Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q1 2024 Earnings Presentation
32 slides from Marcus & Millichap's earnings presentation, May 8, 2024
Slide 1: First Quarter 2024 Earnings Conference Call
2024 Earnings Conference Call May 8, 2024 First 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 First Quarter Highlights
2024 FIRST QUARTER HIGHLIGHTS Financial Highlights YoY Revenue $129.1 million (16.6)% Net Loss $(10.0) million 71.2 % Adjusted EBITDA $(10.1) million 35.8 % Operational Highlights YoY Sales Volume $9.7 billion (7.0)% Transaction Closings 1,564 (13.4)% Number of Investment Sales and Financing 1,722 (
Slide 6: 2024 First Quarter Brokerage Highlights
2024 FIRST QUARTER BROKERAGE HIGHLIGHTS YoY Sales Volume $5.7 billion (20.6)% Transaction Closings 1,102 (13.8)% Number of Investment Sales Professionals as 1,624 (8.4)% of March 31, 2024 Real Estate Brokerage Commissions Revenue $109.5 million (18.9)% Revenue by Transactions by Transactions by Tran
Slide 7: 2024 First Quarter Financing Highlights
2024 FIRST QUARTER FINANCING HIGHLIGHTS YoY Sales Volume $1.6 billion (3.9)% Transaction Closings 234 (16.1)% Number of Financing Professionals as of 98 6.5% March 31, 2024 Financing Fees Revenue $14.4 million (9.1)% Transactions by Transactions by Property Type Region Northeast / Other, 17% Mid-Atl
Slide 8: Market Highlights
Market Highlights
Slide 9: Total Employment Well Above Pre-Pandemic Level
TOTAL EMPLOYMENT WELL ABOVE PRE-PANDEMIC LEVEL, RECENT GROWTH PACE A FACTOR IN DELAYED FED RATE EASING Total Employment Job Openings vs. Unemployed Total Employment Job Openings Unemployed 160 +27.7M 24 Average Monthly Job Growth: 2.4M Labor Shortage Job Openings/Unemployed (Millions) 2021: 604K +22
Slide 10: Most Aggressive Fed Rate Hikes Since 1980 Disrupting CRE Markets
MOST AGGRESSIVE FED RATE HIKES SINCE 1980 DISRUPTING CRE MARKETS; QUANTITATIVE TIGHTENING INCREASING LONG-TERM RATES 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 $10.0 F
Slide 11: Inflation Has Trended Lower, But Still Above Target
INFLATION HAS TRENDED LOWER, BUT STILL ABOVE TARGET; RECENT RISE IN 10-YEAR TREASURY CHALLENGING VALUATIONS 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%
Slide 12: Private Investors Dominate U.S. Commercial Real Estate
PRIVATE PRIVATEINVESTORS DOMINATE INVESTORS DOMINATE U.S. U.S. COMMERCIAL COMMERCIAL REAL REAL ESTATE; ESTATE; INSTITUTIONAL INVESTORSMORE INSTITUTIONAL INVESTORS MORE HESITANT HESITANT IN CURRENT IN CURRENT WINDOW WINDOW 100% 3% 5% 4% 4% 4% 4% 4% 5% 3% 6% 6% 9% 8% 9% 9% 10% 7% 90% 13% 12% 10% 10% 1
Slide 13: 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, 3.1 million in 2023, and Unemployment R
Slide 14: 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 15: Maturing CRE Loan Volumes Concerning
MATURING CRE LOAN VOLUMES CONCERNING; MOST LENDERS EXTENDING TERMS/WORK-OUTS Commercial Real Estate Loan Maturities* • With the exception of office properties, rent $1,000 growth and appreciation has been healthy in Other Dollar Volume (Billions) most segments over the past 5-7 years. $750 Healthcar
Slide 16: Lender Caution Hampering Sales/Financing Transactions
LENDER CAUTION AND TIGHTENED UNDERWRITING, WIDENED BID/ASK SPREAD HAMPERING SALES/ Annual U.S. Commercial Real Estate Sales Trends(1) FINANCING TRANSACTIONS 60 Total Transactions (000s) • Transaction count in 2023 dipped 40% year-over- 45 year; dollar volume dropped by 51%. • In 1Q 2024 transactions
