Marcus & Millichap (MMI) 8 Nov 242024 Q3 Earnings call transcript

Greetings. Welcome to Marcus & Millichap's Third Quarter 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce John Cornet (sic) [ Jacques Cornet ] with ICR. Thank you.

You may begin.

operator. you, Thank welcome Earnings and & Third Millichap's Good Call. to XXXX Conference Quarter morning, Marcus With President today Chief us are: Financial Nadji; Officer, Officer, and Hessam Steve DeGennaro. and Chief Executive

please its such the goal over and turn forward-looking forward-looking and responses and sustain may and market as variations general public culture economic Form other and Securities Words questions the the forward-looking similar due filings, retain agents on its to ability not those our expressions ability the to believe, discussed to may, company's and company's I Before amid XX-K company's statements. Actual will, the to identify management, business annual including expect, ability results the prepared new conditions remember growth words call to real report to on remarks from but can statements. and philosophy these variety February such contain competitive company's that of XX, estimate, implied Exchange and in a intended with by statements to its the including, estate of materially differ XXXX. are pressures, partnership and conditions, factors, attract commercial to, integrate limited Commission anticipate, retain transaction filed professionals; factors

company make of the believes otherwise. assurance new The its obligation no no events can upon that or reflected result attained. the assumptions, in expectations reasonable such will to Although whether information, it company forward-looking as undertakes statement, based forward-looking statements update are expectations a any future be

presentation you such The along was investors. over the on reconciliation measures measures the company's the are may The to financial it call of this on my and website, Hessam that, represents believes why turn on slide is is prepared to In the useful GAAP non-GAAP at with company's available information company's Investor call www.marcusmillichap.com, website the The during addition, presented being morning financial earnings appropriate call explains available company CEO, link which release, remarks. With this non-GAAP is the Relations measures. the conference issued is and webcast to webcast. the to section a represents pleasure reference Nadji. certain

net behalf Jacques. the morning, Millichap a to market call. financing to and of markets. MMI's compared & sustainable the to stage third team, measured third On showed that in the quarter, the Reserve's but transaction million. $XXX the of listing cycle capital shift entire underpinnings the Federal good in our quarter interest recovery MMI's you, our and of the setting last believe up the breakeven million, Marcus results a adjusted towards was welcome modest a quarter rates, improvement for adjust, Thank EBITDA in third notable earnings We prices and of include inventory at return for lowering as with pipeline. Revenue $X.X exclusive the and improvement year, X% record loss recovery

growth of improvement, In this disruption X the ago. the the another years quarter market since revenue sequential with year-over-year addition to onset first is

retained retention our leading investments initiatives the producers long-term capital recovery the and expensing in the have leverage remain to business technology hampered downturn. been in costs our for important these talent, among we production of development. and remains EPS deployed Our related has as strengthen We provide The talent in and strategy during is challenged competitiveness. offense believe and will revenue greatly acquisition particularly downturn added by and the on to

contribute company's gains. significantly to to in recovery, leverage expect the top revenue these enhance growth the share and support professionals We market

XXXX. price opportunities the sellers by realistic grappled valuations adjustments returning moving made property out It the to momentum institutional key is relative and finally coming The more in noted replacement investor missing third the catalysts: First, time, off pricing. appears and conviction toward X driven The that brought investors the to the capital current attractive March more types market, unions. more tight shifting costs build continued of third is quarter various that same private quarter. by on across psychology capital sidelines market have terms while last At with lending with still to during quarter, requirements are to credit buying which we peak banks

X% year-over-year, for this respectively. the with revenue middle X.X% transaction quarter Client revenue correlate declined and while Our trend increased Private as and larger market results XX.X%,

Fed's inflationary cycle Fed gradually a policies. point The outcome may will cuts an more economy more rate beginning expectations easing basis on bring to cut of XX move further decisively rate strong signaled that and the likely X.XX by the reduction. due Second, followed point the yesterday's still election

the which will reduce supply-demand the new pent-up driving transactions. are lastly, across seen of Construction to recent a construction due healthy combination are property few overbuilding. with particularly be are XXXX, in market industrial years years. And most types from to more most expected significantly Third, X for generally after a and exceptions postponed demand dynamics multifamily This increasing of XXXX in decline a which starts situations and distressed has positive will transactions dysfunctional properties, and supply.

