Marcus & Millichap, Inc. Q2 FY2025 earnings call

• Business improved despite market headwinds; financing revenue grew due to IPA team additions, integration of services, and better lending environment.
• Private client brokerage had 10.3% revenue growth and 12% transaction growth. Larger transactions ($20M+) declined 12% due to tariff impact.
• Auction division sold 273 transactions (27% of US commercial auctions) as a new revenue stream.
• Initiated management reorganization on May 1 to streamline decision-making. Focus on talent, technology, capital markets expansion, and MMI brand growth.

Total revenue for the second quarter was $172 million, a 9% year-over-year growth. Brokerage revenue was $141 million (82% of total revenue), up 4% year-over-year. Financing revenue was $26 million, a 44% increase year-over-year. Brokerage breakdown: Core private client business accounted for 66% of brokerage revenue ($94 million) in Q2, with private client transactions up 15% in volume and 12% in count. Middle market and larger transactions (30% of brokerage revenue, $42 million) saw a 10% increase in dollar volume but an 8% decrease in transaction count due to client pauses post-tariffs. Financing revenue grew from $18 million to $26 million, driven by an 86% increase in transaction volume to $3.4 billion across 409 transactions.

• Cost of services as a percentage of revenue expected to be higher in Q3 as revenue builds.
• SG&A is expected to be relatively flat in Q3.
• Tax expense for Q3 is expected to be in the range of $500,000 to $1 million.
• Continues to focus on investing in talent, technology, strategic acquisitions, and returning capital to shareholders.

• General economic and commercial real estate market conditions.
• Ability to retain and attract transactional professionals.
• Competitive pressures on business philosophy and partnership culture.
• Impact of tariffs on consumers and corporate profits leading to slower economic growth.

Q: Talk about shifting trends in transaction volume segments, especially private market.

A: Improvement due to client outreach, better pricing alignment, and easing lending. Mix of larger transactions affected commission rates.

Q: Commission rates decline despite private market revenue increase.

A: Decline due to more $100M+ transactions with lower average fees.

Q: Tax accounting change impact.

A: Change to year-to-date method, one-time hit in Q2, expected to normalize.

Q: External growth opportunities and share repurchases.

A: Active in M&A, balancing repurchases, dividends, and growth opportunities.