☒
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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35-2478370
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Trading
Symbol (s)
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Name of each exchange
on which registered
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Common Stock
, par value $0.0001 per share
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MMI
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New York Stock Exchange
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Large accelerated filer
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☒
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Accelerated filer
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☐
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Non-accelerated
filer
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☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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Page
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Item 1.
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4
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Item 1A.
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16
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Item 1B.
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29
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Item 2.
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29
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Item 3.
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29
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Item 4.
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29
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Item 5.
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30
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Item 6.
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32
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Item 7.
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34
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Item 7A.
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48
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Item 8.
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48
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Item 9.
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48
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Item 9A.
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48
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Item 9B.
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50
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Item 10.
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51
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Item 11.
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52
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Item 12.
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52
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Item 13.
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53
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Item 14.
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53
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Item 15.
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54
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Item 16.
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56
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57
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• | market trends in the commercial real estate market or the general economy; |
• | our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals; |
• | the effects of increased competition on our business; |
• | our ability to successfully enter new markets or increase our market share; |
• | our ability to successfully expand our services and businesses and to manage any such expansions; |
• | our ability to retain existing clients and develop new clients; |
• | our ability to keep pace with changes in technology; |
• | any business interruption or technology failure and any related impact on our reputation; |
• | changes in interest rates, tax laws, employment laws or other government regulation affecting our business; and |
• |
other risk factors included under “Risk Factors” in this Annual Report on Form
10-K.
|
• |
a
49-year
history of providing investment brokerage and financing services through proprietary inventory and marketing systems, policies and culture of information sharing and
in-depth
investment brokerage training. These services are executed by our salesforce under the supervision of a dedicated management team focused on client service and growing the firm;
|
• |
market leading share and brand within the
$1-$10
million private client market segment, which consistently represents more than 80% of total U.S. commercial property transactions greater than $1 million in the marketplace;
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• | investment sales and financing professionals providing exclusive client representation across multiple property types; |
• | a broad geographic platform in the United States and Canada powered by information sharing and proprietary real estate marketing technologies; |
• | an ability to scale with our private clients as they grow and connect private capital with larger assets through our Institutional Property Advisors (“IPA”) group; |
• | a financing team integrated with our brokerage sales force providing independent mortgage brokerage services by accessing a wide range of lenders on behalf of our clients; |
• | an experienced management team overseeing our offices, with an average of 11 years of real estate investment brokerage experience with our Company; |
• | our managers are in a support and leadership role as company executives and do not compete with or participate in investment sales professionals’ commissions; and |
• | industry-leading research and advisory services tailored to the needs of our clients and supporting our investment sales and financing professionals. |
• | Properties priced less than $1 million; |
• |
Private client market:
|
• |
Middle market:
|
• |
Larger transaction market:
|
|
2019
|
2018
|
Change
|
|||||||||||||||||||||||||||||||||
Real Estate Brokerage:
|
Number
|
|
Volume
|
|
Revenues
|
|
Number
|
|
Volume
|
|
Revenues
|
|
Number
|
|
Volume
|
|
Revenues
|
|
||||||||||||||||||
|
|
(in millions)
|
|
(in thousands)
|
|
|
|
(in millions)
|
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(in thousands)
|
|
|
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(in millions)
|
|
(in thousands)
|
|
|||||||||||||||||||
<$1 million
|
1,011
|
$ |
657
|
$ |
27,012
|
1,077
|
$ |
695
|
$ |
29,677
|
(66
|
) | $ |
(38
|
) | $ |
(2,665
|
) | ||||||||||||||||||
Private client market
($1-$10
million)
|
5,311
|
17,239
|
487,528
|
5,230
|
16,645
|
483,967
|
81
|
594
|
3,561
|
|||||||||||||||||||||||||||
Middle market (
≥
$10-$20
million)
|
441
|
6,002
|
107,818
|
472
|
6,462
|
116,850
|
(31
|
) |
(460
|
) |
(9,032
|
) | ||||||||||||||||||||||||
Larger transaction market (
≥
$20 million)
|
279
|
12,960
|
106,998
|
300
|
12,268
|
116,861
|
(21
|
) |
692
|
(9,863
|
) | |||||||||||||||||||||||||
|
7,042
|
$ |
36,858
|
$ |
729,356
|
7,079
|
$ |
36,070
|
$ |
747,355
|
(37
|
) | $ |
788
|
$ |
(17,999
|
) | |||||||||||||||||||
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Base Period
12/31/14
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|
12/31/15
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|
12/31/16
|
|
12/31/17
|
|
12/31/18
|
|
12/31/19
|
|
||||||||||||
Marcus & Millichap, Inc.