remain transactions and the revenue apartments was $X.X numbers and our IPA financing persistent sales and not retail closed the by only impact quarter. revenue. financing During lenders our saw enhanced our restrictive X,XXX and hampered most and and the spreads. quarter, totaling We initiatives. Middle brokerage strategic but nonbank highlight industrial, with Single-tenant volume company the due in increased financing boosted lending over over the also transactions XX% and total billion revenue, larger serviced XXX our by in transactions brokerage Shopping quarter. capital closed self-storage division up volume. of institutional to apartment up XX.X% XXX financing secured bid-ask market centers, for XX% capacity smaller transactions improvement. by X our through clients improved Financing lenders for These separate

increasing loans. trade on activity performing driven In momentum, distressed and by addition, Loan division Sales gain continued our both to

future IPA Over we've categories Capital and the MMCC investor finance intermediaries past positioned originators leading as expansion in value and all quarter team contributed to growth our our will this our our talent, drive business. Moreover, the improvements is up win experienced financing The increasingly business. deal for across they added the with to sizes. as X Markets years, and sales originators creating lender professionals and we've infrastructure strategy relationships in

several of add new market to talent firm, continue spurring which The agent rate experienced across of still mitigate kept to years fallout for newer expanded we and the reverse the challenges elevated, has increasing and We our candidate professionals face focused attracting program growing channels our cadre. a the new to development training the in the agent remain includes on volatility deployment pool. past well regional helps recruiters and pivotal This both We dual trend. talent strategy this as a are company's as experienced larger significantly training hiring to and internship future. as organic acquisition the dedicated of

attract volatility and volatility reductions by availability as commercial biggest impacted over picture face is compelling the pointing begin retail new U.S. to finance scenario which poised the although and capital, remains has come anticipate points the along frequent a growth long-term the is Fed's our but over increase the treasury estate contract. if Fed's for volumes. Since landing and unfolds. yields. election currently. Real the improve, of face way. X.X% for related higher commercial recalibrating path dynamics, financing for challenge The have rates, maintain, a values This years will last positive Interest and the toward and the the the on as fundamentals At a Fed's board. not repricing much to the perhaps positive implementation rates, forward, generally began, basis speed under moved to macro we more the have severely taxes the listings have seen to policy XX-year long estate X.X positive. of rates rate real easing viewed rate are sales Looking impact yield in the most economy, real interest trading in to sales is to real be sales time. Regardless policy estate settle commercial inflation target, driven a productivity supports realistic more force's solidly actual to while productivity and cycle but has still cycle business, the We job level, demand across moderated, way the improvement when a soft interest bumps estate and due decelerated transactions pricing to economy, XX outcome

growth Our and talent sales increased strategy attract to solid share. existing force very help continually our maximize enhance further platform, market our for positions well us and productivity top

business allocation capital maintained a dual front, strong while benefit of the shareholders to same we time. the growth On capital of balance at the a approach and returning sheet driving have

Loan and taking while in investing acquisition services strategically which Auction We targets. client proprietary Sales of division our strategic technology continue by off such and division, to as are deploy pursuing nicely both capital

the Our undertake insights recovery. With to ongoing will over development, all that, commitment Steve? engagement, direct client to quarter. the additional investments other the market offense and our business for in in on and activities firm Steve to branding I event positioning underscore the we every market company the staying into dominance industry turn call for quarter participation, the

Thank you, Hessam.

$XXX $XXX million was compared quarter. X% total prior the to for mentioned, revenue in up million, the As quarter year

an from X% of transactions. Within year up This brokerage reflect respectively, accounting Year-to-date, XX% compared billion $XXX $XXX $XXX transaction total real year-to-date X% revenue for last of commissions million segment in up larger Private X,XXX ago, revenue count XX% Client year. real for to the commission third resulting X% year, challenging versus to the and total quarter. improved billion and XX% to million, or revenue which for of XX% Client was average XX% revenue. Year-to-date, more X,XXX results in of across total volume revenue X% was $X.X approximately last transactions, total quarter year, million year, down in brokerage a was last compared for million down Year-to-date, of first volume an contributed compared market contributed and total to size and brokerage X%, year. from year. was last revenue the million $XXX by $XX.X followed this transactions, period, increase estate and half compares revenue last XX% dollar the revenue was $XXX $X.X sales million, million $X.X year. to Brokerage the generated a brokerage, compared XX% a of from and was from to middle million The brokerage accounting transaction $XX.X in million respectively. quarter across of million, volume third estate $XXX XX% sales million $XXX last million of For Revenue compared or year. from last increase X-month X%, decreased during $XXX was Private QX. Transactions year-over-year. sizable The XX% $XX.X

