UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

__________________________

FORM 10-Q

__________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2022~~2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from___________to___________

Commission File Number: 001-36155

__________________________

MARCUS & MILLICHAP, INC.

(Exact name of registrant as specified in its Charter)

__________________________


Delaware			35-2478370
(State or Other Jurisdiction of Incorporation or Organization)			(I.R.S. Employer Identification No.)

23975 Park Sorrento, Suite 400 Calabasas, California			91302
(Address of Principal Executive Offices)			(Zip Code)

(818) 212-2250

(Registrant’s telephone number, including area code)

__________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

MMI

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter time period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding as of ~~October 31, 2022~~August 1, 2023 was ~~39,365,723~~38,460,595 shares.

Table of Contents

MARCUS & MILLICHAP, INC.

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets as of ~~September~~June 30 ~~2022~~, 2023 (Unaudited) and December 31, ~~2021~~2022			3
Condensed Consolidated Statements of ~~Net~~ ~~Income~~Operations for the Three ~~and Nine~~ and Six Months Ended ~~September 30, 2022~~June 3 0 , 2023 and ~~2021~~2022 (Unaudited)			4
Condensed Consolidated Statements of Comprehensive (Loss) Income for the Three ~~and Nine~~ and Six Months Ended ~~September 30, 2022~~June 3 0 , 2023 and ~~2021~~2022 (Unaudited)			5
Condensed Consolidated Statements of Stockholders’ Equity for the Three ~~and Nine~~ ~~Months~~and Six Months Ended ~~September 30, 2022~~June 3 0 , 2023 and ~~2021~~2022 (Unaudited)			6
Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September 30, 2022~~June 3 0 , 2023 and ~~2021~~2022 (Unaudited)			8
Notes to Condensed Consolidated Financial Statements (Unaudited)			9

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			2927
Item 3. Quantitative and Qualitative Disclosures About Market Risk			4140
Item 4. Controls and Procedures			4241

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			4342
Item 1A. Risk Factors			4342
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			4342
Item 3. Defaults Upon Senior Securities			4342
Item 4. Mine Safety Disclosures			4342
Item 5. Other Information			4443
Item 6. Exhibits			4544

SIGNATURES

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)


		September 30, 2022 (unaudited)		December 31, 2021			June 30, 2023 (unaudited)		December 31, 2022
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents		$	270,864	$	382,140
Cash, cash equivalents, and restricted cash						Cash, cash equivalents, and restricted cash	$	171,220	$	235,873
Commissions receivable	Commissions receivable	11,768		17,230		Commissions receivable	9,954		8,453
Prepaid expenses	Prepaid expenses	8,665		13,220		Prepaid expenses	8,872		9,411
Income tax receivable	Income tax receivable	3,253		—		Income tax receivable	17,491		8,682
Marketable debt securities, available-for-sale (includes amortized cost of $213,042 and $183,915 at September 30, 2022 and December 31, 2021, respectively, and $0 allowance for credit losses)		211,759		183,868
Marketable debt securities, available-for-sale (amortized cost of $165,471 and $254,682 at June 30, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)						Marketable debt securities, available-for-sale (amortized cost of $165,471 and $254,682 at June 30, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)	164,856		253,434
Advances and loans, net	Advances and loans, net	3,484		6,403		Advances and loans, net	3,497		4,005
Other assets, current	Other assets, current	5,964		5,270		Other assets, current	5,850		7,282
Total current assets	Total current assets	515,757		608,131		Total current assets	381,740		527,140
Property and equipment, net	Property and equipment, net	26,823		23,192		Property and equipment, net	28,462		27,644
Operating lease right-of-use assets, net	Operating lease right-of-use assets, net	83,972		81,528		Operating lease right-of-use assets, net	102,741		87,945
Marketable debt securities, available-for-sale (includes amortized cost of $94,727 and $111,858 at September 30, 2022 and December 31, 2021, respectively, and $0 allowance for credit losses)		89,329		112,610
Marketable debt securities, available-for-sale (amortized cost of $74,758 and $72,819 at June 30, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)						Marketable debt securities, available-for-sale (amortized cost of $74,758 and $72,819 at June 30, 2023 and December 31, 2022, respectively, and $0 allowance for credit losses)	70,711		68,595
Assets held in rabbi trust	Assets held in rabbi trust	9,222		11,508		Assets held in rabbi trust	10,365		9,553
Deferred tax assets, net	Deferred tax assets, net	37,883		33,736		Deferred tax assets, net	35,933		41,321
Goodwill and other intangible assets, net	Goodwill and other intangible assets, net	57,092		48,105		Goodwill and other intangible assets, net	53,525		55,696
Advances and loans, net	Advances and loans, net	164,640		113,242		Advances and loans, net	181,944		169,955
Other assets, non-current	Other assets, non-current	15,170		13,146		Other assets, non-current	18,092		15,859
Total assets	Total assets	$	999,888	$	1,045,198	Total assets	$	883,513	$	1,003,708
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable and accrued expenses	Accounts payable and accrued expenses	$	10,237	$	15,487	Accounts payable and accrued expenses	$	11,893	$	11,450
Deferred compensation and commissions	Deferred compensation and commissions	62,547		114,685		Deferred compensation and commissions	43,351		75,321
Income tax payable		—		17,853

Operating lease liabilities	Operating lease liabilities	18,683		18,973		Operating lease liabilities	17,838		16,984
Accrued bonuses and other employee related expenses	Accrued bonuses and other employee related expenses	34,572		49,848		Accrued bonuses and other employee related expenses	11,088		38,327
Other liabilities, current	Other liabilities, current	20,603		8,784		Other liabilities, current	4,899		9,933
Total current liabilities	Total current liabilities	146,642		225,630		Total current liabilities	89,069		152,015
Deferred compensation and commissions	Deferred compensation and commissions	55,825		53,536		Deferred compensation and commissions	41,299		64,461
Operating lease liabilities	Operating lease liabilities	62,837		58,334		Operating lease liabilities	78,707		65,109
Other liabilities, non-current	Other liabilities, non-current	10,623		11,394		Other liabilities, non-current	10,519		8,614
Total liabilities	Total liabilities	275,927		348,894		Total liabilities	219,594		290,199
Commitments and contingencies	Commitments and contingencies	—		—		Commitments and contingencies	—		—
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.0001 par value:	Preferred stock, $0.0001 par value:					Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and outstanding shares – none at September 30, 2022 and December 31, 2021, respectively		—		—
Authorized shares – 25,000,000; issued and outstanding shares – none at June 30, 2023 and December 31, 2022, respectively						Authorized shares – 25,000,000; issued and outstanding shares – none at June 30, 2023 and December 31, 2022, respectively	—		—
Common stock, $0.0001 par value:	Common stock, $0.0001 par value:					Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 39,797,423 and 39,692,373 at September 30, 2022 and December 31, 2021, respectively		4		4
Authorized shares – 150,000,000; issued and outstanding shares – 38,460,595 and 39,255,838 at June 30, 2023 and December 31, 2022, respectively						Authorized shares – 150,000,000; issued and outstanding shares – 38,460,595 and 39,255,838 at June 30, 2023 and December 31, 2022, respectively	4		4
Additional paid-in capital	Additional paid-in capital	128,174		121,844		Additional paid-in capital	140,142		131,541
Retained earnings	Retained earnings	599,710		573,546		Retained earnings	526,373		585,581
Accumulated other comprehensive (loss) income		(3,927)		910
Accumulated other comprehensive loss						Accumulated other comprehensive loss	(2,600)		(3,617)
Total stockholders’ equity	Total stockholders’ equity	723,961		696,304		Total stockholders’ equity	663,919		713,509
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	999,888	$	1,045,198	Total liabilities and stockholders’ equity	$	883,513	$	1,003,708

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~NET INCOME~~OPERATIONS

(in thousands, except per share amounts)

(Unaudited)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Revenues:
Revenue:										Revenue:
Real estate brokerage commissions	Real estate brokerage commissions	$	292,889	$	299,759	$	934,483	$	715,458	Real estate brokerage commissions	$	140,330	$	354,685	$	275,376	$	641,594
Financing fees	Financing fees	28,099		29,391		91,363		75,448		Financing fees	17,896		36,811		33,764		63,264
Other revenues		2,852		3,233		13,415		10,400
Total revenues		323,840		332,383		1,039,261		801,306
Other revenue										Other revenue	4,640		4,461		8,518		10,563
Total revenue										Total revenue	162,866		395,957		317,658		715,421
Operating expenses:	Operating expenses:									Operating expenses:
Cost of services	Cost of services	217,360		219,194		670,170		506,882		Cost of services	101,163		256,042		196,590		452,810
Selling, general and administrative	Selling, general and administrative	73,004		64,673		227,380		178,147		Selling, general and administrative	68,910		79,841		141,129		154,376
Depreciation and amortization	Depreciation and amortization	2,924		2,850		10,167		8,806		Depreciation and amortization	3,468		3,332		6,675		7,243
Total operating expenses	Total operating expenses	293,288		286,717		907,717		693,835		Total operating expenses	173,541		339,215		344,394		614,429
Operating income		30,552		45,666		131,544		107,471
Other income, net		978		323		967		2,737
Operating (loss) income										Operating (loss) income	(10,675)		56,742		(26,736)		100,992
Other income (expense), net										Other income (expense), net	4,890		(461)		9,700		(11)
Interest expense	Interest expense	(229)		(144)		(547)		(436)		Interest expense	(216)		(158)		(431)		(318)
Income before provision for income taxes		31,301		45,845		131,964		109,772
Provision for income taxes		9,939		11,921		35,651		29,304
Net income		$	21,362	$	33,924	$	96,313	$	80,468
(Loss) income before provision (benefit) for income taxes										(Loss) income before provision (benefit) for income taxes	(6,001)		56,123		(17,467)		100,663
Provision (benefit) for income taxes										Provision (benefit) for income taxes	2,728		13,955		(2,905)		25,712
Net (loss) income										Net (loss) income	$	(8,729)	$	42,168	$	(14,562)	$	74,951

Earnings per share:
(Loss) earnings per share:										(Loss) earnings per share:
Basic	Basic	$	0.53	$	0.85	$	2.40	$	2.02	Basic	$	(0.23)	$	1.05	$	(0.37)	$	1.87
Diluted	Diluted	$	0.53	$	0.84	$	2.39	$	2.00	Diluted	$	(0.23)	$	1.04	$	(0.37)	$	1.85
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	40,086		39,940		40,038		39,859		Basic	38,538		40,048		38,867		40,018
Diluted	Diluted	40,302		40,241		40,358		40,148		Diluted	38,538		40,342		38,867		40,390

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(in thousands)

(Unaudited)

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
Net income $ 21,362 $ 33,924 $ 96,313 $ 80,468
Other comprehensive loss:
Marketable debt securities, available-for-sale:
Change in net unrealized (losses) gains (1,541) (240) (5,456) (715)
Less: reclassification adjustment for net losses (gains) included in other income, net 7 23 (70) 26
Net change, net of tax of $(522) and $(1,888) for the three and nine months ended September 30, 2022, and $(75) and $(239) for the three and nine months ended September 30, 2021, respectively (1,534) (217) (5,526) (689)
Foreign currency translation gain (loss), net of tax of $0 for each of the three and nine months ended September 30, 2022 and 2021, respectively 569 192 689 (138)
Total other comprehensive loss (965) (25) (4,837) (827)
Comprehensive income $ 20,397 $ 33,899 $ 91,476 $ 79,641


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022

Net (loss) income	$	(8,729)	$	42,168	$	(14,562)	$	74,951
Other comprehensive (loss) income:
Marketable debt securities, available-for-sale:
Change in net unrealized gains and losses	(516)		(1,558)		600		(3,915)
Less: reclassification adjustment for net losses (gains) included in other income (expense), net	17		7		17		(77)
Net change, net of tax of $(168) and $198 for the three and six months ended June 30, 2023, and $(528) and $(1,366) for the three and six months ended June 30, 2022, respectively	(499)		(1,551)		617		(3,992)
Foreign currency translation gain, net of tax of $0 for each of the three and six months ended June 30, 2023 and 2022, respectively	346		179		400		120
Total other comprehensive (loss) income	(153)		(1,372)		1,017		(3,872)
Comprehensive (loss) income	$	(8,882)	$	40,796	$	(13,545)	$	71,079

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for shares)

(Unaudited)


		Three Months Ended September 30, 2022																					Three Months Ended June 30, 2023
		Preferred Stock			Common Stock			Additional Paid-in Capital				Retained Earnings			Accumulated Other Comprehensive Loss				Total				Preferred Stock						Common Stock			Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
Balance at June 30, 2022		—	$	—	39,964,292	$	4			$	123,767						$	596,361			$	(2,962)		$	717,170
Net and comprehensive income (loss)		—	—		—	—		—				21,362			(965)				20,397
Dividend		—	—		—	—		—				(10,436)			—				(10,436)
Balance at March 31, 2023																						Balance at March 31, 2023	—			$	—		38,876,354	$	4		$	132,905		$	551,696		$	(2,447)		$	682,158
Net and comprehensive (loss) income																						Net and comprehensive (loss) income	—			—			—	—		—			(8,729)			(153)			(8,882)

Stock-based award activity	Stock-based award activity																					Stock-based award activity
Stock-based compensation	Stock-based compensation	—	—		—	—		4,544				—			—				4,544			Stock-based compensation	—			—			—	—		5,351			—			—			5,351

Shares issued pursuant to employee stock purchase plan																						Shares issued pursuant to employee stock purchase plan	—			—			15,297	—		392			—			—			392
Issuance of common stock for vesting of restricted stock units	Issuance of common stock for vesting of restricted stock units	—	—		63,397	—		—				—			—				—			Issuance of common stock for vesting of restricted stock units	—			—			43,923	—		—			—			—			—

Issuance of common stock for unvested restricted stock awards																						Issuance of common stock for unvested restricted stock awards	—			—			17,339	—		—			—			—			—
Shares withheld related to net share settlement of stock-based awards	Shares withheld related to net share settlement of stock-based awards	—	—		(3,471)	—		(137)				—			—				(137)			Shares withheld related to net share settlement of stock-based awards	—			—			(11,885)	—		(339)			—			—			(339)
Issuance of common stock for stock settled deferred consideration																						Issuance of common stock for stock settled deferred consideration	—			—			58,205	—		1,833			—			—			1,833
Repurchases of common stock	Repurchases of common stock	—	—		(226,795)	—		—				(7,577)			—				(7,577)			Repurchases of common stock	—			—			(538,638)	—		—			(16,594)			—			(16,594)
Balance as of September 30, 2022		—	$	—	39,797,423	$	4	$	128,174			$	599,710		$	(3,927)			$	723,961
Balance as of June 30, 2023																						Balance as of June 30, 2023	—			$	—		38,460,595	$	4	$	140,142		$	526,373		$	(2,600)		$	663,919


		Three Months Ended September 30, 2021																					Three Months Ended June 30, 2022
		Preferred Stock			Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total				Preferred Stock						Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
Balance at June 30, 2021		—	$	—	39,578,360	$	4			$	117,457						$	477,620			$	1,772		$	596,853
Balance at March 31, 2022																						Balance at March 31, 2022	—			$	—		39,795,399	$	4		$	122,782		$	554,193		$	(1,590)		$	675,389
Net and comprehensive income (loss)	Net and comprehensive income (loss)	—	—		—	—		—				33,924			(25)				33,899			Net and comprehensive income (loss)	—			—			—	—		—			42,168			(1,372)			40,796
Stock-based award activity	Stock-based award activity																					Stock-based award activity
Stock-based compensation	Stock-based compensation	—	—		—	—		2,703				—			—				2,703			Stock-based compensation	—			—			—	—		4,275			—			—			4,275

Shares issued pursuant to employee stock purchase plan																						Shares issued pursuant to employee stock purchase plan							11,089			414			—			—			414
Issuance of common stock for settlement of deferred stock units	Issuance of common stock for settlement of deferred stock units	—	—		60,373	—		—				—			—				—			Issuance of common stock for settlement of deferred stock units							166,449	—		—			—			—			—
Issuance of common stock for vesting of restricted stock units	Issuance of common stock for vesting of restricted stock units	—	—		58,411	—		—				—			—				—			Issuance of common stock for vesting of restricted stock units	—			—			44,971	—		—			—			—			—

Issuance of common stock for unvested restricted stock awards																						Issuance of common stock for unvested restricted stock awards							11,494												—
Shares withheld related to net share settlement of stock-based awards	Shares withheld related to net share settlement of stock-based awards	—	—		(30,359)	—		(1,186)				—			—				(1,186)			Shares withheld related to net share settlement of stock-based awards	—			—			(93,783)	—		(5,121)			—			—			(5,121)
Balance as of September 30, 2021		—	$	—	39,666,785	$	4	$	118,974			$	511,544		$	1,747			$	632,269
Issuance of common stock for stock settled deferred consideration																						Issuance of common stock for stock settled deferred consideration							28,673			1,417									1,417
Balance as of June 30, 2022																						Balance as of June 30, 2022	—			$	—		39,964,292	$	4	$	123,767		$	596,361		$	(2,962)		$	717,170

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except for shares)

(Unaudited)


		Nine Months Ended September 30, 2022																					Six Months Ended June 30, 2023
		Preferred Stock			Common Stock			Additional Paid-in Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total				Preferred Stock							Common Stock						Additional Paid-in Capital					Retained Earnings					Accumulated Other Comprehensive (Loss) Income					Total
		Shares	Amount		Shares	Amount								Shares								Amount			Shares				Amount
Balance at December 31, 2021		—	$	—	39,692,373	$	4			$	121,844						$	573,546			$	910		$	696,304
Net and comprehensive income (loss)		—	—		—	—		—				96,313			(4,837)				91,476
Balance at December 31, 2022																						Balance at December 31, 2022	—			$	—			39,255,838		$	4				$	131,541				$	585,581				$	(3,617)				$	713,509
Net and comprehensive (loss) income																						Net and comprehensive (loss) income	—			—				—		—				—					(14,562)					1,017					(13,545)
Dividends	Dividends	—	—		—			—				(62,572)			—				(62,572)			Dividends	—			—				—						—					(10,284)					—					(10,284)
Stock-based award activity	Stock-based award activity																					Stock-based award activity
Stock-based compensation	Stock-based compensation	—	—		—	—		12,675				—			—				12,675			Stock-based compensation	—			—				—		—				10,362					—					—					10,362
Shares issued pursuant to employee stock purchase plan	Shares issued pursuant to employee stock purchase plan	—	—		11,089	—		414				—			—				414			Shares issued pursuant to employee stock purchase plan	—			—				15,297		—				392					—					—					392
Issuance of common stock for settlement of deferred stock units		—	—		166,449	—		—				—			—				—
Issuance of common stock for vesting of restricted stock units	Issuance of common stock for vesting of restricted stock units	—	—		275,631	—		—				—			—				—			Issuance of common stock for vesting of restricted stock units	—			—				337,796		—				—					—					—					—
Issuance of common stock for unvested restricted stock awards	Issuance of common stock for unvested restricted stock awards	—	—		11,494	—		—				—			—				—			Issuance of common stock for unvested restricted stock awards	—			—				17,339		—				—					—					—					—
Shares withheld related to net share settlement of stock-based awards	Shares withheld related to net share settlement of stock-based awards	—	—		(161,491)	—		(8,176)				—			—				(8,176)			Shares withheld related to net share settlement of stock-based awards	—			—				(125,319)		—				(3,986)					—					—					(3,986)
Issuance of common stock for stock settled deferred consideration	Issuance of common stock for stock settled deferred consideration	—	—		28,673	—		1,417				—			—				1,417			Issuance of common stock for stock settled deferred consideration	—			—				58,205		—				1,833					—					—					1,833
Repurchases of common stock	Repurchases of common stock	—	—		(226,795)	—		—				(7,577)			—				(7,577)			Repurchases of common stock	—			—				(1,098,561)		—				—					(34,362)					—					(34,362)
Balance as of September 30, 2022		—	$	—	39,797,423	$	4	$	128,174			$	599,710		$	(3,927)			$	723,961
Balance as of June 30, 2023																						Balance as of June 30, 2023	—	$0		$	—	0		38,460,595	0	$	4	$	—	$	140,142		$	—	$	526,373		$	—	$	(2,600)		$	—	$	663,919


		Nine Months Ended September 30, 2021																					Six Months Ended June 30, 2022
		Preferred Stock			Common Stock			Additional Paid-In Capital				Retained Earnings			Accumulated Other Comprehensive Income (Loss)				Total				Preferred Stock						Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
		Shares	Amount		Shares	Amount								Shares								Amount			Shares			Amount
Balance at December 31, 2020		—	$	—	39,401,976	$	4			$	113,182						$	431,076			$	2,574		$	546,836
Balance at December 31, 2021																						Balance at December 31, 2021	—			$	—		39,692,373	$	4		$	121,844		$	573,546		$	910		$	696,304
Net and comprehensive income (loss)	Net and comprehensive income (loss)	—	—		—	—		—				80,468			(827)				79,641			Net and comprehensive income (loss)	—			—			—	—		—			74,951			(3,872)			71,079
Dividends																						Dividends	—			—			—	—		—			(52,136)			—			(52,136)
Stock-based award activity	Stock-based award activity																					Stock-based award activity																			—
Stock-based compensation	Stock-based compensation	—	—		—	—		7,653				—			—				7,653			Stock-based compensation	—			—			—	—		8,131			—			—			8,131
Shares issued pursuant to employee stock purchase plan	Shares issued pursuant to employee stock purchase plan	—	—		11,635	—		369				—			—				369			Shares issued pursuant to employee stock purchase plan	—			—			11,089	—		414			—			—			414
Issuance of common stock for settlement of deferred stock units	Issuance of common stock for settlement of deferred stock units	—	—		60,373	—		—				—			—				—			Issuance of common stock for settlement of deferred stock units	—			—			166,449	—		—			—			—			—
Issuance of common stock for vesting of restricted stock units	Issuance of common stock for vesting of restricted stock units	—	—		241,726	—		—				—			—				—			Issuance of common stock for vesting of restricted stock units	—			—			212,234	—		—			—			—			—
Issuance of common stock for unvested restricted stock awards	Issuance of common stock for unvested restricted stock awards	—	—		12,492	—		—				—			—				—			Issuance of common stock for unvested restricted stock awards	—			—			11,494	—		—			—			—			—
Shares withheld related to net share settlement of stock-based awards	Shares withheld related to net share settlement of stock-based awards	—	—		(88,898)	—		(3,230)				—			—				(3,230)			Shares withheld related to net share settlement of stock-based awards	—			—			(158,020)	—		(8,039)			—			—			(8,039)
Issuance of common stock for stock settled deferred consideration	Issuance of common stock for stock settled deferred consideration	—	—		27,481	—		1,000				—			—				1,000			Issuance of common stock for stock settled deferred consideration	—			—			28,673	—		1,417			—			—			1,417
Balance as of September 30, 2021		—	$	—	39,666,785	$	4	$	118,974			$	511,544		$	1,747			$	632,269
Balance as of June 30, 2022																						Balance as of June 30, 2022	—			$	—		39,964,292	$	4	$	123,767		$	596,361		$	(2,962)		$	717,170

See accompanying notes to condensed consolidated financial statements.

