Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q2 2021 Earnings Presentation
35 slides from Marcus & Millichap's earnings presentation, Aug 6, 2021
Slide 1: Second Quarter 2021 Earnings Conference Call
SECOND QUARTER 2021 EARNINGS CONFERENCE CALL AUGUST 6, 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 and beyond, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctu
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 Second Quarter Highlights
Financial Highlights YoY vs. ’19 Revenue $284.9 million 142.7% 36.0% Net Income $31.5 million nm (1) 48.2% 2021 SECOND Adjusted EBITDA $48.1 million nm (1) 50.3% QUARTER HIGHLIGHTS Operational Highlights YoY vs. ’19 Sales Volume $17.4 billion 151.2% 34.4% Transaction Closings 3,285 107.0% 29.6% Numb
Slide 6: Year-to-Date 2021 Highlights
Financial Highlights YoY vs. ‘19 Revenue $468.9 million 52.2% 26.6% YEAR-TO-DATE Net Income $46.5 million nm (1) 26.1% Adjusted EBITDA $73.8 million 178.2% 33.8% 2021 HIGHLIGHTS Operational Highlights YoY vs. ‘19 Sales Volume $29.4 billion 57.2% 28.8% Transaction Closings 5,617 46.4% 25.2% Number of
Slide 7: Brokerage Highlights - Second Quarter
2021 SECOND Sales Volume $13.6 billion YoY 150.0% vs. ‘19 46.9% QUARTER Transaction Closings 2,330 116.7% 27.0% BROKERAGE Number of Investment Sales Professionals as of June 30, 2021 1,935 (1.4)% 3.9% HIGHLIGHTS Real Estate Brokerage Commissions $252.9 million 144.7% 34.0% Revenue Revenue by Transac
Slide 8: Brokerage Highlights - Year-to-Date
YoY vs. ‘19 YEAR-TO-DATE 2021 Sales Volume $22.4 billion 61.7% 37.3% BROKERAGE Transaction Closings Number of Investment Sales 3,918 45.7% 21.0% HIGHLIGHTS Professionals as of June 30, 2021 1,935 (1.4)% 3.9% Real Estate Brokerage Commissions $415.7 million 51.1% 24.6% Revenue Revenue by Transactions
Slide 9: Financing Highlights - Second Quarter
2021 SECOND Sales Volume $2.9 billion YoY 151.3% vs. ‘19 55.2% QUARTER Transaction Closings 684 79.5% 41.3% FINANCING Number of Financing Professionals as of June 30, 2021 87 2.4% (15.5)% HIGHLIGHTS Financing Fees Revenue $28.2 million 122.1% 59.0% Transactions by Transactions by Property Type Regio
Slide 10: Financing Highlights - Year-to-Date
YoY vs. ’19 YEAR-TO-DATE 2021 Sales Volume $4.5 billion 55.0% 35.5% FINANCING Transaction Closings Number of Financing Professionals as of 1,178 37.1% 35.1% HIGHLIGHTS 87 2.4% (15.5)% June 30, 2021 Financing Fees Revenue $46.1 million 64.2% 46.3% Transactions by Transactions by Property Type Northea
Slide 11: Market Highlights
Marcus ¢ Millichap MARKET HIGHLIGHTS
Slide 12: Employment Recovery Gathering Momentum
EMPLOYMENT RECOVERY GATHERING MOMENTUM Economic Foundation Leading Up to the Pandemic Was Historically Strong. Jobs Recovery Making Gains; Stimulus, Vaccinations and Economic Reopening Positive Forces Supporting Revival. 2021 forecast to add 6.0 million jobs* -22.4 Million 155.0 +15.6 Million 150.0
Slide 13: Unprecedented Government Support, Consumption and Savings Bode Well for 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 $18.0 30% $430 $16.5 Core Retail Sales (Billions) Deposits (Trillions) Percent of GDP 20% $390 $15.0 10% $350 $13.5 0% $310 $12.
Slide 14: Private Investors Dominate U.S. Commercial Real Estate Acquisitions
PRIVATE INVESTORS DOMINATE U.S. COMMERCIAL REAL ESTATE ACQUISITIONS 100% 5% 5% 4% 4% 5% 4% 4% 5% 5% 5% 5% 8% 9% 9% 7% 12% 12% 11% 11% 14% 17% 20% 18% 25% 75% 25% 28% 25% 27% 24% 27% 24% Percent of Dollar Volume 32% 27% 26% 29% 9% User/Other 8% 8% 31% 11% 14% 14% REIT/Listed 50% 18% Institutional 10%
Slide 15: Employment and Space Demand
Employment Growth vs. Unemployment Rate EMPLOYMENT AND SPACE DEMAND Employment Growth Unemployment Rate BEGINNING RECOVERY 12.0 8% Employment Growth (Mil.) Unemployment Rate • Job creation lost momentum in late 2020 6.0 6% amid stimulus delays but accelerating with 0.0 4% 3.3 million positions added
Slide 16: 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 varied by property type. 90% • Necessity-based retail, single-tenant retail, 85% industrial, apartments and sel
Slide 17: CRE Sales Recovering Rapidly; COVID-19 Variant Concerns and Pricing Gap Still Challenging
CRE SALES RECOVERING RAPIDLY; COVID-19 VARIANT CONCERNS Annual U.S. Commercial Real Estate Sales Trends(1) AND PRICING GAP STILL CHALLENGING 40 Total Transactions (000s) 30 • Following severe drop in sales activity in 2Q 2020, investors have reengaged. Sales 20 activity moving toward historical tren
