Marcus & Millichap, Inc. Q2 FY2026 earnings call

Overall Market & Performance

• The company delivered its best first half performance since 2022, with broad-based growth across all segments for the first time since the 2022 market disruption.
• Growth is driven by narrowed bid-ask spreads, more realistic seller pricing, improving lender balance sheets, and more available financing across all deal size ranges.
• Management maintained investments in brand, talent, and infrastructure during the market downturn, keeping strategic initiatives on track while pressuring near-term earnings; the company is now positioned to capture market share gains and operating leverage as the market recovers.

Sales Force & Talent Strategy

• Ended Q2 with 1,575 investment sales professionals, a modest YoY increase. Headcount growth is slowed intentionally by a strategic shift to expanded internship and fellowship programs for organic growth, which produce higher productivity and retention for new hires despite slower nominal growth.
• Approximately 25% of new hires are semi-experienced professionals from smaller local/regional firms, a share that is increasing as brokers recognize the advantages of the larger Marcus & Millichap platform and training systems. Recruiting of experienced professionals and teams remains a core priority, particularly for the financing division.
• Year-to-date transactions per agent are up 9-10% YoY, reflecting early benefits from the revised talent strategy.

Financing Business Operations

• Marcus & Millichap is now Freddie Mac and Fannie Mae's largest non-direct multifamily debt originator via its partnership with M&T Bank. The company closed loans with 207 separate lenders in Q2 and 304 lenders in the first half, demonstrating its broad capital source network as a key competitive advantage.
• Refinancings accounted for 47% of financing revenue in Q2, up from 39% YoY, as more property owners can secure new loans in the improving market. Growth is driven by expansion of IPA Capital Markets, agency financing capabilities, technology investments, and lender relationship building.

Capital Return Strategy

• The company ended Q2 with $345 million in cash, cash equivalents, and marketable securities, maintaining a strong balance sheet with ample liquidity for both shareholder returns and strategic acquisitions.
• Repurchased 913,000 shares for $24 million in Q2; the board approved additional repurchase authorization, bringing remaining authorization to ~$90 million. The board also declared a semiannual dividend of 25 cents per share, payable October 2026. Over the last four years, the company has returned over $251 million to shareholders via dividends and buybacks.

For Q2 2026, Marcus and Millichap reported total revenue of $203 million, an 18% year-over-year (YoY) increase. The 6-month total revenue was $374 million, also up 18% YoY. Breakdown by segment:

• Real Estate Brokerage Commissions: $167 million in Q2 2026, up 18% YoY, accounting for 82% of total revenue. 1,530 transactions were completed, totaling $10 billion in volume, up 11% and 18% YoY respectively. Within brokerage:
  • Private client: $106 million, up 14% YoY
  • Middle market: $22 million, up 13% YoY
  • Larger transaction (deals over $20 million): $33 million, up 43% YoY
• Financing Business: $30 million in Q2 2026, up 15% YoY, accounting for ~14.8% of total revenue. 480 loans were closed, up 17% YoY, with $4 billion in dollar volume, up 5% YoY. 6-month financing revenue hit $57 million, up 29% YoY.
• Other Revenue: $6 million in Q2 2026, up from $5 million YoY, accounting for ~3% of total revenue. 6-month other revenue was $12 million, up from $8 million YoY.

Profitability: Q2 2026 net income was $4 million ($0.10 per share), compared to a net loss of $11 million ($0.28 loss per share) YoY. Adjusted EBITDA improved to $12 million from $1.5 million YoY. Total operating expenses were $201 million, up from $181 million YoY; cost of services was 62.4% of revenue (up 50 bps YoY), while SG&A was 35% of revenue, down from 42% YoY, reflecting positive operating leverage.

• Cost of services as a percentage of revenue is expected to be sequentially higher in Q3 2026, following typical seasonal patterns as revenue builds through the year.
• SG&A expense is expected to see a modest sequential increase from Q2 2026 levels.
• Q3 2026 income tax expense is projected to be in the range of $1.5 million to $2 million.
• Management remains confident in the long-term recovery of the commercial real estate transaction market and the company's ability to capture growing market share. Over the next 5-7 years, new synergistic business lines are expected to contribute significant nominal growth and revenue diversification.
• Management maintains conviction that the company will return to peak-level profitability as market conditions improve, though the path to these levels will reflect changes in the company's cost structure and talent investment over the past five years.

• Persistent interest rate volatility and higher-than-expected rates (10-year Treasury yields are 50 bps higher than at the start of 2026 and 70 bps higher than pre-February 2026 military conflict lows) disrupt deal underwriting, alignment between buyers, sellers and lenders, and extend transaction timelines, slowing recovery.
• Lingered economic and market uncertainty creates a choppy, uneven recovery in transaction volumes.
• Intense competition for talent in the commercial real estate brokerage industry increases labor-related costs, putting pressure on margins.

Q: With a ~50-person year-over-year increase in sales professionals, what is the breakdown between inexperienced new hires and experienced incoming brokers, and what benefits come from the current recruiting strategy? / A: Management explained that ~25% of new hires have prior experience, and this share is rising as the company shifts away from traditional inexperienced recruiting to prioritize expanded internship and fellowship programs. These enhanced programs produce higher new hire productivity and faster time to productive output. Recruiting experienced teams and individuals, especially for the financing division, remains an active third track of the strategy. Early benefits include a 9-10% YoY increase in transactions per agent year-to-date.

Q: Is Marcus & Millichap exploring new business lines for revenue diversification, and what is the strategic priority for these expansions? / A: Management confirmed the company is exploring synergistic expansions that complement its core brokerage business, rather than abandoning the core transaction business. Top priorities include expanding leasing capabilities (especially in multi-tenant retail and industrial) to leverage existing infrastructure and serve current clients better, continuing to scale financing capabilities, acquiring tech-enabled appraisal/consulting groups, and exploring investment management opportunities. All expansions are focused on the fragmented, underserved private client and middle quasi-institutional market, which the company is uniquely positioned to serve. Over 5-7 years, these lines are expected to deliver significant nominal growth and diversification.

Q: When can incremental margin improvement be expected, and what is the path back to peak EBITDA levels seen in 2021-2022? / A: Margin improvement will come from two core sources: operating leverage from top-line growth above the 2025 break-even revenue level, and productivity gains from technology and infrastructure investments that improve workflow efficiency. The company maintains that peak profitability levels are achievable as the market normalizes, but notes that industry competition has increased labor costs since the pre-pandemic period, so the path to peak profitability will rely on increasing revenue per agent, adding new synergistic revenue streams, and maintaining disciplined cost structure management. ROI is closely reviewed for all expense categories to ensure profitability growth.