Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q1 2021 Earnings Presentation
29 slides from Marcus & Millichap's earnings presentation, May 7, 2021
Slide 1: First Quarter 2021 Earnings Conference Call
FIRST QUARTER 2021 EARNINGS CONFERENCE CALL MAY 7, 2021 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 2021, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctuations) in
Slide 3: Conference Call Participants
CONFERENCE CALL PARTICIPANTS HESSAM NADJI President, Chief Executive Officer and Director STEVE DEGENNARO Chief Financial Officer 3 3
Slide 4: MMI Financial Highlights
Marcus ¢ Millichap MMI FINANCIAL HIGHLIGHTS
Slide 5: 2021 First Quarter Highlights
Financial Highlights YOY Revenue $184.0 million (3.5)% Net Income $15.0 million 14.9% 2021 FIRST Adjusted EBITDA $25.7 million 14.8% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $12.0 billion 1.7% Transaction Closings 2,332 3.6% Number of Investment Sales and Financing 2,038 2.3% Profe
Slide 6: 2021 First Quarter Brokerage Highlights
2021 FIRST YOY Sales Volume $8.9 billion 5.0% QUARTER Transaction Closings 1,588 (1.7)% BROKERAGE Number of Investment Sales Professionals as of 1,953 2.6% March 31, 2021 HIGHLIGHTS Real Estate Brokerage Commissions Revenue $162.8 million (5.3)% Revenue by Transactions by Transactions by Transaction
Slide 7: 2021 First Quarter Financing Highlights
2021 FIRST Sales Volume $1.6 billion YOY (8.1)% QUARTER Transaction Closings 494 3.3% FINANCING Number of Financing Professionals as of March 31, 2021 85 (4.5)% HIGHLIGHTS Financing Fees Revenue $17.8 million 16.2% Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlantic,
Slide 8: Market Highlights
MARKET HIGHLIGHTS 8
Slide 9: Employment Recovery Slow but Gathering Momentum
EMPLOYMENT RECOVERY SLOW BUT GATHERING MOMENTUM Economic Foundation Leading Up to the Pandemic Was Historically Strong; Economic Shutdown in Response to Health Crisis Dealt Unprecedented Blow to the Labor Market. Jobs Recovery Making Gains; Stimulus, Vaccinations and Economic Reopening Positive Forc
Slide 10: Unprecedented Government Support, Consumption and Savings Bode Well for Future Economic Growth
UNPRECEDENTED GOVERNMENT SUPPORT, CONSUMPTION AND SAVINGS BODE WELL FOR FUTURE ECONOMIC GROWTH Government Stimulus Share of GDP Core Retail Sales Savings Deposits 40% $470 $17 $16 30% $430 Core Retail Sales (Billions) Deposits (Trillions) Percent of GDP $15 20% $390 $14 10% $350 $13 0% $310 $12 Glob
Slide 11: U.S. Commercial Real Estate Buyer Composition
U.S. COMMERCIAL REAL ESTATE BUYER COMPOSITION 100% 5% 4% 4% 3% 3% 3% 5% 5% 4% 4% 5% 4% 4% 5% 6% 5% 5% 5% 8% 8% 9% 13% 12% 9% 9% 7% 17% 12% 12% 11% 11% 9% 14% 20% 20% 19% 22% 20% 17% 8% 18% 25% 75% 25% 28% 27% 24% 26% 17% 27% 24% 25% 28% 36% 47% Percent of Dollar Volume 25% 32% 27% 26% 24% 26% 31% 7%
Slide 12: Employment and Space Demand Poised for Recovery?
