Slide 1: Third Quarter 2018 Earnings Conference Call
THIRD QUARTER 2018 EARNINGS CONFERENCE CALL November 7, 2018 1
Slide 2: Forward-Looking Statements
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 2018 and beyond and expectations for market share growth. Statements about our beliefs and expectations and statem
Slide 3: Conference Call Participants
CONFERENCE CALL PARTICIPANTS HESSAM NADJI President, Chief Executive Officer and Director MARTY LOUIE Chief Financial Officer 3 3
Slide 4: MMI Financial Highlights
Marcus ¢ Millichap MMI FINANCIAL HIGHLIGHTS
Slide 5: 2018 Third Quarter Highlights
Financial Highlights YOY Revenue $210.6 million 14.9% Net Income $20.9 million 34.8% 2018 THIRD Adjusted EBITDA $32.2 million 12.8% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $12.0 billion 18.7% Transaction Closings 2,427 6.5% Investment Sales and Financing Professionals 1,870 6.4% a
Slide 6: Year-to-Date Highlights
Financial Highlights YOY Revenue $584.5 million 13.1% Net Income $61.0 million 41.8% YEAR-TO-DATE Adjusted EBITDA $93.3 million 17.2% 2018 HIGHLIGHTS Operational Highlights YOY Sales Volume $33.1 billion 10.7% Transaction Closings 6,869 5.1% Investment Sales and Financing Professionals 1,870 6.4% as
Slide 7: 2018 Third Quarter Brokerage Highlights
2018 THIRD YOY Sales Volume $9.3 billion 16.2% QUARTER Transaction Closings 1,809 6.6% BROKERAGE Investment Sales Professionals as of September 30, 1,765 6.0% 2018 HIGHLIGHTS Real Estate Brokerage Commissions Revenue $192.0 million 13.4% Revenue by Transactions by Transactions by Transaction Size Pr
Slide 8: Year-to-Date 2018 Brokerage Highlights
YOY YEAR-TO-DATE 2018 Sales Volume $26.2 billion 20.2% BROKERAGE Transaction Closings 5,146 7.0% HIGHLIGHTS Investment Sales Professionals as of September 30, 2018 1,765 6.0% Real Estate Brokerage Commissions Revenue $536.1 million 13.6% Revenue by Transactions by Transactions by Transaction Size Pr
Slide 9: 2018 Third Quarter Financing Highlights
2018 THIRD YOY QUARTER Sales Volume $1.8 billion 33.3% Transaction Closings 434 6.1% FINANCING Financing Professionals as of September 30, 105 14.1% HIGHLIGHTS 2018 Financing Fees Revenue $15.9 million 40.3% (1) Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlantic, 16%
Slide 10: Year-to-Date 2018 Financing Highlights
YOY YEAR-TO-DATE 2018 Sales Volume $4.4 billion 13.7% FINANCING Transaction Closings 1,191 (1.4)% HIGHLIGHTS Financing Professionals as of September 30, 2018 105 14.1% Financing Fees Revenue $41.2 million 20.8% (1) Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlantic,
Slide 11: Market Highlights
Marcus ¢ Millichap MARKET HIGHLIGHTS
Slide 12: U.S. Employment Gains Driving Real Estate Demand
U.S. EMPLOYMENT GAINS DRIVING REAL ESTATE DEMAND U.S. Employment Has Accelerated in 2018 2018 forecast to add 2.4 million jobs** 0.9 -8.7 Million 0.0 Quarterly Job Growth (Millions) +8.2 Million +19.8 Million* -0.9 -1.8 -2.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Slide 13: Employment and Space Demand Remain Strong
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE Employment Growth Unemployment Rate DEMAND REMAIN STRONG Employment Growth (Mil.) 3.2 7% Unemployment Rate 2.4 6% • Employment growth totaled more than 2.5 million jobs in the past 12 months 1.6 5% • Total employment stands 11.1 million 0.
