Q1 2025 Marcus & Millichap Inc Earnings Call

Yeah Courtney. Thank you you may begin.

Speaker Change: Thank you operator, good morning, and welcome to Marcus <unk> Millichap first quarter 2025 earnings conference call.

Speaker Change: With us today are president and Chief Executive Officer to some <unk> and Chief Financial Officer, Steve D. Janeiro.

Speaker Change: Before I turn the call over to management. Please remember that our prepared remarks, and our responses to questions may contain forward looking statements.

Speaker Change: Words, such as May will expect believe estimate anticipate goal and variations of these words and similar expressions are intended to identify forward looking statements actual results can differ materially from those implied by such forward looking statements due to a variety.

Speaker Change: The of factors, including but not limited to general economic conditions, and commercial real estate market conditions, the company's ability to retain and attract transactional professionals the company's ability to retain its business philosophy and partnership culture amid competitive pressures the companys ability to integrate new.

Speaker Change: Steven's and welcome to Marcus & Millichap's first quarter, 20th, 25th and 1st quarter As a reminder, this call has been recorded I would down next turn on the conference over to your whole Jacques Cornet, thank you for making it. If you operate it, good morning, welcome to Marcus & Millichap's first quarter, 2025th and 1st half of the call

Speaker Change: New agents and sustain its growth.

Speaker Change: And other factors discussed in the Companys public filings, including its annual report on Form 10-K filed with the Securities and Exchange Commission on February 27th 2025.

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

Jack Cornet: With us today, the president is exactly the opposite, and I'm not you, and she's the national opposite, Steven DeGennaro. Before I turn the call of dramaticness, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, and combat, believe, estimate, anticipate, go, interrogation that you were in similar expressions. I can't wait to identify forward-looking-

Speaker Change: <unk> or otherwise.

Speaker Change: In addition, certain financial information presented on this call represents non-GAAP financial measures company's earnings release, which was issued this morning and is available on the Companys website represents a reconciliation to the appropriate GAAP measures and explains why the company believes.

Speaker Change: Such non-GAAP measures are useful to investors.

Speaker Change: This conference is being webcast. The webcast link is available on the Investor Relations section of the company's website at Www Dot Marcus Millichap Dot com along with the slide presentation, you may reference during the prepared remarks.

Speaker Change: With that it is my pleasure to turn the call over to CEO Assam <unk>.

Speaker Change: Thank you shark on behalf of the entire Marcus <unk> Millichap team good morning, and welcome to our first quarter 2025 earnings call.

Speaker Change: The year was off to a positive start for MMA with first quarter revenue of $145 million.

Speaker Change: This was 12% higher than the first quarter of 2024 on the heels of a 44% year over year revenue increase in the fourth quarter of last year.

Speaker Change: The company's brokerage revenue grew nearly 13% year over year, while some improvement in the lending environment helped drive a 26% revenue increase in financing, which our team executed with 172 separate lenders during the quarter.

Speaker Change: The statement, whether as a result of new information, future events, or other lives. In addition, just financial information presented on this call, represent non-GAAP financial measures. Companies earning relief, which is due this morning, and is available on the company's website, represent new reconciliation and the appropriate GAAP measures , and explain why the company believes that non-GAAP measures are useful to undoubtedly.

Speaker Change: This unique access demonstrates our ability to help clients navigate is still a challenging marketplace.

Speaker Change: Adjusted EBITDA of negative $8 $7 million, reflecting an improvement of 13% over the previous year as we tightly manage costs, while remaining on offense by making strategic investments in the MMA platform.

Speaker Change: This topic is doing webcast. The webcast link is available on your investor relations section of the company's web site, www.Mark Zandi Millichap.com along with the flight presentation you may left me and join the prepared remarks. The back is my pleasure to come to the call over to you, Leo and Sam Nadji. Thank you, Jacques. On behalf of the entire Mark Zandi Millichap team, good morning and welcome to our first...

Speaker Change: And looking beneath the headline numbers a few trends that are worth highlighting.

Speaker Change: First it is safe to say that the market disruption with battled over the last two plus years continued in the first quarter.

Speaker Change: Higher and still volatile interest rates are still a drag on sales force productivity with lifting is taking longer to market and deal closings often requiring multiple price adjustments.

Speaker Change: The year was also a positive start for MMI with first quarter revenue of $145 million. This was 12% higher than the first quarter of 2024 on the field of a 44% European revenue increase in the fourth quarter of last year. The company's brokerage revenue, who nearly set 2% year to year, well, some improvement in the lending environment, helped to either 25% revenue increase in financing.

Speaker Change: Both of these factors significantly reduced business development capacity.

Speaker Change: Secondly, tightened underwriting and more limited lending from banks and credit unions combined with the lingering bid ask spreads are still hampering private client transaction.

Speaker Change: Sales in Microcap apartments are particularly impacted as many owners are postponing transaction in the hopes of improving market conditions.

