Marcus & Millichap, Inc. (the “Company”, “Marcus &
Millichap”, or “MMI”) (NYSE: MMI), a leading national real estate
services firm specializing in commercial real estate investment
sales, financing, research and advisory services, reported its
first quarter results today.
First Quarter 2024 Highlights Compared to First Quarter
2023
- Total revenue of $129.1 million, compared to $154.8 million
- Brokerage commissions of $109.5 million, compared to $135.0
million
- Private Client Market brokerage revenue of $73.2 million,
compared to $90.5 million
- Middle Market and Larger Transaction Market brokerage revenue
of $31.5 million, compared to $39.5 million
- Financing fees of $14.4 million, compared to $15.9 million
- Net loss of $10.0 million, or $0.26 per common share, diluted,
compared to net loss of $5.8 million, or $0.15 per common share,
diluted
- Earnings were primarily impacted by a lower number of
transactions against a challenging market environment resulting in
lower revenue
- Adjusted EBITDA of $(10.1) million, compared to $(7.4)
million
“Operating in today’s complex environment, we are strategically
positioned to navigate the current climate as real estate markets
gradually recover. Our first quarter results reflect both the
ongoing industry-wide reduction in the number of transactions and
our deliberate long-term investments in talent retention and
acquisition as well as business development,” stated Hessam Nadji,
Marcus & Millichap’s president and chief executive officer.
Mr. Nadji continued, “With record capital on the sidelines, once
clarity and stability on inflation and interest rates emerge, real
estate transactions are poised to rebound albeit with a delayed
timeline. We are encouraged as appropriately priced assets that we
bring to market are generating multiple offers despite the
“higher-for-longer” interest rates. Our expanded talent pool,
technology and strong brand position us to reach new milestones as
the market recovers. Meanwhile, our healthy balance sheet enables
strategic investments while consistently returning capital to our
shareholders. We believe this balanced approach is allowing us to
leverage the market dislocation, further enhance our market
position and create long-term value for our shareholders.”
First Quarter 2024 Results Compared to First Quarter
2023
Total revenue for the first quarter 2024 was $129.1 million, a
decrease of 16.6% compared to $154.8 million for the same period in
the prior year.
For real estate brokerage commissions, revenue was $109.5
million, a decrease of 18.9% compared to the same period in the
prior year. The decline is primarily attributed to a 13.8% decrease
in the number of transactions. This is reflective of the ongoing
market disruption driven by the rapid rise in interest rates and
constrained lending. The average transaction size and the average
commission per transaction decreased by 7.9% and 5.9%,
respectively, compared to the first quarter 2023. Private Client
Market revenue decreased by 19.2%, and the combined Middle Market
and Larger Transaction Market revenue decreased by 20.1%.
For financing fees, revenue was $14.4 million, a decrease of
9.1% compared to the same period in the prior year. The decline is
primarily attributed to a 16.1% decline in the number of
transactions, partially offset by average fee per transaction and
average transaction size increases of 1.4% and 14.6%,
respectively.
Total operating expenses for the first quarter 2024 were $149.2
million, compared to $170.9 million for the same period in the
prior year. The change was primarily due to reductions of 19.4% in
cost of services and 4.6% in selling, general and administrative
expenses. Cost of services as a percentage of total revenue
decreased by 210 basis points to 59.5% compared to the same period
during the prior year.
Selling, general and administrative expenses for the first
quarter 2024 were $68.9 million, compared to $72.2 million for the
same period in the prior year. The change was primarily due to a
reduction in marketing support and events attributable to the lower
revenue level.
Net loss for the first quarter 2024 was $10.0 million, or $0.26
per common share, diluted, compared to $5.8 million, or $0.15 per
common share, diluted, for the same period in the prior year.
Adjusted EBITDA for the first quarter 2024 was $(10.1) million,
compared to $(7.4) million for the same period in the prior year,
primarily as a result of the decrease in operating income.