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MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Cash flows from operating activities	Cash flows from operating activities					Cash flows from operating activities
Net income		$	96,313	$	80,468
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Net (loss) income						Net (loss) income	$	(14,562)	$	74,951
Adjustments to reconcile net (loss) income to net cash used in operating activities:						Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	Depreciation and amortization	10,167		8,806		Depreciation and amortization	6,675		7,243
Noncash lease expense		17,840		17,773
Credit loss recovery		—		25
Non-cash lease expense						Non-cash lease expense	12,928		11,944
Credit loss expense (recovery)						Credit loss expense (recovery)	634		(28)
Stock-based compensation	Stock-based compensation	12,675		7,653		Stock-based compensation	10,362		8,131
Deferred taxes, net	Deferred taxes, net	(2,256)		(2,847)		Deferred taxes, net	5,188		(130)
Unrealized foreign exchange losses (gains)	Unrealized foreign exchange losses (gains)	1,600		(298)		Unrealized foreign exchange losses (gains)	(56)		403
Net realized gains on marketable debt securities, available-for-sale		(87)		(78)
Net realized losses (gains) on marketable debt securities, available-for-sale						Net realized losses (gains) on marketable debt securities, available-for-sale	23		(96)
Other non-cash items	Other non-cash items	(1,459)		361		Other non-cash items	(560)		(22)
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Commissions receivable	Commissions receivable	4,891		(5,297)		Commissions receivable	(1,396)		2,922
Prepaid expenses	Prepaid expenses	4,544		925		Prepaid expenses	540		3,177
Advances and loans	Advances and loans	(49,171)		(2,434)		Advances and loans	(12,043)		(48,539)
Other assets	Other assets	(4,472)		(1,076)		Other assets	(4,981)		(2,818)
Accounts payable and accrued expenses	Accounts payable and accrued expenses	(4,942)		4,020		Accounts payable and accrued expenses	672		(2,684)
Income tax receivable/payable		(21,106)		1,932
Income tax receivable and payable						Income tax receivable and payable	(8,808)		(15,005)
Accrued bonuses and other employee related expenses	Accrued bonuses and other employee related expenses	(15,239)		11,223		Accrued bonuses and other employee related expenses	(27,244)		(19,260)
Deferred compensation and commissions	Deferred compensation and commissions	(45,481)		(4,499)		Deferred compensation and commissions	(54,154)		(61,047)
Operating lease liabilities	Operating lease liabilities	(14,598)		(15,889)		Operating lease liabilities	(8,852)		(9,759)
Other liabilities	Other liabilities	(994)		(1,175)		Other liabilities	859		(1,223)
Net cash (used in) provided by operating activities		(11,775)		99,593
Net cash used in operating activities						Net cash used in operating activities	(94,775)		(51,840)
Cash flows from investing activities	Cash flows from investing activities					Cash flows from investing activities
Acquisition of businesses, net of cash received	Acquisition of businesses, net of cash received	(12,500)		229		Acquisition of businesses, net of cash received	—		(12,500)
Purchases of marketable debt securities, available-for-sale	Purchases of marketable debt securities, available-for-sale	(276,708)		(291,063)		Purchases of marketable debt securities, available-for-sale	(142,867)		(174,259)
Proceeds from sales and maturities of marketable debt securities, available-for-sale	Proceeds from sales and maturities of marketable debt securities, available-for-sale	266,481		248,540		Proceeds from sales and maturities of marketable debt securities, available-for-sale	230,795		135,206
Purchases of securities, held-to-maturity		—		(9,500)

Issuances of employee notes receivable	Issuances of employee notes receivable	(71)		(40)		Issuances of employee notes receivable	(119)		(71)
Payments received on employee notes receivable	Payments received on employee notes receivable	71		290		Payments received on employee notes receivable	33		71
Purchase of property and equipment	Purchase of property and equipment	(8,564)		(4,238)		Purchase of property and equipment	(5,469)		(5,022)
Net cash used in investing activities		(31,291)		(55,782)
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	82,373		(56,575)
Cash flows from financing activities	Cash flows from financing activities					Cash flows from financing activities
Taxes paid related to net share settlement of stock-based awards	Taxes paid related to net share settlement of stock-based awards	(8,176)		(3,230)		Taxes paid related to net share settlement of stock-based awards	(3,986)		(8,039)
Proceeds from issuance of shares pursuant to employee stock purchase plan	Proceeds from issuance of shares pursuant to employee stock purchase plan	414		369		Proceeds from issuance of shares pursuant to employee stock purchase plan	392		414
Dividends paid	Dividends paid	(50,161)		—		Dividends paid	(10,327)		(50,082)
Principal payments on stock appreciation rights liability	Principal payments on stock appreciation rights liability	(1,761)		(1,481)		Principal payments on stock appreciation rights liability	(1,945)		(1,761)
Principal payments on deferred and contingent consideration	Principal payments on deferred and contingent consideration	(2,431)		(1,739)		Principal payments on deferred and contingent consideration	(1,578)		(2,431)
Cash paid for stock repurchases	Cash paid for stock repurchases	(5,659)		—		Cash paid for stock repurchases	(34,928)		—
Net cash used in financing activities	Net cash used in financing activities	(67,774)		(6,081)		Net cash used in financing activities	(52,372)		(61,899)
Effect of currency exchange rate changes on cash and cash equivalents		(436)		125
Net (decrease) increase in cash and cash equivalents		(111,276)		37,855
Cash and cash equivalents at beginning of period		382,140		243,152
Cash and cash equivalents at end of period		$	270,864	$	281,007
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash						Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	121		(175)
Net decrease in cash, cash equivalents, and restricted cash						Net decrease in cash, cash equivalents, and restricted cash	(64,653)		(170,489)
Cash, cash equivalents, and restricted cash at beginning of period						Cash, cash equivalents, and restricted cash at beginning of period	235,873		382,140
Cash, cash equivalents, and restricted cash at end of period						Cash, cash equivalents, and restricted cash at end of period	$	171,220	$	211,651
Supplemental cash flow disclosures:	Supplemental cash flow disclosures:					Supplemental cash flow disclosures:
Interest paid during the period	Interest paid during the period	$	599	$	734	Interest paid during the period	$	408	$	514
Income taxes paid, net	Income taxes paid, net	$	58,572	$	30,168	Income taxes paid, net	$	714	$	40,046
Supplemental disclosures of noncash investing and financing activities:
Supplemental disclosures of non-cash investing and financing activities:						Supplemental disclosures of non-cash investing and financing activities:
Unpaid purchases of property and equipment	Unpaid purchases of property and equipment	$	892	$	786	Unpaid purchases of property and equipment	$	382	$	1,196
Right-of-use assets obtained in exchange for operating lease liabilities	Right-of-use assets obtained in exchange for operating lease liabilities	$	20,799	$	19,008	Right-of-use assets obtained in exchange for operating lease liabilities	$	27,593	$	15,169

Issuance of stock for the settlement of deferred consideration	Issuance of stock for the settlement of deferred consideration	$	1,417	$	1,000	Issuance of stock for the settlement of deferred consideration	$	1,833	$	1,417
Measurement period adjustment of acquisition related contingent consideration		$	—	$	(100)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Description of Business and Basis of Presentation ~~and Recent Accounting Pronouncements~~

Description of Business

Marcus & Millichap, Inc. (the “Company,” “Marcus & Millichap,” or “MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of ~~September~~June 30, ~~2022,~~2023, MMI operates 8280 offices in the United States and Canada through its wholly-owned subsidiaries, including the operations of Marcus & Millichap Capital Corporation.

Reorganization and Initial Public Offering

MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) to spin-off its majority-owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”). Prior to the initial public offering (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result, MMREIS became a wholly-owned subsidiary of MMI. Thereafter, MMC distributed 80.0% of the shares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of indebtedness of MMC. MMI completed its IPO inon November 5, 2013.

Basis of Presentation

The financial information presented in the accompanying unaudited condensed consolidated financial statements, has been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto, including the Company’s accounting policies for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K filed on ~~March 1, 2022~~February 28, 2023 with the SEC. The results of the three ~~months~~ and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2022,~~2023, for other interim periods or for future years.

The Company reclassified certain items previously included within accounts payable and other liabilities to other liabilities, current in the December 31, 2021 condensed consolidated balance sheet to conform with current period presentation.

Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, ~~and~~ the related disclosures at the date of the condensed consolidated financial statements and the reported amounts of ~~revenues~~revenue and expenses during the reporting period. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash, ~~and~~ cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, security deposits (included under other assets, non-current) and commissions receivable, net. Cash, ~~and~~ cash equivalents, and restricted cash are placed with high-credit quality financial institutions and invested in ~~high-~~high-credit quality money market funds and commercial paper. Concentrations and ratings of marketable debt securities, available-for-sale are limited by the approved investment policy.

Table of Contents

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~credit quality money market funds and commercial paper. Concentrations and ratings of marketable debt securities, available-for-sale are limited by the approved investment policy.~~

To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds that represent amounts recorded as cash, cash equivalents, and ~~cash equivalents.~~restricted cash. The Company historically has not experienced any significant losses related to cash, cash equivalents, and ~~cash equivalents.~~restricted cash.

In September 2021, the Company entered into a Strategic Alliance (“Strategic Alliance”) with M&T Realty Capital Corporation (“MTRCC”) pursuant to which the Company has agreed to provide loan opportunities that may be funded through MTRCC’s Delegated Underwriting and Servicing Agreement (“DUS Agreement”) with the Federal National Mortgage Association (“Fannie Mae”) ~~and which~~that requires MTRCC to guarantee a portion of each loan funded. On a loan-by-loan basis, the Company, at its option, can indemnify a portion of MTRCC’s guarantee obligation of loan opportunities presented to and closed by MTRCC ~~though~~through the DUS Agreement. The Company manages and limits the concentration of risk related to the guarantees assumed by monitoring the underlying property type, geographic location, credit of the borrowers, underlying debt service coverage, and loan to value ratios.

The Company derives its ~~revenues~~revenue from a broad range of real estate investors, owners, and users in the United States and Canada, none of which individually represents a significant concentration of credit risk. The Company maintains allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, no transaction represented 10% or more of total ~~revenues.~~revenue. Further, while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk.

During the three and ~~nine~~six months ended ~~September~~June 30, 2023, the Company’s Canadian operations represented 3.5% and 3.2% of total revenue, respectively. During both the three and six months ended June 30, 2022, the Company’s Canadian operations represented ~~1.5% and 2.0% of total revenues. During both the three and nine months ended September 30, 2021, the Company’s Canadian operations represented approximately~~ 2.2% of total ~~revenues.~~revenue.

During each of the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, no office represented 10% or more of total ~~revenues.~~revenue.

Revenue Recognition

The Company generates real estate brokerage commissions by acting as a broker for real estate owners or investors seeking to buy or sell interests in commercial properties and generates financing fees from securing financing on purchase transactions, from refinancing its clients’ existing mortgage debt and other ancillary fees associated with financing activities, including, but not limited to, ~~mortgage servicing,~~ debt and equity advisory services, loan sales, due diligence services, guarantee fees, and loan performance fees and other consulting. The Company’s contracts, except as noted below, do not contain multiple-element arrangements, variable consideration, financing components, significant noncash consideration, licenses, long-term contracts with customers or other items affecting the transaction price.fees.

Real Estate Brokerage Commissions

Contracts for representing buyers and sellers of real estate are usually negotiated on a transaction-by-transaction basis. The consideration associated with the successful outcome remains constrained until the completion of a transaction which ~~in almost all cases, is~~occurs at the close of escrow. At that time, the ~~Company recognizes~~Company's performance is complete, and revenue ~~related to the transaction. The Company’s fee agreements do not include terms or conditions that require the Company to perform any service or fulfill any obligation once the transaction closes.~~is recorded.

Financing Fees

Contracts for representing potential borrowers are usually negotiated on a transaction-by-transaction basis. The consideration associated with the successful outcome remains constrained until the completion of a transaction which ~~in almost all cases, is~~occurs at the time the loan closes. At that time, the Company recognizes revenue related to the transaction. The Company’s fee arrangements, with ~~certain exceptions,~~an exception for guarantee obligations, do not include terms or conditions that require the Company to perform any service or fulfill any obligation once the loan closes.

~~Table of Contents~~

~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Loan Performance Fees - For loans originated through the Strategic Alliance with MTRCC, the Company receives variable consideration in the form of loan performance fees based on a portion of the servicing fees expected to be received under the servicing contract for servicing the loan. As the Company is not obligated to perform any servicing functions and has no further obligations related to the transaction giving rise to the loan performance fees, the estimated value of the loan performance fees to be received is recorded at the time the loan closes and are collected over the estimated term of the related loan. Any changes in the estimate of loan performance fees to be received are recorded in revenue in the period the estimate changes.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Guarantee Obligations - For certain loans originated through the Strategic Alliance with MTRCC, the Company may agree, at its option, to indemnify MTRCC for a portion of MTRCC’s obligations for loans sold to Fannie Mae. For these loans, the Company allocates a portion of the transaction price and records a loan guarantee obligation based on its fair value. Revenue for this ~~stand ready~~stand-ready obligation is recorded on a straight-line basis over the term of the estimated guarantee period and is recorded in financing fees in the condensed consolidated statements of ~~net income.~~operations. The guarantee obligation is capped at 16.7% of ~~the~~any unpaid principal balance in excess of the collateral securing such loan. For these loans, the Company ~~also~~is required to pledge cash in a restricted bank account in support of the guarantee obligation. The Company records an allowance for ~~loss-sharing obligations based on~~estimated losses related to the ~~unpaid balance~~loans subject to the guarantee considering the risk characteristics of the loan, ~~for its portion of~~ the ~~obligation guaranteed to MTRCC.~~loan's risk rating, historical loss experience, potential adverse situations affecting individual loans and other forecasted information as appropriate.

Mortgage Servicing - The Company ~~recognizes~~recognized mortgage servicing ~~revenues~~revenue upon the acquisition of a servicing contract. The Company ~~records~~recorded servicing fees when earned, provided the loans ~~are~~were current and the debt service payments ~~are~~were made by the borrowers. As of September 30, 2022, the Company no longer owns any mortgage servicing rights.

Other ~~Revenues~~Revenue

Other ~~revenues include~~revenue includes fees generated from consulting and advisory services ~~as well as referral~~and fees ~~from other real estate brokers, and~~ are recognized when services are provided, or upon closing of the transaction.

~~Recent Accounting Pronouncements~~

~~Pending Adoption~~

~~In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04,~~ ~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~ (“ASU 2020-04”). ASU 2020-04 is effective for all entities upon issuance and may be applied prospectively to contract modifications through December 31, 2022. The Company's Amended and Restated Credit Agreement (see Note 12 – “Commitments and Contingencies”) no longer references LIBOR. As the Company had not drawn on its Credit Agreement, we determined that the adoption of ASU 2020-04 did not have an impact on the condensed consolidated financial statements.

2. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022
Computer software and hardware equipment	Computer software and hardware equipment	$	40,725	$	33,819	Computer software and hardware equipment	$	46,995	$	42,617
Furniture, fixtures and equipment	Furniture, fixtures and equipment	26,130		24,511		Furniture, fixtures and equipment	26,964		26,453
Less: accumulated depreciation and amortization	Less: accumulated depreciation and amortization	(40,032)		(35,138)		Less: accumulated depreciation and amortization	(45,497)		(41,426)
		$	26,823	$	23,192		$	28,462	$	27,644

Depreciation expense for property and equipment was ~~$1.7~~$2.3 million and $1.8 million for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$5.4~~$4.3 million and $3.7 million for ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 ~~and 2021.~~, respectively.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

3. Investments in Marketable Debt Securities, ~~Available for Sale~~Available-for-Sale

Amortized cost, allowance for credit losses, gross unrealized gains (losses) in accumulated other comprehensive (loss) income and fair value of marketable debt securities, available-for-sale, by type of security consisted of the following (in thousands):


		September 30, 2022											June 30, 2023
		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Short-term investments:	Short-term investments:											Short-term investments:
U.S. treasuries	U.S. treasuries	$	122,550	$	—	$	—	$	(1,140)	$	121,410	U.S. treasuries	$	65,984	$	—	$	—	$	(489)	$	65,495
Corporate debt	Corporate debt	89,638		—		1		(132)		89,507		Corporate debt	99,487		—		1		(127)		99,361
Asset-backed securities (“ABS”) and other		854		—		—		(12)		842

		$	213,042	$	—	$	1	$	(1,284)	$	211,759		$	165,471	$	—	$	1	$	(616)	$	164,856
Long-term investments:	Long-term investments:											Long-term investments:
U.S. treasuries	U.S. treasuries	$	44,315	$	—	$	—	$	(1,434)	$	42,881	U.S. treasuries	$	18,115	$	—	$	—	$	(706)	$	17,409
U.S. government sponsored entities	U.S. government sponsored entities	619		—		—		(76)		543		U.S. government sponsored entities	574		—		—		(64)		510
Corporate debt	Corporate debt	42,885		—		3		(3,326)		39,562		Corporate debt	44,923		—		6		(2,679)		42,250
ABS and other		6,908		—		—		(565)		6,343
Asset-backed securities (“ABS”) and other												Asset-backed securities (“ABS”) and other	11,146		—		—		(604)		10,542
		$	94,727	$	—	$	3	$	(5,401)	$	89,329		$	74,758	$	—	$	6	$	(4,053)	$	70,711


		December 31, 2021											December 31, 2022
		Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Allowance for Credit Losses		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Short-term investments:	Short-term investments:											Short-term investments:
U.S. treasuries	U.S. treasuries	$	35,767	$	—	$	—	$	(34)	$	35,733	U.S. treasuries	$	135,688	$	—	$	14	$	(1,153)	$	134,549
Corporate debt	Corporate debt	148,148		—		22		(35)		148,135		Corporate debt	118,135		—		1		(95)		118,041
ABS and other												ABS and other	859		—		—		(15)		$	844
		$	183,915	$	—	$	22	$	(69)	$	183,868		$	254,682	$	—	$	15	$	(1,263)	$	253,434
Long-term investments:	Long-term investments:											Long-term investments:
U.S. treasuries	U.S. treasuries	$	70,902	$	—	$	128	$	(263)	$	70,767	U.S. treasuries	$	21,434	$	—	$	—	$	(719)	$	20,715
U.S. government sponsored entities	U.S. government sponsored entities	726		—		22		(3)		745		U.S. government sponsored entities	602		—		—		(66)		536
Corporate debt	Corporate debt	33,197		—		962		(146)		34,013		Corporate debt	44,214		—		21		(2,877)		41,358
ABS and other	ABS and other	7,033		—		82		(30)		7,085		ABS and other	6,569		—		—		(583)		5,986
		$	111,858	$	—	$	1,194	$	(442)	$	112,610		$	72,819	$	—	$	21	$	(4,245)	$	68,595

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company’s investments in marketable debt securities, available-for-sale, that have been in a continuous unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the following (in thousands):


		September 30, 2022													June 30, 2023
		Less than 12 months				12 months or greater				Total					Less than 12 months				12 months or greater				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. treasuries	U.S. treasuries	$	143,148	$	(2,042)	$	20,766	$	(532)	$	163,914	$	(2,574)	U.S. treasuries	$	42,767	$	(139)	$	39,930	$	(1,056)	$	82,697	$	(1,195)
U.S. government sponsored entities	U.S. government sponsored entities	453		(55)		88		(21)		541		(76)		U.S. government sponsored entities	—		—		509		(64)		509		(64)
Corporate debt	Corporate debt	110,806		(2,793)		4,454		(665)		115,260		(3,458)		Corporate debt	107,067		(564)		25,047		(2,242)		132,114		(2,806)
ABS and other	ABS and other	6,950		(534)		212		(43)		7,162		(577)		ABS and other	4,623		(83)		5,887		(521)		10,510		(604)
		$	261,357	$	(5,424)	$	25,520	$	(1,261)	$	286,877	$	(6,685)		$	154,457	$	(786)	$	71,373	$	(3,883)	$	225,830	$	(4,669)


		December 31, 2021													December 31, 2022
		Less than 12 months				12 months or greater				Total					Less than 12 months				12 months or greater				Total
		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
U.S. treasuries	U.S. treasuries	$	103,019	$	(297)	$	—	$	—	$	103,019	$	(297)	U.S. treasuries	$	73,055	$	(1,232)	$	66,144	$	(640)	$	139,199	$	(1,872)
U.S. government sponsored entities	U.S. government sponsored entities	115		(3)		—		—		115		(3)		U.S. government sponsored entities	447		(46)		87		(20)		534		(66)
Corporate debt	Corporate debt	115,908		(173)		146		(8)		116,054		(181)		Corporate debt	130,816		(1,909)		10,681		(1,063)		141,497		(2,972)
ABS and other	ABS and other	2,915		(30)		—		—		2,915		(30)		ABS and other	4,710		(314)		2,091		(284)		6,801		(598)
		$	221,957	$	(503)	$	146	$	(8)	$	222,103	$	(511)		$	209,028	$	(3,501)	$	79,003	$	(2,007)	$	288,031	$	(5,508)

Gross realized gains and losses from the sales of the Company’s marketable debt securities, available-for-sale, consisted of the following (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Gross realized gains (1)	Gross realized gains (1)	$	—	$	68	$	114	$	78	Gross realized gains (1)	$	—	$	1	$	—	$	114
Gross realized losses (1)	Gross realized losses (1)	$	(10)	$	—	$	(27)	$	—	Gross realized losses (1)	$	(23)	$	(17)	$	(23)	$	(17)


(1)			Recorded in other income (expense), net in the condensed consolidated statements of ~~net income.~~operations. The cost basis of securities sold were determined based on the specific identification method.