|
100.00
|
87.64
|
80.36
|
98.08
|
103.25
|
112.03
|
||||||||||||||||||
S&P 500
|
100.00
|
101.38
|
113.51
|
138.29
|
132.23
|
173.86
|
||||||||||||||||||
Peer Group
|
100.00
|
102.37
|
83.72
|
119.62
|
106.05
|
157.24
|
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Years Ended December 31,
|
|||||||||||||||||||
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2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
||||||||||
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(in thousands except per share, investment sales and financing
professional and sales volume amounts) |
|||||||||||||||||||
Statement of Income Data:
|
|
|
|
|
|
|||||||||||||||
Total revenues
|
$ |
806,428
|
$ |
814,816
|
$ |
719,700
|
$ |
717,450
|
$ |
689,055
|
||||||||||
Cost of services
|
498,878
|
502,883
|
446,557
|
444,768
|
423,389
|
|||||||||||||||
Operating income
|
96,423
|
112,287
|
96,132
|
106,501
|
114,651
|
|||||||||||||||
Provision for income taxes
(1)
|
30,582
|
29,963
|
47,702
|
42,445
|
47,018
|
|||||||||||||||
Net income
|
$ |
76,930
|
$ |
87,257
|
$ |
51,524
|
$ |
64,657
|
$ |
66,350
|
||||||||||
Earnings per share:
|
|
|
|
|
|
|||||||||||||||
Basic
|
$ |
1.95
|
$ |
2.23
|
$ |
1.32
|
$ |
1.66
|
$ |
1.71
|
||||||||||
Diluted
|
$ |
1.95
|
$ |
2.22
|
$ |
1.32
|
$ |
1.66
|
$ |
1.69
|
||||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|||||||||||||||
Basic
|
39,404
|
39,149
|
38,988
|
38,899
|
38,848
|
|||||||||||||||
Diluted
|
39,548
|
39,383
|
39,100
|
39,035
|
39,162
|
|||||||||||||||
Balance Sheet Data:
|
|
|
|
|
|
|||||||||||||||
Cash and cash equivalents
|
$ |
232,670
|
$ |
214,683
|
$ |
220,786
|
$ |
187,371
|
$ |
96,185
|
||||||||||
Marketable securities,
available-for-sale
(2)
|
$ |
211,561
|
$ |
220,645
|
$ |
125,659
|
$ |
104,929
|
$ |
134,255
|
||||||||||
Total assets
|
$ |
709,034
|
$ |
566,380
|
$ |
459,664
|
$ |
394,016
|
$ |
321,225
|
||||||||||
Long-term liabilities
|
$ |
112,322
|
$ |
63,950
|
$ |
61,517
|
$ |
56,986
|
$ |
57,224
|
||||||||||
Total liabilities
|
$ |
214,127
|
$ |
156,806
|
$ |
144,776
|
$ |
135,162
|
$ |
132,235
|
||||||||||
Total stockholders’ equity
|
$ |
494,907
|
$ |
409,574
|
$ |
314,888
|
$ |
258,854
|
$ |
188,990
|
||||||||||
Other Data:
|
|
|
|
|
|
|||||||||||||||
Adjusted EBITDA
(3)
|
$ |
115,551
|
$ |
129,457
|
$ |
111,716
|
$ |
118,296
|
$ |
124,140
|
||||||||||
Investment sales and financing professionals
|
2,021
|
1,977
|
1,819
|
1,737
|
1,607
|
|||||||||||||||
Sales volume (dollars in millions)
|
$ |
49,706
|
$ |
46,355
|
$ |
42,191
|
$ |
42,312
|
$ |
37,847
|
(1)
|
Provision for income taxes for 2017 includes a
one-time
charge in the amount of $11.6 million in connection with the remeasurement of deferred tax assets, net due to enactment of the Tax Cuts and Jobs Act, which reduced the U.S. federal statutory corporate tax rate from 35% to 21% starting in 2018. In addition, we adopted Accounting Standards Update No.
2016-09,
Improvements to Employee Share-Based Payment Accounting
non-employee
directors’ vesting of equity awards granted under our Amended and Restated 2013 Omnibus Equity Incentive Plan. Prior to 2017, windfalls tax benefits, net were recorded directly to additional paid in capital.
|
(2)
|
Includes both short-term and long-term marketable securities,
available-for-sale.
|
(3)
|
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“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. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations –
Non-GAAP
Financial Measure.”
|
|
Years Ended
December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Real Estate Brokerage:
|
|
|
|
|
|
|
|
|
|
|||
Average Number of Investment Sales Professionals
|
1,843
|
1,726
|
1,649
|
|||||||||
Average Number of Transactions per Investment Sales Professional
|
3.82
|
4.10
|
3.98
|
|||||||||
Average Commission per Transaction
|
$ |
103,572
|
$ |
105,574
|
$ |
98,963
|
||||||
Average Commission Rate
|
1.98
|
% |
2.07
|
% |
2.13
|
% | ||||||
Average Transaction Size (in thousands)
|
$ |
5,234
|
$ |
5,095
|
$ |
4,644
|
||||||
Total Number of Transactions
|
7,042
|
7,079
|
6,562
|
|||||||||
Total Sales Volume (in millions)
|
$ |
36,858
|
$ |
36,070
|
$ |
30,475
|
|
Years Ended
December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Financing
(1)
:
|
|
|
|
|||||||||
Average Number of Financing Professionals
|
102
|
100
|
95
|
|||||||||
Average Number of Transactions per Financing Professional
|
19.06
|
16.78
|
17.97
|
|||||||||
Average Fee per Transaction
|
$ |
32,680
|
$ |
33,176
|
$ |
28,960
|
||||||
Average Fee Rate
|
0.88
|
% |
0.89
|
% |
0.88
|
% | ||||||
Average Transaction Size (in thousands)
|
$ |
3,693
|
$ |
3,716
|
$ |
3,299
|
||||||
Total Number of Transactions
|
1,944
|
1,678
|
1,707
|
|||||||||
Total Financing Volume (in millions)
|
$ |
7,180
|
$ |
6,236
|
$ |
5,632
|
(1)
|
Operating metrics calculated excluding certain financing fees not directly associated to transactions. |
|
Year
Ended December 31, 2019 |
|
Percentage
of Revenue |
|
Year
Ended December 31, 2018 |
|
Percentage
of Revenue |
|
Change
|
|||||||||||||||
|
Dollar
|
|
Percentage
|
|
||||||||||||||||||||
Revenues:
|
|
|
|
|
|
|
||||||||||||||||||
Real estate brokerage commissions
|
$ |
729,356
|
90.4
|
% | $ |
747,355
|
91.7
|
% | $ |
(17,999
|
) |
(2.4
|
)% | |||||||||||
Financing fees
|
66,293
|
8.2
|
57,817
|
7.1
|
8,476
|
14.7
|
||||||||||||||||||
Other revenues
|
10,779
|
1.4
|
9,644
|
1.2
|
1,135
|
11.8
|
||||||||||||||||||
Total revenues
|
806,428
|
100.0
|
814,816
|
100.0
|
(8,388
|
) |
(1.0
|
) | ||||||||||||||||
Operating expenses:
|
|
|
|
|
|
|
||||||||||||||||||
Cost of services
|
498,878
|
61.9
|
502,883
|
61.7
|
(4,005
|
) |
(0.8
|
) | ||||||||||||||||
Selling, general and administrative expense
|
203,110
|
25.1
|
193,349
|
23.7
|
9,761
|
5.0
|
||||||||||||||||||
Depreciation and amortization expense
|
8,017
|
1.0
|
6,297
|
0.8
|
1,720
|
27.3
|
||||||||||||||||||
Total operating expenses
|
710,005
|
88.0
|
702,529
|
86.2
|
7,476
|
1.1
|
||||||||||||||||||
Operating income
|
96,423
|
12.0
|
112,287
|
13.8
|
(15,864
|
) |
(14.1
|
) | ||||||||||||||||
Other income (expense), net
|
12,477
|
1.5
|
6,333
|
0.8
|
6,144
|
97.0
|
||||||||||||||||||
Interest expense
|
(1,388
|
) |
(0.2
|
) |
(1,400
|
) |
(0.2
|
) |
12
|
(0.9
|
) | |||||||||||||
Income before provision for income taxes
|
107,512
|
13.3
|
117,220
|
14.4
|
(9,708
|
) |
(8.3
|
) | ||||||||||||||||
Provision for income taxes
|
30,582
|
3.8
|
29,963
|
3.7
|
619
|
2.1
|
||||||||||||||||||
Net income
|
$ |
76,930
|
9.5
|
% | $ |
87,257
|
10.7
|
% | $ |
(10,327
|
) |
(11.8
|
)% | |||||||||||
Adjusted EBITDA
(1)
|
$ |
115,551
|
14.3
|
% | $ |
129,457
|
15.9
|
% | $ |
(13,906
|
) |
(10.7
|
)% | |||||||||||
(1)
|
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“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. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see
“Non-GAAP
Financial Measure.”
