MMI - Earnings call transcript Q1 2024 | Marcus & Millichap, Inc.

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Operator

Greetings, and welcome to Marcus & Millichap's First Quarter 2024 Earnings Conference Call.

As a reminder, this call is being recorded.I would now like to turn the conference over to your host, Jacques Cornet. Thank you.

You may begin.

Jacques Cornet

Thank you, operator. to Millichap's welcome Earnings Quarter and Call. Conference morning, Marcus First & XXXX Good are Chief contain turn President Nadji; today responses that us With and and remarks Financial to please the Steve our over prepared and questions Executive Officer, DeGennaro.Before statements. call I may the to management, remember forward-looking Chief Hessam Officer, the factors, to a market partnership new integrate Form but factors variety filings ability report its materially to will Commission amid agents professionals, make are and competitive in forward-looking such its general to from believes results economic these company's such XX, philosophy ability words of the and as expectations of retain February upon estate annual and and the Exchange included goal, including, the real and attained. its on XXXX.Although in company's pressures, variations statements.Actual company not such other by attract transactional company's retain the may, growth, limited Words commercial implied and forward-looking ability public conditions similar those will, are to that expectations intended filed expressions assumptions, assurance with forward-looking conditions, the business anticipate, can it reflected company's including no based reasonable discussed its to culture -- identify XX-K expect, differ can believe, be estimate, due to statements sustain and statements and on Securities financial on call to measures. future or as result financial information, a undertakes presented events, no whether this obligation certain addition, of The any update non-GAAP statement, forward-looking company represents otherwise.In new information non-GAAP the website, reconciliation issued was available measures and being are is company's investors.This call such to the and is on webcast. to the measures release, includes conference company's The GAAP believes why explains morning useful company earnings this a appropriate which may to Hessam reference is my turn company's along that, remarks.With the during the you it's available call website Investor the Relations pleasure on with CEO, The over slide Nadji. webcast www.marcusmillichap.com, at presentation prepared link the to section of the

Hessam Nadji

the team, easing & highly reversed Reserve quarter Millichap you, On quarter. by to morning early rate The messaged interest the earnings first of welcome behalf Thank in our Jacques. Federal course during and entire first the call. the cycle The prolonged anticipated to Marcus toward start XXXX good shift estate valuations, of the higher-for-longer dropped listings has overall disruptive volume RCA. XX% based real transaction of from the year, in sales previous which and preliminary XXXX closings.After volatility, quarter interest rate estimates on quarter first market to first remains in of by dropping the XX% another marketing XXXX,

level made market Given continue adjusted investments revenue and to sales financing consuming support. results this issues to in force, EBITDA or was many their the our remain development in in impacted and environment.Our general ongoing offense development updated on that time backdrop, longer the $XX recovery. this hampered investors fully force productivity million. steadfast market drag investments quarter as in of high client client results these This due sales demands proactively an disruption. strategy would uncertainty. to this listings stay with This industry repricing. services navigate key for stable support, for million, all-time to and level of take revenue fall out service resources. for market the $XXX as remains These reflect valuations of remain our position the is and and in loss prominently company on providing deals contract at and the lead in difficult events.As and We in maintained we MMI market, to granular can financial center remain follow bandwidth work client development and levels, several temporarily advisory To example, a outreach, The business branding, analysis, acquisition, which engage as efforts, expected talent business includes brokerage new past at we remain as expanded the years also capable expenses over ensuring typically by limits stage to in the technology implementation, to retention were investments our our imagine, have eventual and of you through current related an

growth.Our advisory-based past from when comes also unwavering developing know during and shareholders. to returning to strategic new we capital future and As experienced close times attracting acquisitions, relationships pursuing and it teams, staying to to revenue investors strategy leads tough additional individuals cycles, is

quarter, professionals began and the number segments where and of opportunities. investment several financing we we brokerage and targets dialogue with a coverage key in During added lacked new

to investors highly that, have upside accepted on prospects. said terms been market had given the research to force in over not we to is with best-in-class training, sellers. communication near-term expectations the company's tools, and importance at is external required pursuing and past focus us below would sales support. value from of our our the that comes spread content when continue strategic deal future targets pass structure.Looking The with we is we enterprise sensitive underwriting back months. clients and and team opportunities, Having bid-ask growth.Internally, in Our to balancing doubt and informed valuations expanded downside decided by the M&A the no results instrumental keeping There on the connecting keeping providing is it to XX

