Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q2 2024 Earnings Presentation
38 slides from Marcus & Millichap's earnings presentation, Aug 7, 2024
Slide 1: Second Quarter 2024 Earnings Conference Call
2024 Earnings Conference Call August 7, 2024 Second Quarter 2024 1
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS This release includes forward-looking statements, including our expectations regarding the long-term outlook of the commercial real estate transaction market and our positioning within it, our belief relating to the Company’s long-term growth, our assessment of the key fac
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
Slide 5: 2024 Second Quarter Highlights
2024 SECOND QUARTER HIGHLIGHTS Financial Highlights YoY Revenue $158.4 million (2.8)% Net Loss $(5.5) million (36.6)% Adjusted EBITDA(1) $1.4 million 236.5 % Operational Highlights YoY Sales Volume $9.5 billion (2.7)% Transaction Closings 1,800 (7.5)% Number of Investment Sales and Financing 1,726 (
Slide 6: 2024 Year to Date Highlights
2024 YEAR TO DATE HIGHLIGHTS Financial Highlights YoY Revenue $287.5 million (9.5)% Net Loss $(15.5) million 6.6 % Adjusted EBITDA(1) $(8.6) million (1.9)% Operational Highlights YoY Sales Volume $19.2 billion (4.9)% Transaction Closings 3,364 (10.4)% Number of Investment Sales and Financing 1,726 (
Slide 7: 2024 Second Quarter Brokerage Highlights
2024 SECOND QUARTER BROKERAGE HIGHLIGHTS YoY Sales Volume $7.2 billion (4.9)% Transaction Closings 1,272 (10.5)% Number of Investment Sales Professionals as 1,625 (8.1)% of June 30, 2024 Real Estate Brokerage Commissions Revenue $135.4 million (3.5)% Revenue by Transactions by Transactions by Transa
Slide 8: 2024 Year to Date Brokerage Highlights
2024 YEAR TO DATE BROKERAGE HIGHLIGHTS YoY Sales Volume $12.8 billion (12.6)% Transaction Closings 2,374 (12.1)% Number of Investment Sales Professionals as 1,625 (8.1)% of June 30, 2024 Real Estate Brokerage Commissions Revenue $244.9 million (11.1)% Revenue by Transactions by Transactions by Trans
Slide 9: 2024 Second Quarter Financing Highlights
2024 SECOND QUARTER FINANCING HIGHLIGHTS YoY Sales Volume $1.8 billion 11.0% Transaction Closings 272 (4.2)% Number of Financing Professionals as of 101 4.1% June 30, 2024 Financing Fees Revenue $18.3 million 2.2% Transactions by Transactions by Property Type Region Northeast / Other, 21% Mid-Atlant
Slide 10: 2024 Year to Date Financing Highlights
2024 YEAR TO DATE FINANCING HIGHLIGHTS YoY Sales Volume $3.5 billion 3.4% Transaction Closings 506 (10.1)% Number of Financing Professionals as of 101 4.1% June 30, 2024 Financing Fees Revenue $32.7 million (3.1)% Transactions by Transactions by Property Type Region Northeast / Other, 19% Mid-Atlant
Slide 11: Market Highlights
Market Highlights
Slide 12: Total Employment Well Above Pre-Pandemic Level, Signs of Slowing
TOTAL EMPLOYMENT WELL ABOVE PRE-PANDEMIC LEVEL, SIGNS OF A MORE PRONOUNCED SLOWING EMERGING Total Employment Job Openings vs. Unemployed Total Employment Job Openings Unemployed 160 +28.3M 24 Average Monthly Job Growth: 1.0M Labor Shortage Job Openings/Unemployed (Millions) 2021: 604K +22.6M 152 202
Slide 13: Most Aggressive Fed Tightening Since 1980 Disrupted CRE
MOST AGGRESSIVE FED TIGHTENING SINCE 1980 DISRUPTED CRE; FED’S RECENT DOVISH MESSAGING, ECONOMIC CONCERNS, LOWERING YIELDS 10-Year Treasury vs. Fed Funds Rate Inflation Adjusted Fed Balance Sheet 10-Year Treasury Fed Funds Rate Notes & Bonds MBS 6.0% TIPS/TIPS Inflation Compensation/Agencies/Bills $
Slide 14: Inflation Has Trended Lower, Paving the Way for Fed Easing