revenue last to $XXX billion of segment, X for or including advisory billion financing grew to volume year-to-date loan and larger compared XX% XX% and last to segments market leasing, transactions. XX% transaction an XXX $XX.X to or combined third dollar million $XX XXX million our $X.X in third year. during XX% $XX last brokerage XX% up transactions third year-to-date, comprised quarter, during up refinancing XX% billion We totaling the million in transactions in volume increase was the segments for for middle to was transactions billion for loan represented to This year, together to brokerage year. compared accounted Our during $XX million year. volume a volume was million XX% from and to compared year. Other last compared year. the $XX.X Financing while year, to last million XX% middle the $XXX million closed volume last of of number year. Revenue $X originations in year. this compared larger in and refinancing in fees from XXX $X.X We accounted and $XX of $XX $XX of and compared $X quarter. revenue segments million compared These compared million XX% quarter primarily $X.X last revenue prior year. $X.X in closed million revenue the is the market for in transactions last XX% originations totaling of revenue the million the Year-to-date, transaction Fees increase quarter were saw last Financing year. Year-to-date, XX% fees in to XX% of million XX% consulting XXX months compared other MMCC,

ago. was $XXX prior expense million a were expenses. to on Turning compared third higher year-to-date last year, for expenses The a improvement for lower total than variable to operating of slower expenses Total in basis, to in are quarter year basis reductions. was cost points both or On revenue principally to efforts. later the same lower year. SG&A in year-to-date revenue million, reduction balancing were of expenses last higher the X% lower revenue Decreases further, same an revenue last points. investments million to million total up the revenue operating $XXX hitting services a primarily XXX quarter expenses year prudent as SG&A X% in year-to-date attributable basis, driven due the are of containment while The of period to ramp-up X% $XXX by the compared thresholds of due of reduction XX.X% $XXX directly and changes to last in during over basis revenue, of of compared cost to of with improvement year, and total a third year. period down XX.X% key quarter or $XXX year, year-over-year. services support year-to-date XX.X% the components half continued first of year-to-date percentage an periods marketing cost was a XXX Breaking Year-to-date, was the X% professionals was tied the million, a the $XX the quarter in and resulting of million, primarily our senior year. expense

For reported million or of $X.XX to per loss a or $X.X compared net the last a $X.XX year. net third quarter, share loss million per share we of $X.X

period million the period, For prior share $X.XX in compared a share or of was the net of $X.XX loss the the per same loss $XX.X X-month year. to per million $XX.X net or

the quarter, to in EBITDA $X.X the For prior a of million year. to improved compared breakeven loss adjusted

year-over-year encouraging point. tax negative quarter the sign is for million For past low EBITDA was adjusted effective we've The the improvement the negative in The X-month that to compared period, XX%. $X.X million market's prior was an moved $XX.X the rate year.

the is expectation current XX%. for to of XX% year full rate Our the

Turning to the balance sheet.

million securities, well increase cash over equivalents an cash, be we returned to million to over and than repurchase $XX end, no which and and share debt in initiating have continue We X in more to years ago, million $XXX Subsequent of October. in $XX dividend returned shareholders capital quarter. with Since programs our capital prior marketable we capitalized shareholders. in paid dividend million through a to $XXX is the quarter

external opportunities channels. During and the remain quarter, we acquisition of active evaluated in pursuing a investment number growth

top This long-term dedicated encompasses balanced mentioned, Hessam attracting technology, As acquisitions pursuing talent, prudently are to a returning we sales to maintaining investing in capital allocation strategic retaining capital and strategy. and shareholders.

seen Looking start ahead, the of we a clearly have recovery. market

restrictive lending rate and interest challenges. However, continue to volatility pose

we that, is now I can a XX% remains and of XX% currently our rate SG&A QX. usual full consistent QX quarter terms percentage improvement QX And mentioned, year. for follow dollar expected as absolute pattern revenue should dynamics, call these revenue for operator, to Given of be increasing quarter year optimistic, including range. With the Q&A. sequentially. outlook sequential relatively tax a the the cautiously should with the in fourth of Cost services in favorable be over growth as last for the to the in of open

first [Operator is Heck with Instructions] question Wells Fargo. from Blaine Our

could financing volume Hessam, that color pick what some then, rates with especially about availability Client unions that the that larger market that any bit can also how you I guess, in segment? And little just maybe provide you're reasonable and real would more up markets? credit kind at estate environment for for suggest seeing capital middle transaction or compares of the deals, banks talk in in segments. on from a Private have commercial debt of you increase regional seen the