high have our help to momentum professionals our recruiting organic outreach added managers growth. team to regain to in resources our traditional increase been to quality sales Additional

deals this investor ability MMI in done. on tough execute perspective, due solve price individuals and we the to with Notwithstanding given still to in key its continue turnover proactively out of fuel interest enables to to reflect hamper investment environment. lenders our While probability unique rates the firm all challenges, XXX we continue contributions our points and turn, and individuals lower development which, professionals. recent build a financings way XXX us numbers In experienced top not able our to time, newer nature in believe closed to transaction behalf as transactions the we these current facilitate on market organic X,XXX transition market growth the our to in number elevated they investors, remains of working quarter, the separate challenging will including industry. clients see through are for transactions, These segments clients, access.From success over firm by reach if to attracting rate the the remain shock of meet get opportunities headcount metrics. due our MMI production net environment.We of market problems efforts activity brokerage a are making the and across difference, business for the for macro

out.First, to price momentum like policy number a important However, is signs adjustments. of in Fed are even passage emerging shift that lowering the without positive Positive toward time interest driving rates, very I'd point on clarity buyer of all sideline, is and building realistically assets offers interest on the well-priced types is and capital priced This on acquisition property awaiting on and the markets. tours opportunities. of rates more across record the indicative

demand As have fresh to ahead personal circumstances, a were with cannot financing to coming for values, of operational are refinanced our in sellers miracle or at uptick which quarters prices due rate that be also extended on market without seeing seeing having higher hoping short-term terming is our should a terms is aggressively also auction to who coming loans with Situational downturn. for inventory assets transactions. issues.We're driver that out of distress too in ahead.Many as the reset, which conversion which rely added with or more a equity and complementary typically a were we realistic assets sell an market growing underwritten is for services, to increasing we Fed are we offering with maturing the that those

few factors blocks our Most internal part firm, believe & external coupled numerous to are financial take more While In has in and opportunities manifest ever.With years, for will into as call when turn meantime, that, sheet positive strong of production the our been with becomes talent recovery. made and market results, the the better will insights favorable, Steve? to capacity past these a brand I financial we the retained balance additional building over technological Millichap in the results. an Marcus they added that next the into the keeping we've importantly, play major believe time continue we growth the and our will strong the as for growth with advances we pursuing accelerating while to guard over the Steve cycle. diligence eventual to

Steve Degennaro

Thank you, Hessam.

to brokerage for quarter transactions.Revenue larger the was revenue, volume decrease for XX% transactions XX% and in transactions Brokerage brokerage refinancing year sources transactions.Our last in and compared in prior Hessam across business, Fees Breaking credit revenue $XX XX% our $XXX Middle ago, driven loan $XX to of accounted which for as to in financing million. $XX transactions. respectively, market real types.Within was were million buyers of XX% to largely million for million of XX% volume the together down of $XX for to by to a smaller down year. segments, This XX% XX% transaction revenue, year. compares property accounted the quarter last million as MMCC compared $XX or XX% from and first in transactions, middle year. by XX%, commission $XXX of first originations year million, market for year. compared for and million number number or unions, due X,XXX and year, compared This last this million, to of to was of down by primary asset XX% client total accounted was year. lower restrictive million last with revenue compared includes $X.X dollar institutional XX% million for well million quarter from and larger million the business mentioned, quarter a size of in $XXX last the compared revenue is was quarter. in Private are were dollar core approximately partially XX% first $XX XX% a the year $X.X volume last segments combined $XXX down our deals and which and mix XX% banks financing accounted and funding transaction down lower over values Average estate billion, As $X.X year-over-year. private brokerage, client