Slide 18: 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 • CRE market benefiting from government 480 bps Average Rate 480 bps induced stimulus, low interest rates and 210 bps 580 bps 6% ample liquidit
Slide 19: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 20: Private Client Market Segment
• Market segment consists of sales $1 million to <$10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal drive
Slide 21: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 22: Total Revenues
TOTAL REVENUES ($ in millions) Q2 ’19, Q2 ‘20 & Q2 ‘21 Year-to-Date ’19, ‘20 & ‘21 $320 $500 $468.9 $284.9 $280 $400 $370.3 $240 $209.6 $200 $308.1 $300 $160 $120 $117.4 $200 $80 $100 $40 $0 $0 Q2 '19 Q2 '20 Q2 '21 YTD '19 YTD '20 YTD '21 22
Slide 23: Brokerage Operating Metrics - Q2
BROKERAGE OPERATING METRICS Q2 ’2019, Q2 ‘2020 & Q2 ‘2021 Total Sales Volume Total Number of Transactions ($ in billions) $15.0 $13.6 2,800 2,330 2,400 2,000 1,834 $10.0 $9.2 1,600 $5.4 1,200 1,075 $5.0 800 400 $0.0 0 Q2 '19 Q2 '20 Q2 '21 Q2 '19 Q2 '20 Q2 '21 Average Number of Investment Sales Profe
Slide 24: Brokerage Revenue by Market Segment - Q2
BROKERAGE REVENUE BY MARKET SEGMENT Q2 ’2019, Q2 ‘2020 & Q2 ‘2021 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $8,000 $7,618 $200,000 $7,137 $158,136 $6,000 $150,000 $128,526 $4,518 $4,000 $100,000 $70,817 $2,000 $50,000 $0 $0 Q2 '19 Q2 '20 Q2 '21 Q2 '19 Q2 '20 Q
Slide 25: Brokerage Operating Metrics - Year-to-Date
BROKERAGE OPERATING METRICS Year-to-Date 2019, 2020 & 2021 Total Sales Volume Total Number of Transactions ($ in billions) $30.0 5,000 $22.4 4,000 3,918 $20.0 3,239 $16.3 3,000 2,690 $13.9 $10.0 2,000 1,000 $0.0 0 YTD '19 YTD '20 YTD '21 YTD '19 YTD '20 YTD '21 Average Number of Investment Sales Pro
Slide 26: Brokerage Revenue by Market Segment - Year-to-Date
BROKERAGE REVENUE BY MARKET SEGMENT Year-to-Date 2019, 2020 & 2021 <$1 million Private Client Market ($1 - <$10 million) ($ thousands) ($ thousands) $15,000 $13,756 $300,000 $263,559 $12,425 $224,584 $10,260 $10,000 $200,000 $185,081 $5,000 $100,000 $0 $0 YTD '19 YTD '20 YTD '21 YTD '19 YTD '20 YTD
Slide 27: Operating Expenses
OPERATING EXPENSES ($ in millions) Q2 ’19, Q2 ‘20 & Q2 ‘21 Year-To-Date ’19, ‘20 & ‘21 $280 $480 $243.3 $407.1 $240 $420 $360 $200 $182.6 $325.1 $300 $291.1 $160 $178.6 61.4% of Rev 62.7% of Rev $287.7 $240 $127.8 61.0% of Rev $120.0 59.3% of Rev $120 $219.5 $187.5 60.9% of Rev $180 62.8% of Rev $80
Slide 28: Net Income and Adjusted EBITDA Performance - Q2
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q2 ’19, Q2 ‘20 & Q2 ‘21 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $35 $54 $31.5 $48.1 $48 $30 $42 $25 $36 $21.3 $32.0 $20 $30 $15 $24 $18 $10 $12 $5 $6 $4.2 $0.1 $0 $0 Q2 '19 Q2 '20 Q2 '21 Q2 '19 Q2 '20 Q2 '21 28
Slide 29: Net Income and Adjusted EBITDA Performance - YTD
NET INCOME AND ADJUSTED EBITDA PERFORMANCE YTD ’19, ‘20 & ’21 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $50 $78 $73.8 $46.5 $72 $45 $66 $40 $36.9 $60 $55.2 $35 $54 $30 $48 $42 $25 $36 $20 $30 $26.5 $15 $13.2 $24 $18 $10 $12 $5 $6 $0 $0 YTD '19 YTD '20 YTD '21 YTD '19 YTD '20 YTD '21
Slide 30: Cash Flow Provided By (Used In) Operating Activities
CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES QTD Cash Flow Provided By YTD Cash Flow Provided By (Used In) Operating Activities (1) Operating Activities (1) ($ in millions) ($ in millions) $60.0 $40 $33.5 $53.6 $30 $50.0 $20 $40.0 $10 $0 $30.0 -$10 -$20 $20.0 ($24.4) $14.2 -$30 $10.0 -$40 -$
Slide 31: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash and Cash Equivalents and Marketable Debt Securities, Available-For-Sale ($ in millions) $500 $475.1(2) $449.2 $450 $400 $350 $206.0 (1) $244.7(1) $300 $250 $200 $150 $243.2 $230.4 $100 $50 $0 12/31/2020 6/30/2021 12/31/2020 Cash and Cash Equivalents Marketable Deb
Slide 32: Appendix
APPENDIX 32
Slide 33: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended June 30 Six Months Ended June 30 2021 2020 2021 2020 Net Income $31,532 $106 $46,544 $13,176 Adjusted EBITDA, which the Company defines as net income before Adjustments: (i) interest income and other, including net realized gains (losses) on marketab
Slide 34: National Platform Focused on Real Estate Investment Brokerage
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 35: 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 35 (2) EBITDA is not a measurement of our financial performance u