Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q2 2022 Earnings Presentation
32 slides from Marcus & Millichap's earnings presentation, Aug 5, 2022
Slide 1: Second Quarter 2022 Earnings Conference Call
SECOND QUARTER 2022 EARNINGS CONFERENCE CALL – AUGUST 5, 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 Second Quarter Highlights
Financial Highlights YoY Revenue $396.0 million 39.0% Net Income $42.2 million 33.7% 2022 SECOND Adjusted EBITDA $62.9 million 30.8% QUARTER HIGHLIGHTS Operational Highlights YoY Sales Volume $26.4 billion 51.6% Transaction Closings 3,636 10.7% Number of Investment Sales and Financing 1,901 (6.0)% P
Slide 6: 2022 Second Quarter Brokerage Highlights
2022 SECOND Sales Volume $19.9 billion YoY 46.5% QUARTER Transaction Closings 2,685 15.2% BROKERAGE Number of Investment Sales Professionals as of June 30, 2022 1,812 (6.4)% HIGHLIGHTS Real Estate Brokerage Commissions Revenue $354.7million 40.2% Revenue by Transactions by Transactions by Transactio
Slide 7: 2022 Second Quarter Financing Highlights
2022 SECOND YoY Sales Volume $4.5 billion 55.5% QUARTER Transaction Closings 697 1.9% FINANCING Number of Financing Professionals as of June 30, 89 2.3% HIGHLIGHTS 2022 Financing Fees Revenue $36.8 million 30.5% Transactions by Transactions by Property Type Region Northeast/ Mid- Other, Atlantic, 11
Slide 8: Market Highlights
MARKET HIGHLIGHTS Marcus ¢ Millichap 8
Slide 9: Unprecedented Government Stimulus Bolsters Consumption and Pent-Up Demand, Fueled Recovery and Inflation
UNPRECEDENTED GOVERNMENT STIMULUS BOLSTERS CONSUMPTION AND PENT-UP DEMAND, FUELED 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.
Slide 10: Job Recovery Continues with Employment Nearing Pre-Pandemic Levels
JOB RECOVERY CONTINUES WITH EMPLOYMENT NEARING PRE - PANDEMIC LEVELS 2022 forecast to add 4.3 million jobs* -22.0 Million +21.5 Million 155.0 150.0 Total Employment (Millions) 145.0 140.0 135.0 130.0 125.0 120.0 115.0 20-Jan 21-Jan 22-Jan 20-Sep 21-Sep 20-Apr 20-Jul 21-Apr 21-Jul 22-Apr 20-Mar 20-Ma
Slide 11: Labor Shortage Weighs on Hiring; Inflation Pressure Influencing Federal Reserve Action
LABOR SHORTAGE WEIGHS ON HIRING; INFLATION PRESSURE 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% * Unemployed and 10
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 July 22, 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 2Q 2022 3.6% 32% Highest Since Dec. 2018 2.7% 24% Rent Growth 16% Rate 1.8% 0.9% 8% 0.0% 0% * Through July 22, 2022 Preliminary estimate for 2Q 2022 rents 13 Sources: Federal Reserve, C
Slide 14: Private Investors Dominate U.S. Commercial Real Estate; REIT Acquisitions Beginning to Slow
PRIVATE INVESTORS DOMINATE U.S. COMMERCIAL REAL ESTATE; REIT ACQUISITIONS BEGINNING TO SLOW 100% 5% 5% 4% 4% 5% 4% 4% 3% 3% 5% 6% 5% 8% 7% 9% 9% 9% 9% 12% 12% 10% 14% 17% 20% 18% 25% 28% 75% 28% 25% 28% 24% 27% 27% 25% Percent of Dollar Volume 32% 27% 26% 29% 5% User/Other 9% 9% 9% 31% 12% 16% 14% R
Slide 15: Employment and Space Demand Points of Strength; Recession Fears Rising
EMPLOYMENT AND SPACE Employment Growth vs. Unemployment Rate DEMAND POINTS OF STRENGTH; Employment Growth Unemployment Rate RECESSION FEARS RISING 12.0 8% Employment Growth (Mil.) Unemployment Rate • Labor shortage still restraining job creation, 6.0 6% but record 6.7 million jobs added in 2021 0.0