|
|
Years Ended December 31,
|
|||||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
||||||||||
Net income
|
$ |
76,930
|
$ |
87,257
|
$ |
51,524
|
$ |
64,657
|
$ |
66,350
|
||||||||||
Adjustments:
|
|
|
|
|
|
|||||||||||||||
Interest income and other
(1)
|
(10,322
|
) |
(7,052
|
) |
(3,514
|
) |
(1,761
|
) |
(1,373
|
) | ||||||||||
Interest expense
|
1,388
|
1,400
|
1,496
|
1,533
|
1,726
|
|||||||||||||||
Provision for income taxes
(2)
|
30,582
|
29,963
|
47,702
|
42,445
|
47,018
|
|||||||||||||||
Depreciation and amortization
|
8,017
|
6,297
|
5,363
|
4,387
|
3,305
|
|||||||||||||||
Stock-based compensation
|
9,278
|
11,983
|
9,145
|
7,035
|
7,114
|
|||||||||||||||
Non-cash
MSR activity
(3)
|
(322
|
) |
(391
|
) |
—
|
—
|
—
|
|||||||||||||
Adjusted EBITDA
(4)
|
$ |
115,551
|
$ |
129,457
|
$ |
111,716
|
$ |
118,296
|
$ |
124,140
|
||||||||||
(1)
|
Other includes net realized gains (losses) on marketable securities
available-for-sale.
|
(2)
|
The year ended December 31, 2017, includes a
one-time
charge in the amount of $11.6 million in connection with the remeasurement of deferred tax assets, net due to enactment of Tax Cuts and Jobs Act, which reduced the U.S. federal statutory corporate tax rate from 35% to 21% starting in 2018. In addition, we adopted a new accounting pronouncement in 2017 that required any windfall tax benefits, net of shortfalls to be recorded as a discrete item in our provision for income taxes. Prior to 2017, windfalls tax benefits, net were recorded directly to additional paid in capital. These windfalls/shortfalls arise from the difference in the grant date price and the vesting date price of employee and
non-employee
directors vesting of equity awards granted under our 2013 Plan.
|
(3)
|
Non-cash
MSR activity includes the assumption of servicing obligations.
|
(4)
|
The decrease in Adjusted EBITDA for the year ended December 31, 2019 compared to the same period in 2018 is primarily due to lower total revenues and a higher proportion of operating expenses compared to total revenues. |
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
2018
|
|
2017
|
|
||||||
Net cash provided by operating activities
|
$ |
25,287
|
$ |
117,314
|
$ |
66,537
|
||||||
Net cash used in investing activities
|
(3,422
|
) |
(117,980
|
) |
(27,338
|
) | ||||||
Net cash used in financing activities
|
(3,878
|
) |
(5,437
|
) |
(5,784
|
) | ||||||
Net increase (decrease) in cash and cash equivalents
|
17,987
|
(6,103
|
) |
33,415
|
||||||||
Cash and cash equivalents at beginning of year
|
214,683
|
220,786
|
187,371
|
|||||||||
Cash and cash equivalents at end of year
|
$ |
232,670
|
$ |
214,683
|
$ |
220,786
|
||||||
|
Total
|
|
Less than
1 Year |
|
1-3
Years
|
|
3-5
Years |
|
More
Than 5 Years |
|
Other
(8)
|
|
||||||||||||
Operating lease liabilities, including imputed interest
(1)
|
$ |
89,241
|
$ |
21,262
|
$ |
33,889
|
$ |
21,317
|
$ |
12,773
|
$ |
—
|
||||||||||||
SARs liability (principal and interest)
(2)
|
25,880
|
2,080
|
4,408
|
2,334
|
17,058
|
—
|
||||||||||||||||||
Notes payable (principal and interest)
(3)
|
6,897
|
6,897
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Deferred commissions payable
(4)
|
34,158
|
13,339
|
20,819
|
—
|
—
|
—
|
||||||||||||||||||
Deferred compensation liability
(5)
|
8,241
|
1,553
|
2,126
|
34
|
—
|
4,528
|
||||||||||||||||||
Contingent consideration
(6)
|
4,788
|
1,238
|
2,163
|
1,142
|
245
|
—
|
||||||||||||||||||
Other
(7)
|
2,146
|
1,235
|
—
|
—
|
—
|
911
|
||||||||||||||||||
|
$ |
171,351
|
$ |
47,604
|
$ |
63,405
|
$ |
24,827
|
$ |
30,076
|
$ |
5,439
|
||||||||||||
(1)
|
See Note 4 – “Operating Leases” of our Notes to the Consolidated Financial Statements. |
(2)
|
Forecasted principal payments are based on each participant’s estimated retirement age and contractual interest rate of 3.920% on January 1, 2020 and reflect required payments that result from the retirement of certain executives. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. |
(3)
|
See Note 8– “Notes Payable to Former Stockholders” of our Notes to the Consolidated Financial Statements. |
(4)
|
Includes short-term and long-term deferred commissions payable. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. |
(5)
|
Represents current estimated payouts for participants currently receiving payments based on their elections at the time of deferral. We hold assets held in rabbi trust of $9.5 million to settle outstanding amounts when they become due. Amounts assume no increase in asset or liability due to future returns.
