Business Wire | Feb 18, 2021 04:07PM EST

Marcus & Millichap, Inc. Reports Results for Fourth Quarter and Full-Year 2020

Feb. 18, 2021

CALABASAS, Calif.--(BUSINESS WIRE)--Feb. 18, 2021--Marcus & Millichap, Inc. (the "Company", "Marcus & Millichap", "MMI") (NYSE: MMI), a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services, today reported financial results for the fourth quarter and full year ended December 31, 2020.

Fourth Quarter 2020 Results and Highlights

* Total revenues were $250.2 million, increasing by 57.8% sequentially and by 5.2% year-over-year * Net income of $23.6 million, or $0.59 per common share, diluted, compared to $6.0 million, or $0.15 per common share, diluted, in the third quarter of 2020 and $20.7 million, or $0.52 per common share, diluted, in the fourth quarter of 2019 * Adjusted EBITDA of $36.9 million, compared to $12.2 million in the third quarter of 2020 and $32.5 million in the fourth quarter of 2019 * Revenue from financing fees were $26.9 million, increasing by 72.0% sequentially and by 42.8% year-over-year * Private Client brokerage revenue increased 41.9% sequentially and decreased 2.0% year-over-year * Middle Market and Larger Transaction brokerage revenue increased 91.8% sequentially and 6.0% year-over-year * Completed two business acquisitions

Full Year 2020 Results and Highlights

* Total revenues were $716.9 million, compared to $806.4 million in 2019 * Net income of $42.8 million, or $1.08 per common share, diluted, compared to $76.9 million, or $1.95 per common share, diluted, in 2019 * Adjusted EBITDA of $75.7 million, compared to $115.6 million in 2019 * Revenue from financing fees increased 6.4% to $70.5 million * Number of investment sales professionals was 2,006, increasing by 4.2% over the past 12 months * Completed four business acquisitions

Hessam Nadji, President and CEO commented, "We concluded a tumultuous year with a record fourth quarter, which was bolstered by our intensified investor outreach, signature internal collaboration which helps clients solve problems and act on opportunities as well as the further resurrection of previously cancelled or delayed deals." He added, "Positive vaccine news, investor urgency to close transactions before year-end and historically low interest rates helped spur transaction activity. For the year, the Company successfully preserved its strong balance sheet, added to its roster of experienced professionals, completed four strategic acquisitions, implemented a number of technology enhancements and outpaced the market by a healthy margin."

Mr. Nadji continued, "While the pace of improvement in the transaction market is likely to be slower in the first quarter, we are encouraged by many positive factors that support rising transaction volumes as the year progresses. Expectation of widespread vaccinations, more robust job numbers and additional stimulus should lead to the release of pent-up demand in the second half of the year. We continue to strengthen our tools and technology, as well as make strategic investments, positioning us to create long-term shareholder value."

Fourth Quarter 2020 Results Compared to Fourth Quarter 2019

Total revenues for the fourth quarter of 2020 were $250.2 million, compared to $237.9 million for the same period in the prior year, increasing 5.2%. The growth in total revenues was driven by the increase in real estate brokerage commissions, financing fees and other revenues. Real estate brokerage commissions of $217.1 million rose modestly from the prior year. Financing fees increased 42.8% to $26.9 million primarily due to an increase in overall financing volume, partially offset by a decrease in average fee rates. Other revenues increased 75.0% to $6.2 million.

Total operating expenses for the fourth quarter of 2020 increased 4.4% to $220.2 million, compared to $210.8 million for the same period in the prior year. The increase was primarily driven by a 3.5% increase in cost of services and a 5.9% increase in selling, general and administrative expense. Cost of services as a percent of total revenues decreased 100 basis points to 64.2% compared to the same period in the prior year, primarily due to the mix in closed deals by seniority/experience level of our investment sales and financing professionals.

Selling, general and administrative expense for the fourth quarter of 2020 increased 5.9% to $56.4 million, compared to the same period in the prior year. The increase was primarily due to higher costs associated with (i) compensation related costs, including salaries and related benefits and variable employee incentive compensation; (ii) business development, marketing and other support related to the long-term retention of our sales and financing professionals, as well as recent additions of experienced professionals; and (iii) our acquisition activities. These increases were partially offset by reductions in (i) legal costs and (ii) net other expense categories, including events, travel and other related expenses.

