Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q4 2020 Earnings Presentation
38 slides from Marcus & Millichap's earnings presentation, Feb 18, 2021
Slide 1: Fourth Quarter 2020 Earnings Conference Call
FOURTH QUARTER 2020 EARNINGS CONFERENCE CALL FEBRUARY 18, 2021 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 2021 and beyond, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctu
Slide 3: Conference Call Participants
CONFERENCE CALL PARTICIPANTS HESSAM NADJI President, Chief Executive Officer and Director STEVE DEGENNARO Chief Financial Officer 3 3
Slide 4: MMI Financial Highlights
Marcus ¢ Millichap MMI FINANCIAL HIGHLIGHTS
Slide 5: 2020 Fourth Quarter Highlights
Financial Highlights YOY QOQ 2020 FOURTH Revenue $250.2 million 5.2% 57.8% QUARTER Net Income $23.6 million 14.0% 291.1% HIGHLIGHTS Adjusted EBITDA $36.9 million 13.6% 202.1% SEQUENTIAL Operational Highlights YOY QOQ QUARTER Sales Volume Transaction Closings $15.6 billion 2,978 5.3% 6.1% 72.5% 39.2%
Slide 6: Full Year 2020 Highlights
Financial Highlights YOY Revenue $716.9 million (11.1)% Net Income $42.8 million (44.3)% Adjusted EBITDA $75.7 million (34.5)% FULL YEAR 2020 HIGHLIGHTS Operational Highlights YOY Sales Volume $43.4 billion (12.7)% Transaction Closings 8,954 (7.9)% Number of Investment Sales and Financing 2,097 3.8%
Slide 7: 2020 Fourth Quarter/Sequential Brokerage Highlights
2020 FOURTH QUARTER/ YOY QOQ Sales Volume $11.2 billion 2.2% 60.0% SEQUENTIAL Transaction Closings 2,071 1.0% 35.6% BROKERAGE Number of Investment Sales Professionals as of 2,006 4.2% 4.5% December 31, 2020 HIGHLIGHTS Real Estate Brokerage Commissions Revenue $217.1 million 0.7% 54.2% Revenue by Tra
Slide 8: Full Year 2020 Brokerage Highlights
YOY FULL YEAR 2020 Sales Volume $32.1 billion (13.0)% BROKERAGE Transaction Closings 6,288 (10.7)% HIGHLIGHTS Number of Investment Sales Professionals as of December 31, 2020 2,006 4.2% Real Estate Brokerage Commissions Revenue $633.2 million (13.2)% Revenue by Transactions by Transactions by Transa
Slide 9: 2020 Fourth Quarter/Sequential Financing Highlights
2020 FOURTH QUARTER/ YOY QOQ Sales Volume $3.1 billion 41.7% 81.7% SEQUENTIAL Transaction Closings 642 10.3% 45.2% FINANCING Number of Financing Professionals as of 91 (5.2)% 15.2% December 31, 2020 HIGHLIGHTS Financing Fees Revenue $26.9 million 42.8% 72.0% Transactions by Transactions by Property
Slide 10: Full Year 2020 Financing Highlights
YOY FULL YEAR 2020 Sales Volume $7.7 billion 6.8% FINANCING Transaction Closings 1,943 (0.1)% HIGHLIGHTS Number of Financing Professionals as of December 31, 2020 91 (5.2)% Financing Fees Revenue $70.5 million 6.4% Transactions by Transactions by Property Type Northeast/ Mid- Region Atlantic, Other,
Slide 11: COVID-19 Update
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Slide 12: Proactive Pandemic Response
PROACTIVE PANDEMIC RESPONSE • 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 measures to preserve capital while continuing to invest in strategic ini
Slide 13: Market Highlights
MARKET HIGHLIGHTS 13
Slide 14: Employment Recovery Slow but Steady
EMPLOYMENT RECOVERY SLOW BUT STEADY Economic Foundation Leading Up to the Pandemic Was Historically Strong; Economic Shutdown in Response to Health Crisis Dealt Unprecedented Blow to the Labor Market. Jobs recovery making slow gains. 2021 forecast to add 3.9 million jobs* -22.2 Million 155.0 150.0 +