The Company invests its excess cash in a diversified portfolio of fixed and variable rate debt securities to meet current and future cash flow needs. All investments are made in accordance with the Company’s approved investment policy. As of ~~September~~June 30, ~~2022,~~2023, the portfolio had ana weighted average credit rating of AA and a weighted term to contractual maturity of ~~1.3~~1.7 years, with ~~223~~226 securities in the portfolio representing an unrealized aggregate loss of ~~$6.7~~$4.7 million, or 2% of amortized cost, and a weighted average credit rating of ~~AA+.~~AA.

As of ~~September~~June 30, ~~2022,~~2023, the Company performed an impairment analysis and determined an allowance for credit losses was not required. The Company determined that it did not have an intent to sell and it was not more likely than not that the Company would be required to sell any security based on its current liquidity position, or to maintain compliance with its investment policy, specifically as it relates to minimum credit ratings. The Company evaluated the securities with an unrealized loss considering severity of loss, credit ratings, specific credit events during the period since acquisition, overall likelihood of default, market sector, potential impact from the current economic environment, including interest rates, geopolitical unrest and a review of an issuer’s and securities’ liquidity and financial strength, as needed. The Company concluded that it would receive all scheduled interest and principal payments. The Company, therefore, determined

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

~~determined~~ qualitatively that the unrealized loss was related to changes in interest rates and other market factors and therefore no allowance for credit losses was required.

Amortized cost and fair value of marketable debt securities, available-for-sale, by contractual maturity consisted of the following (in thousands, except weighted average data):


		September 30, 2022				December 31, 2021					June 30, 2023				December 31, 2022
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	Due in one year or less	$	213,042	$	211,759	$	183,915	$	183,868	Due in one year or less	$	165,471	$	164,856	$	254,683	$	253,434
Due after one year through five years	Due after one year through five years	78,268		74,918		96,035		96,257		Due after one year through five years	55,898		53,492		56,507		54,169
Due after five years through ten years	Due after five years through ten years	13,554		11,808		11,129		11,601		Due after five years through ten years	14,560		13,210		13,435		11,850
Due after ten years	Due after ten years	2,905		2,603		4,694		4,752		Due after ten years	4,300		4,009		2,876		2,576
		$	307,769	$	301,088	$	295,773	$	296,478		$	240,229	$	235,567	$	327,501	$	322,029
Weighted average contractual maturity	Weighted average contractual maturity			1.3 years				1.5 years		Weighted average contractual maturity			1.7 years				1.1 years

Actual maturities may differ from contractual maturities because certain issuers have the right to prepay certain obligations with or without prepayment penalties.

4. Acquisitions, Goodwill and Other Intangible Assets

~~During the nine months ended September 30, 2022, the Company expanded its network of financing professionals and provided further diversification to its financing services.~~

The Company completed an acquisition of a business that was accounted for as a business combination, and the results have been included in the condensed consolidated financial statements beginning on the acquisition date. Terms of the acquisition principally included cash paid at closing.

~~The goodwill~~Goodwill is recorded as part of the Company’s acquisitions and primarily arose from the acquired assembled workforce and brokerage and financing sales platforms. The Company expects all of the goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent and deferred consideration to be determined once the cash payments are made to settle any contingent and deferred consideration. The goodwill resulting from acquisitions is allocated to the Company’s one reporting unit.

Goodwill and intangible assets, net consisted of the following (in thousands):


		September 30, 2022						December 31, 2021							June 30, 2023						December 31, 2022
		Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value			Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Goodwill and intangible assets:	Goodwill and intangible assets:													Goodwill and intangible assets:
Goodwill	Goodwill	$	38,101	$	—	$	38,101	$	34,071	$	—	$	34,071	Goodwill	$	38,047	$	—	$	38,047	$	37,914	$	—	$	37,914
Intangible assets (1)	Intangible assets (1)	32,444		(13,453)		18,991		23,974		(9,940)		14,034		Intangible assets (1)	32,420		(16,942)		15,478		32,287		(14,505)		17,782
		$	70,545	$	(13,453)	$	57,092	$	58,045	$	(9,940)	$	48,105		$	70,467	$	(16,942)	$	53,525	$	70,201	$	(14,505)	$	55,696


(1)			Total weighted average amortization period was ~~4.7~~4.2 years and ~~4.4~~4.5 years as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, respectively. Intangible assets principally include non-competes and customer relationships.

The Company recorded amortization expense for intangible assets of ~~$1.2~~$1.1 million ~~and $0.9 million~~ for both the three months ended ~~September~~June 30, 2023 and 2022 and ~~2021, respectively, and $3.5 million and $3.0~~$2.3 million for both the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021, respectively.~~2022.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The changes in the carrying amount of goodwill consisted of the following (in thousands):

Nine Months Ended
September 30,
2022 2021
Beginning balance $ 34,071 $ 33,375
Additions from acquisitions (1)
4,030 696
Impairment losses — —
Ending balance $ 38,101 $ 34,071


~~(1)~~	~~The 2021 addition represents a measurement period adjustment for an acquisition made in 2020.~~Six Months Ended June 30, 2023
Beginning balance	$	37,914
Additions from acquisitions	—
Impact of foreign currency translation	133
Ending balance	$	38,047

Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the following (in thousands):


		September 30, 2022			June 30, 2023
Remainder of 2022		$	1,171
2023		4,617
Remainder of 2023				Remainder of 2023	$	2,275
2024	2024	4,101		2024	4,101
2025	2025	3,881		2025	3,880
2026	2026	2,156		2026	2,156
2027				2027	1,855
Thereafter	Thereafter	3,065		Thereafter	1,211
		$	18,991		$	15,478

The Company evaluates goodwill for impairment annually in the fourth quarter. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing, which indicate that it is more likely than not an impairment loss has occurred. The Company evaluates its intangible assets that have finite useful lives whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable.

As of ~~September~~June 30, ~~2022,~~2023, the Company considered the impact of economic conditions and evaluated its goodwill and intangible assets for impairment testing. The Company estimated the recoverability of the intangible assets by comparing the carrying amount of each asset to the future undiscounted cash flows that the Company expects the asset to generate. The sum of the undiscounted expected future cash flows was greater than the carrying amount of the intangible assets. The Company concluded that as of ~~September~~June 30, ~~2022,~~2023, there was no impairment of its intangible assets or goodwill.

5. Selected Balance Sheet Data

Allowances on Advances and Loans

Allowance for credit losses for advances and loans as of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021~~2022 was ~~$836,000~~$578,000 and ~~$789,000,~~$791,000, respectively.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other Assets

Other assets consisted of the following (in thousands):


		Current				Non-Current					Current				Non-Current
		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Mortgage servicing rights (“MSRs”), net of amortization		$	—	$	—	$	—	$	1,855
Security deposits	Security deposits	—		—		1,680		1,395		Security deposits	$	—	$	—	$	1,500	$	1,625
Employee notes receivable	Employee notes receivable	1		40		—		—		Employee notes receivable	52		6		38		—
Securities, held-to-maturity(1)	Securities, held-to-maturity(1)	—		—		9,500		9,500		Securities, held-to-maturity(1)	—		—		9,500		9,500
Loan performance fee receivable	Loan performance fee receivable	564		—		3,990		—		Loan performance fee receivable	1,261		766		6,565		4,261
Prepaid lease costs and other		5,399		5,230		—		396
Other(2)										Other(2)	4,537		6,510		489		473
		$	5,964	$	5,270	$	15,170	$	13,146		$	5,850	$	7,282	$	18,092	$	15,859

(1)Securities, held-to-maturity, are expected to mature on September 1, 2024 and accrue interest based on the 1-year treasury rate.

~~MSRs~~

~~The net change in the carrying value of MSRs consisted of the following (in thousands):~~

Nine Months Ended
September 30,
2022 2021
Beginning balance $ 1,855 $ 1,897
Additions — 421
Amortization (1,275) (399)
Reclassification to assets held for sale (280) —
Loss on sale (300) —
Ending balance $ — $ 1,919

In the six months ended June 30, 2022, the Company received cancellation notices on certain servicing contracts. Amortization of those contracts was adjusted to reflect the cancellations. In June 2022, the Company determined to discontinue its servicing activities(2)Other primarily includes customer trust accounts and signed an agreement to sell the remaining servicing rights. The Company recorded a loss on the sale of the remaining rights in the second quarter of 2022 and had reclassified the remaining carrying value of the MSRs to assets held for sale. The loss on sale was recorded within selling, general and administrative expenses within the condensed consolidated statements of net income. The sale closed in the third quarter of 2022.

~~The portfolio of loans serviced by the Company aggregated $1.7 billion for the period ended December 31, 2021.~~

prepaid lease costs.

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Deferred Compensation and Commissions

Deferred compensation and commissions consisted of the following (in thousands):


		Current				Non-Current					Current				Non-Current
		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Stock appreciation rights (“SARs”) liability (1)	Stock appreciation rights (“SARs”) liability (1)	$	2,323	$	2,241	$	13,002	$	14,918	Stock appreciation rights (“SARs”) liability (1)	$	2,480	$	2,323	$	11,037	$	13,137
Commissions payable to investment sales and financing professionals	Commissions payable to investment sales and financing professionals	59,507		110,769		36,789		31,697		Commissions payable to investment sales and financing professionals	40,196		72,247		22,647		45,156
Deferred compensation liability (1)	Deferred compensation liability (1)	524		1,080		6,034		6,921		Deferred compensation liability (1)	471		493		7,615		6,168
Other	Other	193		595		—		—		Other	204		258		—		—
		$	62,547	$	114,685	$	55,825	$	53,536		$	43,351	$	75,321	$	41,299	$	64,461


(1)			The SARs and deferred compensation liabilities become subject to payout at the time the participant is no longer considered a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to participants within the next twelve months have been classified as current.

SARs Liability

Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for the SARs was frozen as of March 31, 2013 and was transferred to MMI through a capital distribution. The SARs liability will be settled with each participant in ten annual installments in January of each year upon retirement or termination from service, or in full upon consummation of a change in control of the Company.

Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014, at a rate based on the 10-year treasury note, plus 2%. The rate resets annually. The rates at January 1, 2023 and 2022 were 5.79% and ~~2021 were~~ 3.63% ~~and 2.93%~~, respectively. MMI recorded interest expense related to this liability of ~~$135,000~~$190,000 and ~~$122,000~~$136,000 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$406,000~~$380,000 and ~~$366,000~~$271,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively.

Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During ~~each of~~ the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company made total payments of $2.3 million and $2.2 million, respectively, consisting of principal and accumulated interest.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Commissions Payable

Certain investment sales and financing professionals can earn additional commissions after meeting certain annual revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned as they relate to specific transactions closed. The Company may defer payment of certain commissions, at its election, for up to three years. Commissions that are not expected to be paid within twelve months are classified as long-term.

Deferred Compensation Liability

A select group of management is eligible to participate in the Marcus & Millichap Deferred Compensation Plan (the “Deferred Compensation Plan”). The Deferred Compensation Plan is a non-qualified deferred compensation plan that is intended to comply with Section 409A of the Internal Revenue Code and permits participants to defer compensation up to the limits set forth in the Deferred Compensation Plan. Amounts are paid out generally when the participant is no longer a service provider; however, an in-service payout election is available to participants. Participants may elect to receive payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred Compensation Plan through ~~company owned~~Company-owned variable life insurance policies. The Deferred Compensation Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company asset in a rabbi trust, which is recorded in assets held in rabbi trust in the accompanying condensed consolidated balance

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

sheets. The assets in the trust are restricted unless the Company becomes insolvent, in which case the trust assets are subject to the claims of the Company’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next twelve months for participants that have separated from service or elected an in-service payout have been classified as current. During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company made total payments to participants of ~~$807,000~~$163,000 and ~~$1,200,000~~$625,000 respectively.

The assets held in the rabbi trust are carried at the cash surrender value of the variable life insurance policies, which represents its fair value. The net change in the carrying value of the assets held in the rabbi trust and the net change in the carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust expenses, consisted of the following (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2022 2021 2022 2021
(Decrease) increase in the carrying value of the assets held in the rabbi trust (1)
$ (347) $ (59) $ (2,131) $ 932
Decrease (increase) in the net carrying value of the deferred compensation obligation (2)
$ 317 $ 43 $ 2,108 $ (720)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Increase (decrease) in the carrying value of the assets held in the rabbi trust (1)	$	472	$	(1,259)	$	930	$	(1,784)
(Increase) decrease in the net carrying value of the deferred compensation obligation (2)	$	(452)	$	1,259	$	(885)	$	1,791

(1)Recorded in other income (expense), net in the condensed consolidated statements of ~~net income.~~operations.

(2)Recorded in selling, general and administrative expense in the condensed consolidated statements of ~~net income.~~operations.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other Liabilities

Other liabilities consisted of the following (in thousands):


		Current				Non-Current					Current				Non-Current
		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021			June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Deferred consideration	Deferred consideration	$	4,692	$	5,112	$	1,467	$	4,689	Deferred consideration	$	1,294	$	3,633	$	724	$	1,486
Contingent consideration	Contingent consideration	2,414		2,681		5,610		6,631		Contingent consideration	1,513		1,726		5,005		5,341
Dividends payable	Dividends payable	10,784		—		1,627		—		Dividends payable	645		612		1,528		1,603
Stock repurchase payable	Stock repurchase payable	1,918		—		—		—		Stock repurchase payable	—		565		—		—
Loan guarantee obligation										Loan guarantee obligation	537		2,040		2,696		—
Other	Other	795		991		1,919		74		Other	910		1,357		566		184
		$	20,603	$	8,784	$	10,623	$	11,394		$	4,899	$	9,933	$	10,519	$	8,614

6. Related-Party Transactions

Shared and Transition Services

Certain services are provided to the Company under a Transition Services Agreement (“TSA”) between MMC and the Company. The TSA is intended to provide certain services until the Company acquires these services separately. Under the TSA, the Company ~~incurred~~earned net ~~costs (charge-back)~~charge-backs during the three months ended ~~September~~June 30, 2023 and 2022 of $19,000 and ~~2021 of $(17,000) and $(11,000),~~$7,000, respectively, and during the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022 of $44,000 and ~~2021 of $(35,000) and $4,000,~~$18,000, respectively. These amounts are included in selling, general and administrative expense in the accompanying condensed consolidated statements of ~~net income.~~operations.

Brokerage and Financing Services with the Subsidiaries of MMC

MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. The Company performs certain brokerage and financing services related to transactions of the subsidiaries of MMC. For the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company earned real estate brokerage commissions and financing fees of

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~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~$650,000~~ $0 and ~~$603,000,~~$912,000, respectively, from transactions with subsidiaries of MMC related to these services. The Company incurred cost of services of ~~$388,000~~$0 and ~~$363,000,~~$547,000, respectively, related to ~~these revenues.~~this revenue. For the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, the Company earned real estate brokerage commissions and financing fees of ~~$3.2 million~~$441,000 and ~~$1.4 million,~~$2,510,000, respectively, from transactions with subsidiaries of MMC related to these services. The Company incurred cost of services of ~~$1.9 million~~$264,000 and ~~$840,000,~~$1,501,000, respectively, related to ~~these revenues.~~this revenue.

Operating Lease with MMC

The Company extended its operating lease with MMC for a single-story office building located in Palo Alto, California, which ~~now~~ expires in May 2032. The related operating lease cost was ~~$296,000~~$295,000 and ~~$333,000~~$320,000 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$967,000~~$592,000 and ~~$998,000~~$653,000 for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. Operating lease cost is included in selling, general and administrative expense in the accompanying condensed consolidated statements of operations. The related operating lease right-of-use asset, net ~~income.~~and operating lease liability as of June 30, 2023 was $8,115,000 and $8,442,000, respectively and as of December 31, 2022 was $9,041,000 and $9,262,000, respectively.

~~Accounts Payable and Accrued Expenses with~~Amounts due to (from) MMC

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company ~~owed~~recorded a receivable of $3,000 and a payable of $79,000 with MMC, ~~$90,000 and $93,000,~~ respectively. These amounts are included in other assets, current and accounts payable and accrued expenses, respectively, in the accompanying condensed consolidated balance sheets.

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(Unaudited)

Other

The Company makes advances to non-executive employees from time-to-time. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the aggregate principal amount for employee notes receivable was ~~$1,000~~$90,000 and ~~$40,000,~~$6,000, respectively, which is included in other assets ~~current~~ in the accompanying condensed consolidated balance sheets. See Note 5 ~~– “Selected~~- "Selected Balance Sheet ~~Data” for additional information.~~Data".

As of ~~September~~June 30, ~~2022,~~2023, George M. Marcus, the Company’s founder and Chairman, beneficially owned approximately ~~38%~~39% of the Company’s issued and outstanding common stock, including shares owned by Phoenix Investments Holdings, LLC and the Marcus Family Foundation II.

7. Fair Value Measurements

U.S. GAAP defines the fair value of a financial instrument as the amount that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of fair value and the supporting methodologies and assumptions. The Company uses various pricing sources and third parties to provide and validate the values utilized.

The degree of judgment used in measuring the fair value of financial instruments is generally inversely correlated with the level of observable valuation inputs. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment.

Assets recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of the three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

•Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

•Level 3: Unobservable inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. Management estimates include certain

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

Recurring Fair Value Measurements

The Company values its investments including commercial paper and floating net asset value money market funds recorded in cash, ~~and~~ cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, assets held in the rabbi trust, deferred compensation liability and contingent and deferred consideration at fair value on a recurring basis.

Fair values for investments included in cash, ~~and~~ cash equivalents, and restricted cash and marketable debt securities, available-for-sale were determined for each individual security in the investment portfolio and all ~~these~~ securities are Level 1 or 2 measurements as appropriate.

Fair values for assets held in the rabbi trust and related deferred compensation liability were determined based on the cash surrender value of the ~~company owned~~Company-owned variable life insurance policies and underlying investments in the trust, and are Level 2 and Level 1 measurements, respectively.

Contingent consideration in connection with acquisitions, is carried at fair value and determined on a contract-by-contract basis, calculated using unobservable inputs based on a probability of achieving EBITDA and other performance requirements, and is a Level 3 measurement. Deferred consideration in connection with acquisitions is carried at fair value

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

and calculated using a discounted cash flow estimate with the only remaining condition on such payments being the passage of time, and is a Level 2 measurement.