|
(6)
|
Relates to contingent consideration in connection with our business acquisitions. See Note 6 – “Acquisitions, Goodwill and Other Intangible Assets” and Note 10 – “Fair Value Measurements” of our Notes to the Consolidated Financial Statements. |
(7)
|
Relates to amounts that may be advanced to sales and financing professionals and uncertain tax positions. See Note 13 – “Income Taxes” and Note 16 – “Commitments and Contingencies” of our Notes to the Consolidated Financial Statements. |
(8)
|
Amounts in Other represent amounts where payments are dependent on future events, which may occur at any time from less than 1 year to more than 5 years and relates to our deferred compensation liability and uncertain tax positions. Payments for deferred compensation liability are based on the participants’ elections at the time of deferral. The net liability for uncertain tax positions may be payable by us in the future. The ultimate resolution depends on many factors and assumptions; accordingly, we are not able to reasonably estimate the timing of such payments, if any. |
Change in Interest Rates
|
Approximate Change in
Fair Value of Investments Increase (Decrease) |
|
||
2% Decrease
|
$ |
4,320
|
||
1% Decrease
|
$ |
2,333
|
||
1% Increase
|
$ |
(2,333
|
) | |
2% Increase
|
$ |
(4,664
|
) |
Name
|
Age
|
|
Position(s)
|
|||
Hessam Nadji
|
54
|
President, Chief Executive Officer and Director
|
||||
Martin E. Louie
|
58
|
Chief Financial Officer
|
||||
Gregory A. LaBerge
|
49
|
First Vice President, Chief Administrative Officer
|
• | From our main web page, click on “Investor Relations” at the bottom of the main web page. |
• | Next click on “Corporate Governance” in the middle navigation bar. |
• | Then click on “Governance Documents.” |
• | Finally, click on “Code of Ethics.” |
Plan Category
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding
Options,
Warrants and
Rights
(1)
|
|
Weighted-
Average Exercise
Price of
Outstanding
Options,
Warrants and
Rights
(2)
|
|
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
(3) (4)
|
|
||||||
|
(a)
|
|
(b)
|
|
(c)
|
|
||||||
Equity compensation plans approved by security holders
|
1,124,161
|
$ |
—
|
5,460,208
|
||||||||
Equity compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
|
1,124,161
|
$ |
—
|
5,460,208
|
||||||||
(1)
|
Consists of deferred stock units (“DSUs”) and restricted stock units (“RSUs”) granted under our Amended and Restated 2013 Omnibus Equity Incentive Plan (“2013 Plan”). Excludes restricted stock awards granted under the 2013 Plan, purchase rights granted under our 2013 Employee Stock Purchase Plan (“ESPP”) and cash settled SARs. |
(2)
|
Outstanding DSUs and RSUs have no exercise price. |
(3)
|
Includes 5,255,735 shares available for future issuance under the 2013 Plan. Includes 204,473 shares available for future issuance under the ESPP, including shares subject to purchase during the current offering period, which commenced on November 15, 2019 (the exact number of which will not be known until the purchase date on May 15, 2020). Subject to the number of shares remaining in the share reserve, the maximum number of shares purchasable by any participant on any one purchase date for any purchase period, including the current purchase period may not exceed 1,250 shares. |
(4)
|
Pursuant to the terms of the ESPP, on the first day of each fiscal year, beginning with the 2015 fiscal year, the number of shares authorized for issuance under the ESPP is automatically increased by the lesser of: (i) 366,667 shares of our common stock; (ii) 1% of the outstanding shares of our common stock as of the last day of the immediately preceding fiscal year; or (iii) such other amount as the Board may determine. |
(a) | The following documents are filed as part of this Report: |
(1) | Consolidated Financial Statements |
(2) | Financial Statement Schedules |
(b) | Exhibits |
Number
|
|
Description
|
||
3.1
|
||||
3.2
|
||||
4.1
|
||||
4.2*
|
||||
10.1
|
||||
10.2†
|
||||
10.3†
|
Number
|
|
Description
|
||
10.4†
|
||||
10.5†
|
||||
10.6†
|
||||
10.7†
|
||||
10.8†
|
||||
10.9†
|
||||
10.10†
|
||||
10.11†
|
||||
10.12†
|
||||
10.13
|
||||
10.14*
|
||||
21.1*
|
||||
23.1*
|
||||
31.1*
|
||||
31.2*
|
||||
32.1**
|
Number
|
|
Description
|
||
101*
|
The following financial statements from the Company’s Annual Report on Form
10-K
for the year ended December 31, 2019, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Net and Comprehensive Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
|
|||
104*
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
|
† | Indicates management contract or compensatory plan. |
* | Filed herewith. |
** | Furnished, not filed. |
(c) | Financial Statement Schedules |
Dated: March 2, 2020
|
Marcus & Millichap, Inc.
|
|||||
|
/s/ Hessam Nadji
|
|||||
|
Hessam Nadji
|
|||||
|
President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ Hessam Nadji
Hessam Nadji
|
Director, President and Chief Executive Officer (Principal Executive Officer)
|
March 2, 2020
|
||
/s/ Martin E. Louie
Martin E. Louie
|
Chief Financial Officer
(Principal Financial Officer)
|
March 2, 2020
|
||
/s/ Kurt H. Schwarz
Kurt H. Schwarz
|
First Vice President of Finance and Chief Accounting Officer
(Principal Accounting Officer)
|
March 2, 2020
|
||
/s/ George M. Marcus
George M. Marcus
|
Director
|
March 2, 2020
|
||
/s/ William A. Millichap
William A. Millichap
|
Director
|
March 2, 2020
|
||
/s/ Norma J. Lawrence
Norma J. Lawrence
|
Director
|
March 2, 2020
|
||
/s/ Lauralee E. Martin
Lauralee E. Martin
|
Director
|
March 2, 2020
|
||
/ s/ Nicholas F. McClanahan
Nicholas F. McClanahan
|
Director
|
March 2, 2020
|
||
/s/ George T. Shaheen
George T. Shaheen
|
Director
|
March 2, 2020
|
||
/s/ Don C. Watters
Don C. Watters
|
Director
|
March 2, 2020
|
|
Page
|
|
||
F-
2
|
||||
F-
5
|
||||
F-
6
|
||||
F-
7
|
||||
F-
8
|
||||
F-
9
|
|
|
Deferred Commissions Payable
|
|
|
|
Description of the Matter
|
At December 31, 2019, the Company’s commissions payable to investment sales and financing professionals was $61.5 million. As discussed in Note 7 to the consolidated financial statements, certain investment sales and financing professionals have the ability to earn additional commissions after meeting certain annual revenue thresholds. All commissions are recognized as cost of services in the period in which they are earned as they relate to specific transactions closed. The Company has the ability to defer payment of certain commissions, at its election, for up to three years. These payments are referred to as deferred commissions.
