Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q2 2019 Earnings Presentation
33 slides from Marcus & Millichap's earnings presentation, Aug 6, 2019
Slide 1: Second Quarter 2019 Earnings Conference Call
SECOND QUARTER 2019 EARNINGS CONFERENCE CALL August 6, 2019 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 2019 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: 2019 Second Quarter Highlights
Financial Highlights YOY Revenue $209.6 million 5.1% Net Income $21.3 million (4.0)% 2019 SECOND Adjusted EBITDA $32.0 million (5.1)% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $13.0 billion 14.1% Transaction Closings 2,535 7.6% Investment Sales and Financing Professionals 1,965 6.7%
Slide 6: Year-to-Date Highlights
Financial Highlights YOY Revenue $370.3 million (1.0)% Net Income $36.9 million (8.1)% YEAR-TO-DATE Adjusted EBITDA $55.2 million (9.8)% 2019 HIGHLIGHTS Operational Highlights YOY Sales Volume $22.8 billion 7.9% Transaction Closings 4,485 1.0% Investment Sales and Financing Professionals 1,965 6.7%
Slide 7: 2019 Second Quarter Brokerage Highlights
2019 SECOND YOY QUARTER Sales Volume $9.2 billion 3.2% Transaction Closings 1,834 4.7% BROKERAGE Investment Sales Professionals as of June 30, 2019 1,862 7.1% HIGHLIGHTS Real Estate Brokerage Commissions Revenue $188.7 million 3.9% Revenue by Transactions by Transactions by Transaction Size Property
Slide 8: Year-to-Date 2019 Brokerage Highlights
YOY YEAR-TO-DATE 2019 Sales Volume $16.3 billion (3.1)% BROKERAGE Transaction Closings 3,239 (2.9)% HIGHLIGHTS Investment Sales Professionals as of June 30, 2019 Real Estate Brokerage Commissions Revenue 1,862 $333.6 million 7.1% (3.1)% Revenue by Transactions by Transactions by Transaction Size Pro
Slide 9: 2019 Second Quarter Financing Highlights
2019 SECOND YOY QUARTER Sales Volume $1.9 billion 14.1% Transaction Closings 484 11.8% FINANCING Financing Professionals as of June 30, 2019 103 1.0% HIGHLIGHTS Financing Fees Revenue $17.7 million 14.0% Transactions by Transactions by Property Type Region Other, Northeast/ 16% Mid-Atlantic, 12% Mul
Slide 10: Year-to-Date 2019 Financing Highlights
YOY YEAR-TO-DATE 2019 Sales Volume $3.3 billion 25.8% FINANCING Transaction Closings 872 15.2% HIGHLIGHTS Financing Professionals as of June 30, 2019 Financing Fees Revenue 103 $31.5 million 1.0% 24.5% Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlantic, 16% 12% South
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 Tight Labor Market Tapers U.S. Employment Growth in 2019 2019 forecast to add 2.0 million jobs** 0.9 -8.7 Million Quarterly Job Growth (Millions) 0.0 +8.3 Million +21.6 Million* -0.9 -1.8 -2.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201
Slide 13: Employment and Space Demand Remain Strong
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE Employment Growth Unemployment Rate DEMAND REMAIN STRONG 3.2 7% Employment Growth (Mil.) Unemployment Rate 2.4 6% • Employment growth totaled more than 2.3 million jobs in the past 12 months 1.6 5% • Total employment stands 12.9 million 0.