Net income for the fourth quarter of 2020 was $23.6 million, or $0.59 per common share, basic and diluted, compared to $20.7 million, or $0.53 per common share, basic and $0.52 per common share, diluted, for the same period in the prior year. Adjusted EBITDA for the fourth quarter of 2020 was $36.9 million, compared to $32.5 million for the same period in the prior year.

Full Year 2020 Results Compared to Full Year 2019

Total revenues for 2020 were $716.9 million, compared to $806.4 million for the same period in the prior year, a decrease of $89.5 million, or 11.1%. Total operating expenses for 2020 decreased by 6.6% to $663.3 million compared to $710.0 million for the same period in the prior year. Cost of services as a percent of total revenues increased to 62.5%, up 60 basis points compared to the same period in the prior year reflecting a higher proportion of transactions completed by our more senior investment sales and financing professionals in a challenging environment. The Company reported net income for 2020 of $42.8 million, or $1.08 per common share, basic and diluted, compared with net income of $76.9 million, or $1.95 per common share, basic and diluted for the same period in the prior year. Adjusted EBITDA for 2020 decreased by 34.5% to $75.7 million, from $115.6 million for the same period in the prior year. As of December 31, 2020, the Company had 2,097 investment sales and financing professionals, a net gain of 76 over the prior year.

Impact of COVID-19

Since the declaration of the COVID-19 pandemic in mid-March, the Company has implemented recommendations and protocols from the Centers for Disease Control, the World Health Organization and federal, state and local authorities where it operates to ensure the safety and well-being of its clients, employees, and agents. The Company quickly implemented work from home protocols for all offices and has been conducting business using its extensive technology platform. To mitigate the impact of COVID-19 on our business, the Company has assessed its cost structure and instituted expense reductions to preserve the Company's strong balance sheet and financial position.

The impact of shelter-in-place orders, widespread travel restrictions and disruptions to the financial markets in response to the economic uncertainty introduced by the pandemic had an adverse impact on the real estate investment sales market. The slower transaction market in the first half of 2020, impacted the Company's business, resulting in a reduction in sales volume, revenues, Adjusted EBITDA and earnings per share. The duration of the disruptive nature of the pandemic on the Company's business as well as the financial impact is unknown but has been diminishing since the onset of the pandemic. During the fourth quarter of 2020, we continued to see a recovery in transaction activity and availability of capital from the initial shock of COVID-19.

Business Outlook

Notwithstanding the impact of the COVID-19 pandemic on the current business environment, we believe that the Company is positioned to achieve long-term growth by leveraging a number of factors. These include our leading national brand and market position within the Private Client Market segment, growth opportunities in the Middle Market and Larger Transaction Market segments, significant growth potential in our financing division, Marcus & Millichap Capital Corporation, and supplementing our organic growth through incremental strategic acquisitions. The Company's growth plan also includes further expansion of investment brokerage services in office, industrial and various specialty property types such as hospitality, self-storage and seniors housing.

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 segment continues to offer long-term growth opportunities through consolidation. This market segment consistently accounts for over 80% of all commercial property sales transactions and over 60% of the commission pool and is highly fragmented. The top 10 brokerage firms led by MMI have an estimated 22% share of this segment by transaction count.

Key factors that may influence the Company's business during 2021 include:

* Hampered transaction velocity as a result of the impact of COVID-19 on the market and the Company's transaction volume, revenues and earnings per share * Volatility in market sales and investor sentiment driven by: Slowdown in market sales in the short- to mid-term due to local and regional surges of COVID-19 cases, interest rate fluctuations, increasing bid-ask spread between buyers and sellers and economic trends Possible boost to investor sentiment and sales activity based on perceived bottoming of interest rates, easing cycle, increased COVID-19 vaccine supply and distribution and economic initiatives which may increase real estate investor demand, particularly in the second half of 2021 Possible impediment of investor sentiment related to regulatory changes at the local, state and national level * Experienced sales and financing professionals' larger share of revenue production in a more challenging market environment, resulting in a higher cost of services * Volatility in the Company's Middle and Larger Transaction Market segments * Global geopolitical uncertainty, which may cause investors to refrain from transacting * The potential for accretive acquisition activity and subsequent integration

