NYSE: MMI
2022
MA RCUS & M ILLICHAP, I NC .
AN NUA L REPORT
www.MarcusMillichap.com
REAL ESTATE INVESTMENT SALES
FINANCING
RESEARCH
ADVISORY SERVICES
Mission Statement
At Marcus & Millichap, our commitment is to help our clients
create and preserve wealth by providing them with the best real estate
investment sales, financing, research and advisory services.
Founded on Specialization – A Culture of Client
Results Powered by Research and Technology
■ Dedicated to real estate investment brokerage since 1971
■ The industry leader in real estate investment transactions
• Nearly 2,000 investment sales and financing professionals
• Serving investors with 80+ offices throughout the U.S. and Canada
• Integrated marketing system matching buyers and sellers
• Specialized coverage by property type
■ A leading source of real estate financing and capital markets expertise
■ A trusted provider of market research and advisory services
TO OUR SHAREHOLDERS
March 17, 2023
Marcus & Millichap (MMI) achieved another record revenue year
despite the market disruption related to action taken by the Federal
Reserve. Our team delivered revenue of $1.3 billion, up slightly
from the prior record year. The company generated adjusted
EBITDA of $166 million, the second-best in our 52-year history.
We completed more investment sales and financing transactions
than any other firm in the United States, with over 12,000
transactions and $86.3 billion in volume. This level of execution
enabled the firm to outperform the market with a year-over-year 6%
decline in our brokerage transactions compared to a 25% decline
in total U.S. commercial property sales, as reported by Real
Capital Analytics. We are proud of these accomplishments,
especially amid heightened market volatility.
Our tradition of focusing on our clients first, fostering an internal
culture of support and collaboration, and maintaining a strong
balance sheet while investing in the future continues to drive our
management philosophy. In 2022, the company expanded its capital
allocation plan by launching a dividend policy and initiating a
share repurchase program. As a result, we returned approximately
$90 million to shareholders. This expanded capital allocation plan
reflects our confidence in the operating strength of the company and
its balance sheet, as illustrated by our healthy liquidity.
Industry Position
Marcus & Millichap continues to provide commercial real estate
investors with the largest sales force in the industry specializing
in investment brokerage and financing. We accomplish this with a
team of over 1,900 professionals located in more than 80 offices
throughout North America. At the foundation is our leading
market position in the private client segment, comprised of asset
sales priced from $1 million to $10 million. This segment typically
accounts for more than 80% of commercial property sales in the
market and accounted for 58% of our brokerage revenue in 2022.
As the market leader in this segment, we are well positioned for
growth in this highly fragmented market niche.
transactions
Our results reflect several strategic initiatives implemented over
the past several years. These include substantial and consistent
enhancements in proprietary technology, higher retention and
productivity of tenured professionals, further expansion into larger,
institutional
through our Institutional Property
Advisors (IPA) division and growth of our financing division,
Marcus & Millichap Capital Corporation (MMCC). Our scale and
proprietary marketing system enable us to showcase every listing
to the largest pool of qualified investors and move capital across
markets and property types. This past year we introduced
our newest client application, MyMMI, to drive deeper penetration
with our client sales efforts. To that end, we also established an
auction sales division to expand our existing marketing sales
channels. Early in the year, we added financing expertise
specializing in institutional multifamily capital markets to our IPA
division. These are just a few examples of our ever-evolving strategic
initiatives to grow our client outreach and market penetration.
Market Environment
2022 was a tale of two halves. The first half of the year was a
continuation of our record prior year, and the second half was a
dramatic reversal in market momentum. This change was a result
of the most aggressive action taken by the Federal Reserve in
40 years as they increased interest rates more than 400 basis
points to address inflation. This rapid rise in the cost of debt
disrupted real estate valuations, debt financing and ushered in a
high degree of economic uncertainty. The consequences were
evident in our second-half results and particularly impactful to
our fourth quarter as reflected in the spike of canceled deals and
listings that required repricing and remarketing. Given this
environment, we believe that the market outlook will remain
challenging through the first half of 2023.
During these times, the Marcus & Millichap brand and reputation
of helping clients navigate uncertainty is a differentiator and
competitive advantage. Although in the short term we have seen
slowing volumes caused by a re-calibration of property valuations,
widening of bid-ask spreads and tighter underwriting by lenders
and buyers alike, we are confident in our long-term competitive
positioning and staying the course. Our strategy of investing in
talent, brand, technology and infrastructure will continue to
strengthen our position and provide sustainable long-term value
for our shareholders.
Looking Forward
We enter this next market transition as committed as ever to our
strategic initiatives that have produced outstanding results over
the long run. As we have done through multiple other cycles,
we will continue to invest in our business and people as we
balance prudent cost management with long-term investments to
further enhance our competitive position. We are confident that
our leading brand and unwavering client focus will foster more
relationships, sales force expansion and future growth.
We thank our clients for entrusting us with their relationships and
most meaningful and impactful transactions. We would also like to
express our gratitude and appreciation to the entire Marcus &
Millichap team for their hard work in 2022. Lastly, we are thankful
for our dedicated shareholders’ continued trust and support.
Sincerely,
George M. Marcus
Chairman of the
Board of Directors
Hessam Nadji
President,
Chief Executive Officer
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
________________________
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
to
.
Commission File Number 001-36155
________________________
MARCUS & MILLICHAP, INC.
(Exact name of registrant as specified in its charter)
________________________
Delaware
(State or other jurisdiction of
incorporation or organization)
35-2478370
(I.R.S. Employer
Identification No.)
23975 Park Sorrento, Suite 400 Calabasas, California, 91302
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (818) 212-2250
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol (s)
Name of each exchange on which registered
Common Stock, par value $0.0001 per share
MMI
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to
submit and such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
x
Non-accelerated filer
o
Emerging growth company o
Accelerated filer
o
Smaller reporting company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report. x
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x
The aggregate market value of the registrant’s voting stock held by non-affiliates at June 30, 2022 was approximately $906.9 million, based on
the closing price per share of common stock on June 30, 2022 of $36.74 as reported on the New York Stock Exchange. Shares of common stock
known by the registrant to be beneficially owned by directors and executive officers of the registrant and 10% stockholders who are affiliates are
not included in the computation. The registrant, however, has made no determination that such persons are “affiliates” within the meaning of
Rule 12b-2 under the Securities Exchange Act of 1934.
As of February 23, 2023, there were 39,243,988 shares of the registrant’s common stock outstanding.
________________________
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Proxy Statement to be delivered to stockholders in connection with the annual meeting of stockholders to be held on
May 2, 2023 are incorporated by reference into Part III of this Annual Report on Form 10-K. Such Proxy Statement will be filed with the United
States Securities and Exchange Commission (the “SEC”) within 120 days of the registrant’s fiscal year ended December 31, 2022.
TABLE OF CONTENTS
PART I
Item 1.
Business
Item 1A.
Risk Factors
Item 1B.
Unresolved Staff Comments
Item 2.
Item 3.
Item 4.
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Item 6.
Item 7.
Equity Securities
[RESERVED]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
Item 8.
Item 9.
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Item 9A.
Controls and Procedures
Item 9B.
Other Information
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Item 16.
Exhibits, Financial Statement Schedules
Form 10-K Summary
SIGNATURES
PART IV
2
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32
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35
35
48
49
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51
52
53
53
54
54
55
57
58
MARKET, INDUSTRY AND OTHER DATA
Unless otherwise indicated, information contained in this Annual Report on Form 10-K concerning the commercial
real estate industry and the markets in which we operate, including our general expectations and market position, market
opportunity and market size, is based on (i) information gathered from various sources, (ii) certain assumptions that we
have made, and (iii) on our knowledge of the commercial real estate market. While we believe that the market position,
market opportunity and market size information that is included in this Annual Report on Form 10-K is generally reliable,
such information is inherently imprecise. Unless indicated otherwise, the industry data included herein is generally based
on information available through the nine months ended September 30, 2022 since full year 2022 information may not yet
have been published. We use market data from CoStar Group, Inc. and Real Capital Analytics that consists of list side
information of sales transactions of multifamily, retail, office, and industrial buildings, with a value of $1 million or more.
3
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K includes forward-looking statements, including the Company’s business outlook
for 2023, the anticipation of further interest rate increases and inflation, the execution of our capital return program,
including a semi-annual dividend, and the 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 rising
inflation and higher interest rates;
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, including cyber 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 this Annual Report on Form 10-K.
•
•
•
•
•
•
•
•
•
•
In addition, in this Annual Report, 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K. 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.
4
Unless the context requires otherwise, the words “Marcus & Millichap,” “MMI,” “we,” the “Company,” “us” and “our”
refer to Marcus & Millichap, Inc., and its consolidated subsidiaries.
PART I
Item 1. Business
Company Overview
Marcus & Millichap, Inc. (“MMI”) is a leading national real estate services firm specializing in commercial real
estate investment sales, financing services, research, and advisory services. We are the leading national investment
brokerage company in the $1 million to $10 million private client market segment. This is the largest and most active
market segment and comprised approximately 83% of total U.S. commercial property transactions greater than $1 million
in the marketplace in 2022. As of December 31, 2022, we had 1,904 investment sales and financing professionals that are
primarily exclusive commission-based independent contractors who provide real estate investment brokerage and financing
services to sellers and buyers of commercial real estate in 81 offices in the United States and Canada. In 2022, we closed
12,272 sales, financing, and other transactions with total sales volume of approximately $86.3 billion.
We service clients by underwriting, marketing, selling, and financing commercial real estate properties in a manner
that maximizes value for sellers, provides buyers with the largest and most diverse inventory of commercial properties, and
secures the most competitive financing from lenders for borrowers. Our business model is based on several key attributes:
•
for more than 50 years, we have provided investment brokerage and financing services through proprietary
inventory and marketing systems, policies and a culture of information sharing, and in-depth investment
brokerage training. Our sales force executes these services under the supervision of a dedicated sales
management team focused on client service and growing the firm;
• market leading share and brand within the $1 million to $10 million private client market segment, which
consistently represents more than 80% of total U.S. commercial property transactions greater than $1 million
in the marketplace;
•
•
•
•
•
•
investment sales and financing professionals providing exclusive client representation across multiple
property types;
a broad geographic platform in the United States and Canada powered by information sharing and proprietary
real estate marketing technologies;
an ability to scale with our private clients as they grow and connect private capital with larger assets through
our Institutional Property Advisors (“IPA”) division;
a financing team integrated with our brokerage sales force providing independent mortgage brokerage
services by accessing a wide range of lenders on behalf of our clients;
a sales management team that supports and leads as Company executives and that does not compete with or
participate in investment sales or financing professionals’ commissions; and
industry-leading research and advisory services tailored to the needs of our clients and supporting our
investment sales and financing professionals.
Corporate Information
We were formed as a sole proprietorship in 1971, incorporated in California on August 26, 1976 as G. M. Marcus &
Company, and we were renamed as Marcus & Millichap, Inc. in August 1978, Marcus & Millichap Real Estate Investment
Brokerage Company in September 1985, and Marcus & Millichap Real Estate Investment Services, Inc., (“MMREIS”), in
February 2007. Prior to the completion of our initial public offering (“IPO”), MMREIS was majority-owned by Marcus &
Millichap Company (“MMC”) and all of MMREIS’ preferred and common stock outstanding was held by MMC and its
affiliates or officers and employees of MMREIS. In June 2013, in preparation for the spin-off of its real estate investment
services business, MMC formed a Delaware holding company called Marcus & Millichap, Inc. Prior to the completion of
our IPO in November 2013, the shareholders of MMREIS contributed the shares of MMREIS to MMI in exchange for
common stock of MMI, and MMREIS became a wholly-owned subsidiary of MMI.
5
Our Services
We generate revenue by collecting real estate brokerage commissions upon the sale, and financing fees upon the
financing of commercial properties, by providing equity advisory services and loan sales, and providing consulting and
advisory services. Real estate brokerage commissions are typically based upon the value of the property and financing fees
are typically based upon the size of the loan. In 2022, approximately 90% of our revenues were generated from real estate
brokerage commissions, 9% from financing fees, and 1% from other revenue, including consulting and advisory services.
We divide commercial real estate into four major market segments, characterized by price in order to understand
trends in our revenue from period to period:
•
•
Properties priced less than $1 million;
Private client market: properties priced from $1 million to up to but less than $10 million;
• Middle market: properties priced from $10 million to up to but less than $20 million; and
•
Larger transaction market: properties priced from $20 million and above.
We serve clients with one property, multiple properties and large investment portfolios. The largest group of
investors we serve typically transacts in the $1 million to $10 million private client market segment. The investment
brokerage and financing professionals serving private clients within the private client market segment represent the largest
part of our business, which differentiates us from our competitors. In 2022, approximately 58% of our brokerage
commissions came from this market segment. Properties in this market segment are characterized by higher asset turnover
rates due to the type of investor as compared to other market segments. Private clients are often motivated to buy, sell and/
or refinance properties not only for business reasons but also due to personal circumstances, such as death, divorce, taxes,
changes in partnership structures and other personal or financial circumstances. Therefore, private client investors are
influenced less by the macroeconomic trends than other large-scale investors, making the private client market segment
less volatile over the long-term than other market segments. Accordingly, our business model distinguishes us from our
national competitors, who may focus primarily on the more volatile larger transaction and middle market segments, or on
other business activities such as leasing or property management, and from our local and regional competitors, who lack a
broad national platform.
Geographic Locations
We were founded in 1971 in the western United States, and we continue to increase our presence throughout North
America through execution of our growth strategies by targeting markets based on population, employment, level of
commercial real estate sales, inventory, and competitive landscape opportunities where we believe the markets will benefit
from our business model. We have grown to have offices in 36 states across the United States and in four provinces in
Canada.
6
Below is a map reflecting the geographic location of our 81 offices as of December 31, 2022.
Commercial Real Estate Investment Brokerage
Our primary business and source of revenue is the representation of commercial property owners as their exclusive
investment broker in the sale of their properties. Our investment sales professionals also represent buyers in fulfilling their
investment real estate acquisition needs. Commissions from real estate investment brokerage sales accounted for
approximately 90% of our revenue in 2022. Sales are generated by maintaining relationships with property owners,
providing market information and trends to them during their investment or “hold” period, and being selected as their
representative when they decide to sell, buy additional property, or exchange their property for another property. We
collect commissions upon the sale of each property based on a percentage of sales price. These commission percentages are
typically inversely correlated with sales price and thus are generally higher for smaller transactions.
We underwrite, value, and market properties to reach the largest and most qualified pool of buyers. We offer our
clients one of the industry’s largest team of investment sales professionals, who operate with a culture and policy of
information sharing powered by our proprietary system, MNet, which enables real-time buyer-seller matching. We use a
proactive marketing campaign that leverages the investor relationships of our entire sales force, direct marketing and a suite
of proprietary web-based tools that connects each asset with the right buyer pool. Additionally, in January 2023, we
launched a division focused on commercial property auction services to offer clients an accelerated way to buy and sell
commercial property as a complement to our traditional property marketing channels. We strive to maximize value for the
seller by generating high demand for each property. Our approach also provides a diverse, consistently underwritten
inventory of investment real estate for buyers. When a client engages one of our investment sales professionals, they are
engaging an entire system, structure, and organization committed to maximizing value for them.
7
In 2022, we closed 9,111 real estate brokerage transactions in a broad range of commercial property types, with a
total sales volume of approximately $68.1 billion. For more than 15 years, we have closed more transactions than any other
firm.
We are building on our track record of strength in multifamily, retail, office, and industrial properties by expanding
our coverage of additional property types. These include hospitality, self-storage, seniors housing, healthcare, land, and
manufactured housing properties, where we are already a leading broker but have significant room for additional growth
due to market size, fragmentation, and specific geographic market opportunities. We are also expanding our specialty
group management and support infrastructure, specialized branding, and business development customized for each
property type. In addition, we are continuously focusing on our recruitment efforts for new and experienced investment
sales and financing professionals. We expect that these efforts will expand our presence and result in increased business in
these property types.
We service clients in all market segments by underwriting, marketing, selling and financing commercial real estate
properties in a manner that maximizes value for sellers and provides buyers with the largest and most diverse inventory of
commercial properties. In addition, we achieve growth by leveraging the strength of our relationships in the private client
market segment to increase our share of the middle and larger transaction market segments. Because commission rates
earned on commercial properties are typically inversely correlated with sales price, our expansion into the middle and
larger transaction market segments has led to our average commission rates fluctuating from period-to-period as a result of
changes in the relative mix of transactions closed in the middle and larger transaction market segments as compared to the
private client market segment.
The following table sets forth the number of investment sales transactions, sales volume, and revenue by commercial
real estate market segment for real estate brokerage in 2022 compared to 2021:
2022
2021
Change
Real Estate Brokerage:
Number
Volume
Revenue
Number
Volume
Revenue
Number
Volume
Revenue
<$1 million
936
$
560
$
24,809
1087
$
732
$
30,681
(151)
$
(172) $
(5,872)
(in millions)
(in thousands)
(in millions)
(in thousands)
(in millions)
(in thousands)
Private Client Market
($1 – <$10 million)
Middle Market
($10 – <$20 million)
Larger Transaction
Market (≥$20 million)
Financing
6,850
24,474
682,019
7,300
24,339
693,996
(450)
135
(11,977)
735
590
9,980
188,593
33,074
274,889
643
622
9,111
$
68,088
$
1,170,310
9,652
$
67,507
$
1,170,969
(541)
$
581
$
33,562
276,062
(32)
(488)
(1,173)
(659)
8,874
170,230
92
1,106
18,363
Marcus & Millichap Capital Corporation (“MMCC”) is a financial intermediary that provides commercial real estate
capital markets solutions, including senior debt, mezzanine debt, joint venture and preferred equity, as well as loan sales
and consultative/due diligence services to commercial real estate owners, developers, investors, and capital providers. Our
advisors assist clients to secure capital for both acquisitions and the refinancing of single assets and portfolios. MMCC
generates revenue from advisory fees collected from capital placement with an assortment of capital providers including
national and regional banks, credit unions, private equity funds, insurance companies, government agencies, including the
Federal National Mortgage Association (“Fannie Mae”), the Federal Home Loan Mortgage Corporation (“Freddie Mac”),
the Federal Housing Administration (“FHA”), conduit lenders, debt funds, hard money lenders, and structured debt
facilitators (including preferred equity and mezzanine providers). MMCC additionally receives recurring loan performance
fees from certain lenders and other incentive-based fees based on achieving certain production thresholds. MMCC’s
financing fees vary by loan amount, transactional complexity, and loan type. In 2022, MMCC completed 2,143 financing
transactions representing total financing volume of approximately $12.8 billion, resulting in $113.0 million in financing
fees, which accounted for approximately 9% of MMI’s total revenue. The combination of MMCC’s size, market reach, and
financing volume enables us to establish long-term relationships with various capital sources. This, in turn, improves
MMCC’s value proposition to borrowers who are seeking competitive rates and terms. MMCC seeks to secure the most
competitive financing solutions for each client’s specific needs and requirements. During 2022, approximately 41% of
MMCC’s revenue came from placing acquisition financing, 37% from refinancing activities, and 22% from other financing
activities.
8
MMCC is fully integrated with the investment sales force in our brokerage offices. MMCC financing professionals
are supervised by our MMCC management team and regional managers, who promote cross-selling, information-sharing,
business referrals, and high-quality customer service within the offices. The MMCC national network of financing
professionals is also supported by a dedicated, nationally focused management team coordinating access to a broad range
of national and regional capital sources. By combining these resources with the latest property and capital markets data and
information, we can differentiate ourselves in the marketplace and deliver tailored financial solutions that meet our clients’
financial objectives. In 2021, MMCC entered into a strategic alliance with M&T Realty Capital Corporation (“MTRCC”)
enabling MMCC to provide clients with increased access to MTRCC’s affordable and conventional multifamily agency
financing through a highly streamlined process with dedicated resources. MTRCC has a Delegated Underwriting and
Servicing Agreement (“DUS Agreement”) with Fannie Mae and is an approved lender for Freddie Mac’s Conventional and
Targeted Affordable Housing loans.
Ancillary Services: Research, Advisory and Consulting
Our research, advisory, and consulting services are designed to assist clients in forming their investment strategy and
making transaction decisions. Our advisory and consulting services are coordinated with both our investment sales and
financing professionals and are designed to provide market and property focused market research, publications, and
customized analysis that increase customer loyalty and help sustain long-term relationships.
We provide a wide range of advisory and consulting services to developers, lenders, owners, real estate investment
trusts, high-net-worth individuals, pension fund advisors, and other institutions. Our advisory services include opinions of
value, operating and financial performance benchmarking analysis, specific asset buy-sell strategies, market and submarket
analysis and ranking, portfolio strategies by property type, market strategy, development and redevelopment feasibility
studies, and other services.
Competitive Strengths
We believe the following strengths provide us with a competitive advantage and opportunities for success:
National Platform Built on Investment Brokerage and Financing Services
We have built a leading national platform serving our clients’ needs of investment brokerage and financing services.
We continue to be focused on investment brokerage, financing, and other services complementary to our business. Our
commitment to specialization is reflected in how we generally organize our investment sales and financing professionals by
market area and property type, which enhances our investment sales and financing professionals’ skills, relationships, and
market knowledge required for achieving the best results for our clients. As a result of these founding principles, we offer
an efficient system of matching each property with the largest pool of qualified buyers and therefore maximizing value in
the process.
Market Leader in the Private Client Market Segment
Since our founding, we have focused on being the leading service provider to the $1 million to $10 million private
client market segment. This segment is the largest by ownership and transaction count and consistently accounts for over
80% of total U.S. commercial property transactions and over 60% of the commission pool. It is comprised of high-net-
worth individuals, partnerships, and small private fund managers with both passive, long-term investments, as well as those
with opportunistic and short-term investment horizons. Private clients are often motivated to buy, sell, and/or refinance
properties not only for business reasons but also due to personal and financial circumstances. The vast size and personal
transaction drivers of private clients make this market segment the most active in terms of sales velocity. In addition, this
market segment is highly fragmented with the top 10 brokerage firms accounting for approximately 21% of transactions in
2022. We are the leading broker in the $1 million to $10 million private client market segment based on transaction count
in 2022. With our established market leadership and brand name, we have significant room for market share expansion by
further consolidating our leadership position in this market segment.
In addition, the private client market segment is characterized by high barriers to entry. These barriers include the
need for a large, specialized sales force prospecting private clients, the difficulties in identifying, establishing, and
maintaining relationships with such investors, capabilities of exposing properties to a large pool of potential buyers, and the
challenge of serving their needs locally, regionally, and nationally. We believe this private client market segment is the
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least covered market segment by other national firms and is significantly underserved by local and regional firms that lack
a national platform.
Platform Built for Maximizing Investor Value
We have built our business to maximize value for real estate investors through an integrated set of services geared
toward our clients’ needs. We are committed to an investment brokerage specialization and providing one of the largest
sales force in the industry, promoting a culture and policy of information sharing on each property we represent, and
equipping our investment sales professionals with exclusive real estate inventory and marketing technologies that enhance
the marketability of the properties we represent. Our system generates real-time buyer-seller matching and maximizes
value one property at a time. Our investment sales organization can therefore underwrite and market investment real estate
to the largest pool of qualified buyers. We coordinate proactive marketing campaigns across investor relationships and
resources of the entire firm, far beyond the capabilities of an individual listing agent. These efforts produce wide exposure
to investors whom we identify as high-probability bidders for each property. To grow with our clients, we established the
IPA division to serve the needs of our private client investors who are now seeking higher valued properties as well as
larger institutional investors. Our ability to bridge private capital with larger, institutional assets creates value for private
and larger transaction clients, while offering growth opportunities and strengthening the retention of our investment sales
and financing professionals.
We have one of the largest teams of financing professionals in the investment brokerage industry through MMCC.
MMCC provides financing expertise and access to debt and capital sources by identifying and securing competitive loan
pricing and terms for our clients across a broad range of potential lenders and financing alternatives. Based on the most
recent data, we are a leading mortgage broker in the industry based on the number of financing transactions closed in 2022.
Our dedicated market research teams analyze the latest local and national economic and real estate trends and produce
proprietary analyses for our clients, enabling them to make informed investment and financing decisions. Integrating all
these services into a single national platform increases opportunities to maximize value for our clients across multiple
property types, market segments, and geographies.
Local Management with Significant Investment Brokerage Experience
Our local management team members are dedicated to recruiting, training, developing, and supporting our
investment sales and financing professionals. The majority of our local management team are former senior investment
sales professionals of our Company who now focus on management, do not compete with our sales force, and have an
average of 14 years of real estate investment brokerage experience with our Company. Our training, development, and
mentoring programs rely greatly on the regional managers’ personal involvement. Their past experience as senior
investment sales professionals plays a key role in developing new and experienced investment sales and financing
professionals. They help our junior professionals establish technical and client service skills as well as set up, develop, and
grow relationships with clients. We believe this management structure has helped differentiate the firm from our
competitors and ultimately achieves better results for our clients.
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Growth Strategy
We have demonstrated the ability over the long-term to manage through the cyclical market and continue to be a
leader in the $1 million to $10 million private client market segment. The following graph shows the number of
transactions and sales volume of all investment sales, financing and other transactions from 2013 to 2022:
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9,472
9,726
7,667
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2014
2015
2016
2017
2018
2019
2020
2021
2022
Sales Volume
Number of Transactions
We have a long track record of growing our business model driven by opening new offices, recruiting, training, and
developing new investment sales and financing professionals as well as deploying our client-focused business model to
increase coverage of specialty property types and the middle and larger transaction market segments. Our long-term growth
plan has focused on investing in our current business model through organic growth and acquisitions to provide our unique
business model to a wider client base. Since 2013, our revenue has increased more than threefold, and we have grown from
slightly over 1,000 investment sales and financing professionals to more than 1,900 in the United States and Canada. Our
future growth will depend on continually expanding our national footprint and optimizing the size, product segmentation,
and specialization of our team of investment sales and financing professionals. The key strategies of our growth plan
include:
Increase Market Share in the Private Client Market Segment
Our leading position in the private client market segment and inherent fragmentation continues to provide significant
opportunity for us to expand and bring our client service offerings to a larger portion of this expansive market segment. We
can continue to leverage our existing platform, relationships, and brand recognition among private clients to grow through
expanded marketing and coverage.
Focused Market Expansion
Since we currently have offices in most major-market and mid-market metropolitan cities, our growth is expected to
come from focused market expansion in existing office locations and new locations from acquisitions, targeted hiring, and
increased coverage of specialty property types. We have targeted markets based on population, employment, level of
commercial real estate sales, inventory, and competitive landscape. Our optimal office plans are used to capitalize on these
factors by tailoring sales force size, coverage, and composition by office and business activity to direct efforts to offices
with the most opportunity where we believe we can leverage our national footprint and proprietary real estate marketing
technologies. These initiatives do not require significant increases in the number of offices or in the size of our offices,
which allows us to leverage our current office locations without significant incremental investment.
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Expand and Develop Our Team of Investment Sales Professionals
A key to growing our business is hiring, training, and developing investment sales professionals. We are always
focused on hiring experienced investment sales professionals through our recruiting department, specialty directors, and
regional managers in support of our expansion strategy. Our new investment sales professionals are trained in all aspects of
real estate fundamentals, client service, and our proprietary marketing technologies through formal training, apprenticeship
programs, the William A. Millichap Fellowship Program (discussed below), and mentorship by our dedicated regional,
district and division managers, as well as our senior investment sales and financing professionals. As these investment sales
professionals mature, we continue to provide them with identified best practices and training in specialty property types.
We believe this model creates a high level of teamwork, as well as operational and client service consistency. Please see
“Human Capital Management” for more information.
Pursue Selective Acquisitions
Acquisitions continue to be a strategy to supplement the growth of our sales force and the services that we provide to
our clients. We continually explore acquisition opportunities to augment our investment brokerage and financing services
businesses. We primarily look for acquisitions of small-to-medium size investment brokerage and financing services
businesses with teams of professionals with consistent revenue and earnings trends, which will expand our geographic or
property type coverage.
Grow in Specialty Property Types and Middle and Larger Transaction Market Segment Presence
Leveraging our current business model into specialty property types and to the middle and larger transaction market
segments opens up significant opportunities for growth.
Specialty Property Types
We believe that specialty property types, including hospitality, self-storage, seniors housing, land, and manufactured
housing offer significant opportunities for our clients. By deploying our unique business model to increase coverage of
these property types, we can create growth for us as well as enhance value for our clients through diversification. To create
these opportunities, we are increasing our property type expertise by continuing to strategically add specialty directors who
can bring added management capacity, business development, and investment sales professional support. These executives
will work with our sales management team to increase investment sales professional hiring, training, development, and
redeployment and to execute various branding and marketing campaigns to expand our presence in these targeted property
types.
Middle and Larger Transaction Market Segments Presence
Our extensive relationships with private client investors who typically invest in the $1 million to $10 million private
client market segment have enabled us to capture a greater portion of commercial real estate transactions in excess of $10
million and bridge the private client market investor to the middle market and larger transaction market segments in recent
years. As property values increase and investors grow and expand, they require larger properties. Our IPA division
positions us to provide our unique investment brokerage and financing services to investors in those market segments. Our
ability to connect private client capital with middle and larger transaction market segment properties allows us to continue
to serve our clients as they grow and plays a major role in differentiating our services. The IPA division is a group
dedicated to servicing larger investors. This strategy has had market acceptance and provides a vehicle for growth by
delivering our unique service platform within the middle and larger transaction market segments for the multifamily, retail,
and office property types. The evolution of our investors and their utilization of our IPA division has driven incremental
growth in these market segments. Hiring multiple investment sales teams into IPA in 2022 has expanded our capability to
service clients and furthers our growth plan.
Expand Marcus & Millichap Capital Corporation Financing Business
Our growth plan for MMCC continues to focus on expanding our capital markets services in markets currently
served by our investment sales brokerage offices and other strategic markets. This includes increasing the capacity of the
existing professionals in offices we currently serve and integrating financing professionals and related services in offices
that do not have an MMCC presence. We will also continue to expand our service platform by increasing access to a broad
array of new capital resources and pursuing selective acquisitions. We have and continue to expand MMCC’s capital
markets advisory services and added complementary services in loan sales, consultative/due diligence, and debt and equity
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advising through acquisitions, as well as expanded service offerings. While maintaining a core focus on our private client
segment, MMCC, through the IPA division, has commenced a focus on institutional clients. These specialized financing
professionals work closely with IPA investment sales professionals across the country, supporting them and their clients in
their financing needs as well as working directly with institutional clients.
We have established alliances with national capital sources that provide access to an assortment of highly
competitive products including Fannie Mae, Freddie Mac, and FHA. These alliances serve to expand the distribution
network for each of our capital partners, while affording our financing professionals and clients with more favorable
pricing and terms. We will continue to hire and acquire experienced financing professionals and companies to further grow
our MMCC business, support the growth of our service platform, and establish relationships with various capital sources.
Further, our internally developed training programs are directed at enhancing the skill sets for our professionals, promoting
the MMCC value proposition, increasing our internal capture rate with our investment sales brokerage clients, and
increasing activity with non-brokerage clients. As of December 31, 2022, we had 34 offices with financing professionals.
