Marcus & Millichap, Inc. Reports Results for Fourth Quarter and Full Year 2023
Fourth Quarter 2023 Highlights Compared to Fourth Quarter 2022
-
Total revenue of
$166.2 million , compared to$262.4 million -
Brokerage commissions of
$144.6 million , compared to$235.8 million -
Private Client Market brokerage revenue of
$94.8 million , compared to$145.6 million -
Middle Market and Larger Transaction Market brokerage revenue of
$44.1 million , compared to$85.1 million -
Financing fees of
$15.9 million , compared to$21.6 million
-
Brokerage commissions of
-
Net loss of
$10.2 million , or$0.27 per common share, diluted, compared to net income of$7.9 million , or$0.20 per common share, diluted - Earnings were also impacted by higher expenses related to investments in growth initiatives, including talent acquisition and retention
-
Adjusted EBITDA of
$(4.5) million , compared to$14.1 million
Full Year 2023 Highlights Compared to Full Year 2022
-
Total revenue of
$645.9 million , compared to$1,301.7 million -
Brokerage commissions of
$559.8 million , compared to$1,170.3 million -
Private Client Market brokerage revenue of
$373.0 million , compared to$682.0 million -
Middle Market and Larger Transaction Market brokerage revenue of
$165.9 million , compared to$463.5 million -
Financing fees of
$66.9 million , compared to$113.0 million
-
Brokerage commissions of
-
Net loss of
$34.0 million , or$0.88 per common share, diluted, compared to net income of$104.2 million , or$2.59 per common share, diluted - Earnings were also impacted by higher expenses related to investments in growth initiatives, including talent acquisition and retention
-
Adjusted EBITDA of
$(19.6) million , compared to$165.5 million
“Our fourth quarter results continued to reflect the ongoing market disruption created by the Fed’s fight against inflation and persistent interest rate volatility impacting real estate valuations,” said
Fourth Quarter 2023 Results Compared to Fourth Quarter 2022
Total revenue for the fourth quarter 2023 was
For real estate brokerage commissions, revenue was
For financing fees, revenue was
Total operating expenses for the fourth quarter 2023 were
Selling, general and administrative expenses for the fourth quarter 2023 were
Net loss for the fourth quarter 2023 was
Full Year 2023 Results Compared to Full Year 2022
Total revenue for 2023 was
Capital Allocation
During the twelve months ended
After accounting for shares repurchased through
Business Outlook
Notwithstanding the ongoing price discovery and wider than normal bid/ask spreads, the commercial real estate transaction market is poised over the long-term to overcome the near term challenges which are currently expected to extend for the first half of 2024. Accordingly, the Company believes it remains well-positioned to achieve long-term growth.
The Company benefits from its experienced management team, infrastructure investments, industry-leading market research and proprietary technology. The size and fragmentation of the Private Client Market continues to offer long-term growth opportunities through consolidation. This highly fragmented market segment consistently accounts for over 80% of all commercial property sales transactions and over 60% of the commission pool. The top 10 brokerage firms led by MMI have an estimated 20% share of this segment by transaction count.
Key factors that may influence the Company’s business during 2024 include:
-
Volatility in transactional activity and investor sentiment driven by:
- The elevated cost of debt capital
- Interest rate uncertainty and the heightened bid-ask spread between buyers and sellers
- Risks of a potential recession and its unfavorable impact to CRE space demand
- Possible impact to market sentiment related to the presidential election, potential tax and other policy changes which may influence transaction velocity and/or future fluctuations in sales and financing activity
- Increase in operating expenses driven by labor costs, insurance, taxes and construction materials
- Volatility in each of the Company’s markets
- Increase in costs related to in-person events, client meetings, and conferences
- Global geopolitical uncertainty, which may cause investors to refrain from transacting
- The potential for acquisition activity and subsequent integration
Webcast and Call Information
Marcus & Millichap will host a live webcast today to discuss the financial results at
For those unable to access the webcast, callers from
Replay Information
For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from
About
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This release includes forward-looking statements, including the Company’s business outlook for 2024, market consensus on interest rate decreases in 2024 and for the 2024 economic forecast, our expectations of 2024 commercial real estate sales activity in the wake of reduced interest rates, the execution of our capital return program, including a semi-annual dividend and stock repurchase program, and expectations for market share growth. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
- general uncertainty in the capital markets, a worsening of economic conditions, and the rate and pace of economic recovery following an economic downturn;
- changes in our business operations;
- market trends in the commercial real estate market or the general economy, including the impact of inflation and increased interest rates;
- our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals;
- the impact of forgivable loans and related expense resulting from the recruitment and retention of agents;
- the effects of increased competition on our business;
- our ability to successfully enter new markets or increase our market share;
- our ability to successfully expand our services and businesses and to manage any such expansions;
- our ability to retain existing clients and develop new clients;
- our ability to keep pace with changes in technology;
- any business interruption or technology failure, including cybersecurity risks and ransomware attacks, and any related impact on our reputation;
- changes in interest rates, availability of capital, tax laws, employment laws or other government regulation affecting our business;
- our ability to successfully identify, negotiate, execute and integrate accretive acquisitions; and
- other risk factors included under “Risk Factors” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.