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 aggressively Occupancy (%) 95% delivering new completions. • Supply chain disruptions remain a 90% challenge; companies have bolstered 85% inventories to mitigate shortages,
Slide 17: CRE Market Responding to Higher Interest Rates; Fed Messaging Will Remain a Key Factor
CRE MARKET RESPONDING TO HIGHER INTEREST RATES; GOING Annual U.S. Commercial Real Estate Sales Trends(1) FORWARD, FED MESSAGING WILL REMAIN A KEY FACTOR 60 Total Transactions (000s) • Transaction counts in 1H 2022 estimated to 45 have dipped modestly, falling 2% year-over- 30 year. In 2Q, estimates
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 <$10 million. PRIVATE CLIENT MARKET • Largest and most active market segment, accounting for 80%+ of transactions. SEGMENT • Primarily driven by high-net worth individuals, partnerships and smaller private fund managers. Largest Transaction and Commis
Slide 21: MMI Financial Details
MMI FINANCIAL DETAILS Marcus ¢ Millichap 1 CCC LLL
Slide 22: Total Revenue
TOTAL REVENUE ($ IN MILLIONS) Q2 ‘21 vs Q2 ‘22 $440 $396.0 $400 $360 $320 $284.9 $280 $240 $200 $160 $120 $80 $40 $0 Q2 '21 Q2 '22 22
Slide 23: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q2 2021 vs Q2 2022 Total Sales Volume Total Number of Transactions ($ in billions) $25.0 3,200 2,800 2,685 $19.9 2,330 $20.0 2,400 $15.0 $13.6 2,000 1,600 $10.0 1,200 800 $5.0 400 $0.0 0 Q2 '21 Q2 '22 Q2 '21 Q2 '22 Average Number of Investment Sales Professionals Average
Slide 24: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q2 2021 vs Q2 2022 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $8,000 $7,618 $250,000 $7,000 $6,672 $209,836 $200,000 $6,000 $158,136 $5,000 $150,000 $4,000 $3,000 $100,000 $2,000 $50,000 $1,000 $0 $0 Q2 '21 Q2 '22 Q2 '2
Slide 25: Operating Expense
OPERATING EXPENSE ($ IN MILLIONS) Q2 2021 vs Q2 2022 $400 $350 $339.2 $300 64.7% of Rev $250 $243.3 $200 $256.1 62.7% of Rev $178.5 $150 $100 21.7% of Rev 20.2% of Rev $79.8 $50 $61.8 $3.0 $3.3 1.0% of Rev 0.8% of Rev $0 Q2 '21 Q2 '22 Depreciation SG&A COS 25
Slide 26: Net Income and Adjusted EBITDA Performance
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q2 2021 vs Q2 2022 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $45 $70 $42.2 $62.9 $40 $60 $35 $31.5 $50 $48.1 $30 $40 $25 $20 $30 $15 $20 $10 $10 $5 $0 $0 Q2 '21 Q2 '22 Q2 '21 Q2 '22 26
Slide 27: Cash Flow Provided by (Used In) Operating Activities
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES QTD Cash Flow Provided by (Used In) Operating Activities (1) ($ in millions) $60.0 $53.6 $50.0 $40.0 $30.0 $20.0 $15.7 $10.0 $0.0 Q2 '21 Q2 '22 (1) Cash flows used in operating activities were $(112.1) million for the six months ended June 30, 202
Slide 28: Liquidity Position
LIQUIDITY POSITION Cash and Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $700 $600 $587.7 542.3 $500 $272.0 (1) $400 $330.6(1) $300 $200 $315.7 $100 $211.7 $0 3/31/2022 6/30/2022 Cash and Cash Equivalents Marketable Debt Securities, Available-For-Sale Liquidity
Slide 29: Appendix
APPENDIX Marcus ¢ Millichap 9 CCC LLL
Slide 30: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended June 30 Adjusted EBITDA, which the Company defines as net income before 2022 2021 (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash equivalents; (ii) interest expe
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