Slide 14: Property Fundamentals Remain Healthy; Construction Levels Beginning to Ease
PROPERTY FUNDAMENTALS REMAIN HEALTHY; CONSTRUCTION LEVELS Occupancy Trends BEGINNING TO EASE 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 peaked i
Slide 15: Investment Sales Slip, But Remain at Healthy Levels
Annual U.S. Commercial Real Estate Sales Trends(1) INVESTMENT SALES SLIP, BUT REMAIN AT HEALTHY LEVELS 40 Total Transactions (000s) • Rising interest rates and hawkish Fed 30 messaging in 2018 motivated investors 20 resulting in more transaction activity last year. 10 • The reversal in Fed messaging
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 200 bps 580 bps despite interest rate fluctuations 6% 420 bps • The
Slide 17: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 18: Private Client Market Segment
• Market segment consists of sales $1 million - $10 million • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers • Influenced by personal drivers th
Slide 19: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 20: Total Revenues
TOTAL REVENUES ($ in millions) Q2 2018 vs. Q2 2019 Year-to-Date 2018 vs. 2019 $240 $400 $373.9 $370.3 $209.6 $199.4 (1.0)% $200 $300 $160 $120 $200 $80 $100 $40 $0 $0 Q2 '18 Q2 '19 YTD '18 YTD '19 20
Slide 21: Brokerage Operating Metrics Q2 2019
BROKERAGE OPERATING METRICS Q2 2019 Total Sales Volume Total Number of Sales Transactions ($ in billions) $9.2 1,834 $10.0 2,000 1,752 $8.9 $8.0 1,600 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q2 '18 Q2 '19 Q2 '18 Q2 '19 Average Number of Investment Sales Professionals Average Commission Per Transaction (
Slide 22: Brokerage Revenue by Market Segment Q2 2019
BROKERAGE REVENUE BY MARKET SEGMENT Q2 2019 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $8,000 $7,137 $150,000 $128,526 $6,727 $118,152 $125,000 $6,000 $100,000 $4,000 $75,000 $50,000 $2,000 $25,000 $0 $0 Q2 '18 Q2 '19 Q2 '18 Q2 '19 Larger Transaction Market (≥ $
Slide 23: Brokerage Operating Metrics Year-to-Date 2019
BROKERAGE OPERATING METRICS Year-to-Date 2019 Total Sales Volume Total Number of Sales Transactions ($ in billions) $21.0 4,000 $16.9 $16.3 3,337 3,239 3,000 $14.0 2,000 $7.0 1,000 $0.0 0 YTD '18 YTD '19 YTD '18 YTD '19 Average Number of Investment Sales Professionals Average Commission Per Transact
Slide 24: Brokerage Revenue by Market Segment Year-to-Date 2019
BROKERAGE REVENUE BY MARKET SEGMENT Year-to-Date 2019 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $13,595 $224,584 $15,000 $12,425 $250,000 $224,164 $200,000 +0.2% $10,000 $150,000 $100,000 $5,000 $50,000 $0 $0 YTD '18 YTD '19 YTD '18 YTD '19 Middle Market (≥ $10
Slide 25: Operating Expenses
OPERATING EXPENSES ($ in millions) Q2 2018 vs. Q2 2019 Year-To-Date 2018 vs. 2019 $200 $360 $182.6 $321.5 $325.1 $170.5 $300 $160 $240 $120 $119.9 $219.5 $127.8 $221.5 59.2% of Rev 59.3% of Rev 60.1% of Rev 61.0% of Rev $180 $80 $120 $40 $52.8 $97.1 26.0% of Rev $101.8 27.5% of Rev $49.1 24.6% of Re
Slide 26: Net Income and Adjusted EBITDA Performance Q2 2019
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q2 2019 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $24 $22.2 $36 $33.7 $21.3 $32.0 $20 $30 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q2 '18 Q2 '19 Q2 '18 Q2 '19 26
Slide 27: Net Income and Adjusted EBITDA Performance Year-to-Date 2019
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Year-to-Date 2019 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $45 $70 $40.2 $61.2 $40 $36.9 $60 $35 $55.2 $30 $50 $25 $40 $20 $30 $15 $20 $10 $5 $10 $0 $0 Q2 '18 Q2 '19 YTD '18 YTD '19 27
Slide 28: Cash Flow Provided by (Used in) Operating Activities
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES QTD Cash Flow Provided by YTD Cash Flow Provided by (Used In) Operating Activities Operating Activities ($ in millions) ($ in millions) $40.0 $36.0 $30 $23.0 $35.0 $20 $30.0 $25.0 $10 $20.0 $0 $15.0 $14.2 -$10 $10.0 $5.0 -$20 ($24.4) $0.0 -$30 Q2
Slide 29: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $450 $399.4 $400 $360.5(2) $350 $300 $184.7 (1) $153.7(1) $250 $200 $150 $100 $214.7 $206.8 $50 $0 12/31/2018 6/30/2019 12/31/2017 12/31/2018 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investmen
Slide 30: Appendix
APPENDIX 30
Slide 31: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended June 30 Six Months Ended June 30 2019 2018 2019 2018 Net Income $21,279 $22,167 $36,917 $40,178 Adjusted EBITDA, which the Company defines as net income before Adjustments: (i) interest income and other, including net realized gains (losses) on marke
Slide 32: Company Overview
NATIONAL PLATFORM FOCUSED ON INVESTMENT BROKERAGE • 48-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