Speaker Change: which has been executed with 172 steps of lenders during the court. This unique act that demonstrates that ability to help mine navigate is still a challenging marketplace. It definitely did off of negative $8.7 million, reflecting an improvement of 13% over the previous year as we tightly manage costs while remaining on all that by making specific investments in the MMI platform.

Speaker Change: Single tenant retail has also been challenged by a wide bid ask spread but posted some improvements in the quarter.

Speaker Change: As a result brokerage revenue in the private client segment grew 6% during the quarter compared to a 30% increase for middle market and larger transactions.

Speaker Change: Price corrections from the market peak and the return of major private and institutional capital to the market drove the increase activity in deals valued above $10 million.

Speaker Change: These investors are also placing greater emphasis on replacement cost as a key benchmark for investment decisions.

Speaker Change: This has become much more of a catalyst in recent quarters.

Speaker Change: The first quarter is more substantial growth in middle market and larger deals is also attributed to the expansion of our IPA division and investment brokerage and through larger financings executed by our IPA capital markets group.

Speaker Change: Ipas average size transaction with $38 million for both sales and financing, which illustrates the company's recent expansion in larger account business.

Speaker Change: Lastly, our earnings are impacted by expenses related to strategic investments made over the past few years.

Speaker Change: These include retention and acquisition of top talent proprietary technology and expanding the <unk> brand throughout the market disruption.

Operator: I would now like to turn the conference over to your host, Jacques Cornet. Thank you. You may be seated. Thank you, operator.

Speaker Change: We're also making pivotal investments in next generation analytics back office production and application of AI in our client targeting system.

Jacques Cornet: Good morning and welcome to Marcus & Millichap's first quarter 2025 earnings conference call.

Speaker Change: Notwithstanding the near term impact on our financial results. We believe these long term investments will position our sales force to be more competitive and capture stronger gains when market conditions improve.

Jacques Cornet: With us today are President and Chief Executive Officer Hessam Nadji and Chief Financial Officer Steve DeGennaro. Before I turn the call over to management, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal, and variations of these words and similar expressions. are intended to identify forward-looking states.

Speaker Change: As for the timing of a sustained market recovery, we remain cautiously optimistic.

Speaker Change: Coming into 2025, the fed's battle against the inflation and goal of engineering, a soft landing for the economy looked highly encouraging.

Speaker Change: Assuming the administration's willingness to negotiate with trading partners comes to fruition. Most forecasters believe the worst case scenario on a global trade wars will be avoided.

Jacques Cornet: Actual results can differ materially from those implied by such forward-looking statements due to a variety of factors, including but not limited to general economic conditions and commercial real estate market conditions, the company's ability to retain and attract transactional professionals, The company's ability to retain its business philosophy and partnership culture amid competitive pressures, the company's ability to integrate new agents and sustain its growth, and other factors discussed in the company's public filings, including its annual report on Form 10-K, filed with the Securities and Exchange Commission on February 27, 2025. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained.

Speaker Change: In that case, the strong economic foundation, low unemployment and healthy real estate fundamentals should spur a release of pent up demand on the commercial real estate transactions.

We believe another catalyst for rising future transaction volumes will be a larger scale resetting of prices.

Speaker Change: Our team is tracking numerous potential deals that will have to transact at some point.

Speaker Change: These would provide fresh comps that should bring more clarity on real time valuations.

Speaker Change: Help the market reset and move forward more rapidly.

Speaker Change: Examples include multifamily assets acquired in 2021, and 2022 with short term debt fund financing distressed office in legacy retail assets that many lenders will likely move off their portfolios.

Jacques Cornet: The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Speaker Change: And previously extended loans terming out again in the next 12 to 18 months.

Jacques Cornet: In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release, which was issued this morning and is available on the company's website, represents a reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors.

Speaker Change: We expect these trends to also propel our auction services and loan sales both of which are seeing steady rise in activity.

Speaker Change: In the meantime, the main pillars of our strategy to persevere through this elongated market disruption our unwavering.

Speaker Change: These include aggressively pursuing recruiting and acquisition opportunities for experienced professional teams and target companies investing in vital technology and expanding our brand through targeted client campaigns.

Jacques Cornet: This conference is being webcast. The webcast link is available on the investor relations section of the company's website at www.marcusmillichap.com, along with the slide presentation you may reference during the prepared remarks.

Speaker Change: The company's industry, leading market research and presence at Marquis industry events are also critical to future growth.

Hessam Nadji: With that, it is my pleasure to turn the call over to CEO Hessam Nadji. Thank you, Jacques. On behalf of the entire Marcus & Millichap team, good morning and welcome to our first quarter 2025 earnings. The year was off to a positive start for MMI with first quarter revenue of $145 million. This was 12% higher than the first quarter of 2024, on the heels of a 44% year-over-year revenue increase in the fourth quarter of last year. The company's brokerage revenue grew nearly 13% year-over-year, while some improvement in the lending environment helped drive a 26% revenue increase in financing, which our team executed with 172 separate lenders during the quarter.