Conference Call Details

Marcus & Millichap will host a conference call today to discuss the results at 2:00 p.m. Pacific Time/5:00 p.m. Eastern Time. To participate in the conference call, callers from the United States and Canada should dial (877) 407-9208 ten minutes prior to the scheduled call time. International callers should dial (201) 493-6784. For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 5:00 p.m. Pacific Time/8:00 p.m. Eastern Time on Thursday, February 18, 2021, through 8:59 p.m. Pacific Time/11:59 p.m. Eastern Time on Thursday, March 4, 2021, by dialing (844) 512-2921 in the United States and Canada or (412) 317-6671 internationally and entering passcode 13713798.

About Marcus & Millichap, Inc.

Marcus & Millichap, Inc. is a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of December 31, 2020, the Company had 2,097 investment sales and financing professionals in 84 offices who provide investment brokerage and financing services to sellers and buyers of commercial real estate. The Company also offers market research, consulting and advisory services to our clients. Marcus & Millichap closed 8,954 transactions in 2020, with a sales volume of approximately $43.4 billion. For additional information, please visit www.MarcusMillichap.com.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements, including the Company's business outlook for 2021, the potential continuing impact of the COVID-19 pandemic, and expectations for changes (or fluctuations) in 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:

* uncertainties relating to the continuing impact of the COVID-19 pandemic, including the length and severity of such pandemic and the federal government's proposed stimulus response package, and the pace of recovery following such pandemic; * general uncertainty in the capital markets and a worsening of economic conditions and the rate and pace of economic recovery following an economic downturn; * changes in our business operations, including restrictions on business activities, resulting from the COVID-19 pandemic; * market trends in the commercial real estate market or the general economy; * our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals; * 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 and any related impact on our reputation; * changes in interest rates, 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," "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.

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(Unaudited)

Three Months Ended Year Ended December 31, December 31,

2020 2019 2020 2019

Revenues:

Real estate brokerage $ 217,120 $ 215,541 $ 633,164 $ 729,356 commissions

Financing fees 26,864 18,806 70,538 66,293

Other revenues 6,230 3,561 13,204 10,779

Total revenues 250,214 237,908 716,906 806,428

Operating expenses:

Cost of services 160,672 155,196 447,879 498,878

Selling, general and 56,413 53,265 204,514 203,110 administrative

Depreciation and 3,077 2,343 10,899 8,017 amortization

Total operating expenses 220,162 210,804 663,292 710,005

Operating income 30,052 27,104 53,614 96,423

Other income (expense), net 2,426 3,410 6,650 12,477

Interest expense (205 ) (370 ) (900 ) (1,388 )

Income before provision for 32,273 30,144 59,364 107,512 income taxes

Provision for income taxes 8,651 9,423 16,526 30,582

Net income 23,622 20,721 42,838 76,930



Other comprehensive income (loss):

Marketable debt securities, available-for-sale:

Change in net unrealized 112 (52 ) 799 1,822 gains (losses)

Less: reclassificationadjustment for net losses 2 (2 ) 34 (43 )(gains) included in otherincome (expense), net

Net change, net of tax of$40, $(6), $286 and $611 forthe three months endedDecember 31, 2020 and 2019 114 (54 ) 833 1,779 and the years ended December31, 2020 and 2019,respectively

Foreign currency translationloss, net of tax of $0 forthe three months ended (491 ) (376 ) (237 ) (576 )December 31, 2020 and 2019and the years ended December31, 2020 and 2019

Total other comprehensive (377 ) (430 ) 596 1,203 (loss) income

Comprehensive income $ 23,245 $ 20,291 $ 43,434 $ 78,133



Earnings per share:

Basic $ 0.59 $ 0.53 $ 1.08 $ 1.95

Diluted $ 0.59 $ 0.52 $ 1.08 $ 1.95

Weighted average common shares outstanding:

Basic 39,715 39,468 39,642 39,404

Diluted 39,967 39,640 39,735 39,548

MARCUS & MILLICHAP, INC. KEY OPERATING METRICS SUMMARY (Unaudited)

