Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q1 2019 Earnings Presentation
27 slides from Marcus & Millichap's earnings presentation, May 7, 2019
Slide 1: First Quarter 2019 Earnings Conference Call
FIRST QUARTER 2019 EARNINGS CONFERENCE CALL May 7, 2019 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 2019 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: 2019 First Quarter Highlights
Financial Highlights YOY Revenue $160.7 million (7.9)% Net Income $15.6 million (13.2)% 2019 FIRST Adjusted EBITDA $23.2 million (15.6)% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $9.8 billion 0.7% Transaction Closings 1,950 (6.5)% Investment Sales and Financing Professionals 1,919 8
Slide 6: 2019 First Quarter Brokerage Highlights
YOY 2019 FIRST QUARTER Sales Volume $7.1 billion (10.3)% BROKERAGE Transaction Closings 1,405 (11.4)% HIGHLIGHTS Investment Sales Professionals as of March 31, 2019 1,813 8.0% Real Estate Brokerage Commissions Revenue $144.9 million (10.8)% Revenue by Transactions by Transactions by Transaction Size
Slide 7: 2019 First Quarter Financing Highlights
2019 FIRST YOY QUARTER Sales Volume $1.5 billion 44.8% FINANCING Transaction Closings 388 19.8% HIGHLIGHTS Financing Professionals as of March 31, 2019 Financing Fees Revenue 106 $13.7 million 16.5% 41.2% Transactions by Transactions by Property Type Region Other, Northeast/ 15% Mid-Atlantic, 13% Mu
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 Tight Labor Market Tapers U.S. Employment Growth in 2019 2019 forecast to add 2.2 million jobs** 0.9 -8.7 Million Quarterly Job Growth (Millions) 0.0 +8.3 Million +21.1 Million* -0.9 -1.8 -2.7 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 201
Slide 10: Employment and Space Demand Remain Strong
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE Employment Growth Unemployment Rate DEMAND REMAIN STRONG 3.2 7% Employment Growth (Mil.) Unemployment Rate 2.4 6% • Employment growth totaled more than 2.5 million jobs in the past 12 months 1.6 5% • Total employment stands 12.4 million 0.
Slide 11: Property Fundamentals Remain Healthy; Construction Levels Beginning to Ease
PROPERTY FUNDAMENTALS REMAIN HEALTHY; CONSTRUCTION LEVELS Occupancy Trends BEGINNING TO EASE 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 peaked i
Slide 12: CRE Sales Have Remained at Historically Healthy Levels
CRE SALES HAVE REMAINED AT HISTORICALLY HEALTHY LEVLES FED SHIFT, OTHER FACTORS CONTRIBUTED Annual U.S. Commercial Real Estate Sales Trends(1) TO Q1-2019 TRANSACTION DECLINE 40 Total Transactions (000s) 30 • Rising interest rates, hawkish Fed messaging 20 in 2018 motivated many investors to transact
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 200 bps 580 bps despite interest rate fluctuations 6% 370 bps • The
Slide 14: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 15: Private Client Market Segment
• Market segment consists of sales $1 million - $10 million; is the largest and most active, accounting for 80%+ of transactions PRIVATE CLIENT MARKET • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers • Influenced by personal drivers that result
Slide 16: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 17: Total Revenues
TOTAL REVENUES ($ in millions) Q1 2018 vs. Q1 2019 $200 $174.5 $160.7 $160 $120 $80 $40 $0 Q1 '18 Q1 '19 17
Slide 18: Brokerage Operating Metrics
BROKERAGE OPERATING METRICS Q1 2019 Total Sales Volume Total Number of Sales Transactions ($ in billions) $10.0 2,000 $7.9 $7.1 1,600 1,585 1,405 $8.0 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q1 '18 Q1 '19 Q1 '18 Q1 '19 Average Number of Investment Sales Professionals Average Commission Per Transaction (
Slide 19: Brokerage Revenue by Market Segment
BROKERAGE REVENUE BY MARKET SEGMENT Q1 2019 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $8,000 $120,000 $106,012 $6,868 $96,058 $100,000 $6,000 $5,288 $80,000 $4,000 $60,000 $40,000 $2,000 $20,000 $0 $0 Q1 '18 Q1 '19 Q1 '18 Q1 '19 Larger Transaction Market (≥ $20
Slide 20: Operating Expenses
OPERATING EXPENSES ($ in millions) Q1 2018 vs. Q1 2019 $160 $151.1 $142.4 $120 $101.6 58.2% of Rev $91.7 57.1% of Rev $80 $40 $48.1 27.6% of Rev $48.9 30.4% of Rev $1.4 0.8% of Rev $1.8 1.1% of Rev $0 Q1 '18 Q1 '19 Depreciation SG&A COS 20
Slide 21: Net Income and Adjusted EBITDA Performance
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q1 2019 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $20 $30 $18.0 $27.4 $15.6 $23.2 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q1 '18 Q1 '19 Q1 '18 Q1 '19 21
Slide 22: Cash Flow Used in Operating Activities
CASH FLOW USED IN OPERATING ACTIVITIES QTD Cash Flow Used in Operating Activities ($ in millions) $0 -$5 -$10 -$15 ($13.0) -$20 -$25 -$30 -$35 -$40 ($38.6) -$45 Q1 '18 Q1 '19 (1) Net cash provided by operating activities is driven by our net income adjusted for non-cash items and changes in operatin
Slide 23: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $450 $399.4 $400 $352.3(2) $350 $300 $184.7 (1) $154.2(1) $250 $200 $150 $100 $214.7 $198.1 $50 $0 12/31/2018 3/31/2019 12/31/2017 12/31/2018 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investmen
Slide 24: Appendix
APPENDIX 24
Slide 25: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended March 31 2019 2018 Net Income $15,638 $18,011 Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) Adjustments: on marketable securities, available-for-sale and cash and
Slide 26: Company Overview
NATIONAL PLATFORM FOCUSED ON INVESTMENT BROKERAGE • 48-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 27: 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 27 (2) EBITDA is not a measurement of our financial performance u