in Q2, appears to be improving somewhat with July/August preliminary estima
Slide 17: Recent Business Trends – Emerging Signs of Improvement for MMI
Recent Business Trends – Emerging Signs of Improvement for MMI Transaction Activity Still Subdued Lenders Re-engaged with Caution Visibility and Durability are clouded MMI is experiencing improving transaction flow on a sequential quarter basis, albeit subdued from prior year levels More Q3 transact
Slide 18: Market Overview
MARKET OVERVIEW Marcus ¢ Millichap
Slide 19: Record Employment Growth Cycle Comes to an End
Total Employment (Millions) * Forecast per Economy.com Sources: BLS, Moody’s Analytics -22.2 Million RECORD EMPLOYMENT GROWTH CYCLE COMES TO AN END Economic Foundation Leading Up to the Pandemic Was Historically Strong; Economic Shutdown in Response to Health Crisis Dealt Unprecedented Blow to the L
Slide 20: Recovery Timeframe Uncertain
Y-o-Y Job Growth (Millions) RECOVERY TIMEFRAME UNCERTAIN, – Recovery FROM ’08-’09 SUGGESTS CRE SALES/FINANCING COULD LEAD SUSTAINABLE HIRING Y-o-y Transaction Growth * Includes apartment, retail, office, and industrial sales $1 million and greater Sources: BLS, CoStar Group, Inc., Real Capital Analy
Slide 21: Employment and Space Demand Face Significant Impact
Employment Growth (Mil.) Unemployment Rate Employment Growth vs. Unemployment Rate Net Absorption (000s of Units) Net Absorption (Mil. SqFt.) * Through 2Q; trailing 12-months through 2Q 2020 for employment growth ** Preliminary estimate for trailing 12-months through 2Q 2020 Sources: BLS, CoStar Gro
Slide 22: Property Fundamentals Challenged but Relatively Durable
Occupancy Trends Occupancy (%) Construction Trends Completions as % of Inventory PROPERTY FUNDAMENTALS CHALLENGED BUT RELATIVELY DURABLE; CONSTRUCTION SLOWDOWN A POSITIVE Property fundamentals entered economic shutdown in very strong position. Crisis impact varies by property type. Necessity-based r
Slide 23: Investment Sales Face Steep, Temporary Decline
Quarterly U.S. Commercial Real Estate Sales and Interest Rates(1) INVESTMENT SALES FACE STEEP, TEMPORARY DECLINE DUE TO SHELTER-IN-PLACE AND MARKET UNCERTAINTY Sales activity started 2020 with positive momentum but began to drop significantly in March as shelter-in-place orders took hold. Significan
Slide 24: Commercial Real Estate Yields Compelling
Average Rate Average Yield (Cap Rate) 430 bps 440 bps 480 bps 480 bps 200 bps 580 bps 560 bps Cap Rate Long-Term Avg. 10-Yr Treasury Long-Term Avg. * As of 2Q 2020 Cap rates for sales $1 million and greater Sources: CoStar Group, Inc., Real Capital Analytics, Federal Reserve, Standard & Poor’s COMME
Slide 25: MMI Financial Summary
Marcus ¢ Millichap MMI FINANCIAL SUMMARY
Slide 26: Illustrative MMI Earnings Model
ILLUSTRATIVE MMI EARNINGS MODEL Includes stock-based compensation EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measure derived in accordance with U.S. GAAP Investment Sales Revenue
Slide 27: Strong Trends in Investment Sales Operational Metrics
STRONG TRENDS IN INVESTMENT SALES OPERATIONAL METRICS Average Investment Sales Professionals 8% CAGR Total Investment Sales Volume ($ in billions) Total Number of Investment Sales Transactions Investment Sales Revenue ($ in millions) 7% CAGR 5% CAGR 7% CAGR
Slide 28: Total Revenues
TOTAL REVENUES ($ in millions) (44.0)% (16.8)% Q2 2019 vs. Q2 2020 Year-to-Date 2019 vs. 2020
Slide 29: Brokerage Operating Metrics Q2 2020
Total Sales Volume ($ in billions) Total Number of Transactions Average Number of Investment Sales Professionals Average Commission Per Transaction ($ in thousands) (41.3)% (41.4)% +5.0% (6.5)% BROKERAGE OPERATING METRICS Q2 2020
Slide 30: Brokerage Operating Metrics Year-to-Date 2020
Total Sales Volume ($ in billions) Total Number of Transactions Average Number of Investment Sales Professionals Average Commission Per Transaction ($ in thousands) (15.1)% (16.9)% +4.5% BROKERAGE OPERATING METRICS Year-to-Date 2020 (0.7)%
Slide 31: Brokerage Revenue by Market Segment Q2 2020
Private Client Market ($1 - $10 million) ($ thousands) <$1 million ($ thousands) Middle Market (≥ $10 - $20 million) ($ thousands) Larger Transaction Market (≥ $20 million) ($ in thousands) (36.7)% (44.9)% (36.9)% BROKERAGE REVENUE BY MARKET SEGMENT Q2 2020 (57.0)%
Slide 32: Operating Expenses
59.3% of Rev 1.0% of Rev 1.7% of Rev $325.1 $291.1 27.5% of Rev OPERATING EXPENSES ($ in Millions) 61.0% of Rev 0.9% of Rev 2.3% of Rev $182.6 $120.0 25.2% of Rev Q2 2019 vs. Q2 2020 Year-To-Date 2019 vs. 2020 60.9% of Rev 31.9% of Rev 62.8% of Rev 37.1% of Rev
Slide 33: Net Income and Adjusted EBITDA Performance
Adjusted EBITDA ($ in millions) Net Income ($ in millions) NET INCOME AND ADJUSTED EBITDA PERFORMANCE Through 6/30/2020
Slide 34: Cash Flow Provided By (Used In) Operating Activities
QTD Cash Flow Provided By Operating Activities (1) ($ in millions) YTD Cash Flow Used In Operating Activities (1) ($ in millions) CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES 2Q 2020 (1) Net cash provided by (used in) operating activities is driven by our net income adjusted for non-cash ite
Slide 35: Strong Liquid Capital Position
Cash on Hand and Core-Cash Investments ($ in millions) $399.0 $322.1(2) STRONG LIQUID CAPITAL POSITION 6/30/2020 12/31/2019 6/30/2020 Relates to investments designated by the company as core-cash investments in fixed and variable debt securities, in accordance with our investment policy approved by
Slide 36: Appendix
APPENDIX
Slide 37: Adjusted EBITDA Reconciliation
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
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