In addition, in this release, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” "goal," “expect,” “predict,” “potential,” “should” and similar expressions, as they relate to our Company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
Forward-looking statements speak only as of the date of this release. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We have not filed our Form 10-K for the year ended
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) |
||||||||||||||||
|
Three Months Ended
|
|
Years Ended
|
|||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Revenue: |
|
|
|
|
|
|
|
|||||||||
Real estate brokerage commissions |
$ |
144,559 |
|
|
$ |
235,827 |
|
|
$ |
559,752 |
|
|
$ |
1,170,310 |
|
|
Financing fees |
|
15,877 |
|
|
|
21,615 |
|
|
|
66,898 |
|
|
|
112,978 |
|
|
Other revenue |
|
5,807 |
|
|
|
5,007 |
|
|
|
19,277 |
|
|
|
18,422 |
|
|
Total revenue |
|
166,243 |
|
|
|
262,449 |
|
|
|
645,927 |
|
|
|
1,301,710 |
|
|
Operating expenses: |
|
|
|
|
|
|
|
|||||||||
Cost of services |
|
105,427 |
|
|
|
180,724 |
|
|
|
406,645 |
|
|
|
850,894 |
|
|
Selling, general and administrative |
|
74,702 |
|
|
|
72,629 |
|
|
|
285,023 |
|
|
|
300,009 |
|
|
Depreciation and amortization |
|
3,315 |
|
|
|
3,239 |
|
|
|
13,627 |
|
|
|
13,406 |
|
|
Total operating expenses |
|
183,444 |
|
|
|
256,592 |
|
|
|
705,295 |
|
|
|
1,164,309 |
|
|
Operating (loss) income |
|
(17,201 |
) |
|
|
5,857 |
|
|
|
(59,368 |
) |
|
|
137,401 |
|
|
Other income, net |
|
5,733 |
|
|
|
4,368 |
|
|
|
19,855 |
|
|
|
5,336 |
|
|
Interest expense |
|
(216 |
) |
|
|
(161 |
) |
|
|
(888 |
) |
|
|
(708 |
) |
|
(Loss) income before (benefit) provision for income taxes |
|
(11,684 |
) |
|
|
10,064 |
|
|
|
(40,401 |
) |
|
|
142,029 |
|
|
(Benefit) provision for income taxes |
|
(1,451 |
) |
|
|
2,153 |
|
|
|
(6,366 |
) |
|
|
37,804 |
|
|
Net (loss) income |
$ |
(10,233 |
) |
|
$ |
7,911 |
|
|
$ |
(34,035 |
) |
|
$ |
104,225 |
|
|
|
|
|
|
|
|
|
|
|||||||||
(Loss) earnings per share: |
|
|
|
|
|
|
|
|||||||||
Basic |
$ |
(0.27 |
) |
|
$ |
0.20 |
|
|
$ |
(0.88 |
) |
|
$ |
2.61 |
|
|
Diluted |
$ |
(0.27 |
) |
|
$ |
0.20 |
|
|
$ |
(0.88 |
) |
|
$ |
2.59 |
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|||||||||
Basic |
|
38,415 |
|
|
|
39,461 |
|
|
|
38,659 |
|
|
|
39,893 |
|
|
Diluted |
|
38,415 |
|
|
|
39,678 |
|
|
|
38,659 |
|
|
|
40,186 |
|
|
KEY OPERATING METRICS SUMMARY
(Unaudited)
Total sales volume was approximately
|
Three Months Ended
|
|
Years Ended
|
|||||||||||||
Real Estate Brokerage |
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Average Number of Investment Sales Professionals |
|
1,705 |
|
|
|
1,799 |
|
|
|
1,744 |
|
|
|
1,817 |
|
|
Average Number of Transactions per Investment |
||||||||||||||||
Sales Professional |
|
0.83 |
|
|
|
1.14 |
|
|
|
3.14 |
|
|
|
5.01 |
|
|
|
$ |
102,306 |
|
|
$ |
115,431 |
|
|
$ |
102,238 |
|
|
$ |
128,450 |
|
|
