Marcus & Millichap, Inc. · NYSE:MMI
Marcus & Millichap — Q4 2019 Earnings Presentation
33 slides from Marcus & Millichap's earnings presentation, Feb 20, 2020
Slide 1: Fourth Quarter 2019 Earnings Conference Call
FOURTH QUARTER 2019 EARNINGS CONFERENCE CALL February 20, 2020 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 2020 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 Fourth Quarter Highlights
Financial Highlights YOY Revenue $237.9 million 3.3 % Net Income $20.7 million (21.0)% 2019 FOURTH Adjusted EBITDA $32.5 million (10.1)% QUARTER HIGHLIGHTS Operational Highlights YOY Sales Volume $14.9 billion 12.3 % Transaction Closings 2,807 7.8 % Number of Investment Sales and Financing 2,021 2.2
Slide 6: Full Year 2019 Highlights
Financial Highlights YOY Revenue $806.4 million (1.0)% Net Income $76.9 million (11.8)% Adjusted EBITDA $115.6 million (10.7)% FULL YEAR 2019 HIGHLIGHTS Operational Highlights YOY Sales Volume $49.7 billion 7.2 % Transaction Closings 9,726 2.7 % Number of Investment Sales and Financing 2,021 2.2 % P
Slide 7: 2019 Fourth Quarter Brokerage Highlights
2019 FOURTH Sales Volume $10.9 billion YOY 10.5 % QUARTER Transaction Closings 2,050 6.1 % BROKERAGE Number of Investment Sales Professionals as of December 31, 2019 1,925 3.2 % HIGHLIGHTS Real Estate Brokerage Commissions Revenue $215.5 million 2.1 % Revenue by Transactions by Transactions by Trans
Slide 8: Full Year 2019 Brokerage Highlights
YOY FULL YEAR 2019 Sales Volume $36.9 billion 2.2 % BROKERAGE Transaction Closings 7,042 (0.5)% HIGHLIGHTS Number of Investment Sales Professionals as of December 31, 2019 1,925 3.2 % Real Estate Brokerage Commissions Revenue $729.4 million (2.4)% Revenue by Transactions by Transactions by Transacti
Slide 9: 2019 Fourth Quarter Financing Highlights
2019 FOURTH YOY Sales Volume $2.2 billion 20.0 % QUARTER Transaction Closings 582 19.5 % FINANCING Number of Financing Professionals as of December 31, 2019 96 (13.5)% HIGHLIGHTS Financing Fees Revenue $18.8 million 13.4 % Transactions by Transactions by Property Type Region Other, Northeast/ 11% Mi
Slide 10: Full Year 2019 Financing Highlights
YOY FULL YEAR 2019 Sales Volume $7.2 billion 15.1 % FINANCING Transaction Closings 1,944 15.9 % HIGHLIGHTS Number of Financing Professionals as of December 31, 2019 96 (13.5)% Financing Fees Revenue $66.3 million 14.7 % Transactions by Transactions by Property Type Region Northeast/ Other, Mid-Atlan
Slide 11: Market Highlights
Marcus ¢ Millichap MARKET HIGHLIGHTS
Slide 12: 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 2020 2020 forecast to add 1.2 million jobs* 0.9 -8.7 Million Quarterly Job Growth (Millions) 0.0 +8.3 Million +22.7 Million -0.9 -1.8 -2.7 2000 2019 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Slide 13: 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 2.1 million jobs in 2019. 1.6 5% • Total employment stands 14.0 million 0.8 4% above th
Slide 14: Property Fundamentals Remain Healthy; Construction Levels Beginning to Ease
PROPERTY FUNDAMENTALS REMAIN HEALTHY; CONSTRUCTION LEVELS Occupancy Trends BEGINNING TO EASE 100% Occupancy (%) • Property fundamentals are healthy across all 95% property types. 90% • Multifamily and industrial led the recovery – 85% new supply in both sectors has peaked and is beginning to abate.