Slide 14: Property Fundamentals Remain Healthy
PROPERTY FUNDAMENTALS REMAIN HEALTHY; CONSTRUCTION TRENDS VARY Occupancy Trends BY PROPERTY TYPE 100% Occupancy (%) • Property fundamentals demonstrate healthy 95% performance across all property types 90% • Multifamily and industrial properties led the 85% recovery – new supply in both sectors incr
Slide 15: Investment Sales Remain Stable at Healthy Levels
U.S. Commercial Real Estate: Total Transaction Activity(1) INVESTMENT SALES REMAIN STABLE AT HEALTHY LEVELS 40 Total Transactions (000s) 30 • Investment sales have declined moderately 20 since 2015 but remain at healthy levels 10 • Year-to-date through 3Q 2018 sales increased modestly from 2017 base
Slide 16: Commercial Real Estate Yields Compelling
Cap Rate/10-Year Treasury Spreads COMMERCIAL REAL ESTATE 12% CRE Cap Rate 10-Year Treasury Rate YIELDS COMPELLING Cap Rate Long-Term Avg. 440 bps 9% 430 bps Average Rate 480 bps • Overall, cap rates have maintained stability 480 bps 580 bps 210 bps despite rising interest rates 6% 330 bps • The spre
Slide 17: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 18: Private Client Market Segment
• Market segment consists of sales $1 million - $10 million; is the largest and most active, accounting for 80%+ of transactions PRIVATE CLIENT MARKET • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers • Influenced by personal drivers that result
Slide 19: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 20: Total Revenues
TOTAL REVENUES ($ in millions) Q3 2017 vs. Q3 2018 Year-to-Date 2017 vs. 2018 $240 $700 $210.6 $584.5 $200 $600 $183.3 $516.9 $500 $160 $400 $120 $300 $80 $200 $40 $100 $0 $0 Q3 '17 Q3 '18 YTD '17 YTD '18 20
Slide 21: Brokerage Operating Metrics Q3 2018
BROKERAGE OPERATING METRICS Q3 2018 Total Sales Volume Total Number of Sales Transactions ($ in billions) $9.3 1,809 $10.0 2,000 $8.0 1,697 $8.0 1,600 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q3 '17 Q3 '18 Q3 '17 Q3 '18 Average Number of Investment Sales Professionals Average Commission Per Transaction (
Slide 22: Brokerage Revenue by Market Segment Q3 2018
BROKERAGE REVENUE BY MARKET SEGMENT Q3 2018 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $7,224 $125,898 $8,000 $7,032 $140,000 $115,959 $6,000 $105,000 $4,000 $70,000 $2,000 $35,000 $0 $0 Q3 '17 Q3 '18 Q3 '17 Q3 '18 Larger Transaction Market (≥ $20 million) Middl
Slide 23: Brokerage Operating Metrics Year-to-Date 2018
BROKERAGE OPERATING METRICS Year-to-Date 2018 Total Sales Volume Total Number of Sales Transactions ($ in billions) $28.0 $26.2 6,000 $21.8 4,810 5,146 $21.0 4,000 $14.0 2,000 $7.0 $0.0 0 YTD '17 YTD '18 YTD '17 YTD '18 Average Commission Per Transaction Average Number of Investment Sales Profession
Slide 24: Brokerage Revenue by Market Segment Year-to-Date 2018
BROKERAGE REVENUE BY MARKET SEGMENT Year-to-Date 2018 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $25,000 $400,000 $350,062 $20,110 $20,819 $328,177 $20,000 $300,000 $15,000 $200,000 $10,000 $5,000 $100,000 $0 $0 YTD '17 YTD '18 YTD '17 YTD '18 Middle Market (≥ $
Slide 25: Operating Expenses
OPERATING EXPENSES ($ in millions) Q3 2017 vs. Q3 2018 Year-To-Date 2017 vs. 2018 $200 $540 $504.7 $183.2 $480 $158.7 $448.2 $160 $420 $360 $120 $314.8 $354.4 60.6% of Rev $114.8 $132.9 $300 60.9% of Rev 62.6% of Rev 63.1% of Rev $240 $80 $180 $40 $120 $48.7 23.1% of Rev $129.4 25.0% of Rev $145.8 2
Slide 26: Net Income and Adjusted EBITDA Performance Q3 2018
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q3 2018 Net Income Adjusted EBITDA (1) ($ in millions) ($ in millions) $24 $36 $20.9 $32.2 $20 $28.5 $30 $15.5 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q3 '17 Q3 '18 Q3 '17 Q3 '18 (1) Refer to Adjusted EBITDA reconciliation table on slide 31. 26
Slide 27: Net Income and Adjusted EBITDA Performance Year-to-Date 2018
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Year-to-Date 2018 Net Income Adjusted EBITDA (1) ($ in millions) ($ in millions) $93.3 $70 $100 $61.0 $60 $79.6 $80 $50 $43.0 $40 $60 $30 $40 $20 $20 $10 $0 $0 YTD '17 YTD '18 YTD '17 YTD '18 (1) Refer to Adjusted EBITDA reconciliation table on slide 31. 27
Slide 28: Cash Flow Provided by Operating Activities
CASH FLOW PROVIDED BY OPERATING ACTIVITIES QTD Cash Flow Provided by YTD Cash Flow Provided by Operating Activities Operating Activities ($ in millions) ($ in millions) $35.0 $32.0 $60 $55.0 $30.0 $50 $24.9 $25.0 $40 $20.0 $30 $15.0 $25.3 $10.0 $20 $5.0 $10 $0.0 $0 Q3 '17 Q3 '18 YTD '17 YTD '18 (1)
Slide 29: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $350 $310.9 $309.2 $300 $90.1 (1) $250 $128.2 (1) $200 $150 $100 $220.8 (2) $181.0 (2) $50 $0 12/31/2017 9/30/2018 12/31/2017 12/31/2017 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investments de
Slide 30: Appendix
APPENDIX 30
Slide 31: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended September 30 Year-to-Date September 2018 2018 2017 2018 2017 Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized (losses) gains Net Income $20,854 $15,475 $61,032 $43,044 on marketable
Slide 32: Company Overview
NATIONAL PLATFORM FOCUSED ON INVESTMENT BROKERAGE • 47-year old platform dedicated to perfecting real estate investment brokerage • Designed to facilitate the movement of capital providing liquidity to clients MARKET LEADER IN THE PRIVATE CLIENT MARKET SEGMENT • Only national brokerage firm focused
Slide 33: Illustrative MMI Earnings Model
ILLUSTRATIVE MMI EARNINGS MODEL Transaction Commission Investment Agents Productivity Value Rate Sales Revenue Investment Financing & Cost of SG&A(1) EBITDA(2) Sales Revenue Other Revenue Services (1) Includes stock-based compensation 33 (2) EBITDA is not a measurement of our financial performance u