Average Commission Rate |
|
1.66 |
% |
|
|
1.80 |
% |
|
|
1.82 |
% |
|
|
1.72 |
% |
|
Average Transaction Size (in thousands) |
$ |
6,168 |
|
|
$ |
6,407 |
|
|
$ |
5,630 |
|
|
$ |
7,473 |
|
|
Total Number of Transactions |
|
1,413 |
|
|
|
2,043 |
|
|
|
5,475 |
|
|
|
9,111 |
|
|
Total Sales Volume (in millions) |
$ |
8,716 |
|
|
$ |
13,090 |
|
|
$ |
30,823 |
|
|
$ |
68,088 |
|
|
|
Three Months Ended
|
|
Years Ended
|
|||||||||||||
Financing (1) |
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Average Number of Financing Professionals |
|
98 |
|
|
|
86 |
|
|
|
96 |
|
|
|
86 |
|
|
Average Number of Transactions per Financing |
||||||||||||||||
Professional |
|
2.42 |
|
|
|
4.74 |
|
|
|
11.21 |
|
|
|
24.92 |
|
|
Average Fee per Transaction |
$ |
54,468 |
|
|
$ |
45,325 |
|
|
$ |
50,677 |
|
|
$ |
44,546 |
|
|
Average |
|
0.89 |
% |
|
|
0.78 |
% |
|
|
0.81 |
% |
|
|
0.74 |
% |
|
Average Transaction Size (in thousands) |
$ |
6,133 |
|
|
$ |
5,823 |
|
|
$ |
6,254 |
|
|
$ |
5,984 |
|
|
Total Number of Transactions |
|
237 |
|
|
|
408 |
|
|
|
1,076 |
|
|
|
2,143 |
|
|
Total Financing Volume (in millions) |
$ |
1,453 |
|
|
$ |
2,376 |
|
|
$ |
6,729 |
|
|
$ |
12,823 |
(1) |
Operating metrics exclude certain financing fees not directly associated to transactions. |
The following table sets forth the number of transactions, sales volume and revenue by commercial real estate market segment for real estate brokerage:
|
Three Months Ended |
|
|||||||||||||||||||||||||
|
2023 |
2022 |
Change |
||||||||||||||||||||||||
Real Estate Brokerage |
Number |
Volume |
Revenue |
Number |
Volume |
Revenue |
Number |
Volume |
Revenue |
||||||||||||||||||
|
|
(in millions) |
(in thousands) |
|
(in millions) |
(in thousands) |
|
(in millions) |
(in thousands) |
||||||||||||||||||
< |
209 |
$ |
125 |
$ |
5,680 |
208 |
$ |
111 |
$ |
5,098 |
1 |
|
$ |
14 |
|
$ |
582 |
|
|||||||||
Private Client Market
( |
1,043 |
|
3,447 |
|
94,772 |
1,565 |
|
5,546 |
|
145,586 |
(522 |
) |
|
(2,099 |
) |
|
(50,814 |
) |
|||||||||
Middle Market
( |
85 |
|
1,194 |
|
19,567 |
154 |
|
2,131 |
|
38,476 |
(69 |
) |
|
(937 |
) |
|
(18,909 |
) |
|||||||||
Larger Transaction |
|||||||||||||||||||||||||||
Market (≥$20 million) |
76 |
|
3,950 |
|
24,540 |
116 |
|
5,302 |
|
46,667 |
(40 |
) |
|
(1,352 |
) |
|
(22,127 |
) |
|||||||||
|
1,413 |
$ |
8,716 |
$ |
144,559 |
2,043 |
$ |
13,090 |
$ |
235,827 |
(630 |
) |
$ |
(4,374 |
) |
$ |
(91,268 |
) |
|||||||||
|
Year Ended |
||||||||||||||||||||||||||
|
2023 |
2022 |
Change |
||||||||||||||||||||||||
Real Estate Brokerage |
Number |
Volume |
Revenue |
Number |
Volume |
Revenue |
Number |
Volume |
Revenue |
||||||||||||||||||
|
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
|||||||||||||||||||||
< |
809 |
$ |
483 |
$ |
20,894 |
936 |
$ |
560 |
$ |
24,809 |
(127 |
) |
$ |
(77 |
) |
$ |
(3,915 |
) |
|||||||||
Private Client Market
( |
4,097 |
|
13,616 |
|