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):


		September 30, 2022								December 31, 2021									June 30, 2023								December 31, 2022
		Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3			Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets:	Assets:																	Assets:
Assets held in rabbi trust	Assets held in rabbi trust	$	9,222	$	—	$	9,222	$	—	$	11,508	$	—	$	11,508	$	—	Assets held in rabbi trust	$	10,365	$	—	$	10,365	$	—	$	9,553	$	—	$	9,553	$	—
Cash equivalents (1):	Cash equivalents (1):																	Cash equivalents (1):
Commercial paper	Commercial paper	$	80,095	$	—	$	80,095	$	—	$	8,948	$	—	$	8,948	$	—	Commercial paper	$	50,191	$	—	$	50,191	$	—	$	41,324	$	—	$	41,324	$	—
Money market funds	Money market funds	120,011		120,011		—		—		210,985		210,985		—		—		Money market funds	81,411		81,411		—		—		139,025		139,025		—		—
		$	200,106	$	120,011	$	80,095	$	—	$	219,933	$	210,985	$	8,948	$	—		$	131,602	$	81,411	$	50,191	$	—	$	180,349	$	139,025	$	41,324	$	—

Marketable debt securities, available-for-sale:	Marketable debt securities, available-for-sale:																	Marketable debt securities, available-for-sale:
Short-term investments:	Short-term investments:																	Short-term investments:
U.S. treasuries	U.S. treasuries	$	121,410	$	121,410	$	—	$	—	$	35,733	$	35,733	$	—	$	—	U.S. treasuries	$	65,495	$	65,495	$	—	$	—	$	134,549	$	134,549	$	—	$	—
Corporate debt	Corporate debt	89,507		—		89,507		—		—		—		—		—		Corporate debt	99,361		—		99,361		—		118,041		—		118,041		—
ABS and other	ABS and other	842		—		842		—		148,135		—		148,135		—		ABS and other	—		—		—		—		844		—		844		—
		$	211,759	$	121,410	$	90,349	$	—	$	183,868	$	35,733	$	148,135	$	—		$	164,856	$	65,495	$	99,361	$	—	$	253,434	$	134,549	$	118,885	$	—

Long-term investments:	Long-term investments:																	Long-term investments:
U.S. treasuries	U.S. treasuries	$	42,881	$	42,881	$	—	$	—	$	70,767	$	70,767	$	—	$	—	U.S. treasuries	$	17,409	$	17,409	$	—	$	—	$	20,715	$	20,715	$	—	$	—
U.S. government sponsored entities	U.S. government sponsored entities	543		—		543		—		745		—		745		—		U.S. government sponsored entities	510		—		510		—		536		—		536		—
Corporate debt	Corporate debt	39,562		—		39,562		—		34,013		—		34,013		—		Corporate debt	42,250		—		42,250		—		41,358		—		41,358		—
ABS and other	ABS and other	6,343		—		6,343		—		7,085		—		7,085		—		ABS and other	10,542		—		10,542		—		5,986		—		5,986		—
		$	89,329	$	42,881	$	46,448	$	—	$	112,610	$	70,767	$	41,843	$	—		$	70,711	$	17,409	$	53,302	$	—	$	68,595	$	20,715	$	47,880	$	—

Liabilities:	Liabilities:																	Liabilities:
Contingent consideration	Contingent consideration	$	8,024	$	—	$	—	$	8,024	$	9,312	$	—	$	—	$	9,312	Contingent consideration	$	6,518	$	—	$	—	$	6,518	$	7,067	$	—	$	—	$	7,067
Deferred consideration	Deferred consideration	$	6,159	$	—	$	6,159	$	—	$	9,801	$	—	$	9,801	$	—	Deferred consideration	$	2,018	$	—	$	2,018	$	—	$	5,119	$	—	$	5,119	$	—
Deferred compensation liability	Deferred compensation liability	$	6,558	$	6,558	$	—	$	—	$	8,001	$	8,001	$	—	$	—	Deferred compensation liability	$	8,086	$	8,086	$	—	$	—	$	6,661	$	6,661	$	—	$	—


(1)			Included in cash, ~~and~~ cash equivalents, and restricted cash on the accompanying condensed consolidated balance sheets.

There were no transfers in or out of Level 3 during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022.

During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company considered current and future interest rates and the probability of achieving EBITDA and other performance targets in its determination of fair value for the contingent consideration. The Company is uncertain as to the extent of the volatility in the unobservable inputs in the foreseeable future. Deferred consideration in connection with acquisitions is carried at fair value and calculated using a discounted cash flow estimate with the only remaining condition on such payments being the passage of time.

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, contingent and deferred consideration had a maximum undiscounted payment to be settled in cash or stock of ~~$23.8~~$17.3 million and ~~$28.6~~$21.3 million, respectively. Assuming the achievement of the applicable performance criteria and/or service and time requirements, the Company anticipates these payments will be made over the next one to ~~five-year~~four-year period. Changes in fair value are included in selling, general and administrative expense in the condensed consolidated statements of ~~net income.~~operations.

2120

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(Unaudited)

A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):


		Nine Months Ended September 30,					Six Months Ended June 30,
		2022		2021			2023		2022
Beginning balance	Beginning balance	$	9,312	$	5,572	Beginning balance	$	7,067	$	9,312
Contingent consideration in connection with acquisitions	Contingent consideration in connection with acquisitions	—		(100)		Contingent consideration in connection with acquisitions	—		—
Change in fair value of contingent consideration(1)	Change in fair value of contingent consideration(1)	(248)		3,246		Change in fair value of contingent consideration(1)	511		(493)
Payments of contingent consideration	Payments of contingent consideration	(1,040)		(620)		Payments of contingent consideration	(1,060)		(1,040)
Ending balance	Ending balance	$	8,024	$	8,098	Ending balance	$	6,518	$	7,779


(1)			Includes immaterial impact of foreign currency translation.

Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in thousands):

Fair Value at
~~September~~June 30, 2023

Valuation Technique

Unobservable inputs

Range (Weighted Average)(1)

Contingent

consideration

6,518

Discounted cash flow

Expected life of cash flows

0.1-4.3 years

(2.2 years)

Discount rate

6.2%-7.3%

(6.8%)

Probability of achievement

0.0%-100.0%

(94.8%)

Fair Value at
December 31, 2022

Valuation Technique

Unobservable inputs

Range (Weighted Average)(1)

Contingent

consideration

~~8,024~~7,067

Discounted cash flow

Expected life of cash flows

~~0.7-5.1~~0.4-4.8 years ~~(2.8~~

(2.7 years)

Discount rate

~~6.3%-6.9% (6.7%)~~6.0%-7.0%

(6.5)%

Probability of achievement

0.0%-100.0% ~~(96.3%)~~

Fair Value at
December 31, 2021

~~Valuation Technique~~

~~Unobservable inputs~~

~~Range (Weighted Average)(1)~~

~~Contingent consideration~~

~~9,312~~

~~Discounted cash flow~~

~~Expected life of cash flows~~

~~1.4-5.8 years (3.4 years)~~

~~Discount rate~~

~~2.2%-3.5% (2.9%)~~

~~Probability of achievement~~

~~29.0%-100.0% (95.2%)~~(95.4)%


(1)			Unobservable inputs were weighted by the relative fair value of the instruments.

Nonrecurring Fair Value Measurements

In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a nonrecurring basis. The Company reviews the carrying value of ~~MSRs,~~ intangibles, goodwill and other assets for indications of impairment at least annually. When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required.

~~MSRs are recorded at fair~~

8. Stockholders’ Equity

Common Stock

As of June 30, 2023 and December 31, 2022, there were 38,460,595 and 39,255,838 shares of common stock, $0.0001 par value, ~~upon acquisition~~issued and outstanding, which included unvested restricted stock awards (“RSAs”) issued to non-employee directors, respectively. See Note 11 – “(Loss) Earnings per Share” for additional information.

On August 1, 2023, the Board of Directors declared a ~~servicing contract. The Company has elected the amortization method for the subsequent measurement~~semi-annual regular dividend of ~~MSRs. MSRs are carried~~$0.25 per share, payable on October 6, 2023, to stockholders of record at the ~~lower~~close of amortized cost or fair value. MSRs are a Level 3 measurement. The Company’s MSRs do not trade in an active, open market with readily observable prices. The estimated fair value of the Company’s MSRs were developed using a discounted cash flow model that calculates the present value of estimated future net servicing income. The model considers contractual provisions and assumptions of market participants including specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. Management uses assumptions in the determination of fair value for MSRs after considering default, severity, prepayment and discount rates related to the specific types and underlying collateral of the various serviced loans, interest rates, refinance rates, and current government and private sector responsesbusiness on ~~the economic impact of the COVID-19 pandemic. In June 2022, the Company determined to discontinue its~~September 15, 2023.

2221

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

servicing activities and signed an agreement to sell the remaining servicing rights. The sale closed in the third quarter of 2022. See Note 5 – “Selected Balance Sheet Data” for additional information.

~~8. Stockholders’ Equity~~

~~Common Stock~~

As of ~~September~~June 30, ~~2022 and December 31, 2021, there were 39,797,423 and 39,692,373 shares~~2023, $2.2 million of ~~common stock, $0.0001 par value, issued and outstanding, which include~~dividend equivalents related to unvested ~~restricted~~ stock awards ~~(“RSAs”) issued to non-employee directors, respectively. See Note 11 – “Earnings per Share” for additional information.~~

On February 16, 2022, the Board of Directors declared a semi-annual regular dividend of $0.25 per share and a special dividend of $1.00 per share, payable on April 4, 2022, to stockholders of record at the close of business on March 8, 2022.

On August 2, 2022, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, payable on October 6, 2022, to stockholders of record at the close of business on September 15, 2022.

~~As a result, the Company paid $50.2 million in dividends to outstanding shareholders during the nine months ended September 30, 2022.~~

As of September 30, 2022, the dividend payable was $12.4 million, of which $10.0 million was paid on October 6, 2022, and $2.4 million remains to be paid upon vesting of stock awards. This payable of $12.4 million isare recorded in other liabilities ~~current and other liabilities, non-current~~ in the condensed consolidated balance sheets. See Note 5 – “Selected Balance Sheet Data.”

Preferred Stock

The Company has 25,000,000 authorized shares of preferred stock with a par value $0.0001 per share. At ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, there were no preferred shares issued or outstanding.

Accumulated Other Comprehensive (Loss) Income

Amounts reclassified from accumulated other comprehensive (loss) income are included as a component of other income (expense), net or selling, general and administrative expense, as applicable, in the condensed consolidated statements of ~~net income.~~operations. The reclassifications were determined on a specific identification basis.

The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as it is operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative foreign currency translation adjustments.

Repurchases of Common Stock

On August 2, 2022, the Company's Board of Directors authorized a common stock repurchase program of up to $70 million. On May 2, 2023, the Company's Board of Directors approved an additional $70 million to repurchase common stock under its stock repurchase program. During the ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, the Company repurchased and retired ~~226,795~~1,098,561 shares of common stock for ~~$7.6~~$34.4 million, at an average cost of ~~$33.41~~$31.28 per ~~share, of which $1.9 million was for shares repurchased but not settled.~~share. As of ~~September~~June 30, ~~2022, $62.4~~2023, $76.0 million remained ~~available~~authorized for repurchases under the stock repurchase program.

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

9. Stock-Based Compensation Plans

2013 Omnibus Equity Incentive Plan

The Company’s ~~board~~Board of ~~directors~~Directors adopted the 2013 Omnibus Equity Incentive Plan (the “2013 Plan”), which became effective upon the Company’s IPO. In February 2017, the Board of Directors amended and restated the 2013 Plan, which was approved by the Company’s stockholders in May 2017. Grants are made from time to time by the compensation committee of the Company’s ~~board~~Board of ~~directors~~Directors at its discretion, subject to certain restrictions as to the number and value of shares that may be granted to any individual. In addition, non-employee directors receive annual grants under a director compensation policy. The compensation committee of the Company’s ~~board~~Board of ~~directors~~Directors has the option to grant dividend equivalents to unvested grants. Any dividend equivalents granted to unvested awards are paid to the participant at the time the related grants vest. As of ~~September~~June 30, ~~2022,~~2023, there were ~~3,801,591~~3,401,886 shares available for future grants under the 2013 Plan.

On August ~~2, 2022,~~1, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, ~~payable on~~with a payment date of October 6, ~~2022,~~2023, to stockholders of record at the close of business on September 15, ~~2022.~~2023. The Compensation Committee granted dividend equivalents to all unvested grants as of the record date.

As of ~~September~~June 30, ~~2022, $2.4~~2023, $2.2 million of dividend equivalents remains to be paid upon vesting of stock ~~awards, including $0.5 million related to the semi-annual regular dividend declared on August 2, 2022.~~awards.

Awards Granted and Settled

Under the 2013 Plan, the Company has issued RSAs to non-employee directors and restricted stock units (“RSUs”) to employees and independent contractors. RSAs vest over a one-year period from the date of grant, subject to service requirements. RSUs generally vest in equal annual installments over a five-year period from the date of grant or earlier as approved by the compensation committee of the Company’s ~~board~~Board of ~~directors.~~Directors. Dividend equivalents granted for unvested stock awards are paid at the time the stock awards vest. Any unvested awards and dividend equivalents are canceled upon termination as a service provider. As of ~~September~~June 30, ~~2022,~~2023, there were no issued or outstanding options, SARs, performance units or performance share awards under the 2013 Plan.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

During the ~~nine~~six months ended ~~September~~June 30, ~~2022, 288,954~~2023, 349,290 shares of RSUs and RSAs vested, ~~and 82,876~~with 125,319 shares of common stock ~~were~~ withheld to pay applicable required employee statutory withholding taxes based on the market value of the shares on the vesting date. The shares withheld for taxes were returned to the share reserve and are available for future issuance in accordance with provisions of the 2013 Plan. Unvested RSUs will be settled through the issuance of new shares of common stock.

Outstanding Awards

Activity under the 2013 Plan consisted of the following (dollars in thousands, except weighted average per share data):

Shares Weighted-
Average Grant
Date Fair Value
Per Share
Nonvested shares at December 31, 2021⁽¹⁾ 980,936 $ 36.58
Granted 1,051,178 45.75
Vested (288,954) 36.24
Forfeited/canceled (24,137) 39.00
Nonvested shares at September 30, 2022⁽¹⁾ 1,719,023 $ 42.21
Unrecognized stock-based compensation expense as of September 30, 2022 $ 63,294
Unrecognized compensation expense is expected to be recognized over a weighted-average period (years) of approximately 3.95
Weighted average remaining vesting period (years) as of September 30, 2022 3.95


	Shares	Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2022⁽¹⁾	1,741,461	$	42.14
Granted	556,260	34.09
Vested	(349,290)	42.10
Forfeited/canceled	(10,347)	40.90
Nonvested shares at June 30, 2023⁽¹⁾	1,938,084	$	39.85


(1)			Nonvested RSUs will be settled through the issuance of new shares of common stock.

~~Table~~As of ~~Contents~~

~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

June 30, 2023, the Company had unrecognized stock-based compensation relating to RSUs and RSAs of approximately $68.2 million, which is expected to be recognized over a weighted-average period of 3.69 years.

Employee Stock Purchase Plan

In 2013, the Company adopted the 2013 Employee Stock Purchase Plan (“ESPP”). The ESPP is intended to qualify under Section 423 of the Internal Revenue Code and provides for consecutive, non-overlapping ~~6-month~~six-month offering periods. The offering periods generally start on the first trading day on or after May 15 and November 15 of each year. Qualifying employees may purchase shares of the Company stock at a 10% discount based on the lower of the market price at the beginning or end of the offering period, subject to IRS limitations. The Company determined that the ESPP was a compensatory plan and is required to expense the fair value of the awards over each ~~6-month~~six-month offering period.

The ESPP initially had 366,667 shares of common stock reserved, and ~~145,636~~121,615 shares of common stock remain available for issuance as of ~~September~~June 30, ~~2022.~~2023. The ESPP provides for annual increases in the number of shares available for issuance under the ESPP, equal to the ~~least~~lesser of (i) 366,667 shares, (ii) 1% of the outstanding shares on such date, or (iii) an amount determined by the compensation committee of the Board of Directors. Pursuant to the provisions of the ESPP, the Board of Directors has determined to not provide for any annual increases to date. ~~At September~~As of June 30, ~~2022,~~2023, total unrecognized compensation cost related to the ESPP was ~~$32,000~~$65,000 and is expected to be recognized over a weighted average period of ~~0.13~~0.38 years.

SARs and DSUs

Prior to the IPO, certain employees were granted SARs. As of March 31, 2013, the outstanding SARs were frozen at the liability amount, and will be paid out to each participant in installments upon retirement or departure under the terms of the revised SARs agreements. To replace beneficial ownership in the SARs, the difference between the book value liability and the fair value of the awards was granted to plan participants in the form of deferred stock units (“DSUs”), which were fully vested upon receipt and will be settled in actual stock at a rate of 20% per year if the participant remains employed by the Company during that period (otherwise all unsettled shares of stock upon termination from service will be settled five years from the termination date, unless otherwise agreed to by the Company). In the event of death or termination of service after reaching the age of 67, 100% of the DSUs will be settled. ~~During the nine months ended September 30,~~As of December 31, 2022, ~~166,449~~all DSUs were ~~settled, and 78,615 shares~~settled.

Table of common stock were withheld to pay applicable required employee statutory withholding taxes based on the market value of the DSUs on the settlement date. As of September 30, 2022, 114,744 shares of fully vested DSUs remained to be settled in 2022.Contents

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Summary of Stock-Based Compensation

Components of stock-based compensation are included in selling, general and administrative expense in the condensed consolidated statements of ~~net income~~operations and consisted of the following (in thousands):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
ESPP	ESPP	$	66	$	33	$	151	$	107	ESPP	$	28	$	29	$	83	$	85
RSUs and RSAs	RSUs and RSAs	4,478		2,670		12,524		7,546		RSUs and RSAs	5,323		4,246		10,279		8,046
		$	4,544	$	2,703	$	12,675	$	7,653		$	5,351	$	4,275	$	10,362	$	8,131

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~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

10. Income Taxes

The Company’s effective tax rate for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 was ~~31.7%~~(45.5)% and ~~27.0%~~16.6%, respectively, compared to ~~26.0%~~24.9% and ~~26.7% respectively,~~25.5% for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022, respectively. The Company provides for the effects of income taxes in interim financial statements based on the Company’s estimate of its annual effective tax rate for the full year, which is based on forecasted income by jurisdiction where the Company operates, adjusted for any tax effects of items that relate discretely to the period, if any.