Capital Allocation
On February 8, 2024, the Board of Directors declared a
semi-annual regular dividend of $0.25 per share, or $10.1 million
with a payment date of April 5, 2024, to stockholders of record at
the close of business on March 12, 2024.
During the three months ended March 31, 2024, the Company
repurchased 16,900 shares of common stock at an average price of
$32.77 per share for a total price of $0.6 million.
After accounting for shares repurchased through May 3, 2024,
Marcus & Millichap has approximately $71.0 million available to
repurchase shares under its program. No time limit has been
established for the completion of the program, and the repurchases
are expected to be executed from time-to-time, subject to general
business and market conditions and other investment opportunities,
through open market purchases or privately negotiated transactions,
including through Rule 10b5-1 plans.
Business Outlook
The market is still working through the ongoing price discovery,
wider than normal bid/ask spreads, and a prolonged downturn in
transaction volume due to the Federal Reserve’s decision to delay
interest rate reductions. While these conditions are likely to
persist through much of 2024, price adjustments, distressed
situations and maturing loans could drive additional transactions
in the quarters ahead. Over the long term, real estate demand is
expected to return sales and financing volumes to higher than
current levels given the record capital on the sideline and key
advantages of real estate investments. Accordingly, the Company
believes it remains well-positioned to achieve long-term
growth.
The Company benefits from its experienced management team,
infrastructure investments, industry-leading market research and
proprietary technology. The size and fragmentation of the Private
Client Market continues to offer long-term growth opportunities
through consolidation. This highly fragmented market segment
consistently accounts for over 80% of all U.S. commercial property
transactions and over 60% of the commission pool. The top 10
brokerage firms led by MMI had an estimated 20% share of this
segment by transaction count in 2023.
Key factors that may influence the Company’s business during
2024 include:
- Volatility in transactional activity and investor sentiment
driven by:
- The elevated cost of debt capital
- Interest rate uncertainty and the heightened bid-ask spread
between buyers and sellers
- Risks of a potential recession and its unfavorable impact to
commercial real estate space demand
- Possible impact to market sentiment related to the presidential
election, potential tax and other policy changes which may
influence transaction velocity and/or future fluctuations in sales
and financing activity
- Increase in operating expenses driven by labor costs,
insurance, taxes and cost of materials
- Volatility in each of the Company’s markets
- Increase in costs related to in-person events, client meetings,
and conferences
- Global geopolitical uncertainty, which may cause investors to
refrain from transacting
- The potential for acquisition activity and subsequent
integration
Webcast and Call Information
Marcus & Millichap will host a live webcast today to discuss
the financial results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern
Time. The webcast will be accessible through the Investor Relations
section of Marcus & Millichap's website at
ir.marcusmillichap.com and will be archived upon completion of the
call. The Company encourages the use of the webcast due to
potential extended wait times to access the conference call via
dial-in.
For those unable to access the webcast, callers from the United
States and Canada should dial 1-877-407-9208 ten minutes prior to
the scheduled call time. International callers should dial
1-201-493-6784.
Replay Information
For those unable to participate during the live broadcast, a
telephonic replay of the call will also be available from 1:30 p.m.
Eastern Time on Wednesday, May 8, 2024 through 11:59 p.m. Eastern
Time on Wednesday, May 22, 2024 by dialing 1-844-512-2921 in the
United States and Canada or 1-412-317-6671 internationally and
entering passcode 13745195.
About Marcus & Millichap, Inc.
Marcus & Millichap, Inc. is a leading national real estate
services firm specializing in commercial real estate investment
sales, financing services, research and advisory services. As of
March 31, 2024, the Company had 1,722 investment sales and
financing professionals in more than 80 offices who provide
investment brokerage and financing services to sellers and buyers
of commercial real estate. The Company also offers market research,
consulting and advisory services to its clients. Marcus &
Millichap closed 1,564 transactions during the three months ended
March 31, 2024, with a sales volume of $9.7 billion. For additional
information, please visit www.MarcusMillichap.com.