We continue to capitalize on the synergies our financing professionals provide to our client-focused service platform with
financing fees increasing 3.0% from $109.7 million in 2021 to $113.0 million in 2022.
Seasonality
There is seasonality in our real estate brokerage commissions and financing fees, which has generally caused our
revenue, operating income, net income, and cash flows from operating activities to be lower in the first half of the year and
higher in the second half of the year, particularly in the fourth quarter. This historical trend could be disrupted either
positively or negatively by market trends, macroeconomic uncertainties, geopolitical events, or natural disasters, which
may impact, among other things, investor sentiment for a particular property type or location, volatility in financial
markets, current and future projections of interest rates, attractiveness of other asset classes, market liquidity, and the extent
of limitations or availability of capital allocations for larger property buyers. For a more detailed description of our
seasonality, refer to Item 1A – “Risk Factors – External Business Risks – Seasonal fluctuations and other market data in
the investment real estate industry could adversely affect our business and make comparisons of our quarterly results
difficult” and Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Overview – Seasonality” of this Annual Report on Form 10-K.
Competition
We compete in real estate brokerage and financing within the commercial real estate industry on a national, regional,
and local basis. Competition is based on a number of critical factors, including the quality and expertise of our investment
sales and financing professionals, our execution skills, sales support, brand recognition, and our business reputation. We
primarily compete with other brokerage and financing firms that seek investment brokerage and financing business from
real estate owners and investors. To a lesser extent, we compete with in-house real estate departments, owners who may
transact without using a brokerage firm, direct lenders, consulting firms, and investment managers. Our relative
competitive position also varies across geographies, property types, and services. In investment brokerage, our competitors
on a national level include CBRE Group Inc. ("CBRE"), Cushman & Wakefield plc ("Cushman"), Colliers International
Group, Inc. ("Colliers"), Jones Lang LaSalle Incorporated (“JLL”), Newmark Group Inc. ("Newmark") and NAI Global.
Competitors in financing services include institutional firms such as CBRE, JLL, Cushman, Walker & Dunlop, NorthMarq
Capital, and a large group of local and regional mortgage banking firms. These investment brokerage firms mainly focus
on larger sales and institutional investors and are not heavily concentrated in our largest market segment, which is the $1
million to $10 million private client market segment. However, there is crossover and competition between us and these
firms. As a result of the fragmentation in the market, there are also numerous local and regional competitors in our markets,
as well as competitors specializing in certain property types. Despite recent consolidation, the commercial real estate
services industry remains highly fragmented and competitive.
Competition to attract and retain qualified professionals is also intense in each of our geographic regions and across
all property types. We offer what we believe to be competitive compensation and support programs to our professionals.
Our ability to continue to compete effectively will depend on retaining, motivating, and appropriately compensating our
professionals.
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Technology and Security
Investments in Technology
We have a long-standing tradition of technological orientation, innovation, and advancement. Our efforts include the
development of proprietary applications designed to make the process of matching buyers and sellers faster and more
efficient as well as state-of-the-art communication technology, infrastructure, internet presence, and electronic marketing.
We have a proprietary internal marketing system, MNet, which allows our investment sales professionals to share
listing information with investors across the United States and Canada. MNet is an integrated tool that contains our entire
property inventory, allowing our investment sales professionals to find listings with targeted criteria, such as searching by
demographic data surrounding a target property, and to search for properties based on investors’ acquisition criteria. This
system is an essential part of connecting buyers and sellers through our platform. Our policies require information sharing
among our sales force, and the MNet system automates the process of matching each property we represent to the largest
pool of qualified buyers tracked by our investment sales professionals. A part of MNet, called Buyer Needs, enables our
sales force to register the investment needs of various buyers, which are then matched to our available inventory on a real-
time basis.
A related application, MNet-Launch, is a system for automating the production of property marketing materials and
launching marketing campaigns. MNet-Launch allows our investment sales professionals to create a listing proposal or
marketing package, which automatically imports property information, data on comparable properties, and other
information, and then dynamically populates our e-marketing, print, and internet media. This system allows our investment
sales professionals to rapidly create professionally branded and designed materials for marketing properties on behalf of
our clients in an efficient and timely manner. This web-based application improves efficiency by tightly integrating MNet
data for transaction history, sales and rent comparables, and market insights that differentiate us in the marketplace. The
proposals and marketing packages produced by MNet-Launch also deliver updated content and expanded demographic and
financial analysis to better market those properties for our clients.
In 2020, we relaunched the Marcus & Millichap external website, bringing improved search capabilities and
enhanced features for our investment sales professionals as well as our clients, via integrated deal room functionality. The
website is designed not only to bring in new clients for our investment sales and financing professionals, but also to make
our inventory of properties available for maximum exposure for our sellers, and to provide buyers with an opportunity to
engage with our investment sales and financing professionals. In October 2022, we launched a new feature on our website
called MyMMI, which allows investors to register for an account and create personalized criteria for inventory, research,
and events notifications. Since its launch, over 27,000 visitors have created MyMMI accounts. We actively qualify leads
generated from the saved search preferences and share those leads with our agents via our customer relationship
management platform. During 2022, our websites averaged approximately 179,000 new visitors per month and
approximately 623,000 page views per month and also served as a portal for delivery of online marketing materials and for
deal collaboration.
Information Security and Risk Oversight
We maintain a comprehensive technology and information security program to ensure our technology platforms and
systems are effective and prepared for information security risks, including regular oversight of our programs for security
monitoring for internal and external threats to ensure the confidentiality and integrity of our information assets. We
regularly perform evaluations of our information security program and continue to invest in our capabilities to keep the
Company’s, our employees’, our independent contractors’ and our clients’ critical assets safe. Our Chief Information
Officer is ultimately responsible for our information security program, which includes identifying threats, detecting
potential attacks, and protecting our information assets. We have implemented information security monitoring capabilities
designed to alert us to suspicious activity and developed an incident response program that includes periodic testing and is
designed to restore business operations as quickly and as orderly as possible in the event of a breach. In addition,
employees participate in ongoing mandatory trainings and receive communications regarding the cybersecurity
environment to increase awareness throughout the firm. We also conduct enhanced information security trainings for
specific, specialized employee populations.
The Audit Committee of our Board of Directors, which is comprised entirely of independent directors, has oversight
of the Company’s information security and other risks relevant to the Company’s information technology controls and
security. Our Chief Information Officer will report security instances to the Audit Committee as they occur, if material, and
provides an information technology and cybersecurity update to the Audit Committee on a quarterly basis.
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Marketing and Branding
We were founded over 50 years ago on the idea that when investment sales and financing professionals collaborate,
we can optimize outcomes for our clients. Today, we are known for (i) providing investment brokerage and financing
services through our proprietary marketing system, (ii) our policies and culture of information sharing, and (iii) our in-
depth investment brokerage training. All of this is executed under the supervision of a dedicated local, regional, and
national management team focused on client service and growing the firm.
In recent years we have also garnered recognition among institutions and larger private investors due to our
integrated platform and ability to link private and institutional capital. We continue to strengthen and broaden our name
recognition and credibility by executing a variety of marketing and branding strategies. Locally, our offices and investment
sales and financing professionals engage in numerous events, direct mail campaigns, and investor symposiums as well as
participate in real estate conferences and organizations for various market segments and property types. Our regional
managers and investment sales and financing professionals develop long-term client relationships and promote our brand
through these activities.
Our research division produces more than 1,700 publications and client presentations per year and is a leading
source of information for the industry as well as the general business media. We provide research on 10 commercial
property types covering: multifamily, retail, office, industrial, single-tenant net lease, seniors housing, self-storage,
hospitality, medical office, and manufactured housing, as well as capital markets/financing. This research includes analysis
and forecasting of the economy, capital markets, real estate fundamentals, investment, pricing, and yield trends. It is
designed to assist investors in their strategy formation and decisions relating to specific assets and to help our investment
sales and financing professionals develop and maintain relationships with clients.
Our transactional and market research expertise result in significant print, radio, television, and online media
coverage including major national real estate publications such as Real Estate Forum, Multi-Housing News, Commercial
Property Executive, Connect CRE, Wealth Management Real Estate, as well as local market business journals and major
national news outlets such as CNBC, The Wall Street Journal, Los Angeles Times, The New York Times, Fox Business,
Bloomberg Businessweek, Forbes, and numerous newspapers and trade publications in major metropolitan cities. Our CEO
is frequently interviewed on national business channels, such as CNBC, Yahoo! Finance, TD Ameritrade, Fox Business,
and Bloomberg to discuss the commercial real estate market. We frequently have featured speaking roles in key regional
and national industry events, we are regularly quoted in regional and national publications and media, and we deliver
content directly to the real estate investment community through print, electronic publications, and video. Nationally, our
specialty groups and capital markets executives actively participate in various trade organizations, many of which focus on
specific property types and provide an effective vehicle for branding and client relationship development.
We believe all of these activities create significant exposure and name recognition for our firm, which helps to build
and foster strong, long-term client relationships.
Intellectual Property
We hold various trademarks and trade names, which include the “Marcus & Millichap” name. We believe our
intellectual property plays a role in maintaining our competitive position in a number of the markets that we serve. With
respect to the Marcus & Millichap name, we maintain trademark registrations for these service marks.
In addition to trade names, we have developed proprietary technologies for the provision of real estate investment
services, such as MNet, MNet-Launch, and CapNet. We also offer proprietary research to clients through our research
division. Given the importance of these proprietary technologies to our business, we seek to secure our rights under
applicable intellectual property protection laws in these and any other proprietary assets that we use in our business. The
expiration or termination of our trademarks or trade names or the loss of any of our other intellectual property rights
including the Marcus & Millichap name may have a material adverse effect on our business.
Government Regulation
We are subject to various real estate regulations, and we maintain real estate and other broker licenses in 47 states in
the United States and four provinces in Canada. We are a licensed broker in each state in which we have an office, as well
as those states where we frequently do business. We are also subject to numerous other federal, state, and local laws and
regulations that contain general standards for, and prohibitions on, the conduct of real estate brokers and sales associates,
including agency duties, collection of commissions, telemarketing, advertising, and consumer disclosures. One of our
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wholly-owned subsidiaries is subject to certain human resource, data security, information technology, and other
compliance requirements due to its loan sale and consulting contracts with certain U.S. government agencies.
Employees and Investment Sales and Financing Professionals
Most of our investment sales professionals are classified as independent contractors under state and Internal
Revenue Service guidelines. As such, we generally do not pay for the professionals’ expenses or benefits or withhold
payroll taxes; rather, they are paid from the commissions earned by us upon the closing of a transaction, and these
individuals do not earn a salary from which taxes are withheld. Our investment sales and financing professionals hold
applicable real estate sales licenses for their function and execute a “Salespersons Agreement” setting out the relationship
between the professional and us. Each professional is obligated to provide brokerage services exclusively to us, and is
provided access to our information technology, research and other support and business forms. Each professional generally
reports on their activities to either the local regional manager, or in some cases, to product specialty managers.
Environmental Sustainability
We recognize that operating our business in an environmentally sustainable manner is important to our success. For
this reason, we are exploring ways to address the environmental impact of our business, reduce carbon emissions, increase
energy efficiency, reduce waste, and limit our consumption of natural resources.
Climate Measures
As an organization, we have made a commitment to identifying, mitigating, and managing risks associated with
climate change. In addition, although we do not own or manage real property, we recognize the impact our activities, as
well as those of our clients and vendors, may have on the environment and are exploring ways to reduce these impacts. We
have enacted policies designed to manage our environmental impact and support our clients in their efforts to advance their
own sustainability initiatives.
Resource Consumption
We are similarly focused on reducing our waste and energy usage. In addition to exploring the use of reusable
materials, the methods of reducing waste, and potential energy efficient improvements, we have pivoted to the use of
technology such as online deal rooms and e-signing vendors to reduce paper waste and have partnered with e-waste
recycling vendors to recycle our physical technology equipment or dispose of it in an environmentally sound manner.
We are committed to leasing office space in LEED Certified, Energy Star Rated, and BOMA Best Gold buildings
where appropriate and are working with our current landlords to make environmentally sustainable improvements. Thirty-
two of our current offices are located in such buildings, and we expect this number to increase as leases expire and new
space is acquired. Additionally, we facilitate remote work where appropriate and have invested in best-of-class tools to
allow our team to work at the highest levels outside the office, thereby reducing the carbon footprint associated with
unnecessary office energy consumption and a regular commute. We also request data regarding our energy consumption
and our utilization of other natural resources from each of our landlords.
We plan to regularly evaluate our environmental sustainability policies and practices to identify potential
opportunities for further improvements and support the environmental sustainability initiatives of our employees and
vendors.
More information on our Commitment to Sustainability policy can be found at https://www.marcusmillichap.com/a-
commitment-to-sustainability. The content of the websites referred to in this Annual Report on Form 10-K are not
incorporated by reference into this document.
Human Capital
We consider our relationship with our employees and independent contractors to be good, and we endeavor to offer
reasonable and equitable opportunities to create a workplace that is welcoming, diverse, inclusive, equitable, safe, engaged,
and respectful of all people. We take recruiting, development, training, and the retention of talent very seriously to help
drive long-term value. Our local management team members, as executives of the Company, are dedicated to recruiting,
training, developing, and supporting our investment sales and financing professionals. The majority of our local
management teams are former senior investment sales professionals of the Company, who now focus on management, do
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not compete with our sales force and have an average of 14 years of real estate investment brokerage experience with our
Company.
Recruiting
We seek to attract talent by offering in-depth training to our employees, independent investment sales and financing
professionals, as well as competitive salaries and benefit programs for our employees, competitive commissions and
business support for our independent investment sales and financing professionals, and through our reputation as the top
broker within the $1 million to $10 million private client market segment.
Development and Training
On the development and training front, our National Director of Development and Training was appointed in
October 2021 to provide an even greater focus on the training and development of our investment sales and financing
professionals. In addition, our regional managers provide extensive training and development to our sales force, including
classroom training, coaching, mentoring, workshops, and working with and supporting our professionals. Their past
experience as senior investment sales professionals plays a key role in developing new and experienced investment sales
and financing professionals. They do not compete with our junior professionals and help to establish technical and client
service skills as well as set up, develop, and grow relationships with clients. Our training programs are further facilitated
and supported by Marcus & Millichap University, our learning management system and other professional development
opportunities.
In 2021, we launched the William A. Millichap Fellowship Program, a comprehensive two-year training and
development program designed to prepare participants for rewarding careers in commercial real estate. The Fellowship
Program was launched in partnership with the Commercial Real Estate Women Network (“CREW Network”), a premier
business network dedicated to transforming the commercial real estate industry by advancing women globally and Project
Destined, a leading social impact platform that provides training in financial literacy, entrepreneurship, and real estate, and
sponsors real estate internships in HBCUs and Public Universities. The Fellowship Program is currently conducted in 15
major cities within the U.S. The first fellowship group commenced in February 2022. We believe our training,
development, and mentoring programs have helped differentiate us from our competitors and achieve better results for our
clients.
In 2022, we continued to partner with a leading analytics and advisory company to implement a robust leadership
training program for our senior leadership including our regional managers. This program includes a leadership strengths
assessment, a leadership development program, and an employee engagement survey. We also have a variety of training
programs available to our employees through LinkedIn Learning, as well as other training resources.
Retaining Talent
We address retention by offering a sales awards program to recognize, retain, and motivate our top investment sales
and financing professionals; through our affiliation with Innovating Commerce Serving Communities, NAIOP, and
National Multifamily Housing Council; providing business support from our various functional groups; providing the
opportunity to earn additional commissions after meeting certain annual financial thresholds for more senior investment
sales and financing professionals; and providing competitive base salaries and incentive opportunities for employees.
Diversity, Equity and Inclusion
We strive to create a company culture that embraces, supports, and promotes a diverse and inclusive workforce
across all levels of the organization where people feel respected, valued, and heard. We are committed to and value an
environment which recognizes and upholds the human rights of both our employees and our independent investment sales
and financing professionals. To lead this effort, we have created the role of Head of Diversity, Equity and Inclusion, a
Senior Director level position, reporting directly to our executive team. We continue to implement internal initiatives to
increase diversity in our workforce and strengthen an inclusive culture. Among these initiatives are our sponsorships of
CREW Network, Project Destined, AAREP, Project Reap, and CORE REimagined. We are currently a National Platinum
Sponsor of CREW Network, as well as a local sponsor in Southern California with local board participation. Our affinity
groups, MMWomen (Marcus & Millichap Women) and MMAA (Marcus & Millichap African Americans), hold various
networking and virtual events designed for agents and originators who are interested in making connections across the
firm, in addition to internal Company events such as Fireside Chats with leaders inside and outside the Company. In 2022,
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we also engaged in a new recruitment endeavor, partnering with the U.S. Department of Defense's SkillBridge program,
which assists retiring military veterans retrain for, and transition to, civilian careers.
Communication and Engagement with Our Workforce
We also monitor and measure employee satisfaction and engagement through embedded management, human
resource, and legal departments. The Company is committed to maintaining an environment where open, honest
communications are the expectation, not the exception, and where employees feel comfortable in approaching supervisors
or management with questions and concerns including instances in which potential violations of standards or policies may
have occurred. Employees have the ability to communicate directly with Human Resources representatives regularly. In
addition, we offer employees several methods to advise the Company of any workplace or compliance issues, including a
confidential reporting hotline monitored by the Company’s Compliance Officer. In addition, we have relied on an industry
leading employee engagement survey as an additional resource for employee feedback and communication.
Adaptation and Resilience
The Company’s structure and technology investments allow for rapid adaptation to market and societal conditions.
We believe our nimble and resilient workforce coupled with cutting edge technology minimizes the likelihood of any
significant impact of business disruptions and system outages. When the COVID-19 pandemic required the immediate
closure of offices, the Company’s workforce pivoted to remote work and continued without disruption or delay.
Promoting Health, Well-being and Employee Safety
We are committed to protecting the health and safety of our employees, investment sales and financing
professionals, and their families, while at the same time focusing on our clients’ success. To promote employee health and
well-being, we have implemented health and safety measures, and remote work arrangements, with the goal of protecting
our employees, investment sales and financing professionals, and clients. We continue to follow the local guidelines in
cities where our offices are located. We have taken multiple measures to support our investment sales and financing
professionals’ continued ability to generate and execute business remotely. Such measures include multiple technological
solutions, intensified internal training and education, as well as a significant increase in client outreach and investor
education webcasts.
To support employee well-being, we have rolled out the Learn to Live program. These digital tools are available
anywhere, anytime to help employees identify thoughts and behavior patterns that affect their emotional well-being and
work through them. It provides tools and instruction to manage stress, depression, anxiety, substance use, and sleep issues.
The program includes one-on-one coaching, a support team to work through individual programs, and live and on-demand
webinars. We also provide “Well-ness Resource Monthly Articles” to all employees, which are available on our intranet.
Topics have included: healthy habits, burnout and resilience, financial wellness, vaccine information, breast cancer
awareness, suicide prevention, and alcohol and substance abuse. We also hold an annual fitness challenge in which all
employees can participate.
Community Engagement and Empowerment
We have participated in and continue to be involved in ongoing community and charity events to promote
community and employee engagement. Some of these events have included Marcus & Millichap’s ongoing partnership
with Team Feed Corporate/Feeding America on the Million Meals Initiative with the goal of providing meals to people in
need, employee participation in community volunteer events such as Habitat for Humanity and food banks, monetary
donations to various veterans’ groups, and company matching of individual donations in times of natural disasters.
Key Metrics
As of December 31, 2022, we had 887 employees, consisting of 76 employees who serve as financing professionals,
37 employees in communications and marketing, 22 employees in research and 752 employees in management, support
and general and administrative functions. As we noted above in “Growth Strategy,” a key factor to growing our business is
hiring, training and developing investment sales and financing professionals.
As of December 31, 2022, we had 1,904 investment sales and financing professionals, a 4.5% decrease compared to
December 31, 2021. The decline in the headcount of investment sales and financing professionals is attributable to a
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reduction of unproductive investment sales and financing professionals during the COVID-19 pandemic and a shift toward
more experienced investment sales and financing professionals due to the challenging market environment and rising
interest rates.
Available Information
Our website address is www.MarcusMillichap.com. Information on our website does not constitute part of this report
and inclusions of our internet address in this Annual Report on Form 10-K are inactive textual references only. We are
required to file current, annual and quarterly reports, proxy statements, and other information required by the Exchange
Act, with the SEC. We make available free of charge through a link provided on our website, our annual reports on Form
10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements, Forms 3, 4 and 5 filed by or on
behalf of directors, executive officers and certain large stockholders, and any amendments to those documents filed or
furnished pursuant to the Exchange Act. Such reports are available as soon as reasonably practicable after they are filed
with the SEC.
The SEC also maintains a website that contains reports, proxy and information statements and other information
about us that we file electronically with the SEC at www.sec.gov.
We also make available on our website and will provide print copies to stockholders upon request, (i) our corporate
governance guidelines, (ii) our code of ethics, and (iii) charters of the audit, compensation, nominating and corporate
governance, and executive committees of our Board of Directors.
From time to time, we may announce key information in compliance with Regulation FD by disclosing that
information on our website.
Item 1A. Risk Factors
Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors
and the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related
notes, before making any investment decisions regarding our securities. If any of the following risks actually occur, our
business, financial condition and operating results could be adversely affected. As a result, the trading price of our
securities could decline, and you may lose part or all of your investment.
Overview
We are impacted by and manage many risk factors detailed below affecting our business including External
Business Risks, Human Resource and Personnel Risks, Internal Business Risks, Technology and Cybersecurity Risks,
Investment Risks, Risks Related to Our Founder and General Risks as well as the risks discussed in “Management’s
Discussion and Analysis of Financial Position and Results of Operations” and “Quantitative and Qualitative Disclosures
About Market Risk.” Many of these factors described below in External Business Risks are outside of our control. In
addition, we are a personnel and relationship-intensive business rather than a capital-intensive business. While all the risk
factors discussed below have the potential to negatively impact our business, the most significant risks facing us are the
risks associated with general economic conditions, commercial real estate market conditions, and our ability to attract and
retain qualified and experienced managers and investment sales and financing professionals.
External Business Risks
General economic conditions and commercial real estate market conditions have had and may in the future have a
negative impact on our business.
Over the past several years macroeconomic factors, including the COVID-19 pandemic, have caused significant
volatility to the U.S. economy. The impact of these factors has led to uncertainty in the financial markets, high inflation,
rising interest rates and may lead to an extended economic downturn, which could adversely impact the commercial real
estate industry. We may be negatively impacted by periods of economic downturns, recessions and disruptions in the
capital markets; credit and liquidity issues in the capital markets, including international, national, regional and local
markets; inflationary pressures; tax and regulatory changes and corresponding declines in the demand for commercial real
estate investment and related services. Historically, commercial real estate markets and, in particular, the U.S. commercial
real estate market, have tended to be cyclical and related to the flow of capital to the sector, the condition of the economy
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as a whole, and to the perceptions and confidence of market participants to the economic outlook. Cycles in the real estate
markets may lead to similar cycles in our earnings and significant volatility in our stock price. Further real estate markets
may “lag” behind the broader economy such that even when underlying economic fundamentals improve in a given market,
additional time may be required for these improvements to translate into strength in the real estate markets. The “lag” may
be exacerbated when banks delay their resolution of commercial real estate assets whose values are less than their
associated loans.
Negative economic conditions, changes in interest rates such as the significant increase in rates during 2022, credit
and the availability of capital, both debt and/or equity, disruptions in capital markets, uncertainty of the tax and regulatory
environment and/or declines in the demand for commercial real estate investment and related services in international and
domestic markets or in significant markets in which we do business, have had and could have in the future a material
adverse effect on our business, results of operations and/or financial condition. In particular, the commercial real estate
market is directly impacted by (i) the lack of debt and/or equity financing for commercial real estate transactions, (ii)
increased interest rates and changes in monetary policies by the U.S. Federal Reserve, (iii) changes in the perception that
commercial real estate is an accepted asset class for portfolio diversification, (iv) changes in tax policy affecting the
attractiveness of real estate as an investment choice, (v) changes in regulatory policy impacting real estate development
opportunities and capital markets, (vi) slowdowns in economic activity that could cause residential and commercial tenant
demand to decline, (vii) declines in the regional or local demand for commercial real estate, or (viii) significant disruptions
in other segments of the real estate markets could adversely affect our results of operations. Any of the foregoing could
adversely affect the operation and income of commercial real estate properties. Additionally, we are subject to inflationary
pressures on employee and contractor wages and salaries, which can materially impact our financial results.
These and other types of events could lead to a decline in transaction activity as well as a decrease in property values
which, in turn, would likely lead to a reduction in brokerage commissions and financing fees relating to such transactions.
These effects would likely cause us to realize lower revenue from our transaction service fees, including brokerage
commissions, which fees usually are tied to the transaction value and are payable upon the successful completion of a
particular transaction. Such declines in transaction activity and value would likely also significantly reduce our financing
activities and revenue.
Fiscal uncertainty, significant changes and volatility in the financial markets and business environment, and similar
significant changes in the global, political, security and competitive landscape, make it increasingly difficult for us to
predict our revenue and earnings into the future. As a result, any revenue or earnings projections or economic outlook
which we may give, may be affected by such events or may otherwise turn out to be inaccurate.
Our business has been, and may in the future, be adversely affected by restrictions in the availability of debt or equity
capital, the fluctuating cost of capital, as well as a lack of adequate credit and the risk of deterioration of the debt or
credit markets and commercial real estate markets.
Restrictions on the availability of capital, both debt and/or equity, can create significant reductions in the liquidity
and flow of capital to the commercial real estate markets. Severe restrictions in debt or equity liquidity as well as the lack
of the availability of credit in the markets we service can significantly reduce the volume and pace of commercial real
estate transactions. These restrictions can also have a general negative effect upon commercial real estate prices
themselves. Our business is particularly sensitive to the volume of activity and pricing in the commercial real estate market.
This has had, and may have in the future, a significant adverse effect on our business.
We cannot predict with any degree of certainty the magnitude or duration of developments in the credit markets and
commercial real estate markets as it is inherently difficult to make accurate predictions with respect to such
macroeconomic movements that are beyond our control. This uncertainty limits our ability to plan for future developments.
In addition, uncertainty regarding market conditions may limit the ability of other participants in the credit markets or
commercial real estate markets to plan for the future. As a result, market participants may act more conservatively than
they might in a stabilized market, which may perpetuate and amplify the adverse developments in the markets we service.
While business opportunities may emerge from assisting clients with transactions relating to distressed commercial real
estate assets, there can be no assurance that the volume of such transactions will be sufficient to meaningfully offset the
declines in transaction volumes within the overall commercial real estate market.
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Increases in prevailing interest rates may result in downward pressure on the price of real estate and reduce activity in
the commercial real estate industry resulting in a negative impact on our business.
Market interest rates are affected by many factors outside of our control, including governmental monetary policies,
domestic and international economic conditions, inflation, deflation, recession, changes in unemployment, the money
supply, international disorder and instability in domestic and foreign financial markets. Rising interest rates create
downward pressure on the price of real estate and reduce activity in the commercial real estate industry, which have
recently and may continue to have an adverse impact on our business.
Interest rates remained at relatively low levels on a historical basis and the U.S. Federal Reserve maintained the
federal funds target range at 0.0% to 0.25% for much of 2020 and 2021. During 2022, the Federal Reserve raised interest
rates by an aggregate of 425 basis points. These increases resulted in a slow down in activity during the second half of
2022. The market consensus is that interest rates will be increased additional times during 2023. If interest rates increase
further, the resulting reduction in commercial real estate transactions and subsequent price reduction of commercial real
estate generally may result in us closing fewer brokerage, financing and other transactions, which would result in decreased
revenue and adversely impact our business.
Inflation can have an adverse impact on our business and on our clients.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as
inflation decreases the value of money. The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest
annual inflation rate since November 1981, but decreased to 6.5% in December 2022. As a result, during 2022, the Federal
Reserve increased the federal funds rate and indicated its intention to continue to increase interest rates in an effort to
combat inflation. Inflation has increased the wages paid to our employees and independent contractors. Furthermore, our
clients are also affected by inflation and rising interest rates. A significant and continued increase in interest rates and
inflation would be expected to have a negative impact on client demand for commercial real estate and need for our
services, which would, in turn, affect our profitability.
Our loss sharing indemnification obligation pursuant to our agreement with M&T Realty Capital Corporation may
adversely impact our results of operations, cash flows and/or our financial condition.
In September 2021, MMCC entered into an agreement with MTRCC, which has a DUS Agreement with Fannie Mae
and is an approved lender for Freddie Mac’s Conventional and Targeted Affordable Housing loans. MTRCC originates,
underwrites, closes and services loans under the DUS Agreement and is subject to indemnifying Fannie Mae for of a
portion of the risk of loss for those loans. Under the agreement with MTRCC, MMCC provides loan opportunities to
MTRCC, and for those loans closed under the DUS Agreement by MTRCC, MMCC has the option to assume a portion of
the indemnification obligation of MTRCC to Fannie Mae. We may need to secure additional sources of financing to satisfy
our loss sharing indemnification obligations under these programs. We cannot make any assurances that such financing
would be available on attractive terms, if at all, or that any indemnification obligations might be material or would not have
an adverse effect on our business, financial condition and results of operations.
We have numerous significant competitors and potential future competitors, some of which may have greater resources
than we do, and we may not be able to continue to compete effectively.
We compete in investment sales and financing within the commercial real estate industry. Our investment sales
focus is on the private client market segment, which is highly fragmented. The fragmentation of our market makes it
challenging to effectively gain market share. While we may have a competitive advantage over other national firms in the
private client market segment, we also face competition from local and regional service providers who have existing
relationships with potential clients. Furthermore, transactions in the private client market segment are smaller than many
other commercial real estate transactions. Although the brokerage commissions in this segment are generally a higher
percentage of the sales price, the smaller size of the transactions requires us to close many more transactions to sustain
revenue. If the commission structure or the velocity of transactions were to change, we could be disproportionately affected
by changes compared to other companies that focus on larger transactions, institutional clients and other segments of the
commercial real estate market.
There is no assurance that we will be able to continue to compete effectively, maintain our current fee arrangements
with our private clients, maintain current margin levels or counteract increased competition. The services we provide to our
clients are highly competitive on a national, regional and local level. Depending on the geography, property type or service,
we face competition from, including, but not limited to, commercial real estate service providers, in-house real estate
departments, private owners and developers, commercial mortgage servicers, institutional lenders, research and consulting
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firms, and investment managers, some of whom are clients and many of whom may have greater financial resources than
we do. In addition, future changes in laws and regulations could lead to the entry of other competitors. Many of our
competitors are local, regional or national firms. Although most are substantially smaller than we are, some of these
competitors are larger on a local, regional or national basis, and we believe more national firms are exploring entry into or
expansion in the $1 million to $10 million private client market segment. We may face increased competition from even
stronger competitors in the future due to a trend toward acquisitions and consolidation. We are also subject to competition
from other large national and multi-national firms as well as regional and local firms that have similar service competencies
to ours. Our existing and future competitors may choose to undercut our fees or increase the levels of compensation they
are willing to pay to their employees and investment sales and financing professionals. This could result in these
competitors recruiting our employees and investment sales and financing professionals, cause us to increase our level of
compensation or commission necessary to retain employees or investment sales and financing professionals, and/or require
us to recruit new employees or investment sales and financing professionals. These occurrences could cause our revenue to
decrease, and/or expenses to increase, which could have an adverse effect on our business, financial condition and results
of operations.
