MMI - Earnings call transcript Q2 2024 | Marcus & Millichap, Inc.

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Operator

Greetings, and welcome to Marcus & Millichap's Second 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

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

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

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

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

that, CEO, turn to call the to is With it over Nadji. Hessam my pleasure

Hessam Nadji

team, On Thank call. and behalf you, welcome to Jacques. of Millichap second earnings entire our Marcus good morning, & the quarter

anticipated, Revenue in reflects financing. loss timelines constrained Marketing As impact of to This the Reserve. times continued second EBITDA usual, faced headwinds stance of $X.X had deals be of multiple by than and for quarter portion Federal million. challenging to longer ongoing bid/ask due and primarily quarter and $XXX on the of of be closing spreads an the lingering interest million, the with net came the company recalibrated closing. to elevated million at rates our $X.X adjusted higher-for-longer before while the a

these growth measurable Notwithstanding indicators price team's that on productivity, the in quarter. positive emerged impact of the current of reflective market. more are a the inventory Internally, of in adjustments our number our these new macro conditions and include

at adjustments math finally costs. reentering quarter, valuations replacement gain momentum market bottom has and in the saw when on is last types. or brought by time also markets more assets aggressively This of real now the pricing that not short-term creating more growing by sentiment capital to the rates estate in that working. maturing to peak long-term passage deals We come XXXX. Externally, or difficulty paying entry the again secure saw of are a is broadly X the also the the revenue underwritten given showing Many investors many the with in We the motivation building. In revenue many to over sequential quarter XX% with once are cash cost in. Year-over-year higher is financing was relying X% lowest is since also the incredible X% the quarter recognizing transact. investors well-priced decline adding market growth deals of achieved all all start third Situational gain goal QX in less years than first cases, debt sequential of points for comparison to downturn for just of are compared driven realistic short-term driven throughout a opportunities property comparison and such our attractive distress price to most for are and of near say particularly financing XXXX. from that the

In to through but and progress considerable time made fact, continues spreads our team equilibrium. working toward financing much dedicate bid-ask been has securing

by personnel market a helping our recognize and moment and brokerage the they're X,XXX to disruption laser-focused challenging force get during me environment, of support we clients through take elongated sales perseverance our over In closed volume. a Let and into was positive transactions this severe middle in uptick and on this investors trend. it. the institutional and billion to $X.X major market gradually in since relative off is the in This XXXX. transactions market furred An private back larger these sales drop coming

remains lease pace of single by Client provide a spots a remain regional especially challenge. multi-tenant business the limited and of lenders and The financing. sell, net slow hampered to refinancings the selective recovering manufactured motivation and transactions to sharply. discovery in continues segment, clear Our X% which price desire self-storage. be Private low include as fell banks to local segment housing ability remains Financing Bright the tenant retail, or were and down

and a loan due volume increased in to large by sales. However, financing transactions our rise XX%

quarter toward financings over foundation in directly At is plans job up. easing back The to jump financing XX deal Fed and to financing network a ratings inflation growth results of is different and our for decelerating a closed build rate direct growing Capital our technology by investments past during that much the our shifted Markets provides or contributing valued the information this level, among us This also In active to Our the environment, and the lenders It our team in and XXX XXX financing real-time of IPA collaboration larger sales result these the of led enable months. finally proprietary indicative sales with a quarter interest division integration also institutional million start and degree $XX originators. is between our IPA of more, lending lender at macro XX% agency the and sharing multifamily achieved of the practice. teams. cycle. slower

the latest before landing quarter yield start dropped and has percentage moves, Even since level layoffs to XX-year a economy XXXX. or waiting since retreat. at full and ahead over cycle employment Fed a for, point safety. flight a concerns could still the Ironically, exactly earnings and for modest inflation sits July economic May has data lowest the strong consumer the growth the and to been employment corresponding fresh of Fed raise underpinnings significant the Mixed nearly what is point the data a to major corporate treasury the as about of hard opposed softer-than-expected and

case help transactions. now even rate by bolster for point the a estate XX is soft reduction If landing basis in real September, Fed scenario the interest boost anything, there further and which a would