Speaker Change: As an example last month, we hosted our second large scale client webcast. So far this year to help investors process incoming data and navigate a challenging market.

Speaker Change: These sessions garnered over 20000 viewers and are one of the essential tools and keeping our team connected with clients.

Speaker Change: And developing new relationships.

Speaker Change: To help streamline our decision, making execution and deployment of talent towards growth initiatives, We recently announced a management reorganization.

Speaker Change: As we shared in last week's press release on the topic. The key elements include the appointment of an enterprise wide Chief operating officer, overseeing our brokerage operations and the creation of Chief growth Officer, and Chief client officer position.

Hessam Nadji: This unique access demonstrates our ability to help clients navigate a still challenging marketplace. The adjusted EBITDA of negative $8.7 million reflected an improvement of 13% over the previous year as we tightly managed costs while remaining on offense by making strategic investments in the MMI platform.

Speaker Change: These key leadership roles are specifically targeted towards accelerating our growth initiatives, particularly strategic partnership and investment opportunities there.

Speaker Change: They also focus on advancing our sales force training and development programs and synthesizing market penetration plans and client service delivery across each of our specialty divisions.

Hessam Nadji: In looking beneath the headline numbers, a few trends are worth highlighting. First, it's safe to say that the market disruption we've battled over the last two plus years continued in the first quarter. Higher and still volatile interest rates are still a drag on salesforce productivity, with listings taking longer to market and deal closings often requiring multiple price adjustments. Both of these factors significantly reduce business development capacity. Secondly, tightened underwriting and more limited lending from banks and credit unions, combined with the lingering bid-ask spread, are still hampering private client trends. Sales in microcap apartments are particularly impacted as many owners are postponing transactions in the hopes of improving market Single tenant retail has also been challenged by wide bid-ask spread, but posted some improvements in the quarter.

Speaker Change: In addition, our most senior executives in charge of brokerage divisions have been promoted to oversee additional offices and bring their expertise to a larger segment of our sales force.

Speaker Change: I am very excited about these changes and confident that they will help us move forward better and faster.

Speaker Change: Looking ahead, we continue to explore potential strategic acquisitions in our core business and adjacent business lines concur.

Speaker Change: Concurrently the recruitment of experienced professionals and teams remains a bright spot as we consistently add talent with established books of business to our platform. This approach helps mitigate the elevated turnover of trainees in newer agents caused by the market disruption.

Speaker Change: This strategy is also enabling us to expand market coverage with minimal overlap among existing teams.

Speaker Change: We remain excited about <unk> growth prospects and reaping the benefits of the investments we've made to lead in the recovery.

Hessam Nadji: As a result, brokerage revenue in the private client segment grew 6% during the quarter, compared to a 30% increase for middle market and larger transactions. Price corrections from the market peak and the return of major private and institutional capital to the market drove the increased activity in deals valued above $10 million. These investors are also placing greater emphasis on replacement costs as a key benchmark for investment decisions. This has become much more of a catalyst in recent quarters. The first quarter's more substantial growth in middle market and larger deals is also attributed to the expansion of our IPA division in investment brokerage and through larger financings executed by our IPA Capital Markets IPA's average size transaction was $38 million for both sales and financing, which illustrates the company's recent expansion in larger account business.

Speaker Change: Let me note that revenue production for many of our talented veteran producers and.

Speaker Change: And market leaders, who have joined the company in the last few years remains hampered by a disrupted market.

Speaker Change: Once they are extremely capable sales force enters a better functioning market driven by clarity on values and more stable interest rates, we expect their productivity to drive significant operating leverage.

Speaker Change: Our strong balance sheet and strategic investments in talent and technology will further power, our leading market position and maximize shareholder value over the long run.

Speaker Change: With that I will turn the call over to Steve for more details on our results Steve.

Steve: Thank you Hassan.

Steve: As mentioned total revenue for the first quarter was up 12% to $145 million compared to $129 million in the prior year quarter.

Steve: Breaking down revenue by segment real estate brokerage Commission for the first quarter accounted for 85% of total revenue or $124 million, an increase of 13% year over year.

Hessam Nadji: Lastly, our earnings are impacted by expenses related to strategic investments made over the past few years. These include retention and acquisition of top talent, proprietary technology, and expanding the MMI brand throughout the market disruption. We're also making pivotal investments in next generation analytics, back office production, and application of AI in our client targeting. Notwithstanding the near-term impact on our financial results, we believe these long-term investments will position our sales force to be more competitive and capture stronger gains when market conditions improve. As for the timing of a sustained market recovery, we remain cautiously optimistic. Coming into 2025, the Fed's battle against inflation and goal of engineering a soft landing for the economy looked highly encouraging.