Our brokerage operations are subject to geographic and commercial real estate market risks, which could adversely
affect our revenue and profitability.
Our real estate brokerage offices are located in and around large metropolitan areas as well as mid-market regions
throughout the U.S. and Canada. Local and regional economic conditions in these locations could differ materially from
prevailing conditions in other parts of the country. We realize more of our revenue in California than in any other state. In
2022, we earned approximately 23% of our revenue from offices in California. In particular, as a result of this
concentration, we are subject to risks related to the California economy and real estate markets more than in other
geographic markets. In addition to economic conditions, this geographic concentration means that California-specific
legislation, California-specific COVID-19 outbreaks or restrictions, taxes and regional disasters, such as earthquakes and
wildfires as well as the impact of climate change, could disproportionately affect us. A downturn in investment real estate
demand or economic conditions in California and other regions could result in a further decline in our total gross
commission income which could have an adverse effect on our business, financial condition and results of operations.
Seasonal fluctuations and other market data in the investment real estate industry could adversely affect our business
and make comparisons of our quarterly results difficult.
Our revenue and profits have historically tended to be significantly higher in the second half of each year than in the
first half of the year. This is a result of a general focus in the real estate industry on completing or documenting
transactions by calendar year end and because certain of our expenses are relatively constant throughout the year. This
historical trend can be disrupted both positively and negatively by major economic, regulatory or political events impacting
investor sentiment for a particular property type or location, current and future projections of interest rates and tax rates,
attractiveness of other asset classes, market liquidity and the extent of limitations or availability of capital allocations for
larger institutional buyers, to name a few. During the year ended December 31, 2022, seasonal fluctuations were disrupted
by changes in overall market conditions and rising interest rates. As a result, our historical pattern of seasonality may or
may not continue to the same degree experienced in the prior years and may make it difficult to determine, during the
course of the year, whether planned results will be achieved, and thus to adjust to changes in expectations.
A change in the tax laws relating to like-kind exchanges could adversely affect our business and the value of our stock.
Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”), provides for tax-free exchanges of
real property for other real property. Legislation has been proposed on several occasions that would repeal or restrict the
application of Section 1031. If tax-free exchanges under Section 1031 were to be limited or unavailable, our clients or
prospective clients may decide not to purchase or sell property that they would have otherwise purchased or sold due to the
tax consequences of the transaction, thus reducing the commissions we would have otherwise received. Any repeal or
significant change in the tax rules pertaining to like-kind exchanges could have a substantial adverse impact on our
business, financial condition, results of operations, and the value of our stock.
A change in the tax laws could adversely affect our business and the value of our stock.
Changes in tax laws can impact investors’ perceived value of real estate, timing of transactions and perception of
real estate as a favorable investment. As a result, such changes may increase or decrease investors’ desire to engage in real
estate transactions, which could have an unfavorable impact on our business, financial condition, results of operations, and
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the value of our stock. Changes in tax laws in the various jurisdictions in which we operate may also impact the taxes we
are required to pay, our ability to transact business in such jurisdictions, and may make operating in these jurisdictions
unprofitable and unfavorably impact our results of operations and ability to execute our growth plans.
The Internet could devalue our information services and lead to reduced client relationships, which could reduce the
demand for our services.
The dynamic nature of the Internet, which has substantially increased the availability and transparency of
information relating to commercial real estate listings and transactions, could change the way commercial real estate
transactions are done. This has occurred to some extent in the residential real estate market as online brokerage and/or
auction companies have eroded part of the market for traditional residential real estate brokerage firms. The proliferation of
large amounts of data on the Internet could also devalue the information that we gather and disseminate as part of our
business model and may harm certain aspects of our investment brokerage business in the event that principals of
transactions prefer to transact directly with each other. Further, the rapid dissemination and increasing transparency of
information, particularly for public companies, increases the risks to our business that could result from negative media or
announcements about ethics lapses, improper behavior or other operational problems, which could lead clients to terminate
or reduce their relationships with us.
New laws or regulations or changes in existing laws or regulations or the application thereof could adversely affect our
businesses, financial condition, results of operations, and prospects.
We are subject to numerous federal, state, local and foreign regulations specific to the services we perform in our
business, as well as laws of broader applicability, such as securities, financial services and employment laws. In general,
the brokerage of real estate transactions requires us to maintain applicable licenses where we perform these services. If we
fail to maintain our licenses, conduct these activities without a license, or violate any of the regulations covering our
licenses, we may be required to pay fines (including treble damages in certain states), return commissions received or have
our licenses suspended or revoked. We could also be subject to disciplinary or other actions in the future due to claimed
noncompliance with these regulations, which could have a material adverse effect on our operations and profitability.
Our business is also governed by various laws and regulations, limiting the manner in which prospective clients may
be contacted, including federal and state “Do Not Call” and “Do Not Fax” regulations. We may be subject to legal claims
and governmental action if we are perceived to be acting in violation of these laws and regulations. We may also be subject
to claims to the extent individual employees or investment sales and financing professionals breach or fail to adhere to
Company policies and practices designed to maintain compliance with these laws and regulations. The penalties for
violating these laws and regulations can be material and could result in changes to the ways in which we are able to contact
prospective clients.
As the size and scope of commercial real estate transactions have increased significantly during the past several
years, both the difficulty of ensuring compliance with numerous licensing regimes and the possible loss resulting from non-
compliance have increased. New or revised legislation or regulations applicable to our business, both within and outside of
the U.S., as well as changes in administrations or enforcement priorities may have an adverse effect on our business. Such
new or revised legislation or regulations applicable to our business may impact transaction volumes and values, increase
the costs of compliance or prevent us from providing certain types of services in certain jurisdictions or in connection with
certain transactions or clients. For example, legislation which limits or prohibits dual agency could have an adverse impact
on our revenue. We are unable to predict how any of these new laws, rules, regulations and proposals will be implemented
or in what form, or whether any additional or similar changes to laws or regulations, including the interpretation or
implementation thereof, will occur in the future. Risks of legislative changes, including as a result of interpretive guidance
or other directives from the current administration, and new laws, regulations and interpretations may also come into effect.
The impact of any new or revised legislation or regulations under the current administration is unknown. Any such action
could affect us in substantial and unpredictable ways and could have an adverse effect on our business, financial condition
and results of operations.
Human Resource and Personnel Risks
If we are unable to attract and retain qualified and experienced managers, investment sales and financing
professionals, our growth may be limited, and our business and operating results could suffer.
Our most important asset is people, and our continued success is highly dependent upon the efforts of our managers
and investment sales and financing professionals. If these managers or investment sales and financing professionals depart,
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we will lose the substantial time and resources we have invested in training and developing those individuals and our
business, financial condition and results of operations may suffer. Additionally, such departures may have a
disproportionate adverse effect on our operations if our most experienced investment sales and financing professionals do
not remain with us or if departures occur in geographic areas where substantial amounts of our real estate brokerage
commissions and financing fee revenue are generated.
Our competitors frequently attempt to recruit our investment sales and financing professionals or change
commission structures in the marketplace. For a variety of reasons, the exclusive independent contractor and employment
arrangements we have entered into or may enter into with these professionals may not prevent these professionals from
departing and competing against us. As the majority of our investment sales and financing professionals are independent
contractors and we currently do not have employment agreements with most key employees, there is no assurance that we
will be able to retain their services. Similarly, most key employees in sales leadership roles, which includes our
experienced managers, currently do not have employment agreements and there is no assurance that we will be able to
retain their services.
An increasing component of our growth has also occurred through the recruiting, training and retention of key
experienced investment sales and financing professionals. Any future growth through attracting these types of professionals
will be partially dependent upon the continued availability of qualified candidates fitting the culture of our firm at
reasonable terms and conditions. However, our competitors continue to offer lucrative compensation packages and
commission splits to these key experienced professionals that we may not be able to match or exceed while also remaining
profitable. As a result, the professionals whom we would like to recruit or retain may not agree to terms and conditions
acceptable to us. In addition, as the recruitment and retention of what appear to be the key experienced professionals may
require substantial investment, such as lucrative compensation packages, support agreements, and commission splits, this
investment involves risks that the persons acquired will not perform in accordance with expectations and that business
judgments concerning the value, strengths and weaknesses of the persons recruited will prove incorrect, and therefore may
not have been worth the substantial investment.
If we lose the services of our executive officers or certain other members of our senior management team, we may not
be able to execute our business strategy.
Our success depends in a large part upon the continued service of our senior management team, who are important
to our vision, strategic direction and culture. Our current long-term business strategy was developed in large part by our
senior-level management team, some of whom have recently retired or will be transitioning to new positions, and depends
in part on their skills and knowledge to implement. Our focus on new growth and investment initiatives may require
additional management expertise to successfully execute our strategy. We may not be able to offset the impact on our
business of the loss of the services of our senior-level management team or other key officers or employees or be able to
recruit additional or replacement talent, which could negatively impact our business, financial condition and results of
operations.
Our business could be hurt if we are unable to retain our business philosophy and culture of information sharing and
efforts to retain our philosophy and culture could adversely affect our ability to maintain and grow our business.
Our policy of information sharing, matching properties with large pools of investors and the emphasis that we place
on our clients, our people and our culture define our business philosophy and differentiates our services from that of our
competitors. Various factors could adversely affect this culture. If we do not continue to develop and implement the right
processes and tools to manage our changing enterprise and maintain this culture, our ability to compete successfully and
achieve our business objectives could be impaired, which could negatively impact our business, financial condition and
results of operations.
The concentration of sales among our top investment sales and financing professionals could lead to losses if we are
unable to retain them.
Our most successful investment sales and financing professionals are responsible for a significant percentage of our
revenue. They also serve as mentors and role models, and provide invaluable training for younger professionals, which is
an integral part of our culture. This concentration among our top investment sales and financing professionals of real estate
brokerage commissions and financing fees revenue can lead to greater and more concentrated risk of loss if we are unable
to retain them, and could have a material adverse impact on our business and financial condition. Furthermore, many of our
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investment sales and financing professionals work in teams. If a team leader or manager leaves our Company, his or her
team members may leave with the team leader or manager.
Most of our sales professionals are independent contractors, not employees, and if laws, regulations or rulings mandate
that they be employees, our business would be adversely impacted.
Most of our investment sales professionals are retained as independent contractors, and we are subject to the Internal
Revenue Service regulations and applicable state law guidelines regarding independent contractor classification. These
regulations and guidelines are subject to judicial and agency interpretation, and it could be determined that the independent
contractor classification is inapplicable to some or all of our investment sales professionals. Further, if legal standards for
classification of these investment sales professionals as independent contractors change or appear to be changing, it may be
necessary to modify our compensation or commission structure for these investment sales professionals in some or all of
our markets, including paying additional compensation or reimbursing expenses. If we are forced to classify these
investment sales professionals as employees, we would also become subject to laws regarding employee classification and
compensation, and to claims regarding overtime, minimum wage, and meal and rest periods. We could also incur
substantial costs, penalties and damages due to future challenges by current or former investment sales professionals to our
classification or compensation practices. Any of these outcomes could result in substantial costs to us, could significantly
impair our financial condition and our ability to conduct our business as we choose, and could damage our reputation and
impair our ability to attract clients and investment sales and financing professionals.
Fraud, or theft, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain clients
and subjecting us to significant legal liability and reputational harm.
If our employees or investment sales and financing professionals engage in misconduct, our business could be
adversely affected. It is not always possible to deter misconduct, and the precautions we take to deter and prevent this
activity may not be effective in all cases. If our employees or investment sales and financing professionals were to engage
in unethical business practices, improperly use, disseminate, fail to disseminate or disclose information provided by our
clients, we could be subject to regulatory sanctions, suffer serious harm to our reputation, financial position and current
client relationships and significantly impair our ability to attract future clients. These events could adversely affect our
business, financial condition and results of operations. To the extent any fraud or theft of funds or misconduct result in
losses that exceeds our insurance coverage, our business could be materially adversely affected.
Internal Business Risks
We may fail to successfully differentiate our brand from those of our competitors, which could adversely affect our
revenue.
The value of our brand and reputation is one of our most important assets. An inherent risk in maintaining our brand
is we may fail to successfully differentiate the scope and quality of our service and product offerings from those of our
competitors, or we may fail to sufficiently innovate or develop improved products or services that will be attractive to our
clients. Additionally, given the rigors of the competitive marketplace in which we operate, there is the risk we may not be
able to continue to find ways to operate more productively and more cost-effectively, including by achieving economies of
scale, or we will be limited in our ability to further reduce the costs required to operate on a nationally coordinated
platform.
Our attempts to expand our services and businesses may not be successful and we may expend significant resources
without corresponding returns.
We intend to expand our specialty groups, particularly multi-tenant retail, office, industrial and hospitality, as well
as various niche segments, including multifamily tax credit, affordable housing, student housing, manufactured housing,
seniors housing and self-storage. We also plan to grow our financing services provided through our subsidiary, Marcus &
Millichap Capital Corporation. We expect to incur expenses relating to acquisitions, recruitment, training, and expanding
our markets and services. The planned expansion of services and platforms requires significant resources, and there can be
no assurance we will compete effectively, attract or train a sufficient number of professionals to support the expansion, or
operate these businesses profitably. We may incur significant expenses for these plans without corresponding returns,
which would harm our business, financial condition and results of operations.
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If we experience significant growth in the future, such growth may be difficult to sustain and may place significant
demands on our administrative, operational and financial resources.
If we experience significant growth in the future, such growth could place additional demands on our resources and
increase our expenses, as we will have to commit additional management, operational and financial resources to maintain
appropriate operational and financial systems to adequately support expansion. There can be no assurance we will be able
to manage our expanding operations effectively or we will be able to maintain or accelerate our growth, and any failure to
do so could adversely affect our ability to generate revenue and control our expenses, which could adversely affect our
business, financial condition and results of operations. Moreover, we may have to delay, alter or eliminate the
implementation of certain aspects of our growth strategy due to events beyond our control, including, but not limited to,
changes in general economic conditions and commercial real estate market conditions. Such delays or changes to our
growth strategy may adversely affect our business.
Our growth plan includes completing acquisitions, which may or may not happen depending on the acquisition
opportunities that are available in the marketplace.
Our ability to grow by acquiring companies or assets and by making investments to complement our existing
businesses will depend upon the availability of suitable acquisition candidates. If we are unable to find suitable acquisition
candidates, if we are unable to attract the interest of such candidates, or if we are unable to successfully negotiate and
complete such acquisitions, that could limit our ability to grow.
If we acquire businesses in the future, we may experience high transaction and integration costs, the integration process
may be disruptive to our business and the acquired businesses may not perform as we expect.
From time to time, we pursue strategic acquisitions to add and enhance our real estate brokerage and financing
service offerings. The companies we have acquired have generally been regional or specialty firms that expand our network
of investing and financing professionals and/or provide further diversification to our brokerage and financing services. Our
acquisition structures may include deferred and/or contingent consideration payments in future periods that are subject to
the passage of time or achievement of certain financial performance metrics and other conditions. Acquisitions also
frequently involve significant costs related to integrating culture, information technology, accounting, reporting and
management services and rationalizing personnel levels. If we are unable to fully integrate the culture, accounting,
reporting and other systems of the businesses we acquire, we may not be able to effectively manage them, and our financial
results may be materially adversely affected.
In addition, the acquisitions of businesses involve risks that the businesses acquired will not perform in accordance
with expectations, that the expected synergies associated with acquisitions will not be achieved, that we will experience
attrition from professionals licensed or associated with the acquired companies and that business judgments concerning the
value, strengths and weaknesses of the businesses acquired will prove incorrect, which could have an adverse effect on our
business, financial condition and results of operations.
A majority of our revenue is derived from transaction fees, which are not long-term contracted sources of recurring
revenue and are subject to external economic conditions and declines in those engagements could have a material
adverse effect on our financial condition and results of operations.
We historically have earned principally all our revenue from real estate brokerage transactions and financing fees.
We expect that we will continue to rely heavily on revenue from these sources for substantially all our revenue for the
foreseeable future. A decline in the number of transactions completed or in the value of the commercial real estate we sell
could significantly decrease our revenue, which would adversely affect our business, financial condition and results of
operations.
If we are unable to retain existing clients and develop new clients, our financial condition may be adversely affected.
We are substantially dependent on long-term client relationships and on revenue received for services provided for
them. Our listing agreements generally expire within six months and depend on the cooperation of the client during the
pendency of the agreement, as is typical in the industry. In this competitive market, if we are unable to maintain these
relationships or are otherwise unable to retain existing clients and develop new clients, our business, results of operations
and/or financial condition may be materially adversely affected. Historically, a global economic downturn and weaknesses
in the markets in which our clients and potential clients compete have led to a lower volume of transactions and fewer real
estate clients generally, which makes it more difficult to maintain existing and establish new client relationships. These
26
effects could increase again in the wake of the continuing political and economic uncertainties in the U.S. and in other
countries.
We may face significant liabilities and/or damage to our professional reputation as a result of litigation allegations and
negative publicity.
As a licensed real estate broker, we and our licensed professionals and brokers are subject to regulatory due
diligence, disclosure and standard-of-care obligations. The actual or perceived failure to fulfill these obligations could
subject us or our professionals and brokers to litigation from parties who attempted to or in fact financed, purchased or sold
properties that we or they brokered, managed or had some other involvement. We could become subject to claims by those
who either wished to participate or did participate in real estate transactions alleging that we did not fulfill our regulatory,
contractual or other legal obligations. We also face potential conflicts of interest claims when we represent both the buyer
and the seller in a transaction.
We depend on our business relationships and our reputation for integrity and high-caliber professional services to
attract and retain clients. As a result, allegations by private litigants or regulators, whether the ultimate outcome is
favorable or unfavorable to us, as well as negative publicity and press speculation about us or our investment activities,
whether or not valid, may harm our reputation and damage our business prospects. In addition, if any lawsuits were
brought against us and resulted in a finding of substantial legal liability, it could materially, adversely affect our business,
financial condition or results of operations or cause significant reputational harm to us, which could materially impact our
business.
Some of these litigation risks may be mitigated by the commercial insurance we maintain in amounts we believe are
appropriate. However, in the event of a substantial loss, our commercial insurance coverage and/or self-insurance reserve
levels might not be sufficient to pay the full damages, or the scope of available coverage may not cover certain types of
claims. Further, the value of otherwise valid claims we hold under insurance policies could become uncollectible in the
event of the covering insurance company’s insolvency, although we seek to limit this risk by placing our commercial
insurance only with highly-rated companies. Any of these events could negatively impact our business, financial condition
or results of operations.
Failure to appropriately deal with actual or perceived conflicts of interest could adversely affect our businesses.
Outside of our employees and investment sales and financing professionals, our reputation is one of our most
important assets. As we have expanded the scope of our services, we increasingly must address potential, actual or
perceived conflicts of interest relating to the services we provide to our existing and potential clients. For example,
conflicts may arise between our position as an advisor to both the buyer and seller in commercial real estate sales
transactions or in instances when a potential buyer requests that we represent them in securing the necessary capital to
acquire an asset we are selling for another client, or when a capital source takes an adverse action against an owner client
that we are advising in another matter. From time to time, we also advise or represent entities and parties affiliated with us
in commercial real estate transactions which also involve clients who are unaffiliated with us. In this context, we may be
subject to complaints or claims of a conflict of interest. While we believe we have attempted to adopt various policies,
controls and procedures to address or limit actual or perceived conflicts, these policies and procedures may not be
adequate, require excessive expenditures and may not be adhered to by our employees. Appropriately dealing with conflicts
of interest is complex and difficult and our reputation could be damaged and cause us to lose existing clients or fail to gain
new clients if we fail, or appear to fail, to deal appropriately with conflicts of interest, which could have an adverse effect
on our business, financial condition and results of operations.
Technology and Cybersecurity Risks
If we do not respond to technological innovations or changes or upgrade our technology systems, our growth prospects
and results of operations could be adversely affected.
To remain competitive, we must continue to enhance and improve the functionality, features and security of our
technology infrastructure. Infrastructure upgrades may require significant capital investment outside of the normal course
of business. In the future, we will likely need to improve and upgrade our technology, database systems and network
infrastructure in order to allow our business to grow in both size and scope. Without such improvements, our operations
might suffer from unanticipated system disruptions, slow performance or unreliable service levels, any of which could
negatively affect our ability to provide rapid customer service. We may face significant delays in introducing new services,
investment sales professional tools and enhancements. Moreover, if we do not keep pace with the rapid innovations and
27
changes taking place in information technology in our industry, we could be at a competitive disadvantage. If competitors
introduce new products and services using new technologies, our proprietary technology and systems may become less
competitive, and our business may be harmed. In addition, the expansion and improvement of our systems and
infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that
our business will improve.
Interruption, data security breaches, or failure of our information technology, communications systems or data services
could hurt our ability to effectively provide our services, which could damage our reputation and harm our operating
results.
Our business requires the continued operation of information technology and communication systems and network
infrastructure. Our ability to conduct our business may be adversely impacted by disruptions or breaches to these systems
or infrastructure. Our information technology and communications systems are vulnerable to damage or disruption from
fire, power loss, telecommunications failure, system malfunctions, computer viruses, third-party misconduct or penetration
and criminal acts, natural disasters such as hurricanes, earthquakes, wildfires and floods, acts of war or terrorism, or other
events which are beyond our control. For example, in August 2021, we were subject to a cybersecurity attack on our
information technology systems. We immediately engaged cybersecurity experts to secure and restore all essential systems
and were able to do so with only minimal disruption to our business. There are no guarantees, however, that if we were to
experience another cybersecurity attack on our information technology systems, we would be able restore all essential
systems with only minimal disruption to our business again or that we would not incur significant expense in connection
with an attack.
In addition, the operation and maintenance of these systems and networks is, in some cases, dependent on third-party
technologies, systems and service providers for which there is no certainty of uninterrupted availability. Any of these
events could cause system interruption, delays, and loss of critical data or intellectual property (such as our client lists and
information, business methods and research) and may also disrupt our ability to provide services to or interact with our
clients, and we may not be able to successfully implement contingency plans that depend on communication or travel. We
have business continuity plans and backup systems to reduce the potentially adverse effect of such events, but our business
continuity planning may not be sufficient and cannot account for all eventualities. A catastrophic event that results in the
destruction or disruption of any of our data centers or our critical business or information technology systems could
severely affect our ability to conduct normal business operations and, as a result, our future operating results could be
adversely affected. Our business relies significantly on the use of commercial real estate data. We produce much of this
data internally, but a significant portion is purchased from third-party providers for which there is no certainty of
uninterrupted availability. A disruption of our ability to provide data to our professionals and/or clients could damage our
reputation, and our operating results could be adversely affected.
Failure to maintain the security of our information and technology networks, including personally identifiable and
client information could adversely affect us.
Security breaches and other disruptions could compromise our information and expose us to liability, which could
cause our business and reputation to suffer. In the ordinary course of our business, we collect and store sensitive data,
including our proprietary business information and intellectual property and that of our clients and personally identifiable
information of our employees and contractors, in our data centers and on our networks. The secure processing,
maintenance and transmission of this information is critical to our operations. Despite our security measures, our
information technology and infrastructure have been subject to, and may in the future be vulnerable to various cyber-
attacks, such as hacking, spoofing and phishing attacks and ransomware attacks, or our systems may be breached due to
employee error, malfeasance or other disruptions. Additionally, since 2020, a portion of our workforce has worked
remotely in some capacity in response to the COVID-19 pandemic. This arrangement introduces potential new
vulnerabilities to cyber threats. A significant actual or potential theft, loss, fraudulent use or misuse of client, employee or
other personally identifiable data, whether by third parties or as a result of employee malfeasance or otherwise, non-
compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and security
policies with respect to such data could result in significant costs, fines, litigation or regulatory actions against us. Such an
event could additionally disrupt our operations and the services we provide to clients, damage our reputation, and cause a
loss of confidence in our services, which could adversely affect our business, revenue and competitive position.
Additionally, we increasingly rely on third-party data storage providers, including cloud storage solution providers,
resulting in less direct control over our data. Such third parties may also be vulnerable to security breaches and
compromised security systems, which could adversely affect our reputation.
We rely on the collection and use of personally identifiable information from clients to conduct our business. We
disclose our information collection and dissemination practices in a published privacy statement on our websites, which we
28
may modify from time to time. We may be subject to legal claims, government action, including under the Racketeer
Influenced and Corrupt Organizations Act, and damage to our reputation if we act or are perceived to be acting
inconsistently with the terms of our privacy statement, client expectations or the law. In the event we or the vendors with
which we contract to provide services on behalf of our clients were to suffer a breach of personally identifiable
information, our customers could terminate their business with us. Further, we may be subject to claims to the extent
individual employees or investment sales and financing professionals breach or fail to adhere to Company policies and
practices and such actions jeopardize any personally identifiable information. In addition, concern among potential buyers
or sellers about our privacy practices could keep them from using our services or require us to incur significant expense to
alter our business practices or educate them about how we use personally identifiable information.
Investment Risks
Our investments in marketable debt securities, available-for-sale are subject to certain risks which could affect our
overall financial condition, results of operations or cash flows.
We invest a portion of our available cash and cash equivalent balances in money market funds, some of which have
floating net asset values or by purchasing marketable debt securities with maturities in excess of three months in a managed
portfolio in a variety of fixed or variable rate debt securities, including U.S. government and federal agency securities and
corporate debt securities. The primary objective of our investment activity is to maintain the safety of principal, provide for
future liquidity requirements while maximizing yields without significantly increasing risk. Should any of our investments
or marketable debt securities lose value or have their liquidity impaired, it could affect our overall financial condition.
Additionally, should we choose or are required to sell these securities in the future at a loss, our consolidated operating
results or cash flows may be affected.
We may be deemed to be an investment company due to our investments in marketable debt securities, available-for-sale
and, if such a determination were made, we would become subject to significant regulation that would adversely affect
our business.
We may be deemed to be an investment company under the Investment Company Act of 1940 if, among other
things, we own “investment securities” with a value exceeding 40% of the value of our total assets, unless we qualify under
a particular exemption or safe harbor. We invest part of our available cash and cash equivalents in a variety of short-term,
investment-grade securities, some of which may qualify as “investment securities” under the Investment Company Act.
Investment companies are subject to registration under the Investment Company Act and compliance with a variety of
restrictions and requirements. If we were to be deemed an investment company we would become subject to these
restrictions and requirements, and the consequences of having been an investment company without registering under the
Investment Company Act could have a material adverse effect on our business, financial condition and results of
operations, as well as restrict our ability to sell and issue securities, borrow funds, engage in various transactions or other
activities and make certain investment decisions. In addition, we may incur significant costs or limitation on business
opportunities to avoid investment company status if an exemption from the Investment Company Act were to be
considered unavailable to us at a time when the value of our “investment securities” exceeds 40% of the value of our total
assets. We believe that we satisfy the conditions to be exempt from the Investment Company Act because, among other
things, we are engaged directly and primarily in a business other than that of investing, reinvesting, owning, holding or
trading in securities. However, absent an exemptive order from the SEC, our status of being exempt cannot be assured.
Risks Related to Our Founder
Our Chair and founder owns a significant portion of our common stock, which may prevent other stockholders from
influencing significant decisions, and the sale of such stock may depress the price of our common stock and impair our
ability to raise capital.
George M. Marcus, our Chair and founder beneficially owns approximately 15.0 million shares, or approximately
38% of our outstanding common stock as of December 31, 2022. Because of Mr. Marcus’s substantial ownership of our
outstanding common stock, he may be able to significantly influence the outcome of corporate actions requiring
stockholder approval, including the election and removal of directors, so long as he controls a significant portion of our
common stock. Mr. Marcus’ shares may also be sold in a public or private sale which could adversely affect the prevailing
market price of our common stock and could impair our ability to raise capital through the future sales of equity securities.
29
Our Chair may have actual or potential conflicts of interest because of his position with MMC.
George M. Marcus serves as the Chair of our Board of Directors and is Chair of the Board of Directors of MMC. In
addition, Mr. Marcus beneficially owns substantially all of the outstanding stock of MMC. His position at MMC and the
ownership of any MMC equity or equity awards creates or may create the appearance of conflicts of interest if and when he
is faced with decisions that could have different implications for MMC and for us.
General Risks
Our existing goodwill and other intangible assets could become impaired, which may require us to take non-cash
charges.
Under current accounting guidelines, we evaluate our goodwill and other intangible assets for potential impairment
annually or more frequently if circumstances indicate impairment may have occurred. We perform the required annual
goodwill impairment evaluation in the fourth quarter of each year. Any impairment of goodwill or other intangible assets
would result in a non-cash charge against earnings, and such charge could materially adversely affect our reported results
of operations and the market price of our common stock in future periods.
In preparing our financial statements we make certain assumptions, judgments, and estimates that affect amounts
reported in our consolidated financial statements, which, if not accurate, may significantly impact our financial results.
We make assumptions, judgments, and estimates that affect amounts reported in our consolidated financial
statements. These assumptions, judgments, and estimates are drawn from historical experience and various other factors
that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual
results could differ materially from our estimates, and such differences could significantly impact our financial results.
Changes in United States Generally Accepted Accounting Principles (“U.S. GAAP”) could adversely affect our
financial results and may require significant changes to our internal accounting systems and processes.
We prepare our consolidated financial statements in conformity with U.S. GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to interpret and
create appropriate accounting principles and guidance. The FASB periodically issues new accounting standards on a
variety of topics. For information regarding new accounting standards, please refer to Note 2 – “Accounting Policies and
Recent Accounting Pronouncements” of our Notes to Consolidated Financial Statements. These and other such standards
generally result in different accounting principles, which may significantly impact our reported results or could result in
variability of our financial results.
We are obligated to develop and maintain proper and effective internal control over financial reporting. If we fail to
maintain an effective system of internal controls, we may not be able to accurately report financial results or prevent
fraud.
Effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention
of fraud. Any inability to provide reliable financial reports or prevent fraud could harm our business.
We must annually evaluate our internal control procedures to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002, which requires our management and auditors to assess the effectiveness of internal controls.
If we fail to remedy or maintain the adequacy of our internal controls when such standards are modified, supplemented, or
amended from time to time, we could be subject to regulatory scrutiny, civil or criminal penalties, or shareholder litigation.
In addition, failure to maintain adequate internal controls could result in financial statements that do not accurately
reflect our financial condition. There can be no assurance that we will be able to continue to complete the work necessary
to fully comply with the requirements of the Sarbanes-Oxley Act or that our management and external auditors will
continue to conclude that our internal controls are effective.
The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.