Slide 17: Commercial Real Estate Yield Spreads Challenged
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 ahead has fueled uncertainty in valu
Slide 18: MMI Market Position
MMI Market Position
Slide 19: Private Client Market
PRIVATE CLIENT MARKET Largest Transaction and Commission Pool Opportunity • Private client market consists of sales $1 million to <$10 • Influenced by personal drivers that result in buying/selling/ million. refinancing properties, as well as market conditions. Should be • Largest and most active ma
Slide 20: MMI Financial Details
MMI Financial Details
Slide 21: Total Revenue
TOTAL REVENUE ($ IN MILLIONS) Q1 ‘23 vs Q1 ‘24 $200 (16.6)% $154.8 $150 $129.1 $100 $50 $0 Q1'23 Q1'24 21
Slide 22: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q1 2023 vs Q1 2024 Total Sales Volume Total Number of Transactions ($ in billions) $15 1,500 1,279 (13.8)% 1,102 $10 $7.1 (20.6)% 1,000 $5.7 $5 500 $0 Q1'23 Q1'24 0 Q1'23 Q1'24 Average Number of Investment Sales Professionals Average Commission Per Transaction ($ in thous
Slide 23: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q1 2023 vs Q1 2024 <$1 million Private Client Market ($1 - <$10 million) ($ in thousands) ($ in thousands) $6,000 (5.4)% $150,000 $5,038 $4,764 (19.2)% $4,000 $100,000 $90,503 $73,163 $2,000 $50,000 $0 $0 Q1'23 Q1'24 Q1'23 Q1'24 Middle Market ($10 - <$20 million)
Slide 24: Operating Expense
OPERATING EXPENSE ($ IN MILLIONS) Q1 2023 vs Q1 2024 $200 $175 $170.9 $149.2 $150 $125 $95.4 $76.9 $100 61.6% of Rev $75 $72.2 $68.9 59.5% of Rev $50 46.7% of Rev 53.4% of Rev $25 2.1% of Rev $3.2 $3.4 2.7% of Rev $0 Q1'23 Q1'24 Depreciation SG&A COS 24
Slide 25: Net Loss and Adjusted EBITDA Performance
NET LOSS AND ADJUSTED EBITDA PERFORMANCE Q1 2023 vs Q1 2024 Net Loss Adjusted EBITDA ($ in millions) ($ in millions) $— $— $(2.0) $(5.0) $(4.0) $(5.8) $(6.0) 71.2% $(10.0) $(8.0) $(7.4) $(10.0) 35.8% $(10.0) $(10.1) $(15.0) $(12.0) Q1'23 Q1'24 Q1'23 Q1'24 25
Slide 26: Cash Flow Used in Operating Activities
CASH FLOW USED IN OPERATING ACTIVITIES QTD Cash Flow Used In Operating Activities (1) ($ in millions) $— (49.6)% $(25.0) $(50.0) $(51.0) $(75.0) $(100.0) $(101.2) $(125.0) Q1'23 Q1'24 (1) Cash flows used in operating activities were $51.0 million for the three months ending March 31, 2024 compared t
Slide 27: Liquidity Position
LIQUIDITY POSITION Cash and Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $500 $407.1 (14.9)% $400 $346.3 $300 $236.3 $255.7 $200 $100 $170.8 $90.6 $0 12/31/2023 3/31/2024 Cash and Cash Equivalents Marketable Debt Securities, Available-For-Sale 27
Slide 28: Appendix
Appendix
Slide 29: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Adjusted EBITDA, which the Company defines as net (loss) income Three Months Ended March 31, before (i) interest income; (ii) interest expense; (iii) (benefit) provision for income taxes; (iv) depreciation and amortization; and (v) stock-based compensation. The Company
Slide 30: 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 31: 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 32: Marcus & Millichap First Quarter 2024
Marcus ¢ Millichap First Quarter 2024