Steve: The increase was attributable to 18% growth in transaction volume of $6 $7 billion across a 175 transactions.

Steve: Volume growth was partially offset by a 4% decline in the average commission rate.

Steve: Average transaction size was $5 $7 million up from $5 1 million a year ago, reflecting a modest shift in transaction mix to middle and larger transactions with institutional investors, which also accounts for the change in average commission rate.

Steve: Within brokerage our core private client business accounted for 63% of revenue or $78 million.

Hessam Nadji: Assuming the administration's willingness to negotiate with trading partners comes to fruition, most forecasters believe that Warski's scenario on global trade wars will be avoided. In that case, the strong economic foundation, low unemployment, and healthy real estate fundamentals should spur a release of pent-up demand on commercial real estate transactions. We believe another catalyst for rising future transaction volumes will be a larger scale resetting of pricing. Our team is tracking numerous potential deals that will have to transact at some point. These would provide fresh comps that should bring more clarity on real-time valuations, help the market reset, and move forward more rapidly.

Steve: This compares to 67% and $73 million last year.

Steve: Private client transactions were up 4% in dollar volume and 3% in number of transactions.

Steve: Our middle market and larger transaction segments, together accounted for 33% of brokerage revenue or $41 million compared to 29% and $32 million last year.

Steve: The middle market and larger transactions combined were up 30% and dollar volume and 33% and number of transactions as institutional investors were notably more active during the quarter.

Steve: Revenue in our financing business, which includes MMC grew 26% to $18 million in the first quarter compared to $14 million last year.

Hessam Nadji: Examples include multifamily assets acquired in 2021 and 2022 with short-term debt fund financing, distressed office and legacy retail assets that many lenders will likely move off their portfolios, and previously extended loans terming out again in the next 12 to 18 months. We expect these trends to also propel our auction services and loan sales, both of which are seeing steady rise in activity.

Steve: The growth was attributable to both pricing and volume driven by a 16% increase in volume and a 12% increase in the average commission rate.

Steve: Fees from refinancing accounted for 50% of loan originations in the quarter compared to 51% last year.

Steve: Overall, we closed 337 financing transactions totaling $1 9 billion in volume up 44% and 16% year over year, respectively.

Hessam Nadji: In the meantime, the main pillars of our strategy to persevere through this elongated market disruption are unwavering. These include aggressively pursuing recruiting and acquisition opportunities for experienced professionals, teams, and target companies, investing in vital technology, and expanding our brand through targeted client campaigns. The company's industry-leading market research and presence at marquee industry events are also critical to future growth. As an example, last month we hosted our second large scale client webcast so far this year to help investors process incoming data and navigate a challenging market. These sessions garnered over 20,000 viewers and are one of the essential tools in keeping our team connected with clients.

Steve: Other revenue comprised primarily of leasing consulting and advisory fees was $3 3 million in the first quarter compared to $5 million last year.

Steve: Now looking at expenses total operating expense for the quarter was $163 million compared to $149 million a year ago.

Steve: Cost of services was $88 million for the quarter or <unk>, 69% of revenue an increase of 140 basis points over the same period last year due to revenue growth and production mix by agent tenure.

SG&A during the quarter was $72 million compared to $69 million a year ago, a modest increase that reflects higher agent marketing support tied to last year's revenue and expenses related to talent acquisition and retention offset by continued expense management.

Hessam Nadji: and Developing New Relationships.

Hessam Nadji: To help streamline our decision-making, execution, and deployment of talent toward growth initiatives, we recently announced a management reorganization. As we shared in last week's press release on the topic, the key elements include the appointment of an enterprise-wide chief operating officer overseeing all brokerage operations, and the creation of chief growth officer and chief client officer positions. These key leadership roles are specifically targeted toward accelerating our growth initiatives, particularly strategic partnership and investment opportunities. They also focus on advancing our Salesforce training and development programs and synthesizing market penetration plans and client service delivery across each of our specialty divisions.

Steve: For the first quarter, we reported a net loss of $4 $4 million or <unk> 11 per share a meaningful improvement compared with a net loss of $10 million and 26 per share in the prior year.

Steve: We continue to believe the investments we've made in talent acquisition, our technology platform and support services will be accretive in the eventual market recovery.

Adjusted EBITDA was negative $8 $7 million compared to negative $10 1 million in the prior year.

The effective tax rate for the quarter was 68%.

Steve: As we've discussed on prior calls the tax rate can fluctuate quarter to quarter, depending on the relationship between expenses that are non deductible for tax purposes to projected pre tax income for the full year.

Hessam Nadji: In addition, our most senior executives in charge of brokerage divisions have been promoted to oversee additional offices and bring their expertise to a larger segment of our sales.