Auditing the Company’s deferred commissions was complex with regard to evaluating the completeness of the population of investment sales and financing professionals eligible for deferred commissions and the accuracy of the investment sales and financing professionals’ revenue thresholds used in determining deferred commissions earned.
|
|
How We Addressed the Matter in Our Audit
|
We evaluated the design and tested the operating effectiveness of the Company’s internal controls over the deferred commissions process. For example, we tested controls over the completeness and accuracy of the data used in calculating the deferred commissions, including approvals.
|
|
|
To test the deferred commissions payable, we performed audit procedures that included, among others, performing a predictive test in which we evaluated the completeness of the deferred commissions schedule based on investment sales and financing professionals’ sales performance. Additionally, we performed procedures to obtain evidence of eligibility approval and performed a hindsight analysis to evaluate the amount of cash disbursed to the amount of deferred commissions payable previously accrued.
|
|
December 31,
|
|||||||
|
2019
|
|
|
2018
|
||||
Assets
|
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$ |
232,670
|
$ |
214,683
|
||||
Commissions receivable
|
5,003
|
4,948
|
||||||
Prepaid expenses
|
10,676
|
7,904
|
||||||
Income tax receivable
|
4,999
|
—
|
||||||
Marketable securities,
available-for-sale
|
150,752
|
137,436
|
||||||
Other assets, net
|
6,067
|
6,368
|
||||||
Total current assets
|
410,167
|
371,339
|
||||||
Prepaid rent
|
—
|
13,892
|
||||||
Property and equipment, net
|
22,643
|
19,550
|
||||||
Operating lease
right-of-use
assets, net
|
90,535
|
—
|
||||||
Marketable securities,
available–for-sale
|
60,809
|
83,209
|
||||||
Assets held in rabbi trust
|
9,452
|
8,268
|
||||||
Deferred tax assets, net
|
22,122
|
22,959
|
||||||
Goodwill and other intangible assets, net
|
22,312
|
15,385
|
||||||
Other assets
|
70,994
|
31,778
|
||||||
Total assets
|
$ |
709,034
|
$ |
566,380
|
||||
Liabilities and stockholders’ equity
|
|
|
||||||
Current liabilities:
|
|
|
||||||
Accounts payable and other liabilities
|
$ |
10,790
|
$ |
11,035
|
||||
Notes payable to former stockholders
|
6,564
|
1,087
|
||||||
Deferred compensation and commissions
|
44,301
|
47,910
|
||||||
Income tax payable
|
—
|
4,486
|
||||||
Operating lease liabilities
|
17,762
|
—
|
||||||
Accrued bonuses and other employee related expenses
|
22,388
|
28,338
|
||||||
Total current liabilities
|
101,805
|
92,856
|
||||||
Deferred compensation and commissions
|
45,628
|
49,887
|
||||||
Notes payable to former stockholders
|
—
|
6,564
|
||||||
Operating lease liabilities
|
63,155
|
—
|
||||||
Deferred rent and other liabilities
|
3,539
|
7,499
|
||||||
Total liabilities
|
214,127
|
156,806
|
||||||
Commitments and contingencies
|
—
|
—
|
||||||
Stockholders’ equity:
|
|
|
||||||
Preferred stock, $0.0001 par value:
|
|
|
||||||
Authorized shares – 25,000,000; issued and outstanding shares – none at December 31, 2019 and 2018, respectively
|
—
|
—
|
||||||
Common stock, $0.0001 par value:
|
|
|
||||||
Authorized shares – 150,000,000; issued and outstanding shares – 39,153,195 and 38,814,464 at December 31, 2019 and 2018, respectively
|
4
|
4
|
||||||
Additional
paid-in
capital
|
104,658
|
97,458
|
||||||
Stock notes receivable from employees
|
(4
|
) |
(4
|
) | ||||
Retained earnings
|
388,271
|
311,341
|
||||||
Accumulated other comprehensive income
|
1,978
|
775
|
||||||
Total stockholders’ equity
|
494,907
|
409,574
|
||||||
Total liabilities and stockholders’ equity
|
$ |
709,034
|
$ |
566,380
|
||||
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
|
2018
|
|
|
2017
|
|||||
Revenues:
|
|
|
||||||||||
Real estate brokerage commissions
|
$ |
729,356
|
$ |
747,355
|
$ |
649,393
|
||||||
Financing fees
|
66,293
|
57,817
|
49,653
|
|||||||||
Other revenues
|
10,779
|
9,644
|
20,654
|
|||||||||
Total revenues
|
806,428
|
814,816
|
719,700
|
|||||||||
Operating expenses:
|
|
|
||||||||||
Cost of services
|
498,878
|
502,883
|
446,557
|
|||||||||
Selling, general and administrative expense
|
203,110
|
193,349
|
171,648
|
|||||||||
Depreciation and amortization expense
|
8,017
|
6,297
|
5,363
|
|||||||||
Total operating expenses
|
710,005
|
702,529
|
623,568
|
|||||||||
Operating income
|
96,423
|
112,287
|
96,132
|
|||||||||
Other income (expense), net
|
12,477
|
6,333
|
4,590
|
|||||||||
Interest expense
|
(1,388
|
) |
(1,400
|
) |
(1,496
|
) | ||||||
Income before provision for income taxes
|
107,512
|
117,220
|
99,226
|
|||||||||
Provision for income taxes
|
30,582
|
29,963
|
47,702
|
|||||||||
Net income
|
76,930
|
87,257
|
51,524
|
|||||||||
Other comprehensive income (loss):
|
|
|
|
|||||||||
Marketable securities,
available-for-sale:
|
|
|
|
|||||||||
Change in unrealized gains (losses)
|
1,822
|
(536
|
) |
193
|
||||||||
Less: reclassification adjustment for net (gains) losses included in other income (expense), net
|
(43
|
) |
7
|
—
|
||||||||
Net change, net of tax of $611, $(177) and $139 for the years ended December 31, 2019, 2018 and 2017, respectively
|
1,779
|
(529
|
) |
193
|
||||||||
Foreign currency translation (loss) gain, net of tax of $0 for each of the years ended December 31, 2019, 2018 and 2017, respectively
|
(576
|
) |
377
|
(63
|
) | |||||||
Total other comprehensive income (loss)
|
1,203
|
(152
|
) |
130
|
||||||||
Comprehensive income
|
$ |
78,133
|
$ |
87,105
|
$ |
51,654
|
||||||
Earnings per share:
|
|
|
|
|||||||||
Basic
|
$ |
1.95
