Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q4 2021 Earnings Presentation
36 slides from Marcus & Millichap's earnings presentation, Feb 18, 2022
Slide 1: Fourth Quarter 2021 Earnings Conference Call
FOURTH QUARTER 2021 EARNINGS CONFERENCE CALL – FEBRUARY 18, 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 the execution of our capital return program, i
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: 2021 Fourth Quarter Highlights
Financial Highlights YoY vs. ’19 Revenue $495.1 million 97.9% 108.1% Net Income $62.0 million 162.5% 199.2% 2021 FOURTH Adjusted EBITDA $88.2 million 138.8% 171.3% QUARTER HIGHLIGHTS Operational Highlights YoY vs. ’19 Sales Volume $34.2 billion 118.5% 130.1% Transaction Closings 4,313 44.8% 53.7% Nu
Slide 6: Full-Year 2021 Highlights
Financial Highlights YoY vs. ’19 Revenue $1,296.4 million 80.8% 60.8% Net Income $142.5 million 232.6% 85.2% FULL-YEAR 2021 Adjusted EBITDA $213.0 million 181.4% 84.3% HIGHLIGHTS Operational Highlights YoY vs. ‘19 Sales Volume $84.4 billion 94.3% 69.7% Transaction Closings 13,255 48.0% 36.3% Number
Slide 7: 2021 Fourth Quarter Brokerage Highlights
2021 FOURTH Sales Volume $28.6 billion YoY 155.4% vs. ‘19 161.0% QUARTER Transaction Closings 3,278 58.3% 59.9% BROKERAGE Number of Investment Sales Professionals as of December 31, 2021 1,914 (4.6)% (0.6)% HIGHLIGHTS Real Estate Brokerage Commissions $455.5 million 109.8% 111.3% Revenue Revenue by
Slide 8: Full-Year 2021 Brokerage Highlights
YoY vs. ‘19 FULL-YEAR 2021 Sales Volume $67.5 billion 110.6% 83.2% BROKERAGE Transaction Closings Number of Investment Sales 9,652 53.5% 37.1% HIGHLIGHTS Professionals as of December 31, 2021 1,914 (4.6)% (0.6)% Real Estate Brokerage Commissions $1.2 billion 84.9% 60.5% Revenue Revenue by Transactio
Slide 9: 2021 Fourth Quarter Financing Highlights
2021 FOURTH Sales Volume $3.8 billion YoY 23.6% vs. ‘19 75.0% QUARTER Transaction Closings 696 8.4% 19.6% FINANCING Number of Financing Professionals as of December 31, 2021 80 (12.1)% (16.7%) HIGHLIGHTS Financing Fees Revenue $34.2 million 27.5% 82.1% Transactions by Transactions by Property Type R
Slide 10: Full-Year 2021 Financing Highlights
YoY vs. ’19 FULL-YEAR 2021 Sales Volume $11.6 billion 51.3% 61.6% FINANCING Transaction Closings 2,474 27.3% 27.3% HIGHLIGHTS Number of Financing Professionals as of December 31, 2021 80 (12.1)% (16.7)% Financing Fees Revenue $109.7 million 55.5% 65.5% Transactions by Transactions by Property Type N
Slide 11: Market Highlights
MARKET HIGHLIGHTS Marcus ¢ Millichap 1 CCC LLL
Slide 12: 2021 Job Creation Sets Record; Pace of Gains Slowing
2021 JOB CREATION SETS RECORD; PACE OF GAINS SLOWING Economic Foundation Leading Up to the Pandemic Was Historically Strong. Jobs Recovery Making Gains; Stimulus, Vaccinations and Economic Reopening Positive Forces Supporting Revival. 2022 forecast to add 4.3 million jobs* -22.4 Million +18.8 Millio
Slide 13: Unprecedented Government Stimulus Sparked Consumption and Pent-Up Demand
UNPRECEDENTED GOVERNMENT STIMULUS SPARKED CONSUMPTION AND PENT-UP DEMAND, SPURRING THE RECOVERY AND INFLATION Government Stimulus Share of GDP Core Retail Sales Savings Deposits 40% $470 $18.0 30% $430 $16.5 Core Retail Sales (Billions) Deposits (Trillions) Percent of GDP 20% $390 $15.0 10% $350 $13