Hessam Nadji: I'm very excited about these changes and confident that they will help us move forward better and faster. Looking ahead, we continue to explore potential strategic acquisitions in our core business and adjacent business lines. Concurrently, the recruitment of experienced professionals and teams remains a bright spot as we consistently add talent with established books of business to our platform. This approach helps mitigate the elevated turnover of trainees and newer agents caused by the market disruption. The strategy is also enabling us to expand market coverage with minimal overlap among existing teams. We remain excited about MMI's growth prospects and reaping the benefits of the investments we've made to lead in the recovery.

Steve: Therefore, the future tax rate can be unpredictable given the market uncertainty.

Steve: Turning to the balance sheet, we continue to be well capitalized with no debt and $330 million in cash cash equivalents and marketable securities a decrease from the year end balance of $394 million.

Steve: The decrease is typical for our first quarter and reflects seasonal outlays for current and deferred agent commissions.

Steve: Performance based management compensation and investments in talent.

Steve: As a reminder, our deferred earnings program has a three year vesting period. Therefore, the deferred commission payout in the quarter was larger than usual given the record revenue performance in 2022.

Steve: During the quarter, we declared a semiannual dividend of <unk> 25 per share or approximately $10 million, which was paid in the first week of April.

Hessam Nadji: Let me note that revenue production for many of our talented veteran producers And market leaders who have joined the company in the last few years remains hampered by a disrupted market. Once our extremely capable sales force enters a better functioning market driven by clarity on values and more stable interest rates, we expect their productivity to drive significant operating leverage.

Steve: In addition, since the start of the year, we opportunistically repurchased nearly 174000 shares under our share repurchase program for $5 $4 million.

Steve: We now have $66 million remaining on the current share repurchase authorization.

Steve: Over the past three years, we have returned a total of $187 million of capital to shareholders through a combination of dividends and share repurchases.

Hessam Nadji: A strong balance sheet and strategic investments in talent and technology will further power our leading market position and maximize shareholder value over the long run.

We remain committed to a balanced long term capital allocation strategy, which includes investing in technology recruiting and retaining the best in class producers strategic acquisitions, and returning capital to shareholders.

Steve DeGennaro: With that, I will turn the call over to Steve for more details on our results. Steve? Thank you, Hessam. As mentioned, total revenue for the first quarter was up 12% to $145 million compared to $129 million in the prior year quarter. Breaking down revenue by segment, Real Estate Brokerage Commission for the first quarter accounted for 85% of total revenue, or $124 million, an increase of 13% year over year. The increase was attributable to 18% growth in transaction volume of $6.7 billion across 1,175 transactions. Volume growth was partially offset by a 4% decline in the average commission.

Steve: Turning to the outlook for next quarter, while several metrics and leading indicators show signs of improvement others reflect investor caution related to lack of clarity on tariffs interest rates and inflation.

Steve: That said, we anticipate a continued recovery in transactional activity for the year, albeit at a moderated pace in the near term until there is greater clarity on trade and tax policies.

Steve: For the second quarter cost of services as a percentage of revenue should follow the historical pattern and be sequentially higher than the first quarter.

Steve DeGennaro: Average transaction size was $5.7 million, up from $5.1 million a year ago, reflecting a modest shift in transaction mix to middle and larger transactions with institutional investors, which also accounts for the change in average commission. Within brokerage, our core private client business accounted for 63% of revenue, or $78 million. This compares to 67% and $73 million last year. Private client transactions were up 4% in dollar volume and 3% in number of transactions. Our middle market and larger transaction segments together accounted for 33% of brokerage revenue, or $41 million, compared to 29% and $32 million last year.

Steve: SG&A is expected to be largely in line with the first quarter, reflecting the benefit of ongoing cost actions.

Steve: As always we remain hyper focused on continuous client engagement with proactive outreach to help identify unique opportunities and provide thoughtful advice on how to navigate and otherwise choppy environment.

Steve: Internally the ongoing investments, we're making in systems talent and market coverage position us well to capture growth as market conditions improve.

Steve: With that operator, we can now open the call for Q&A.

Steve: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Steve: A confirmation tone will indicate your line is in the question queue.

Steve DeGennaro: The middle market and larger transactions combined were up 30% in dollar volume and 33% in number of transactions as institutional investors were notably more active during the quarter. Revenue in our financing business, which includes MMCC, grew 26% to $18 million in the first quarter, compared to $14 million last year. The growth was attributable to both pricing and volume, driven by a 16% increase in volume and a 12% increase in the average commission. Fees from refinancing accounted for 50% of loan originations in the quarter, compared to 51% last year. Overall, we closed 337 financing transactions, totaling $1.9 billion in volume, up 44% and 16% year-over-year respectively.

Steve: Start to if you would like to remove your questions from the queue.

Steve: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Steve: One moment, please while we poll for questions.

Speaker Change: The first question comes from the line of young <unk> with Wells Fargo. Please go ahead.

Steve: Great. Thank you good morning out there thank.

Steve: Thank you for your commentary on kind of macro level thoughts I was wondering if you can provide some additional color on what your clients are talking about or thinking about by the different product types and whether youre seeing any different thoughts thought process for each each different ones.