The provision for income taxes differs from the amount computed by applying the U.S. federal statutory rate to income before provision for income taxes and consisted of the following (dollars in thousands):


		Three Months Ended September 30,								Nine Months Ended September 30,									Three Months Ended June 30,								Six Months Ended June 30,
		2022				2021				2022				2021					2023				2022				2023				2022
		Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate			Amount		Rate		Amount		Rate		Amount		Rate		Amount		Rate
Income tax expense at the federal statutory rate		$	6,573	21.0	%	$	9,627	21.0	%	$	27,712	21.0	%	$	23,052	21.0	%
State income tax expense, net of federal benefit		1,707		5.5	%	2,111		4.6	%	6,129		4.6	%	5,157		4.7	%
Income tax (benefit) expense at the federal statutory rate																		Income tax (benefit) expense at the federal statutory rate	$	(1,260)	21.0	%	$	11,786	21.0	%	$	(3,668)	21.0	%	$	21,139	21.0	%
State income tax expense (benefit), net of federal benefit																		State income tax expense (benefit), net of federal benefit	315		(5.3)	%	2,389		4.3	%	(424)		2.4	%	4,422		4.4	%
(Windfall) shortfall tax benefits, net related to stock-based compensation	(Windfall) shortfall tax benefits, net related to stock-based compensation	(54)		(0.2)	%	(443)		(1.0)	%	(2,118)		(1.6)	%	(522)		(0.5)	%	(Windfall) shortfall tax benefits, net related to stock-based compensation	119		(2.0)	%	(1,758)		(3.1)	%	773		(4.4)	%	(2,064)		(2.1)	%
Change in valuation allowance	Change in valuation allowance	1,073		3.4	%	55		0.1	%	992		0.8	%	243		0.2	%	Change in valuation allowance	17		(0.3)	%	23		0.0	%	244		(1.4)	%	(81)		(0.1)	%
Permanent and other items (1)	Permanent and other items (1)	640		2.0	%	571		1.3	%	2,936		2.2	%	1,374		1.3	%	Permanent and other items (1)	3,537		(58.9)	%	1,515		2.7	%	170		(1.0)	%	2,296		2.3	%
		$	9,939	31.7	%	$	11,921	26.0	%	$	35,651	27.0	%	$	29,304	26.7	%		$	2,728	(45.5)	%	$	13,955	24.9	%	$	(2,905)	16.6	%	$	25,712	25.5	%


(1)			Permanent items relate principally to compensation charges, qualified transportation fringe benefits, ~~and~~ meals and ~~entertainment.~~entertainment, and other items principally related to the effect of providing taxes in the interim financial statements based on the estimated full year effective tax rate.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

11. (Loss) Earnings per Share

Basic and diluted (loss) earnings per share for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively consisted of the following (in thousands, except per share data):


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Numerator (Basic and Diluted):	Numerator (Basic and Diluted):									Numerator (Basic and Diluted):
Net income		$	21,362	$	33,924	$	96,313	$	80,468
Net (loss) income										Net (loss) income	$	(8,729)	$	42,168	$	(14,562)	$	74,951
Change in value for stock settled consideration(3)	Change in value for stock settled consideration(3)	(12)		(2)		(50)		8		Change in value for stock settled consideration(3)	13		(24)		37		(38)
Adjusted net income		$	21,350	$	33,922	$	96,263	$	80,476
Adjusted net (loss) income										Adjusted net (loss) income	$	(8,716)	$	42,144	$	(14,525)	$	74,913

Denominator:	Denominator:									Denominator:
Basic	Basic									Basic
Weighted average common shares issued and outstanding	Weighted average common shares issued and outstanding	39,983		39,634		39,881		39,539		Weighted average common shares issued and outstanding	38,553		39,936		38,880		39,829
Deduct: Unvested RSAs (1)	Deduct: Unvested RSAs (1)	(12)		(13)		(12)		(14)		Deduct: Unvested RSAs (1)	(15)		(12)		(13)		(13)
Add: Fully vested DSUs (2)	Add: Fully vested DSUs (2)	115		319		169		334		Add: Fully vested DSUs (2)	—		124		—		202
Weighted average common shares outstanding	Weighted average common shares outstanding	40,086		39,940		40,038		39,859		Weighted average common shares outstanding	38,538		40,048		38,867		40,018

Basic earnings per common share		$	0.53	$	0.85	$	2.40	$	2.02
Basic (loss) earnings per common share										Basic (loss) earnings per common share	$	(0.23)	$	1.05	$	(0.37)	$	1.87
Diluted	Diluted									Diluted
Weighted average common shares outstanding from above	Weighted average common shares outstanding from above	40,086		39,940		40,038		39,859		Weighted average common shares outstanding from above	38,538		40,048		38,867		40,018
Add: Dilutive effect of RSUs, RSAs & ESPP(5)	Add: Dilutive effect of RSUs, RSAs & ESPP(5)	131		188		235		176		Add: Dilutive effect of RSUs, RSAs & ESPP(5)	—		213		—		291
Add: Contingently issuable shares~~(3)~~(5)	Add: Contingently issuable shares~~(3)~~(5)	85		113		85		113		Add: Contingently issuable shares~~(3)~~(5)	—		81		—		81
Weighted average common shares outstanding	Weighted average common shares outstanding	40,302		40,241		40,358		40,148		Weighted average common shares outstanding	38,538		40,342		38,867		40,390
Diluted earnings per common share		$	0.53	$	0.84	$	2.39	$	2.00
Diluted (loss) earnings per common share										Diluted (loss) earnings per common share	$	(0.23)	$	1.04	$	(0.37)	$	1.85
Antidilutive shares excluded from diluted earnings per common share(4)	Antidilutive shares excluded from diluted earnings per common share(4)	1,046		112		1,041		363		Antidilutive shares excluded from diluted earnings per common share(4)	1,887		843		1,781		843

(1)RSAs were issued and outstanding to the non-employee directors and have a one-year vesting term subject to service requirements. See Note 9 – “Stock-Based Compensation Plans” for additional information.

(2)Shares are included in weighted average common shares outstanding as the shares are fully vested but have not yet been delivered. See Note 9 – “Stock-Based Compensation Plans” for additional information.

(3)Relates to contingently issuable stock settled consideration.

(4)Primarily pertaining to RSU grants to the Company’s employees and independent contractors.

(5)Shares related to the Company's RSUs, RSAs, ESPP, and contingently issuable shares were excluded from the weighted average common shares outstanding for the three and six months ended June 30, 2023 because inclusion of such shares would be antidilutive in a period of loss.

12. Commitments and Contingencies

Credit Agreement

On June 18, 2014, the Company entered into a credit agreement with Wells Fargo Bank, National Association (the “Credit Agreement”). On May 31, 2022, the Company executed an amended and restated Credit Agreement (the “First Amended and Restated Credit Agreement”) to extend the maturity date of the Credit Agreement on substantially the same terms and conditions as the original credit facility. The First Amended and Restated Credit Agreement provided for a $60.0 million principal amount senior secured revolving credit facility that was guaranteed by all of the Company’s domestic subsidiaries (the “Credit Facility”), which was scheduled to mature on August 1, 2022. On July 28, 2022, the Company entered into the Second Amended and Restated Credit Agreement, which provides for a three-year extension of its Credit Facility with Wells Fargo Bank, National Association on principally the same terms and conditions as the extension signed in May 2022. The new agreement matures on June 1, 2025.

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MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company may borrow, repay and reborrow amounts under the Credit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility must be repaid in full. Borrowings under the Credit Agreement are available for general corporate purposes and working capital. The Credit Facility includes a $10.0 million sublimit for the

~~Table of Contents~~

~~MARCUS & MILLICHAP, INC.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

issuance of standby letters of credit of which $533,000 was utilized at ~~September~~June 30, ~~2022.~~2023. Borrowings under the Credit Facility will bear interest at the Daily Simple SOFR rate plus a spread of between 1.00% to 1.25% depending on the Company’s total funded debt to EBITDA as defined in the Credit Agreement. In connection with the amendments of the Credit Agreement, the Company paid bank fees and other expenses, which are being amortized over the remaining term of the Credit Agreement. The Company pays a commitment fee of up to 0.1% per annum, payable quarterly, based on the amount of unutilized commitments under the Credit Facility. The amortization and commitment fee is included in the interest expense in the accompanying condensed consolidated statements of ~~net income~~operations and was ~~$94,000~~$26,000 and ~~$21,000~~$22,000 for the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and ~~$141,000~~$51,000 and ~~$65,000, respectively,~~$47,000 during the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021.~~respectively. As of ~~September~~June 30, ~~2022,~~2023, there were no amounts outstanding under the Credit Agreement.

The Credit Facility contains customary covenants, including financial and other covenant reporting requirements and events of default. Financial covenants require the Company, on a combined basis with its guarantors, to maintain (i) an EBITDAR Coverage Ratio (as defined in the Credit Agreement) of not less than 1.25:1.0 as of each quarter end, determined on a rolling four-quarter basis, and (ii) total funded debt to EBITDA not greater than 2.0:1.0 as of each quarter end, determined on a rolling four-quarter basis, and also limits investments in foreign entities and certain other loans. The Credit Facility is secured by substantially all assets of the Company, including pledges of 100% of the stock or other equity interest of each subsidiary except for the capital stock of a controlled foreign corporation (as defined in the Internal Revenue Code), in which case no such pledge is required. As of ~~September~~June 30, ~~2022,~~2023, the Company was in compliance with all financial and non-financial covenants and has not experienced any limitation in its operations as a result of the covenants. Our ability to borrow under our Credit Facility is limited by our ability to comply with its covenants or obtain necessary waivers.

Strategic Alliance

The Company, in connection with the Strategic Alliance with MTRCC, has agreed to provide loan opportunities that may be funded through MTRCC’s DUS agreement with Fannie Mae. MTRCC's agreement with Fannie Mae ~~and which~~ requires MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can indemnify a portion of MTRCC’s guarantee obligation of loan opportunities presented to and closed by MTRCC. As of ~~September~~June 30, ~~2022,~~2023, the Company has agreed to a maximum aggregate guarantee obligation of ~~$54.1~~$114.7 million relating to loans with an unpaid balance of ~~$324.9~~$688.1 million. ~~The maximum guarantee obligation is not representative of the actual loss the Company would incur.~~ The Company would be liable for ~~this amount~~its maximum aggregate guarantee obligation only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral underlying these loans ~~was~~were determined to be without value at the time of settlement. As of June 30, 2023 and December 31, 2022, the Company has recorded an allowance for loss-sharing obligations of $656,000 and $275,000, respectively, and pledged $102,000 and $16,000, respectively, in a restricted bank account in support of the guarantee obligation.

Other

In connection with certain agreements with investment sales and financing professionals, the Company may agree to advance amounts to such professionals upon reaching certain time and performance goals. Such commitments as of ~~September~~June 30, ~~2022~~2023 aggregated ~~$19.3~~$10.0 million.

13. Subsequent Events

On August ~~2, 2022,~~1, 2023, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, ~~or $10.5 million,~~ payable on October 6, ~~2022~~2023, to stockholders of record at the close of business on September 15, ~~2022, of which $10.0 million was paid on October 6, 2022.~~

~~Between September 30, 2022 and October 31, 2022, the Company repurchased an additional 431,700 shares of common stock for $14.9 million under the stock repurchase program.~~2023.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, the words “Marcus & Millichap,” “MMI,” “we,” the “Company,” “us” and “our” refer to Marcus & Millichap, Inc., and its consolidated subsidiaries.

Forward-Looking Statements

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors, including but not limited to further interest rate changes, rising inflation, and geopolitical unrest. The results of operations for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2022,~~2023, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Form 10-Q and in conjunction with our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 filed with the SEC on ~~March 1, 2022,~~February 28, 2023, including the “Risk Factors” section and the consolidated financial statements and notes included therein.

Overview

We are a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. We have been the top commercial real estate investment broker in the United States based on the number of investment transactions for more than 1516 years. As of ~~September~~June 30, ~~2022,~~2023, we had ~~1,880~~1,865 investment sales and financing professionals that are primarily exclusive independent contractors operating in 8280 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, we closed ~~3,034~~1,946 and ~~9,574~~3,753 investment sales, financing and other transactions with total sales volume of approximately ~~$22.6~~$9.7 billion and ~~$69.9~~$20.2 billion, respectively. During the year ended December 31, ~~2021,~~2022, we closed ~~13,255~~12,272 investment sales, financing and other transactions with total sales volume of approximately ~~$84.4~~$86.3 billion.

We generate ~~revenues~~revenue by collecting real estate brokerage commissions upon the sale, and fees upon the financing, of commercial properties, and by providing equity advisory services, loan sales, loan guarantees and consulting and advisory services. Real estate brokerage commissions are typically based upon the value of the property and financing fees are typically based upon the size of the loan. During the three months ended ~~September~~June 30, ~~2022, and the year ended December 31, 2021,~~2023, approximately ~~90%~~86% of our ~~revenues were~~revenue was generated from real estate brokerage commissions, 9%11% from financing fees and 1%3% from other real estate related services.

We divide commercial real estate into four major market segments, characterized by price:

• Properties priced less than $1 million;

• Private client market: properties priced from $1 million to up to but less than $10 million;

• Middle market: properties priced from $10 million to up to but less than $20 million; and

• Larger transaction market: properties priced from $20 million and above.

We are the industry leader in serving private clients in the $1-$10 million private client market segment, which contributed approximately ~~57%~~69% and ~~61%~~59% of our real estate brokerage commissions during the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and approximately ~~57%~~68% and ~~62%~~58% of our real estate brokerage commissions during the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, respectively. The following ~~table sets~~tables set forth the number of transactions, sales volume and ~~revenues~~revenue by commercial real estate market segment for real estate brokerage:

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		Three Months Ended September 30,																Three Months Ended June 30,
		2022					2021					Change						2023					2022					Change
Real Estate Brokerage	Real Estate Brokerage	Number	Volume		Revenues		Number	Volume		Revenues		Number	Volume		Revenues		Real Estate Brokerage	Number	Volume		Revenue		Number	Volume		Revenue		Number	Volume		Revenue
			(in millions)		(in thousands)			(in millions)		(in thousands)			(in millions)		(in thousands)				(in millions)		(in thousands)			(in millions)		(in thousands)			(in millions)		(in thousands)
<$1 million	<$1 million	243	$	154	$	7,252	267	$	183	$	7,419	(24)	$	(29)	$	(167)	<$1 million	209	$	120	$	4,665	279	$	168	$	6,672	(70)	$	(48)	$	(2,007)
Private Client Market ($1 – <$10 million)	Private Client Market ($1 – <$10 million)	1,658	5,885		165,534		1,894	6,296		183,033		(236)	(411)		(17,499)		Private Client Market ($1 – <$10 million)	1,070	3,571		96,238		2,021	7,348		209,868		(951)	(3,777)		(113,630)
Middle Market ($10 – <$20 million)	Middle Market ($10 – <$20 million)	188	2,527		46,901		136	1,940		35,353		52	587		11,548		Middle Market ($10 – <$20 million)	77	1,021		17,425		209	2,819		56,456		(132)	(1,798)		(39,031)
Larger Transaction Market (≥$20 million)	Larger Transaction Market (≥$20 million)	157	9,360		73,202		159	8,088		73,954		(2)	1,272		(752)		Larger Transaction Market (≥$20 million)	66	2,830		22,002		176	9,533		81,689		(110)	(6,703)		(59,687)
		2,246	$	17,926	$	292,889	2,456	$	16,507	$	299,759	(210)	$	1,419	$	(6,870)		1,422	$	7,542	$	140,330	2,685	$	19,868	$	354,685	(1,263)	$	(12,326)	$	(214,355)


		Nine Months Ended September 30,																Six Months Ended June 30,
		2022					2021					Change						2023					2022					Change
Real Estate Brokerage	Real Estate Brokerage	Number	Volume		Revenues		Number	Volume		Revenues		Number	Volume		Revenues		Real Estate Brokerage	Number	Volume		Revenue		Number	Volume		Revenue		Number	Volume		Revenue
			(in millions)		(in thousands)			(in millions)		(in thousands)			(in millions)		(in thousands)				(in millions)		(in thousands)			(in millions)		(in thousands)			(in millions)		(in thousands)
<$1 million	<$1 million	728	$	450	$	19,711	791	$	532	$	21,175	(63)	$	(82)	$	(1,464)	<$1 million	392	$	236	$	9,703	485	$	296	$	12,459	(93)	$	(60)	$	(2,756)
Private Client Market ($1 – <$10 million)	Private Client Market ($1 – <$10 million)	5,285	18,929		536,433		4,861	15,639		446,592		424	3,290		89,841		Private Client Market ($1 – <$10 million)	2,040	6,825		186,741		3,627	13,044		370,899		(1,587)	(6,219)		(184,158)
Middle Market ($10 – <$20 million)	Middle Market ($10 – <$20 million)	581	7,849		150,117		370	5,141		97,699		211	2,708		52,418		Middle Market ($10 – <$20 million)	143	1,921		34,793		393	5,322		103,216		(250)	(3,401)		(68,423)
Larger Transaction Market (≥$20 million)	Larger Transaction Market (≥$20 million)	474	27,771		228,222		352	17,619		149,992		122	10,152		78,230		Larger Transaction Market (≥$20 million)	126	5,692		44,139		317	18,411		155,020		(191)	(12,719)		(110,881)
		7,068	$	54,999	$	934,483	6,374	$	38,931	$	715,458	694	$	16,068	$	219,025		2,701	$	14,674	$	275,376	4,822	$	37,073	$	641,594	(2,121)	$	(22,399)	$	(366,218)

Factors Affecting Our Business

Our business and our operating results, financial condition and liquidity are significantly affected by the number and size of commercial real estate investment sales and financing transactions that we close in any period. The number and size of these transactions are affected by our ability to recruit and retain investment sales and financing professionals, identify and contract properties for sale, and identify those that need financing and refinancing. We principally monitor the commercial real estate market through four factors, which generally drive our business. The factors are the economy, commercial real estate supply and demand, capital markets, and investor sentiment and investment activity.

The Economy

Our business is dependent on economic conditions within the markets in which we operate. Changes in the economy on a global, national, regional or local basis can have a positive or negative impact on our business. Economic indicators and projections related to job growth, unemployment, interest rates, retail spending and consumer confidence trends can have a positive or negative impact on our business. Overall market conditions, including global trade, interest rate changes, inflation, and job creation, can affect investor sentiment and, ultimately, the demand for our services from investors in real estate.

~~The U.S. economy continued~~Economic uncertainty continues to ~~deliver a variety of mixed signals in~~weigh on the ~~third quarter of 2022. Job~~investor perspective. Although numerous key economic indicators such as job creation, ~~accelerated to a monthly average of 371,667 in the third quarter, outpacing the second quarter and pushing~~ the unemployment rate ~~back down to 3.5%, in alignment~~and GDP growth remain positive and most economists are now predicting a soft landing, recession risk remains a concern among investors. Inflation has eased, with the ~~50+ year record low. Inflation adjusted retail sales also gained ground while~~headline Consumer Price Index (CPI) falling to 3.0% and the ~~preliminary third quarter GDP reading indicated~~forward looking Producer Price Index (PPI) falling to just 0.1%, but many measurements including the ~~economy grew~~core Personal Consumption Expenditures Index (core PCE), which is monitored most closely by 2.6%, more than erasing the contraction of the first half of the year. However, inflation remained elevated, with headline figures at 8.2% and core inflation ending the quarter at 6.7%, both well above the Federal Reserve, ~~target. In response to elevated inflation, following its September 21, 2022 meeting,~~still remain well above their target of 2.0%. Following the Federal ~~Reserve issued a 75~~Reserve's 25 basis points increase in July 2023, we believe the combination of slowing job creation, reduced wage pressure, easing inflation, tighter credit markets and more modest economic growth has the potential to curtail further Federal Reserve ~~Rate, its fifth increase~~rate increases.

Various economic indicators continue to send mixed signals about the near-term economic outlook. The two best-known indicators of ~~2022. This was followed by~~ an ~~additional 75 basis point increase on November 2, 2022~~ensuing recession remain in contradiction. The treasury rate yield curve inverted early in the fourth quarter last year, and guidance suggesting another rate increase in December.. Chairman Powell also indicated that unemployment would likely need to rise significantly in 2023 to rein in inflation. The September 21st forward guidance weighed heavily on the stock marketshort-term treasury rates remain higher than longer-term rates, signaling a possible downturn ahead.

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~~contributing~~However, the 3.6% unemployment rate has moved little, remaining near its 54-year low as of July 2023, indicating continued labor market strength. Other measures are mixed as well. The Institute for Supply Management (ISM) manufacturing index continues to point to contraction, while the ISM services index points to growth. Meanwhile, job creation, inflation-adjusted retail sales and other metrics have begun to flatten, suggesting the economic growth trajectory may be shifting into neutral. The inconsistency among indicators continues to confound economic forecasts for 2023, but the broad consensus is leaning toward a ~~5% decrease~~soft landing and a period of slow growth in late 2023, early 2024. The rising perception that the ~~S&P 500 during September. While many economic drivers remain sound, the Federal Reserve’s rate hikes and increasingly aggressive positioning~~U.S. economy could avoid a recession has ~~weighed on investor sentiment,~~convinced an increasing number of commercial real estate ~~valuations, and tighter underwriting among lenders. These dynamics adversely impact~~investors to cautiously reengage the ~~short-to-mid-term business and~~ investment ~~outlook~~.market, but the sector has yet to attain the critical mass needed to fully revive investment activity.

Commercial Real Estate Supply and Demand

Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control. These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds.

~~While underlying economic growth metrics suggest~~Space demand for most commercial ~~real estate space should still be comparatively strong, third~~property types remained positive in the second quarter of 2023. Apartment absorption was reinvigorated by strengthening consumer sentiment and reduced fears of a recession, but the number of net new apartment leases fell short of the robust construction deliveries in the quarter, resulting in a 10 basis points rise of vacancy rates on a national level. Nonetheless, rent growth resumed in the second quarter, taking the national average ~~occupancy levels decreased slightly in apartment, office and industrial properties.~~effective rent to a record high. Retail space demand ~~however, remained~~was also positive ~~pushing~~in the occupancy rate back into alignment with pre-pandemic levels. Elevated apartment and industrial construction levels have been a significant factor weighing on overall occupancy, but concerns about an impending Federal Reserve induced recession has restrained both household formation and space leasing commitments. The cooling economic outlook and reduced competition for available space has tempered rent growth momentum, in turn moderating the aggressiveness of investment buyer underwriting.second quarter, slightly outpacing construction. As a result, retail vacancy rates remained flat for a third consecutive quarter at 4.6%, matching the ~~bid-ask spread~~record low set in 2018. Industrial space demand remained positive in the second quarter, but tapered relative to the first quarter in response to reduced retailer inventories and downshifted international trade. The robust pace of industrial space construction, on track to deliver a record 400 million square feet in 2023, resulted in an up-tick in industrial vacancy rates to 4.3%, up from the record low 3.6% rate achieved in the second quarter last year. Nonetheless, industrial rent growth remains elevated, achieving a 14.3% gain on a year-over-year basis.

Contrary to the positive momentum achieved by the other property types, office space demand has yet to stabilize. Hybrid and work-from-home business practices remain in place for most companies, but questions surrounding the long-term viability of these models remain. Some companies have reinvigorated their efforts to bring workers back to the office full time, while others appear content with more flexible practices. Thus far, no clear consensus has emerged, and long-term office space demand remains in question. The national average office vacancy rate continued to rise in the second quarter, reaching a 23 year record high of 17%. Suburban office space has outperformed the urban core while class B/C office space has a lower vacancy rate than class A office space. The broad-based uncertainty surrounding office space demand has been further complicated by dramatically tightened lending on office building assets, which has further restrained the limited office investor activity.