|
$ |
2.23
|
$ |
1.32
|
||||||
Diluted
|
$ |
1.95
|
$ |
2.22
|
$ |
1.32
|
||||||
Weighted average common shares outstanding:
|
|
|
|
|||||||||
Basic
|
39,404
|
39,149
|
38,988
|
|||||||||
Diluted
|
39,548
|
39,383
|
39,100
|
|
|
Series A
Redeemable
Preferred Stock |
|
|
Common Stock
|
|
|
Additional
Paid-In
Capital |
|
|
Stock Notes
Receivable
From
Employees |
|
|
Retained
Earnings
(Accumulated
Deficit) |
|
|
Accumulated
Other Comprehensive Income (Loss) |
|
|
Total
|
|
|||||||||||||||
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
||||||||||||||||||||||||
Balance as of December 31,
2
016
|
|
|
—
|
|
|
$
|
—
|
|
|
|
37,882,266
|
|
|
$
|
4
|
|
|
$
|
85,445
|
|
|
$
|
(4
|
)
|
|
$
|
172,599
|
|
|
$
|
810
|
|
|
$
|
258,854
|
|
Cumulative effect of a change in accounting principle, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
85
|
|
|
|
—
|
|
|
|
(52
|
)
|
|
|
—
|
|
|
|
33
|
|
Balance at January 1, 2017, as adjusted
|
|
|
—
|
|
|
|
—
|
|
|
|
37,882,266
|
|
|
|
4
|
|
|
|
85,530
|
|
|
|
(4
|
)
|
|
|
172,547
|
|
|
|
810
|
|
|
|
258,887
|
|
Net and comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
51,524
|
|
|
|
130
|
|
|
|
51,654
|
|
Stock-based award activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,145
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,145
|
|
Issuance of common stock pursuant to employee stock purchase plan
|
|
|
—
|
|
|
|
—
|
|
|
|
30,209
|
|
|
|
—
|
|
|
|
653
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
653
|
|
Issuance of common stock for
|
|
|
—
|
|
|
|
—
|
|
|
|
351,801
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock for vesting of restricted stock units
|
|
|
—
|
|
|
|
—
|
|
|
|
284,837
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock for unvested restricted stock awards
|
|
|
—
|
|
|
|
—
|
|
|
|
17,538
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares withheld related to net share settlement of stock-based awards
|
|
|
—
|
|
|
|
—
|
|
|
|
(192,640
|
)
|
|
|
—
|
|
|
|
(5,451
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,451
|
)
|
Balance as of December 31, 2017
|
|
|
—
|
|
|
|
—
|
|
|
|
38,374,011
|
|
|
|
4
|
|
|
|
89,877
|
|
|
|
(4
|
)
|
|
|
224,071
|
|
|
|
940
|
|
|
|
314,888
|
|
Cumulative effect of a change in accounting principle, net of tax
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13
|
|
|
|
(13
|
)
|
|
|
—
|
|
Balance at January 1, 2018, as adjusted
|
|
|
—
|
|
|
|
—
|
|
|
|
38,374,011
|
|
|
|
4
|
|
|
|
89,877
|
|
|
|
(4
|
)
|
|
|
224,084
|
|
|
|
927
|
|
|
|
314,888
|
|
Net and comprehensive income (loss)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
87,257
|
|
|
|
(152
|
)
|
|
|
87,105
|
|
Stock-based award activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,983
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
11,983
|
|
Issuance of common stock pursuant to employee stock purchase plan
|
|
|
—
|
|
|
|
—
|
|
|
|
21,001
|
|
|
|
—
|
|
|
|
621
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
621
|
|
Issuance of common stock for
settlement of deferred stock units |
|
|
—
|
|
|
|
—
|
|
|
|
237,052
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock for vesting of restricted stock units
|
|
|
—
|
|
|
|
—
|
|
|
|
317,236
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock for unvested restricted stock awards
|
|
|
—
|
|
|
|
—
|
|
|
|
12,852
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares withheld related to net share settlement of stock-based awards
|
|
|
—
|
|
|
|
—
|
|
|
|
(147,688
|
)
|
|
|
—
|
|
|
|
(5,023
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(5,023
|
)
|
Balance as of December 31, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
38,814,464
|
|
|
|
4
|
|
|
|
97,458
|
|
|
|
(4
|
)
|
|
|
311,341
|
|
|
|
775
|
|
|
|
409,574
|
|
Net and comprehensive income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
76,930
|
|
|
|
1,203
|
|
|
|
78,133
|
|
Stock-based award activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,278
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,278
|
|
Issuance of common stock pursuant to employee stock purchase plan
|
|
|
—
|
|
|
|
—
|
|
|
|
21,421
|
|
|
|
—
|
|
|
|
657
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
657
|
|
Issuance of common stock for vesting of restricted stock units
|
|
|
—
|
|
|
|
—
|
|
|
|
378,194
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock for unvested restricted stock awards
|
|
|
—
|
|
|
|
—
|
|
|
|
12,806
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Shares withheld related to net share settlement of stock-based awards
|
|
|
—
|
|
|
|
—
|
|
|
|
(73,690
|
)
|
|
|
—
|
|
|
|
(2,735
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,735
|
)
|
Balance as of December 31, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
|
39,153,195
|
|
|
$
|
4
|
|
|
$
|
104,658
|
|
|
$
|
(4
|
)
|
|
$
|
388,271
|
|
|
$
|
1,978
|
|
|
$
|
494,907
|
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
|
2018
|
|
|
2017
|
|||||
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|||
Net income
|
$ |
76,930
|
$ |
87,257
|
$ |
51,524
|
||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|||||||||
Depreciation and amortization expense
|
8,017
|
6,297
|
5,363
|
|||||||||
Amortization of
right-of-use
assets
|
21,207
|
—
|
—
|
|||||||||
Provision for bad debt expense
|
114
|
291
|
219
|
|||||||||
Stock-based compensation
|
9,278
|
11,983
|
9,145
|
|||||||||
Deferred taxes, net
|
226
|
(142
|
) |
12,825
|
||||||||
Net realized gains on marketable securities,
available-for-sale
|
(87
|
) |
(10
|
) |
(2
|
) | ||||||
Other
non-cash
items
|
(176
|
) |
(194
|
) |
108
|
|||||||