Volatility in the market price of our common stock may prevent shareholders from being able to sell shares of our
common stock at or above the price shareholders paid for them. The market price for our common stock could fluctuate
significantly for various reasons, including quarterly and annual variations in our results and those of our competitors;
30
changes to the competitive landscape; estimates and projections by the investment community; the arrival or departure of
key personnel, especially the retirement or departure of key senior investment sales and financing professionals and
management; the introduction of new services by us or our competitors; acquisitions, strategic alliances or joint ventures
involving us or our competitors; and general global and domestic economic, credit and liquidity issues, market or political
conditions.
As a result of these factors, investors in our common stock may not be able to resell their shares at or above the price
paid to acquire the stock or may not be able to resell them at all. These broad market and industry factors may materially
reduce the market price of our common stock, regardless of our operating performance. In addition, price volatility may be
greater if the public float and trading volume of our common stock is low.
If securities analysts do not publish research or reports about our business or if they downgrade our Company or our
sector, or we do not meet expectations of the analysts the price of our common stock could decline.
The trading market for our common stock depends in part on the research and reports that industry or financial
analysts publish about us or our business. These research reports about our business may contain information about us,
including, but not limited to estimates of our future results of operations and stock price. We do not control these analysts,
nor can we assure that any analysts will continue to follow us, issue research reports or publish information that accurately
predicts our actual results or stock price. Furthermore, if we do not meet the expectations of industry or financial analysts
or one or more of the analysts who do cover us downgrades our Company or our industry, or the stock of any of our
competitors, the price of our common stock could decline. If one or more of these analysts ceases coverage of our
Company, we could lose visibility in the market, which in turn could cause the price of our common stock to decline.
Significant fluctuations in our revenue and net income may make it difficult for us to achieve steady earnings growth
on a quarterly or an annual basis, which may make the comparison between periods difficult and may cause the price of
our common stock to decline.
We have experienced and may continue to experience fluctuations in revenue and net income as a result of many
factors, including, but not limited to, economic conditions, capital market disruptions, the timing of transactions, revenue
mix and the timing of additional selling, general and administrative expenses to support growth initiatives. We provide
many of our services pursuant to contracts that typically expire within six months and that are dependent on the client’s
cooperation. Consequently, many of our clients can terminate or significantly reduce their relationships with us on very
short notice for any reason.
We plan our capital and operating expenditures based on our expectations of future revenue and, if revenue are
below expectations in any given quarter or year, we may be unable to adjust capital or operating expenditures in a timely
manner to compensate for any unexpected revenue shortfall, which could have an immediate material adverse effect on our
business, financial condition and results of operation.
Future sales or the perception of future sales of a substantial amount of our common stock may depress the price of
shares of our common stock.
Future sales, issuances of shares under our Amended and Restated 2013 Omnibus Equity Incentive Plan and 2013
Employee Stock Purchase Plan or the availability of a substantial amount of our common stock in the public market could
adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through the
future sales of equity securities.
We may issue shares of our common stock or other securities from time to time as consideration for future
acquisitions and investments. If any such acquisition or investment is significant, the number of shares of our common
stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be
substantial. We may also grant registration rights covering those shares of our common stock or other securities in
connection with any such acquisitions and investments.
We cannot predict the size of future issuances or sales of our common stock or the effect, if any, that future
issuances and sales of our common stock will have on the market price of our common stock. Sales of substantial amounts
of our common stock (including shares of our common stock issued in connection with an acquisition), or the perception
that such sales could occur, may adversely affect prevailing market prices for our common stock.
31
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
Our principal executive offices are located at 23975 Park Sorrento, Suite 400, Calabasas, California 91302 where
our telephone number is (818) 212-2250. We lease all of our brokerage offices (typically less than 12,000 square feet) and
other support facilities in United States and Canada. We believe that our current facilities are adequate to meet our needs
through the end of 2023; however, as we continue to evaluate our office footprint, our lease needs could change during the
year.
Item 3. Legal Proceedings
We are involved in claims and legal actions arising in the ordinary course of our business, some of which involve
claims for damages that are substantial in amount. Most of these litigation matters are covered by our insurance policies,
which contain deductibles, exclusions, claim limits, and aggregate policy limits. Such litigation and other proceedings may
include, but are not limited to, actions relating to commercial relationships, standard brokerage disputes such as the alleged
failure to disclose physical or environmental defects or property expenses or contracts, the alleged inadequate disclosure of
matters relating to the transaction such as the relationships among the parties to the transaction, potential claims or losses
pertaining to the asset, vicarious liability based upon conduct of individuals or entities outside of our control, general fraud
claims, conflicts of interest claims, employment law claims, including claims challenging the classification of our sales
professionals as independent contractors, claims alleging violations of state consumer fraud statutes, and intellectual
property. While the ultimate liability for these legal proceeding cannot be determined, we review the need for an accrual
for loss contingencies quarterly, and record an accrual for litigation related losses where the likelihood of loss is both
probable and estimable. We do not believe, based on information currently available to us, that the final outcome of these
proceedings will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
For information on our legal proceedings, see Note 15 – “Commitments and Contingencies” of our accompanying
Notes to Consolidated Financial Statements included in Part II, Item 8 – “Financial Statements and Supplementary Data” of
this Annual Report on Form 10-K.
Item 4. Mine Safety Disclosures
Not applicable.
32
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock trades on the New York Stock Exchange (“NYSE”) under the symbol “MMI”.
As of February 13, 2023, there were 20 stockholders of record, and the closing price of our common stock was
$36.62 per share as reported on the NYSE.
Dividends
On February 16, 2022, the Board of Directors declared a semi-annual regular dividend of $0.25 per share and a
special dividend of $1.00 per share, payable on April 4, 2022, to stockholders of record at the close of business on March 8,
2022. The second of the semi-annual regular dividends was paid on October 6, 2022, to stockholders of record at the close
of business on September 15, 2022. As a result, the Company paid $60.4 million in dividends to outstanding shareholders
during the twelve months ended December 31, 2022. As of December 31, 2022, $2.2 million remains to be paid upon
vesting of stock awards.
On February 9, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, payable on
April 6, 2023, to stockholders of record at the close of business on March 14, 2023. Based on the estimated number of
shares to be outstanding as of March 14, 2023, the dividends declared aggregated $10.4 million, including dividend
equivalents totaling $0.5 million to be paid on unvested restricted stock and deferred stock units granted under the 2013
Plan. These dividend equivalents will be paid when the underlying restricted stock and deferred stock units vest. Any and
all future dividends are subject to review and approval by the Board of Directors.
Stock Performance Graph
The performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise
subject to the liabilities under that Section and shall not be deemed to be incorporated by reference into any filing of
Marcus & Millichap, Inc. under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act.
The following graph shows a comparison from December 31, 2017 through December 31, 2022 of the cumulative
total return for our common stock, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and an industry peer group
for this period.
The graph assumes that $100 was invested at the market close on December 31, 2017 in the common stock of
Marcus & Millichap Inc., the S&P 500 Index and the peer group, and assumes reinvestment of dividends. The stock price
performance of the following graph is not necessarily indicative of future stock price performance. The industry peer group
is comprised of the following publicly-traded real estate services companies: CBRE, Colliers, Cushman (from August 2018
when it began trading), JLL, and Newmark (from December 2017 when it began trading) (collectively “Peer Group”). We
selected our Peer Group based on companies that represent our primary competitors with certain business lines reasonably
comparable to ours and based on how long they have been publicly-traded.
33
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Marcus & Millichap, Inc, the S&P 500 Index, and a Peer Group
$250
$200
$150
$100
$50
$0
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
Marcus & Millichap, Inc.
S&P 500 Index
Peer Group
Marcus & Millichap, Inc.
S&P 500 Index
Peer Group
Base Period
12/31/17
100.00
100.00
100.00
Purchases of Equity Securities by the Issuer
12/31/18
12/31/19
12/31/20
12/31/21
12/31/22
105.27
95.62
86.65
114.23
125.72
128.20
114.17
148.85
119.03
157.80
191.58
208.45
109.17
156.88
135.96
On August 2, 2022, our Board of Directors authorized a common stock repurchase program of up to $70 million. As
of December 31, 2022, $40.4 million of common stock remains eligible for repurchase under the program.
Share repurchase activity during the three months ended December 31, 2022 was as follows:
Periods
Total Number of
Shares Purchased(1)
Average Price
Paid Per Share
October 1, 2022 - October 31, 2022
431,700 $
November 1, 2022 - November 30, 2022
December 1, 2022 - December 31, 2022
Total
103,343
102,433
637,476
34.51
35.13
34.31
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares That May
Yet Be Purchased Under
the Plans or Programs
431,700 $
103,343
102,433
637,476 $
47,526,291
43,895,957
40,381,973
40,381,973
(1)
Excludes shares withheld for employee taxes upon vesting of stock-based awards. Stock repurchases under our
program may be made through open market and privately negotiated transactions at times and in such amounts as
management deems appropriate. The timing and actual number of shares repurchased will depend on a variety of
factors including price, corporate and regulatory requirements, capital availability, and other market conditions. The
stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior
notice.
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Recent Sales of Unregistered Securities
None.
Item 6. [RESERVED]
Not applicable.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion of our financial condition and results of operations should be read in conjunction with our
audited consolidated financial statements and the accompanying notes thereto included elsewhere herein. The following
discussion contains, in addition to historical information, forward-looking statements that include risks and uncertainties.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain
factors, including those factors set forth under Item 1A – “Risk Factors” and Item 7 – “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Overview – Factors Affecting Our Business” of this Annual
Report on Form 10-K.
Overview
Our Business
We are a leading national brokerage firm specializing in commercial real estate investment sales, financing,
research, and advisory services. We have been the top commercial real estate investment broker in the United States based
on the number of investment transactions for more than 15 years. As of December 31, 2022, we had 1,904 investment sales
and financing professionals that are primarily exclusive independent contractors operating in 81 offices, who provide real
estate brokerage and financing services to sellers and buyers of commercial real estate. We also offer market research,
consulting, and advisory services to our clients. During the year ended December 31, 2022, we closed 12,272 investment
sales, financing and other transactions with total sales volume of approximately $86.3 billion. During the year ended
December 31, 2021, we closed 13,255 investment sales, financing, and other transactions with total sales volume of
approximately $84.4 billion.
We generate revenue by collecting real estate brokerage commissions upon the sale, and fees upon the financing of
commercial properties and by providing consulting, advisory, and other real estate services. Real estate brokerage
commissions are typically based upon the value of the property, and financing fees are typically based upon the size of the
loan. During the year ended December 31, 2022, approximately 90% of our revenue was generated from real estate
brokerage commissions, 9% from financing fees, and 1% from other real estate related services.
Acquisitions
We continue to pursue opportunities to increase our market presence through the execution of our growth strategies
by targeting markets based on population, employment, level of commercial real estate sales, inventory and competitive
opportunities where we believe the markets will benefit from our commercial real estate investment sales, financing,
research, and advisory services.
Factors Affecting Our Business
Our business and our operating results, financial condition, and liquidity are significantly affected by the number
and size of commercial real estate investment sales and financing transactions that we close in any period. The number and
size of these transactions are affected by our ability to recruit and retain investment sales and financing professionals,
identify and contract properties for sale, and identify those that need financing and refinancing. We principally monitor the
commercial real estate market through four factors, which generally drive our business. The factors are the economy,
commercial real estate supply and demand, capital markets, and investor sentiment and investment activity.
The Economy
Our business is dependent on economic conditions within the markets in which we operate. Changes in the economy
on a global, national, regional, or local basis can have a positive or negative impact on our business. Economic indicators
and projections related to job growth, unemployment, interest rates, retail spending, and consumer confidence trends can
35
have a positive or negative impact on our business. Overall market conditions, including global trade, interest rate changes,
inflation, and job creation, can affect investor sentiment and, ultimately, the demand for our services from investors in real
estate.
The close of 2022 brought positive signs of receding inflationary pressure as pressure on the Consumer Price Index
(CPI), Producer Price Index (PPI), and Personal Consumption Expenditure (PCE) readings all abated. All inflation
measures remain well above the Federal Reserve’s target rates, but their rate of growth has eased in recent months,
supporting the Federal Reserve’s ability to moderate their rate increase regimen. Various economic indicators continue to
send mixed signals about the near-term economic outlook. The two best known signals of an ensuing recession remain in
contradiction. The treasury rate yield curve inverted early in the fourth quarter last year and short-term treasury rates
remain higher than longer term rates signaling a possible downturn, but the unemployment rate is at a 54-year low of 3.4%
as of January 2023 indicating labor market strength. Other measures are mixed as well. The manufacturing outlook index is
delivering contraction readings, while job creation, inflation-adjusted personal consumption and other metrics suggest
growth. This inconsistency among indicators has confounded economist forecasts for 2023, resulting in a variety of
contradictory outlooks. Within that context, many commercial real estate investors stepped to the sidelines in the second
half of 2022 to await clarity and a stabilization of interest rates.
Looking forward into 2023, economist forecasts of economic growth for the year range between -1.4% and +2.0%
with a consensus of +0.5% per the January 10 Blue Chip economist survey. This range suggests that the economy may
experience a mild recession or could achieve a soft landing. Regardless, the consensus suggests the U.S. economy will
remain relatively flat in the coming year. Given the Federal Reserve’s restrictive monetary policies, it is likely that most
commercial real estate investors would perceive even mild growth in 2023 positively. Sustained job creation in the coming
year, together with rising wages and a deep well of cash savings have the potential to sustain demand for multifamily
housing as well as industrial and retail space demand. Positive commercial real estate fundamentals will be a key ingredient
supporting commercial real estate investment activity.
Commercial Real Estate Supply and Demand
Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected
by many factors beyond our control. These factors include the supply of commercial real estate, coupled with user demand
for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as
stocks and bonds.
Fourth quarter national average occupancy levels decreased in apartment, office, and industrial properties, reflecting
elevated uncertainty surrounding the economy and interest rate climate. Retail space demand remained positive, pushing
the occupancy rate back into alignment with pre-pandemic levels. Elevated apartment and industrial construction levels
have been a significant factor weighing on overall occupancy, but concerns surrounding high inflation and a potential
recession have restrained both household formation and space leasing commitments. Below-average consumer and
business sentiment suggest that demand will remain below normal over the short term, but a recent uptick in sentiment and
reduced rate increases by the Federal Reserve have the potential to reinvigorate space demand in 2023. Rent growth has
been tempered by these same economic and monetary policy forces, moderating the aggressiveness of investment buyer
underwriting. As a result, the bid-ask spread between buyers and sellers has widened and fourth quarter commercial real
estate transactions activity was significantly reduced from the record heights achieved in 2021. Economic crosscurrents and
continuing questions about the Federal Reserve’s rate policies have the potential to create additional hurdles for investors
in 2023, but should increased evidence of an economic “soft landing” emerge, pent-up investor demand could surface.
Capital Markets
Credit and liquidity issues in the financial markets have a direct impact on the flow of capital to the commercial real
estate market. Real estate purchases are often financed with debt, and as a result, credit and liquidity impact transaction
activity and prices. Movements of interest rates in one direction, whether increasing or decreasing, could adversely or
positively affect the operations and income potential of commercial real estate properties, as well as lender and equity
underwriting for real estate investments. These changes directly influence investor demand for commercial real estate
investments.
In its effort to battle inflation last year, the Federal Reserve initiated its most aggressive interest rate increase cycle
since 1980. The Federal Reserve appears to have completed the heavy lifting of raising the Federal Overnight Rate by 425
basis points in 2022 and has begun to signal a potential shift to a fine-tuning strategy in 2023. On February 1, 2023, the
36
Federal Reserve limited its rate increase to 25 basis points. While the Federal Reserve indicated that additional rate
increases will likely occur in 2023, the smaller rate increase alleviated some pressure on commercial real estate lenders.
The combination of a comparatively low 10-year treasury rate, together with an expectation of a slower pace of Federal
Reserve movements in 2023 allows commercial real estate lenders to tighten their safety margins and to reduce their rates.
Lending liquidity remains constrained compared to early 2022, but the lending climate is improving with rates edging
lower and capital availability increasing, potentially boosting commercial real estate transactional liquidity as the year
progresses.
Investor Sentiment and Investment Activity
We facilitate investors' buying, selling, and financing properties in order to generate commissions. Investors’ desires
and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy,
supply and demand for properly positioned properties, available credit, and market events impact investor sentiment and,
therefore, transaction velocity. In addition, our private clients, who make up the largest source of revenue, are often
motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership
breakups, and estate planning.
Commercial real estate sales activity declined sharply in the fourth quarter of 2022 as the cost of debt capital rose
above commercial real estate yields in many instances. The disconnect between sellers seeking prices similar to the
beginning of 2022, before the Federal Reserve increased interest rates by more than 425 basis points, and buyers
contending with the higher borrowing costs slowed activity. This disconnect between buyers and sellers remains a
headwind to transaction activity, but as the Federal Reserve slows its rate increases, the market may recalibrate and
navigate a price discovery process. In addition, as economic clarity emerges and the risk of a recession balances out against
the prospect of a “soft landing,” investors may have increased comfort deploying capital. Office properties, particularly
those in the urban core, face the greatest uncertainty, while more inflation-resistant properties such as apartments, self-
storage and hotels, particularly in growth markets, are better positioned to sustain buyer interest. Sales of “defensive” assets
such as single-tenant net lease properties backed by high credit tenants and medical office assets have also maintained
buyer interest. Ultimately, the market velocity will be dictated by a combination of the economic outlook, Federal Reserve
action, interest rates, and the narrowing of the buyer/seller expectation gap. If the Federal Reserve raises rates minimally
throughout the year and the economy avoids a significant recession, we believe commercial real estate sales activity should
return toward its historical norm in 2023.
Seasonality
Our real estate brokerage commissions and financing fees have tended to be seasonal and, combined with other
factors, can affect an investor’s ability to compare our financial condition and results of operations on a quarter-by-quarter
basis. Historically, this seasonality has generally caused our revenue, operating income, net income, and cash flows from
operating activities to be lower in the first half of the year and higher in the second half of the year, particularly in the
fourth quarter. The concentration of earnings and cash flows in the last six months of the year, particularly in the fourth
quarter, is due to an industry-wide focus of clients to complete transactions towards the end of the calendar year. This
historical trend can be disrupted both positively and negatively by major economic events, political events, natural disasters
or pandemics such as the COVID-19 pandemic, which may impact, among other things, investor sentiment for a particular
property type or location, volatility in financial markets, current and future projections of interest rates, attractiveness of
other asset classes, market liquidity and the extent of limitations or availability of capital allocations for larger property
buyers, among others. Private client investors may accelerate or delay transactions due to personal or business-related
reasons unrelated to economic events. In addition, our operating margins are typically lower during the second half of each
year due to our commission structure for some of our senior investment sales and financing professionals. These senior
investment sales and financing professionals are on a graduated commission schedule that resets annually, pursuant to
which higher commissions are paid for higher sales volumes. During the year ended December 31, 2022, seasonal
fluctuations were disrupted by changes in overall market conditions and rising interest rates, and going forward our
historical pattern of seasonality may or may not continue to the same degree experienced in prior years.
Operating Segments
We follow the guidance for segment reporting, which requires reporting information on operating segments in
interim and annual financial statements. Substantially all of our operations involve the delivery of commercial real estate
services to our customers including real estate investment sales, financing and consulting and advisory services.
37
Management makes operating decisions, assesses performance and allocates resources based on an ongoing review of these
integrated operations, which constitute only one operating segment for financial reporting purposes.
Key Financial Measures and Indicators
Revenue
Our revenue is primarily generated from our real estate investment sales business. In addition to real estate
brokerage commissions, we generate revenue from financing fees and from other revenue, which are primarily comprised
of consulting and advisory fees.
Because our business is transaction oriented, we rely on investment sales and financing professionals to continually
develop leads, identify properties to sell and finance, market those properties, and close the sale timely to generate a
consistent flow of revenue. While our sales volume is impacted by seasonality factors, the timing of closings is also
dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting
in the $1 million to $10 million private client market segment. These factors can cause transactions to be accelerated or
delayed beyond our control. Further, commission rates earned are generally inversely related to the value of the property
sold. As a result of our expansion into the middle and larger transaction market segments, we have seen our overall
commission rates fluctuate from period-to-period as a result of changes in the relative mix of the number and volume of
investment sales transactions closed in the middle and larger transaction market segments as compared to the $1 million to
$10 million private client market segment. These factors may result in period-to-period variations in our revenue that differ
from historical patterns.
A small percentage of our transactions include retainer fees and/or breakage fees. Retainer fees are credited against a
success-based fee paid upon the closing of a transaction or a breakage fee. Transactions that are terminated before
completion will sometimes generate breakage fees, which are usually calculated as a set amount or a percentage of the fee
we would have received had the transaction closed.
Real Estate Brokerage Commissions
We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or
investors seeking to buy properties. Revenue from real estate brokerage commissions is typically recognized at the close of
escrow.
Financing Fees
We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients’
existing mortgage debt. We recognize financing fee revenue when the loan closes and we have no remaining significant
obligations for performance in connection with the transaction.
To a lesser extent, we also earn equity advisory services, loan sales, and ancillary fees associated with financing
activities. We no longer hold any mortgage servicing rights, but prior to the third quarter of 2022, recognized mortgage
servicing revenue upon the acquisition of a servicing obligation. We generated mortgage servicing fees through the
provision of collection, remittance, recordkeeping, reporting, and other related mortgage servicing functions, activities, and
services.
Other Revenue
Other revenue includes fees generated from consulting, advisory, and other real estate services performed by our
investment sales professionals, as well as referral fees from other real estate brokers. Revenue from these services is
recognized as the services are performed and completed.
Operating Expenses
Our operating expenses consist of cost of services, selling, general and administrative expenses and depreciation and
amortization. The significant components of our expenses are further described below.
38
Cost of Services
The majority of our cost of services expense is variable commissions paid to our investment sales professionals and
compensation-related costs related to our financing activities. Commission expenses are directly attributable to providing
services to our clients for investment sales and financing services. Most of our investment sales and financing professionals
are independent contractors and are paid commissions; however, because there are some who are initially paid a salary and
certain of our financing professionals are employees, costs of services also include employee-related compensation,
employer taxes, and benefits for those employees. The commission rates we pay to our investment sales and financing
professionals vary based on individual contracts negotiated and are generally higher for the more experienced
professionals. Some of our most senior investment sales and financing professionals also have the ability to earn additional
commissions after meeting certain annual financial thresholds. These additional commissions are recognized as cost of
services in the period in which they are earned. Payment of a portion of these additional commissions are generally
deferred for a period of one to three years, at our election, and paid at the beginning of the second and fourth calendar year.
Cost of services also includes referral fees paid to other real estate brokers where we are the principal service provider.
Cost of services, therefore, can vary based on the commission structure of the independent contractors that closed
transactions in any particular period.
Selling, General and Administrative Expenses
The largest expense component within selling, general and administrative expenses is personnel expenses for our
management team and sales and support staff. In addition, these costs include facilities expenses (excluding depreciation
and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction
costs related to acquisitions, changes in fair value for contingent and deferred consideration, forgiveness of advances and
loans issued to investment sales and financing professionals and other administrative expenses. Also included in selling,
general and administrative are expenses for stock-based compensation to non-employee directors, employees, and
independent contractors (i.e. investment sales and financing professionals) under the Amended and Restated 2013 Omnibus
Equity Incentive Plan (“2013 Plan”) and the 2013 Employee Stock Purchase Plan (“ESPP”).
Depreciation and Amortization Expense
Depreciation expense consists of depreciation recorded on our computer software and hardware and furniture,
fixtures, and equipment. Depreciation is recorded over estimated useful lives ranging from three to seven years for assets.
Amortization expense consists of (i) amortization recorded on our mortgage servicing rights (“MSRs”) using the interest
method over the period that servicing income is expected to be received and (ii) amortization recorded on intangible assets
amortized on a straight-line basis using a useful life between one and seven years.
Other Income (Expense), Net
Other income (expense), net primarily consists of interest income, net gains or losses on our deferred compensation
plan assets, realized gains and losses on our marketable debt securities, available-for-sale, foreign currency gains and
losses, and other non-operating income and expenses.
Interest Expense
Interest expense primarily consists of interest expense associated with the stock appreciation rights (“SARs”)
liability and our credit agreement.
Provision for Income Taxes
We are subject to U.S. and Canadian federal taxes and individual state and local taxes based on the income
generated in the jurisdictions in which we operate. Our effective tax rate fluctuates as a result of the change in the mix of
our activities in the jurisdictions we operate due to differing tax rates in those jurisdictions and the impact of permanent
items, including principally compensation charges, qualified transportation fringe benefits, uncertain tax positions, meals
and entertainment, and tax-exempt deferred compensation plan assets. Our provision for income taxes includes the windfall
tax benefits and shortfall expenses, net, from shares issued in connection with our 2013 Plan and ESPP.
We record deferred taxes, net based on the tax rate expected to be in effect at the time those items are expected to be
recognized for tax purposes.
39
Results of Operations
Following is a discussion of our results of operations for the years ended December 31, 2022 and 2021. The tables
included in the period comparisons below provide summaries of our results of operations. The period-to-period
comparisons of financial results are not necessarily indicative of future results.
Key Operating Metrics
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends
affecting our business, formulate financial projections, and make strategic decisions. We also believe these metrics are
relevant to investors’ and others’ assessment of our financial condition and results of operations. During the years ended
December 31, 2022, 2021, and 2020, we closed more than 12,000, 13,200, and 8,900 investment sales, financing, and other
transactions, respectively, with total sales volume of approximately $86.3 billion, $84.4 billion, and $43.4 billion,
respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as
follows:
Real Estate Brokerage:
Average Number of Investment Sales Professionals
Average Number of Transactions per Investment Sales Professional
1,817
5.01
1,925
5.01
1,920
3.28
Years Ended December 31,
2022
2021
2020
Average Commission per Transaction
Average Commission Rate
Average Transaction Size (in thousands)
Total Number of Transactions
Total Sales Volume (in millions)
Financing (1):
Average Number of Financing Professionals
Average Number of Transactions per Financing Professional
Average Fee per Transaction
Average Fee Rate
Average Transaction Size (in thousands)
Total Number of Transactions
Total Financing Volume (in millions)
$ 128,450
$ 121,319
$ 100,694
1.72 %
1.73 %
1.98 %
$
$
$
$
$
7,473
9,111
68,088
$
$
6,994
9,652
67,507
$
$
5,097
6,288
32,052
Years Ended December 31,
2022
2021
2020
86
24.92
44,546
0.74 %
5,984
2,143
12,823
$
$
$
85
29.11
37,959
0.81 %
4,691
2,474
11,605
$
$
$
86
22.59
33,747
0.85 %
3,948
1,943
7,672
(1)
Operating metrics calculated excluding certain financing fees not directly associated to transactions.
40
Comparison of Years Ended December 31, 2022 and 2021
Below are key operating results for the year ended December 31, 2022 compared to the results for the year ended
December 31, 2021 (dollars in thousands):
Revenue:
Real estate brokerage
commissions
Financing fees
Other revenue
Total revenue
Operating expenses:
Cost of services
Selling, general and
administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Interest expense
Income before provision for income
taxes
Provision for income taxes
Net income
Adjusted EBITDA (1)
Year
Ended
December 31,
2022
Percentage
of
Revenue
Year
Ended
December 31,
2021
Percentage
of
Revenue
Change
Dollar
Percentage
$ 1,170,310
89.9 % $ 1,170,969
90.3 % $
(659)
112,978
18,422
8.7
1.4
109,690
15,781
8.5
1.2
1,301,710
100.0
1,296,440
100.0
3,288
2,641
5,270
(0.1)%
3.0 %
16.7 %
0.4 %
65.4
23.0
1.0
89.4
10.6
0.4
(0.1)
10.9
2.9
840,209
255,154
11,721
1,107,084
189,356
4,527
(580)
193,303
50,833
64.8
19.7
0.9
85.4
14.6
0.3
—
14.9
3.9
850,894
300,009
13,406
1,164,309
137,401
5,336
(708)
142,029
37,804
104,225
165,504
$
$
10,685
1.3 %
44,855
1,685
57,225
17.6 %
14.4 %
5.2 %
(51,955)
(27.4)%
809
(128)
(51,274)
(13,029)
17.9 %
22.1 %
(26.5)%
(25.6)%
(26.8)%
(22.3)%
8.0 % $
142,470
11.0 % $ (38,245)
12.7 % $
213,002
16.4 % $ (47,498)
(1)
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting
principles (“U.S. GAAP”) and should not be considered as an alternative to net income, operating income, or any
other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation
of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.”
Revenue
Our total revenue was $1,301.7 million in 2022 compared to $1,296.4 million in 2021, an increase of $5.3 million,
or 0.4%. Total revenue increased as a result of increases in financing fees and other revenue, as described below.
Real estate brokerage commissions. Revenue from real estate brokerage commissions decreased to $1,170.3 million
in 2022 from $1,171.0 million in 2021, a decrease of $0.7 million, or 0.1%. While total sales volume increased by 0.9%,
the average transaction size increased by 6.8% due to a larger proportion of transactions closed from the Middle
Transaction Market segment. The total number of investment sales transactions decreased 5.6%.
Financing fees. Revenue from financing fees increased to $113.0 million in 2022 from $109.7 million in 2021, an
increase of $3.3 million, or 3.0%. The increase was driven by a 10.5% increase in financing volume, partially offset by a
seven basis points reduction in average commission rates due in part to fees from certain larger loan transactions. Financing
volume increase was driven by a 27.6% increase in the average transaction size that was partially offset by a 13.4%
decrease in the number of financing transactions.
Other revenue. Other revenue increased to $18.4 million in 2022 from $15.8 million in 2021, an increase of $2.6
million, or 16.7%. The increase was primarily driven by increases in consulting and advisory services during 2022,
compared to 2021.
41
Operating expenses
Our total operating expenses were $1,164.3 million in 2022 compared to $1,107.1 million in 2021, an increase of
$57.2 million, or 5.2%. The increase was due to increases in cost of services, which are variable commissions paid to our
investment sales professionals, and compensation-related costs in connection with our financing activities, selling, general
and administrative costs and depreciation and amortization expense, as described below.
Cost of services. Cost of services increased to $850.9 million in 2022 from $840.2 million in 2021, an increase of
$10.7 million, or 1.3%. Cost of services as a percent of total revenue increased to 65.4% for 2022 compared to 64.8% for
2021. These increases were primarily due to a higher proportion of transactions closed by our more senior investment sales
and financing professionals, who earned additional commissions after meeting certain annual financial thresholds earlier in
the year.
Selling, general and administrative expense. Selling, general and administrative expense in 2022 increased $44.9
million, to $300.0 million from $255.2 million in 2021. The increase was primarily due to increases in (i) compensation
related costs, primarily driven by increases in staff salaries and stock-based compensation; (ii) business development,
marketing, and other support related to the long-term retention of our sales and financing professionals; and (iii) net change
in value of contingent and deferred consideration in connection with our acquisition activities. These increases were
partially offset by decreases in (i) bonus accruals and (ii) legal costs.
Depreciation and amortization expense. Depreciation and amortization expense increased to $13.4 million in 2022
from $11.7 million in 2021, an increase of $1.7 million, or 14.4%, principally related to additional amortization of
intangible assets related to recent acquisitions and additional amortization of mortgage servicing rights due to the
cancellation notices received on certain servicing contracts.