Although fundamentals for most property types remain positive, both lending and investor activity remain below the pre-pandemic norm. The expectation gap between buyers and sellers ~~has widened, which in turn has begun~~remains wide, though it is beginning to slow commercial real estate transactions and weigh on investment activity. Financial market turbulence, economic crosscurrents and rising interest rates have the potential to create additional hurdles for investorsshow preliminary signs of stabilization. Space demand will likely be strongly influenced in the ~~final quarter~~second half of ~~2022~~2023 by Federal Reserve rate movements, consumer and ~~into 2023.~~business sentiment, and the prospects of a soft landing.

Capital Markets

Credit and liquidity issues in the financial markets have a direct impact on the flow of capital to the commercial real estate market. Real estate purchases are often financed with debt, and as a result, credit and liquidity impact transaction activity and prices. Movements of interest rates in one direction, whether increasing or decreasing, could adversely or positively affect the operations and income potential of commercial real estate properties, as well as lender and equity underwriting for real estate investments. These changes directly influence investor demand for commercial real estate investments. Furthermore, the use of debt or loan-to-value ratios can shift along with lender confidence and underwriting standards. At times of heightened uncertainty or liquidity issues, loan-to-values decline, requiring buyers to provide more equity and take more risk to close deals.

InThe capital markets remain at the heart of the commercial real estate transaction slowdown. The combination of sharply higher interest rates with tighter lender underwriting, reduced loan-to-value standards and a broad-based reduction in the volume of available debt capital have restrained market liquidity and forced investors to recalibrate their ~~effort~~underwriting. This exacerbated the buyer/seller expectation gap and restrained trading in the first half of 2023.

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The rapid withdrawal of savings from Silicon Valley Bank in March and then First Republic Bank in May forced the shutdown of both banks, causing other banks to ~~battle inflation,~~shore up their reserves. To mitigate their risk exposure to runs on the ~~Federal Reserve initiated its most aggressive interest rate increase cycle since 1980. Chairman Powell intensified the pressure in August, declaring “There will be pain.” He delivered~~bank by depositors, banks have increased their reserves by 10% to $3.3 trillion. They accomplished this by reducing their lending, including their lending on ~~that declaration following~~commercial real estate properties, and increasing their emphasis on deposits.

Following the Federal Reserve’s ~~September meeting with a third 75~~25 basis points rate increase ~~and forward-looking guidance suggesting there could~~in July 2023, Chairman Powell indicated that future rate decisions will be ~~125 basis points of additional increases through~~data-driven. While this is not a clear signal that the Federal Reserve will stop increasing rates, Wall Street has assigned a 61% likelihood that the overnight rate at the end of the ~~year. Such increases could take~~year will be in the current range of 5.25% - 5.5%. The 10-year treasury rate has recently been range-bound in the upper 3% to low 4% range, with each periodic fluctuation requiring repricing and causing transaction delays. Although many lenders continue to maintain lending rate floors that have sustained a widened lender spread and higher interest rates for borrowers, if the Federal Reserve ~~Rate~~signals rate stability at its September meeting, lenders may begin to tighten their spreads thereby reducing rates, if only nominally. While debt capital remains available for most property types, the underwriting remains stringent, with tightened loan-to-value percentages that have forced investors to underwrite acquisitions with higher cap rates. An increasing number of property owners have begun to seek updated property valuations and more owners have begun to test the sales market, suggesting that activity may begin to revive, despite fewer property owners bringing assets to the ~~mid-4% range. Chairman Powell further stated that to bring inflation fully under control, unemployment will need to rise to 4.4% by year-end 2023 and the substantial stockpile of capital~~market in the ~~market would need to be reduced. This messaging by~~first half of the year.

The Federal Reserve’s rate decision in September could significantly impact the market. Should the Federal Reserve ~~weighed on financial markets, pushed short-term interest rates higher and caused~~signal at least a temporary end to their rate increases, lenders may begin to ~~increase~~rein in their spreads, ~~tighten~~thereby reducing mortgage rates. Investors may begin to underwrite assets more aggressively, potentially narrowing the buyer/seller expectation gap. However, if the Federal Reserve continues to signal an intention to raise rates further, many lenders and investors may sustain their ~~underwriting standards, increase their debt-service coverage requirements~~more conservative practices. In addition, concerns regarding commercial property loan performance and ~~reduce their loan-to-value thresholds. Together, this sequence of events has raised~~potential defaults have increased, particularly for office properties. Although overall systemic risk appears limited given healthy property fundamentals in most property types, these concerns add to a conservative stance among lenders in general. We believe record capital on the ~~cost of capital~~sidelines, eventual clarity on the factors outlined above and reduced lending liquidity, in turn hampering investors’ ability to purchase and sell commercial real estate assets. While well-financed buyers, particularly private investors, continue to close transactions, the rapid financial market changes are expected to weigh on activity as the investor community recalibratesan end to the ~~new climate. Healthy real estate fundamentals, the sector's inflation-hedging aspects and competitive yields bode well for capital flows and trading activity~~tightening cycle should result in ~~the long-term.~~a recovery in transaction volumes. The timing of such a recovery is difficult to predict.

Investor Sentiment and Investment Activity

We facilitate ~~investors'~~investors buying, selling, and financing properties in order to generate commissions. Investors’ desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity. In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups and estate planning.

~~Although~~Commercial real estate sales activity remained constrained through the first half of 2023 as tightened lender underwriting, significantly higher interest rates, recession risk and broad-based market uncertainty weighed on investor decisions. We believe a significant volume of investment capital remains on the sidelines waiting for economic, interest rate, financial market and commercial real estate ~~sales volume activity began~~pricing clarity. Price adjustments are necessary to ~~decrease in the third quarter, it remained quite strong from a historical perspective. It should be noted, however,~~recalibrate values to higher interest rates, but how long that ~~the majority of the transactions that closed in the third~~

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~~quarter were likely placed under contract in the first or second quarter before~~recalibration process takes will substantially depend on the Federal Reserve ~~began to place significantly increased pressure on the financial markets. As~~rate policies. Once investors re-engage in the market, ~~has shifted, investors have become more cautious, with some buyers choosing not~~it will likely take time to ~~complete under contract acquisitions~~navigate the price discovery process and in some cases losing earnest money deposits. Transaction delays and cancellations demonstrate the rising caution in the marketplace. Different property types and markets have felt varying levels of impact. for sales activity to revive.

Office properties, particularly those in the urban core, face the greatest uncertainty ~~while more inflation-resistant properties such as apartments, self-storage~~ and ~~hotels, particularly~~the greatest challenges in ~~growth markets, are better positioned~~acquiring debt financing. Apartment financing, underpinned by Fannie Mae and Freddie Mac, has generally been the most attainable, with typically lower interest rates than other property types. However, the rapid interest rate spike relative to ~~sustain buyer interest. Sales~~the sector's very low cap rates and the large apartment development pipeline together with the three quarters of ~~“defensive”~~weakened apartment demand in 2022 has weighted on apartment sales. Defensive assets — such as single-tenant net lease properties backed by ~~high credit~~high-credit tenants — and medical office assets continue to receive buyer interest, but sales of these types of properties have also ~~remained active. Economic uncertainty, together with~~fallen as the ~~rapidly changing~~flow of 1031 exchange capital ~~markets have widened~~coming from other property types has diminished. Ultimately, the market velocity will be dictated by a combination of the economic outlook, Federal Reserve action, interest rates and the narrowing of the buyer/seller expectation ~~gap, often slowing~~gap. If the ~~transaction process~~Federal Reserve signals an end to their rate increases and ~~restraining~~the economy avoids a significant recession, we believe commercial real estate sales ~~activity. Nonetheless, we believe~~activity should begin to move toward its historical norm in the ~~significant volume~~latter part of ~~investor capital looking for less volatile investment opportunities than are offered by other types~~2023.

Table of investments such as the stock market may favor hard assets like commercial real estate that offer some inflation resistance. Over the long-term, commercial real estate tends to be less volatile than most other investment classes and could attract additional investor attention during the period of economic and financial market instability.Contents

Key Financial Measures and Indicators

~~Revenues~~Revenue

Our ~~revenues are~~revenue is primarily generated from our real estate investment sales business. In addition to real estate brokerage commissions, we generate ~~revenues~~revenue from financing fees and from other ~~revenues,~~revenue, which are primarily comprised of consulting and advisory fees.

Because our business is transaction oriented, we rely on investment sales and financing professionals to continually develop leads, identify properties to sell and finance, market those properties and close the sale timely to generate a consistent flow of revenue. While our sales volume is impacted by seasonality factors, the timing of closings is also dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting in the $1-$10 million private client market segment. These factors can cause transactions to be accelerated or delayed beyond our control. Further, commission rates earned are generally inversely related to the value of the property sold. As a result of our expansion into the middle and larger transaction market segments, we have seen our overall commission rates fluctuate from period-to-period as a result of changes in the relative mix of the number and volume of investment sales transactions closed in the middle and larger transaction market segments as compared to the $1-$10 million private client market segment. These factors may result in period-to-period variations in our ~~revenues~~revenue that differ from historical patterns.

A small percentage of our transactions include retainer fees and/or breakage fees. Retainer fees are credited against a success-based fee paid upon the closing of a transaction or a breakage fee. Transactions that are terminated before completion will sometimes generate breakage fees, which are usually calculated as a set amount or a percentage of the fee we would have received had the transaction closed.

Real Estate Brokerage Commissions

We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or investors seeking to buy properties. ~~Revenues~~Revenue from real estate brokerage commissions ~~are~~is recognized at the close of escrow.

Financing Fees

We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients’ existing mortgage debt. We recognize financing fee ~~revenues~~revenue at the time the loan closes, and we have no remaining significant obligations in connection with the transaction.

To a lesser extent, we also earn fees on loan performance, equity advisory services, loan sales, loan guarantees and ancillary services associated with financing activities. We recognize guarantee fees over the term of the guarantee and other fees when we have no further obligations, generally upon the closing of a transaction. ~~We previously~~During the six months ended June 30, 2022, we generated mortgage servicing fees through the provision of collection, remittance, recordkeeping, reporting and other related mortgage servicing functions, activities and services. We recognized mortgage servicing ~~revenues~~revenue upon the acquisition of a servicing obligation.

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Other Revenue

Other ~~Revenues~~

~~Other revenues include~~revenue includes fees generated from consulting, advisory and other real estate services performed by our investment sales ~~professionals, as well as referral fees from other real estate brokers. Revenues~~professionals. Revenue from these services ~~are~~is recognized as they are performed and completed.

Operating Expenses

Our operating expenses consist of cost of services, selling, general and administrative expenses and depreciation and amortization. The significant components of our expenses are further described below.

Cost of Services

The majority of our cost of services expense is variable commissions paid to our investment sales professionals and compensation-related costs related to our financing activities. Commission expenses are directly attributable to providing services to our clients for investment sales and financing services. Most of our investment sales and financing professionals are independent contractors and are paid commissions; however, because there are some who are initially paid a salary and certain of our financing professionals are employees, costs of services also include employee-related compensation, employer taxes and benefits for those employees. The commission rates we pay to our investment sales and financing

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professionals vary based on individual contracts negotiated and are generally higher for the more experienced professionals. Some of our most senior investment sales and financing professionals can also earn additional commissions after meeting certain annual financial thresholds. These additional commissions are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional commissions are generally deferred for a period of one to three years, at our election, and paid at the beginning of the second, third or fourth calendar year. Cost of services also includes referral fees paid to other real estate brokers where we are the principal service provider. Cost of services, therefore, can vary based on the commission structure of the independent contractors that closed transactions in any particular period.

Selling, General and Administrative Expenses

The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff. In addition, these costs include facilities costs (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction costs related to acquisitions, costs to acquire and retain talent, changes in fair value for contingent and deferred consideration and other administrative expenses. Also included in selling, general and administrative are expenses for stock-based compensation to non-employee directors, employees and independent contractors (i.e. investment sales and financing professionals) under the Amended and Restated 2013 Omnibus Equity Incentive Plan (“2013 Plan”) and the 2013 Employee Stock Purchase Plan (“ESPP”).

Depreciation and Amortization Expense

Depreciation expense consists of depreciation recorded on our computer software and hardware and furniture, fixture and equipment. Depreciation is provided over estimated useful lives ranging from three to seven years for assets. Amortization expense consists of (i) amortization recorded for the 2022 period on our mortgage servicing rights (“MSRs”) using the interest method over the period that servicing income is expected to be received and (ii) amortization recorded on intangible assets amortized on a straight-line basis using a useful life between one and seven years.

Other Income (Expense), Net

Other income (expense), net primarily consists of interest income, net gains or losses on our deferred compensation plan assets, realized gains and losses on our marketable debt securities, available-for-sale, foreign currency gains and losses and other non-operating income and expenses.

Interest Expense

Interest expense primarily consists of interest expense associated with the stock appreciation rights (“SARs”) liability, and our Credit Agreement.

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Provision (Benefit) for Income Taxes

We are subject to U.S. and Canadian federal taxes and individual state and local taxes based on the income generated in the jurisdictions in which we operate. Our effective tax rate fluctuates as a result of (i) changes in our annual effective tax rate applied to current pre-tax income (loss), (ii) the change in the mix of our activities in the jurisdictions in which we operate due to differing tax rates in those jurisdictions and (iii) the impact of permanent items, including compensation charges, qualified transportation fringe benefits, uncertain tax positions, meals and entertainment and tax-exempt deferred compensation plan assets. Our provision (benefit) for income taxes includes the windfall tax benefits and shortfall expenses, net, from shares issued in connection with our 2013 Plan and ESPP.

We record deferred taxes, net based on the tax rate expected to be in effect at the time those items are expected to be recognized for tax purposes.

Results of Operations

Following is a discussion of our results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021.~~2022. The tables included in the period comparisons below provide summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results.

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Key Operating Metrics

We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We also believe these metrics are relevant to investors’ and others’ assessment of our financial condition and results of operations. During the three months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we closed more than ~~3,000~~1,900 and ~~3,300~~3,600 investment sales, financing and other transactions, respectively, with total sales volume of approximately ~~$22.6~~$9.7 billion and ~~$20.8~~$26.4 billion, respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, we closed more than ~~9,500~~3,700 and ~~8,900~~6,500 investment sales, financing and other transactions, respectively, with total sales volume of ~~$69.9~~approximately $20.2 billion and ~~$50.2~~$47.4 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
Real Estate Brokerage 2022 2021 2022 2021
Average Number of Investment Sales Professionals 1,792 1,909 1,823 1,934
Average Number of Transactions per Investment Sales Professional 1.25 1.29 3.88 3.30
Average Commission per Transaction $ 130,405 $ 122,052 $ 132,213 $ 112,246
Average Commission Rate 1.63 % 1.82 % 1.70 % 1.84 %
Average Transaction Size (in thousands) $ 7,981 $ 6,721 $ 7,781 $ 6,108
Total Number of Transactions 2,246 2,456 7,068 6,374
Total Sales Volume (in millions) $ 17,926 $ 16,507 $ 54,999 $ 38,931

Three Months Ended
September 30, Nine Months Ended
September 30,
Financing (1)
2022 2021 2022 2021
Average Number of Financing Professionals 87 86 86 86
Average Number of Transactions per Financing Professional 5.95 6.98 20.17 20.67
Average Fee per Transaction $ 44,751 $ 42,319 $ 44,363 $ 36,126
Average Fee Rate 0.70 % 0.77 % 0.74 % 0.82 %
Average Transaction Size (in thousands) $ 6,350 $ 5,503 $ 6,021 $ 4,390
Total Number of Transactions 518 600 1,735 1,778
Total Financing Volume (in millions) $ 3,289 $ 3,302 $ 10,447 $ 7,806


	Three Months Ended June 30,						Six Months Ended June 30,
Real Estate Brokerage	2023			2022			2023			2022
Average Number of Investment Sales Professionals	1,757			1,822			1,769			1,839
Average Number of Transactions per Investment Sales Professional	0.81			1.47			1.53			2.62
Average Commission per Transaction	$	98,686		$	132,099		$	101,954		$	133,056
Average Commission Rate	1.86		%	1.79		%	1.88		%	1.73		%
Average Transaction Size (in thousands)	$	5,303		$	7,399		$	5,433		$	7,688
Total Number of Transactions	1,422			2,685			2,701			4,822
Total Sales Volume (in millions)	$	7,542		$	19,868		$	14,674		$	37,073


	Three Months Ended June 30,						Six Months Ended June 30,
Financing (1)	2023			2022			2023			2022
Average Number of Financing Professionals	95			87			94			86
Average Number of Transactions per Financing Professional	2.99			8.01			5.99			14.15
Average Fee per Transaction	$	52,166		$	44,985		$	49,382		$	44,198
Average Fee Rate	0.90		%	0.70		%	0.82		%	0.75		%
Average Transaction Size (in thousands)	$	5,786		$	6,453		$	5,986		$	5,882
Total Number of Transactions	284			697			563			1,217
Total Financing Volume (in millions)	$	1,643		$	4,498		$	3,370		$	7,158

(1)Operating metrics exclude certain financing fees not directly associated to transactions.

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Comparison of Three Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022

Below are key operating results for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the three months ended ~~September~~June 30, ~~2021~~2022 (dollars in thousands):


		Three Months Ended September 30, 2022		Percentage of Revenue		Three Months Ended September 30, 2021			Percentage of Revenue		Change							Three Months Ended June 30, 2023			Percentage of Revenue		Three Months Ended June 30, 2022			Percentage of Revenue		Change
								Dollar			Percentage									Dollar					Percentage
Revenues:
Revenue:																	Revenue:
Real estate brokerage commissions	Real estate brokerage commissions	$	292,889	90.4	%	$	299,759		90.2	%	$	(6,870)	-2.3	%	(2.3)	%	Real estate brokerage commissions	$	140,330		86.2	%	$	354,685		89.6	%	$	(214,355)	-60.4	%	(60.4)	%
Financing fees	Financing fees	28,099		8.7		29,391			8.8		(1,292)		-4.4	%	(4.4)	%	Financing fees	17,896			11.0		36,811			9.3		(18,915)		-51.4	%	(51.4)	%
Other revenues		2,852		0.9		3,233			1.0		(381)		-11.8	%	(11.8)	%
Total revenues		323,840		100		332,383			100		(8,543)		-2.6	%	(2.6)	%
Other revenue																	Other revenue	4,640			2.8		4,461			1.1		179		4.0	%	4.0	%
Total revenue																	Total revenue	162,866			100		395,957			100		(233,091)		-58.9	%	(58.9)	%
Operating expenses:	Operating expenses:																Operating expenses:
Cost of services	Cost of services	217,360		67.1		219,194			65.9		(1,834)		-0.8	%	(0.8)	%	Cost of services	101,163			62.1		256,042			64.7		(154,879)		-60.5	%	(60.5)	%
Selling, general and administrative	Selling, general and administrative	73,004		22.6		64,673			19.5		8,331		12.9	%	12.9	%	Selling, general and administrative	68,910			42.3		79,841			20.2		(10,931)		-13.7	%	(13.7)	%
Depreciation and amortization	Depreciation and amortization	2,924		0.9		2,850			0.9		74		2.6	%	2.6	%	Depreciation and amortization	3,468			2.1		3,332			0.8		136		4.1	%	4.1	%
Total operating expenses	Total operating expenses	293,288		90.6		286,717			86.3		6,571		2.3	%	2.3	%	Total operating expenses	173,541			106.5		339,215			85.7		(165,674)		-48.8	%	(48.8)	%
Operating income		30,552		9.4		45,666			13.7		(15,114)		-33.1	%	(33.1)	%
Other income, net		978		0.3		323			0.1		655		202.8	%	202.8	%
Operating (loss) income																	Operating (loss) income	(10,675)			(6.5)		56,742			14.3		(67,417)		-118.8	%	(118.8)	%
Other income (expense), net																	Other income (expense), net	4,890			3.0		(461)			(0.1)		5,351		-1160.7	%	(1)
Interest expense	Interest expense	(229)		0.0		(144)			0.0		(85)		59.0	%	59.0	%	Interest expense	(216)			(0.1)		(158)			0.0		(58)		36.7	%	36.7	%
Income before provision for income taxes		31,301		9.7		45,845			13.8		(14,544)		-31.7	%	(31.7)	%
(Loss) income before provision for income taxes																	(Loss) income before provision for income taxes	(6,001)			(3.7)		56,123			14.2		(62,124)		-110.7	%	(110.7)	%
Provision for income taxes	Provision for income taxes	9,939		3.1		11,921			3.6		(1,982)		-16.6	%	(16.6)	%	Provision for income taxes	2,728			1.7	%	13,955			3.5		(11,227)		-80.5	%	(80.5)	%
Net income		$	21,362	6.6	%	$	33,924		10.2	%	$	(12,562)	-37.0	%	(37.0)	%
Net (loss) income																	Net (loss) income	$	(8,729)		(5.4)	%	$	42,168		10.6	%	$	(50,897)	-120.7	%	(120.7)	%
Adjusted EBITDA ~~(1)~~(2)	Adjusted EBITDA ~~(1)~~(2)	$	36,633	11.3	%	$	50,985		15.3	%	$	(14,352)	-28.1	%	(28.1)	%	Adjusted EBITDA ~~(1)~~(2)	$	(1,056)		(0.6)	%	$	62,909		15.9	%	$	(63,965)	-101.7	%	(101.7)	%

(1)Percentage not meaningful.

