Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q2 2018 Earnings Presentation
34 slides from Marcus & Millichap's earnings presentation, Aug 7, 2018
Slide 1: Second Quarter 2018 Earnings Conference Call
SECOND QUARTER 2018 EARNINGS CONFERENCE CALL August 7, 2018 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 2017 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: 2018 Second Quarter Highlights
Financial Highlights YOY Revenue $199.4 million 10.6% Net Income $22.2 million 42.4% 2018 SECOND Adjusted EBITDA $33.7 million 17.6% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $11.4 billion 0.2% Transaction Closings 2,357 7.6% Investment Sales and Financing Professionals 1,841 5.3% a
Slide 6: Year-to-Date Highlights
Financial Highlights YOY Revenue $373.9 million 12.1% Net Income $40.2 million 45.7% YEAR-TO-DATE Adjusted EBITDA $61.2 million 19.7% 2018 HIGHLIGHTS Operational Highlights YOY Sales Volume $21.1 billion 6.6% Transaction Closings 4,442 4.3% Investment Sales and Financing Professionals 1,841 5.3% as
Slide 7: 2018 Second Quarter Brokerage Highlights
2018 SECOND YOY QUARTER Sales Volume $8.9 billion 23.0% BROKERAGE Transaction Closings 1,752 7.9% HIGHLIGHTS Investment Sales Professionals as of June 30, 2018 Real Estate Brokerage Commissions Revenue 1,739 $181.6 million 4.9% 11.7% Revenue by Transactions by Transactions by Transaction Size Proper
Slide 8: Year-to-Date 2018 Brokerage Highlights
YOY YEAR-TO-DATE 2018 Sales Volume $16.9 billion 22.5% BROKERAGE Transaction Closings 3,337 7.2% HIGHLIGHTS Investment Sales Professionals as of June 30, 2018 Real Estate Brokerage Commissions Revenue 1,739 $344.2 million 4.9% 13.7% Revenue by Transactions by Transactions by Transaction Size Propert
Slide 9: 2018 Second Quarter Financing Highlights
2018 SECOND YOY QUARTER Sales Volume $1.6 billion 17.8% FINANCING Transaction Closings 433 6.1% HIGHLIGHTS Financing Professionals as of June 30, 2018 Financing Fees Revenue 102 $15.6 million 12.1% 22.5% Transactions by Transactions by Property Type Northeast/ Region Other, Mid-Atlantic, 15% 13% Mul
Slide 10: Year-to-Date 2018 Financing Highlights
YOY YEAR-TO-DATE 2018 Sales Volume $2.6 billion 3.4% FINANCING Transaction Closings 757 (5.3)% HIGHLIGHTS Financing Professionals as of June 30, 2018 Financing Fees Revenue 102 $25.3 million 12.1% 11.1% Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlantic, 13% 14% Offi
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 U.S. Employment Has Accelerated in 2018 2018 forecast to add 2.5 million jobs** 0.9 -8.7 Million 0.0 Quarterly Job Growth (Millions) +8.2 Million +19.2 Million* -0.9 -1.8 -2.7 2011 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2012 2013 2014
Slide 13: Employment and Space Demand Remain Strong
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE Employment Growth Unemployment Rate DEMAND REMAIN STRONG Employment Growth (Mil.) 3.2 7% Unemployment Rate 2.4 6% • Employment growth totaled nearly 2.4 million jobs in the past 12 months 1.6 5% • Total employment stands 10.5 million 0.8 4
Slide 14: Property Fundamentals Remain Healthy; Construction Trends Vary
PROPERTY FUNDAMENTALS REMAIN HEALTHY; CONSTRUCTION TRENDS VARY Occupancy Trends BY PROPERTY TYPE 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 incr
Slide 15: Investment Sales Remain Stable at Healthy Levels
U.S. Commercial Real Estate: Total Dollar Volume (1) INVESTMENT SALES REMAIN STABLE AT HEALTHY LEVELS $750 Total Dollar Volume ($ Bil.) $600 • Investment sales have declined moderately $450 since 2015 but remain at healthy levels $300 • First half 2018 sales increased modestly $150 from 2017 based o
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 580 bps 210 bps despite rising interest rates 6% 340 bps • The spre
Slide 17: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 18: Private Client Market Segment
• Market segment consists of sales between $1 million and $10 million; is the largest and most active, accounting for 80%+ of transactions PRIVATE CLIENT MARKET • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers • Influenced by personal drivers t