SPECIAL NOTE REGARDING 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 factors influencing the Company’s business outlook for
2024 and the execution of our capital return program, including a
semi-annual dividend and stock repurchase program. We have based
these forward-looking statements largely on our current
expectations and projections about future events and financial
trends affecting the financial condition of our business.
Forward-looking statements should not be read as a guarantee of
future performance or results and will not necessarily be accurate
indications of the times at, or by, which such performance or
results may be achieved. Forward-looking statements are based on
information available at the time those statements are made and/or
management’s good faith belief as of that time with respect to
future events and are subject to risks and uncertainties that could
cause actual performance or results to differ materially from those
expressed in or suggested by the forward-looking statements.
Important factors that could cause such differences include, but
are not limited to:
- general uncertainty in the capital markets, a worsening of
economic conditions, and the rate and pace of economic recovery
following an economic downturn;
- changes in our business operations;
- market trends in the commercial real estate market or the
general economy, including the impact of inflation and increased
interest rates;
- our ability to attract and retain qualified senior executives,
managers, and investment sales and financing professionals;
- the impact of forgivable loans and related expense resulting
from the recruitment and retention of agents;
- the effects of increased competition on our business;
- our ability to successfully enter new markets or increase our
market share;
- our ability to successfully expand our services and businesses
and to manage any such expansions;
- our ability to retain existing clients and develop new
clients;
- our ability to keep pace with changes in technology;
- any business interruption or technology failure, including
cybersecurity risks and ransomware attacks, and any related impact
on our reputation;
- changes in interest rates, availability of capital, tax laws,
employment laws, or other government regulation affecting our
business;
- our ability to successfully identify, negotiate, execute, and
integrate accretive acquisitions; and
- other risk factors included under “Risk Factors” in our most
recent Annual Report on Form 10-K.
In addition, in this release, the words “believe,” “may,”
“will,” “estimate,” “continue,” “anticipate,” “intend,” “goal,”
“expect,” “predict,” “potential,” “should,” and similar
expressions, as they relate to our Company, our business and our
management, are intended to identify forward-looking statements. In
light of these risks and uncertainties, the forward-looking events
and circumstances discussed in this release may not occur and
actual results could differ materially from those anticipated or
implied in the forward-looking statements.
Forward-looking statements speak only as of the date of this
release. You should not put undue reliance on any forward-looking
statements. We assume no obligation to update forward-looking
statements to reflect actual results, changes in assumptions or
changes in other factors affecting forward-looking information,
except to the extent required by applicable laws. If we update one
or more forward-looking statements, no inference should be drawn
that we will make additional updates with respect to those or other
forward-looking statements. We have not filed our Quarterly Report
on Form 10-Q (“Form 10-Q”) for the quarter ended March 31, 2024. As
a result, all financial results described in this release should be
considered preliminary, and are subject to change to reflect any
necessary adjustments or changes in accounting estimates, that are
identified prior to the time we file our Form 10-Q.