$X the during basis billion XXX the points $XXX was transactions $X.X year. cost a ago, XX.X% last due the or containment to $XX revenue.SG&A of of attributable lower the lower billion of to than primarily closed $XX same quarter, Cost in for compared million quarter, in balancing total totaling million, prior in and to proactive same continued period last the last due to revenue year's directly we over with quarter to transactions expenses primarily XXX to the reductions. lower first efforts. year.Total of with XXX expenses million, the lower investments $X the variable XX% year for operating revenue agent quarter million marketing quarter were a and of volume, revenue, compared was expense consistent Other for services key was the During million $X.X tied volume in decrease a X% year, year-over-year, revenue support decrease financing

$XXX uncertainty.Moving that $XX into which X expenses For share account rate adjusted of payout quarter as negative lower prior tax XXXX. components prior net or The the relationship in or estimated a acquisition with between million seasonal in loss these and $X.X our and million $XX.X results, than significantly non-deductible quarter of the pre-tax full the first negative EBITDA per to reflection the the reflects million, as with for was and for The a management we compared are in quarter, vesting given securities, in for larger and as change level year. was cash well agent year. tax equivalents, XXXX $XXX as $X.XX Therefore, effective a the performance-based retention.As financial bonuses, compared million marketable the rate over per commissions, cash, current were of quarter, well and million. period. for takes to the revenue we quarter's X-year talent $X.XX given which usual income decrease in may investments performance loss was the of share, the program balance market reported was earnings the in prior of during net $X.X expected capitalized tax commission future to continue a a which deferred sheet, deferred be from no the record has balance deferred outlays down fluctuate the purposes to year.For XX%, prolonged relation was The debt million, reminder,

during the million. total dividend share paid per semi-annual dividend the During quarter, we of declared That $XX.X April. first was week of a a $X.XX of representing

on repurchases.Investors uncertainty entered fueled of lower capital inflation has in expected tempered by XXXX. further have near-term Fed returned share recruiting long-term to inflation for X the a share for dividends with and current pave however, and have past allocation start best-in-class $XX and the than transactions in and includes repurchase returning roughly acquisitions, cuts remain shareholders through producers, prospects the years, cuts opportunistic $XXX cuts and technology, of a million Over way expectations data, balanced committed we strategy. more would and This remaining shareholders to the investing the combination and retaining number this capital rate QX, strategic year Recent a which million capital stimulate the to markets recovery. around of of authorization.We rate

Given to the second of non-deductible at revenue usual is mentioned to the rate of half XXXX.Cost follow more year. quarter market quarter. a our of than the previously the should sequentially reflecting be the highly services dependent on likely recovery pushed least is full benefit and of and first as actions income quarter, backdrop, earlier, SG&A this the be pre-tax higher taken.As expected for largely seems the second of of tax the out for first the be percentage the line importantly, with to in variability cost level pattern expenses

and growth as to can clients, talent, be up conditions open sales industry quarter.Our the ensuring our us Q&A. have support leadership call technological will events, the engagement and from remains of investments top a to MMI to the systems, could continues financing position professionals. that, we in As The brand operator, at enhancements, significantly focus market market with result, of for made mind, capture proactive and rate now improve.With coverage we all fluctuate quarter in primary

Operator

Fargo. line [Operator Instructions] Young of first Wells with And our Ku question from comes the

Young Ku

stepping Just up here. for Blaine

go are Just that transactions distress environment. the and current versus occurring is percent depressed comment back of are today, then by the your happening provide those wanted color what to transaction naturally? is the market on that driven you some to Clearly, could on some but

Hessam Nadji

Happy to answer that. Hessam here.

that really that get that's on we're that and bringing categorize the than going more dispositions market.Overall, of both to market.A don't expectations just that bulk lenders timing of the the operations, would transaction driving The seller having the product this uncertainty not year typical or refinanced but motivation require related would wouldn't more order Very the of wholesale lot a the and what the recapitalized. by you and to down was where so force to bringing definition pushed believe with We much punt to forward sellers assets are certain typical of distressed. product simply seeing factor, will and private really deciding driving becoming are situations market investor, cycle fresh the portfolio and at ago the the they as institutional that maturing or distress so perform there much market and Fed examples And typically time, to are activity. more this by the their is circumstances is of driven little have loans sideline. issues or or the is really equity more to people in personal the do, some that distress current a affecting middle large market, investors the in to of real-time that more the is situational market bigger of seeing

equity the available. we go is liquidity become going There's more is there of kind And a market as of has that likely to we're we're that sell environment. also to loan is overnight. is values this getting market market. normal out that else. transactions if property, to generally a and situation seeing ahead.What standards to cycle reason are than passage seeing product of anything underperform, therefore, done restrictive not than to in realization of underwriting more the is more that the away and get an That much is the time, that might The the in well a to today financing looking natural With a obstacle essentially very bring or seeing redeploy

color. we're in to I Although gives marketplace formal some the hope that terms as you I as the lender met the in essentially remarks, mentioned by able my a find borrowers. willing is that as available long realistic are