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE DEMAND Employment Growth Unemployment Rate POISED FOR RECOVERY? 5.0 8% Employment Growth (Mil.) Unemployment Rate • Job creation lost momentum towards the end 0.0 6% of 2020 amid stimulus delays, but 1.6 million -5.0 4% positions added in
Slide 13: As Economy Recovers, Gap Among Property Types Should Narrow
AS ECONOMY RECOVERS, GAP AMONG PROPERTY TYPES Occupancy Trends SHOULD NARROW 100% • Property fundamentals entered economic Occupancy (%) 95% shutdown in very strong position. Crisis impact varies by property type. 90% • Necessity-based retail, single-tenant retail, 85% industrial, apartments and sel
Slide 14: Sales Making Steady Recovery; Economic Uncertainty, Pricing Gap Still Hamper Transactions
SALES MAKING STEADY RECOVERY; Annual U.S. Commercial Real Estate Sales Trends(1) ECONOMIC UNCERTAINTY, PRICING GAP STILL HAMPER TRANSACTIONS 40 Total Transactions (000s) 30 • Following the severe drop in sales activity in 2Q last year, investors have reengaged 20 to take advantage of opportunities a
Slide 15: 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 • Market still in price discovery process. 480 bps Average Rate 480 bps Some assets are trading at pre-COVID prices 210 bps 580 bps 6% or highe
Slide 16: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 17: Private Client Market Segment
• Market segment consists of sales $1 million - <$10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal driver
Slide 18: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 19: Total Revenues
TOTAL REVENUES ($ in millions) Q1 2020 vs. Q1 2021 $240 $200 $190.7 (3.5)% $184.0 $160 $120 $80 $40 $0 Q1 '20 Q1 '21 19
Slide 20: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q1 2020 vs. Q1 2021 Total Sales Volume Total Number of Transactions ($ in billions) $10.0 $8.9 2,000 $8.4 1,615 1,588 $8.0 1,600 (1.7)% $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q1 '20 Q1 '21 Q1 '20 Q1 '21 Average Number of Investment Sales Professionals Average Commission Per
Slide 21: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q1 2020 vs. Q1 2021 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $8,000 $120,000 $114,264 $105,423 $5,742 $6,138 $100,000 $6,000 $80,000 $4,000 $60,000 $40,000 $2,000 $20,000 $0 $0 Q1 '20 Q1 '21 Q1 '20 Q1 '21 Larger Transaction
Slide 22: Operating Expenses
OPERATING EXPENSES ($ in millions) Q1 2020 vs. Q1 2021 $200 $171.1 $163.8 $160 $120 $113.8 $109.1 59.3% of Rev 59.6% of Rev $80 $40 $54.9 28.8% of Rev $51.7 28.1% of Rev $2.5 1.3% of Rev $3.0 1.6% of Rev $0 Q1 '20 Q1 '21 Depreciation SG&A COS 22
Slide 23: Net Income and Adjusted EBITDA Performance
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q1 2020 vs. Q1 2021 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $16 $30 $15.0 $25.7 $13.1 $24 $22.4 $12 $18 $8 $12 $4 $6 $0 $0 Q1 '20 Q1 '21 Q1 '20 Q1 '21 23
Slide 24: Cash Flow Used in Operating Activities
CASH FLOW USED IN OPERATING ACTIVITIES QTD Cash Flow Used in Operating Activities ($ in millions) $0.0 -$10.0 -$20.0 ($20.1) -$30.0 -$40.0 -$50.0 ($52.8) -$60.0 Q1 '20 Q1 '21 (1) Net cash used in operating activities is driven by our net income adjusted for non-cash items and changes in operating as
Slide 25: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash and Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $500 $449.2 $450 $423.1(2) $400 $350 $206.0 (1) $201.4(1) $300 $250 $200 $150 $243.2 $221.7 $100 $50 $0 12/31/2020 3/31/2021 12/31/2020 Cash and Cash Equivalents Marketable Deb
Slide 26: Appendix
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Slide 27: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended March 31, 2021 2020 Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash Net Income $15,012 $13,070 eq
Slide 28: Company Overview
NATIONAL PLATFORM FOCUSED ON REAL ESTATE INVESTMENT BROKERAGE • 50-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 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