Slide 19: Private Client Market Leader with Growth Opportunity
MMI: PRIVATE CLIENT MARKET LEADER WITH GROWTH OPPORTUNITY Marcus & Millichap 8.7% • Top 10 U.S. Brokerage Firms’ Private Client ($1M – $10M) Market Share by CB Richard Ellis 4.4% Transactions (1) Cushman & Wakefield 2.6% Colliers International 2.4% NAI 1.6% NGKF 1.4% Keller Williams 1.1% Coldwell Ba
Slide 20: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 21: Total Revenues
TOTAL REVENUES ($ in millions) Q2 2017 vs. Q2 2018 Year-to-Date 2017 vs. 2018 $373.9 $240 $400 $199.4 $333.6 $200 $180.4 $300 $160 $120 $200 $80 $100 $40 $0 $0 Q2 '17 Q2 '18 YTD '17 YTD '18 21
Slide 22: Brokerage Operating Metrics Q2 2018
BROKERAGE OPERATING METRICS Q2 2018 Total Sales Volume Total Number of Sales Transactions ($ in billions) $8.9 $10.0 2,000 1,752 1,624 $7.3 1,600 $8.0 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q2 '17 Q2 '18 Q2 '17 Q2 '18 Average Number of Investment Sales Professionals Average Commission Per Transaction (
Slide 23: Brokerage Revenue by Market Segment Q2 2018
BROKERAGE REVENUE BY MARKET SEGMENT Q2 2018 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $7,084 $8,000 $140,000 $6,727 $112,468 $118,152 $6,000 $105,000 $4,000 $70,000 $2,000 $35,000 $0 $0 Q2 '17 Q2 '18 Q2 '17 Q2 '18 Larger Transaction Market (≥ $20 million) Middl
Slide 24: Brokerage Operating Metrics Year-to-Date 2018
BROKERAGE OPERATING METRICS Year-to-Date 2018 Total Sales Volume Total Number of Sales Transactions ($ in billions) $21.0 4,000 $16.9 3,113 3,337 $13.8 3,000 $14.0 2,000 $7.0 1,000 $0.0 0 YTD '17 YTD '18 YTD '17 YTD '18 Average Commission Per Transaction Average Number of Investment Sales Profession
Slide 25: Brokerage Revenue by Market Segment Year-to-Date 2018
BROKERAGE REVENUE BY MARKET SEGMENT Year-to-Date 2018 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $13,078 $13,595 $224,164 $15,000 $250,000 $212,218 $200,000 $10,000 $150,000 $100,000 $5,000 $50,000 $0 $0 YTD '17 YTD '18 YTD '17 YTD '18 Middle Market (≥ $10 - $20
Slide 26: Operating Expenses
OPERATING EXPENSES ($ in millions) Q2 2017 vs. Q2 2018 Year-To-Date 2017 vs. 2018 $200 $360 $170.5 $321.5 $289.5 $155.4 $300 $160 $240 $120 $221.5 $200.0 60.0% of Rev 59.2% of Rev $110.4 61.2% of Rev $119.9 60.1% of Rev $180 $80 $120 $40 $86.9 26.1% of Rev $97.1 26.0% of Rev $43.7 24.2% of Rev $49.1
Slide 27: Net Income and Adjusted EBITDA Performance Q2 2018
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q2 2018 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $22.2 $24 $33.7 $36 $20 $28.7 $30 $15.6 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q2 '17 Q2 '18 Q2 '17 Q2 '18 27
Slide 28: Net Income and Adjusted EBITDA Performance Year-to-Date
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Year-to-Date 2018 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $45 $70 $40.2 $61.2 $40 $60 $35 $51.1 $27.6 $50 $30 $25 $40 $20 $30 $15 $20 $10 $5 $10 $0 $0 Q2 '17 Q2 '18 YTD '17 YTD '18 28
Slide 29: Cash Flow Provided by Operating Activities
CASH FLOW PROVIDED BY OPERATING ACTIVITIES QTD Cash Flow Provided by YTD Cash Flow Provided by Operating Activities Operating Activities ($ in millions) ($ in millions) $38.0 $25 $23.0 $37.5 $37.5 $20 $37.0 $15 $36.5 $36.0 $10 $36.0 $35.5 $5 $0.5 $35.0 $0 Q2 '17 Q2 '18 YTD '17 YTD '18 (1) Net cash p
Slide 30: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $350 $321.8 $310.9 $300 $81.8(1) $90.1 (1) $250 $200 $150 $220.8 $240.0 $100 $50 $0 12/31/2017 6/30/2018 12/31/2017 12/31/2017 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investments designated b
Slide 31: Appendix
APPENDIX 31
Slide 32: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended June 30 Year-to-Date June 2018 2018 2017 2018 2017 Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized (losses) gains Net Income $22,167 $15,569 $40,178 $27,569 on marketable securitie
Slide 33: Company Overview
NATIONAL PLATFORM FOCUSED ON INVESTMENT BROKERAGE • 47-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 34: 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 34 (2) EBITDA is not a measurement of our financial performance u