Slide 15: Unprecedented Government Support, Consumption and Savings Bode Well for Growth
UNPRECEDENTED GOVERNMENT SUPPORT, CONSUMPTION AND SAVINGS BODE WELL FOR FUTURE ECONOMIC GROWTH Government Stimulus Share of GDP Core Retail Sales Savings Deposits 40% $410 $17 $16 30% $385 Core Retail Sales (Billions) Deposits (Trillions) Percent of GDP $15 20% $360 $14 10% $335 $13 0% $310 $12 Glob
Slide 16: Employment and Space Demand Still Face Headwinds
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE DEMAND Employment Growth Unemployment Rate STILL FACE HEADWINDS 5.0 8% Employment Growth (Mil.) Unemployment Rate • Job creation lost momentum towards the end 0.0 6% of 2020 as the latest stimulus package -5.0 4% was delayed. -10.0 2% • Re
Slide 17: Significant Geographic and Property Type Divide Has Created Opportunities
SIGNIFICANT GEOGRAPHIC AND PROPERTY TYPE DIVIDE HAS CREATED OPPORTUNITIES AS WELL Occupancy Trends AS CHALLENGES 100% • Property fundamentals entered economic Occupancy (%) 95% shutdown in very strong position. Crisis impact varies by property type. 90% • Necessity-based retail, single-tenant retail
Slide 18: After Initial Shock, Investment Sales Making Steady Recovery
AFTER INITIAL SHOCK, INVESTMENT SALES MAKING STEADY RECOVERY; Annual U.S. Commercial Real Estate Sales Trends(1) ECONOMIC UNCERTAINTY, PRICING GAP STILL HAMPER TRANSACTIONS 40 Total Transactions (000s) 30 • Following the severe drop in sales activity in 2Q last year, investors have reengaged 20 to t
Slide 19: 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 • Some assets are trading at pre-COVID prices 480 bps Average Rate 480 bps or higher. Wide gap in bid-ask spread exists 200 bps 580 bps 6% for
Slide 20: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 21: Private Client Market Segment
• Market segment consists of sales $1 million - <$10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal driver
Slide 22: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 23: Total Revenues
TOTAL REVENUES ($ in millions) Q4 2019 vs. Q4 2020 Q3 2020 vs. Q4 2020 2019 vs. 2020 $300 $280 $900 $250.2 $250.2 $806.4 $237.9 $250 $800 $240 $716.9 $700 $200 $200 $158.6 $600 $160 $150 $500 $120 $400 $100 $300 $80 $50 $200 $40 $100 $0 $0 $0 Q4 '19 Q4 '20 Q3 '20 Q4 '20 2019 2020 23
Slide 24: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q4 2019 vs. Q4 2020 Total Sales Volume Total Number of Transactions ($ in billions) $15.0 2,400 2,071 2,050 $10.9 $11.2 2,000 $10.0 1,600 1,200 $5.0 800 400 $0.0 0 Q4 '19 Q4 '20 Q4 '19 Q4 '20 Average Number of Investment Sales Professionals Average Commission Per Transact
Slide 25: Sequential Brokerage Operating Metrics
SEQUENTIAL BROKERAGE OPERATING METRICS Q3 2020 vs. Q4 2020 Total Sales Volume Total Number of Transactions ($ in billions) $15.0 2,400 2,071 $11.2 2,000 1,600 1,527 $10.0 $7.0 1,200 $5.0 800 400 $0.0 0 Q3 '20 Q4 '20 Q3 '20 Q4 '20 Average Number of Investment Sales Professionals Average Commission Pe
Slide 26: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q4 2019 vs. Q4 2020 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $10,000 $160,000 $141,717 $138,830 $7,404 $7,906 $140,000 $8,000 $120,000 $6,000 $100,000 $80,000 $4,000 $60,000 $2,000 $40,000 $20,000 $0 $0 Q4 '19 Q4 '20 Q4 '19
