Slide 1: First Quarter 2018 Earnings Conference Call
FIRST QUARTER 2018 EARNINGS CONFERENCE CALL May 8, 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 First Quarter Highlights
Financial Highlights YOY Revenue $174.5 million 13.9% Net Income $18.0 million 50.1% 2018 FIRST Adjusted EBITDA $27.4 million 22.3% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $9.8 billion 15.1% Transaction Closings 2,085 0.9% Investment Sales and Financing Professionals 1,769 1.9% as
Slide 6: 2018 First Quarter Brokerage Highlights
YOY 2018 FIRST QUARTER Sales Volume $7.9 billion 22.0% BROKERAGE Transaction Closings 1,585 6.4% HIGHLIGHTS Investment Sales Professionals as of March 31, 2018 1,678 2.4% Real Estate Brokerage Commissions Revenue $162.5 million 16.0% Revenue by Transactions by Transactions by Transaction Size Proper
Slide 7: 2018 First Quarter Financing Highlights
2018 FIRST YOY QUARTER Sales Volume $1.0 billion (13.8)% FINANCING Transaction Closings 324 (17.1)% HIGHLIGHTS Financing Professionals as of March 31, 2018 Financing Fees Revenue 91 $9.7 million (7.1)% (3.3)% Transactions by Transactions by Property Type Region Other Northeast/ 10% Mid-Atlantic 14%
Slide 8: Market Highlights
Marcus ¢ Millichap MARKET HIGHLIGHTS
Slide 9: U.S. Employment Gains Driving Real Estate Demand
U.S. EMPLOYMENT GAINS DRIVING REAL ESTATE DEMAND U.S. Employment Has Expanded Well Above Prior Peak 2018 forecast to add 2.6 million jobs** 0.9 -8.7 Million 0.0 Quarterly Job Growth (Millions) +8.2 Million +18.5 Million* -0.9 -1.8 -2.7 2004 2013 2000 2001 2002 2003 2005 2006 2007 2008 2009 2010 2011
Slide 10: 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 8% Unemployment Rate 2.4 7% • Employment growth totaled nearly 2.3 million jobs in the past 12 months 1.6 6% • Total employment stands 9.8 million above
Slide 11: Property Fundamentals Remain Healthy; Construction Trends Vary by Property Type
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 properties led the recovery, 85% followed by industrial – new supply in both sec
Slide 12: Investment Sales Have Flattened; Remain at Healthy Levels
INVESTMENT SALES HAVE U.S. Commercial Real Estate: Total Dollar Volume (1) FLATTENED; REMAIN AT HEALTHY LEVELS $600 Total Dollar Volume ($ Bil.) $450 • Investment sales have declined moderately $300 since 2015 but remain at healthy levels $150 • First quarter 2018 sales were generally flat based on
Slide 13: 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 interest rate volatility 6% 350 bps • The s
Slide 14: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 15: Private Client Market Segment
• Market segment consists of sales $1 million - $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 • Often driven by personal factors that resu
Slide 16: MMI: 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 – $10M) Market Share by CB Richard Ellis 4.4% Transactions (1) Cushman & Wakefield 2.6% Colliers International 2.4% NAI 1.6% NGKF 1.4% Keller Williams 1.1% Coldwell Ba
Slide 17: Market Share Growth Opportunity by Property Type
MARKET SHARE GROWTH OPPORTUNITY BY PROPERTY TYPE MMI Transactions by Property Type T-12 as of 1Q 2018 (1) • Leverage platform, relationships, brand to Volume Property Type Transactions grow in various sectors ($Billion) • Growth opportunity remains in leading Multifamily 3,333 $22.7 property types (
Slide 18: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 19: Total Revenues
TOTAL REVENUES ($ in millions) Q1 2017 vs. Q1 2018 $200 $174.5 $153.2 $160 $120 $80 $40 $0 Q1 '17 Q1 '18 19
Slide 20: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q1 2018 Total Sales Volume Total Number Of Sales Transactions ($ in billions) $10.0 2,000 $7.9 1,585 $8.0 1,600 1,489 $6.5 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q1 '17 Q1 '18 Q1 '17 Q1 '18 Average Number of Investment Sales Professionals Average Commission Per Transaction (
Slide 21: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q1 2018 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $8,000 $6,868 $120,000 $106,012 $99,750 $5,994 $100,000 $6,000 $80,000 $4,000 $60,000 $40,000 $2,000 $20,000 $0 $0 Q1 '17 Q1 '18 Q1 '17 Q1 '18 Larger Transaction Market (≥ $20
Slide 22: Operating Expenses
OPERATING EXPENSES ($ in millions) Q1 2017 vs. Q1 2018 $160 $151.1 $134.2 $120 $89.6 58.5% of Rev $101.6 58.2% of Rev $80 $40 $48.1 $43.2 28.2% of Rev 27.6% of Rev $1.3 0.9% of Rev $1.4 0.8% of Rev $0 Q1 '17 Q1 '18 Depreciation SG&A COS 22
Slide 23: Net Income and Adjusted EBITDA Performance
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q1 2018 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $20 $18.0 $30 $27.4 $16 $24 $22.4 $12.0 $12 $18 $8 $12 $4 $6 $0 $0 Q1 '17 Q1 '18 Q1 '17 Q1 '18 23
Slide 24: Cash Flow Used in Operating Activities
CASH FLOW USED IN OPERATING ACTIVITIES QTD Cash Flow Used In Operating Activities ($ in millions) $0 -$5 -$10 -$15 ($13.0) -$20 -$25 -$30 -$35 -$40 ($37.1) Q1 '17 Q1 '18 (1) Net cash used in operating activities is driven by our net income adjusted for non-cash items and changes in operating assets
Slide 25: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $350 $310.9 $293.2 $300 $90.1 (1) $250 $93.8(1) $200 $150 $100 $220.8 $199.4 $50 $0 12/31/2017 3/31/2018 12/31/2017 12/31/2017 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investments designated b
Slide 26: Appendix
APPENDIX 26
Slide 27: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended March 31, 2018 2017 Adjusted EBITDA, which the Company defines as net income before Net Income $18,011 $12,000 (i) interest income and other, including net realized gains (losses) on marketable securities, available-for-sale and cash and cash Adjustm
Slide 28: 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 29: 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 29 (2) EBITDA is not a measurement of our financial performance u