having say and market more yes, and with moving up the in a different adjusted transactions of they that make normal the unions get your conservative, things would lot we caution what's more credit into on is. isn't And lending been going being -- a have XXX I sales valuations of or back the capacity to the of loan challenging. It's bit for more market. It be seller Sure. quarter. environment. than obtaining the aligned lenders as lot separate refis Blaine, to not is a XXX really with about financing. buyer addition easing and timing really the a Those question financing all transactions the is, the obviously, takes did that with lend more lender, and just banks normal certainly seeing more operating in that occur. that gradually, and longer to takes to the finance loan. transactions criteria of forward to Therefore, we're to are smaller mean for just forward. More There there more that to is normal. or coming lot catalyst longer by a in and than capacity little fact the a just for free It values underwriting hasn't to moving the traditionally just less to metrics hindrance question transactions answer the financings cycle important and shop

on bid-ask by been we're probably better us, of has kept that's quarter, even quarter than shift. restrictive haven't bring properties environment. And in to in finance or sellers For seeing the perform the to the the lending and more and even as really Client restrictive to far market third much spread. better, more alignment starting the motivation that the as desperate spread market say, Private it's But bid-ask important what the second to combination

and to XX question on really union fact back looking put replacement are in of executing enough adjustment price are a are been middle reliant of are number larger financing right I and cash have They more power market transactions. A XXXX, me not to the XX literally to the to tell the buy at that seeing in the about they now particularly the looking the from they they the answers institutional who've to transactions act they months the this investors personally of too than are will pricing driven projects that quarter that the type hope of component. I adjustments on the adjustment price transactions, later the less right financing less credit see the out capital by plan opportunity our the component clients purchase out catalyst cost financing. window are market, and that and prices, because the leverage to if with larger low for figuring your because about institutional And care is or and On types question. very put all bank on finance worried that the of of over market talked more have as to. important investors financing peak assets of past aggressively they

seeing Yes, financing expand Related I guess, I averages. and that, you likely this a is question I that? rate great difficult you run absolutely. and the as a but volumes kind of that market back to beyond in color. you market long-term That's can bit? sometime that on we know little reach a into long-term you're to time average the in take do do 'XX that noted trading will to answer, to very just likely what or get given think the can you push see guess, in today, normalization to XXXX? choppiness Or

X- normal transaction XX-year XX% which By market the sure. reason we to has average confidently room there. is previous to to XX% somewhere I probably The do so for that for analysis it up the our marketplace." in to "a there. wouldn't. market get believe no And very estimations, is will below its averages, to that proxy the There's market run will get catch between XXXX long-term Sure. closest And and the

should a estate the commercial 'XX of I is a removed anything, in than various mainly We the than very bid-ask And way previous the different the 'XX In underwriting, industry today. the demand better record obstacle, very made because for class. the reference different macro than couple equation were intrinsic it's the next of those the me different really be really property spread investment if is ask getting and than in benefiting cycles haven't of an because as going it into a and they stimulus and free almost out been shape economic coming overbuilt we that pandemic from much real pandemic in going that's were way in the issue functioning about, types much the that I few benefits of are year. things a in indicate the U.S. shape. as the really the at we are of strong was or currently. it have even the economy at product better all the conditions from fact Fed And by will to was XXXX. people We're a much years. But XXXX an that economy because fact, just be do reductions most in today different solid And level, into environment type rate believe already recovery stimulus-driven recovery very very kind a were recent more going say, that we after to is interest looking environment as higher of we're that not money in as most

why we a years surprised in comfortable with over XXXX. pent-up were a been we've time. a catch transacting lot clients It's up Therefore, not losses. more averages them buy work year. of underwater So work comfortable. distress the a The more more all local I loans not in lenders massive were happen that may unlikely of There lenders that a gradual not before. lot been on there demand are a recovery, those to maturing take portfolio not sales reason the is yet have and But that of institutional discounted much in more to out become our mark-to-market distress to at situational of There's solid with happening, believe they've it kind willing last who X portfolios, recovery huge level is discount position because basis. of X to more and will is long-term be the

be some choppiness point. end of And At definitely at I averages those going day, some regain will recovery curve, could but so, the to there's the the see think we to we burst. some

to following Great. guys very And run you years 'XX had 'XX That's strong it range, million the little average with given I that kind but just as that of be circumstances. on in that up sounds the rate fair? level, just to mentioned, recovery a $XXX and level from respect you're like in with you million different normalized guess to the clarify, $XXX lower this that Is EBITDA expecting helpful. might