Slide 27: Sequential Brokerage Revenue by Market Segment
SEQUENTIAL BROKERAGE REVENUE BY MARKET SEGMENT Q3 2020 vs. Q4 2020 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $10,000 $160,000 $138,830 $7,906 $140,000 $8,000 $120,000 $97,856 $6,290 $6,000 $100,000 $80,000 $4,000 $60,000 $2,000 $40,000 $20,000 $0 $0 Q3 '20 Q4
Slide 28: Brokerage Operating Metrics Full Year 2020
BROKERAGE OPERATING METRICS Full Year 2020 Total Sales Volume Total Number of Transactions ($ in billions) $40.0 $36.9 8,000 7,042 $32.1 6,288 $30.0 6,000 $20.0 4,000 $10.0 2,000 $0.0 0 2019 2020 2019 2020 Average Number of Investment Sales Professionals Average Commission Per Transaction ($ in thou
Slide 29: Brokerage Revenue by Market Segment Full Year 2020
BROKERAGE REVENUE BY MARKET SEGMENT Full Year 2020 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $30,000 $27,012 $500,000 $487,528 $24,456 $421,767 $400,000 $20,000 $300,000 $200,000 $10,000 $100,000 $0 $0 2019 2020 2019 2020 Middle Market ($10 - <$20 million) Lar
Slide 30: Operating Expenses
OPERATING EXPENSES ($ in millions) Q4 2019 vs. Q4 2020 2019 vs. 2020 $240 $780 $220.2 $710.0 $210.8 $720 $663.3 $200 $660 $600 $160 $540 $480 $155.2 $498.9 65.2% of Rev $160.7 64.2% of Rev $420 61.9% of Rev $447.9 62.5% of Rev $120 $360 $300 $80 $240 $180 $56.4 $203.1 25.1% of Rev $204.5 28.5% of Re
Slide 31: Net Income and Adjusted EBITDA Performance Q4 2020
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q4 2020 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $28 $42 $36.9 $24 $23.6 $36 $32.5 $20.7 $20 $30 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q4 '19 Q4 '20 Q4 '19 Q4 '20 31
Slide 32: Net Income and Adjusted EBITDA Performance Full Year 2020
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Full Year 2020 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $90 $140 $80 $76.9 $120 $115.6 $70 $100 $60 $50 $80 $75.7 $42.8 $40 $60 $30 $40 $20 $20 $10 $0 $0 2019 2020 2019 2020 32
Slide 33: Cash Flow Provided by Operating Activities
CASH FLOW PROVIDED BY OPERATING ACTIVITIES QTD Cash Flow Provided By YTD Cash Flow Provided By Operating Activities (1) Operating Activities (2) ($ in millions) ($ in millions) $70.0 $66.4 $40 $38.1 $60.0 $50.0 $30 $25.3 $40.0 $31.3 $20 $30.0 $20.0 $10 $10.0 $0.0 $0 Q4 '19 Q4 '20 2019 2020 (1) Net c
Slide 34: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $450 $399.0 $401.6(2) $400 $342.8(2) $350 $166.3(1) $158.4(1) $300 $250 $169.7 $200 $150 $232.7 $243.2 $100 $173.1 $50 $0 12/31/2019 9/30/2020 12/31/2020 12/31/2017 12/31/2019 Cash and Cash Equivalents Core-Cash In
Slide 35: Appendix
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Slide 36: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Adjusted EBITDA, which the Company defines as net income before Three Months Ended Full Year (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash Dec. 31, Sept. 30, Dec. 31, Dec. 31, De
Slide 37: Company Overview
NATIONAL PLATFORM FOCUSED ON REAL ESTATE INVESTMENT BROKERAGE • 50-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 38: 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 38 (2) EBITDA is not a measurement of our financial performance u