(2)Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.”

Revenue

Our total revenue was $162.9 million for the three months ended June 30, 2023 compared to $396.0 million for the same period in 2022, a decrease of $233.1 million, or 58.9%. Total revenue decreased as a result of decreases in real estate brokerage commissions and financing fees, as described below. See "Factors Affecting Our Business" section for additional market information.

Real estate brokerage commissions. Revenue from real estate brokerage commissions decreased to $140.3 million for the three months ended June 30, 2023 from $354.7 million for the same period in 2022, a decrease of $214.4 million, or 60.4%. The number of transactions decreased by 47.0% and the average commission per transaction decreased 25.3%, which drove a decrease of revenue of 54.1% in the Private Client Market and a decrease of 71.5% in the combined Middle Market and Larger Transaction Market. The average commission rate increased by seven basis points in the second quarter of 2023 compared to the same quarter in 2022 as a result of a shift in the proportion of transactions to the Private Client Market from the Middle Market and Larger Transaction Market as Private Client Market transactions typically earn higher commission rates.

Financing fees. Revenue from financing fees decreased to $17.9 million for the three months ended June 30, 2023 from $36.8 million for the same period in 2022, a decrease of $18.9 million, or 51.4%, resulting primarily from a 59.3% decrease in the number of financing transactions, partially offset by a 16.0% increase in the average fee per transaction. The average fee rate increased by 20 basis points primarily due to a decrease in the average transaction size of 10.3% as a result of a decrease in the percentage of larger size financing transactions, which typically earn lower commission rates.

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Other revenue. Other revenue increased to $4.6 million for the three months ended June 30, 2023 from $4.5 million for the same period in 2022, an increase of $0.2 million, or 4.0%. The increase was primarily driven by increases in consulting and advisory services during the three months ended June 30, 2023, compared to the same period in 2022.

Total Operating Expenses

Our total operating expenses were $173.5 million for the three months ended June 30, 2023 compared to $339.2 million for the same period in 2022, a decrease of $165.7 million, or 48.8%. Cost of services decreased by $154.9 million and selling, general, and administrative expenses decreased by $10.9 million, as described below. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities.

Cost of services. Cost of services decreased to $101.2 million for the three months ended June 30, 2023 from $256.0 million for the same period in 2022, a decrease of $154.9 million, or 60.5%. The decrease was primarily due to decreased commission expenses driven by the related decreased revenue noted above. Cost of services as a percentage of total revenue decreased by 260 basis points to 62.1% compared to the same period in 2022.

Selling, general, and administrative expense. Selling, general and administrative expense for the second quarter of 2023 decreased to $68.9 million, from $79.8 million compared to the same period in the prior year, a decrease of $10.9 million or 13.7%. The change was primarily due to a reduction in compensation related costs, specifically performance-based bonuses for the second quarter of 2023, partially offset by an increase in business development, marketing, and other support costs related to the long-term retention of our sales and financing professionals.

Depreciation and amortization expense. Depreciation and amortization expense increased by an immaterial amount for the three months ended June 30, 2023 compared to the same period in the prior year.

Other Income (Expense), Net

Other income (expense), net increased to income of $4.9 million for the three months ended June 30, 2023 from an expense of $0.5 million for the same period in 2022. The increase of $5.4 million was primarily driven by an increase of $3.2 million in income from investments and a favorable change of $1.7 million in the value of our deferred compensation plan assets that are held in a rabbi trust.

Interest Expense

Interest expense increased by an immaterial amount for the three months ended June 30, 2023 compared to the same period in 2022, and primarily relates to interest expense on the Company’s SARs liability.

Provision for Income Taxes

The provision for income taxes was $2.7 million for the three months ended June 30, 2023, compared to $14.0 million for the same period in 2022. The effective income tax rate for the three months ended June 30, 2023, was (45.5)% compared to 24.9% for the same period in 2022. The tax provision for the three months ended June 30, 2023 is affected by non-deductible permanent items and changes in estimates to reflect income taxes through June 30, 2023 at the estimated annual effective tax rate. This resulted in recording a tax provision versus a tax benefit despite the loss before income taxes for the three months ended June 30, 2023.

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Comparison of Six Months Ended June 30, 2023 and 2022

Below are key operating results for the six months ended June 30, 2023 compared to the six months ended June 30, 2022 (dollars in thousands):


	Six Months Ended June 30, 2023		Percentage of Revenue		Six Months Ended June 30, 2022		Percentage of Revenue		Change
									Dollar				Percentage
Revenue:
Real estate brokerage commissions	$	275,376	86.7	%	$	641,594	89.7	%	$	(366,218)	-57.1	%	(57.1)	%
Financing fees	33,764		10.6		63,264		8.8		(29,500)		-46.6	%	(46.6)	%
Other revenue	8,518		2.7		10,563		1.5		(2,045)		-19.4	%	(19.4)	%
Total revenue	317,658		100		715,421		100		(397,763)		-55.6	%	(55.6)	%
Operating expenses:
Cost of services	196,590		61.9		452,810		63.3		(256,220)		-56.6	%	(56.6)	%
Selling, general and administrative	141,129		44.4		154,376		21.6		(13,247)		-8.6	%	(8.6)	%
Depreciation and amortization	6,675		2.1		7,243		1.0		(568)		-7.8	%	(7.8)	%
Total operating expenses	344,394		108.4		614,429		85.9		(270,035)		-43.9	%	(43.9)	%
Operating (loss) income	(26,736)		(8.4)		100,992		14.1		(127,728)		-126.5	%	(126.5)	%
Other income (expense), net	9,700		3.0		(11)		0.0		9,711		-88281.8	%	(1)
Interest expense	(431)		(0.1)		(318)		0.0		(113)		35.5	%	35.5	%
(Loss) income before (benefit) provision for income taxes	(17,467)		(5.5)		100,663		14.1		(118,130)		-117.4	%	(117.4)	%
(Benefit) provision for income taxes	(2,905)		(0.9)		25,712		3.6		(28,617)		-111.3	%	(111.3)	%
Net (loss) income	$	(14,562)	(4.6)	%	$	74,951	10.5	%	$	(89,513)	-119.4	%	(119.4)	%
Adjusted EBITDA (2)	$	(8,479)	(2.7)	%	$	114,761	16.0	%	$	(123,240)	-107.4	%	(107.4)	%

(1)Percentage not meaningful.

~~Revenues~~Revenue

Our total ~~revenues were $323.8~~revenue was $317.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$332.4~~$715.4 million for the same period in ~~2021,~~2022, a decrease of ~~$8.5~~$397.8 million, or ~~2.6%~~55.6%. Total ~~revenues~~revenue decreased as a result of decreases in real estate brokerage commissions, financing fees and other ~~revenues,~~revenue, as described below. See "Factors Affecting Our Business" section for additional market information.

Real estate brokerage commissions. ~~Revenues~~Revenue from real estate brokerage commissions decreased to ~~$292.9~~$275.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$299.8~~$641.6 million for the same period in ~~2021,~~2022, a decrease of ~~$6.9~~$366.2 million, or ~~2.3%~~57.1%. ~~While the~~The number of transactions decreased by ~~8.6%~~44.0% and the average commission per transaction decreased 23.4%, which drove a decrease of revenue of 49.7% in the ~~sales volume increased by 8.6%, driven by revenue from~~Private Client Market and a decrease of 69.4% in the combined Middle Market and Larger Transaction Market, which increased 9.9%, representing 41.0% of the brokerage revenue in the third quarter of 2022 compared to 36.5% in the third quarter of 2021. As larger transactions typically earn lower commission rates, theMarket. The average commission rate ~~has decreased~~increased by 1915 basis points in the ~~third~~second quarter of ~~2022~~2023 compared to the same quarter in ~~2021, which was~~2022, as a result of a shift in the ~~main driver for~~proportion of transactions to the ~~overall decrease in revenue.~~Private Client Market from the Middle Market and Larger Transaction Market as Private Client Market transactions typically earn higher commission rates.

Financing fees. ~~Revenues~~Revenue from financing fees decreased to ~~$28.1~~$33.8 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$29.4~~$63.3 million for the same period in ~~2021,~~2022, a decrease of ~~$1.3~~$29.5 million, or ~~4.4%~~46.6%, resulting primarily from a ~~13.7%~~53.7% decrease in the number of financing transactions, partially offset by ~~a 5.7%~~an 11.7% increase in the average fee per transaction. The average fee rate ~~declined~~increased by 7seven basis points due to an increase in the ~~average transaction size of 15.4% as a result of an increase in the~~ number of ~~larger~~smaller size financing transactions, which typically earn ~~lower~~higher commission rates.

~~Other revenues~~. Other revenues decreased to $2.9 million for the three months ended September 30, 2022 from $3.2 million for the same period in 2021, a decrease of $0.4 million, or 11.8%. The decrease was primarily driven by decreases

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Other revenue. Other revenue decreased to $8.5 million for the six months ended June 30, 2023 from $10.6 million for the same period in 2022, a decrease of $2.0 million, or 19.4%. The decrease was primarily driven by decreases in consulting and advisory services during the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023, compared to the same period in ~~2021.~~2022.

Total Operating Expenses

Our total operating expenses were ~~$293.3~~$344.4 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$286.7~~$614.4 million for the same period in ~~2021, an increase~~2022, a decrease of ~~$6.6~~$270.0 million, or ~~2.3%~~43.9%. ~~The increase was due to increases in~~Cost of services decreased by $256.2 million and selling, general, and administrative expenses ~~partially offset~~decreased by ~~decreases in cost of services,~~$13.2 million, as described below. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities.

Cost of services. Cost of services decreased to ~~$217.4~~$196.6 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$219.2~~$452.8 million for the same period in ~~2021,~~2022, a decrease of ~~$1.8~~$256.2 million, or ~~0.8%~~56.6%. The decrease was primarily due to decreased commission expenses driven by the related decreased ~~revenues~~revenue noted above. Cost of services as a percentage of total ~~revenues increased~~revenue decreased by 140 basis points to ~~67.1%~~61.9% compared to ~~65.9% for~~ the same period in 2021 primarily due to our senior investment sales and financing professionals who earn additional commissions after meeting certain annual financial thresholds, reaching their thresholds earlier due to the increase in sales volume.2022.

Selling, general, and administrative expense. Selling, general and administrative expense for the ~~third quarter of 2022 increased~~six months ended June 30, 2023 decreased to ~~$73.0~~$141.1 million, from ~~$64.7~~$154.4 million compared to the same period in the prior year, ~~an increase~~a decrease of ~~$8.3~~$13.2 million or ~~12.9%~~8.6%. The change was primarily due to ~~increases~~a reduction in ~~(i) compensation related costs; (ii)~~compensation-related costs, specifically performance-based bonuses for the first half of 2023, partially offset by an increase in business development, marketing, ~~and~~ other support and expensing of capital related to the long-term retention of our sales and financing ~~professionals; and (iii) return to in-person agent and client business events, conferences, and meetings.~~professionals.

Depreciation and amortization expense. Depreciation and amortization expense ~~was $2.9 million~~decreased by an immaterial amount for ~~both~~ the ~~three~~six months ended ~~September~~June 30, ~~2022 and 2021.~~2023 compared to the same period in the prior year.

Other Income (Expense), Net

Other income (expense), net increased to ~~$1.0~~$9.7 million for the ~~three~~six months ended ~~September~~June 30, ~~2022~~2023 from ~~$0.3~~$0.0 million for the same period in ~~2021.~~2022. The increase of ~~$0.7~~$9.7 million was primarily driven by an increase of ~~$1.9~~$6.7 million in income from investments ~~partially offset by an increase in foreign exchange loss of $0.9 million~~ and ~~an unfavorable~~a favorable change of ~~$0.3~~$2.7 million in the value of our deferred compensation plan assets that are held in a rabbi trust.

Interest Expense

Interest expense increased by an immaterial amount for the three months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021,~~2022, and primarily relates to interest expense on the Company’s SARs liability.

(Benefit) Provision for Income Taxes

The benefit for income taxes was $2.9 million for the six months ended June 30, 2023, compared to a provision for income taxes ~~was $9.9 million for the three months ended September 30, 2022, compared to $11.9~~of $25.7 million for the same period in ~~2021, a decrease of $2.0 million.~~2022. The effective income tax rate for the ~~three~~six months ended ~~September~~June 30, ~~2022,~~2023 was ~~31.7%~~16.6% compared to ~~26.0%~~25.5% for the same period in ~~2021.~~2022. The effective income tax rate ~~increased~~decreased primarily due to ~~an increase in the valuation allowance with respect to our Canadian operations.~~

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~~Comparison of Nine Months Ended September 30, 2022 and 2021~~

~~Below are key operating results for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 (dollars in thousands):~~

Nine Months Ended
September 30, 2022 Percentage
of
Revenue Nine Months Ended
September 30, 2021 Percentage
of
Revenue Change
Dollar Percentage
Revenues:
Real estate brokerage commissions $ 934,483 89.9 % $ 715,458 89.3 % $ 219,025 30.6 %
Financing fees 91,363 8.8 75,448 9.4 15,915 21.1 %
Other revenues 13,415 1.3 10,400 1.3 3,015 29.0 %
Total revenues 1,039,261 100.0 801,306 100.0 237,955 29.7 %
Operating expenses:
Cost of services 670,170 64.5 506,882 63.3 163,288 32.2 %
Selling, general and administrative 227,380 21.9 178,147 22.2 49,233 27.6 %
Depreciation and amortization 10,167 0.9 8,806 1.1 1,361 15.5 %
Total operating expenses 907,717 87.3 693,835 86.6 213,882 30.8 %
Operating income 131,544 12.7 107,471 13.4 24,073 22.4 %
Other income, net 967 0.1 2,737 0.3 (1,770) (64.7) %
Interest expense (547) (0.1) (436) (0.1) (111) 25.5 %
Income before provision for income taxes 131,964 12.7 109,772 13.6 22,192 20.2 %
Provision for income taxes 35,651 3.4 29,304 3.7 6,347 21.7 %
Net income $ 96,313 9.3 % $ 80,468 9.9 % $ 15,845 19.7 %
Adjusted EBITDA $ 151,394 14.6 % $ 124,790 15.6 % $ 26,604 21.3 %

~~Revenues~~

Our total revenues were $1.0 billion for the nine months ended September 30, 2022 compared to $801.3 million for the same period in 2021, an increase of $238.0 million, or 29.7%. Total revenues increased as a result of increases in real estate brokerage commissions, financing fees and other revenues, as described below.

~~Real estate brokerage commissions.~~ Revenues from real estate brokerage commissions increased to $934.5 million for the nine months ended September 30, 2022 from $715.5 million for the same period in 2021, an increase of $219.0 million, or 30.6%. The increase was primarily driven by a 41.3% increase in overall sales volume generated by a 10.9% increase in the number of investment sales transactions and a 27.4% increase in average transaction size. The revenue from the combined Middle Market and Larger Transaction Market increased 52.7% for the nine months ended September 30, 2022 as compared to the same period last year and represented 40.5% of the brokerage revenue for the nine months ended September 30, 2022, versus 34.6% of the brokerage revenue for the nine months ended September 30, 2021. The average commission rates in the nine months ended September 30, 2022 decreased by 14 basis points compared to the same period last year, primarily as a result of the increase in the number of larger transactions, which typically earn lower commission rates.

~~Financing fees~~. Revenues from financing fees increased to $91.4 million for the nine months ended September 30, 2022 from $75.4 million for the same period in 2021, an increase of $15.9 million, or 21.1%, resulting primarily from a 37.1% increase in average transaction size and a 33.8% increase in total financing volume, partially offset by a 2.4% decrease in the number of financing transactions. The average fee rate declined by 8 basis points as larger transactions typically earn lower commission rates.

~~Other revenues~~. Other revenues increased to $13.4 million for the nine months ended September 30, 2022 from $10.4 million for the same period in 2021, an increase of $3.0 million, or 29.0%. The increase was primarily driven by increases in consulting and advisory services during the nine months ended September 30, 2022, compared to the same period in 2021.

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~~Total Operating Expenses~~

Our total operating expenses were $907.7 million for the nine months ended September 30, 2022 compared to $693.8 million for the same period in 2021, an increase of $213.9 million, or 30.8%. The increase was due to increases in cost of services, which are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities, selling, general and administrative costs and depreciation and amortization expense, as described below.

~~Cost of services.~~ Cost of services increased to $670.2 million for the nine months ended September 30, 2022 from $506.9 million for the same period in 2021, an increase of $163.3 million, or 32.2%. The increase was primarily due to increased commission expenses driven by the related increased revenues noted above. Cost of services as a percentage of total revenues increased to 64.5% compared to 63.3% for the same period in 2021 primarily due to our senior investment sales and financing professionals who earn additional commissions after meeting certain annual financial thresholds, reaching their thresholds earlier due to the increase in sales volume.

~~Selling, general, and administrative expense.~~ Selling, general and administrative expense for nine months ended September 30, 2022 increased to $227.4 million from $178.1 million compared to the same period in 2021, an increase of $49.2 million, or 27.6%. The change was primarily due to increases in (i) compensation related costs; (ii) business development, marketing and other support related to the long-term retention of our sales and financing professionals; and (iii) return to in-person agent and client business events, conferences, and meetings.

~~Depreciation and amortization expense.~~ Depreciation and amortization expense increased to $10.2 million for the nine months ended September 30, 2022 from $8.8 million for the same period in 2021, an increase of $1.4 million, or 15.5%, principally related to additional amortization of intangible assets related to recent acquisitions and additional amortization of mortgage servicing rights due to the cancellation notices received on certain servicing contracts.

~~Other Income, Net~~

Other income, net decreased to $1.0 million for the nine months ended September 30, 2022 from $2.7 million for the same period in 2021. The decrease of $1.7 million was primarily driven by an increase in foreign exchange loss of $1.6 million, an unfavorable change of $3.1 million in the value of our deferred compensation plan assets that are held in a rabbi trust, partially offset by an increase of $2.5 million of income from investments and $0.4 million in sublease income.

~~Interest Expense~~

Interest expense increased by an immaterial amount for the nine months ended September 30, 2022 compared to the same period in 2021, and primarily relates to interest expense on the Company’s SARs liability.

~~Provision for Income Taxes~~

The provision for income taxes was $35.7 million for the nine months ended September 30, 2022, compared to $29.3 million for the same period in 2021, an increase of $6.3 million. The effective income tax rate for the nine months ended September 30, 2022, was 27.0% compared to 26.7% for the same period in 2021. The effective income tax rate increased primarily due to the change in the relationship of permanent nondeductible items to projected pre-tax income ~~before provision~~ for ~~income taxes and an increase in~~ the ~~valuation allowance with respect to our Canadian operations. These increases were partially offset by the windfall tax benefits, net related to the settlement of stock-based awards.~~full year.

Non-GAAP Financial Measure

In this quarterly report on Form 10-Q, we include a non-GAAP financial measure, adjusted earnings before interest income/expense, taxes, depreciation and amortization, stock-based compensation and other non-cash items, or Adjusted EBITDA. We define Adjusted EBITDA as net (loss) income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, ~~and~~ cash equivalents, and restricted cash, (ii) interest expense, (iii) provision (benefit) for income taxes, (iv) depreciation and amortization, and (v) stock-based ~~compensation, and (vi) non-cash Mortgage Servicing Rights (“MSR”) activity.~~compensation. We use Adjusted EBITDA in our business operations to evaluate the performance of our business, develop budgets and measure our performance against those budgets, among other things. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate our 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 our results as reported under U.S. GAAP. We find Adjusted EBITDA to be a useful

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management metric to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items.

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In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our 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 September 30,				Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
		2022		2021		2022		2021			2023		2022		2023		2022
Net income		$	21,362	$	33,924	$	96,313	$	80,468
Net (loss) income										Net (loss) income	$	(8,729)	$	42,168	$	(14,562)	$	74,951
Adjustments:	Adjustments:									Adjustments:
Interest income and other (1)	Interest income and other (1)	(2,365)		(503)		(3,959)		(1,470)		Interest income and other (1)	(4,090)		(979)		(8,480)		(1,594)
Interest expense	Interest expense	229		144		547		436		Interest expense	216		158		431		318
Provision for income taxes		9,939		11,921		35,651		29,304
Provision (benefit) for income taxes										Provision (benefit) for income taxes	2,728		13,955		(2,905)		25,712
Depreciation and amortization	Depreciation and amortization	2,924		2,850		10,167		8,806		Depreciation and amortization	3,468		3,332		6,675		7,243
Stock-based compensation	Stock-based compensation	4,544		2,703		12,675		7,653		Stock-based compensation	5,351		4,275		10,362		8,131
Non-cash MSR activity (2)		—		(54)		—		(407)
Adjusted EBITDA	Adjusted EBITDA	$	36,633	$	50,985	$	151,394	$	124,790	Adjusted EBITDA	$	(1,056)	$	62,909	$	(8,479)	$	114,761

(1)Other includes net realized gains (losses) on marketable debt securities available-for-sale.

