Marcus & Millichap, Inc. Q4 FY2025 earnings call

• 2025 revenue grew 8.5% and adjusted EBITDA improved to $25 million vs $9 million in 2024. Q4 revenue beat tough comp by 2%. • 2025 marked strongest sales force growth in 7 years with nearly 100 net additions of brokerage and financing professionals. • Maintained market leadership with nearly 9,000 transactions totaling over $50 billion in 2025. • 2025 key factors: capital markets and investor sentiment improved, private client and middle market segments picked up, financing business grew 23%. • Only larger transactions ($20M+) declined 13% due to tough comp and market oversupply in some metros. • Focus on technology strategy, leveraging AI in financial analysis, document generation, etc., while emphasizing brokers' value-added expertise. • 2026 outlook: interest rates stabilized, price corrections and reduced new construction create investment opportunities, but impacted by macroeconomic and geopolitical uncertainties.

Total revenue for the fourth quarter was $244 million, an increase of 2% compared to $240 million in the prior year. Full-year total revenue was $755 million, up 8.5% from $696 million. Real estate brokerage commissions in Q4 were $205 million, accounting for 84% of quarterly revenue, with 1,902 transactions and $11.8 billion volume. Full-year real estate brokerage commissions were $633 million, up 7%, with 6,038 transactions and $35 billion volume. Private client business in Q4 accounted for 65% of brokerage revenue ($133 million), up from 59% and $120 million in the same period last year, with 13% volume growth and 10% transaction count growth. Middle market and larger transaction segments in Q4 accounted for 31% of brokerage revenue ($65 million), down from 38% and $77 million last year. Full-year middle market and larger transaction segments accounted for 32% of brokerage revenue ($200 million). Financing business revenue in Q4 was $33 million, up 6% from $31 million last year, with $3.7 billion volume across 507 transactions. Full-year financing revenue was $104 million, up 23%, with 33% transaction count growth and $11.9 billion volume. Other revenue in Q4 was $5 million, down from $6 million last year, and $19 million full-year, down from $22 million prior year.

• Q1 revenue expected to be sequentially lower than Q4 due to seasonality. • Cost of services for Q1 expected in range of 60%-61% of revenue. • SG&A for Q1 expected to increase year-over-year in absolute dollars. • Effective tax rate for quarter and year expected in range of 50%-60%. • Committed to balanced capital allocation strategy, including investing in technology and talent, pursuing strategic acquisitions, and returning capital to shareholders.

• General economic and commercial real estate market conditions uncertainty. • Ability to retain and attract transactional professionals. • Maintaining business philosophy and partnership culture under competitive pressures. • Integrating new agents and sustaining growth. • AI potential impact: data commoditization may lead to fee pressure, but core intermediary relationships and people skills remain crucial. • Market uncertainty causing large bid-ask spread in strategic acquisitions, gap in valuation expectations and terms.

Q: Hessam, as you alluded to, the broker group has been under pressure due to AI displacement concerns. Which segments could be impacted and does focus on Private Client Group provide protection?

A: AI can improve manual processes, but second wave interpretive AI faces challenges in commercial real estate due to disorganized data. Private Client Group may have some protection as relationship, due diligence, and people skills are hard to replace by robots.

Q: You had strong growth in broker count. Was growth visible, any specific specialties targeted, and plans for 2026 headcount?

A: Had visibility into recruitment efforts, increased candidate pool and filtering. Experienced talent hired in 2025 will take time to rebuild pipeline. 2026 plans maintain momentum with existing initiatives.

Q: Continuing to explore strategic transactions, any impact of AI disruption on acquisition opportunities?

A: AI doesn't diminish appetite for acquisitions. Previously issues were market uncertainty, bid-ask spread, and valuation gaps, but market clarity returning boosts confidence in future acquisitions.

Q: Follow-up on M&A, is it market uncertainty, price, or cultural fit?

A: All three. Culture least problematic, bid-ask spread wide, and concern over being founder's retirement plan are factors.

Q: Cross-sell from financing to brokerage?

A: Yes, e.g., IPA Capital Markets collaboration with sales teams, loan sales and auction channels creating cross-selling.

Q: 2026 performance outlook given market stability?

A: Early 2026 best start since 2022, but still bid-ask spread and investor caution. Incremental improvement from sweat and blood, not hockey stick relief.