Changes in operating assets and liabilities:
|
|
|
|
|||||||||
Commissions receivable
|
(55
|
) |
4,783
|
(4,777
|
) | |||||||
Prepaid expenses
|
(2,740
|
) |
1,757
|
(1,567
|
) | |||||||
Prepaid rent
|
—
|
1,500
|
(2,107
|
) | ||||||||
Assets held in rabbi trust
|
—
|
—
|
(700
|
) | ||||||||
Other assets, net
|
(45,176
|
) |
(7,247
|
) |
(13,665
|
) | ||||||
Accounts payable and other liabilities
|
(486
|
) |
226
|
(572
|
) | |||||||
Income tax receivable/payable
|
(9,485
|
) |
5,794
|
(126
|
) | |||||||
Accrued bonuses and other employee related expenses
|
(5,889
|
) |
4,676
|
1,782
|
||||||||
Deferred compensation and commissions
|
(8,975
|
) |
(438
|
) |
8,427
|
|||||||
Operating lease liabilities
|
(17,102
|
) |
—
|
—
|
||||||||
Deferred rent and other liabilities
|
(314
|
) |
781
|
660
|
||||||||
Net cash provided by operating activities
|
25,287
|
117,314
|
66,537
|
|||||||||
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|||
Acquisitions, net of cash received
|
(6,083
|
) |
(14,926
|
) |
—
|
|||||||
Purchases of marketable securities,
available-for-sale
|
(168,083
|
) |
(208,460
|
) |
(65,093
|
) | ||||||
Proceeds from sales and maturities of marketable securities,
available-for-sale
|
179,693
|
113,911
|
44,753
|
|||||||||
Payments received on employee notes receivable
|
42
|
18
|
27
|
|||||||||
Issuances of employee notes receivable
|
(200
|
) |
(451
|
) |
(481
|
) | ||||||
Purchase of property and equipment
|
(8,812
|
) |
(8,072
|
) |
(6,554
|
) | ||||||
Proceeds from sale of property and equipment
|
21
|
—
|
10
|
|||||||||
Net cash used in investing activities
|
(3,422
|
) |
(117,980
|
) |
(27,338
|
) | ||||||
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|||
Proceeds from issuance of shares pursuant to employee stock purchase plan
|
657
|
621
|
653
|
|||||||||
Taxes paid related to net share settlement of stock-based awards
|
(2,735
|
) |
(5,023
|
) |
(5,451
|
) | ||||||
Principal payments on notes payable to former stockholders
|
(1,087
|
) |
(1,035
|
) |
(986
|
) | ||||||
Principal payments on stock appreciation rights liability
|
(185
|
) |
—
|
—
|
||||||||
Payments of contingent consideration
|
(528
|
) |
—
|
—
|
||||||||
Net cash used in financing activities
|
(3,878
|
) |
(5,437
|
) |
(5,784
|
) | ||||||
Net increase (decrease) in cash and cash equivalents
|
17,987
|
(6,103
|
) |
33,415
|
||||||||
Cash and cash equivalents at beginning of year
|
214,683
|
220,786
|
187,371
|
|||||||||
Cash and cash equivalents at end of year
|
$ |
232,670
|
$ |
214,683
|
$ |
220,786
|
||||||
Supplemental disclosures of cash flow information
|
|
|
|
|
|
|
|
|
|
|||
Interest paid during the period
|
$ |
2,107
|
$ |
2,195
|
$ |
1,912
|
||||||
Income taxes paid, net
|
$ |
39,841
|
$ |
24,311
|
$ |
35,002
|
||||||
1.
|
Description of Business and Basis of Presentation
|
2.
|
Accounting Policies and Recent Accounting Pronouncements
|
• |
Level 1:
|
• |
Level 2:
|
• |
Level 3:
|
3.
|
Property and Equipment, Net
|
4.
|
Operating Leases
|
|
Year Ended
December 31, 2019
|
|||
Operating lease cost:
|
|
|||
Lease cost
(1)
|
$ |
24,372
|
||
Variable lease cost
(2)
|
5,305
|
|||
Sublease income
|
(305
|
) | ||
|
$ |
29,372
|
||
(1)
|
Includes short-term lease cost and ROU asset amortization. |
(2)
|
Primarily relates to common area maintenance, property taxes, insurance, utilities and parking. |
|
Year Ended
December 31,
|
|||
2020
|
$ |
21,262
|
||
2021
|
19,002
|
|||
2022
|
14,887
|
|||
2023
|
11,657
|
|||
2024
|
9,660
|
|||
Thereafter
|
12,773
|
|||
Total future minimum lease payments
|
89,241
|
|||
Less imputed interest
|
(8,324
|
) | ||
Present value of operating lease liabilities
|
$ |
80,917
|
||
|
Year Ended
December 31, 2019
|
|||
Operating cash flow information:
|
|
|||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$ |
20,266
|
||
Noncash activity:
|
|
|||
ROU assets obtained in exchange for operating lease liabilities
|
$ |
21,548
|
||
Tenant improvements owned by lessor related to ROU assets
(1)
|
$ |
5,952
|
(1)
|
Reclassification from other assets current. |
|
December 31, 2019
|
|||
Weighted average remaining operating lease term
|
5.04 years
|
|||
Weighted average discount rate
|
3.8
|
%
|
5.
|
Investments in Marketable Securities
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
||||||||||
|
|
Unrealized
Loss |
|
|
Fair
Value |
|
|
Unrealized
Loss |
|
|
Fair Value
|
|
||||
Less than 12 months
|
$ |
(21
|
) | $ |
47,823
|
$ |
(576
|
) | $ |
127,326
|
||||||
12 months or longer
|
$ |
(1
|
) | $ |
566
|
$ |
(383
|
) | $ |
30,609
|
||||||
|
|
Years Ended December 31,
|
|
|||||||||
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|||
Gross realized gains
(1)
|
$ |
134
|
$ |
12
|
$ |
2
|
||||||
Gross realized losses
(1)
|
$ |
(47
|
) | $ |
(2
|
) | $ |
—
|
||||
(1)
|
Recorded in other income (expense), net in the consolidated statements of net and comprehensive income. The cost basis of securities sold were determined based on the specific identification method. |
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
||||||||||
|
|
Amortized
Cost |
|
|
Fair Value
|
|
|
Amortized
Cost |
|
|
Fair Value
|
|
||||
Due in one year or less
|
$ |
150,517
|
$ |
150,752
|
$ |
137,532
|
$ |
137,436
|
||||||||
Due after one year through five years
|
41,123
|
41,794
|
61,875
|
61,846
|
||||||||||||
Due after five years through ten years
|
12,813
|
13,467
|
17,310
|
16,747
|
||||||||||||
Due after ten years
|
5,532
|
5,548
|
4,737
|
4,616
|
||||||||||||
|
$ |
209,985
|
$ |
211,561
|
$ |
221,454
|
$ |
220,645
|
||||||||
Weighted average contractual maturity
|
1.7
years |
|
1.8
years |
|
6.
