Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q1 2022 Earnings Presentation
32 slides from Marcus & Millichap's earnings presentation, May 6, 2022
Slide 1: First Quarter 2022 Earnings Conference Call
FIRST QUARTER 2022 EARNINGS CONFERENCE CALL – MAY 6, 2022
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 2022, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctuations) in
Slide 3: Conference Call Participants
CONFERENCE CALL PARTICIPANTS HESSAM NADJI President, Chief Executive Officer and Director STEVE DEGENNARO Chief Financial Officer 3
Slide 4: MMI Financial Highlights
MMI FINANCIAL HIGHLIGHTS Marcus ¢ Millichap 4 CCC LLL
Slide 5: 2022 First Quarter Highlights
Financial Highlights YoY Revenue $319.5 million 73.6% Net Income $32.8 million 118.4% 2022 FIRST Adjusted EBITDA $51.9 million 101.8% QUARTER HIGHLIGHTS Operational Highlights YoY Sales Volume $21.0 billion 75.4% Transaction Closings 2,904 24.5% Number of Investment Sales and Financing 1,931 (5.3)%
Slide 6: 2022 First Quarter Brokerage Highlights
2022 FIRST Sales Volume $17.2 billion YoY 94.1% QUARTER Transaction Closings 2,137 34.6% BROKERAGE Number of Investment Sales Professionals as of March 31, 2022 1,846 (5.5)% HIGHLIGHTS Real Estate Brokerage Commissions Revenue $286.9 million 76.2% Revenue by Transactions by Transactions by Transacti
Slide 7: 2022 First Quarter Financing Highlights
2022 FIRST YoY Sales Volume $2.7 billion 65.0% QUARTER Transaction Closings 520 5.3% FINANCING Number of Financing Professionals as of March 31, 85 0.0% HIGHLIGHTS 2022 Financing Fees Revenue $26.5 billion 48.3% Transactions by Transactions by Property Type Region Northeast/ Mid- Other, Atlantic, 14
Slide 8: Market Highlights
MARKET HIGHLIGHTS Marcus ¢ Millichap 8
Slide 9: Unprecedented Gov't Stimulus Bolsters Consumption and Pent-Up Demand
UNPRECEDENTED GOV’T STIMULUS BOLSTERS CONSUMPTION AND PENT-UP DEMAND, FUELS RECOVERY AND INFLATION Government Stimulus Share of GDP Core Retail Sales Savings Deposits 40% $510 $19.5 BILLIONS TRILLIONS 32% $470 $18.0 Core Retail Sales (Billions) Deposits (Trillions) 24% $430 Percent of GDP $16.5 16%
Slide 10: Job Recovery Continues with Employment Nearing Pre-Pandemic Level
JOB RECOVERY CONTINUES WITH EMPLOYMENT NEARING PRE - PANDEMIC LEVEL 2022 forecast to add 4.5 million jobs* -22.0 Million +20.4 Million 155.0 150.0 Total Employment (Millions) 145.0 140.0 135.0 130.0 125.0 120.0 115.0 20-May 21-Apr 21-May 20-Sep 21-Sep 20-Jan 20-Mar 20-Apr 21-Jan 21-Mar 22-Jan 22-Mar
Slide 11: Labor Shortage Beginning to Weigh on Hiring Pace
LABOR SHORTAGE BEGINNING TO WEIGH ON HIRING PACE; INFLATION PRESSURES INFLUENCING FEDERAL RESERVE ACTION Job Openings vs. Unemployed Inflation vs. Treasury Rates Job Openings Unemployed Core PCE 10-Year Treasury 24 6.0% MILLIONS Job Openings/Unemployed (Millions) 18 4.5% Rate 12 3.0% 6 1.5% 0 0.0% *
Slide 12: Interest Rates Still Low on a Long-Term Historical Basis
INTEREST RATES STILL LOW ON A LONG-TERM HISTORICAL BASIS Fed Funds Rate 10-Year Treasury 20% 15% Rate 10% Long-Term Avg: 5.7% 5% Long-Term Avg: 4.7% 0% * Through May 4, 2022 Source: Federal Reserve 12
Slide 13: Positive Rent Growth Supports Underlying Commercial Real Estate Fundamentals
POSITIVE RENT GROWTH SUPPORTS UNDERLYING COMMERCIAL REAL ESTATE FUNDAMENTALS 10-Year Treasury Rent Growth: 2018 to 1Q 2022 3.6% 24% Highest Since Dec. 2018 2.7% 18% Rent Growth 12% Rate 1.8% 0.9% 6% 0.0% 0% * Through May 4, 2022 13 Sources: Federal Reserve, CoStar Group, Inc., RealPage, Inc., Yardi
Slide 14: Private Investors Dominate U.S. Commercial Real Estate Acquisitions
PRIVATE INVESTORS DOMINATE U.S. COMMERCIAL REAL ESTATE ACQUISITIONS; INSTITUTIONS REMAINED ACTIVE IN 1Q 2022 100% 5% 5% 4% 4% 5% 4% 4% 3% 3% 5% 5% 5% 8% 9% 9% 9% 9% 8% 12% 12% 10% 14% 17% 20% 18% 25% 75% 28% 25% 28% 24% 27% 29% 27% 25% Percent of Dollar Volume 32% 27% 26% 29% User/Other 9% 9% 6% 31%
Slide 15: Employment Recovery Leveling; Space Demand Accelerating
