Marcus & Millichap(MMI) - 2024 Q3 - Quarterly Report

Financial Performance - As of September 30, 2024, the company closed 1,987 investment sales and financing transactions with a total sales volume of approximately $12.0 billion for the three months ended, and 5,351 transactions with a total sales volume of approximately$31.2 billion for the nine months ended [131]. - Total revenue for the three months ended September 30, 2024, was $168.5 million, an increase of$6.5 million, or 4.0%, compared to $162.0 million for the same period in 2023 [177]. - Total revenue for the nine months ended September 30, 2024, was$456.0 million, a decrease of $23.7 million, or 4.9$479.7 million for the same period in 2023 [192]. - The operating loss for the three months ended September 30, 2024, was $(11.5) million, a decrease of$3.966 million, or 25.7%, compared to $(15.4) million for the same period in 2023 [182]. - Net loss for the three months ended September 30, 2024, was$(5.4) million, a decrease of $3.855 million, or 41.7$(9.2) million for the same period in 2023 [182]. Revenue Breakdown - Approximately 84% of the company's revenue during the three months ended September 30, 2024, was generated from real estate brokerage commissions, 12% from financing fees, and 4% from other real estate-related services [132]. - Revenue from real estate brokerage commissions increased to $142.0 million, up$2.2 million, or 1.5%, driven by a 14.7% increase in total sales volume [178]. - Financing fees revenue rose to $20.6 million, an increase of$3.3 million, or 19.3%, due to a 12.0% increase in total financing volume [179]. - Other revenue increased to $6.0 million, up$1.0 million, or 20.3%, primarily from an increase in consulting fees [180]. Market Trends - The private client market (properties priced from $1 million to less than$10 million) contributed approximately 62% of real estate brokerage commissions during the three months ended September 30, 2024 [134]. - The company reported a decrease in the number of transactions in the private client market, with 957 transactions in Q3 2024 compared to 1,014 in Q3 2023, reflecting a decline of 5.6% [136]. - The total revenue from the private client market for the nine months ended September 30, 2024, was $245.5 million, down from$278.2 million in the same period of 2023, representing a decrease of 11.8% [137]. - The commercial real estate sector experienced below-average sales activity in Q3 2024, with total sales volume of approximately $12.0 billion, compared to$11.4 billion in Q3 2023 [171]. Economic Outlook - The company anticipates modest economic growth through the remainder of 2024 and into 2025, driven by a "soft landing" economic forecast [142]. - The Consumer Price Index (CPI) registered 2.4% and the Personal Consumption Expenditure (PCE) index was at 2.1% in September 2024, indicating a downward trend in inflation [143]. Operational Metrics - The average commission per transaction increased to $106,664 in Q3 2024 from$102,731 in Q3 2023, while the average commission rate decreased to 1.66% from 1.88% [171]. - The total number of transactions closed in Q3 2024 was 1,331, slightly down from 1,361 in Q3 2023 [171]. - The average number of financing professionals increased to 103 in Q3 2024 from 96 in Q3 2023, with total financing volume rising to $2,134 million from$1,906 million [174]. - The average transaction size for real estate brokerage increased to $6,407, compared to$5,462 in Q3 2023 [171]. Expenses and Losses - Total operating expenses for the three months ended September 30, 2024, were $180.0 million, an increase of$2.5 million, or 1.4%, compared to $177.5 million for the same period in 2023 [182]. - Revenue from real estate brokerage commissions for the nine months ended September 30, 2024, decreased to$386.9 million, down $28.3 million, or 6.8$(8.7) million, an improvement of $6.464 million, or 42.7$(15.1) million for the same period in 2023 [191]. Cash Flow and Investments - Cash flows used in operating activities were $34.9 million for the nine months ended September 30, 2024, compared to$87.1 million for the same period in 2023, a decrease of $52.2 million [206]. - Cash flows provided by investing activities were$55.3 million for the nine months ended September 30, 2024, compared to $128.7 million for the same period in 2023, a decrease of$73.4 million [209]. - Cash flows used in financing activities were $18.3 million for the nine months ended September 30, 2024, compared to$53.3 million for the same period in 2023, a decrease of $35.0 million [210]. - As of September 30, 2024, cash, excluding restricted cash, cash equivalents, and marketable debt securities, aggregated$338.3 million [211]. Interest Rate and Market Risks - The market liquidity has been restrained due to sustained higher interest rates and tighter lender underwriting, impacting investor demand and transaction activity [149]. - The Federal Reserve's 50 basis point rate reduction in September improved investor sentiment, but the subsequent increase in the 10-year treasury rate negatively impacted borrowing rates [151]. - The company does not face material interest rate risk with respect to other assets and liabilities, equity price risk, or other market risks [220]. - The investment portfolio predominantly consists of fixed interest rate debt securities, with some variable interest rate debt securities [220]. Foreign Currency and Investment Strategy - The functional currency of the Canadian operations is the Canadian dollar, exposing the company to foreign currency exchange rate risk [222]. - The primary objective of the investment activity is to maintain the safety of principal while maximizing yields without significantly increasing risk [219]. - The company may choose to sell securities for strategic reasons, including anticipated capital requirements and yield management [219].