Total sales volume was $15.6 billion for the three months ended December 31, 2020, encompassing 2,978 transactions consisting of $11.2 billion for real estate brokerage (2,071 transactions), $3.1 billion for financing (642 transactions) and $1.3 billion in other transactions, including consulting and advisory services (265 transactions). Total sales volume was $43.4 billion for the year ended December 31, 2020, encompassing 8,954 transactions consisting of $32.1 billion for real estate brokerage (6,288 transactions), $7.7 billion for financing (1,943 transactions) and $3.6 billion in other transactions, including consulting and advisory services (723 transactions). As of December 31, 2020, the Company had 2,006 investment sales professionals and 91 financing professionals. Key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

Three Months Ended Year Ended

December 31, December 31,

Real Estate Brokerage 2020 2019 2020 2019

Average Number of Investment 1,948 1,882 1,920 1,843 Sales Professionals

Average Number ofTransactions per Investment 1.06 1.09 3.28 3.82 Sales Professional

Average Commission per $ 104,838 $ 105,142 $ 100,694 $ 103,572 Transaction

Average Commission Rate 1.94 % 1.97 % 1.98 % 1.98 %

Average Transaction Size (in $ 5,404 $ 5,341 $ 5,097 $ 5,234 thousands)

Total Number of Transactions 2,071 2,050 6,288 7,042

Total Sales Volume (in $ 11,191 $ 10,950 $ 32,052 $ 36,858 millions)

Three Months Ended Year Ended

December 31, December 31,

Financing ^(1) 2020 2019 2020 2019

Average Number of Financing 87 96 86 102 Professionals

Average Number ofTransactions per Financing 7.38 6.06 22.59 19.06 Professional

Average Fee per Transaction $ 38,083 $ 31,034 $ 33,747 $ 32,680

Average Fee Rate 0.80 % 0.83 % 0.85 % 0.88 %

Average Transaction Size (in $ 4,789 $ 3,729 $ 3,948 $ 3,693 thousands)

Total Number of Transactions 642 582 1,943 1,944

Total Financing Volume (in $ 3,075 $ 2,170 $ 7,672 $ 7,180 millions)

^(1) ^Operating metrics calculated excluding certain financing fees notdirectly associated to transactions.

The following table sets forth the number of transactions, sales volume and revenues by commercial real estate market segment for real estate brokerage:

Three Months Ended,

December 31, 2020 September 30, 2020 Change

Real Estate Number Volume Revenues Number Volume Revenues Number Volume RevenuesBrokerage

(in (in (in (in (in (in millions) thousands) millions) thousands) millions) thousands)

<$1 million 295 $ 190 $ 7,906 241 $ 156 $ 6,290 54 $ 34 $ 1,616

Private ClientMarket ($1 - 1,570 4,908 138,830 1,168 3,592 97,856 402 1,316 40,974 <$10 million)

Middle Market($10 - <$20 112 1,526 29,719 70 945 17,643 42 581 12,076 million)

LargerTransaction 94 4,567 40,665 48 2,302 19,055 46 2,265 21,610 Market (?$20million)

2,071 $ 11,191 $ 217,120 1,527 $ 6,995 $ 140,844 544 $ 4,196 $ 76,276



Three Months Ended December 31,

2020 2019 Change

Real Estate Number Volume Revenues Number Volume Revenues Number Volume RevenuesBrokerage

(in (in (in (in (in (in millions) thousands) millions) thousands) millions) thousands)

<$1 million 295 $ 190 $ 7,906 278 $ 183 $ 7,404 17 $ 7 $ 502

Private ClientMarket ($1 - 1,570 4,908 138,830 1,558 5,080 141,717 12 (172 ) (2,887 )<$10 million)

Middle Market($10 - <$20 112 1,526 29,719 129 1,768 31,297 (17 ) (242 ) (1,578 )million)

LargerTransaction 94 4,567 40,665 85 3,919 35,123 9 648 5,542 Market (?$20million)