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per
share amounts)
(Unaudited)
Three Months Ended March 31,
2024
2023
Revenue:
Real estate brokerage commissions
$
109,475
$
135,046
Financing fees
14,427
15,868
Other revenue
5,202
3,878
Total revenue
129,104
154,792
Operating expenses:
Cost of services
76,868
95,427
Selling, general and administrative
68,916
72,219
Depreciation and amortization
3,422
3,207
Total operating expenses
149,206
170,853
Operating loss
(20,102
)
(16,061
)
Other income, net
5,568
4,810
Interest expense
(199
)
(215
)
Loss before benefit for income taxes
(14,733
)
(11,466
)
Benefit for income taxes
(4,746
)
(5,633
)
Net loss
$
(9,987
)
$
(5,833
)
Net loss per share:
Basic
$
(0.26
)
$
(0.15
)
Diluted
$
(0.26
)
$
(0.15
)
Weighted average common shares
outstanding:
Basic
38,447
39,200
Diluted
38,447
39,200
MARCUS & MILLICHAP, INC. KEY
OPERATING METRICS SUMMARY (Unaudited)
Total sales volume was approximately $9.7 billion for the three
months ended March 31, 2024, encompassing 1,564 transactions
consisting of $5.7 billion for real estate brokerage (1,102
transactions), $1.6 billion for financing (234 transactions) and
$2.4 billion in other transactions, including consulting and
advisory services (228 transactions). As of March 31, 2024, the
Company had 1,624 investment sales professionals and 98 financing
professionals. Key metrics for real estate brokerage and financing
activities (excluding other transactions) are as follows:
Three Months Ended March 31,
Real Estate Brokerage
2024
2023
Average Number of Investment Sales
Professionals
1,638
1,782
Average Number of Transactions per
Investment Sales Professional
0.67
0.72
Average Commission per Transaction
$
99,343
$
105,587
Average Commission Rate
1.93
%
1.89
%
Average Transaction Size (in
thousands)
$
5,137
$
5,576
Total Number of Transactions
1,102
1,279
Total Sales Volume (in millions)
$
5,661
$
7,132
Three Months Ended March 31,
Financing (1)
2024
2023
Average Number of Financing
Professionals
99
92
Average Number of Transactions per
Financing Professional
2.36
3.03
Average Fee per Transaction
$
47,178
$
46,548
Average Fee Rate
0.67
%
0.75
%
Average Transaction Size (in
thousands)
$
7,094
$
6,189
Total Number of Transactions
234
279
Total Financing Volume (in millions)
$
1,660
$
1,727
(1)
Operating metrics exclude certain financing fees not directly
associated to transactions.
The following table sets forth the number of transactions, sales
volume and revenue by commercial real estate market segment for
real estate brokerage:
Three Months Ended March 31,
2024
2023
Change
Real Estate Brokerage
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
<$1 million
186
$
103
$
4,764
183
$
116
$
5,038
3
$
(13
)
$
(274
)
Private Client Market
($1 – <$10 million)
808
2,590
73,163
970
3,254
90,503
(162
)
(664
)
(17,340
)
Middle Market
($10 – <$20 million)
59
802
15,093
66
900
17,368
(7
)
(98
)
(2,275
)
Larger Transaction
Market (≥$20 million)
49
2,166
16,455
60
2,862
22,137
(11
)
$
(696
)
$
(5,682
)
1,102
$
5,661
$
109,475
1,279
$
7,132
$
135,046
(177
)
$
(1,471
)
$
(25,571
)
MARCUS & MILLICHAP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands, except for
shares and par value)
March 31, 2024 (unaudited)
December 31, 2023
Assets
Current assets:
Cash, cash equivalents, and restricted
cash
$
90,556
$
170,753
Commissions receivable
13,785
16,171
Prepaid expenses
7,546
8,813
Income tax receivable
9,461
9,299
Marketable debt securities,
available-for-sale (amortized cost of $198,847 and $169,018 at
March 31, 2024 and December 31, 2023, respectively, and $0
allowance for credit losses)
198,314
168,881
Advances and loans, net
7,861
3,574
Other assets, current
16,014
16,203
Total current assets
343,537
393,694
Property and equipment, net
27,832
27,450
Operating lease right-of-use assets,
net
92,929
90,058
Marketable debt securities,
available-for-sale (amortized cost of $59,302 and $69,538 at March
31, 2024 and December 31, 2023, respectively, and $0 allowance for
credit losses)
57,400
67,459
Assets held in rabbi trust
11,467
10,838
Deferred tax assets, net
51,725
46,930
Goodwill and other intangible assets,
net
50,041
51,183
Advances and loans, net
175,604
175,827
Other assets, non-current
16,116
14,972