Slide 14: Labor Shortage Beginning to Weigh on Hiring Pace
LABOR SHORTAGE BEGINNING TO WEIGH ON HIRING PACE; INFLATIONARY PRESSURE INDUCING FEDERAL RESERVE ACTION Job Openings vs. Unemployed Inflation vs. Treasury Rates Job Openings Unemployed Core PCE 10-Year Treasury 24 6.0% Job Openings/Unemployed (Millions) 18 4.5% Rate 12 3.0% 6 1.5% 0 0.0% * Through D
Slide 15: Private Investors Dominate U.S. Commercial Real Estate Acquisitions
PRIVATE INVESTORS DOMINATE U.S. COMMERCIAL REAL ESTATE ACQUISITIONS; INSTITUTIONAL ACTIVITY ALSO ROSE IN 2021 100% 4% 4% 4% 4% 3% 5% 5% 5% 5% 5% 5% 8% 9% 9% 9% 9% 12% 12% 10% 14% 20% 17% 18% 25% 75% 28% 25% 28% 24% 27% 27% 25% Percent of Dollar Volume 32% 27% 26% 29% User/Other 9% 9% 31% 16% 9% 14%
Slide 16: Employment Recovery Leveling; Space Demand Accelerating
Employment Growth vs. Unemployment Rate EMPLOYMENT RECOVERY LEVELING; Employment Growth Unemployment Rate SPACE DEMAND ACCELERATING 12.0 8% Employment Growth (Mil.) Unemployment Rate • Labor shortage beginning to slow pace of job 6.0 6% creation, but record 6.4 million jobs added in 0.0 4% 2021. -6.
Slide 17: As Economy Recovers, Gap Between Property Types Should Narrow
AS ECONOMY RECOVERS, GAP BETWEEN PROPERTY TYPES Occupancy Trends SHOULD NARROW 100% • Property fundamentals entered economic Occupancy (%) 95% shutdown in very strong position. Crisis impact varied by property type. 90% • Necessity-based retail, single-tenant retail, 85% industrial, apartments and s
Slide 18: Overall CRE Sales Accelerated to Exceed Pre-COVID Levels in 2021
OVERALL CRE SALES ACCELERATED Annual U.S. Commercial Real Estate Sales Trends(1) TO EXCEED PRE-COVID LEVELS IN 2021 48 Total Transactions (000s) 36 • Transactions hit all-time record in 2021, showing increase of 21% over 2019. 24 Larger deals pushed dollar volume higher. 12 • Buyer bids have become
Slide 19: Commercial Real Estate Yields and Inflation Resistance Compelling
COMMERCIAL REAL ESTATE Cap Rate/10-Year Treasury Spreads YIELDS AND INFLATION 12% CRE Cap Rate 10-Year Treasury Rate RESISTANCE COMPELLING Cap Rate Long-Term Avg. 440 bps 9% 430 bps • Market benefiting from strong rent growth 480 bps Average Rate 480 bps in most segments and low interest rates. 210
Slide 20: MMI Market Position
MMI MARKET POSITION Marcus ¢ Millichap 0 CCC LLL
Slide 21: Private Client Market Segment
• Market segment consists of sales $1 million to <$10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal drive
Slide 22: MMI Financial Details
MMI FINANCIAL DETAILS Marcus ¢ Millichap 2 CCC LLL
Slide 23: Total Revenues
TOTAL REVENUES ($ IN MILLIONS) Q4 ’19, Q4 ‘20 & Q4 ‘21 Full-Year ’19, ‘20 & ‘21 $520 $495.1 $1,400 $1,296.4 $480 $1,300 $440 $1,200 $400 $1,100 $360 $1,000 $900 $320 $806.4 $800 $280 $716.9 $237.9 $250.2 $700 $240 $600 $200 $500 $160 $400 $120 $300 $80 $200 $40 $100 $0 $0 Q4 '19 Q4 '20 Q4 '21 2019 2
Slide 24: Brokerage Operating Metrics Q4
BROKERAGE OPERATING METRICS Q4 2019, Q4 2020 & Q4 2021 Total Sales Volume Total Number of Transactions ($ in billions) $35.0 3,600 3,278 $30.0 $28.6 3,200 2,800 $25.0 2,400 2,050 2,071 $20.0 2,000 $15.0 1,600 $10.9 $11.2 1,200 $10.0 800 $5.0 400 $0.0 0 Q4 '19 Q4 '20 Q4 '21 Q4 '19 Q4 '20 Q4 '21 Avera