Tom: Sure. This is Tom good morning.

Steve: I would say that.

Speaker Change: There hasnt been much shift in the sentiment towards different property types in the first quarter. We continued to see a lot of enthusiasm for retail as retailers made a significant comeback structurally from years of very limited new construction and re positioning of a lot of.

Steve DeGennaro: Other revenue, comprised primarily of leasing, consulting, and advisory fees, was $3.3 million in the first quarter, compared to $5 million last year.

Steve DeGennaro: Now, looking at expenses, total operating expense for the quarter was $163 million compared to $149 million a year ago. The cost of services was $88 million for the quarter, or 60.9% of revenue, an increase of 140 basis points over the same period last year due to revenue growth and production mix by agent tenure. SG&A during the quarter was $72 million compared to $69 million a year ago, a modest increase that reflects higher agent marketing support tied to last year's revenue and expenses related to talent acquisition and retention offset by continued expense. For the first quarter, we reported a net loss of $4.4 million, or $0.11 per share, a meaningful improvement compared with a net loss of $10 million and $0.26 per share in the prior year.

Steve: Properties.

Steve: Post e-commerce.

Steve: And.

Steve: Both multi tenant and single tenant demand showed improvement in the first quarter multifamily use bifurcated the private clients smaller multifamily as I mentioned in my formal remarks continues to be hampered by a bid ask spread and.

Steve: Very tight underwriting by banks and credit unions, while larger multifamily really garnering more institutional capital that is transacting much more because of the fact that capital has come back into the market and the higher price points $20 million plus $25 million.

Steve: Plus range.

Steve: I mean, a bigger price correction from peak therefore, the replacement cost factor has become.

Steve: Much bigger catalyst.

Steve: For larger more institutional multifamily.

Steve: We're really seeing some recovery in the office market just in terms of the return to office metrics as well as.

Steve DeGennaro: We continue to believe the investments we've made in talent acquisition, our technology platform and support services will be accretive in the eventual market recovery. The net adjusted EBITDA was negative $8.7 million compared to negative $10.1 million in the prior year. The effective tax rate for the quarter was 68%. As we've discussed on prior calls, the tax rate can fluctuate quarter to quarter depending on the relationship between expenses that are non-deductible for tax purposes to projected pre-tax income for the full year. Therefore, the future tax rate can be unpredictable given the market uncertainty.

Steve: Kind of a bottoming.

Steve: As perceived by investors on values.

Steve: And industrial remains a favorite asset although the trend for us was relatively flat on a year over year basis.

Steve: Self storage continues to be a very popular product types. Although there are some bid ask spread issues in that segment as well we saw some improvement in that segment.

Steve: In the first quarter.

Steve: And of course.

Steve: Overall, the financing improvement was very noticeable in the first quarter.

Speaker Change: Thank you for that and are you also seeing some distinction between different geographical locations based on kind of the.

Steve DeGennaro: Turning to the balance sheet, we continue to be well capitalized with no debt and $330 million in cash, cash equivalents, and marketable securities, a decrease from the year-end balance of $394 million. The decrease is typical for a first quarter and reflects seasonal outlays for current and deferred agent commissions. Performance-Based Management Compensation, and Investments in Talent. As a reminder, our Deferred Earnings Program has a three-year vesting period. Therefore, the Deferred Commission payout in the quarter was larger than usual given the record revenue performance in 2022.

Steve: The recently announced tariff announcements.

Steve: Not so much.

Steve: Looking at the first quarter the trends around the country were fairly consistent.

Steve: There is still a.

Steve: Gap between the growth markets, such as Georgia, Florida.

Steve: And Texas in particular, where you have the.

Steve: The benefit of a lot of in migration and.

Steve: Including business migration as well.

Steve: Really catching investors.

Steve: Appetite for future growth.

Steve: I've actually travel quite a bit over the past few months and spent some time in Florida.

Steve DeGennaro: During the quarter, we declared a semi-annual dividend of $0.25 per share, or approximately $10 million, which was paid in the first week of April. In addition, since the start of the year, we opportunistically repurchased nearly 174,000 shares under our Share Repurchase Program for $5.4 million. We now have $66 million remaining on the current share repurchase authorization. Over the past three years, we have returned a total of $187 million of capital to shareholders through a combination of dividends and share repurchase.

Steve: Mcgrath <unk> numbers.

Steve: Very impressive when you look at the next five year forecast.

Steve: In those particular states, but Florida stands out.

Steve: And therefore at a time of uncertainty investors sort of shift their focus on those kinds of metrics, maybe even more so than the unusuals.

Steve: But we're seeing a comeback.

Steve: Really in markets like that.

Steve: Denver, and Seattle, where there has been some overbuilding and the pipeline of new construction, especially for multifamily has pulled back significantly some of those metros with solid economic basis that have suffered from some overbuilding are showing some improvement.

Steve DeGennaro: We remain committed to a balanced, long-term capital allocation strategy, which includes investing in technology, recruiting and retaining the best-in-class producers, strategic acquisitions, and returning capital to shareholders.

Steve: That was noticeable in the first quarter as well.

Steve: And how would you rate southern California among.

Steve DeGennaro: Turning to The Outlook for next quarter. While several metrics and leading indicators show signs of improvement, others reflect investor caution related to lack of clarity on tariffs, interest rates, and inflation. That said, we anticipate a continued recovery in transactional activity for the year, albeit at a moderated pace in the near term, until there is greater clarity on trade and tax policy. For the second quarter, cost of services as a percentage of revenue should follow the historical pattern and be sequentially higher than the first quarter. SG&A is expected to be largely in line with the first quarter, reflecting the benefit of ongoing cost action.

Steve: Among the markets.

Steve: Interestingly enough the tragedy from the fires has strengthened the rental market as you can imagine for the wrong reasons of course.

Steve: But California in general if you look at the national landscape.

Steve: Based on my travels in a lot of investor interactions.

Steve: It has kind of been the diamond in the rough is lagging the recovery it as of course, a number of local political issues and growth limitations, but nonetheless, because of the price adjustments and.

Steve: Relative.

Steve: Kind of a lagged, but now positive recovery on job growth and little bit of a healthier economic outlook.

Steve DeGennaro: As always, we remain hyper-focused on continuous client engagement with proactive outreach to help identify unique opportunities and provide thoughtful advice on how to navigate an otherwise choppy environment. Internally, the ongoing investments we are making in systems, talent, and market coverage. Position us well to capture growth as market conditions improve.

Steve: We've seen a lot of capital and want to come back into California. So.

Steve: I would say that the beginning of maybe a new cycle and the state, especially on the other side of some of the macro concerns that I commented on in my formal remarks.

Steve: Got it thank you and.

Steve: And I'm not sure how much of your business is done with the foreign investors, but could you.

Operator: With that, operator, we can now open the call for Q&A. Thank you.

Steve: Talk about what youre seeing on that and given kind of the sentiment shift that we've been noticing recently.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question key.

Steve: But for our investments.

Steve: As a category for the entire industry.

Steve: Hasnt really been.

Steve: Annual mover and macro trends for commercial real estate, there are periodic periods of surge and capital that is coming over the years.

Operator: You may press star 2 if you would like to remove your questions from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star 2.

Steve: In periods of a little bit of a drought for us. It's a very small portion of our business and we haven't seen any any change the private client business and so much driven by.

Operator: One moment please while we poll for questions.

Young Ku: The first question comes from the line of Young Ku with the Wells Fargo. Please go ahead. Yes, great. Thank you. Good morning out there. Thank you for your commentary on kind of the macro level thoughts.

Steve: Really private investors and families that invest in real estate throughout the United States, we haven't seen any change in sentiment.

Hessam Nadji: I was wondering if you can provide some additional color on what your clients are talking about or thinking about by the different product types and whether you're seeing any different thought process for each different one. Sure, this is Hessam. Good morning. I would say that there hasn't been much shift in the sentiment toward different property types in the first quarter. We continue to see a lot of enthusiasm for retail as retail has made a significant comeback structurally from years of very limited new construction and the repositioning of a lot of properties post e-commerce and both multi-tenant and single-tenant demand showed improvement in the first quarter.

Steve: But usually if you look at the long term averages.

Steve: Capital component of total CRE transactions in the U S averages somewhere between 10% to 15%. So it has not been the moving factor at a macro level.

Steve: Great. Thank you and just one last question. It looks like you guys did a little bit of stock repurchase during the quarter any perhaps after post post Q1 I was wondering what your appetite is to kind of deploy.

Steve: Deploy capital further for stock repurchases.

Steve: Yes. This is Steve I'll take that yes, youre correct during the quarter.

Speaker Change: As we we did repurchase.

Steve: A few shares and then we're more active.

Speaker Change: After the quarter.

Hessam Nadji: Multi-family is bifurcated. The private client's smaller multi-family, as I mentioned in my formal remarks, continues to be hampered by a bid-ask spread and very tight underwriting by banks and credit unions, while larger multi-family, really garnering more institutional capital and is transacting much more because of the fact that capital has come back into the market and the higher price points, $20 million plus, $25 million plus range, have seen a bigger price correction from peak. Therefore, the replacement cost factor has become a much bigger catalyst for larger, more institutional multi-family. We're really seeing some recovery in the office market, just in terms of the return-to-office metrics as well as kind of a bottoming as perceived by investors on values.

Steve: In total about $5 $5 million worth of repurchases.

Steve: Of course as we've.

Speaker Change: <unk> before.

Speaker Change: <unk> capital to shareholders is just one leg in our capital allocation strategy.

Speaker Change: As we mentioned.

Speaker Change: In total over the last three years $180 million to $187 million in.

Speaker Change: Capital returned to shareholders.

Speaker Change: In addition to obviously, obviously the investments we've made in technology the platform.

Speaker Change: And while M&A has been less active over the last several years, we have been very active in.

Speaker Change: Bringing on individual teams and.

Speaker Change: Hi, producing individuals, which we found to be much more.

Speaker Change: Financially.

Speaker Change: Appropriate investments versus.

Speaker Change: A large any large acquisitions.

Hessam Nadji: And industrial remains a favorite asset, although the trend for us was relatively flat on a year-over-year basis. Self-storage continues to be a very popular product type, although there are some bid-ask spread issues in that segment as well. We saw some improvement in that segment in the first quarter. And of course, the overall financing improvement was very noticeable in the first quarter. Thank you for that.

Speaker Change: Great. Thank you Steve.

Thank you.

Speaker Change: Ladies and gentlemen, we have reached the end of question and answer session I would now like to turn the floor over to <unk> CEO of Marcus <unk> Millichap for closing comments.

Speaker Change: Thank you operator, and thank you everyone for joining our call. We look forward to seeing some of you on the road and to have you back on our next quarterly call. Thank you very much the call is adjourned.

Hessam Nadji: And are you also seeing some distinction between the different geographical locations based on kind of the recently announced tariff announcements? Not so much. In looking at the first quarter, the trends around the country were fairly consistent. There is still a gap between the growth markets, such as Georgia, Florida, and Texas in particular, where you have the benefit of a lot of in-migration, including business migration as well, really catching investors' appetite for future growth. I've actually traveled quite a bit over the past few months and spent some time in Florida. The demographic numbers are very impressive when you look at the next five-year forecast in those particular states, but Florida stands out.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Hessam Nadji: And therefore, at a time of uncertainty, investors sort of shift their focus on those kinds of even more so than usual. But we're seeing a comeback really in markets like Denver and Seattle, where there's been some overbuilding and the pipeline of new construction, especially for multifamily, has pulled back significantly. Some of those metros with solid economic bases that have suffered from some overbuilding are showing some improvement. That was noticeable in the first quarter as well.

Hessam Nadji: And how would you rate Southern California among Interestingly enough, the tragedy from the fires has strengthened the rental market, as you can imagine, for the wrong reasons, of course. But California in general, if you look at the national landscape, based on my travels and a lot of investor interactions, has kind of been the diamond in the rough. It lagged in the recovery. It has, of course, a number of local political issues and growth limitations. But nonetheless, because of the price adjustments and relative kind of a lag, but now positive recovery on job growth and a little bit of a healthier economic outlook, we've seen a lot of capital want to come back into California.

Young Ku: So it's, you know, I would say that the beginning of maybe a new cycle in the state, especially on the other side of some of the macro concerns that I commented on in my formal remarks. Got it. Thank you.

Young Ku: And I'm not sure how much of your business is done with foreign investors, but could you talk about what you're seeing on that end, given kind of the sentiment shift that we've been noticing recently? Well, foreign investment as a category for the entire industry. hasn't really been a needle mover in macro trends for commercial real estate. There are periods of surge in capital that has come in over the years and periods of a little bit of a drought. For us, it's a very small portion of our business and we haven't seen any change. The private client business is so much driven by really private investors and families that invest in real estate throughout the United States and we haven't seen any change in sentiment.

Hessam Nadji: But usually, if you look at the long-term averages, the private capital component of total CRE transactions in the U.S. averages somewhere between 10% to 15%. So it has not been the moving factor at a macro level.

Young Ku: Great, thank you.

Young Ku: And just one last question. It looks like you guys did a little bit of stock repurchase during the quarter and perhaps after post-Q1. I was wondering what your appetite is to kind of deploy capital further for stock repurchases?

Steve DeGennaro: Hey, Young, this is Steve. I'll take that. Yeah, you're correct. During the quarter, we did repurchase a few shares and then were more active after the quarter, in total, about $5.5 million worth of repurchases. Of course, as we've expressed before, return of capital to shareholders is just one leg in our capital allocation strategy. We mentioned, in total, over the last three years, $187 million in capital return to shareholders, in addition to, obviously, the investments we've made in technology, the platform. While M&A has been less active over the last several years, we have been very active in bringing on individual teams and high-producing individuals, which we found to be much more financially appropriate investments versus any large acquisitions.

Young Ku: Great, thank you. Thank you.

Operator: Ladies and gentlemen, we have reached the end of the question and answer session.

Hessam Nadji: I would now like to turn the floor over to Hessam Nadji, CEO of Marcus & Millichap, for closing comments. Thank you, Operator, and thank you, everyone, for joining our call. We look forward to seeing some of you on the road and to have you back on our next quarterly call. Thank you very much.

Operator: The call is adjourned. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.