Total assets
$
826,651
$
878,411
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
$
9,359
$
8,126
Deferred compensation and commissions
40,511
55,769
Operating lease liabilities
17,535
18,336
Accrued bonuses and other employee related
expenses
7,264
19,119
Other liabilities, current
17,923
3,919
Total current liabilities
92,592
105,269
Deferred compensation and commissions
27,304
47,771
Operating lease liabilities
73,935
69,407
Other liabilities, non-current
7,265
10,690
Total liabilities
201,096
233,137
Commitments and contingencies
—
—
Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and
outstanding shares – none at March 31, 2024 and December 31, 2023,
respectively
—
—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued
and outstanding shares – 38,633,603 and 38,412,484 at March 31,
2024 and December 31, 2023, respectively
4
4
Additional paid-in capital
155,157
153,740
Retained earnings
471,670
492,298
Accumulated other comprehensive loss
(1,276
)
(768
)
Total stockholders’ equity
625,555
645,274
Total liabilities and stockholders’
equity
$
826,651
$
878,411
MARCUS & MILLICHAP, INC. OTHER
INFORMATION (Unaudited)
Adjusted EBITDA Reconciliation
Adjusted EBITDA, which the Company defines as net (loss) income
before (i) interest income, (ii) interest expense, (iii) (benefit)
provision for income taxes, (iv) depreciation and amortization, and
(v) stock-based compensation. The Company uses Adjusted EBITDA in
its business operations to evaluate the performance of its
business, develop budgets and measure its performance against those
budgets, among other things. The Company also believes that
analysts and investors use Adjusted EBITDA as a supplemental
measure to evaluate its overall operating performance. However,
Adjusted EBITDA has material limitations as a supplemental metric
and should not be considered in isolation or as a substitute for
analysis of the Company’s results as reported under U.S. generally
accepted accounting principles (“U.S. GAAP”). The Company finds
Adjusted EBITDA to be a useful management metric to assist in
evaluating performance, because Adjusted EBITDA eliminates items
related to capital structure, taxes and non-cash items. Considering
the foregoing limitations, the Company does not rely solely on
Adjusted EBITDA as a performance measure and also considers its
U.S. GAAP results. Adjusted EBITDA is not a measurement of the
Company’s financial performance under U.S. GAAP and should not be
considered as an alternative to net income, operating income or any
other measures calculated in accordance with U.S. GAAP. Because
Adjusted EBITDA is not calculated in the same manner by all
companies, it may not be comparable to other similarly titled
measures used by other companies.
A reconciliation of the most directly comparable U.S. GAAP
financial measure, net income, to Adjusted EBITDA is as follows (in
thousands):
Three Months Ended March 31,
2024
2023
Net loss
$
(9,987
)
$
(5,833
)
Adjustments:
Interest income
(4,765
)
(4,390
)
Interest expense
199
215
Benefit for income taxes
(4,746
)
(5,633
)
Depreciation and amortization
3,422
3,207
Stock-based compensation
5,795
5,011
Adjusted EBITDA
$
(10,082
)
$
(7,423
)
Glossary of Terms
- Private Client Market: transactions with values from $1 million
to up to but less than $10 million
- Middle Market: transactions with values from $10 million to up
to but less than $20 million
- Larger Transaction Market: transactions with values of $20
million and above
- Acquisitions: acquisition of businesses accounted for as a
business combination in accordance with generally accepted
accounting standards
Certain Adjusted Metrics
Real Estate Brokerage
Following are actual and as adjusted metrics excluding any large
transactions in our real estate brokerage business in excess of
$300 million:
Three Months Ended
March 31, 2024
(actual)
(as adjusted)
Total Sales Volume Decrease
(20.6
)%
(20.6
)%
Average Commission Rate Increase
2.1
%
2.1
%
Average Transaction Size Decrease
(7.9
)%
(7.9
)%
View source
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Investor Relations: Investor Relations
InvestorRelations@marcusmillichap.com
Marcus and Millichap (NYSE:MMI)
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