INFLATION HAS TRENDED LOWER, PAVING THE WAY FOR FED EASING Inflation vs. 10-Year Treasury Expected Year-End 2024 Fed Funds Rate Range CPI Inflation 10-Year Treasury Core PCE 10% 5.5% Expected Rate After Dec. 2024 Meeting 8% 5.0% Rate 5% 4.5% 3% 4.0% 0% 3.5% 24 23 ** 24 23 21 19 17 * 22 20 18 16 24 2
Slide 15: Private Investors Dominate U.S. Commercial Real Estate
PRIVATE PRIVATEINVESTORS DOMINATE INVESTORS DOMINATE U.S. U.S. COMMERCIAL COMMERCIAL REAL REAL ESTATE; ESTATE; INSTITUTIONAL INVESTORSGRADUALLY INSTITUTIONAL INVESTORS MORE HESITANT IN CURRENT RE-ENTERNING WINDOW THE MARKET 100% 3% 5% 4% 4% 4% 4% 4% 5% 3% 6% 7% 9% 9% 8% 9% 10% 90% 13% 12% 10% 7% 10%
Slide 16: Employment Remains Positive; Space Demand Varies by Property Type
EMPLOYMENT REMAINS POSITIVE; SPACE DEMAND VARIES BY PROPERTY TYPE Employment Growth vs. Unemployment Rate • Labor shortage still restraining Employment Growth Unemployment Rate employment growth; 4.5 million jobs 12.0 8% Employment Growth (Mil.) added in 2022, 3.0 million in 2023, and Unemployment R
Slide 17: Property Fundamentals Generally Sound; Variations Widening
PROPERTY FUNDAMENTALS GENERALLY SOUND BY HISTORICAL STANDARDS; Occupancy Trends HOWEVER, VARIATIONS WIDENING 100% • Multifamily and industrial aggressively 95% delivering record new completions as the Occupancy (%) economy slows. Risk of over-supply limited to 90% select local markets with heavy con
Slide 18: Maturing CRE Loan Volumes Concerning
MATURING CRE LOAN VOLUMES CONCERNING; MOST LENDERS EXTENDING TERMS/WORK-OUTS Commercial Real Estate Loan Maturities* $1,000 • With the exception of office properties, rent Other Dollar Volume (Billions) growth and appreciation has been healthy $750 in most segments over the past 5-7 years. Healthcar
Slide 19: Lender Caution and Tightened Underwriting Hampering Transactions
LENDER CAUTION AND TIGHTENED UNDERWRITING, WIDENED BID/ASK SPREAD HAMPERING TRANSACTIONS Annual U.S. Commercial Real Estate Sales Trends(1) 60 Total Transactions (000s) • Transaction counts in 2Q declined by an 45 estimated 22% year-over year. In 1H estimates point to a 15% drop year-over- 30 year,
Slide 20: Commercial Real Estate Yield Spreads Challenged; Pricing Recalibrating
COMMERCIAL REAL ESTATE YIELD SPREADS CHALLENGED; PRICING Cap Rate/10-Year Treasury Spreads RECALIBRATING TO HIGHER CRE Cap Rate 10-Year Treasury Rate INTEREST RATES 12% • Rapid rise of interest rates, tightened lender 10% underwriting, and slowing economic growth 8% ahead has fueled uncertainty in v
Slide 21: MMI Market Position
MMI Market Position
Slide 22: Private Client Market
PRIVATE CLIENT MARKET Largest Transaction and Commission Pool Opportunity • Private client market consists of sales $1 million to <$10 • Influenced by personal drivers that result in buying/selling/ million. refinancing properties, as well as market conditions. Should be • Largest and most active ma
Slide 23: MMI Financial Details
MMI Financial Details
Slide 24: Total Revenue
TOTAL REVENUE ($ IN MILLIONS) Q2'23 vs Q2'24 Year-to-Date ‘23 vs ‘24 $250 $600 $200 $450 (2.8)% $162.9 $158.4 $150 (9.5)% $317.7 $300 $287.5 $100 $150 $50 $0 $0 Q2'23 Q2'24 YTD '23 YTD '24 24
Slide 25: Brokerage Operating Metrics Q2
BROKERAGE OPERATING METRICS Q2 2023 vs Q2 2024 Total Sales Volume Total Number of Transactions ($ in billions) $15 2,000 (10.5)% 1,500 1,422 $10 1,272 $7.5 (4.9)% $7.2 1,000 $5 500 $0 Q2'23 Q2'24 0 Q2'23 Q2'24 Average Number of Investment Sales Professionals Average Commission Per Transaction ($ in