Other income, net
Other income, net increased to $5.3 million in 2022 from $4.5 million in 2021. The increase was primarily driven by
a $5.6 million increase in interest income on our investments in marketable debt securities at higher interest rates. This
increase was partially offset by an unfavorable change in the carrying value of the assets held in the rabbi trust for $3.2
million and an unfavorable change in foreign currency losses of $1.1 million.
Interest expense
Interest expense increased to $0.7 million in 2022 from $0.6 million in 2021. The increase was primarily due to an
increase in interest expense on the SARs liability due to higher interest rates partially offset by lower average principal
outstanding.
Provision for income taxes
The provision for income taxes was $37.8 million for 2022 compared to $50.8 million in 2021, a decrease of $13.0
million, or (25.6)%. The effective tax rate for 2022 was 26.6%, compared with 26.3% in 2021. The increase in the effective
tax rate was primarily due to the change in the relationship of permanent nondeductible items and other adjustments
relative to income before provision for income taxes, partially offset by an increase in windfall tax benefits, net related to
the settlement of stock-based awards.
Comparison of Years Ended December 31, 2021 and 2020
A discussion regarding our results of operations for the year ended December 31, 2021 compared to the results for
the year ended December 31, 2020 can be found under Item 7 – “Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, filed with the SEC on March 1, 2022, which is available on the SEC’s website at www.sec.gov.
Non-GAAP Financial Measure
In this Annual Report on Form 10-K, we include a non-GAAP financial measure, adjusted earnings before interest
income/expense, taxes, depreciation and amortization, stock-based compensation and other non-cash items, or Adjusted
EBITDA. We define Adjusted EBITDA as net 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
42
expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-
cash MSR activity. We use Adjusted EBITDA in our business operations to evaluate the performance of our business,
develop budgets, and measure our performance against those budgets, among other things. We also believe that analysts
and investors use Adjusted EBITDA as a supplemental measure to evaluate our overall operating performance. However,
Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation, or as a
substitute for analysis of our results as reported under U.S. GAAP. We find Adjusted EBITDA to be a useful management
metric 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, we do not rely solely on Adjusted EBITDA as a performance
measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our financial performance
under U.S. GAAP and should not be considered as an alternative to net income, operating income, or any other measures
calculated in accordance with U.S. GAAP. Adjusted EBITDA is not calculated in the same manner by all companies and
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):
Net income
Adjustments:
Interest income and other (1)
Interest expense
Provision for income taxes
Depreciation and amortization
Stock-based compensation
Non-cash MSR activity (2)
Adjusted EBITDA(3)
Years Ended December 31,
2022
104,225 $
2021
142,470 $
2020
42,838
$
(7,951)
708
37,804
13,406
17,312
—
(2,496)
580
50,833
11,721
10,361
(467)
(5,048)
900
16,526
10,899
9,905
(321)
$
165,504 $
213,002 $
75,699
(1)
(2)
(3)
Other includes net realized gains (losses) on marketable debt securities, available-for-sale.
Non-cash MSR activity includes the assumption of servicing obligations.
The decrease in Adjusted EBITDA for the year ended December 31, 2022 compared to the same period in 2021 is
primarily due to a higher proportion of selling, general and administrative expenses compared to total revenue.
Liquidity and Capital Resources
Our primary sources of liquidity are cash, cash equivalents, and restricted cash cash flows from operations,
marketable debt securities, available-for-sale, and, if necessary, borrowings under our credit agreement. In order to enhance
yield to us, we have invested a portion of our cash in money market funds and fixed and variable income debt securities in
accordance with our investment policy approved by the Board of Directors. Certain of our investments in money market
funds may not maintain a stable net asset value and may impose fees on redemptions and/or gating fees. To date, the
Company has not experienced any restrictions or gating fees on its ability to redeem funds from money market funds.
Although we have historically funded our operations through operating cash flows, there can be no assurance that we can
continue to meet our cash requirements entirely through our operations, cash, cash equivalents, and restricted cash,
proceeds from the sale of marketable debt securities, available-for-sale, or availability under our credit agreement.
43
Cash Flows
Our total cash, cash equivalents, and restricted cash balance decreased by $146.3 million to $235.9 million at
December 31, 2022, compared to $382.1 million at December 31, 2021. The following table sets forth our summary cash
flows for the years ended December 31, 2022, 2021, and 2020 (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash used in financing activities
Effect of currency exchange rate changes on cash, cash equivalents, and
restricted cash
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Years Ended December 31,
2022
$
13,629 $
(53,975)
(105,555)
(366)
(146,267)
382,140
2021
255,903 $
(108,356)
(5,919)
(2,640)
138,988
243,152
Cash, cash equivalents, and restricted cash at end of year
$
235,873 $
382,140 $
2020
38,088
(17,228)
(10,330)
(48)
10,482
232,670
243,152
Operating Activities
2022 Compared to 2021. Cash flows provided by operating activities were $13.6 million in 2022 compared to
$255.9 million in 2021. The $242.3 million decrease in cash flows from operating activities during 2022 compared to 2021
was primarily due to increased operating expenses as discussed above, an increase in advances and loans to our investment
sales and financing professionals, a higher amount of bonuses and deferred compensation and commissions paid in 2022
related to outperformance in 2021, and an increase in estimated income tax payments.
Investing Activities
2022 Compared to 2021. Cash flows used in investing activities were $54.0 million in 2022 compared to $108.4
million in 2021. The $54.4 million decrease in cash flows used in investing activities for 2022 compared to 2021 was
primarily due to a net decrease of $72.2 million in net cash used to purchase securities in 2022 compared to the same
period in 2021, partially offset by $12.5 million paid in 2022 for the acquisition of a business that did not occur in 2021,
and an increase of $4.8 million in purchases of property and equipment in 2022 compared to 2021.
Financing Activities
2022 Compared to 2021. Cash flows used in financing activities were $105.6 million in 2022 compared to $5.9
million in 2021. The $99.7 million additional cash flow used in financing activities for 2022 was primarily due to the
payment of $60.4 million of dividends and $29.0 million in stock repurchases in 2022, which did not occur in 2021 and an
increase of $6.4 million of taxes paid related to net share settlement of stock-based awards due to settlement of Deferred
Stock Units. See Note 11 – “Stock-Based Compensation Plans” of our Notes to Consolidated Financial Statements for
additional information.
Liquidity
We believe that our existing balances of cash, cash equivalents, and restricted cash, cash flows expected to be
generated from our operations, proceeds from the sale of marketable debt securities, available-for-sale, and borrowings
available under the Credit Agreement (defined below) will be sufficient to satisfy our operating requirements for at least
the next 12 months. If we need to raise additional capital through public or private debt or equity financings, strategic
relationships, or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at
all. Our failure to raise sufficient capital when needed could prevent us from funding acquisitions or otherwise financing
our growth or operations. In addition, our SARs agreements have provisions which could accelerate repayment of
outstanding principal and accrued interest and impact our liquidity. As of December 31, 2022, cash, cash equivalents, and
restricted cash and marketable debt securities, available-for-sale, aggregated $557.9 million, and we had $59.5 million of
borrowing capacity under our credit agreement.
44
Credit Agreement
We have a Credit Agreement with Wells Fargo Bank, National Association for a $60.0 million principal amount
senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025
(the “Credit Agreement”). See Note 15 – “Commitments and Contingencies” of our Notes to Consolidated Financial
Statements for additional information on the Credit Agreement.
Off Balance Sheet Arrangements
The Company, in connection with the Strategic Alliance with MTRCC,, has agreed to provide loan opportunities
that may be funded through MTRCC’s agreement with Fannie Mae, which requires MTRCC to guarantee a portion of each
funded loan. On a loan-by-loan basis, the Company, at its option, can agree to assume a portion of MTRCC guarantee
obligation of loan opportunities presented to and closed by MTRCC. As of December 31, 2022, the Company has agreed to
a maximum aggregate guarantee obligation of $55.7 million relating to loans with an unpaid balance of $334.0 million. The
maximum guarantee obligation is not representative of the actual loss we would incur. The Company would be liable for
this amount only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral
underlying these loans was determined to be without value at the time of settlement. The Company records a loan-loss
obligation and is required to provide cash collateral to MTRCC for this obligation.
Material Cash Requirements
The following table summarizes current and long-term material cash requirements as of December 31, 2022, which
we expect to fund primarily with operating cash flows (in thousands):
Operating lease liabilities, including
imputed interest (1)
SARs liability (principal and interest) (2)
Deferred commissions payable (3)
Deferred compensation liability (4)
Contingent consideration (5)
Deferred consideration (5)
Other (6)
Total
Less than
1 Year
1-3
Years
3-5
Years
More
Than 5
Years
Other (7)
$
90,734 $
19,663 $
37,011 $
22,086 $
11,974 $
21,383
76,180
6,661
7,067
5,119
2,323
31,024
493
1,726
3,633
16,115
11,134
5,175
45,156
294
4,811
1,486
2,130
3,704
10,181
—
134
530
—
1,430
—
1,235
—
—
415
$ 223,259 $
69,996 $
96,063 $
27,884 $
23,805 $
—
—
—
4,505
—
—
1,006
5,511
(1)
(2)
(3)
(4)
(5)
(6)
(7)
See Note 4 – “Operating Leases” of our Notes to the Consolidated Financial Statements.
Forecasted principal payments are based on each participant’s estimated retirement age and current contractual
interest rate of 3.630% as of January 1, 2022 and reflect required payments that resulted from the retirement of
certain executives. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial
Statements.
Includes short-term and long-term deferred commissions payable. See Note 7 – “Selected Balance Sheet Data” of
our Notes to the Consolidated Financial Statements.
Represents current estimated payouts for participants currently receiving payments based on their elections at the
time of deferral. We hold assets in a rabbi trust of $9.6 million to settle outstanding amounts when they become due.
Amounts assume no increase or decrease in the liability due to future returns or losses. See Note 7 – “Selected
Balance Sheet Data” of our Notes to the Consolidated Financial Statements.
Relates to contingent and deferred consideration in connection with our business acquisitions. See Note 6 –
“Acquisitions, Goodwill and Other Intangible Assets” and Note 9 – “Fair Value Measurements” of our Notes to the
Consolidated Financial Statements.
Relates to amounts that may be advanced to sales and financing professionals and uncertain tax positions. See Note
12 – “Income Taxes” and Note 15 – “Commitments and Contingencies” of our Notes to the Consolidated Financial
Statements.
Amounts in Other represent amounts where payments are dependent on future events, which may occur at any time
from less than 1 year to more than 5 years and relates to our deferred compensation liability and uncertain tax
positions. Payments for deferred compensation liability are based on the participants’ elections at the time of deferral
45
and may not begin before separation from service. The net liability for uncertain tax positions may be payable by us
in the future. The ultimate resolution depends on many factors and assumptions; accordingly, we are not able to
reasonably estimate the timing of such payments, if any.
Other than operating expenses, including those accrued and payable as December 31, 2022, cash requirements for
2023 are expected to consist primarily of capital expenditures for the future acquisitions, if any, payment of dividends,
payments for stock repurchases, and advances to our investment sales and financing professionals.
Inflation
Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and
demand, which may be affected by uncertain or changing economic and market conditions, including inflation/deflation
arising in connection with and in response to various macroeconomic factors and impact of rising interest rates on the
broader economy.
The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest annual inflation rate since
November 1981, but decreased to 6.5% in December 2022. As a result, during 2022, the Federal Reserve increased the
federal funds rate by 425 basis points and indicated its intention to continue to increase interest rates in an effort to combat
inflation, which had an adverse impact on commercial real estate transactions in the second half of 2022. Inflation has
increased the wages paid to our employees and independent contractors. Furthermore, our clients are also affected by
inflation and rising interest rates. A significant and continued increase in interest rates and inflation would be expected to
have a negative impact on client demand for commercial real estate.
Critical Accounting Policies; Use of Estimates
We prepare our financial statements in accordance with U.S. GAAP. In applying many of these accounting
principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenue,
and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and
other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments,
however, are often subjective and our actual results may change based on changing circumstances or changes in our
analyses. If actual amounts are ultimately different from our estimates, the revisions are included in our results of
operations for the period in which the actual amounts become known.
We believe that the critical accounting policies discussed below involve a greater degree of judgment or complexity
than our other accounting policies. Accordingly, these are the policies we believe are the most critical to aid in fully
understanding and evaluating our consolidated financial condition and results of operations. See the notes to our
consolidated financial statements for a summary of our significant accounting policies.
Income Taxes
We account for income taxes under the asset and liability method. We recognize deferred tax assets and liabilities
for the future tax consequences attributable to (i) differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis, and (ii) operating losses and tax credit carryforwards. We measure
existing deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which
we expect to have temporary differences realized or settled. We recognize in the provision for income taxes, the effect on
deferred tax assets and liabilities of a change in tax rates in the period that includes the enactment date. We periodically
evaluate deferred tax assets to assess whether it is likely that the deferred tax assets will be realized. In determining
whether a valuation allowance is required, we consider the timing of deferred tax reversals, current year taxable income,
and historical performance. Valuation allowances are provided against deferred tax assets when it is more-likely-than-not
that some portion or all of the deferred tax asset will not be realized. Our valuation allowance is related principally to losses
incurred in our Canadian operations. Future results of operations of the Canadian business will impact valuation allowances
in the future.
Due to the nature of our business, which includes activity in the U.S. and Canada, incorporating numerous states and
provinces as well as local jurisdictions, our tax position can be complex. As such, our effective tax rate is subject to
changes as a result of fluctuations in the mix of our activity in the various jurisdictions in which we operate including
changes in tax rates, state apportionment, tax related interest and penalties, valuation allowances and other permanent
items, including net windfalls and shortfalls related to stock-based compensation. Calculating some of the amounts
46
involves a high degree of judgment. Our state taxes, net of federal benefit, has ranged from 4.3% to 5.0% over the past 3
years.
We evaluate our tax positions quarterly. The threshold for recognizing the benefits of tax return positions in the
financial statements is “more likely than not” to be sustained by the taxing authority and requires measurement of a tax
position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be realized.
We assess our inventory of tax positions with respect to all applicable income tax issues for all open tax years (in each
respective jurisdiction) and determine whether uncertain tax positions are required to be recognized in our consolidated
financial statements.
The above factors create volatility in our effective tax rate from quarter to quarter and have caused our effective tax
rates to range from 26.3% to 27.8% over the past three years.
We recognize interest and penalties incurred as income tax expense. See Note 12 – “Income Taxes” of our Notes to
the Consolidated Financial Statements for additional information.
Leases
Our leases consist of purpose built-out office space, which reverts to the lessor upon termination of the lease and
operating leases for autos. We determine if an arrangement is a lease at inception. Right-of-use assets (“ROU assets”)
represent our right to use an underlying asset for the lease term and lease liabilities represent our contractual obligation to
make lease payments under the lease. Operating leases are included in operating lease ROU assets, non-current, and
operating lease liabilities current and non-current captions in the consolidated balance sheets.
Operating lease ROU assets and liabilities are recognized on the commencement date based on the present value of
lease payments over the lease term. Lease agreements may contain periods of free rent or reduced rent, predetermined fixed
increases in the minimum rent and renewal or termination options, all of which add complexity and impact the
determination of the lease term and lease payments to be used in calculating the lease liability. Certain facility leases
provide for rental escalations related to increases in the lessors’ direct operating expenses. We use the implicit rate in the
lease when determinable. As most of our leases do not have a determinable implicit rate, determining the rate to be used in
our calculations is judgmental. We use an estimated incremental borrowing rate based on borrowing options under our
credit agreement and apply a spread over treasury rates for the indicated term of the lease based on the information
available on the commencement date of the lease. As a result, the incremental borrowing rate has and will continue to be
impacted by market interest rates. The weighted average incremental borrowing rate was 3.9% in 2022 and 2.9% in 2021.
Any payments for completed improvements, determined to be owed by the lessor, net of incentives received, are recorded
as an increase to the ROU asset and considered in the determination of the lease cost.
We have lease agreements with lease and non-lease components, which are accounted for as a single lease
component. Lease cost is recognized on a straight-line basis over the lease term. Variable lease payments consist of
common area costs, insurance, taxes, utilities, parking, and other lease related costs, which are determined principally
based on billings from landlords.
Investments in Marketable Debt Securities, Available-for-Sale
We maintain a portfolio of investments in a variety of fixed and variable rate debt securities, including U.S.
treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities, and other. We consider our
investments in marketable debt securities to be available-for-sale, and accordingly, are recorded at their fair values. We
determine the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along
with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity
date, including consideration of variable maturities and contractual call provisions, are included in other income (expense),
net in the consolidated statements of operations. See Note 5 – “Investments in Marketable Debt Securities, Available-for-
Sale” of our Notes to the Consolidated Financial Statements for additional information. We typically invest in highly rated
debt securities, and our investment policy generally limits the amount of credit exposure to any one issuer. The policy
requires substantially all investments to be investment grade, with the primary objective of minimizing the potential risk of
principal loss and matching long-term liabilities.
Unrealized losses on our marketable securities, available-for-sale, fluctuate based on changes in market interest rates
due the fixed interest rates of most of the securities. Unrealized losses aggregated $5,508,000 and $511,000 as of
47
December 31, 2022 and 2021, respectively. We review our investment portfolio quarterly for all securities in an unrealized
loss position to determine if an impairment charge or credit reserve is required. We exclude accrued interest from both the
fair value and the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and
measuring an impairment. An investment is impaired if the fair value is less than its amortized cost basis. Impairment
relating to credit losses is recorded through a reduction in the amortized cost of the security or an allowance for credit
losses and credit loss expense (included in selling, general and administrative expense), limited by the amount that the fair
value is less than the amortized cost basis. Impairment that has not been recorded as a credit loss is recorded through other
comprehensive income (loss), net of applicable taxes. We made an accounting policy election to not measure an allowance
for credit losses for accrued interest receivable. We evaluate write-off of accrued interest receivable by the major security-
type level at the time credit loss exists for the underlying security.
Determining whether a credit loss exists requires a high degree of judgment, and we consider both qualitative and
quantitative factors in making our determination. We evaluate our intent to sell, or whether we will more likely than not be
required to sell, the security before recovery of its amortized cost basis. For all securities in an unrealized loss position, we
evaluate, among other items, the extent and length of time the fair market value of a security is less than its amortized cost,
time to maturity, duration, seniority, the financial condition of the issuer including credit ratings, any changes thereto and
relative default rates and loss severity, leverage ratios, availability of liquidity to make principle and interest payments,
performance indicators of the underlying assets, analyst reports and recommendations, and changes in base and market
interest rates. If the qualitative and quantitative analysis is sufficient to conclude that an impairment related to credit losses
does not exist, we typically do not perform further quantitative analysis to estimate the present value of cash flows
expected to be collected from the debt security. Estimates of expected future cash flows are our best estimate based on past
events, current conditions, and reasonable and supportable economic forecasts. To date, the Company has not recorded any
credit losses or impairments on its portfolio of marketable securities, available for sale.
Contingent and Deferred Consideration
In connection with certain business acquisitions, the Company may enter into agreements to pay additional cash or
other consideration based on the achievement of certain performance measures and/or service and time requirements.
Contingent and deferred consideration in connection with the acquisition of a business is measured at fair value on the
acquisition date and remeasured at fair value each reporting period thereafter until the consideration is settled, with changes
in fair value recorded in selling, general and administrative expense in the consolidated statements of operations.
In its determination of fair value for contingent and deferred consideration, the Company uses judgment in
determining the probability of achieving contractual EBITDA and other performance targets and the time frame in which
the settlements will occur. Further, judgment is used in determining the appropriate current and future interest rates to
apply in each situation. The Company estimated the probability of achievement of contractual EBITDA and other
performance targets was between 0% to 100.0% based on each acquisition’s historical and estimated future performance
and risk adjusted discount rates of between 6.0% to 7.0%, which resulted in a recorded fair value for the contingent
consideration of $7.1 million and $9.3 million as of December 31, 2022, and 2021, respectively. The Company estimated
the fair value of the deferred consideration using a discounted cash flow estimate using market rates, with the only
remaining condition on such payments being the passage of time which resulted in a recorded fair value of $5.1 million and
$9.8 million as of December 31, 2022, and 2021, respectively. The maximum undiscounted future settlements of
contingent and deferred consideration was $21.3 million at December 31, 2022, and the Company is uncertain as to the
extent of the volatility in the judgments and unobservable inputs will have on the ultimate settlement of these amounts in
the foreseeable future.
Recent Accounting Pronouncements
For information regarding recent accounting pronouncements, see Note 2 – “Accounting Policies and Recent
Accounting Pronouncements” of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual
Report on Form 10-K. We do not believe any of the other accounting pronouncements listed in that note will have a
significant impact on our business.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including U.S.
Treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities, and other. As of December 31,
2022, the fair value of investments in marketable debt securities, available-for-sale was $322.0 million. The primary
48
objective of our investment activity is to maintain the safety of principal, and to provide for future liquidity requirements
while maximizing yields without significantly increasing risk. While some investments may be securities of companies in
foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for
trading or speculative purposes. While our intent is not to sell these investment securities prior to their stated maturities, we
may choose to sell any of the securities for strategic reasons including, but not limited to, anticipated capital requirements,
anticipation of credit deterioration, duration management and because a security no longer meets the criteria of our
investment policy. We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in
high quality investments. The weighted average rating (exclusive of cash, cash equivalents, and restricted cash) was AA+
as of December 31, 2022. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.
Currently, our portfolio of investments predominantly consists of fixed interest rate debt securities; however, a
portion of our investment portfolio may consist of variable interest rate debt securities. Our investments in fixed interest
rate debt securities are subject to various market risks. Changes in prevailing interest rates may adversely or positively
impact their fair market value should interest rates generally rise or fall. Accordingly, we also may have interest rate risk
with variable interest rate debt securities as the income produced may decrease if interest rates fall. Contraction in market
liquidity may adversely affect the value of portions of our portfolio and affect our ability to sell securities in the time
frames required and at acceptable prices. Uncertainty in future market conditions and interest rates may raise market
participant’s expectations of returns, thus impacting the value of securities in our portfolio as well. The following table sets
forth the impact on the fair value of our investments as of December 31, 2022 from changes in interest rates based on the
weighted average duration of the debt securities in our portfolio (in thousands):
Change in Interest Rates
2% Decrease
1% Decrease
1% Increase
2% Increase
Approximate Change in
Fair Value of Investments
Increase (Decrease)
$
$
$
$
5,094
2,547
(2,546)
(5,091)
Due to the nature of our business and the manner in which we conduct our operations, we believe we do not face any
material interest rate risk with respect to other assets and liabilities, equity price risk, or other market risks. The functional
currency of our Canadian operations is the Canadian dollar. We are exposed to foreign currency exchange rate risk for the
settlement of transactions of the Canadian operations as well as unrealized translation adjustments. To date, realized
foreign currency exchange rate gains and losses have not been material.
Item 8. Financial Statements and Supplementary Data
See pages beginning at F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Exchange Act Rules 13a-15(f), including maintenance of (i) records that in reasonable detail
accurately and fairly reflect the transactions and dispositions of our assets, and (ii) policies and procedures that provide
reasonable assurance that (a) transactions are recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States of America, (b) our receipts and
expenditures are being made only in accordance with authorizations of management and our Board of Directors, and (c) we
will prevent or timely detect unauthorized acquisition, use, or disposition of our assets that could have a material effect on
the financial statements.
Our management, with the supervision and participation of our chief executive officer (“CEO”) and chief financial
officer (“CFO”), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e)
49
and 15d- 15(e) under the Exchange Act, as of the end of the period covered by this Annual Report on Form 10-K, based on
the criteria established under the Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”) (2013 framework). Based on such evaluation, our management has
concluded that as of December 31, 2022, our disclosure controls and procedures are designed at a reasonable assurance
level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or
submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the
rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our
CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Our system of internal control is designed to provide reasonable assurance regarding the reliability of financial
reporting and preparation of our financial statements for external reporting purposes in accordance with United States
generally accepted accounting principles. Our management, including our CEO and CFO, assessed the effectiveness of our
internal control over financial reporting as of December 31, 2022. In conducting its assessment, management used the
criteria issued by COSO. Based on this assessment, management concluded that, as of December 31, 2022, our internal
control over financial reporting was effective based on those criteria. The effectiveness of internal control over financial
reporting as of December 31, 2022 has been audited by Ernst & Young LLP, an independent registered public accounting
firm, as stated in their report which is included herein.
Management, including our CEO and CFO, does not expect that our disclosure controls and procedures, or our
internal control over financial reporting will prevent all error and fraud. A control system, no matter how well conceived
and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls
must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Control over Financial Reporting
There have not been any changes in our internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended December 31, 2022 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced
any significant impact to our internal controls over financial reporting despite the fact that many of our employees and
independent contractors are working in a hybrid environment. The design of our processes and controls allow for remote
execution with accessibility to secure data in support of the hybrid environment. We are continually monitoring and
assessing the situation to minimize the impact, if any, on the design and operating effectiveness on our internal controls.
Inherent Limitations on Effectiveness of Controls
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired
control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource
constraints and that management is required to apply judgment in evaluating the benefits of possible controls and
procedures relative to their costs. Internal control over financial reporting cannot provide absolute assurance of achieving
financial reporting objectives because of the inherent limitations of any system of internal control. Internal control over
financial reporting is a process that involves human diligence and compliance and is subject to lapses of judgment and
breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion
or improper overriding of controls. As a result of such limitations, there is risk that material misstatements may not be
prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are
known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce,
though not eliminate, this risk.
Item 9B. Other Information
None.
50
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
51
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers
The names and ages of our executive officers and directors as of February 27, 2023 are as follows:
Name
Hessam Nadji
Steven F. DeGennaro
John David Parker
Richard Matricaria
Gregory A. LaBerge
Hessam Nadji
Age
57
59
42
44
52
Position(s)
President, Chief Executive Officer and Director
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Operating Officer, Eastern Division
Executive Vice President and Chief Operating Officer, Western Division
Senior Vice President, Chief Administrative Officer
Mr. Nadji has served as President and Chief Executive Officer and as a director of the Company since March 2016.
He previously served as Senior Executive Vice President and Chief Strategy Officer. He joined the Company as Vice
President of Research in 1996 and held various other senior management roles through the years, including Chief
Marketing Officer and head of the Company’s specialty brokerage divisions. He played a leading role in the Company’s
initial public offering in 2013. Mr. Nadji received a B.S. in information management and computer science from City
University in Seattle and has over 35 years of experience working in the real estate industry.
Steven F. DeGennaro
Mr. DeGennaro has served as Executive Vice President and Chief Financial Officer since August 2020. Prior to
joining the Company, Mr. DeGennaro held the position of Chief Financial Officer at InTouch Health, a venture-backed
telehealth company, from March 2018 to July 2020. Prior to that he served as Chief Financial Officer at Xirrus, Inc., a
manufacturer of wireless networking products, from January 2004 to November 2017. He also served as Chief Financial
Officer at Calix Networks, Inc. and Xircom, Inc. Mr. DeGennaro began his career at KPMG. Mr. DeGennaro holds a
B.B.A. in Accounting from the University of San Diego.
John David Parker
Mr. Parker has served as Executive Vice President and Chief Operating Officer, Eastern Division since June 2021.
Mr. Parker joined the firm in 2004 as a multifamily agent in the Manhattan office and transitioned to management in 2006.
In 2007, Mr. Parker opened the Company's Brooklyn office and took over responsibility for the New York regional offices
soon afterward. Mr. Parker was appointed Division Manager for the Northeast in 2016 and has been instrumental in driving
the Company's expansion in Canada. Mr. Parker holds a bachelor’s degree in operations and information systems
management from Pennsylvania State University.
Richard Matricaria
Mr. Matricaria has served as Executive Vice President and Chief Operating Officer, Western Division since June
2021. Mr. Matricaria joined the Company in 2000 as a retail broker for several years from 2002 to 2010 before moving to
management in 2010. From 2010 to 2016, Mr. Matricaria opened offices in Orlando and Tampa, and in 2016, Mr.
Matricaria moved to Chicago to oversee the Midwest Division. Mr. Matricaria relocated to the Company's headquarters in
Calabasas in 2019 as part of his expanded responsibilities. Mr. Matricaria received a B.B.A. in management from the
University of Alabama and earned an M.B.A. from St. Thomas University.
Gregory A. LaBerge
Mr. LaBerge has served as Senior Vice President and Chief Administrative Officer since 2015. Mr. LaBerge joined
the Company in 2005 as an investment broker, became a regional manager in 2008, and was named National Director of
our National Hospitality Group in 2012. Prior to that, he worked for 10 years as a management consultant, five years with
Ernst & Young, and for Diamond Technology Partners (now part of PricewaterhouseCoopers). His expertise was in
52
working with Fortune 500 companies on strategic and operational initiatives. Mr. LaBerge received his B.A. degree in
economics from Northwestern University and his M.B.A. from the Kelley School of Business at Indiana University.
Other Proxy Information
Certain information required by this Item regarding our Audit Committee is incorporated herein by reference to
information appearing in our definitive Proxy Statement for our 2023 Annual Meeting of Stockholders (“Proxy
Statement”), which information will appear under the caption entitled “Corporate Governance-Board Committees and
Charters.”
To comply with Section 16(a) of the Exchange Act, we will provide disclosure of delinquent Section 16(a) reports, if
any, in our Proxy Statement under the caption entitled “Other Matters—Delinquent Section 16(a) Reports” in the Proxy
Statement, and such disclosure, if any, is incorporated herein by reference.
Ethical Business Practices
We strive to conduct our business with integrity and the highest standards of ethics and governance that support our
values. We do so by promoting fair labor practices, upholding human rights, and complying with legal requirements,
including those that address bribery and corruption. We also implement policies, practices, and trainings that convey our
expectations and values and meet stakeholder needs.
As part of this effort, we adopted a Code of Ethics. The Code of Ethics does not attempt to identify every possible
category of ethical and legal behavior, but instead sets forth the Company’s clear expectations for ethical and honest
behavior. The Company is committed to legal compliance, fair dealing, and addressing internal and external ethical
concerns, which it does in part through its Ethics Hotline, which allows for anonymous reporting and direct communication
with the Company’s compliance officer. The Company’s expectations for ethics are further embedded into the Company’s
practices through cross-discipline education and trainings, which are provided at the individual, office, and Company-wide
levels.
The Code of Ethics can be found at https://ir.marcusmillichap.com/corporate-governance/governance-documents
and clicking on “Code of Ethics.”
We intend to satisfy the disclosure requirements under Item 5.05(c) of Form 8-K regarding an amendment to, or
waiver from, a provision of the Code of Ethics that applies to our principal executive officer, principal financial officer,
principal accounting officer or controller or persons performing similar functions by posting such information on our
website, at the address and location specified above.
Item 11. Executive Compensation
The information required by this Item is incorporated herein by reference to information appearing in our Proxy
Statement, which information will appear under the caption entitled “Compensation Discussion and Analysis” and
“Executive Compensation” in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this Item is incorporated herein by reference to information appearing in our Proxy
Statement, which information will appear under the captions entitled “Principal Stockholders” in the Proxy statement.