2,071 $ 11,191 $ 217,120 2,050 $ 10,950 $ 215,541 21 $ 241 $ 1,579

Year Ended December,

2020 2019 Change

Real Estate Number Volume Revenues Number Volume Revenues Number Volume RevenuesBrokerage

(in (in (in (in (in (in millions) thousands) millions) thousands) millions) thousands)

<$1 million 944 $ 600 $ 24,456 1,011 $ 657 $ 27,012 (67 ) $ (57 ) $ (2,556 )

Private ClientMarket ($1 - 4,773 15,115 421,767 5,311 17,239 487,528 (538 ) (2,124 ) (65,761 )<$10 million)

Middle Market($10 - <$20 316 4,311 81,621 441 6,002 107,818 (125 ) (1,691 ) (26,197 )million)

LargerTransaction 255 12,026 105,320 279 12,960 106,998 (24 ) (934 ) (1,678 )Market (?$20million)

6,288 $ 32,052 $ 633,164 7,042 $ 36,858 $ 729,356 (754 ) $ (4,806 ) $ (96,192 )

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)

December 31, 2020

(Unaudited)

December 31, 2019

Assets

Current assets:

Cash and cash equivalents

$

243,152

$

232,670

Commissions receivable, net

10,391

5,003

Prepaid expenses

10,153

10,676

Income tax receivable

-

4,999

Marketable debt securities, available-for-sale (includes amortized cost of $158,148 and $150,517 at December

31, 2020 and 2019, respectively, and $0 allowance for credit losses)

158,258

150,752

Advances and loans, net

2,413

2,882

Other assets

4,711

3,185

Total current assets

429,078

410,167

Property and equipment, net

23,436

22,643

Operating lease right-of-use assets, net

84,024

90,535

Marketable debt securities, available-for-sale (includes amortized cost of $45,181 and $59,468 at December 31,

2020 and 2019, respectively, and $0 allowance for credit losses)

47,773

60,809

Assets held in rabbi trust

10,295

9,452

Deferred tax assets, net

21,374

22,122

Goodwill and other intangible assets, net

52,053

22,312

Advances and loans, net

106,913

66,647

Other assets

4,176

4,347

Total assets

$

779,122

$

709,034

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and other liabilities

$

18,288

$

10,790

Notes payable to former stockholders

-

6,564

Deferred compensation and commissions

58,106

44,301

Income tax payable

3,726

-

Operating lease liabilities

19,190

17,762

Accrued bonuses and other employee related expenses

21,007

22,388

Total current liabilities

120,317

101,805

Deferred compensation and commissions

38,745

45,628

Operating lease liabilities

59,408

63,155

Other liabilities

13,816

3,539

Total liabilities

232,286

214,127

Commitments and contingencies

-

-

Stockholders' equity:

Preferred stock, $0.0001 par value:

Authorized shares - 25,000,000; issued and outstanding shares - none at December 31, 2020 and 2019,

respectively

-

-

Common stock, $0.0001 par value:

Authorized shares - 150,000,000; issued and outstanding shares - 39,401,976 and 39,153,195 at

December 31, 2020 and 2019, respectively

4

4

Additional paid-in capital

113,182

104,658

Stock notes receivable from employees

-

(4

)

Retained earnings

431,076

388,271

Accumulated other comprehensive income

2,574

1,978

Total stockholders' equity

546,836

494,907

Total liabilities and stockholders' equity

$

779,122

$

709,034

MARCUS & MILLICHAP, INC. OTHER INFORMATION (Unaudited)

Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash equivalents, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-cash mortgage servicing rights ("MSRs") activity. 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 an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under U.S. generally accepted accounting principles ("U.S. GAAP"). The Company finds Adjusted EBITDA to be a useful tool to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of the foregoing limitations, the Company does not rely solely on Adjusted EBITDA as a performance measure and also considers its U.S. GAAP results. Adjusted EBITDA is not a measurement of the Company's 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):

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)

December 31, 2020 December 31, 2019 (Unaudited)

Assets

Current assets:

Cash and cash equivalents $ 243,152 $ 232,670

Commissions receivable, net 10,391 5,003

Prepaid expenses 10,153 10,676

Income tax receivable - 4,999

Marketable debt securities, available-for-sale(includes amortized cost of $158,148 and $150,517 at December