Slide 26: Brokerage Operating Metrics Year-to-Date
BROKERAGE OPERATING METRICS YEAR-TO-DATE 2023 vs 2024 Total Sales Volume Total Number of Transactions ($ in billions) $25 4,000 (12.1)% $20 2,701 (12.6)% 3,000 $14.7 2,374 $15 $12.8 2,000 $10 1,000 $5 $0 0 YTD '23 YTD '24 YTD '23 YTD '24 Average Number of Investment Sales Professionals Average Commi
Slide 27: Brokerage Revenue by Market Segment Q2
BROKERAGE REVENUE BY MARKET SEGMENT Q2 2023 vs Q2 2024 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $7,500 $150,000 14.7% $5,352 $96,238 (11.9)% $5,000 $4,665 $100,000 $84,816 $2,500 $50,000 $0 $0 Q2'23 Q2'24 Q2'23 Q2'24 Middle Market ($10 - <$20 million) L
Slide 28: Brokerage Revenue by Market Segment Year-to-Date
BROKERAGE REVENUE BY MARKET SEGMENT YEAR-TO-DATE 2023 vs 2024 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $12,500 $250,000 4.3% $10,116 $9,703 $186,741 (15.4)% $10,000 $200,000 $157,979 $7,500 $150,000 $5,000 $100,000 $2,500 $50,000 $0 $0 YTD '23 YTD '24 Y
Slide 29: Operating Expense
OPERATING EXPENSE ($ IN MILLIONS) Q2'23 vs Q2'24 Year-to-Date ‘23 vs ‘24 $200 $400 $173.5 $344.4 $175 $166.4 $350 $315.6 $150 $300 $125 $101.2 $250 $196.6 $98.1 61.9% of Rev 62.1% of Rev 61.9% of Rev $174.9 60.9% of Rev $100 $200 $75 $150 $68.9 44.4% of Rev $141.1 42.3% of Rev $65.0 41.1% of Rev $13
Slide 30: Net Loss and Adjusted EBITDA Performance Q2
NET LOSS AND ADJUSTED EBITDA PERFORMANCE Q2 2023 vs Q2 2024 Net Loss Adjusted EBITDA ($ in millions) ($ in millions) $— $2.0 $1.5 $1.4 $(2.0) $1.0 $(4.0) 236.5% $0.5 36.6% $(5.5) $— $(6.0) $(0.5) $(8.0) $(1.0) $(8.7) $(1.1) $(10.0) $(1.5) Q2'23 Q2'24 Q2'23 Q2'24 30
Slide 31: Net Loss and Adjusted EBITDA Performance Year-to-Date
NET LOSS AND ADJUSTED EBITDA PERFORMANCE YEAR-TO-DATE 2023 vs 2024 Net Loss Adjusted EBITDA ($ in millions) ($ in millions) $5.0 $5.0 $— $— $(5.0) $(10.0) $(5.0) 6.6% $(15.0) $(14.6) (1.9)% $(15.5) $(8.5) $(8.6) $(20.0) $(10.0) YTD '23 YTD '24 YTD '23 YTD '24 31
Slide 32: Cash Flows Provided By (Used In) Operating Activities
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES QTD Cash Flows Provided By YTD Cash Flows Used In Operating Activities Operating Activities (1) ($ in millions) ($ in millions) $7.0 $— $6.4 $6.0 $(20.0) $5.0 (87.6)% $(40.0) $4.0 $(50.2) $3.0 (47.1)% $(60.0) $2.0 $(80.0) $1.0 $0.8 $— $(100.0) $(
Slide 33: Liquidity Position
LIQUIDITY POSITION Cash, excluding Restricted Cash(1), Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $500 $406.8 (20.1)% $400 $325.0 $300 $236.3 $173.5 $200 $100 $170.5 $151.5 $0 12/31/2023 6/30/2024 Cash, excluding restricted cash, and Cash Equivalents Marketab
Slide 34: Appendix
Appendix
Slide 35: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Adjusted EBITDA, which the Company defines as net loss before (i) Three Months Ended Six Months Ended interest income and other, including net realized gains (losses) on June 30, June 30, marketable debt securities, available-for-sale and cash, cash equivalents, and re
Slide 36: Company Overview
NATIONAL PLATFORM FOCUSED ON REAL ESTATE INVESTMENT BROKERAGE • Over 50 years of experience 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 LEADE
Slide 37: Illustrative MMI Earnings Model
ILLUSTRATIVE MMI EARNINGS MODEL Investment Productivity Transaction Commission Sales Agents Value Rate Revenue Investment Financing & Cost of Sales Other SG&A(1) EBITDA(2) Services Revenue Revenue 1. Includes stock-based compensation 2. EBITDA is not a measurement of our financial performance under
Slide 38: Second Quarter 2024
Marcus ¢ Millichap Second Quarter 2024