While we tensions half, the measured expect to market to a recovery in continue a second term. in round near transactions positive of the during momentum geopolitical the and point economic new concerns

values, as believe the we healthy lift conclusion However, interest and lower still the will market real favorable XXXX of recalibrated into rates, from be economy the slower estate yet as the cycle election cycle. a gets heading more

incorporate programs remains Our increase elevated brokerage strategy technology best-in-class client to continue track. outreach maintain and on to inventory,

implementing developing firm, and access During parallel and on sales investments efficiencies who multiple loan Archer path investment and helping of clients internal technology strategic quarter, excited and partners, analytics is synergies further our equity helping with a We're are saw enhance equity consider our investment the we of data business, transactions. our capital us further actively in from in proprietary that round debt auction the facilitate traction to services. external additional help partnership next and

application once investments and both made [ example, the a on term real-time custom XXX,XXX sales for retention historical below now is connectivity in users and an and production buyers sellers. related MMI, earnings that were potential. searches revenue to inventory below boasts our our force, near As in my between and provides as ] drag Expenses client again in our enables trends acquisition

be market the remain we the in cycles. a and market However, talent seen as in that advantage recovery key past pool seniority leadership we've our will of confident

continue the attracting recruiters. originators below our of for challenges newer which past normal headwinds The We channels volatility the larger current of as and professionals employment talent experienced our well cools. is offsetting replenish of new successfully growth new especially market and include steps organic and company's These internship net market cadre teams, company's regional a hiring keeping much are The training to and help of years the add agents expanded face. a several the market. ongoing and engine, deployment will program agents

we selective during continue made favorable investments in acquisition capital investment individuals targets. and allocation quarter, we a the and with discussions and From perspective, teams experienced

relative valuation remain near-term has on risk degree, performance guaranteed valuations to spread proceeds and and target of bid/ask While the some to groups improved the terms challenges.

client our to the our dividends X in a we industry significant capital engagement, shareholder of and repurchases. include Our proud share highly events value. talented and last strategy our on We're prolonged expanding stay invest ongoing disciplined have investments returned branding creating business in our underscore We're team, since commitment in while during and in how amount years capital to offense downturn. this business to development,

and will from stronger Our platform and we cycle that give enhancements ever. than investments us this well-positioned confidence emerge

quarter. additional I to the Steve that, will for turn With the call over insights into Steve?

Steve Degennaro

Hessam. you, Thank

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

from last Total respectively, For real $XXX for estate quarter decline and compared million quarter $XX.X year. of X,XXX volume commission volume last with Year-to-date, first billion and brokerage year, for to X% compared the of year-over-year. down XX%, Revenue revenue XX% compared was second $X.X this across total transactions brokerage and mostly generated million to X% more decline billion XX% was revenue of $XXX compared revenue year. across respectively, of was million for year-over-year. Brokerage real accounted million of XX%, X-month XX% was accounted total last sales transactions million $XXX year, revenue $XXX year. period, a down X,XXX a $XXX total and revenue to on a commission $XXX the from last year-to-date reflecting challenging million and was XX% sales estate

$XX transaction for million larger XX% from compares increase million reflective up of middle approximately $XX to Average market million. mix brokerage revenue compared in $X.X of in XX% revenue year. were and segment the This X% contributed dollar was second size or volume to transaction client this XX% million our an last Within $X.X in and quarter year XX% Transactions last quarter, down year. brokerage the in count private transactions. a during from ago, and

contributed $XXX $XXX million and Client Private XX% of million revenue versus XX% last year. Year-to-date, brokerage or

X% XX% Year-to-date, in up totaling together to $X.X in volume the second billion last and XXX MMCC, dollar middle $XX billion in during and last totaling or originations year. last $X.X revenue months to for million from XXX in number last of compared quarter XX% in for to market volume $X.X refinancing in financing represented million loan These closed to compared in financing larger market $XX the XX% fees $XX middle refinancing transactions year. Fees segments $XX combined compared for $X.X for for to $XX quarter, during million larger were billion transactions accounted accounted million year-to-date segments quarter compared segments or XX% loan closed XX% $XX XXX and and transactions. Our volume to transactions in our transaction of year. the second to last were segment, revenue year. Financing of year. was Revenue brokerage of including billion originations last XX% transactions volume compared $XX Year-to-date, was volume in XX% transaction flat million We XX% similar brokerage compared million the We prior compared X XXX of financing revenue million the year. last year. to the year. and

the year extensions near lenders difficulty are activity showed upon are refinancings the the loan given of refinancing term. workouts facing half and Loan other maturity. lower-than-average first lowering by in The investors factors

million lower other million year. Year-to-date, and advisory X% compared $X.X the quarter expenses. Shifting fees $X.X last the primarily was Total flat consulting second year $X.X during revenue quarter, to last for million, compared this to leasing, second last Other to million operating revenue than year. expenses comprised year. were was of $XXX

down period XX.X% was million the of Cost Breaking $XX total on year. to revenue the X% attributable expenses or $XXX and $XXX principally $XX the year. SG&A containment an compared a over during million, cost million due efforts. year. Year-to-date, is of components revenue, year-to-date lower The balancing of last $XXX further. the expense revenue XX.X% key XX.X% expense in second prior was was revenue primarily reductions. total services total million, SG&A quarter same a compared On changes was variable the in in ago. of last to same last prudent are While of lower year tied expenses result basis, to XXX services reduction cost lower the to expenses X% period were by improvement million The directly or a quarter of X% points compared support lower of of to to and marketing investments basis, year a improvement continued basis year-to-date year-over-year. with operating

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

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

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

For essentially the change bring flat expect quarter the with year. the tax necessary $X.X prior was to to year. rate full the compared X-month year-to-date The period, rate million, rate for reflects we negative into effective adjusted alignment the for the EBITDA the

tax fluctuate depending full can between quarter-to-quarter income As rate purposes to on projected nondeductible expenses for calls, tax pretax relationship are prior the the that we've discussed for year. the on

Our for the XX% a expected remainder settle year. to the of of should range tax rate XX% into

balance sheet. the to over Moving

capital million $XX through We debt cash of April. to from returning no continue well $XXX equivalents dividend modest million includes prior That's marketable the shareholders to and securities. capitalized a in in we be million and cash, paid a quarter's $XXX change balance in and with

XX. declared Continuing on initiating Board little payable balanced our top This ago. total, we have share semiannual capital more September our that to a last a technology, remain X committed since and retaining a In long-term to $X.XX per October years We in Xth allocation more theme, next dividend of shareholders acquisitions the week, as recruiting to strategic $XXX repurchase capital capital shareholders of returned programs million returning on and dividend record combination than in investing and share to strategy. includes than of of shareholders. producers,

expected on, benefit take as needed near-term from serve discovery Fed much estate for time activity stabilization. to Looking catalyst forward, said, recovery That the price and real to touched the Hessam results. as and of a clarity reinvigorate rate may cut will our positively deal-making an provide transactional

shift as our in optimistic Given near-term these cautiously dynamics, outlook is Fed policy. we anticipate a

remain events. the of for builds SG&A in expense third the disciplined a revenue in and management. due QX the to than higher the investments is remainder usual moved As services year the our Cost second and to should sequentially we unfolds, through as year as of revenue pattern increase QX percentage the and follow expected seasonal quarter. client-related of over internal quarter

the XX% rate As I in tax remainder is our the touched for be expected earlier, of range on of the to year. XX% to

disruption, We and leadership, our improving client our to While and investments this results over market has advances policy the unwavering. rate and extended our there in These ability remain now on for is up as industry we engagement, that, talent, call operator, market focus committed market been interest X no platform doubt to technological Q&A. the longer recovers. With systems years past Fed's will that has investments can higher the coverage. open drive the clients for benefit

Operator

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

Blaine Heck

XX% market about in revenue Hessam, transaction in can the grew pretty in transaction market you middle different bit size segments, which resiliency saw the relative a and the volume segment, revenues significantly. Private little the more year-over-year, talk kind while larger especially down of

size in that affecting be obtaining all difficulty mentioned to the seems groups. financing, of you think but I

more how bit And the little playing also a you the how from just could recovery think on all? differ there that's at of if out? the trajectory segments, So larger

Hessam Nadji

Happy to that. address

the to particular I've the the XXXX, do for did pressured especially is spring has or micro-cap market market which transactions and more usual. As has butter both in the the and it we out in sources market affected of with a that fact credit price of difficult for financing market, business bread crisis this shared than of banking Client the in past, X transactions out really to the one, pull smaller and been banks reasons, themselves that the that have Private for unions further disruption our segment of and

slowly valuation And severe, and underwriting second our has and Client the is more a to at and of trading first market disruption continues and such for discovery the resistance that a been sideline degree starting to out. price for the a that hurdle been XX in a so has saw selling more of the of to in response since the clients a slow. bit And has portion And reset. been one of downturns. realism months of dealmaking discount, play has even values been moving last That clarity. rapid Private usually, so, the wait to larger the particularly and facing in uncertainty This disruption that's target beginning this has go X we for the change much that most typical been months on the little we the certainly see there as or

reasons the we've segment been seen cycles. challenged the more in previous Private than Those are what Client has

the well. about the bigger What the place of we've more more we discount course, market, quarter. of bringing the that transactions, remarks, the an we're those to to market are sellers in where more catalysts assets more for talked in a because of were to severely saw they from market, larger bringing some those I that and product been. formal reasonable And segments and uptick my On at middle seeing of impacted prices as larger market come therefore, is

move portion all as Private the all lease the all up segment, been hit particular, quicker. this they component price have the and smaller the a in analyzing interest company's in through a adjustment, is course, of continue. price net financing, market. to way this see has time the valuations have business, stable last catch through little anticipate segment commentary, lower that apartments And to the information unions. starting worked rates, and that painful to of And the the for our dislocation more the business, of I effects I market, of after credit Client of single-tenant for with their price large the resetting hard the we're period as that Blaine, become and mentioned, and banks One within

Steve Degennaro

point is this down additional larger got addition at and put market those more term stockpiles institutional of cash don't buyers near Steve. they've One Blaine, or coming refinancing if the there, the future. cash in assets and in need financing necessarily have do, got to to they potentially reasonable to prices, in

Blaine Heck

is Very potential in on of color. less maybe Great. kind potentially transaction breaking point to the distressed whether more you road helpful the distressed Or calls. seems we of than talk and maybe some as are about the optimism that those for distressed And sellers than market near transactions actually occur? it you going past have in part surge? to you though are expected of the is future was have past that improving Can

Hessam Nadji

more Sure. distressed to definitely Happy to market. address, see Blaine. situations We come

And interest common seeing large course, more that expect But more particularly forward across be is needle really be my values, distress the asset-driven volume. of are and more and more on coming believe we important to real though market. with been the for rates rates, of our broad for ripple that different and by and the and mover that property market to aggressively market the along of take looking our through lot is which I have formal the clearly in process the retail some transaction What's with large older centers client-driven, clients some realistic a kind across even on is mind, country though, needle is having real price product the the said segment more to not forward. debt. going of right multi-tenant closing. shopping going market to assets, of marketing to had will multifamily scale, the portion time of is process that in we're more distressed domino keep going interest a multi-month in We the underwritten to do activity mover to realistic lower effect of on still financing because recovery, to What and remarks. Therefore, will office, buyer, timelines resetting bringing a more as mentioned more short-term extent, types, the selecting bring occur reset business. We pricing lower product a securing very product becoming issues

delayed. June this immediate So certainly sooner. effect. process the that effect. a start lot clearly the a of And projections the got second had There's half the starting industry with to got with shared the act It Fed just we the domino it's ripple April, ease, And had, of hoped we an would Fed not simply therefore, year, would year and that by that optimism much of delayed. May,

Blaine Heck

Great. helpful. That's Okay.

you can are gears, think those having, far how additional you color performance more mentioned, us you any be a risk be might for which that How might there's the shifting based little guess that that of normalized growth bit that issue about forecast, just exploring? external really these for more? Just forward. be? to little on recent you transactions on that explain guys have you asking groups may And increased maybe any discussions valuation depressed kind optimism, versus along opportunities seems of are I going bit even a the just is they though it a operations, give

Hessam Nadji

Happy to. Sure.

been challenged related guaranteed to several the have is definitely movement and We forecast. between that. conversations the Where There very near-term in have uncertainty mix of portion seen a reasonable valuation valuation more expectations. has on been we the

we some based their turn in best moving of the a have at we some and forecasting of conversations be ago some uncomfortable into to their out and to, the negative. fact forward the way, were near-term the the these had we company groups verified be firm were with a what to optimism on of the talking been some final for back year on that Looking of appeared by and impact The that pipelines. decision bought pipelines, would right with

thinking come should a to targets their to developed keeping an being and and with is and term, valuations. where point plus thinking of have are dialogues X forth. But our we're you capital alignment. that. to and the our haven't organization still in to side, multiple some that XX on relationships tell synergies the that long way months to alive. course, highly our been what equals and very just capital is continue so X deals. through the stuck, uncertain can the didn't a been Of we come guardians announce about where the environment, comfort the really a still, so that's how we're yet what's in fit these Unfortunately, we're and just of that encouraging But gotten nonetheless, will risk the cultures some over this time X have these in clearly shareholders' effort and of company's there. of lot There a and I near-term get can a extent those guaranteed on side but the portion XX expectations into point And of we of interest we're past we've part these much where to some

Blaine Heck

Great.

to a You quarter. a transactions the be during guess, there more the share for any keep you do lastly, pricing would more do helpful. that Was did feel liquidity how issue? begs function that of of guess or about potential other I color So any question, just I repurchases? trying

Steve Degennaro

this Steve. Blaine, is Yes,

capital example. as little are Share with normal more out opportunistic dividends perfect I and bit the moment times, as would in allocation And capital to along significant platform. repurchases, direct dollars not share cash and course, guess would we've the the investments to technology be those much -- constantly down. how investments other at of say repurchases, our chosen this, allocate we up we the along generating times a other in we internally. of our as there, Of we're is like in to a evolving our just a and elements investments market when or strategy, with part We're that investments we dial the I

course, Of we to payable dividend. a April. Board We just paid October. in dividend continue another pay did in The just dividend -- we a declared

the So opportunistic. really dials as it being specifically relates moving repurchases levers the it's and and to

Operator

are there I Executive Nadji, comments. to over and President questions, Chief hand As Officer, no now further closing would conference Hessam the for

Hessam Nadji

thank to you, the on Thank you call. on and seeing operator, to road look for joining many forward you We of everybody, our adjourned. session next have and This you, call. is back our earnings

Operator

of you Millichap conference has & Marcus your The participation. concluded. Thank now for

You now your lines. may disconnect

Marcus & Millichap (MMI) 7 Aug 242024 Q2 Earnings call transcript