31, 2020 and 2019, respectively, and $0 allowance for 158,258 150,752 credit losses)

Advances and loans, net 2,413 2,882

Other assets 4,711 3,185

Total current assets 429,078 410,167

Property and equipment, net 23,436 22,643

Operating lease right-of-use assets, net 84,024 90,535

Marketable debt securities, available-for-sale(includes amortized cost of $45,181 and $59,468 at December 31,

2020 and 2019, respectively, and $0 allowance for 47,773 60,809 credit losses)

Assets held in rabbi trust 10,295 9,452

Deferred tax assets, net 21,374 22,122

Goodwill and other intangible assets, net 52,053 22,312

Advances and loans, net 106,913 66,647

Other assets 4,176 4,347

Total assets $ 779,122 $ 709,034



Liabilities and stockholders' equity

Current liabilities:

Accounts payable and other liabilities $ 18,288 $ 10,790

Notes payable to former stockholders - 6,564

Deferred compensation and commissions 58,106 44,301

Income tax payable 3,726 -

Operating lease liabilities 19,190 17,762

Accrued bonuses and other employee related expenses 21,007 22,388

Total current liabilities 120,317 101,805

Deferred compensation and commissions 38,745 45,628

Operating lease liabilities 59,408 63,155

Other liabilities 13,816 3,539

Total liabilities 232,286 214,127



Commitments and contingencies - -

Stockholders' equity:

Preferred stock, $0.0001 par value:

Authorized shares - 25,000,000; issued and outstandingshares - none at December 31, 2020 and 2019,

respectively - -

Common stock, $0.0001 par value:

Authorized shares - 150,000,000; issued andoutstanding shares - 39,401,976 and 39,153,195 at

December 31, 2020 and 2019, respectively 4 4

Additional paid-in capital 113,182 104,658

Stock notes receivable from employees - (4 )

Retained earnings 431,076 388,271

Accumulated other comprehensive income 2,574 1,978

Total stockholders' equity 546,836 494,907

Total liabilities and stockholders' equity $ 779,122 $ 709,034

MARCUS & MILLICHAP, INC. OTHER INFORMATION (Unaudited)

Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash and cash equivalents, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-cash mortgage servicing rights ("MSRs") activity. 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 an analytical tool and should not be considered in isolation or as a substitute for analysis of the Company's results as reported under U.S. generally accepted accounting principles ("U.S. GAAP"). The Company finds Adjusted EBITDA to be a useful tool to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of the foregoing limitations, the Company does not rely solely on Adjusted EBITDA as a performance measure and also considers its U.S. GAAP results. Adjusted EBITDA is not a measurement of the Company's 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 Year Ended

December September December December December 31, 2020 30, 2020 31, 2019 31, 2020 31, 2019

Net income $ 23,622 $ 6,040 $ 20,721 $ 42,838 $ 76,930

Adjustments:

Interest income (958 ) (889 ) (2,494 ) (5,048 ) (10,322 )and other ^(1)

Interest expense 205 199 370 900 1,388

Provision for 8,651 1,916 9,423 16,526 30,582 income taxes

Depreciation and 3,077 2,606 2,343 10,899 8,017 amortization

Stock-based 2,354 2,383 2,238 9,905 9,278 compensation

Non-cash MSR (9 ) (26 ) (90 ) (321 ) (322 )activity ^(2)

Adjusted EBITDA^ $ 36,942 $ 12,229 $ 32,511 $ 75,699 $ 115,551 (3)

(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.

(3)

The increase in Adjusted EBITDA for the three months ended December 31, 2020 compared to the same period in 2019 is primarily due to an increase in total revenues and a lower proportion of operating expenses compared to total revenues, while the decrease for the year ended December 31, 2020 compared to the same period in 2019 is primarily due to a decrease in total revenues and a higher proportion of operating expenses compared to total revenues.

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 (previously Institutional Market segment): transactions with values of $20 million and above * Acquisitions: acquisitions of teams and/or acquisitions as business combinations under accounting standards

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CONTACT: Investor Relations Contact: ICR, Inc. Evelyn Infurna, (203) 682-8265 evelyn.infurna@icrinc.com