53
Equity Compensation Plan Information
The following table summarizes information about our equity compensation plans as of December 31, 2022. All
outstanding awards relate to our common stock.
Number of
Securities
Remaining
Available
for Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column
(a)) (3) (4)
(c)
Number of
Securities
to be Issued
Upon
Exercise of
Outstanding
Options,
Warrants and
Rights(1)
(a)
Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights (2)
(b)
1,729,967 $
—
1,729,967 $
—
—
—
3,943,642
—
3,943,642
Plan Category
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
(1)
(2)
(3)
(4)
Consists of restricted stock units (“RSUs”) granted under our Amended and Restated 2013 Omnibus Equity
Incentive Plan (“2013 Plan”). Excludes restricted stock awards granted under the 2013 Plan, purchase rights granted
under our 2013 Employee Stock Purchase Plan (“ESPP”).
Outstanding RSUs have no exercise price.
Includes 3,806,730 shares available for future issuance under the 2013 Plan. Includes 136,912 shares available for
future issuance under the ESPP, including shares subject to purchase during the current offering period, which
commenced on November 15, 2022 (the exact number of which will not be known until the purchase date on May
15, 2023). Subject to the number of shares remaining in the share reserve, the maximum number of shares
purchasable by any participant on any one purchase date for any purchase period, including the current purchase
period, may not exceed 1,250 shares.
Pursuant to the terms of the ESPP, on the first day of each fiscal year, beginning with the 2015 fiscal year, the
number of shares authorized for issuance under the ESPP is automatically increased by the lesser of: (i) 366,667
shares of our common stock; (ii) 1% of the outstanding shares of our common stock as of the last day of the
immediately preceding fiscal year; or (iii) such other amount as the Board may determine. Pursuant to the provisions
of the ESPP, the Board has determined to not provide for any annual increases to date.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is incorporated herein by reference to information appearing in our Proxy
Statement, which information will appear under the captions entitled “Corporate Governance—Director Independence” and
“Certain Relationships and Related Party Transactions” in the Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this Item is incorporated herein by reference to information appearing in our definitive
Proxy Statement, which information will appear under the caption entitled “Proposal 2: Ratification of Appointment of
Independent Registered Public Accounting Firm for 2023” in the Proxy Statement.
54
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a)
The following documents are filed as part of this Report:
(1)
Consolidated Financial Statements
The consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements
are attached to this Form 10-K beginning on page F-1.
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
(2)
Financial Statement Schedules
The financial statement schedules have been omitted because they are not applicable, or the information
required to be set forth therein is included in the consolidated financial statements or notes thereto.
(b)
Exhibits
The following exhibits are included herein or incorporated herein by reference:
Number
3.1
3.2
4.1
4.2
10.1
10.2†
Description
Amended and Restated Certificate of Incorporation of Marcus & Millichap, Inc., (incorporated by reference to
Exhibit 3.1 to the registrant’s quarterly report on Form 10-Q (No. 001-36155) for the quarter ended September
30, 2013 filed on November 22, 2013).
Amended and Restated Bylaws of Marcus & Millichap, Inc., (incorporated by reference to Exhibit 3.2 to the
registrant’s quarterly report on Form 10-Q (No. 001-36155) for the quarter ended September 30, 2013 filed on
November 22, 2013).
Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the registrant’s registration statement on
Form S-1 (No. 333-191316) filed on September 23, 2013).
Description of the registrant’s securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 (incorporated by reference to Exhibit 4.2 to the registrant’s annual report on Form 10-K (No. 001-36155)
for the year ended December 31, 2019 filed on March 2, 2020).
Transition Services Agreement by and between Marcus & Millichap, Inc. and Marcus & Millichap Company
dated October 31, 2013 (incorporated by reference to Exhibit 10.3 to the registrant’s quarterly report on Form
10-Q (No. 001-36155) for the quarter ended September 30, 2013 filed on November 22, 2013).
Form of Indemnification Agreement by and between Marcus & Millichap, Inc. and each of its Officers and
Directors (incorporated by reference to Exhibit 10.7 to the registrant’s registration statement on Form S-1 (No.
333-191316) filed on September 23, 2013).
10.3† Amended and Restated 2013 Omnibus Equity Incentive Plan, as amended (incorporated by reference to Exhibit
10.6 to the registrant’s annual report on Form 10-K (No. 001-36155) for the year ended December 31, 2017 filed
on March 16, 2018).
10.4†
Form of Stock Option Award Agreement under 2013 Omnibus Equity Incentive Plan (incorporated by reference
to Exhibit 10.10 to the registrant’s registration statement on Form S-1 (No. 333-191316) filed on September 23,
2013).
55
Number
10.5†
10.6†
10.7†
Description
Form of Restricted Stock Unit Award Agreement under 2013 Omnibus Equity Incentive Plan (incorporated by
reference to Exhibit 10.11 to the registrant’s registration statement on Form S-1 (No. 333-191316) filed on
September 23, 2013).
Form of Restricted Stock Award Agreement under 2013 Omnibus Equity Incentive Plan (incorporated by
reference to Exhibit 10.12 to the registrant’s registration statement on Form S-1/A (No. 333-191316) filed on
October 21, 2013).
Form of Amendment, Restatement and Freezing of Stock Appreciation Rights Agreement (Section 409A
grandfathered) (incorporated by reference to Exhibit 10.14 to the registrant’s registration statement on Form S-1
(No. 333-191316) filed on September 23, 2013).
10.8†
2013 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.16 to the registrant’s registration
statement on Form S-1/A (No. 333-191316) filed on October 28, 2013).
10.9† Executive Short-Term Incentive Plan, dated March 13, 2014 (incorporated by reference to Exhibit 99.1 to the
registrant’s current report on Form 8-K (No. 001-36155) filed on March 17, 2014).
10.10† Employment Agreement between the Company and Hessam Nadji effective as of March 31, 2016 (incorporated
by reference to Exhibit 10.21 to the registrant’s current report on Form 8-K/A (No. 001-36155) filed on April 8,
2016).
10.11† Marcus & Millichap, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to the
registrant’s quarterly report on Form 10-Q (No. 001-36155) for the quarter ended June 30, 2018 filed on August
9, 2018).
10.12
Second Amended and Restated Credit Agreement, between the Company and Wells Fargo Bank, National
Association dated July 28, 2022 (incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on
Form 10-Q (No. 001-36155) filed on August 5, 2022).
10.13† Employment Agreement between the Company and Steven F. DeGennaro effective as of August 4, 2020
(incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q (No. 001-36155) for
the quarter ended September 30, 2020 filed on November 9, 2020).
10.14† Change in Control Policy dated August 3, 2021 (incorporated by reference to Exhibit 10.1 to the registrant’s
quarterly report on Form 10-Q (No. 001-36155) for the quarter ended June 30, 2021 filed on August 6, 2021).
10.15† Amended & Restated Death & Disability Policy dated August 3, 2021 (incorporated by reference to Exhibit 10.2
to the registrant’s quarterly report on Form 10-Q (No. 001-36155) for the quarter ended June 30, 2021 filed on
August 6, 2021).
10.16† Employment Agreement by and between John David Parker and Marcus & Millichap, Inc., dated August 4, 2022
(incorporated by reference to Exhibit 10.2 to the registrant’s quarterly report on Form 10-Q filed on August 5,
2022).
10.17† Employment Agreement by and between Richard Matricaria and Marcus & Millichap, Inc., dated August 4,
2022 (incorporated by reference to Exhibit 10.3 to the registrant’s quarterly report on Form 10-Q filed on August
5, 2022).
21.1* List of Subsidiaries.
23.1* Consent of Ernst & Young LLP.
31.1* Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2* Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1** Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002.
56
Number
101*
Description
The following financial statements from the Company’s Annual Report on Form 10-K for the year ended
December 31, 2022, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of
Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of
Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) Notes to Consolidated Financial
Statements, tagged as blocks of text and including detailed tags.
104* Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
†
*
**
Indicates management contract or compensatory plan.
Filed herewith.
Furnished, not filed.
(c)
Financial Statement Schedules
Not applicable.
Item 16. Form 10-K Summary
Not applicable.
57
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: February 27, 2023
Marcus & Millichap, Inc.
/s/ Hessam Nadji
Hessam Nadji
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Hessam Nadji
Hessam Nadji
/s/ Steven F. DeGennaro
Steven F. DeGennaro
/s/ Kurt H. Schwarz
Kurt H. Schwarz
/s/ George M. Marcus
George M. Marcus
/s/ Collete English Dixon
Collete English Dixon
/s/ Norma J. Lawrence
Norma J. Lawrence
/s/ Lauralee E. Martin
Lauralee E. Martin
/s/ Nicholas F. McClanahan
Nicholas F. McClanahan
/s/ George T. Shaheen
George T. Shaheen
/s/ Don C. Watters
Don C. Watters
Director, President
and Chief Executive Officer
(Principal Executive Officer)
February 27, 2023
Chief Financial Officer
(Principal Financial Officer)
February 27, 2023
First Vice President of Finance
and Chief Accounting Officer
(Principal Accounting Officer)
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
Director
February 27, 2023
58
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MARCUS & MILLICHAP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Comprehensive Income for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2022, 2021 and 2020
Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and 2020
Notes to Consolidated Financial Statements
Page
F-2
F-5
F-6
F-7
F-8
F-9
F-10
F-1
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Marcus & Millichap, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Marcus & Millichap, Inc (the Company) as of
December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’
equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity
with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2022, based on criteria
established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework) and our report dated February 28, 2023 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex
judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Description of the
Matter
How We Addressed the
Matter in Our Audit
Deferred commissions payable
At December 31, 2022, Company’s commissions payable to investment sales and financing
professionals was $117.4 million. As discussed in Note 7 to the consolidated financial
statements, certain investment sales and financing professionals have the ability to earn
additional commissions after meeting certain annual revenue thresholds. All commissions are
recognized as cost of services in the period in which they are earned as they relate to specific
transactions closed. The Company has the ability to defer payment of certain commissions, at its
election, for up to three years. These payments are referred to as deferred commissions.
Auditing the Company’s deferred commissions was complex with regard to evaluating the
completeness of the population of investment sales and financing professionals eligible for
deferred commissions and the accuracy of the investment sales and financing professionals’
revenue thresholds used in determining deferred commissions earned.
We evaluated the design and tested the operating effectiveness of the Company’s internal
controls over the deferred commissions process. For example, we tested controls over the
completeness and accuracy of the data used in calculating the deferred commissions, including
approvals.
To test the deferred commissions payable, we performed audit procedures that included, among
others, performing a predictive test in which we evaluated the completeness of the deferred
commissions schedule based on investment sales and financing professionals’ sales
performance. Additionally, we performed procedures to obtain evidence of eligibility approval
and performed a hindsight analysis to evaluate the amount of cash disbursed to the amount of
deferred commissions payable previously accrued.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
Los Angeles, California
February 27, 2023
F-3
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
Marcus & Millichap, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Marcus and Millichap Inc.’s (the Company) internal control over financial reporting as of December 31,
2022, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on
the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related
consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three
years in the period ended December 31, 2022, and the related notes and our report dated February 28, 2023 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in
all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides
a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Los Angeles, California
February 27, 2023
F-4
MARCUS & MILLICHAP, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except for shares and par value)
Assets
Current assets:
Cash, cash equivalents, and restricted cash of $16
Commissions receivable
Prepaid expenses
Income tax receivable
Marketable debt securities, available-for-sale (includes amortized cost of $254,682
and $183,915 at December 31, 2022 and 2021, respectively, and $0 allowance for
credit losses)
$
Advances and loans, net
Other assets, current
Total current assets
Property and equipment, net
Operating lease right-of-use assets, net
Marketable debt securities, available-for-sale (includes amortized cost of $72,819 and
$111,858 at December 31, 2022 and 2021, respectively, and $0 allowance for credit
losses)
Assets held in rabbi trust
Deferred tax assets, net
Goodwill and other intangible assets, net
Advances and loans, net
Other assets, non-current
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses
Deferred compensation and commissions
Income tax payable
Operating lease liabilities
Accrued bonuses and other employee related expenses
Other liabilities, current
Total current liabilities
Deferred compensation and commissions
Operating lease liabilities
Other liabilities, non-current
Total liabilities
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value:
$
$
$
December 31,
2022
2021
235,873 $
8,453
9,411
8,682
253,434
4,005
,
7,282
527,140
27,644
87,945
382,140
17,230
13,220
—
183,868
6,403
,
5,270
608,131
23,192
81,528
68,595
9,553
41,321
55,696
169,955
,
15,859
1,003,708 $
1,003,708 $
112,610
11,508
33,736
48,105
113,242
,
13,146
1,045,198
1,045,198
11,450 $
75,321
—
16,984
38,327
,
9,933
152,015
64,461
65,109
8,614
,
290,199
,
—
15,487
114,685
17,853
18,973
49,848
,
8,784
225,630
53,536
58,334
11,394
,
,
348,894
—
Authorized shares – 25,000,000; issued and outstanding shares – none at
December 31, 2022 and 2021, respectively
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 39,255,838
and 39,692,373 at December 31, 2022 and 2021, respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Total stockholders’ equity
Total liabilities and stockholders’ equity
See accompanying notes to consolidated financial statements.
—
—
4
131,541
585,581
)
( ,
(3,617)
713,509
,
1,003,708 $
1,003,708 $
4
121,844
573,546
910
696,304
,
1,045,198
1,045,198
$
$
F-5
MARCUS & MILLICHAP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Revenue:
Real estate brokerage commissions
$
1,170,310 $
1,170,969 $
633,164
Years Ended December 31,
2022
2021
2020
Financing fees
Other revenue
Total revenue
Operating expenses:
Cost of services
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Operating income
Other income, net
Interest expense
Income before provision for income taxes
Provision for income taxes
Net income
Earnings per share:
Basic
Diluted
Weighted average common shares outstanding:
Basic
Diluted
See accompanying notes to consolidated financial statements.
112,978
18,422
109,690
15,781
1,301,710
1,296,440
850,894
300,009
13,406
1,164,309
137,401
5,336
(708)
142,029
37,804
840,209
255,154
11,721
1,107,084
189,356
4,527
(580)
193,303
50,833
104,225 $
142,470 $
2.61 $
2.59 $
3.57 $
3.55 $
39,893
40,186
39,888
40,187
$
$
$
70,538
13,204
716,906
447,879
204,514
10,899
663,292
53,614
6,650
(900)
59,364
16,526
42,838
1.08
1.08
39,642
39,735
F-6
MARCUS & MILLICHAP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Net income
Other comprehensive (loss) income:
Years Ended December 31,
2022
104,225 $
2021
142,470 $
2020
42,838
$
Marketable debt securities, available-for-sale:
Change in net unrealized gains/losses
Less: reclassification adjustment for net losses (gains)
included in other income (expense), net
Net change, net of tax of $(1,559), $(505) and $286 for the years ended
December 31, 2022, 2021, and 2020, respectively
Foreign currency translation gain (loss), net of tax of $0 for each of the
years ended December 31, 2022, 2021, and 2020, respectively
Total other comprehensive (loss) income
Comprehensive income
(4,565)
(1,554)
(70)
72
(4,635)
(1,482)
108
(4,527)
(182)
(1,664)
799
34
833
(237)
596
$
99,698 $
140,806 $
43,434
See accompanying notes to consolidated financial statements.
F-7
MARCUS & MILLICHAP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for shares)
Series A
Redeemable
Preferred
Stock
Common Stock
Shares
Amount
Shares
Amount
Balance as of December 31, 2019
— $
Net and comprehensive income
Stock-based award activity:
Stock-based compensation
Issuance of common stock
pursuant to employee stock
purchase plan
Issuance of common stock for
vesting of restricted stock units
Issuance of common stock for
unvested restricted stock
awards
Shares withheld related to net
share settlement of stock-based
awards
Reduction of stock notes receivable
from employees
Balance as of December 31, 2020
Net and comprehensive income (loss)
Stock-based award activity:
Stock-based compensation
Issuance of common stock
pursuant to employee stock
purchase plan
Issuance of common stock for
settlement of deferred stock
units
Issuance of common stock for
vesting of restricted stock units
Issuance of common stock for
unvested restricted stock
awards
Issuance of common stock for
stock settled deferred
consideration
Shares withheld related to net
share settlement of stock-based
awards
Balance as of December 31, 2021
Net and comprehensive income (loss)
Dividend
Stock-based award activity:
Stock-based compensation
Issuance of common stock
pursuant to employee stock
purchase plan
Issuance of common stock for
settlement of deferred stock
units
Issuance of common stock for
vesting of restricted stock units
Issuance of common stock for
unvested restricted stock
awards
Shares withheld related to net
share settlement of stock-based
awards
Issuance of common stock for
stock settled deferred
consideration
Repurchases of common stock
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance as of December 31, 2022
— $
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
39,153,195
$
—
—
27,596
264,235
19,516
(62,566)
0
39,401,976
—
—
20,152
60,373
260,525
13,323
27,481
(91,457)
39,692,373
—
—
—
19,813
281,193
292,953
11,494
(206,390)
28,673
(864)
39,255,838
$
4
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
—
—
4
See accompanying notes to consolidated financial statements.
F-8
Stock
Notes
Receivable
From
Employees
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Retained
Earnings
Total
$ 104,658
$
(4) $ 388,238
$
1,978
$ 494,874
—
9,905
642
—
—
(2,023)
—
113,182
—
10,361
653
—
—
—
1,000
(3,352)
121,844
—
—
17,312
709
—
—
—
(9,741)
1,417
—
—
—
—
—
—
—
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
42,838
596
43,434
—
—
—
—
—
—
—
—
—
—
—
—
9,905
642
—
—
(2,023)
4
431,076
142,470
2,574
546,836
(1,664)
140,806
—
—
—
—
—
—
—
573,546
104,225
(62,572)
—
—
—
—
—
—
—
(29,618)
—
10,361
—
—
—
—
—
653
—
—
—
1,000
—
910
(3,352)
696,304
(4,527)
99,698
—
—
—
—
—
—
—
—
—
(62,572)
17,312
709
—
—
—
(9,741)
1,417
(29,618)
$ 131,541
$
— $ 585,581
$
(3,617) $ 713,509
MARCUS & MILLICHAP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2021
2020
2022
$
104,225
$
142,470
$
42,838
Cash flows from operating activities
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Noncash lease expense
Credit loss expense
Stock-based compensation
Deferred taxes, net
Unrealized foreign exchange losses (gains)
Net realized gains on marketable debt securities, available-for-sale
Other non-cash items
Changes in operating assets and liabilities:
Commissions receivable
Prepaid expenses
Advances and loans
Other assets
Accounts payable and accrued expenses
Income tax receivable/payable
Accrued bonuses and other employee related expenses
Deferred compensation and commissions
Operating lease liabilities
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities
Acquisition of businesses, net of cash received
Purchases of marketable debt securities, available-for-sale
Proceeds from sales and maturities of marketable debt securities, available-for-sale
Purchases of securities, held-to-maturity
Issuances of employee notes receivable
Payments received on employee notes receivable
Purchase of property and equipment
Net cash used in investing activities
Cash flows from financing activities
Taxes paid related to net share settlement of stock-based awards
Proceeds from issuance of shares pursuant to employee stock purchase plan
Dividends paid
Principal payments on notes payable to former stockholders
Principal payments on stock appreciation rights liability
Payments of contingent and deferred consideration
Cash paid for stock repurchases
Net cash used in financing activities
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash
Net (decrease) increase in cash, cash equivalents, and restricted cash
Cash, cash equivalents, and restricted cash at beginning of year
Cash, cash equivalents, and restricted cash at end of year
Supplemental disclosures of cash flow information
Interest paid during the period
Income taxes paid, net
Cash paid for amounts included in the measurement of operating lease liabilities
Supplemental disclosures of noncash investing and financing activities:
Unpaid purchases of property and equipment
Right-of-use assets obtained in exchange for operating lease obligations
Issuance of shares pursuant to settlement of deferred consideration
See accompanying notes to consolidated financial statements.
$
$
$
$
$
$
$
$
F-9
13,406
23,112
(51)
17,312
(6,073)
534
(86)
(973)
8,445
3,802
(54,818)
(9,830)
(4,071)
(26,535)
(11,491)
(24,631)
(21,176)
2,528
13,629
(12,500)
(380,799)
350,993
—
(74)
71
(11,666)
)
(
(53,975)
)
(
(9,741)
709
(60,358)
—
(1,761)
(5,351)
(29,053)
)
(
(105,555)
)
(
(366)
(146,267)
382,140
235,873
,
614
69,847
21,770
684
27,027
1,417
$
$
$
$
$
$
$
$
11,721
23,729
166
10,361
(11,845)
3,824
(219)
641
(10,832)
(3,066)
(12,382)
(3,046)
9,779
14,128
29,073
75,047
(21,276)
(2,370)
)
(
255,903
229
(378,106)
285,628
(9,500)
(40)
290
(6,857)
)
(
(108,356)
)
(
(3,352)
653
—
—
(1,481)
(1,739)
—
(5,919)
)
(
(2,640)
138,988
243,152
382,140
,
749
48,563
23,662
406
19,981
1,000
$
$
$
$
$
$
$
$
10,899
22,825
188
9,905
473
(299)
(192)
895
(3,290)
774
(39,773)
(2,743)
(5,643)
8,724
(2,095)
6,421
(18,461)
6,642
38,088
(16,298)
(215,606)
221,677
—
(243)
187
(6,945)
)
(
(17,228)
)
(
(2,023)
642
—
(6,564)
(1,251)
(1,134)
—
(10,330)
)
(
(48)
10,482
232,670
243,152
,
1,223
7,329
21,131
154
16,293
—
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
1.
Description of Business and Basis of Presentation
Description of Business
Marcus & Millichap, Inc., (the “Company”, “Marcus & Millichap”, or “MMI”), a Delaware corporation, is a
brokerage firm specializing in commercial real estate investment sales, financing services, research and advisory services.
As of December 31, 2022, MMI operates 81 offices in the United States and Canada through its wholly-owned
subsidiaries, including the operations of Marcus & Millichap Capital Corporation.
Reorganization and Initial Public Offering
MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) to spin-off its majority
owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”). Prior to the initial public
offering (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of
MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result,
MMREIS became a wholly-owned subsidiary of MMI. Thereafter, MMC distributed 80.0% of the shares of MMI common
stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of
indebtedness of MMC. MMI completed its IPO on November 5, 2013.
Basis of Presentation
The Company’s consolidated financial statements have been prepared in accordance with U.S. generally accepted
accounting principles (“U.S. GAAP”). The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
The Company reclassified certain items previously included within accounts payable and other liabilities to other
liabilities, current in the December 31, 2021 consolidated balance sheet to conform with current period
presentation.
2.
Accounting Policies and Recent Accounting Pronouncements
Accounting Policies
Cash, Cash Equivalents, and Restricted Cash
The Company considers cash equivalents to include short-term, highly liquid investments with maturities of three
months or less when purchased. Portions of the balance of cash, cash equivalents, and restricted cash were held in financial
institutions, various money market funds with fixed and floating net asset values and short-term commercial paper. Money
market funds have floating net asset values and may be subject to gating or liquidity fees. The Company assesses short-
term commercial paper for impairment in connection with investments in marketable debt securities, available-for-sale. The
likelihood of realizing material losses from cash, cash equivalents, and restricted cash, including the excess of cash
balances over federally insured limits, is remote.
Revenue Recognition
The Company generates real estate brokerage commissions by acting as a broker for real estate owners or investors
seeking to buy or sell interests in commercial properties and generates financing fees from securing financing on purchase
transactions, from refinancing its clients’ existing mortgage debt and other ancillary fees associated with financing
activities, including, but not limited to, mortgage servicing, debt and equity advisory services, loan sales, due diligence
services, guarantee fees, loan performance fees and other consulting.
Real Estate Brokerage Commissions
Contracts for representing buyers and sellers of real estate are negotiated on a transaction-by-transaction basis. The
consideration associated with the successful outcome remains constrained until the completion of a transaction which
happens at the close of escrow. At that time, the Company's performance is complete.
Financing Fees
F-10
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Contracts for representing potential borrowers are negotiated on a transaction-by-transaction basis. The consideration
associated with the successful outcome remains constrained until the completion of a transaction which happens at the time
the loan closes. At that time, the Company recognizes revenue related to the transaction. The Company’s fee arrangements,
with an exception for guarantee obligations, do not include terms or conditions that require the Company to perform any
service or fulfill any obligation once the loan closes.
Loan Performance Fees - For loans originated through the Strategic Alliance ("Strategic Alliance") with M&T Realty
Capital Corporation ("MTRCC"), the Company receives variable consideration in the form of loan performance fees based
on a portion of the servicing fees expected to be received by MTRCC under the servicing contract for servicing the loan.
As the Company is not obligated to perform any servicing functions and has no further obligations related to the transaction
giving rise to the loan performance fees, the estimated value of the loan performance fees to be received is recorded at the
time the loan closes and are collected over the estimated term of the related loan. Any changes in the estimate of loan
performance fees to be received are recorded in revenue in the period the estimate changes.
Guarantee Obligations - For certain loans originated through the Strategic Alliance with MTRCC, the Company may
agree, at its option, to indemnify MTRCC for a portion of MTRCC’s obligations for loans sold to the Federal National
Mortgage Association ("Fannie Mae"). For these loans, the Company allocates a portion of the transaction price and
records a loan guarantee obligation based on its fair value. Revenue for this stand ready obligation is recorded on a straight-
line basis over the term of the estimated guarantee period and is recorded in financing fees in the consolidated statements of
operations. The guarantee obligation is capped at 16.7% of any unpaid principal balance in excess of the value of the
collateral securing such loan. For these loans, the Company is required to pledge cash in a restricted bank account in
support of the guarantee obligation. The Company records an allowance for estimated losses related to the loans subject to
the guarantee considering the risk characteristics of the loan, the loan's risk rating, historical loss experience, potential
adverse situations affecting individual loans and other forecasted information as appropriate.
Mortgage Servicing - The Company recognized mortgage servicing revenue upon the acquisition of a servicing
contract. The Company recorded servicing fees when earned provided the loans are current and the debt service payments
are made by the borrower. As of December 31, 2022, the Company no longer owns any mortgage servicing rights.
Other Revenue
Other revenue include fees generated from consulting and advisory services, as well as referral fees from other real
estate brokers, and are recognized when services are provided, or upon closing of the transaction.
Capitalization of Internal Software
Certain costs related to the development or purchase of internal-use software are capitalized. Internal costs that are
incurred in the preliminary project stage are expensed as incurred. Direct consulting costs and certain payroll and related
costs that are incurred during the development stage of a project are capitalized and depreciated using the straight-line
method over a useful life of five years. Capitalized costs are recorded in property and equipment, net, and amortization is
recorded in depreciation and amortization in the consolidated financial statements. Amortization begins for software that
has been placed into production and is ready for its intended use. Post-implementation costs such as training, maintenance
and support are expensed as incurred. The Company evaluates the carrying value of capitalized software for impairment
whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.
Commissions Receivable, Net
Commissions receivable, net consists of commissions earned on brokerage and financing transactions for which
payment has not yet been received. The Company evaluates the need for an allowance for credit losses based on
consideration of historical experience, current conditions and forecasts of future economic conditions. The majority of
commissions receivable are settled within 10 days after the close of escrow.
Advances and Loans, Net
Advances and loans, net includes amounts advanced and loans due from the Company’s investment sales and
financing professionals.
F-11
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
In order to attract and retain highly skilled professionals, from time to time the Company advances funds to its
investment sales and financing professionals. The advances are typically in the form of forgivable loans that have terms
that are generally between 5 and 10 years. The principal amount of a forgivable loan and accrued interest are forgiven over
the term of the loan, so long as the investment sales and financing professionals continue to be a service provider with the
Company, and/or upon achieving contractual performance criteria. Amounts forgiven are charged to selling, general and
administrative expense over the period forgiven. If the investment sales and financing professional’s relationship with the
Company is terminated before the amount advanced is forgiven, the unforgiven amount, and any accrued interest, becomes
due and payable. The Company evaluates the need for an allowance for credit losses based on amounts advanced, expected
forgiveness, consideration of historical experience, current conditions and forecasts of future economic conditions.
Estimated credit losses, net of any reversals, are charged to credit loss expense included in selling, general and
administrative expense. Amounts are generally written off when amounts are determined to be no longer collectable.
The Company, from time to time, also enters into various agreements, including notes receivable, with certain of its
investment sales and financing professionals whereby these individuals receive loans that are to be repaid in the future. The
notes receivable, along with stated interest, are typically collected from future commissions or repaid based on the terms
stipulated in the respective agreements that are generally between one and seven years. The Company evaluates the need
for an allowance for credit losses for the loans based on historical experience, current conditions and reasonable forecasts
of future economic conditions. Estimated credit losses, net of any reversals, are charged to credit loss expense included in
selling, general and administrative expense. Amounts are generally written off when amounts are determined to be no
longer collectable.
Cost of Services
Cost of services principally consists of variable commissions, compensation-related costs related to the Company’s
financing activities, and other costs for the Company’s investment sales and financing professionals related to transactions
closed in the period. Commissions are accrued based on revenue from transactions generated by the Company’s investment
sales and financing professionals. Investment sales and financing professionals are compensated at commission rates based
on individual agreements, and a portion of the commissions due upon the closing of a transaction may be deferred in
accordance with their contracts. Some of the Company's most senior investment sales and financing professionals also have
the ability to earn additional commissions after meeting certain annual financial thresholds. These additional commissions
are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional
commissions are generally deferred for a period of one to three years, at the Company's election, and paid at the beginning
of the second and fourth calendar year. These deferred commissions are included in deferred compensation and
commissions (current and non-current) captions in the accompanying consolidated balance sheets. Cost of services also
includes referral fees paid to other real estate brokers where we are the principal service provider.
Investments in Marketable Debt Securities, Available-for-Sale
The Company maintains a portfolio of investments in a variety of fixed and variable rate debt securities, including
U.S. treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities (“ABS”) and other. The
Company considers its investments in marketable debt securities to be available-for-sale, and accordingly, are recorded at
their fair values. The Company determines the appropriate classification of investments in marketable debt securities at the
time of purchase. Interest along with amortization of purchase premiums and accretion of discounts from the purchase date
through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are
included in other income (expense), net in the consolidated statements of operations. The Company typically invests in
highly rated debt securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The
policy requires substantially all investments to be investment grade, with the primary objective of minimizing the potential
risk of principal loss and matching long-term liabilities. See Note 5 – “Investments in Marketable Debt Securities,
Available-for-Sale” for additional information.
The Company reviews quarterly its investment portfolio of all securities in an unrealized loss position to determine
if an impairment charge or credit reserve is required. The Company excludes accrued interest from both the fair value and
the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and measuring an
impairment. An investment is impaired if the fair value is less than its amortized cost basis. Impairment relating to credit
losses is recorded through a reduction in the amortized cost of the security or an allowance for credit losses and credit loss
expense (included in selling, general and administrative expense), limited by the amount that the fair value is less than the
F-12
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
amortized cost basis. Impairment that has not been recorded as a credit loss is recorded through other comprehensive
income (loss), net of applicable taxes. The Company made an accounting policy election to not measure an allowance for
credit losses for accrued interest receivables. The Company evaluates write-off of accrued interest receivable at the time
credit loss exists for the underlying security.