372,979 |
6,850 |
|
24,474 |
|
682,019 |
(2,753 |
) |
|
(10,858 |
) |
|
(309,040 |
) |
|||||||||
Middle Market
( |
303 |
|
4,117 |
|
73,007 |
735 |
|
9,980 |
|
188,593 |
(432 |
) |
|
(5,863 |
) |
|
(115,586 |
) |
|||||||||
Larger Transaction |
|||||||||||||||||||||||||||
Market (≥$20 million) |
266 |
|
12,607 |
|
92,872 |
590 |
|
33,074 |
|
274,889 |
(324 |
) |
|
(20,467 |
) |
|
(182,017 |
) |
|||||||||
|
5,475 |
$ |
30,823 |
$ |
559,752 |
9,111 |
$ |
68,088 |
$ |
1,170,310 |
(3,636 |
) |
$ |
(37,265 |
) |
$ |
(610,558 |
) |
|||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except for shares and par value) (Unaudited) |
||||||||
|
|
|||||||
|
2023 |
|
2022 |
|||||
Assets |
|
|
|
|||||
Current assets: |
|
|
|
|||||
Cash, cash equivalents, and restricted cash |
$ |
170,753 |
|
|
$ |
235,873 |
|
|
Commissions receivable |
|
16,171 |
|
|
|
8,453 |
|
|
Prepaid expenses |
|
8,813 |
|
|
|
9,411 |
|
|
Income tax receivable |
|
9,299 |
|
|
|
8,682 |
|
|
Marketable debt securities, available-for-sale (amortized cost of |
||||||||
at |
||||||||
credit losses) |
|
168,881 |
|
|
|
253,434 |
|
|
Advances and loans, net |
|
3,574 |
|
|
|
4,005 |
|
|
Other assets, current |
|
16,203 |
|
|
|
7,282 |
|
|
Total current assets |
|
393,694 |
|
|
|
527,140 |
|
|
Property and equipment, net |
|
27,450 |
|
|
|
27,644 |
|
|
Operating lease right-of-use assets, net |
|
90,058 |
|
|
|
87,945 |
|
|
Marketable debt securities, available-for-sale (amortized cost of |
||||||||
|
||||||||
losses) |
|
67,459 |
|
|
|
68,595 |
|
|
Assets held in rabbi trust |
|
10,838 |
|
|
|
9,553 |
|
|
Deferred tax assets, net |
|
46,930 |
|
|
|
41,321 |
|
|
|
|
51,183 |
|
|
|
55,696 |
|
|
Advances and loans, net |
|
175,827 |
|
|
|
169,955 |
|
|
Other assets, non-current |
|
14,972 |
|
|
|
15,859 |
|
|
Total assets |
$ |
878,411 |
|
|
$ |
1,003,708 |
|
|
Liabilities and stockholders’ equity |
|
|
|
|||||
Current liabilities: |
|
|
|
|||||
Accounts payable and accrued expenses |
$ |
8,126 |
|
|
$ |
11,450 |
|
|
Deferred compensation and commissions |
|
55,769 |
|
|
|
75,321 |
|
|
Operating lease liabilities |
|
18,336 |
|
|
|
16,984 |
|
|
Accrued bonuses and other employee related expenses |
|
19,119 |
|
|
|
38,327 |
|
|
Other liabilities, current |
|
3,919 |
|
|
|
9,933 |
|
|
Total current liabilities |
|
105,269 |
|
|
|
152,015 |
|
|
Deferred compensation and commissions |
|
47,771 |
|
|
|
64,461 |
|
|
Operating lease liabilities |
|
69,407 |
|
|
|
65,109 |
|
|
Other liabilities, non-current |
|
10,690 |
|
|
|
8,614 |
|
|
Total liabilities |
|
233,137 |
|
|
|
290,199 |
|
|
Commitments and contingencies |
|
— |
|
|
|
— |
|
|
Stockholders’ equity: |
|
|
|
|||||
Preferred stock, |
|
|
|
|||||
Authorized shares – 25,000,000; issued and outstanding shares – none at |
||||||||
and 2022, respectively |
|
— |
|
|
|
— |
|
|
Common stock, |
|
|
|
|||||
Authorized shares – 150,000,000; issued and outstanding shares – 38,412,484 and |