Employment Growth vs. Unemployment Rate EMPLOYMENT RECOVERY LEVELING; Employment Growth Unemployment Rate SPACE DEMAND ACCELERATING 12.0 8% Employment Growth (Mil.) Unemployment Rate • Labor shortage beginning to weigh on job 6.0 6% creation, but record 6.7 million jobs added in 0.0 4% 2021, and a f
Slide 16: Despite Macro Improvement, Supply-Demand Dynamics Varying by Property Type
DESPITE MACRO IMPROVEMENT, SUPPLY-DEMAND DYNAMICS Occupancy Trends VARYING BY PROPERTY TYPE 100% • Multifamily and industrial continue to lead Occupancy (%) 95% in construction, spurred by strong demand and occupancy trends in 1Q 2022. 90% • Necessity-based retail, single-tenant retail, 85% and self
Slide 17: Overall CRE Sales Continued to Advance in 1Q
OVERALL CRE SALES CONTINUED TO ADVANCE IN 1Q; HIGHER INTEREST Annual U.S. Commercial Real Estate Sales Trends(1) RATES, FED MESSAGING KEY FACTORS GOING FORWARD 60 Total Transactions (000s) 45 • Transactions count in 1Q 2022 estimated to have grown by 20% year-over-year. 30 • Rising interest rates ca
Slide 18: Commercial Real Estate Yield and Inflation Hedge Profile Compelling
COMMERCIAL REAL ESTATE Cap Rate/10-Year Treasury Spreads YIELD AND INFLATION HEDGE 12% CRE Cap Rate 10-Year Treasury Rate PROFILE COMPELLING Cap Rate Long-Term Avg. 440 bps 9% 430 bps 480 bps Average Rate • Market benefiting from strong rent growth 480 bps 210 bps 580 bps 6% in most segments and sti
Slide 19: MMI Market Position
MMI MARKET POSITION Marcus ¢ Millichap 19
Slide 20: Private Client Market Segment
• Market segment consists of sales $1 million to <$10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal drive
Slide 21: MMI Financial Details
MMI FINANCIAL DETAILS Marcus ¢ Millichap 1 CCC LLL
Slide 22: Total Revenue
TOTAL REVENUE ($ IN MILLIONS) Q1 ‘21 vs Q1 ‘22 $360 $319.5 $320 $280 $240 $200 $184.0 $160 $120 $80 $40 $0 Q1 '21 Q1 '22 22
Slide 23: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q1 2021 vs Q1 2022 Total Sales Volume Total Number of Transactions ($ in billions) $20.0 2,400 $17.2 2,137 2,000 $15.0 1,588 1,600 $10.0 $8.9 1,200 800 $5.0 400 $0.0 0 Q1 '21 Q1 '22 Q1 '21 Q1 '22 Average Number of Investment Sales Professionals Average Commission Per Tran
Slide 24: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q1 2021 vs Q1 2022 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $7,000 $200,000 $6,138 $6,000 $5,787 $161,031 $5,000 $150,000 $4,000 $105,423 $100,000 $3,000 $2,000 $50,000 $1,000 $0 $0 Q1 '21 Q1 '22 Q1 '21 Q1 '22 Larger
Slide 25: Operating Expense
OPERATING EXPENSE ($ IN MILLIONS) Q1 2021 vs Q1 2022 $300 $275.2 $250 $200 61.6% of Rev $163.8 $196.8 $150 59.3% of Rev $109.1 $100 28.1% of Rev $50 $74.5 23.3% of Rev $51.7 $3.0 $3.9 1.6% of Rev 1.2% of Rev $0 Q1 '21 Q1 '22 Depreciation SG&A COS 25
Slide 26: Net Income and Adjusted EBITDA Performance
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q1 2021 vs Q1 2022 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $35 $60 $32.8 $51.9 $30 $50 $25 $40 $20 $30 $15.0 $25.7 $15 $20 $10 $10 $5 $0 $0 Q1 '21 Q1 '22 Q1 '21 Q1 '22 26
Slide 27: Cash Flow Used in Operating Activities
CASH FLOW USED IN OPERATING ACTIVITIES QTD Cash Flow Used In Operating Activities (1) ($ in millions) $0.0 -$10.0 -$20.0 ($20.1) -$30.0 -$40.0 -$50.0 -$60.0 -$70.0 ($67.5) -$80.0 Q1 '21 Q1 '22 (1) Cash flows used in operating activities were $(67.5) million for the three months ended March 31, 2022
Slide 28: Strong Liquidity Position
STRONG LIQUIDITY POSITION Cash and Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $700 $678.6 $600 $587.7 $296.5 (1) $500 $272.0(1) $400 $300 $200 $382.1 $315.7 $100 $0 12/31/2021 3/31/2022 Cash and Cash Equivalents Marketable Debt Securities, Available-For-Sale
Slide 29: Appendix
APPENDIX Marcus ¢ Millichap 9 CCC LLL
Slide 30: Adjusted EBITDA Reconciliation
Three Months Ended March 31 ADJUSTED EBITDA RECONCILIATION 2022 2021 Net Income 32,783 15,012 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 Adjus
Slide 31: Company Overview
NATIONAL PLATFORM FOCUSED ON REAL ESTATE INVESTMENT BROKERAGE • 51-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 LEADER IN THE
Slide 32: 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 (2) EBITDA is not a measurement of our financial performance unde