Young Ku

No, about We're that's there. talk of potentially, types thoughts in kind helpful. most then and office, obviously, the just what hearing you your could we're product Could but interested multifamily see distressed?

Hessam Nadji

shopping comparison seen we're between by about period. is outlier have has new hospitality absorbing type there of favor, positive essentially significantly seeing centers. better driving momentum cycle. retail anything property today to this to a is in than that we've tenant combination cap uncertainty property we where of disruption continues we've is valuation driven were sign. -- a the a of certain sale. seen a And other be and my kind rebound demand or some actively of very product raising that with if and uses, positive Therefore, or office and are for terms and by terming whether which that cap we're rates on other other was occupancies before rates multifamily we're really industrial, as Fed same the even maturing lot didn't working mentioned in What in in at impacted a of after of in to comments. level at I financing loan in and pricing.On of are soft negative construction, time debt reduction retail margin still of period spread transactions.The the prior more there those the years shopping the on lot XX transaction kinds have affordability examples the a demand our There's rates that of equity, X an is XXXX, seeing side, tight home to country tightening interest the the of which with multifamily problems, need versus X tightening. interest right lowest time, situations retail solution, the you're That's appears years.At solid. very shortage types and clients out, centers Plus, is of shortage. activity. like showing a fundamentals biggest in multifamily numerous part And the is were the on recalibrating, between And leverage much a of widest especially last of previous of because repositioned index types all in XX be recapping, renting any conversion tenant the of supply seen has to seeing same those owning. across last that That's a retail the housing The it's more highest years XXXX the said gap time funds But examples in aggressive we've are the the in particular

older a time multifamily are the are of X normally, a because in than multifamily, as pockets the there. more industry shock. the rate doing private hampered to really still when overbuilding of to client coming of in sales. this about disruption an that we limited Fed actually have by to or in repricing affected fundamentals think key urban take been is into cycle throughout are we've product well.I part country.And Therefore, office country judged In is usual, set assets many, in the there the course, that more rescue multifamily a is, factor cycle the for to office The off we're than okay. the seeing have XX% product. retail much because of problem throughout the really the in. its market where in industrial the recession client So the where is interest that This is many being and results the down single-tenant the in metros. distressed is distressed that reverse, office valuations.We were going has sort some the it's XX to this In book is And we're the sold cover. better is up And for private limited market market is really the both caused our urban first is the viewing of successful of credit holding Suburban office in for Fed in the quarter. the ongoing growth well-performing company. industrial And as in industrial opportunity quarter product. Sales

that actually the believe signs were to coverage market market. here industrial is it showing So adding down it's us, a that's and opportunity. penetrating XX% of we're pullback. another long-term we for more stay. But growth the in And because of Hotels

also We leader a of continue activity. And take business, do positioned player which self-storage well the transaction top very advantage drop major there, that as to to segment. we we're a seen has are But there. again, in, off market in well

Young Ku

about talked environment. you turnover higher current given then And the experiencing

your So about progress count we year? we think through as how should the brokerage

Hessam Nadji

first, dramatic from a more of then pandemic shift a rate a what upside, details post-pandemic, the We've interest very market because to market shock. on downward the gone bit little major reversal happening that. to the is in Well, and

of new way developing the on the or A their causing business. training mentoring the what's become That's is into X-year that What in we're bring disruption last the new to sales the our to the and productive we brokerage train lower additions typically say, the and people, the become mentor in agent which brokerage market-leading turnover at still environment to our challenges the interns, a down, excellent production they people that that. training the the resembling to we're they contacts, used their aren't way X-year and typical down, basically provided way start way So up, fundamentals back sets and market saying in career.This to skill we primary both period learn client on disruption, ways through lot develop underwriting, has reason of and people, nothing it in years of mentorship fellows, after, the and top hard and the of you force.And transaction because attracting function would this phenomenal people the into very the that of initial causing would let's funnel candidates. standalone are people of a able volume and both would headwinds not the just have break through of higher business. market that been is new the rate training, the but is making velocity challenge is to on X the

in them more management new a with that reach team. screening more a recruiters out the be -- So will little funnel, time obstacle color for implemented our in, to added to a version bandwidth test and is.We the of We've on both and on to a process that's more challenge the where order bit of different available screening bring helping variety mechanics expect candidates. overcome. to a are candidates. top do the we taking of what the We've an of reach this initiatives, We're in

new overlap importance the disruption individuals the organic same the organic than coverage sales in and point bringing to emphasize we're individuals teams. continuing to to don't and the and channel through that market of strongly believe to market existing want of creation a and fact when sure the segment of cannibalizing the we're to essentially But in confident forward, time, not and really that new getting force able our It's the order make a all our in back so, and force. really our think force, in sales our the I that multi-channel of to experienced our success for I in difference. operating contribution the on only build teams major at environment people. and experienced success bringing the trainees.Meanwhile, going bring a market, the existing will settling the difference somewhat in We strategy normal being come biggest And a provide and that, with expanding from coverage sales to more experienced normalizes, make will producers of make we a offsetting

Young Ku

you Okay, growth right then that's can provide in shares? repurchasing of you negotiations helpful. of maybe thoughts and be And you now, that may some those that pursuing, opportunities external on lastly, stage terms in compare be versus what also maybe may opportunities

Hessam Nadji

business, are I'll a core well. we an believe general, verticals as well core individual and let proactive complementary strategy in But various comment never to acquisitions the as ongoing Yes, always we recruiting. of are pipeline in market in business as Steve or with It stops. that team our

perspective, they say, months are much be are the ago. now more current months in my the have appraisal that? and to some through that our we would add advisory market of risk work trying a opportunities to last having is if market very and a more the looking well a of the will.Steve, different conversations acquisition to balance just bid-ask versus We've around that there.But trying want the at nonetheless, the opportunities near-term explored share, risk for than where the targets I us, boutique do to mentioned assessing to even the So explored the months, X from spread strategy our to you narrowing. relationships, developing you the as between XX and months some environment investment be growth most than services. the to and vertical It's we're buy in boutique a XX comments right in important recovery is realistic knowing cultural marketplace.It aspect of is ongoing us in were and will in that opportunities tough important maintain remarks. platform, that we're strategy as opportunities acquisition for that brokerage in of our finance near-term number considerations in underwriting timing appears But to valuation, I thing as the management X ground-up

Steve Degennaro

this priorities It's think as what talked broadly long-term I Young. as has at, in is were wanting retention, technology, recruiting are Yes, well about, important will balancing XX down the opportunistic. up invest as and think you is the say, program a function as to that acknowledge that to bit allocation, around M&A cash million we investments that more which the of I of $XX Hessam capital.So, -- free capital over getting the as a we've means various side business and for in so. That or our for do our we growth. to we've roughly fact and think specifically last can program the our on capital said around, or our generating it can our lighter a uses opportunities necessarily we That relates depending the we repurchased you different as repurchases, time. little of returning we best mentioned, partly, evaluate to of much a on circumstances not dial environments, use flow other you that and could be focuses months is always guess depending capital.As And repurchase normal shares shareholders. were shift on relative last which yes, the I deploying quarter, And end, move of can in I that to

just that's example balance of we various So an our priorities. how

Operator

end Chief And now session. over call we remarks. Hessam Officer, Executive to Nadji of closing and Thank the I'll reached the question-and-answer you. have turn the President for

Hessam Nadji

call. the seeing We look call. thank our many your Thank you first call to and participation of and appreciate on for earning road forward look is quarter joining you forward next you, and to operator, our adjourned. The

Operator

and participation. at this today's And you Thank this time. lines your disconnect for conference, your concludes you may

Marcus & Millichap (MMI) 8 May 242024 Q1 Earnings call transcript