||||||||
39,255,838 at |
|
4 |
|
|
|
4 |
|
|
Additional paid-in capital |
|
153,740 |
|
|
|
131,541 |
|
|
Retained earnings |
|
492,298 |
|
|
|
585,581 |
|
|
Accumulated other comprehensive loss |
|
(768 |
) |
|
|
(3,617 |
) |
|
Total stockholders’ equity |
|
645,274 |
|
|
|
713,509 |
|
|
Total liabilities and stockholders’ equity |
$ |
878,411 |
|
|
$ |
1,003,708 |
|
|
OTHER INFORMATION
(Unaudited)
Adjusted EBITDA Reconciliation
Adjusted EBITDA, which the Company defines as net (loss) income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, cash equivalents, and restricted cash, (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. The Company uses Adjusted EBITDA in its business operations to evaluate the performance of its business, develop budgets and measure its performance against those budgets, among other things. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate its overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under
A reconciliation of the most directly comparable
|
Three Months Ended
|
|
Years Ended |
|||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Net (loss) income |
$ |
(10,233 |
) |
|
$ |
7,911 |
|
|
$ |
(34,035 |
) |
|
$ |
104,225 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|||||||||
Interest income and other (1) |
|
(4,689 |
) |
|
|
(3,992 |
) |
|
|
(17,890 |
) |
|
|
(7,951 |
) |
|
Interest expense |
|
216 |
|
|
|
161 |
|
|
|
888 |
|
|
|
708 |
|
|
(Benefit) provision for income taxes |
|
(1,451 |
) |
|
|
2,153 |
|
|
|
(6,366 |
) |
|
|
37,804 |
|
|
Depreciation and amortization |
|
3,315 |
|
|
|
3,239 |
|
|
|
13,627 |
|
|
|
13,406 |
|
|
Stock-based compensation |
|
8,338 |
|
|
|
4,637 |
|
|
|
24,146 |
|
|
|
17,312 |
|
|
Adjusted EBITDA |
$ |
(4,504 |
) |
|
$ |
14,109 |
|
|
$ |
(19,630 |
) |
|
$ |
165,504 |
|
(1) |
Other includes net realized gains (losses) on marketable debt securities available-for-sale. |
Glossary of Terms
-
Private Client Market segment: transactions with values from
$1 million to up to but less than$10 million -
Middle Market segment: transactions with values from
$10 million to up to but less than$20 million -
Larger Transaction Market segment: transactions with values of
$20 million and above
Certain Adjusted Metrics
Real Estate Brokerage
Following are actual and as adjusted metrics excluding any large transactions in our real estate brokerage business in excess of
|
Three Months Ended
|
Year Ended
|
||||||
(actual) |
(as adjusted) |
(actual) |
(as adjusted) |
|||||
Total Sales Volume Decrease |
(33.4)% |
(33.4)% |
(54.7)% |
(51.9)% |
||||
Average Commission Rate (Decrease) Increase |
(7.8)% |
(7.8)% |
5.8% |
2.2% |
||||
Average Transaction Size Decrease |
(3.7)% |
(3.7)% |
(24.7)% |
(20.0)% |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240216250379/en/
Investor Relations
:
Investor Relations
InvestorRelations@marcusmillichap.com
Source: