Fourth Quarter 2015 Earnings Conference Call March 10, 2016 1 - - PowerPoint PPT Presentation

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Fourth Quarter 2015 Earnings Conference Call March 10, 2016

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Forward-Looking Statements

Certain statements in this presentation are “forward-looking statements” within the meaning of the federal securities laws, including our business outlook for 2016. Statements about our beliefs and expectations and statements containing the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend,” “well-positioned” and similar expressions constitute forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this earnings press release. Investors are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Any forward-looking statements speak only as of the date of this earnings press release and, except to the extent required by applicable securities laws, the Company expressly disclaims any obligation to update

• r revise any of them to reflect actual results, any changes in expectations or any change in
• events. If the Company does update one or more forward-looking statements, no inference

should be drawn that it will make additional updates with respect to those or other forward-looking

• statements. Factors that could cause results to differ materially include, but are not limited to: (1)

general economic conditions and commercial real estate market conditions, including the conditions in the global markets and, in particular, the U.S. debt markets; (2) the Company’s ability to attract and retain transaction professionals; (3) the Company’s ability to retain its business philosophy and partnership culture; (4) competitive pressures; (5) the Company’s ability to integrate new agents and sustain its growth; and (6) other factors discussed in the Company’s public filings, including the risk factors included in the Company’s Annual Report on Form 10-K to be filed with the Securities and Exchange Commission on or about March 15, 2016.

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John K

• hn Kerin

erin

President & Chief Executive Officer

Conference Call Participants

Mar arty ty Louie Louie

Chief Financial Officer

Hes essam am Nadji adji

Senior Executive Vice President

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MMI Financial Highlights

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2015 Fourth Quarter Highlights

Revenue $186.2 million 18.8% Net Income $19.9 million 21.4% Adjusted EBITDA $35.3 million 18.8% Sales Volume $11.0 billion 11.0% Transaction Closings 2,460 14.7% Investment Sales & Financing Professionals 1,607 7.6% as of December 31, 2015 Operational Highlights Financial Highlights

YOY YOY

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Full Year 2015 Highlights

Revenue $689.1 million 20.4% Net Income $66.4 million 34.0% Adjusted EBITDA $124.1 million 33.7% Sales Volume $37.8 billion 14.2% Transaction Closings 8,715 13.7% Investment Sales & Financing Professionals 1,607 7.6% as of December 31, 2015 Operational Highlights Financial Highlights

YOY YOY

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2015 Fourth Quarter Brokerage Highlights

Sales Volume $8.6 billion 15.5% Transaction Closings 1,810 15.2% Investment Sales Professionals as of December 31, 2015 1,509 6.9% Revenue $186.2 million 18.8% Revenue from Private Client Market Segment ($1 - $10 million) $129.3 million 29.3%

34% 35% 14% 17%

Transactions by Region

Western Midwest/ Mountain/ South/Southwest Southeast Northeast/ Mid-Atlantic

YOY

34% 44% 6% 16%

Transactions by Property Type

Multifamily Retail Office Other 4% 69% 15% 12%

Revenue by Transaction Size

Up to $1M $1M - $10M $10M - $20M $20M +

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Full Year 2015 Brokerage Highlights

Sales Volume $28.4 billion 12.2% Transaction Closings 6,332 13.3% Investment Sales Professionals as of December 31, 2015 1,509 6.9% Revenue $632.6 million 20.5% Revenue from Private Client Market Segment ($1 - $10 million) $439.2 million 25.1%

35% 35% 14% 16%

Transactions by Region

Western Midwest/ Mountain/ South/Southwest Southeast Northeast/ Mid-Atlantic

YOY

36% 42% 6% 16%

Transactions by Property Type

Multifamily Retail Office Other 5% 69% 14% 12%

Revenue by Transaction Size

Up to $1M $1M - $10M $10M - $20M $20M +

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2015 Fourth Quarter Financing Highlights

Sales Volume $1.5 billion 17.0% Transaction Closings 466 25.9% Financing Professionals as of December 31, 2015 98 19.5% Revenue $12.5 million 8.5%

47% 33% 7% 13%

Transactions by Property Type

Multi-Family Retail Office Other 63% 20% 4% 13%

Transactions by Region

Western Midwest/ Mountain/ South/ Southwest Southeast Northeast/ Mid-Atlantic

YOY

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Full Year 2015 Financing Highlights

Sales Volume $4.9 billion 29.4% Transaction Closings 1,601 20.2% Financing Professionals as of December 31, 2015 98 19.5% Revenue $42.6 million 25.6%

52% 30% 5% 13%

Transactions by Property Type

Multi-Family Retail Office Other 63% 20% 4% 13%

Transactions by Region

Western Midwest/ Mountain/ South/ Southwest Southeast Northeast/ Mid-Atlantic

YOY

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Market Highlights

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* Forecast per Economy.com Sources: BLS

U.S. Employment Gains Driving Real Estate Demand

• U.S. employment has expanded well above prior peak
• 2016 forecast to add 2.5 million jobs*
• 2.7
• 1.8
• 0.9

0.0 0.9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

+8.2 Million

• 8.7 Million

+13.4 Million Quarterly Job Growth (Millions)

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0.0 0.8 1.6 2.4 3.2

2 1 1 2 1 2 2 1 3 2 1 4 2 1 5

4.0% 5.5% 7.0% 8.5% 10.0%

Employment Growth Unemployment Rate

Employment and Occupancy Trends Strong

• Employment growth totaled more

than 2.7 million jobs in 2015

• Total employment stands 4.7 million

above the pre-recession peak

• Unemployment rate is down 350

basis points since 2011

• Space absorption remains robust in

all property types Space Absorption Trends

Sources: BLS, CoStar Group, Inc., MPF Research

Employment Growth (Mil.) Unemployment Rate

60 120 180 240 Retail Office Industrial

11 12 13 14 15

80 160 240 320 Apartment

Net Absorption (000s of Units) Net Absorption (Mil. SqFt.)

Employment Growth vs. Unemployment Rate

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0.0% 0.5% 1.0% 1.5% 2.0% Multifamily Retail Office Industrial

10-Year Avg. 2011 2012 2013 2014 2015

Fundamentals Remain Healthy Despite New Supply

• Property fundamentals showing steady improvement across all property types
• Multifamily properties led the recovery; increased construction currently balanced with strong demand
• New supply rising, but still below long-term trends for retail and office sectors

Occupancies Rising Construction Trends Favorable

Sources: CoStar Group, Inc., MPF Research

80% 85% 90% 95% 100% Multifamily Retail Office Industrial

10-Year Avg. 2011 2012 2013 2014 2015 Occupancy (%) Completions as % of Inventory

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Attractive Investment Market Backdrop

• Preliminary estimates for 2015 sales

show a gain of 12.5% in transactions and 15% in sales volume over 2014

• Low interest rates, attractive

comparative yields and improving property fundamentals are supporting the rise in sales activity U.S. Commercial Real Estate - Total Transactions (1) U.S. Commercial Real Estate - Total Dollar Volume (1)

Sources: CoStar Group, Inc., Real Capital Analytics * Preliminary estimate (1) Includes sales $1 million and greater for multifamily, retail, office and industrial properties.

15 30 45 60

03 04 05 06 07 08 09 10 11 12 13 14 15*

Total Transactions (000s)

Peak 43,718 53,045

$0 $150 $300 $450 $600

03 04 05 06 07 08 09 10 11 12 13 14 15*

Total Dollar Volume ($ Bil.)

Peak $461.0B $451.9B

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* Through 4Q 2015 preliminary estimate Cap rates for sales $1 million and greater Sources: CoStar Group, Inc., Real Capital Analytics, Federal Reserve, Standard & Poor’s

Commercial Real Estate Yields Compelling

0% 3% 6% 9% 12% 1990 1995 2000 2005 2010 2015* CRE Cap Rate 10-Year Treasury Rate

Average Rate

0% 2% 4% 6% 8%

• Apt. Cap
• Ofc. Cap
• Ret. Cap
• Ind. Cap

10-Year Treasury S&P 500 Avg. Div. AAA Bonds Baa Bonds Money Market

Average Cap Rate/Yield

Average Yield (Cap Rate)

430 bps 440 bps 480 bps 480 bps 200 bps 580 bps 440 bps

Cap Rate Long-Term Avg. 10-Yr Treasury Long-Term Avg.

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Commercial Real Estate Cap Rate Trends

Sources: CoStar Group, Inc., Real Capital Analytics * Preliminary estimate (1) Includes apartment, retail, office, and industrial sales $1 million and greater (2) Includes apartment and office sales $1 million and greater

85% 7% 8% 91% 5%4% 64% 14% 22% 79% 12% 9%

6% 7% 8% 9% 10% 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 *

Primary Secondary Tertiary

5% 6% 7% 8% 9% 2 4 2 5 2 6 2 7 2 8 2 9 2 1 2 1 1 2 1 2 2 1 3 2 1 4 2 1 5 *

Class A Class B/C

Average Cap Rate Cap Rates by Market Type (1) Cap Rates by Class (2) Average Cap Rate

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MMI Market Position

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Private Client Market Segment – Largest Sales and Commission Pool Opportunity

Transactions by Investor Segment (1)

• Segment consists of sales $1 million - $10 million; is the largest and most active, accounting for 80%+ of transactions
• Primarily driven by high-net worth individuals, partnerships and smaller private fund managers
• Most active market segment due to personal drivers that result in buying/selling/refinancing properties
• Segment features the highest commission rates

Commission Pool by Investor Segment (1) (2)

Sources: CoStar Group, Inc., Real Capital Analytics (1) Includes apartment, retail, office, and industrial sales $1 million and greater for 2015; 4Q preliminary estimate for market total. Commercial Real Estate market totaled an estimated 53,045 transactions, with $8.4 billion in total commission pool. (2) Estimate based on industry averages: 3.7% commission rate for private client market segment, 2.0% rate for middle market segment (previously referred to as the hybrid segment) and 0.8% for institutional market segment.

Commercial Real Estate Market Marcus & Millichap Marcus & Millichap

84% 8% 8% 90% 6% 4% 61% 15% 24% 78% 13% 9%

Commercial Real Estate Market

Private Client Market Segment ($1M - $10M) Middle Market Segment ($10M - $20M) Institutional Market Segment ($20M+)

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0.8% 0.8% 0.9% 0.9% 1.4% 1.6% 2.5% 2.8% 4.7% 7.9%

ONCOR Sperry Van Ness Coldwell Banker Lee & Associates NAI NGKF Colliers International Cushman & Wakefield CB Richard Ellis Marcus & Millichap

MMI – Private Client Market Leader with Growth Opportunity

Top 10 U.S. Brokerage Firms by Market Share (Private Client Market Segment $1M - $10M)(1) Variance From Long-Term Average Sales* CRE Sales by Price Tranche 2000-2015

Top 10 Market Share 24.3%

~1.7x Greater

0% 15% 30% 45% 60%

32.6% 41.2% 46.7%

Private Client Market Segment $1M-$10M Middle Market Segment $10M-$20M Institutional Market Segment $20M+

Sources: CoStar Group, Inc., Real Capital Analytics * Long-term average: 2000-2015; 4Q 2015 preliminary estimate; includes multifamily, retail, office, and industrial sales $1 million and greater Variance from long-term average measures the average quarterly percent variance in sales transactions from the 2000-2015 average number of sales Market share includes recent company mergers and acquisitions (1) Includes multifamily, retail, office and industrial sales from $1 million to $10 million during the trailing 12-months through 3Q 2015 in which the brokerage firms represented the seller.

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Market Share Growth Opportunity by Property Type

Sources: CoStar Group, Inc., Real Capital Analytics (1) Includes investment sales, financing and other transactions in 2015

MMI 2015 Transactions by Property Type (1)

• Leverage platform,

relationships, brand to grow in various sectors

• Growth opportunity remains in

leading sectors (multifamily and retail)

• Expanding multi-tenant office,

industrial presence

• Expanding presence in

specialty property types and larger transactions – National specialty divisions led by tenured executives

Property Type Transactions Volume ($Billion)

Multifamily 3,382 $17.9 Retail 3,351 $10.8 Office 567 $2.4 Hospitality 225 $1.6 Industrial 253 $1.0 Self-Storage 201 $0.9 Seniors Housing 83 $0.9 Land 266 $0.6 Manufactured Housing 101 $0.4 Mixed-Use/Other 286 $1.3 Total 8,715 $37.8

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MMI Financial Detail

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Q4 2015 Revenue Increases By 17.8% From Prior Year

Revenue

($ in millions)

$172.4 $203.2 $140 $160 $180 $200 $220 Q4 '14 Q4 '15

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Full Year 2015 Revenue Increases By 20.4% From Prior Year .6% From Prior Year

Revenue

($ in millions)

$572.2 $689.1 $0 $100 $200 $300 $400 $500 $600 $700 $800 FY 2014 FY 2015

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Q4 2015 Brokerage Operating Metrics

Total Sales Volume

($ in billions)

Total Number Of Sales Transactions Average Investment Sales Professionals Average Commission Per Transaction

($ in thousands)

$7.4 $8.6 $0.0 $1.5 $3.0 $4.5 $6.0 $7.5 $9.0 Q4 '14 Q4 '15 1,571 1,810 250 500 750 1,000 1,250 1,500 1,750 2,000 Q4 '14 Q4 '15 1,377 1,461 200 400 600 800 1,000 1,200 1,400 1,600 Q4 '14 Q4 '15 $99.7 $102.9 $0 $20 $40 $60 $80 $100 $120 Q4 '14 Q4 '15

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Full Year Brokerage Operating Metrics

Total Sales Volume

($ in billions)

Total Number Of Sales Transactions Average Investment Sales Professionals Average Commission Per Transaction

($ in thousands)

$25.4 $28.4 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 $30.0 FY 2014 FY 2015 5,588 6,332 1,000 2,000 3,000 4,000 5,000 6,000 7,000 FY 2014 FY 2015 1,297 1,428 200 400 600 800 1,000 1,200 1,400 1,600 FY 2014 FY 2015 $94.0 $99.9 $0 $20 $40 $60 $80 $100 $120 FY 2014 FY 2015

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$0.8 $0.9 $34.7 $109.8 $129.7 $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 Q4 '14 Q4 '15 Depreciation SG&A COS

63.8% of Rev 19.0% of Rev

Q4 2015 Operating Expenses

Operating Expense

($ in millions)

63.7% of Rev 0.5% of Rev 0.5% of Rev

$145.3 $169.2

20.1% of Rev

$38.6

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$3.2 $3.3 $134.3 $350.1 $423.4 $0 $40 $80 $120 $160 $200 $240 $280 $320 $360 $400 $440 $480 $520 $560 $600 $640 FY 2014 FY 2015 Depreciation SG&A COS

61.4% of Rev 21.4% of Rev

Full Year 2015 Operating Expenses

Operating Expense

($ in millions)

61.2% of Rev 0.5% of Rev 0.6% of Rev

$487.6 $574.4

23.5% of Rev

$147.7

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$16.4 $19.9 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 Q4 '14 Q4 '15

Q4 2015 Net Income and Adjusted EBITDA Performance

Adjusted EBITDA

($ in millions)

$29.7 $35.3 $0 $4 $8 $12 $16 $20 $24 $28 $32 $36 $40 Q4'14 Q4 '15

Net Income

($ in millions)

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$49.5 $66.4 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 $60 $65 $70 FY 2014 FY 2015

Full Year Net Income and Adjusted EBITDA Performance

Adjusted EBITDA

($ in millions)

$92.8 $124.1 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 FY 2014 FY 2015

Net Income

($ in millions)

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Cash Flow from Operations

QTD Cash Flow from Operations

($ in millions)

Full Year Cash Flow From Operations

($ in millions)

$36.5 $33.5 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 Q4 '14 Q4 '15 $71.4 $72.1 $50 $55 $60 $65 $70 $75 FY 2014 FY 2015

(1) Decrease primarily due to timing of payments related to accounts payable and accrued expenses and income taxes.

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$149.2 $96.2 $0 $25 $50 $75 $100 $125 $150 $175 $200 Cash and Cash Equivelants Core-Cash Investments

$99.8 (1)

12/31/2014 12/31/2015

Strong Cash Position

Cash on Hand and Core-Cash Investments

($ in millions) (1) Relates to investments designated by the Company as core-cash investments in fixed and variable debt securities, in accordance with our investment policy approved by the Board of Directors with weighted average maturity of 0.65 years.

$195.9

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Appendix

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Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net income before interest income/expense, taxes, net realized gains on marketable securities, available for sale, depreciation and amortization and stock-based compensation is a non-GAAP financial measure. The Company uses Adjusted EBITDA in its business operations to, among other things, evaluate the performance of its business, develop budgets and measure its performance against those budgets. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate its overall

• perating performance. However, Adjusted EBITDA has material limitations as an analytical tool and should not be considered in isolation or as a

substitute for analysis of the Company’s results as reported under U.S. generally accepted accounting principles (“U.S. GAAP”). The Company finds Adjusted EBITDA as a useful tool to assist in evaluating performance because it eliminates items related to capital structure and taxes and non-cash stock-based compensation charges. In light of the foregoing limitations, the Company does not rely solely on Adjusted EBITDA as a performance measure and also considers its U.S. GAAP results. Adjusted EBITDA is not a measurement of the Company’s financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. A reconciliation of the most directly comparable U.S. GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands):

.

Three Months Ended December 31, Year Ended December 31, 2015 2014 2015 2014 Net Income………………………………………….. $ 19,949 $ 16,430 $ 66,350 $ 49,531 Adjustments: Interest income and other (1)………………... (376) (44) (1,373) (50) Interest expense…………………………….. 377 449 1,726 1,651 Provision for income taxes…………………. 14,024 10,285 47,018 33,452 Depreciation and amortization……………... 916 807 3,305 3,206 Stock-based compensation…………………. 364 1,759 7,114 5,034 Adjusted EBITDA…………………………………... $ 35,254 $ 29,686 $ 124,140 $ 92,824

(1) Other for the three and twelve months ended December 31, 2015 includes $2 and $132 of net realized gains on marketable securities, available-for-sale, respectively.

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Company Overview

Na National tional Pla Platf tfor

• rm

m Focused

• cused on
• n

In Investm estmen ent t Br Brok

• ker

erage ge Mar Market Leader in the et Leader in the Priva Private te Client Client Se Segment gment Pla Platf tfor

• rm

m Built Built for

• r

Maximizing Maximizing In Investor estor Value alue Mana Management W gement With ith Sign Significa ificant nt In Investment estment Br Brok

• ker

erage ge Experience Experience Well ell Positioned

• sitioned to

to Ex Execute on Str ecute on Strate tegic gic Gr Growth wth Plan Plan

• 45-year old platform dedicated to perfecting real estate investment brokerage
• Designed to facilitate the movement of capital providing liquidity to clients
• Non-competitive management with extensive investment brokerage experience,

committed to training, coaching and supporting investment sales professionals

• Creates a competitive advantage through agent retention and better client results
• Marcus & Millichap Capital Corporation (“MMCC”), Research & Advisory support

client dialogue, financing, strategy and sales execution

• Culture and policy of information sharing is key to maximizing investor value
• Only national brokerage firm focused on the private client segment
• Private client market segment ($1 - $10 million) consistently comprises 80%+ of

U.S. commercial property sales transactions annually

• Positioned to increase private client market segment share, expand presence in

specialty niches/larger transaction business and grow financing division, MMCC

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Illustrative MMI Earnings Model

Agents Productivity Transaction Value Commission Rate EBITDA (2) Investment Sales Revenue Investment Sales Revenue Cost of Services SG&A (1)

(1) Includes stock-based compensation (2) 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 measure derived in accordance with U.S. GAAP.

Financing Fees & Other Revenue