Slide 25: Brokerage Revenue by Market Segment Q4
BROKERAGE REVENUE BY MARKET SEGMENT Q4 2019, Q4 2020 & Q4 2021 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $10,000 $9,506 $300,000 $247,404 $8,000 $7,404 $7,906 $250,000 $200,000 $6,000 $141,717 $150,000 $138,830 $4,000 $100,000 $2,000 $50,000 $0 $0 Q4 '19
Slide 26: Brokerage Operating Metrics Full-Year
BROKERAGE OPERATING METRICS Full-Year 2019, 2020 & 2021 Total Sales Volume Total Number of Transactions ($ in billions) $80.0 12,000 $70.0 $67.5 9,652 10,000 $60.0 $50.0 8,000 7,042 6,288 $40.0 $36.9 $32.1 6,000 $30.0 4,000 $20.0 $10.0 2,000 $0.0 0 2019 2020 2021 2019 2020 2021 Average Number of Inv
Slide 27: Brokerage Revenue by Market Segment Full-Year
BROKERAGE REVENUE BY MARKET SEGMENT Full-Year 2019, 2020 & 2021 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $35,000 $800,000 $30,681 $693,996 $30,000 $27,012 $25,000 $24,456 $600,000 $487,528 $20,000 $421,767 $400,000 $15,000 $10,000 $200,000 $5,000 $0 $0
Slide 28: Operating Expenses
OPERATING EXPENSES ($ IN MILLIONS) Q4 ’19, Q4 ‘20 & Q4 ‘21 Full-Year ’19, ‘20 & ‘21 $450 $1,200 $413.2 $1,107.1 $400 $1,000 $350 $300 $800 $710.0 $663.3 $840.2 $250 $333.3 $220.2 $210.8 $600 $200 64.8% of Rev 67.3% of Rev $498.9 $447.9 $150 $155.2 65.2% of Rev $400 61.9% of Rev 62.5% of Rev 64.2% of
Slide 29: Net Income and Adjusted EBITDA Performance Q4
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q4 2019, Q4 2020 & Q4 2021 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $70 $100 $62.0 $90 $88.2 $60 $80 $50 $70 $60 $40 $50 $30 $40 $36.9 $23.6 $32.5 $20.7 $20 $30 $20 $10 $10 $0 $0 Q4 '19 Q4 '20 Q4 '21 Q4 '19 Q4 '20 Q4 '21 29
Slide 30: Net Income and Adjusted EBITDA Performance Full-Year
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Full-Year 2019, 2020 & 2021 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $160 $250 $142.5 $140 $213.0 $200 $120 $100 $150 $80 $76.9 $115.6 $100 $60 $75.7 $42.8 $40 $50 $20 $0 $0 2019 2020 2021 2019 2020 2021 30
Slide 31: Cash Flow Provided by Operating Activities
CASH FLOW PROVIDED BY OPERATING ACTIVITIES QTD Cash Flow Provided By YTD Cash Flow Provided By Operating Activities (1) Operating Activities (1) ($ in millions) ($ in millions) $180.0 $280 $255.9 $160.0 $156.3 $240 $140.0 $200 $120.0 $100.0 $160 $80.0 $120 $66.4 $60.0 $80 $40.0 $31.3 $40 $38.1 $20.0
Slide 32: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash and Cash Equivalents and Marketable Securities, Available-For-Sale ($ in millions) $700 $678.6(2) $600 $296.5(1) $500 $449.2 $400 $206.0 (1) $300 $200 $382.1 $243.2 $100 $0 12/31/2020 12/31/2021 12/31/2020 Cash and Cash Equivalents Marketable Securities, Available
Slide 33: Appendix
APPENDIX Marcus ¢ Millichap 3 CCC LLL
Slide 34: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended December 31, Twelve Months Ended December 31, Adjusted EBITDA, which the Company defines as net income before 2021 2020 2021 2020 (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale a
Slide 35: National Platform Focused on Real Estate Investment
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 36: 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 36 (2) EBITDA is not a measurement of our financial performance u