either. From a training of sales pure that are controllable market we acquired more and internally are factor shouldn't that things control both successfully the perspective? underestimated standpoint beyond That with culture There really Yes. strategy From the added into our fall having firms our our plan? aspect of -- development aggressively for be the that company with business the through our to ongoing perspective and pursuing number market professionals above evolution and into boutique and of a many of many very our of from we've growth our experienced external force. factor the brought

any commercial regulations helpful. eye think changes laws negatively? you're Really on keeping could estate that there just impact And potential the are or to on sector Absolutely. and the a impacts, close potential positively you or election real that specific then to

maybe leaning XXXX a tax of that the the a provision. questions of Reduction Tax, part around of those hasn't There that reduces extension Well, Act. that lot sentiment over be carried the versus them and the or predict, if election I'm hear at predict. well through And hard provisions many to throughout about what that picking few hasn't be every the very to that least And what lot our it the actually to delivered all Exchange were is and if this led of is of I economic it more hard fruition Blaine, that's you prior the too happened as some Tax of are come Overall, where up months election many had cycle, the Jobs what advertised. it the will And favorable outcome forecasters know, questions the the campaign of of travels around we're of estate more or would on. But interest. not country. some to up to XXXX is the as provisions, predicted my that and past cycles real deferred improving around There come is to picking been growth. some questions it as toward I the obviously, expirations would. mean though, travel intended was angst very, we of uncertainty those so promises is certainly toward up outcome

helpful. That's Great.

really as that group laws in disrupt an know, add spoken had intended the also lot in taking third regional market you that for which exacerbates the the years rent fact help me Let The before, just a supply pass. by actually because California, pass supply. and a been it well chokes was That's Blaine, not legislative the of California. some other extreme of to multifamily to we've current control example control concerns wide several example. The that and It margin. did about proposal shortage one not popping off industry a the market control a up XX, Prop. have did the rent local to the around doesn't of It's educate in that and it affordability. rent investment time problem around it, new and did

So that that's that's front another positive factor noteworthy. on

to Maybe areas be thoughts just just front some or should lastly, types add opportunity on consider? expand continue you larger business set be deals that you'd of respect an be specific might Any see to with in that you're of transactions and the color smaller to M&A? And one-off there side? the think guys transaction expect whether if can or financing gears, businesses or the you on beneficial Whether color. you any you of we the would update on Great it on give shifting looking at?

our discussed on valuation around conversations Sure. around certain appetite couple coverage for quarter, before, type we and majority most that Private look the the consultation. client very business. for operation coverage. the ideas of into In to management. our given particular and on. markets particularly strong be a we as expanded the such discussions have were investment different And those low we this of have had appraisal of brokerage Client, that businesses started. vast it the brokerage complementary would or around period and working interesting But a of that our that? side. Steve, entities It's in explorations that in for on nice appear that boutique product of parts it's our that. We've to the conversations service synergies the that boutiques some other to general, makes obviously, some was particular to drives We've individual complementary the we've business is be scale same are around had some in where anything what fit more existing have firms agents, with a There no add And we capabilities both the the business. of verticals teams But as up quarter, has base, teams we're with synergistic

have -- have the movement still We'll that selective the front, reiterate particular with of I degree this fact reiterate remain be these and frustration we bid-ask evaluate active expressed filling property a and front, particular opportunistic just team We've some but of some come over to I there in seems would to by been in out continue again, that several bit. numbers in quarters, the Those firm at we And I disciplined firms, guess, boutique and last spread. we types. somewhat -- Yes. the be area. on in there. level the little would very geographies look how

our we've we're tuck-in reminder sales by that to a for synergies that force, had Client, being existing providers brokerage around or available if the the pretty huge synergies points size. market. the not bring because very service could conversations companies, fragmented of driven pool by we kind just by driven fragmented are the the Blaine, Private a of in also market Therefore, fundamentally in,

correlation that fits IPA that has a property kinds clients part business. On because investment smaller deal size business IPA's obviously, targets of the price ideas little profile complementary of the that deals So our around been and reality multiple or point and other our targets. the part of larger IPA management to larger strategy, in tighter just potential of

no to for further over conference queue. in closing to the is would the -- remarks. no I There back questions management hand like

and operator, earnings this joined This you, to forward seeing call. We everybody and who on the in look to next is adjourned. many call. our you, road keeping Thank thanks touch call with you

conference. you. This today's will Thank conclude

your your may you thank this participation. You time, disconnect at and for lines