Slide 15: Investment Sales Slip, But Remain at Healthy Levels
Annual U.S. Commercial Real Estate Sales Trends(1) INVESTMENT SALES SLIP, BUT REMAIN AT HEALTHY LEVELS 35 Total Transactions (000s) • Four rate hikes, and hawkish Fed messaging in 25 2018 motivated investors resulting in more transactions, followed by a decline in 2019. 15 • The reversal of Fed mess
Slide 16: 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 480 bps • Overall, cap rates were stable despite Average Rate 480 bps 200 bps 580 bps interest rate fluctuations. 6% 450 bps • The spread betwe
Slide 17: MMI Market Position
Marcus ¢ Millichap MMI MARKET POSITION
Slide 18: Private Client Market Segment
• Market segment consists of sales $1 million - $10 million. • Largest and most active market segment, accounting for PRIVATE CLIENT MARKET 80%+ of transactions. • Primarily driven by high-net worth individuals, SEGMENT partnerships and smaller private fund managers. • Influenced by personal drivers
Slide 19: MMI Financial Details
Marcus ¢ Millichap MMI FINANCIAL DETAILS
Slide 20: Total Revenues
TOTAL REVENUES ($ in millions) Q4 2018 vs. Q4 2019 Full Year 2018 vs. 2019 $280 $900 $814.8 $806.4 $230.3 $237.9 $800 $240 $700 $200 $600 $160 $500 $120 $400 $300 $80 $200 $40 $100 $0 $0 Q4 '18 Q4 '19 2018 2019 20
Slide 21: Brokerage Operating Metrics Q4 2019
BROKERAGE OPERATING METRICS Q4 2019 Total Sales Volume Total Number of Sales Transactions ($ in billions) $12.0 $10.9 2,400 $9.9 1,933 2,050 $10.0 2,000 $8.0 1,600 $6.0 1,200 $4.0 800 $2.0 400 $0.0 0 Q4 '18 Q4 '19 Q4 '18 Q4 '19 Average Number of Investment Sales Professionals Average Commission Per
Slide 22: Brokerage Revenue by Market Segment Q4 2019
BROKERAGE REVENUE BY MARKET SEGMENT Q4 2019 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $10,000 $150,000 $141,717 $8,858 $133,905 $8,000 $7,404 $125,000 $100,000 $6,000 $75,000 $4,000 $50,000 $2,000 $25,000 $0 $0 Q4 '18 Q4 '19 Q4 '18 Q4 '19 Larger Transaction Mar
Slide 23: Brokerage Operating Metrics Full Year 2019
BROKERAGE OPERATING METRICS Full Year 2019 Total Sales Volume Total Number of Sales Transactions ($ in billions) $42.0 $36.1 $36.9 8,000 7,079 7,042 $36.0 $30.0 6,000 $24.0 $18.0 4,000 $12.0 2,000 $6.0 $0.0 0 2018 2019 2018 2019 Average Number of Investment Sales Professionals Average Commission Per
Slide 24: Brokerage Revenue by Market Segment Full Year 2019
BROKERAGE REVENUE BY MARKET SEGMENT Full Year 2019 <$1 million Private Client Market ($1 - $10 million) ($ thousands) ($ thousands) $40,000 $600,000 $29,677 $483,967 $487,528 $30,000 $27,012 $400,000 $20,000 $200,000 $10,000 $0 $0 2018 2019 2018 2019 Middle Market (≥ $10 - $20 million) Large Transac
Slide 25: Operating Expenses
OPERATING EXPENSES ($ in millions) Q4 2018 vs. Q4 2019 Full Year 2018 vs. 2019 $240 $780 $702.5 $710.0 $210.8 $720 $197.8 $660 $200 1.1% $600 $160 $540 $480 $502.9 61.7% of Rev $498.9 61.9% of Rev $148.5 64.5% of Rev $155.2 65.2% of Rev $420 $120 $360 $300 $80 $240 $180 $40 20.7% of Rev 22.4% of Rev
Slide 26: Net Income and Adjusted EBITDA Performance Q4 2019
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Q4 2019 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $28 $26.2 $42 $36.1 $24 $36 $32.5 $20.7 $20 $30 $16 $24 $12 $18 $8 $12 $4 $6 $0 $0 Q4 '18 Q4 '19 Q4 '18 Q4 '19 26
Slide 27: Net Income and Adjusted EBITDA Performance Full Year 2019
NET INCOME AND ADJUSTED EBITDA PERFORMANCE Full Year 2019 Net Income Adjusted EBITDA ($ in millions) ($ in millions) $100 $140 $129.5 $87.3 $76.9 $120 $115.6 $80 $100 $60 $80 $40 $60 $40 $20 $20 $0 $0 2018 2019 2018 2019 27
Slide 28: Cash Flow Provided by Operating Activities
CASH FLOW PROVIDED BY OPERATING ACTIVITIES QTD Cash Flow Provided by YTD Cash Flow Provided by Operating Activities Operating Activities ($ in millions) ($ in millions) $70.0 $140 $62.3 $60.0 $117.3 $120 $50.0 $100 $40.0 $80 $31.3 $30.0 $60 $20.0 $40 $25.3 $10.0 $20 $0.0 $0 Q4 '18 Q4 '19 2018 2019 (
Slide 29: Strong Liquid Capital Position
STRONG LIQUID CAPITAL POSITION Cash on Hand and Core-Cash Investments ($ in millions) $450 $399.4 $399.0 $400 $350 $166.3(1) $300 $184.7 (1) $250 $200 $150 $214.7 $232.7 $100 $50 $0 12/31/2018 12/31/2019 12/31/2017 12/31/2018 Cash and Cash Equivalents Core-Cash Investments (1) Relates to investments
Slide 30: Appendix
APPENDIX 30
Slide 31: Adjusted EBITDA Reconciliation
ADJUSTED EBITDA RECONCILIATION Three Months Ended December 31 Twelve Months Ended December 31 2019 2018 2019 2018 Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) Net Income $20,721 $26,225 $76,930 $87,257 on marketa
Slide 32: National Platform Focused on Investment Brokerage
NATIONAL PLATFORM FOCUSED ON INVESTMENT BROKERAGE • 49-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 33: 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 33 (2) EBITDA is not a measurement of our financial performance u