Marcus & Millichap, Inc. Reports Results for First Quarter 2024
Marcus & Millichap, Inc. reported its first quarter results for 2024, showcasing total revenue of $129.1 million and a net loss of $10.0 million. The company faced a decrease in revenue attributed to a lower number of transactions due to market challenges. Despite this, it remains strategically positioned to navigate the current environment and leverage its talent pool and technology to create long-term value for shareholders.
Marcus & Millichap maintains a strong market position despite challenges, with a healthy balance sheet enabling strategic investments.
The company's record capital on the sidelines and key advantages in real estate investments position it well for long-term growth.
The expert management team, infrastructure investments, market research, and proprietary technology provide a competitive edge for Marcus & Millichap.
Total revenue for the first quarter of 2024 decreased by 16.6% compared to the same period in 2023, with a net loss of $10.0 million.
A decrease in the number of transactions, driven by interest rate rises and lending constraints, contributed to a decline in revenue for the company.
Operating expenses for the first quarter increased by 19.4% in cost of services and 4.6% in selling, general, and administrative expenses, impacting the overall financial performance.
Insights
The financial figures reported by Marcus & Millichap indicate a contraction in revenue, attributed to a reduction in the number of transactions and average commission per transaction. This suggests an industry-wide downturn influenced by rising interest rates and limited lending. While operating expenses have declined due to cuts in cost of services and administrative expenses, it does not offset the revenue shortfall, resulting in a net loss. The company’s decision to maintain dividends and continue share repurchases demonstrates a strong balance sheet and a commitment to shareholder return. However, decreased earnings could be a concern for dividend sustainability if the downturn persists.
Falling transaction volumes and a decrease in average transaction size reflect the broader real estate market's sensitivity to interest rate hikes and economic uncertainty. Marcus & Millichap's results align with these trends, signaling caution for investors interested in the real estate services sector. The company's outlook implies a potential rebound in real estate transactions, contingent on economic stability, suggesting that current challenges may be temporary. Nonetheless, the company faces headwinds from potential recession risks and the impending presidential election, which could further influence investor sentiment and transactional activity.
Investors evaluating Marcus & Millichap's performance must weigh short-term headwinds against the firm's strategic positioning. With an emphasis on talent retention and technological investments, the company is preparing for a market recovery. The large capital reserves waiting on the sidelines could signal a future uptick in activity, offering a potentially favorable long-term outlook for the company. However, investors should be cautious of the immediate effects of a prolonged market correction and any impacts of the macroeconomic and geopolitical environment on the firm's performance.
First Quarter 2024 Highlights Compared to First Quarter 2023
-
Total revenue of
$129.1 million $154.8 million -
Brokerage commissions of
$109.5 million $135.0 million -
Private Client Market brokerage revenue of
$73.2 million $90.5 million -
Middle Market and Larger Transaction Market brokerage revenue of
$31.5 million $39.5 million -
Financing fees of
$14.4 million $15.9 million
-
Brokerage commissions of
-
Net loss of
$10.0 million $0.26 $5.8 million $0.15 - 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 $(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
For real estate brokerage commissions, revenue was
For financing fees, revenue was
Total operating expenses for the first quarter 2024 were
Selling, general and administrative expenses for the first quarter 2024 were
Net loss for the first quarter 2024 was
Capital Allocation
On February 8, 2024, the Board of Directors declared a semi-annual regular dividend of
During the three months ended March 31, 2024, the Company repurchased 16,900 shares of common stock at an average price of
After accounting for shares repurchased through May 3, 2024, Marcus & Millichap has approximately
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
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
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
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
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
|
||||||
|
|
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
|
Three Months Ended
|
||||||
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
|
||||||
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) |
|||||||||
< |
186 |
|
$ |
103 |
|
$ |
4,764 |
|
183 |
|
$ |
116 |
|
$ |
5,038 |
|
3 |
|
|
$ |
(13 |
) |
|
$ |
(274 |
) |
Private Client Market
( |
808 |
|
|
2,590 |
|
|
73,163 |
|
970 |
|
|
3,254 |
|
|
90,503 |
|
(162 |
) |
|
|
(664 |
) |
|
|
(17,340 |
) |
Middle Market
( |
59 |
|
|
802 |
|
|
15,093 |
|
66 |
|
|
900 |
|
|
17,368 |
|
(7 |
) |
|
|
(98 |
) |
|
|
(2,275 |
) |
Larger Transaction |
||||||||||||||||||||||||||
Market (≥ |
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
|
|
December 31,
|
||||
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 |
|
198,314 |
|
|
|
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 |
|
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, |
|
|
|
||||
Authorized shares – 25,000,000; issued and outstanding shares – none at March 31, 2024 and December 31, 2023, respectively |
|
— |
|
|
|
— |
|
Common stock, |
|
|
|
||||
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
A reconciliation of the most directly comparable
|
Three Months Ended
|
||||||
|
|
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 $10 million -
Middle Market: transactions with values from
$10 million $20 million -
Larger Transaction Market: transactions with values of
$20 million - 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
|
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 version on businesswire.com: https://www.businesswire.com/news/home/20240508693134/en/
Investor Relations:
Investor Relations
InvestorRelations@marcusmillichap.com
Source: Marcus & Millichap, Inc.
FAQ
What were Marcus & Millichap's total revenue and net loss for the first quarter of 2024?
Marcus & Millichap reported total revenue of $129.1 million and a net loss of $10.0 million for the first quarter of 2024.
How did Marcus & Millichap's revenue compare between the first quarter of 2024 and the first quarter of 2023?
Revenue for the first quarter of 2024 decreased by 16.6% compared to the same period in 2023.
What factors contributed to the decline in Marcus & Millichap's revenue for the first quarter of 2024?
The decline in revenue was primarily attributed to a lower number of transactions, reflecting market disruptions from interest rate rises and lending constraints.
What is Marcus & Millichap's strategic approach to navigate the current market environment?
Marcus & Millichap is strategically positioned to leverage talent, technology, and a strong brand to create long-term value for shareholders despite ongoing market challenges.