~~(2)Non-cash MSR activity includes the assumption of servicing obligations.~~

Liquidity and Capital Resources

Our primary sources of liquidity are cash, ~~and~~ cash equivalents, and restricted cash, cash flows from operations, marketable debt securities, available-for-sale and, if necessary, borrowings under our Credit Agreement. In order to enhance yield to us, we have invested a portion of our cash in money market funds and fixed and variable income debt securities, in accordance with our investment policy approved by the ~~board~~Board of ~~directors.~~Directors. Certain of our investments in money market funds may not maintain a stable net asset value and may impose fees on redemptions and/or gating fees. To date, the Company has not experienced any restrictions or gating fees on its ability to redeem funds from money market funds. Although we have historically funded our operations through operating cash flows, there can be no assurance that we can continue to meet our cash requirements entirely through our operations, cash, ~~and~~ cash equivalents, and restricted cash, proceeds from the sale of marketable debt securities, available-for-sale or availability under our Credit Agreement.

Cash Flows

Our total cash, ~~and~~ cash equivalents, and restricted cash balance decreased by ~~$111.3~~$64.7 million to ~~$270.9~~$171.2 million at ~~September~~June 30, ~~2022,~~2023, compared to ~~$382.1~~$235.9 million at December 31, ~~2021.~~2022. The following table sets forth our summary cash flows for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 (in thousands):

Nine Months Ended
September 30,
2022 2021
Net cash flows (used in) provided by operating activities $ (11,775) $ 99,593
Net cash flows used in investing activities (31,291) (55,782)
Net cash flows used in financing activities (67,774) (6,081)
Effect of currency exchange rate changes on cash and cash equivalents (436) 125
Net (decrease) increase in cash and cash equivalents (111,276) 37,855
Cash and cash equivalents at beginning of period 382,140 243,152
Cash and cash equivalents at end of period $ 270,864 $ 281,007

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	Six Months Ended June 30,
	2023		2022
Net cash flows used in operating activities	$	(94,775)	$	(51,840)
Net cash flows provided by (used in) investing activities	82,373		(56,575)
Net cash flows used in financing activities	(52,372)		(61,899)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash	121		(175)
Net decrease in cash, cash equivalents, and restricted cash	(64,653)		(170,489)
Cash, cash equivalents, and restricted cash at beginning of period	235,873		382,140
Cash, cash equivalents, and restricted cash at end of period	$	171,220	$	211,651

Operating Activities

Cash flows used in operating activities were ~~$11.8~~$94.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~cash flows provided by operating activities of $99.6~~$51.8 million for the same period in ~~2021.~~2022. The ~~$111.4~~$42.9 million ~~decrease~~increase in cash flows ~~from~~used in operating activities for the ~~nine~~six months

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ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 was primarily due to ~~increased~~decreased operating expenses as discussed above, an increase in advances and loans to our investment sales and financing professionals, a higher amount of bonuses and deferred compensation and commissions paid in the first quarter of 2022, and increased payments of income ~~taxes. These increases were partially offset by increased revenues~~ as discussed above. The cash flows from operating activities are also affected by the timing of certain cash receipts and payments.

Investing Activities

Cash flows ~~used in~~provided by investing activities were ~~$31.3~~$82.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to cash flows used in investing activities of ~~$55.8~~$56.6 million for the same period in ~~2021.~~2022. The ~~$24.5~~$138.9 million ~~decrease~~increase in cash ~~used in~~provided by investing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 was primarily due to a net ~~decrease~~increase of ~~$41.8~~$127.0 million in net ~~cash used to purchase~~proceeds from sales and maturities of securities in ~~2022~~2023 compared to the same period in ~~2021, partially offset by $12.5 million paid in~~ 2022, ~~for~~as well as the 2022 acquisition of a business ~~and an increase of $4.3~~for $12.5 million, with no corresponding outflow in ~~purchases of property and equipment in 2022 over~~ the ~~same period in 2021.~~current period.

Financing Activities

Cash flows used in financing activities were ~~$67.8~~$52.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to ~~$6.1~~$61.9 million for the same period in ~~2021.~~2022. The ~~$61.7~~decrease of $9.5 million ~~additional~~in cash ~~flow~~flows used in financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2022~~2023 compared to the same period in ~~2021~~2022 was primarily due to ~~the payment~~a decrease of ~~$50.2~~$4.1 million ~~of dividends and $5.7 million~~ in ~~stock repurchases in 2022, which did not occur in 2021, and an increase of $4.9 million of~~ taxes paid related to net share settlement of stock-based ~~awards.~~awards, along with a decrease of $39.8 million in dividends paid, partially offset by $34.9 million in stock repurchases in 2023, which did not occur in the 2022 period.

Liquidity

We believe that our existing balances of cash, ~~and~~ cash equivalents, and restricted cash, cash flows expected to be generated from our operations, and proceeds from the sale of marketable debt securities, available-for-sale ~~and borrowings available under the Credit Agreement (defined below)~~ will be sufficient to satisfy our operating requirements for at least the next 12 months. If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could prevent us from funding acquisitions or otherwise financing our growth or operations. As of ~~September~~June 30, ~~2022,~~2023, cash, ~~and~~ cash equivalents, and restricted cash and marketable debt securities, available-for-sale, aggregated ~~$572.0~~$406.8 million, and we had $59.5 million of borrowing capacity under our Credit ~~Agreement.~~Agreement (defined below).

Credit Agreement

We have a Credit Agreement with Wells Fargo Bank, National Association for a $60.0 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025 (the “Credit Agreement”). The Company is monitoring covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under our Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 12 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements for additional information on the Credit Agreement.

Off Balance Sheet Arrangements

The Company, in connection with the Strategic Alliance with M&T Realty Capital Corporation (“MTRCC”), has agreed to provide loan opportunities that may be funded through MTRCC’s agreement with Fannie Mae which requires MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can assume a portion of MTRCC’s guarantee obligation to Fannie Mae of loan opportunities presented to and closed by MTRCC. As of ~~September~~June 30, ~~2022,~~2023, the Company has agreed to a maximum aggregate guarantee obligation of ~~$54.1~~$114.7 million relating to loans with an unpaid balance of ~~$324.9~~$688.1 million. The maximum guarantee obligation is not representative of the actual loss we would incur. The Company would be liable for this amount only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The Company records a loan-loss obligation and is required to provide cash collateral to MTRCC for this obligation.

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Material Cash Requirements

There have been no material changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 through the date the condensed consolidated financial

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statements were issued, other than for the ~~payment of dividends declared by our board of directors in the first quarter of 2022, aggregating $52.1 million, and a~~ semi-annual regular dividend of $0.25 per share on outstanding common stock declared by our Board of Directors on August ~~2, 2022, aggregating $10.5 million.~~1, 2023, payable on October 6, 2023.

Inflation

Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand, which may be affected by uncertain or changing economic and market conditions, including inflation/deflation arising in connection with and in response to various macroeconomic factors ~~including the effects~~and impact of ~~the COVID-19 pandemic~~rising interest rates on the broader economy.

The ~~Federal Reserve’s efforts~~annual inflation rate in the U.S. increased to ~~combat~~9.1% in June 2022, the highest annual inflation ~~through monetary policy including ramping-up quantitative tightening and by raising~~rate since November 1981, but has since decreased to 3.0% in June 2023. In response to elevated inflation levels, the Federal ~~Funds Rate~~Reserve has ~~escalated. While~~increased the federal funds rate by 525 basis points through July 26, 2023. In the wake of several bank failures and continued concerns in the banking system, the Federal Reserve has sustained their tapered rate increases, fueling speculation that they may soon pause their upward pressure on the overnight rate. As a byproduct of the rapid increases in interest rates since March 2022, lenders have tightened their underwriting standards and raised rates substantively, adversely impacting commercial real estate ~~investments are generally considered~~transactions. Although inflation is still elevated and well above the Federal Reserve’s target rate, it appears to be ~~relatively~~on a downward trend. Services and wage inflation, ~~resistant, the upward pressure on~~however have yet to deliver a measurable downturn. Both of these types of inflation affect commercial real estate operators, increasing their operating costs. Sustained elevated interest rates ~~has the potential~~and inflation would be expected to ~~affect investor activity and therefore transactional activity from which we generate revenues. Investor activity could depend~~have a negative impact on ~~the magnitude of changes in interest rates relative to the elevated level of capital liquidity targeting~~client demand for commercial real estate. ~~The actual economic impact from inflation on our business remains unknown at this time.~~

Critical Accounting Policies; Use of Estimates

We prepare our financial statements in accordance with U.S. GAAP. In applying many of these accounting principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective and our actual results may change based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. There were no significant changes in our critical accounting policies, as disclosed in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

~~Recent Accounting Pronouncements~~

For information regarding recent accounting pronouncements, see Note 1 – “Description of Business, Basis of Presentation and Recent Accounting Pronouncements” of our Notes to Condensed Consolidated Financial Statements. Although we do not believe any of the other accounting pronouncements listed in that note will have a significant impact on our business, we are still in the process of determining the impact the new pronouncements may have on our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including U.S. Treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities and ~~other.~~others. As of ~~September~~June 30, ~~2022,~~2023, the fair value of investments in marketable debt securities, available-for-sale was ~~$301.1~~$235.6 million. The primary objective of our investment activity is to maintain the safety of principal and to provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes. While our intent is not to sell these investment securities prior to their stated maturities, we may choose to sell any of the securities for strategic reasons including, but not limited to, anticipated capital requirements, anticipation of credit deterioration, duration management and because a security no longer meets the criteria of our investment policy. We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average rating (exclusive of cash, cash equivalents, and ~~cash equivalents)~~restricted cash) was AA as of ~~September~~June 30, ~~2022.~~2023. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.

Currently, our portfolio of investments predominantly consists of fixed interest rate debt securities; however, a portion of our investment portfolio may consist of variable interest rate debt securities. Our investments in fixed interest rate debt securities are subject to various market risks. Changes in prevailing interest rates may adversely or positively

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impact their fair market value should interest rates generally rise or fall. Accordingly, we also may have interest rate risk with variable interest rate debt securities as the income produced may decrease if interest rates fall. Contraction in market liquidity may adversely affect the value of portions of our portfolio and affect our ability to sell securities in the time frames required and at acceptable prices. Uncertainty in future market conditions may raise market participant’s expectations of returns, thus impacting the value of securities in our portfolio as well. The following table sets forth the

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impact on the fair value of our investments as of ~~September~~June 30, ~~2022~~2023 from changes in interest rates based on the weighted average duration of the debt securities in our portfolio (in thousands):


Change in Interest Rates	Approximate Change in Fair Value of Investments Increase (Decrease)
2% Decrease …..................	$	~~5,576~~4,424
1% Decrease …..................	$	~~2,788~~2,212
1% Increase …..................	$	~~(2,787)~~(2,211)
2% Increase …..................	$	~~(5,572)~~(4,422)

Due to the nature of our business and the manner in which we conduct our operations, we believe we do not face any material interest rate risk with respect to other assets and liabilities, equity price risk or other market risks. The functional currency of our Canadian operations is the Canadian dollar. We are exposed to foreign currency exchange rate risk for the settlement of transactions of the Canadian operations as well as unrealized translation adjustments. Historically foreign exchange rate risk has not been material. ~~However, due to the strengthening of the US dollar against the Canadian dollar, we recognized a $1.3 million unrealized foreign exchange loss in the third quarter of 2022.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f), including maintenance of (i) records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, and (ii) policies and procedures that provide reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, (b) our receipts and expenditures are being made only in accordance with authorizations of management and our ~~board~~Board of ~~directors~~Directors, and (c) we will prevent or timely detect unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Our management, with the supervision and participation of our chief executive officer (“CEO”) and chief financial officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of the end of the period covered by this Form 10-Q, based on the criteria established under the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on such evaluation, our management has concluded that as of ~~September~~June 30, ~~2022,~~2023, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended ~~September~~June 30, ~~2022~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any significant impact to our internal controls over financial reporting despite the fact that a number of our employees and independent contractors are still working remotely. The design of our processes and controls allow for remote execution with accessibility to secure data. Given the current environment, we are continually monitoring and assessing the design and operating effectiveness on our internal controls.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

We are involved in claims and legal actions arising in the ordinary course of our business, some of which involve claims for damages that are substantial in amount. Most of these litigation matters are covered by our insurance policies, which contain deductibles, exclusions, claim limits and aggregate policy limits. Such litigation and other proceedings may include, but are not limited to, actions relating to commercial relationships, standard brokerage disputes like the alleged failure to disclose physical or environmental defects or property expenses or contracts, the alleged inadequate disclosure of matters relating to the transaction like the relationships among the parties to the transaction, potential claims or losses pertaining to the asset, vicarious liability based upon conduct of individuals or entities outside of our control, general fraud claims, conflicts of interest claims, employment law claims, including claims challenging the classification of our sales professionals as independent contractors, claims alleging violations of state consumer fraud statutes and intellectual property. While the ultimate liability for these legal proceedings cannot be determined, we review the need for an accrual for loss contingencies quarterly and record an accrual for litigation related losses where the likelihood of loss is both probable and estimable. We do not believe, based on information currently available to us, that the final outcome of these proceedings will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Item 1A. Risk Factors

There have been no material changes from the risk factors described in our Annual Report on Form 10-K for the year ended December 31, ~~2021.~~2022.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchases of Equity Securities by the Issuer

On August 2, 2022, our Board of Directors authorized a common stock repurchase program of up to $70 million. As of September 30, 2022, $62.4 million of common stock remains eligible for repurchase under the program.

Share repurchase activity during the ~~nine~~three months ended ~~September~~June 30, ~~2022~~2023 was as follows:

Periods
Total Number of Shares Purchased(1)
Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs
July 1, 2022 - July 31, 2022 — $ — — $ —
August 1, 2022 - August 31, 2022 — $ — — $ —
September 1, 2022 - September 30, 2022 226,795 $ 33.41 226,795 $ 62,422,637
Total 226,795 226,795 $ 62,422,637


Periods	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs(2)
April 1, 2023 - April 30, 2023	401,462	$	31.56	401,462	$	9,944,539
May 1, 2023 - May 31, 2023	115,076	$	28.15	115,076	$	76,704,946
June 1, 2023 - June 30, 2023	22,100	$	31.02	22,100	$	76,019,514
Total	538,638			538,638	$	76,019,514

(1)Excludes shares withheld for employee taxes upon vesting of stock-based awards. Stock repurchases under our program may be made through open market and privately negotiated transactions at times and in such amounts as management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, capital availability and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice.

(2)On May 2, 2023, the Company's Board of Directors approved an additional $70 million to repurchase common stock under its stock repurchase program, resulting in approximately $76 million available to repurchase shares under its program.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

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Item 5. Other Information

~~John David Parker and Richard Matricaria Employment Agreements~~

On August 4, 2022, the Company entered into employment agreements (the “Employment Agreements”) with John David Parker in his capacity as Chief Operating Officer – Eastern Division and Richard Matricaria in his capacity as Chief Operating Officer – Western Division. The Employment Agreements set forth the terms of their continued employment in such roles. The Employment Agreements include the following material terms:

•~~Messrs. Parker and Matricaria’s employment with the Company is at-will and either the Company or the executive may terminate his respective Employment Agreement with or without cause.~~

•~~Messrs. Parker and Matricaria are entitled to receive a monthly salary of $33,333.33 paid in semi-monthly installments, pro-rated for less than a full year of service.~~

•Messrs. Parker and Matricaria are each eligible to receive an annual discretionary cash incentive bonus targeted at $1,550,000 per calendar year for 2022 and continuing thereafter. Such bonuses will be based 60% on the Company’s financial and non-financial performance against goals, and 40% based on personal goals that will be set with each executive’s input. In the event that the Company does not meet a minimum of 50% of its pre-tax income goal, no bonuses will be paid to the executives for that year, unless special considerations are determined by the compensation committee of the Company’s board of directors (the “Compensation Committee”).

•Messrs. Parker and Matricaria are eligible for long term incentive compensation in the form of RSUs. Subject to the approval of the Compensation Committee, each executive will be eligible to receive an RSU grant potential equivalent of up to 50% of such executive’s actual discretionary cash bonus earned and paid each year, subject to the clawback rules implemented by the Securities and Exchange Commission and/or the exchange listing standards. Twenty-five percent of the RSU long-term incentive compensation will be based on the year’s overall results and twenty-five percent will be based on progress toward achieving the Company’s long-term goals and such executive’s contribution towards those long-term goals.Rule 10b5-1 Trading Plans

The ~~foregoing summary~~adoption or termination of contracts, instructions or written plans for the ~~Employment Agreements does not purport~~purchase or sale of our securities by our officers and directors for the three months ended June 30, 2023, which is intended to ~~be complete and is subject~~satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act (“Rule 10b5-1 Plan”), was as follows:

Name

Title

Action

Date Adopted

Expiration Date

Aggregate # of Securities to be Purchased/Sold

Gregory A. LaBerge

Senior Vice President, Chief Administrative Officer

Adoption

May 22, 2023

Earlier of May 19, 2024 or when all shares are sold under the plan.

8,201

None of our officers or directors adopted or terminated a “non-Rule 10b5-1 trading arrangement” as defined in ~~its entirety by the terms~~Item 408 of ~~each Employment Agreement, copies of which are filed as Exhibits 10.2 and 10.3 hereto and incorporated herein by reference.~~Regulation S-K.

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Item 6. Exhibits


Exhibit No.						Description




~~10.1+~~						~~Second Amended and Restated Credit Agreement dated July 28, 2022, by and between Marcus & Millichap, Inc. and Wells Fargo Bank, National Association(incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q (No. 001~~-~~36155) for the quarter ended June 30, 2022, filed on August 5, 2022).~~

~~10.2+~~						Employment Agreement by and between John David Parker and Marcus & Millichap, Inc., dated August 4, 2022 (incorporated by reference to Exhibit 10.2 to the registrant’s quarterly report on Form 10-Q (No. 001 -~~36155) for the quarter ended June 30, 2022, filed on August 5, 2022).~~

~~10.3+~~						Employment Agreement by and between Richard Matricaria and Marcus & Millichap, Inc., dated August 4, 2022 (incorporated by reference to Exhibit 10.3 to the registrant’s quarterly report on Form 10-Q (No. 001 -~~36155) for the quarter ended June 30, 2022, filed on August 5, 2022).~~

31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101*						The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2022,~~2023, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of ~~Net Income,~~Operations, (iii) Condensed Consolidated Statements of Comprehensive Income, (iv) Condensed Consolidated Statements of Stockholders’ Equity, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104*						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

____________

~~+ Previously filed.~~

* Filed herewith.

** Furnished, not filed.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Marcus & Millichap, Inc.

Date:

~~November~~August 4, ~~2022~~2023

By:

/s/ Hessam Nadji

Hessam Nadji

President and Chief Executive Officer

(Principal Executive Officer)

Date:

~~November~~August 4, ~~2022~~2023

By:

/s/ Steven F. DeGennaro

Steven F. DeGennaro

Chief Financial Officer

(Principal Financial Officer)

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~~HIDDEN IXBRL~~


	Shares		Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2021⁽¹⁾	980,936		$	36.58
Granted	1,051,178		45.75
Vested	(288,954)		36.24
Forfeited/canceled	(24,137)		39.00
Nonvested shares at September 30, 2022⁽¹⁾	1,719,023		$	42.21
Unrecognized stock-based compensation expense as of September 30, 2022	$	63,294
Unrecognized compensation expense is expected to be recognized over a weighted-average period (years) of approximately	3.95
Weighted average remaining vesting period (years) as of September 30, 2022	3.95


	Nine Months Ended September 30, 2022		Percentage of Revenue		Nine Months Ended September 30, 2021		Percentage of Revenue		Change
									Dollar		Percentage
Revenues:
Real estate brokerage commissions	$	934,483	89.9	%	$	715,458	89.3	%	$	219,025	30.6	%
Financing fees	91,363		8.8		75,448		9.4		15,915		21.1	%
Other revenues	13,415		1.3		10,400		1.3		3,015		29.0	%
Total revenues	1,039,261		100.0		801,306		100.0		237,955		29.7	%
Operating expenses:
Cost of services	670,170		64.5		506,882		63.3		163,288		32.2	%
Selling, general and administrative	227,380		21.9		178,147		22.2		49,233		27.6	%
Depreciation and amortization	10,167		0.9		8,806		1.1		1,361		15.5	%
Total operating expenses	907,717		87.3		693,835		86.6		213,882		30.8	%
Operating income	131,544		12.7		107,471		13.4		24,073		22.4	%
Other income, net	967		0.1		2,737		0.3		(1,770)		(64.7)	%
Interest expense	(547)		(0.1)		(436)		(0.1)		(111)		25.5	%
Income before provision for income taxes	131,964		12.7		109,772		13.6		22,192		20.2	%
Provision for income taxes	35,651		3.4		29,304		3.7		6,347		21.7	%
Net income	$	96,313	9.3	%	$	80,468	9.9	%	$	15,845	19.7	%
Adjusted EBITDA	$	151,394	14.6	%	$	124,790	15.6	%	$	26,604	21.3	%