Determining whether a credit loss exists requires a high degree of judgment and the Company considers both
qualitative and quantitative factors in making its determination. The Company evaluates its intent to sell, or whether the
Company will more likely than not be required to sell, the security before recovery of its amortized cost basis. For all
securities in an unrealized loss position, the Company evaluates, among other items, the extent and length of time the fair
market value of a security is less than its amortized cost, time to maturity, duration, seniority, the financial condition of the
issuer including credit ratings, any changes thereto and relative default rates, leverage ratios, availability of liquidity to
make principal and interest payments, performance indicators of the underlying assets, analyst reports and
recommendations, and changes in base and market interest rates. If the qualitative and quantitative analysis is sufficient to
conclude that an impairment related to credit losses does not exist, the Company typically does not perform further
quantitative analysis to estimate the present value of cash flows expected to be collected from the debt security. Estimates
of expected future cash flows are the Company’s best estimate based on past events, current conditions and reasonable and
supportable economic forecasts.
Assets Held in Rabbi Trust
The Company maintains a non-qualified deferred compensation program for certain employees. Deferred amounts
are invested in variable whole life insurance policies owned by the Company supporting the deferred obligation and are
held in a rabbi trust. Participants elect to invest in various hypothetical equity and debt securities offered within the plan on
a notional basis. The net change in the carrying value of the underlying assets held in the rabbi trust is recorded in other
income (expense), net. The change in the deferred compensation liability as a result of the change in the notional value of
the participants accounts is recorded as a component of selling, general and administrative expense in the consolidated
statements of operations.
Fair Value Measurements
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received from the sale of an
asset in an orderly transaction between market participants at the measurement date. The Company is responsible for the
determination of fair value and the supporting methodologies and assumptions. The Company uses various pricing sources
and third parties to provide and validate the values utilized.
The degree of judgment used in measuring the fair value of financial instruments is generally inversely correlated
with the level of observable valuation inputs. Financial instruments with quoted prices in active markets generally have
more pricing observability and less judgment is used in measuring fair value. Financial instruments for which no quoted
prices are available have less observability and are measured at fair value using valuation models or other pricing
techniques that require more judgment.
Assets recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of the
three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed
below:
•
•
•
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,
unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or
indirectly, for substantially the full term of the asset or liability; or
Level 3: Unobservable inputs reflect management’s best estimate of what market participants would use in
pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the
valuation technique and the risk inherent in the inputs to the model. Management estimates include certain
pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable
inputs.
F-13
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Recurring Fair Value Measurements
The Company values its investments including commercial paper and floating NAV money market funds recorded
in cash, cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, assets held in
the rabbi trust, deferred compensation liability and contingent and deferred consideration at fair value on a recurring basis.
Fair values for investments included in cash, cash equivalents, and restricted cash and marketable debt securities,
available-for-sale, were determined for each individual security in the investment portfolio and all these securities are
Level 1 or 2 measurements as appropriate.
Fair values for assets held in the rabbi trust and related deferred compensation liability were determined based on the
cash surrender value of the Company owned variable life insurance policies and underlying investments in the trust, and
are Level 2 and Level 1 measurements, respectively.
Contingent consideration in connection with acquisitions, is carried at fair value and determined on a contract-by-
contract basis, calculated using unobservable inputs based on a probability of achieving EBITDA and other performance
requirements (refer to Note 9 – “Fair Value Measurements”), and is a Level 3 measurement. Deferred consideration in
connection with acquisitions is carried at fair value and calculated using a discounted cash flow estimate with the only
remaining condition on such payments being the passage of time, and is a Level 2 measurement.
Nonrecurring Fair Value Measurements
In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a
nonrecurring basis. The Company reviews the carrying value of mortgage servicing rights (“MSRs”), intangibles, goodwill
and other assets for indications of impairment at least annually. When indications of potential impairment are identified,
the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount
in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are
appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required.
Assets and Liabilities not Measured at Fair Value
The Company’s commissions receivable, amounts due from employees and investment sales and financing
professionals (included in the other assets, current and other assets, non-current captions), accounts payable and other
liabilities and commissions payable (included in deferred compensation and commissions, current and deferred
compensation and commissions, non-current captions) are carried at cost, which approximates fair value based on their
immediate or short-term maturities and terms which approximate current market rates.
The Company’s obligations under stock appreciation rights (“SARs”) liability (included in the deferred
compensation and commissions, current and deferred compensation and commissions, non-current captions) bear interest at
a variable rate based on U.S. Treasuries, and the Company has determined that the carrying value approximates their fair
value.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation and amortization. The Company uses the
straight-line method for depreciation and amortization. Depreciation and amortization is recorded over estimated useful
lives ranging from three to seven years.
The Company evaluates its fixed assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.
Other Assets
Other assets consist primarily of securities, held-to-maturity, MSRs, security deposits made in connection with
operating leases, customer trust accounts, employee notes receivable and other assets and receivables. In connection with a
brokerage transaction, the Company may need to, or be required to, hold cash in escrow for a transaction participant. These
F-14
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
amounts are deposited into separate customer trust accounts controlled by the Company. The amounts are included in
current other assets, net, with a corresponding liability included in accounts payable and other liabilities, both in the
consolidated balance sheets.
MSRs were recorded at fair value upon acquisition of a servicing contract. As of December 31, 2022, the Company
no longer owns any MSRs. The Company has elected the amortization method for the subsequent measurement of MSRs.
MSRs were carried at the lower of amortized cost or fair value. All MSRs are amortized using the interest method over the
period that servicing income is expected to be received. MSRs are included in other assets non-current in the
accompanying consolidated balance sheets. See Note 7 – “Selected Balance Sheet Data” for additional information.
Amortization related to the MSRs is included in depreciation and amortization expense in the accompanying consolidated
statements of operations.
The Company measured MSRs at fair value on a nonrecurring basis. MSRs are a Level 3 measurement. The
Company’s MSRs did not trade in an active, open market with readily observable prices. The estimated fair value of the
Company’s MSRs were developed using a discounted cash flow model that calculates the present value of estimated future
net servicing income. The model considers contractual provisions and assumptions of market participants including
specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service
and other economic factors. The Company periodically reassessed and adjusted, when necessary, the underlying inputs and
assumptions used in the model to reflect observable market conditions and assumptions that a market participant would
consider in valuing an MSR asset.
In connection with MSR activities, the Company held funds in escrow for the benefit of the lenders. These funds and
the offsetting obligations are not presented in the Company’s consolidated financial statements as they do not represent
assets and liabilities of the Company.
In June 2022, the Company discontinued its servicing activities and signed an agreement to sell the remaining
servicing rights. The sale closed in the third quarter of 2022. See Note 7 – “Selected Balance Sheet Data” for additional
information.
Leases
The Company utilizes operating leases for all its facilities and autos. The Company determines if an arrangement is a
lease at inception. Right-of-use assets (“ROU assets”) represent the Company’s right to use an underlying asset for the
lease term and lease liabilities represent the Company’s contractual obligation to make lease payments under the lease.
Operating leases are included in operating lease right-of-use assets, and operating lease liabilities, current and non-current
captions in the consolidated balance sheets.
Right-of-use assets and liabilities are recognized on the commencement date based on the present value of lease
payments over the lease term. Lease agreements may contain periods of free rent or reduced rent, predetermined fixed
increases in the minimum rent and renewal or termination options, all of which add complexity and impact the
determination of the lease term and lease payments to be used in calculating the lease liability. Certain facility leases
provide for rental escalations related to increases in the lessors’ direct operating expenses. The Company uses the implicit
rate in the lease when determinable. As most of the Company’s leases do not have a determinable implicit rate the
Company uses an estimated incremental borrowing rate based on borrowing options under its credit agreement and applies
a spread over treasury rates for the indicated term of the lease based on the information available on the commencement
date of the lease. The Company typically leases general purpose built-out office space, which reverts to the lessor upon
termination of the lease. Any payments for completed improvements, determined to be owed by the lessor, net of
incentives received, are recorded as an increase to the ROU asset and considered in the determination of the lease cost.
The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease
component. Lease cost is recognized on a straight-line basis over the lease term. Variable lease payments consist of
common area costs, insurance, taxes, utilities, parking and other lease related costs, which are determined principally based
on billings from landlords. Sub-lease income is recorded as a component of selling general and administrative expense in
the consolidated statements of operations.
F-15
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Litigation
The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, some
of which involve claims for damages that are substantial in amount. Most of these litigation matters are covered by
insurance, which contain deductibles, exclusions, claim limits and aggregate policy limits. While the ultimate liability for
these legal proceedings cannot be determined, the Company uses judgment in the evaluation of claims and the need for
accrual for loss contingencies quarterly. The Company records an accrual for litigation related losses where the likelihood
of loss is both probable and estimable. The Company accrues legal fees for litigation as the legal services are provided.
Advertising Costs
Advertising costs are expensed as incurred. Advertising costs are included in selling, general and administrative
expense in the accompanying consolidated statements of operations.
Advertising costs for the years ended December 31, 2022, 2021, and 2020 were $1,653,000, $830,000, and $586,000
respectively.
Income Taxes
The Company accounts for income taxes under the asset and liability method. The Company recognizes deferred tax
assets and liabilities for the future tax consequences attributable to (i) differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis, and (ii) operating losses and tax credit
carryforwards. The Company measures existing deferred tax assets and liabilities using enacted tax rates expected to apply
to taxable income in the years in which the Company expects to have temporary differences realized or settled. The
Company recognizes in the provision for income taxes, the effect on deferred tax assets and liabilities of a change in tax
rates in the period that includes the enactment date. The Company periodically evaluates deferred tax assets to assess
whether it is likely that the deferred tax assets will be realized. In determining whether a valuation allowance is required,
the Company considers the timing of deferred tax reversals, current year taxable income and historical performance.
Valuation allowances are provided against deferred tax assets when it is more-likely-than-not that some portion or all of the
deferred tax asset will not be realized.
Because of the nature of the Company’s business, which includes activity in the U.S. and Canada, incorporating
numerous states and provinces as well as local jurisdictions, the Company’s tax position can be complex. As such, the
Company’s effective tax rate is subject to changes as a result of fluctuations in the mix of its activity in the various
jurisdictions in which the Company operates including changes in tax rates, state apportionment, tax related interest and
penalties, valuation allowances and other permanent items. Calculating some of the amounts involves a high degree of
judgment.
The Company evaluates its tax positions quarterly. The threshold for recognizing the benefits of tax return positions
in the financial statements is “more likely than not” to be sustained by the taxing authority and requires measurement of a
tax position meeting the more-likely-than-not criterion, based on the largest benefit that is more than 50% likely to be
realized. The Company assesses its inventory of tax positions with respect to all applicable income tax issues for all open
tax years (in each respective jurisdiction) and determines whether uncertain tax positions are required to be recognized in
the Company’s consolidated financial statements.
The Company recognizes interest and penalties incurred as income tax expense.
Stock-Based Compensation
The Company measures and records compensation expense for all stock-based awards made to employees,
independent contractors and non-employee directors. Awards are issued under the Amended and Restated 2013 Omnibus
Equity Incentive Plan (“2013 Plan”) and 2013 Employee Stock Purchase Plan (“ESPP”).
For awards made to the Company’s employees, directors and independent contractors, the Company initially values
restricted stock units (“RSUs”) and restricted stock awards (“RSAs”) based on the grant date closing price of the
Company’s common stock. For awards with periodic vesting, the Company recognizes the related expense on a straight-
F-16
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
line basis over the requisite service period for the entire award, subject to periodic adjustments to ensure that the
cumulative amount of expense recognized through the end of any reporting period is at least equal to the portion of the
grant date value of the award that has vested through that date. The Company accounts for forfeitures as they occur.
For shares issued under the ESPP, the Company determined that the plan was a compensatory plan and is required to
expense the fair value of the awards over each six-month offering period. The Company estimates the fair value of these
awards using the Black-Scholes option pricing model. The Company calculates the expected volatility based on the
historical volatility of the Company’s common stock, the risk-free interest rate based on the U.S. Treasury yield curve in
effect at the time of grant, both consistent with the term of the offering period. The Company includes a dividend yield
based on the recurring semi-annual dividend. The Company accounts for forfeitures as they occur.
Earnings per Share
Basic weighted average shares outstanding includes vested, but unissued, deferred stock units (“DSUs”). The
difference between basic and diluted weighted average shares outstanding represents the dilutive impact of common stock
equivalents consisting of shares to be issued under the 2013 Plan and ESPP, and contingently issuable shares in connection
with stock settled consideration for acquired businesses.
Foreign Currency Translation
The Company prepares the financial statements of its Canadian subsidiary using the local currency as the functional
currency. The assets and liabilities of the Company’s Canadian subsidiary are translated into U.S. dollars at the rates of
exchange at the balance sheet date with the resulting translation adjustments included as a separate component of
stockholder’s equity through other comprehensive income (loss) in the consolidated statements of comprehensive income.
Income and expenses are translated at the average monthly rates of exchange. The Company includes gains and
losses from foreign currency transactions in other income (expense), net in the consolidated statements of operations.
The effect of foreign currency translation on cash, cash equivalents, and restricted cash is reflected in cash flows
from operating activities on the consolidated statements of cash flows, and is not material for any period presented.
Taxes Collected from Clients and Remitted to Governmental Authorities
The Company accounts for tax assessed by any governmental authority that is based on revenue or transaction value
(e.g. sales, use and value added taxes) on a net basis, and, accordingly, such amounts are not included in revenue. Collected
amounts are recorded as a current liability until paid.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of
the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of
cash, cash equivalents, and restricted cash, investments in marketable debt securities, available-for-sale, security deposits
(included under other assets, non-current) and commissions receivable, net. Cash, cash equivalents, and restricted cash are
placed with high-credit quality financial institutions and invested in high-credit quality money market funds and
commercial paper. Concentrations and ratings of marketable debt securities, available-for-sale are limited by the approved
investment policy.
To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds
that represent amounts recorded as cash, cash equivalents, and restricted cash. The Company historically has not
experienced any significant losses related to cash, cash equivalents, and restricted cash.
F-17
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
The Company has entered into a Strategic Alliance with MTRCC pursuant to which the Company has agreed to
provide loan opportunities that may be funded through MTRCC’s Delegated Underwriting and Servicing Agreement
(“DUS Agreement”) with Fannie Mae that requires MTRCC to guarantee a portion of each loan funded. On a loan-by-loan
basis, the Company, at its option, can indemnify a portion of MTRCC’s guarantee obligation of loan opportunities
presented to and closed by MTRCC though the DUS Agreement. The Company manages and limits the concentration of
risk related to the guarantees assumed by monitoring the underlying property type, geographic location, credit of the
borrowers, underlying debt service coverage, and loan to value ratios.
The Company derives its revenue from a broad range of real estate investors, owners, and users in the United States
and Canada, none of which individually represents a significant concentration of credit risk. The Company maintains
allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For
the years ended December 31, 2022, 2021, and 2020, no transaction represented 10% or more of total revenue. Further,
while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due
are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk.
During the year ended December 31, 2022, the Company’s Canadian operations represented approximately 2% of
total revenue. During the years ended December 31, 2021 and 2020, the Company’s Canadian operations represented less
than 2% and 1% of total revenue, respectively.
During each of the years ended December 31, 2022, 2021, and 2020, no office represented 10% or more of total
revenue.
Business Combinations
The Company accounts for business combinations using the acquisition method of accounting, under which the
consideration for the acquisition, including the fair value of any contingent and deferred consideration, is allocated to the
assets acquired and liabilities assumed. The Company recognizes identifiable assets acquired and liabilities assumed at
their acquisition date fair values as determined by management as of the acquisition date. The excess of the consideration
over the assets acquired net of liabilities assumed is recognized as goodwill. During the measurement period, which is not
to exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities
assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent
adjustments are recorded as expense in the consolidated statements of operations.
In connection with certain acquisitions, the Company enters into agreements to pay additional cash amounts based
on the achievement of certain performance measures and/or service and time requirements. Contingent and deferred
consideration in connection with the acquisition of a business is measured at fair value on the acquisition date and
remeasured at fair value each reporting period thereafter until the consideration is settled in cash or stock, with changes in
fair value recorded in selling, general and administrative expense in the consolidated statements of operations.
Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed as incurred and not
considered in determining the fair value of the acquired assets. Acquisition-related costs are reflected in selling, general
and administrative expense in the consolidated statements of operations.
Goodwill and Other Intangible Assets
The Company evaluates goodwill for impairment annually in the fourth quarter. In addition to the annual
impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the
period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has
occurred. The initial impairment evaluation of goodwill is a qualitative assessment and is performed to assess whether the
fair value of a reporting unit is less than its carrying amount. The Company completes a quantitative impairment test if
evidence from the qualitative assessment indicates that it is more likely than not that the fair value of the reporting unit is
less than its carrying amount. If the Company determines the quantitative impairment test is required, the estimated fair
value of the reporting unit is determined and compared to its carrying amount, including goodwill. If the carrying amount
exceeds the estimated fair value, an impairment loss is recognized equal to that excess. The loss recognized cannot exceed
the carrying amount of goodwill. The Company currently has only one reporting unit, therefore, all goodwill is allocated to
that one reporting unit.
F-18
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
The Company evaluates its finite-lived intangible assets for impairment at least annually, or as events or changes in
circumstances indicate the carrying value may not be recoverable. The Company records an impairment loss if impairment
triggers exist and the fair value of the asset is less than the asset’s carrying amount. The Company measures recoverability
by comparing the carrying amount to the future undiscounted cash flows that the intangible assets are expected to generate.
If the carrying value of the intangible assets are not recoverable, the impairment recognized is measured as the amount by
which the carrying value exceeds its fair value. The Company’s intangible assets primarily include non-compete
agreements, customer relationships and contracts in progress that resulted from its business combinations. These intangible
assets are generally amortized on a straight-line basis using a useful life between 1 and 7 years.
Segment Reporting
The Company follows U.S. GAAP for segment reporting, which requires reporting information on operating
segments in interim and annual financial statements. Substantially all of the Company’s operations involve the delivery of
commercial real estate services to its customers including real estate investment sales, financing and consulting and
advisory services. Management makes operating decisions, assesses performance and allocates resources based on an
ongoing review of these integrated operations, which constitute the Company’s only operating segment for financial
reporting purposes.
Recent Accounting Pronouncements
Recently Adopted
In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04, Reference Rate Reform
(Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04
is effective for all entities upon issuance and may be applied prospectively to contract modifications through December 31,
2022. The Company's Amended and Restated Credit Agreement (see Note 15 – “Commitments and Contingencies”) no
longer references LIBOR. As the Company has not drawn funds from the credit facility, we determined that the adoption of
ASU 2020-04 did not have an impact on the consolidated financial statements.
3.
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
Computer software and hardware equipment
Furniture, fixtures and equipment
Less: accumulated depreciation and amortization
December 31,
2022
2021
$
$
42,617 $
26,453
(41,426)
27,644 $
33,819
24,511
(35,138)
23,192
During the years ended December 31, 2022 and 2021, the Company wrote-off approximately $1.2 million and $3.2
million, respectively, of fully depreciated computer software and hardware equipment and furniture, fixtures and
equipment.
F-19
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
4.
Operating Leases
The Company has operating leases for all of its facilities and autos. The operating lease cost, included in selling,
general and administrative expense in the consolidated statements of operations, consisted of the following (in thousands):
Operating lease cost:
Lease cost
Variable lease cost (1)
Sublease income (2)
Years Ended
December 31,
2022
2021
$
$
26,038 $
5,586
(896)
26,209
5,371
(492)
30,728 $
31,088
(1)
(2)
Primarily relates to common area maintenance, property taxes, insurance, utilities and parking.
The Company changed its policy for recording sub-lease income from recording it as a component of other income,
net, to a component of selling general and administrative expense to better align sublease income with the operating
costs related to leasing. Amounts related to the current and prior years were not material.
Maturities of lease liabilities by year consisted of the following (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total future minimum lease payments
Less imputed interest
Present value of operating lease liabilities
Other information related to the operating leases consisted of the following:
Weighted average remaining operating lease term
Weighted average discount rate
December 31,
2022
$
$
19,663
19,791
17,220
13,446
8,640
11,974
90,734
(8,641)
82,093
December 31,
2022
4.97 years
2021
4.57 years
3.9 %
2.9 %
F-20
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
5.
Investments in Marketable Debt Securities, Available-for-Sale
Amortized cost, allowance for credit losses, gross unrealized gains/losses in accumulated other comprehensive
income/loss and fair value of marketable debt securities, available-for-sale, by type of security consisted of the following
(in thousands):
Short-term investments:
U.S. treasuries
Corporate debt
Asset-backed securities (“ABS”) and other
Long-term investments:
U.S. treasuries
U.S. government sponsored entities
Corporate debt
ABS and other
Short-term investments:
U.S. treasuries
Corporate debt
Long-term investments:
U.S. treasuries
U.S. government sponsored entities
Corporate debt
ABS and other
December 31, 2022
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
135,688 $
— $
14 $
(1,153) $
134,549
$
$
118,135
859
—
—
1
—
(95)
(15)
118,041
844
254,682 $
— $
15 $
(1,263) $
253,434
21,434 $
— $
— $
(719) $
20,715
602
44,214
6,569
—
—
—
—
21
—
(66)
(2,877)
(583)
536
41,358
5,986
$
72,819 $
— $
21 $
(4,245) $
68,595
December 31, 2021
Amortized
Cost
Allowance
for Credit
Losses
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value
$
$
$
35,767 $
148,148
183,915 $
— $
—
— $
— $
22
22 $
(34) $
35,733
(35)
148,135
(69) $
183,868
70,902 $
— $
128 $
(263) $
726
33,197
7,033
—
—
—
22
962
82
(3)
(146)
(30)
70,767
745
34,013
7,085
$
111,858 $
— $
1,194 $
(442) $
112,610
F-21
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
The Company’s investments in marketable debt securities, available-for-sale, that have been in a continuous
unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the
following (in thousands):
Less than 12 months
December 31, 2022
12 months or greater
Fair
Value
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
$
73,055 $
(1,232) $
66,144 $
(640) $
Total
Fair
Value
139,199 $
447
130,816
4,710
(46)
(1,909)
(314)
87
10,681
2,091
(20)
(1,063)
(284)
534
141,497
6,801
$
209,028 $
(3,501) $
79,003 $
(2,007) $
288,031 $
U.S. treasuries
U.S. government sponsored
entities
Corporate debt
ABS and other
U.S. treasuries
U.S. government sponsored
entities
$
Corporate debt
ABS and other
Fair
Value
103,019 $
115
115,908
2,915
Less than 12 months
December 31, 2021
12 months or greater
Gross
Unrealized
Losses
Fair
Value
Gross
Unrealized
Losses
(297) $
— $
— $
Total
Fair
Value
103,019 $
(3)
(173)
(30)
—
146
—
— $
115 $
(8)
—
116,054
2,915
$
221,957 $
(503) $
146 $
(8) $
222,103 $
Gross
Unrealized
Losses
(1,872)
(66)
(2,972)
(598)
(5,508)
Gross
Unrealized
Losses
(297)
(3)
(181)
(30)
(511)
Gross realized gains and losses from the sales of the Company’s marketable debt securities, available-for-sale,
consisted of the following (in thousands):
Gross realized gains (1)
Gross realized losses (1)
Years Ended December 31,
2022
2021
2020
$
$
113 $
(27) $
221 $
(2) $
241
(49)
(1)
Recorded in other income, net in the consolidated statements of operations. The cost basis of securities sold were
determined based on the specific identification method.
The Company invests its excess cash in a diversified portfolio of fixed and variable rate debt securities to meet
current and future cash flow needs. All investments are made in accordance with the Company’s approved investment
policy. As of December 31, 2022, the portfolio had an average credit rating of AA+ and weighted term to contractual
maturity of 1.16 years, with 224 securities in the portfolio with an unrealized loss aggregating $5.5 million, or 1.68% of
amortized cost, and a weighted average credit rating of AA+.
As of December 31, 2022, the Company performed an impairment analysis and determined an allowance for credit
losses was not required. The Company determined that it did not have an intent to sell and it was not more likely than not
that the Company would be required to sell any security based on its current liquidity position, or to maintain compliance
with its investment policy, specifically as it relates to minimum credit ratings. The Company evaluated the securities with
an unrealized loss considering severity of loss, credit ratings, specific credit events during the period since acquisition,
overall likelihood of default, market sector, potential impact from the current economic environment and a review of an
issuer’s and securities’ liquidity and financial strength, as needed. The Company concluded that it would receive all
F-22
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
scheduled interest and principal payments. The Company, therefore, determined qualitatively that the unrealized loss was
related to changes in interest rates and other market factors and therefore no allowance for credit losses was required.
Amortized cost and fair value of marketable debt securities, available-for-sale, by contractual maturity consisted of
the following (in thousands, except weighted average data):
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
December 31, 2022
December 31, 2021
Amortized
Cost
254,683 $
$
Fair Value
253,434 $
Amortized
Cost
183,915 $
56,507
13,435
2,876
54,169
11,850
2,576
96,035
11,129
4,694
Fair Value
183,868
96,257
11,601
4,752
$
327,501 $
322,029 $
295,773 $
296,478
Weighted average contractual maturity
1.1 years
1.5 years
Actual maturities may differ from contractual maturities because certain issuers have the right to prepay certain
obligations with or without prepayment penalties.
6.
Acquisitions, Goodwill and Other Intangible Assets
The goodwill recorded as part of the acquisitions primarily arose from the acquired assembled workforce and
brokerage and financing sales platforms. The Company expects all of the goodwill to be tax deductible, with the tax-
deductible amount of goodwill related to the contingent and deferred consideration to be determined once the cash
payments are made to settle any contingent and deferred consideration. The goodwill resulting from acquisitions is
allocated to the Company’s one reporting unit.
Goodwill and intangible assets, net consisted of the following (in thousands):
Goodwill and intangible assets:
Goodwill
Intangible assets (1)(2)
December 31, 2022
December 31, 2021
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Amount
Accumulated
Amortization
Net Book
Value
$ 37,914 $
32,287
— $ 37,914 $ 34,071 $
(14,505)
17,782
23,974
— $ 34,071
14,034
(9,940)
$ 70,201 $
(14,505) $ 55,696 $ 58,045 $
(9,940) $ 48,105
(1)
(2)
Total weighted average amortization period was 4.54 years and 5.53 years as of December 31, 2022 and 2021,
respectively.
Amortization expense for the intangible assets was $4.7 million and $3.8 million for the years ended December 31,
2022 and 2021, respectively.
F-23
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
The changes in the carrying amount of goodwill consisted of the following (in thousands):
Beginning balance
Additions from acquisitions (1)
Ending balance
Years Ended
December 31,
2022
2021
$
$
34,071 $
33,375
3,843
696
37,914 $
34,071
(1)
The 2021 addition represents a measurement period adjustment for an acquisition made in 2020.
Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the
following (in thousands):
2023
2024
2025
2026
2027
Thereafter
Year Ended
December 31,
4,599
$
4,089
3,871
2,156
1,736
1,331
$
17,782
The Company concluded there was no impairment of goodwill or intangible assets during the years ended December
31, 2022 and 2021.
7.
Selected Balance Sheet Data
Allowances on Advances and Loans
Allowance for credit losses for advances and loans consisted of the following (in thousands):
Beginning balance as of January 1, 2022
Credit loss expense (recovery)
Write-off
Ending balance as of December 31, 2022
Beginning balance as of January 1, 2021
Credit loss expense (recovery)
Write-off (recovery)
Ending balance as of December 31, 2021
Advances and
Loans
Commissions
Receivable
Total
789 $
(48)
50
791 $
5 $
(4)
—
1 $
Advances and
Loans
Commissions
Receivable
Total
563 $
255
(29)
789 $
94 $
(89)
—
5 $
$
$
$
$
794
(52)
50
792
657
166
(29)
794
F-24
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Other Assets
Other assets consisted of the following (in thousands):
MSRs, net of amortization
Security deposits
Employee notes receivable
Securities, held-to-maturity(1)
Loan performance fee receivable
Prepaid lease costs, trusts and other
Current
December 31,
Non-Current
December 31,
2022
2021
2022
2021
$
— $
— $
— $
—
6
—
766
6,510
—
40
—
—
5,230
1,625
—
9,500
4,261
473
1,855
1,395
—
9,500
—
396
$
7,282 $
5,270 $
15,859 $
13,146
(1)
Securities, held-to-maturity, are expected to mature on September 1, 2024 and accrue interest based on the 1-year
treasury rate.
MSRs
The net change in the carrying value of MSRs consisted of the following (in thousands):
Beginning balance
Additions
Amortization
Reclassification to assets held for sale
Loss on sale
Ending balance
December 31,
2022
2021
$
1,855 $
—
(1,275)
(280)
(300)
1,897
483
(525)
—
—
$
— $
1,855
In the six months ended June 30, 2022, the Company received cancellation notices on certain servicing contracts.
Amortization of those contracts was adjusted to reflect the cancellations. In June 2022, the Company discontinued its
servicing activities and signed an agreement to sell the remaining servicing rights. The Company recorded a loss on the sale
of the remaining rights in the second quarter of 2022 and had reclassified the remaining carrying value of the MSRs to
assets held for sale. The loss on sale was recorded within selling, general and administrative expenses within the
consolidated statements of operations. The sale closed in the third quarter of 2022.
The portfolio of loans serviced by the Company aggregated $1.7 billion for the period ended December 31, 2021.
F-25
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Deferred Compensation and Commissions
Deferred compensation and commissions consisted of the following (in thousands):
SARs liability (1)
Commissions payable to investment sales and
financing professionals
Deferred compensation liability (1)
Other
Current
December 31,
Non-Current
December 31,
2022
2021
2022
2021
$
2,323 $
2,241 $
13,137 $
14,918
72,247
110,769
493
258
1,080
595
45,156
6,168
—
31,697
6,921
—
$
75,321 $
114,685 $
64,461 $
53,536
(1)
The SARs and deferred compensation liability become subject to payout at the time a participant ceases providing
services to the Company. As a result of the retirement of certain participants, estimated amounts to be paid to the
participants within the next twelve months have been classified as current.
SARs Liability
Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program
assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for
the SARs was frozen as of March 31, 2013 and was transferred to MMI through a capital distribution. The SARs liability
will be settled with each participant in ten annual installments in January of each year upon retirement or termination from
service, or in full upon consummation of a change in control of the Company.
Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on
January 1, 2014 at a rate based on the 10-year treasury note, plus 2%. The rate resets annually. The rates at January 1,
2022, 2021, and 2020 were 3.63%, 2.93% and 3.92%, respectively. MMI recorded interest expense related to this liability
of $542,000, $488,000 and $710,000 for the years ended December 31, 2022, 2021, and 2020, respectively.
Estimated payouts within the next twelve months for participants that have separated from service have been
classified as current. During each of the years ended December 31, 2022 and 2021, the Company made payments of $2.2
million, consisting of principal and accumulated interest.
Commissions Payable
Certain investment sales professionals have the ability to earn additional commissions after meeting certain annual
revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned as they
relate to specific transactions closed. The Company has the ability to defer payment of certain commissions, at its election,
for up to three years. Commissions payable that are not expected to be paid within twelve months are classified as long-
term.
Deferred Compensation Liability
A select group of management is eligible to participate in the Marcus & Millichap Deferred Compensation Plan (the
“Deferred Compensation Plan”). The Deferred Compensation Plan is a non-qualified deferred compensation plan that is
intended to comply with Section 409A of the Internal Revenue Code and permits participants to defer compensation up to
the limits set forth in the Deferred Compensation Plan. Amounts are paid out generally when the participant is no longer a
service provider; however, an in-service payout election is available to participants. Participants may elect to receive
payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred
Compensation Plan through Company owned variable life insurance policies. The Deferred Compensation Plan is managed
by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company
asset in a rabbi trust, which is recorded in assets held in rabbi trust in the accompanying consolidated balance sheets. The
assets in the trust are restricted unless the Company becomes insolvent, in which case the trust assets are subject to the
claims of the Company’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any
F-26
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the
aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next
twelve months for participants that have separated from service or elected in service payout have been classified as current.
During the years ended December 31, 2022 and 2021, the Company made total payments to participants of $1.1 million
and $1.5 million, respectively.
The assets held in the rabbi trust are carried at the cash surrender value of the variable life insurance policies, which
represents its fair value. The net change in the carrying value of the assets held in the rabbi trust and the net change in the
carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust
expenses consisted of the following (in thousands):
Years Ended December 31,
2022
2021
2020
(Decrease) increase in the carrying value of the assets held in the rabbi
trust (1)
Decrease (increase) in the net carrying value of the deferred
compensation obligation (2)
$
$
(1,743) $
1,445 $
1,042
1,743 $
(1,104) $
(799)
(1)
(2)
Recorded in other income (expense), net in the consolidated statements of operations.
Recorded in selling, general and administrative expense in the consolidated statements of operations.
Other Liabilities
Other liabilities consisted of the following (in thousands):
Current
December 31,
Non-Current
December 31,
2022
2021
2022
2021
$
3,633 $
5,112 $
1,486 $
1,726
612
565
3,397
2,681
—
—
991
5,341
1,603
—
184
4,689
6,631
—
—
74
$
9,933 $
8,784 $
8,614 $
11,394
Deferred consideration
Contingent consideration
Dividends payable
Stock repurchase payable
Other
8.
Related-Party Transactions
Shared and Transition Services
Certain services are provided to the Company under a Transition Services Agreement (“TSA”) between MMC and
the Company. The TSA is intended to provide certain services until the Company acquires these services separately. Under
the TSA, the Company incurred net costs (charge-back) during the years ended December 31, 2022, 2021, and 2020 of
$(64,000), $(12,000) and $68,000, respectively. These amounts are included in selling, general and administrative expense
in the accompanying consolidated statements of operations.
Brokerage and Financing Services with the Subsidiaries of MMC
MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. The Company
performs certain brokerage and financing services related to transactions of the subsidiaries of MMC. For the years ended
December 31, 2022, 2021, and 2020, the Company earned real estate brokerage commissions and financing fees of $3.6
million, $2.4 million, and $2.9 million, respectively, from transactions with subsidiaries of MMC related to these services.
The Company incurred cost of services of $2.4 million, $1.4 million, and $1.7 million, respectively, related to these
revenue.
F-27
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Operating Lease with MMC
The Company has an operating lease with MMC for a single-story office building located in Palo Alto, California,
which expires in May 2032. The related operating lease cost was $1.3 million for each of the years ended December 31,
2022, 2021, and 2020, respectively. Operating lease cost is included in selling, general and administrative expense in the
accompanying consolidated statements of operations. See Note 4 – “Operating Leases” for additional information.
Accounts Payable and Other Liabilities with MMC
As of December 31, 2022 and 2021, accounts payable and accrued expenses with MMC aggregating $79,000 and
$93,000, respectively, remain unpaid and are included in accounts payable and accrued expenses in the accompanying
consolidated balance sheets.
Other
The Company makes advances to non-executive employees from time-to-time. At December 31, 2022 and 2021, the
aggregate principal amount for employee notes receivable was $4,000 and $40,000, respectively, which is included in other
assets (current and non-current) in the accompanying consolidated balance sheets. See Note 7 – “Selected Balance Sheet
Data” for additional information.
As of December 31, 2022, George M. Marcus, the Company’s founder and Chairman, beneficially owned
approximately 38% of the Company’s issued and outstanding common stock, including shares owned by Phoenix
Investments Holdings, LLC and the Marcus Family Foundation II.
F-28
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
9.
Fair Value Measurements
Recurring Fair Value Measurements
Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):
December 31, 2022
December 31, 2021
Fair Value
Level 1
Level 2
Level 3
Fair Value
Level 1
Level 2
Level 3
Assets:
Assets held in rabbi trust
Cash equivalents (1):
Commercial paper
Money market funds
$
$
9,553 $
— $
9,553 $ — $ 11,508 $
— $11,508 $ —
41,324 $
— $ 41,324 $ — $
8,948 $
— $ 8,948 $ —
139,025
139,025
—
— 210,985
210,985
—
—
$ 180,349 $139,025 $ 41,324 $ — $219,933 $210,985 $ 8,948 $ —
Marketable debt securities,
available-for-sale:
Short-term investments:
U.S. treasuries
Corporate debt
ABS and other
Long-term investments:
U.S. treasuries
U.S. government
sponsored
entities
Corporate debt
ABS and other
Liabilities:
Contingent consideration
Deferred consideration
Deferred compensation
liability
$
$
$
$
$ 134,549 $134,549 $
— $ — $ 35,733 $ 35,733 $ — $ —
118,041
844
— 118,041
— 148,135
—
844
—
—
— 148,135
—
—
—
—
$ 253,434 $134,549 $118,885 $ — $183,868 $ 35,733 $148,135 $ —
$
20,715 $ 20,715 $
— $ — $ 70,767 $ 70,767 $ — $ —
536
41,358
5,986
—
—
—
536
41,358
5,986
—
—
—
745
34,013
7,085
—
745
— 34,013
—
7,085
—
—
—
68,595 $ 20,715 $ 47,880 $ — $112,610 $ 70,767 $41,843 $ —
7,067 $
5,119 $
— $
— $ 7,067 $
9,312 $
— $ — $ 9,312
— $
5,119 $ — $
9,801 $
— $ 9,801 $ —
6,661 $
6,661 $
— $ — $
8,001 $
8,001 $ — $ —
(1)
Included in cash, cash equivalents, and restricted cash on the accompanying consolidated balance sheets.
There were no transfers in or out of Level 3 during the year ended December 31, 2022.
During the year ended December 31, 2022, the Company considered the probability of achieving EBITDA and other
performance targets and current and future interest rates in its determination of fair value for the contingent consideration.
The Company is uncertain as to the extent of the volatility in the unobservable inputs in the foreseeable future. Deferred
consideration in connection with acquisitions is carried at fair value and calculated using a discounted cash flow estimate
with the only remaining condition on such payments being the passage of time.
As of December 31, 2022 and 2021, contingent and deferred consideration had a maximum undiscounted payment
to be settled in cash or stock of $21.3 million and $28.6 million, respectively. Assuming the achievement of the applicable
performance criteria and/or service and time requirements, the Company anticipates these payments will be made over the
next one to five-year period. Changes in fair value are included in selling, general and administrative expense in the
consolidated statements of operations.
F-29
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following
(in thousands):
Beginning balance
Contingent consideration in connection with acquisitions (1)
Change in fair value of contingent consideration
Payments of contingent consideration
Ending balance
December 31,
2022
2021
$
$
9,312 $
—
(161)
(2,084)
7,067 $
5,572
(100)
4,659
(819)
9,312
(1)
Contingent consideration in connection with acquisitions represents a noncash investing activity. The amount
recorded during the year ended December 31, 2021 relates to a measurement period adjustment. See Note 6 –
“Acquisitions, Goodwill and Other Intangible Assets” for additional information.
Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of
the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in
thousands):
Fair Value at
December 31,
2022
Contingent
Valuation Technique
Unobservable inputs
Range (Weighted Average)(1)
consideration
$
7,067 Discounted cash flow Expected life of cash flows
0.4-4.83 years
(2.7 years)
Discount rate
6.0%-7.0%
Probability of achievement
0.0%-100.0%
(6.5%)
(95.4%)
Fair Value at
December 31,
2021
Contingent
Valuation Technique
Unobservable inputs
Range (Weighted Average)(1)
consideration
$
9,312 Discounted cash flow Expected life of cash flows
1.4-5.8 years
(3.4 years)
Discount rate
2.2%-3.5%
Probability of achievement
29.0%-100.0%
(2.9%)
(95.2%)
(1)
Unobservable inputs were weighted by the relative fair value of the instruments.
Nonrecurring Fair Value Measurements
In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a
nonrecurring basis. The Company reviews the carrying value of MSRs, intangibles, goodwill and other assets for
indications of impairment at least annually. When indications of potential impairment are identified, the Company may be
required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair
value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the
circumstances and utilize Level 2 and Level 3 measurements as required.
MSRs were initially recorded at fair value and subsequently carried at the lower of amortized cost or fair value. The
Company periodically reassessed and adjusted, when necessary, the underlying inputs and assumptions used to reflect
observable market conditions and assumptions that a market participant would consider in valuing an MSR asset.
Management used assumptions in the determination of fair value for MSRs after considering default, severity, prepayment
and discount rates related to the specific types and underlying collateral of the various serviced loans, interest rates, and
refinance rates. In June 2022, the Company discontinued its servicing activities and signed an agreement to sell the
remaining servicing rights. The sale closed in the third quarter of 2022. The fair value of the MSRs approximated the
carrying value at December 31, 2021 after consideration of the revisions to the various assumptions. See Note 7 –
“Selected Balance Sheet Data – Other Assets – MSRs” for additional information.
F-30
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
10.
Stockholders’ Equity
Common Stock
As of December 31, 2022 and 2021, there were 39,255,838 and 39,692,373 shares of common stock, $0.0001 par
value, issued and outstanding, which include unvested RSAs issued to non-employee directors, respectively. See Note 14 –
“Earnings per Share” for additional information.
On February 16, 2022, the Board of Directors declared a semi-annual regular dividend of $0.25 per share and a
special dividend of $1.00 per share, and on August 2, 2022, the Board of Directors declared a semi-annual regular dividend
of $0.25 per share. As a result, the Company paid $60.4 million in dividends to outstanding shareholders during the twelve
months ended December 31, 2022.
As of December 31, 2022, $2.2 million remains to be paid upon vesting of stock awards. This payable of $2.2
million is recorded in other liabilities, current and other liabilities, non-current in the consolidated balance sheets. See Note
7 – “Selected Balance Sheet Data.”
Preferred Stock
The Company has 25,000,000 authorized shares of preferred stock with a par value $0.0001 per share. At
December 31, 2022 and 2021, there were no preferred shares issued or outstanding.
Accumulated Other Comprehensive Income (Loss)
Amounts reclassified from accumulated other comprehensive income (loss) are included as a component of other
income (expense), net or selling, general and administrative expense, as applicable, in the consolidated statements of
operations. The reclassifications were determined on a specific identification basis.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as it is operating at a
loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the cumulative foreign
currency translation adjustments.
Repurchases of Common Stock
On August 2, 2022, the Company's Board of Directors authorized a common stock repurchase program of up to $70
million. During the year ended December 31, 2022, the Company repurchased and retired 864,271 shares of common stock
for $29.6 million, at an average cost of $34.27 per share, of which $0.6 million was for shares repurchased but not settled.
As of December 31, 2022, $40.4 million remained available under the stock repurchase program.
11.
Stock-Based Compensation Plans
2013 Omnibus Equity Incentive Plan
The Company’s Board of Directors adopted the 2013 Plan, which became effective upon the Company’s IPO. In
February 2017, the Board of Directors amended and restated the 2013 Plan, which was approved by the Company’s
stockholders in May 2017. Grants are made from time to time by the compensation committee of the Company’s Board of
Directors at its discretion, subject to certain restrictions as to the number and value of shares that may be granted to any
individual. In addition, non-employee directors receive annual grants under a director compensation policy. At
December 31, 2022, there were 3,806,730 shares available for future grants under the 2013 Plan.
Awards Granted and Settled
Under the 2013 Plan, the Company has issued RSAs to non-employee directors and RSUs to employees and
independent contractors. RSAs vest over a one-year period from the date of grant subject to service requirements. RSUs
generally vest in equal annual installments over a five-year period from the date of grant or earlier as approved by the
compensation committee of the Company’s Board of Directors. Any unvested awards are canceled upon termination as a
service provider. As of December 31, 2022, there were no issued or outstanding options, SARs, performance units or
performance share awards under the 2013 Plan.
F-31
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
During the year ended December 31, 2022, 292,953 shares of RSUs and 13,323 of previously issued RSAs vested.
86,049 shares of common stock were withheld to pay applicable required employee statutory withholding taxes based on
the market value of the shares on the vesting date. The shares withheld for taxes were returned to the share reserve and are
available for future issuance in accordance with provisions of the 2013 Plan. Unvested RSUs will be settled through the
issuance of new shares of common stock.
Outstanding Awards
Activity under the 2013 Plan consisted of the following (dollars in thousands, except weighted average per share
data):
Nonvested shares at December 31, 2019 ⁽¹⁾
Granted
Vested
Forfeited/canceled
Nonvested shares at December 31, 2020 ⁽¹⁾
Granted
Vested
Forfeited/canceled
Nonvested shares at December 31, 2021 ⁽¹⁾
Granted
Vested
Forfeited/canceled
Nonvested shares at December 31, 2022 ⁽¹⁾
Weighted-
Average Grant
Date
Fair Value Per
Share
Total
800,075 $
434,705 $
(284,503) $
(31,898) $
918,379 $
381,215 $
(277,253) $
(41,405) $
980,936 $
1,094,507 $
(306,276) $
(27,706) $
1,741,461 $
33.91
32.80
32.74
34.49
33.73
39.03
31.89
33.47
36.32
45.41
35.49
39.11
42.14
As of December 31, 2022, the Company had unrecognized stock-based compensation relating to RSUs and RSAs
of approximately $60.2 million, which is expected to be recognized over a weighted-average period of 3.77 years.
The aggregate fair value of RSUs and RSAs that vested were $13.4 million, $10.2 million, and $8.9 million for the
years ended December 31, 2022, 2021, and 2020, respectively.
The fair value of fully vested DSUs that settled was $13.4 million, $2.4 million and $0 million for the years ended
December 31, 2022, 2021, and 2020, respectively. See “SARs and DSUs” section below and Note 14 – “Earnings per
Share” for additional information.
ESPP
In 2013, the Company adopted the ESPP. The ESPP is intended to qualify under Section 423 of the Internal
Revenue Code and provides for consecutive, non-overlapping 6-month offering periods. The offering periods generally
start on the first trading day on or after May 15 and November 15 of each year. Qualifying employees may purchase shares
of the Company stock at a 10% discount based on the lower of the market price at the beginning or end of the offering
period, subject to Internal Revenue Service limitations. The Company determined that the ESPP was a compensatory plan
and is required to expense the fair value of the awards over each 6-month offering period.
The ESPP initially had 366,667 shares of common stock reserved, and 136,912 shares of common stock remain
available for issuance as of December 31, 2022. The ESPP provides for annual increases in the number of shares available
for issuance under the ESPP, equal to the least of (i) 366,667 shares, (ii) 1% of the outstanding shares on such date, or (iii)
an amount determined by the compensation committee of the Board of Directors. No annual increases have been made to
F-32
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
date. At December 31, 2022, total unrecognized compensation cost related to the ESPP was $83,000 and is expected to be
recognized over a weighted average period of 0.37 years.
SARs and DSUs
Prior to the IPO, certain employees were granted SARs. As of March 31, 2013, the outstanding SARs were frozen at
the liability amount, and will be paid out to each participant in installments upon retirement or departure under the terms of
the revised SARs agreements. To replace beneficial ownership in the SARs, the difference between the book value liability
and the fair value of the awards was granted to plan participants in the form of DSUs, which were fully vested upon receipt
and will be settled in actual stock at a rate of 20% per year if the participant remains employed by the Company during that
period (otherwise all unsettled shares of stock upon termination from service will be settled five years from the termination
date, unless otherwise agreed to by the Company). In the event of death or termination of service after reaching the age of
67, 100% of the DSUs will be settled. During the twelve months ended December 31, 2022, 281,193 DSUs were settled,
and 120,341 shares of common stock were withheld to pay applicable required employee statutory withholding taxes based
on the market value of the DSUs on the settlement date. As of December 31, 2022, all DSUs were fully vested and settled.
Summary of Stock-Based Compensation
Components of stock-based compensation are included in selling, general and administrative expense in the
consolidated statements of operations and consisted of the following (in thousands):
ESPP
RSUs and RSAs
12.
Income Taxes
Years Ended December 31,
2022
2021
2020
$
$
150 $
142 $
17,162
10,219
17,312 $
10,361 $
168
9,737
9,905
The components of income from continuing operations before provision for income taxes consisted of the following
(in thousands):
United States
Foreign
Years Ended December 31,
2022
143,815 $
2021
193,147 $
(1,786)
156
142,029 $
193,303 $
2020
62,206
(2,842)
59,364
$
$
F-33
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
The provision for income taxes consisted of the following (in thousands):
Federal:
Current
Deferred
State:
Current
Deferred
Foreign:
Current
Deferred
Years Ended December 31,
2022
2021
2020
$
34,968 $
48,785 $
12,437
(4,973)
29,995
8,857
(1,100)
7,757
—
52
52
(9,600)
39,185
13,903
(2,243)
11,660
—
(12)
(12)
310
12,747
3,616
163
3,779
—
—
—
$
37,804 $
50,833 $
16,526
Significant components of the Company’s deferred tax assets, net consisted of the following (in thousands):
Deferred Tax Assets:
Accrued expenses and bonuses
Bad debt and other reserves
Deferred compensation
Operating lease ROU assets, net
Stock-based compensation
Net operating and capital loss carryforwards
State taxes
Other comprehensive income (loss)
Amortizable intangibles and other
Deferred tax assets before valuation allowance
Valuation allowance
Deferred Tax Assets
Deferred Tax Liabilities:
Fixed assets
Operating lease liabilities
Prepaid expenses
State taxes
Other comprehensive income (loss)
Goodwill and other
Deferred Tax Liabilities
Deferred Tax Assets, Net
F-34
December 31,
2022
2021
$
6,406 $
9,655
21,018
20,798
7,273
3,835
—
1,676
2,221
72,882
(4,935)
67,947
(5,715)
(18,523)
(1,180)
(472)
—
(736)
(26,626)
$
41,321 $
6,822
6,989
18,287
20,937
7,031
3,769
92
—
1,577
65,504
(4,599)
60,905
(6,552)
(18,697)
(1,513)
—
(195)
(212)
(27,169)
33,736
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
As of December 31, 2022, and 2021, the Company had state and Canadian net operating loss carryforwards of
approximately $14.2 million and $14.7 million, respectively, principally all of which will begin to expire in 2035.
A valuation allowance is required when it is more-likely-than not that all or a portion of a deferred tax asset will not
be realized. Realization of a deferred tax asset is dependent upon taxable income in prior carryback years as appropriate,
depending on jurisdiction, estimates of future taxable income, tax planning strategies and reversals of existing taxable
temporary differences. The Company determined that as of December 31, 2022 and 2021, $4.9 million and $4.6 million,
respectively, of the deferred tax assets related to state and Canadian losses do not satisfy the recognition criteria. The
Company has therefore recorded a valuation allowance for this amount. The valuation allowance for deferred tax assets
was increased by $337,000, $179,000 and $497,000 during 2022, 2021 and 2020, respectively. The increases are primarily
related to the Company’s Canadian operations.
The provision for income taxes differs from the amount computed by applying the statutory federal corporate
income tax rate to income before provision for income taxes and consisted of the following (dollars in thousands):
Years Ended December 31,
2022
2021
2020
Amount
Rate
Amount
Rate
Amount
Rate
Income tax expense at the federal statutory
rate
$
29,826
21.0 % $
40,594
21.0 % $
12,466
21.0 %
State income tax expense, net of federal
benefit
(Windfall) shortfall tax benefits, net
related to stock-based compensation
Change in valuation allowance
Permanent and other items (1)
6,127
4.3 %
9,210
4.8 %
2,983
5.0 %
(2,714)
337
4,228
(1.9)%
0.2 %
3.0 %
(555)
179
1,405
(0.3)%
0.1 %
0.7 %
240
497
340
0.4 %
0.8 %
0.6 %
$
37,804
26.6 % $
50,833
26.3 % $
16,526
27.8 %
(1)
Permanent items relate principally to compensation charges, qualified transportation fringe benefits, reversal of
uncertain tax positions and meals and entertainment.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits consisted of the following (in
thousands):
Beginning balance
Gross increases/ (decreases) as a result of positions taken:
Prior periods
Current period
Expiration of applicable statutes of limitation
Ending balance
Years Ended December 31,
2022
2021
2020
304 $
55 $
775
(304)
—
—
1
304
(56)
— $
304 $
—
—
(720)
55
$
$
Unrecognized tax benefits balance decreased by $304,000 due to the reversal of a prior year uncertain tax position.
The Company records interest and penalties related to unrecognized tax benefit in provision of income taxes. As of
December 31, 2022 and 2021, the Company has recorded $6,000 in the 2022 and 2021 years related to interest expense in
provision of income taxes. During the years ended December 31, 2022 and 2021, penalties of $0 and $0, respectively, were
recorded relating to unrecognized tax benefits.
The Company is subject to tax in various jurisdictions and, as a matter of ordinary course, the Company may be
subject to income tax examinations by the federal, state and foreign taxing authorities for the tax years 2018 to 2022. The
F-35
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
Company is currently under income tax examination by the state of Illinois, and the audit by the state of New York is
closed without any assessment.
The Company has not provided for U.S. taxes on unremitted earnings of its foreign subsidiary as this subsidiary is
operating at a loss and has no earnings and profits to remit. As a result, deferred taxes were not provided related to the
cumulative translation adjustments.
13.
Retirement Plans
The Company has its own defined contribution plan (the “Marcus & Millichap, Inc. 401(k) Plan”) under Section
401(k) of the Internal Revenue Code for all eligible employees who have completed one month of service. The contribution
plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended.
Participants may contribute up to 100% of their annual eligible compensation, subject to Internal Revenue Service
limitations and ERISA. The Company matches employees’ contributions each pay period, dollar for dollar, up to a
maximum of $4,000. Employees become vested in these Company contributions 33% upon one year of service, 66% upon
two years of service and 100% upon three years of service. Company matching contributions aggregated $2.0 million, $1.2
million and $1.0 million for the years ended December 31, 2022, 2021, and 2020, respectively, which is included in selling,
general and administrative expense in the consolidated statements of operations.
14.
Earnings per Share
Basic and diluted earnings per share for the years ended December 31, 2022, 2021, and 2020 consisted of the
following (in thousands, except per share data):
Numerator (Basic and Diluted):
Net income
Change in value for stock settled consideration
Adjusted net income
Denominator:
Basic
Years Ended December 31,
2022
2021
2020
$
$
104,225 $
142,470 $
42,838
(37)
27
(3)
104,188 $
142,497 $
42,835
Weighted Average Common Shares Issued and Outstanding
39,751
39,575
39,318
Deduct: Unvested RSAs (1)
Add: Fully vested DSUs (2)
(12)
154
(14)
327
Weighted Average Common Shares Outstanding
39,893
39,888
Basic earnings per common share
$
2.61 $
3.57 $
(18)
342
39,642
1.08
Diluted
Weighted Average Common Shares Outstanding from above
Add: Dilutive effect of RSUs, RSAs & ESPP
Add: Contingently issuable shares (3)
39,893
39,888
39,642
207
86
206
93
67
26
39,735
1.08
Weighted Average Common Shares Outstanding
40,186
40,187
Diluted earnings per common share
$
2.59 $
3.55 $
Antidilutive shares excluded from diluted earnings per common
share (4)
1,084
366
684
(1)
(2)
(3)
RSAs were issued and outstanding to the non-employee directors and have a one-year vesting term subject to service
requirements. See Note 11 – “Stock-Based Compensation Plans” for additional information.
Shares are included in weighted average common shares outstanding as the shares are fully vested but were not yet
delivered. See Note 11 – “Stock-Based Compensation Plans” for additional information.
Relates to contingently issuable stock settled consideration.
F-36
(4)
Primarily pertaining to RSU grants to the Company’s employees and independent contractors.
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
15.
Commitments and Contingencies
Credit Agreement
On June 18, 2014, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association (the
“Credit Agreement”). On May 31, 2022, the Company executed an amended and restated Credit Agreement (the “First
Amended and Restated Credit Agreement”) to extend the maturity date of the Credit Agreement on substantially the same
terms and conditions as the original credit facility. The First Amended and Restated Credit Agreement provided for a $60.0
million principal amount senior secured revolving credit facility that was guaranteed by all of the Company’s domestic
subsidiaries (the “Credit Facility”), which was scheduled to mature on August 1, 2022. On July 28, 2022, the Company
entered into the Second Amended and Restated Credit Agreement, which provides for a three-year extension of its Credit
Facility with Wells Fargo Bank, National Association on principally the same terms and conditions as the extension signed
in May 2022. The new agreement matures on June 1, 2025.
The Company may borrow, repay and reborrow amounts under the Credit Facility until its maturity date, at which
time all amounts outstanding under the Credit Facility must be repaid in full. Borrowings under the Credit Agreement are
available for general corporate purposes and working capital. The Credit Facility includes a $10.0 million sublimit for the
issuance of standby letters of credit of which $533,000 was utilized at December 31, 2022. Borrowings under the Credit
Facility will bear interest at the Daily Simple SOFR rate plus a spread of between 1.00% to 1.25% depending on the
Company’s total funded debt to EBITDA as defined in the Credit Agreement. In connection with the amendments of the
Credit Agreement, the Company paid bank fees and other expenses, which are being amortized over the remaining term of
the Credit Agreement. The Company pays a commitment fee of up to 0.1% per annum, payable quarterly, based on the
amount of unutilized commitments under the Credit Facility. The amortization of issuance costs and the commitment fee
are included in interest expense in the consolidated statements of operations and were $167,000, $87,000, and $93,000
during the years ended December 31, 2022, 2021, and 2020, respectively. As of December 31, 2022, there were no
amounts outstanding under the Credit Agreement.
The Credit Facility contains customary covenants, including financial and other covenant reporting requirements and
events of default. Financial covenants require the Company, on a combined basis with its guarantors, to maintain (i) an
EBITDAR Coverage Ratio (as defined in the Credit Agreement) of not less than 1.25:1.0 as of each quarter end,
determined on a rolling four-quarter basis, and (ii) total funded debt to EBITDA not greater than 2.0:1.0 as of each quarter
end, determined on a rolling four-quarter basis, and also limits investments in foreign entities and certain other loans. The
Credit Facility is secured by substantially all assets of the Company, including pledges of 100% of the stock or other equity
interest of each subsidiary except for the capital stock of a controlled foreign corporation (as defined in the Internal
Revenue Code), in which case no such pledge is required. As of December 31, 2022, the Company was in compliance with
all financial and non-financial covenants and has not experienced any limitation in its operations as a result of the
covenants.
Strategic Alliance
The Company, in connection with the strategic alliance with MTRCC, has agreed to provide loan opportunities that
may be funded through MTRCC’s DUS Agreement with Fannie Mae. MTRCC’s agreement with Fannie Mae requires
MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can indemnify a
portion of MTRCC’s guarantee obligation of loan opportunities presented to and closed by MTRCC. As of December 31,
2022, the Company has agreed to a maximum aggregate guarantee obligation of $55.7 million related to loans with an
unpaid balance of $334.0 million. The Company would be liable for this amount only if all of the loans for which it is
providing a guarantee to MTRCC were to default and all of the collateral underlying these loans for which it is providing a
guarantee to MTRCC were to default and all of the collateral underlying these loans was determined to be without value at
the time of settlement. As of December 31, 2022, the Company has recorded an allowance for loss-sharing obligations of
$275,000 and pledged $15,800 in a restricted bank account in support of the guarantee obligation.
Other
In connection with certain agreements with investment sales and financing professionals, the Company may agree to
advance amounts to such professionals upon reaching certain time and performance goals. Such commitments as of
December 31, 2022 aggregated $16.1 million.
F-37
MARCUS & MILLICHAP, INC.
Notes to Consolidated Financial Statements
16.
Subsequent Events
In connection with agreements in principle with investment sales and financing professionals, the Company entered
into commitments through the date these consolidated financial statements were issued, aggregating $15.3 million, of
which $9.3 million has been paid. Such commitments to investment sales and financing professionals may be subject to
various conditions.
On February 9, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, payable on
April 6, 2023, to stockholders of record at the close of business on March 14, 2023. Based on the estimated number of
shares to be outstanding as of March 14, 2023, the dividends declared aggregated $10.4 million, including dividend
equivalents totaling $0.5 million to be paid on unvested restricted stock and deferred stock units granted under the 2013
Plan. These dividend equivalents will be paid when the underlying restricted stock and deferred stock units vest. Any and
all future dividends are subject to review and approval by the Board of Directors.
Between December 31, 2022 and February 23, 2023, the Company repurchased an additional 11,850 shares of
common stock for $0.4 million under the stock repurchase program.
F-38
Board of Directors
Executive Officers
Corporate Information
Hessam Nadji
President
Chief Executive Officer
Steve DeGennaro
Executive Vice President
Chief Financial Officer
Richard Matricaria
Executive Vice President
Chief Operating Officer
Western Division
J.D. Parker
Executive Vice President
Chief Operating Officer
Eastern Division
Gregory A. LaBerge
Senior Vice President
Chief Administrative Officer
Corporate Headquarters
Marcus & Millichap, Inc.
23975 Park Sorrento
Suite 400
Calabasas, CA 91302
Phone: (818) 212-2250
Fax: (818) 212-2260
Investor Relations
You may request a copy of documents
at no cost by contacting:
Investor Relations
InvestorRelations@marcusmillichap.com
Email updates are also available
through the Investor Relations
page on Marcus & Millichap’s
website at www.marcusmillichap.com
Stock Exchange
New York Stock Exchange
NYSE Trading Symbol: MMI
George M. Marcus
Chairman
Hessam Nadji
President
Chief Executive Officer
Collete English Dixon
Executive Director
Marshall Bennett Institute of Real Estate
Norma J. Lawrence
Partner (Retired)
KPMG LLP
Lauralee E. Martin
CEO (Retired)
HCP, Inc.
Nicholas F. McClanahan
Managing Director (Retired)
Merrill Lynch
George T. Shaheen
CEO & Global Managing Partner (Retired)
Andersen Consulting
Don C. Watters
Director Emeritus
McKinsey & Company
www.MarcusMillichap.com