|
Acquisitions, Goodwill and Other Intangible Assets
|
|
|
December 31, 2019
|
|
|
December 31, 2018
|
|
||||||||||||||||||
|
|
Gross
Carrying Amount |
|
|
Accumulated
Amortization |
|
|
Net Book
Value |
|
|
Gross
Carrying Amount |
|
|
Accumulated
Amortization |
|
|
Net Book
Value |
|
||||||
Goodwill and intangible assets:
|
|
|
|
|
|
|
||||||||||||||||||
Goodwill
(1)
|
$ |
15,072
|
$ |
—
|
$ |
15,072
|
$ |
11,459
|
$ |
—
|
$ |
11,459
|
||||||||||||
Intangible assets
(1)(2)
|
9,050
|
(1,810
|
) |
7,240
|
4,240
|
(314
|
) |
3,926
|
||||||||||||||||
|
$ |
24,122
|
$ |
(1,810
|
) | $ |
22,312
|
$ |
15,699
|
$ |
(314
|
) | $ |
15,385
|
||||||||||
(1)
|
Represents additions from acquisitions. |
(2)
|
Total weighted average amortization period was 4.37 years and 5.14 years as of December 31, 2019 and 2018, respectively. |
|
Years Ended December 31,
|
|||||||
|
2019
|
2018
|
||||||
Beginning balance
|
$ |
11,459
|
$ |
—
|
||||
Additions from acquisitions
|
3,613
|
11,459
|
||||||
Impairment losses
|
—
|
—
|
||||||
Ending balance
|
$ |
15,072
|
$ |
11,459
|
||||
|
Year Ended
December 31, |
|
||
2020
|
$ |
2,493
|
||
2021
|
1,623
|
|||
2022
|
1,245
|
|||
2023
|
1,242
|
|||
2024
|
637
|
|||
|
$ |
7,240
|
||
7.
|
Selected Balance Sheet Data
|
|
|
Current
December 31,
|
|
|
Non-Current
December 31,
|
|
||||||||||
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
MSRs, net of amortization
|
$ |
—
|
$ |
—
|
$ |
2,002
|
$ |
2,209
|
||||||||
Due from independent contractors, net
(1)(2)
|
2,882
|
3,831
|
66,647
|
27,157
|
||||||||||||
Security deposits
|
—
|
—
|
1,345
|
1,196
|
||||||||||||
Employee notes receivable
(3)
|
65
|
156
|
323
|
370
|
||||||||||||
Customer trust accounts and other
|
3,120
|
2,381
|
677
|
846
|
||||||||||||
|
$ |
6,067
|
$ |
6,368
|
$ |
70,994
|
$ |
31,778
|
||||||||
(1)
|
Represents amounts advanced, notes receivable and other receivables due from the Company’s investment sales and financing professionals. The notes receivable, along with interest, are typically collected from future commissions and are generally due in one to five years. |
(2)
|
Includes allowance for doubtful accounts related to current receivables of $512 and $514 as of December 31, 2019 and 2018, respectively. The Company recorded a provision for bad debt expense of $114, $291 and $219 and wrote off $116, $271 and $38 of these receivables for the years ended December 31, 2019, 2018 and 2017, respectively. Any cash receipts on notes are applied first to unpaid principal balance prior to any income being recognized. |
(3)
|
Reduction of accrued bonuses and other employee related expenses in settlement of employee notes receivable represents noncash investing activity and was
|
|
|
December 31,
|
|
|||||
|
|
2019
|
|
|
2018
|
|
||
Beginning balance
|
$ |
2,209
|
$ |
—
|
||||
Additions from acquisition
|
—
|
2,121
|
||||||
Additions
|
337
|
391
|
||||||
Amortization
|
(544
|
) |
(303
|
) | ||||
Ending balance
|
$ |
2,002
|
$ |
2,209
|
||||
|
|
Current
December 31,
|
|
|
Non-Current
December 31,
|
|
||||||||||
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
||||
SARs liability
(1)
|
$ |
2,080
|
$ |
1,810
|
$ |
18,122
|
$ |
19,299
|
||||||||
Commissions payable to investment sales and financing professionals
|
40,668
|
44,812
|
20,818
|
23,983
|
||||||||||||
Deferred compensation liability
(1)
|
1,553
|
1,288
|
6,688
|
6,605
|
||||||||||||
|
$ |
44,301
|
$ |
47,910
|
$ |
45,628
|
$ |
49,887
|
||||||||
(1)
|
The SARs and deferred compensation liability become subject to payout as a result of a participant no longer being considered as a service provider. As a result of the separation as a service provider of certain participants, estimated amounts to be paid to the participants within the next twelve months have been classified as current. |
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
|
2018
|
|
|
2017
|
|||||
Increase (decrease) in the carrying value of the assets held in the rabbi trust
(1)
|
$ |
1,353
|
$ |
(326
|
) | $ |
849
|
|||||
Increase (decrease) in the net carrying value of the deferred compensation
(2)
|
$ |
1,293
|
$ |
(306
|
) | $ |
904
|
|||||
(1)
|
Recorded in other income (expense), net in the consolidated statements of net and comprehensive income. |
(2)
|
Recorded in selling, general and administrative expense in the consolidated statements of net and comprehensive income. |
|
|
December 31,
|
|
|||||
|
|
2019
|
|
|
2018
|
|
||
Deferred rent
(1)
|
$ |
—
|
$ |
5,445
|
||||
Contingent consideration and other
(2)
|
3,539
|
2,054
|
||||||
|
$ |
3,539
|
$ |
7,499
|
||||
(1)
|
The Company does not have deferred rent in 2019 due to adoption of the new lease standard on January 1, 2019. |
(2)
|
The current portion of contingent consideration in the amounts of $1,238 and $821 as of December 31, 2019 and 2018, respectively, are included in accounts payable and other liabilities in the consolidated balance sheets. |
8.
|
Notes Payable to Former Stockholders
|
9.
|
Related-Party Transactions
|
10.
|
Fair Value Measurements
|
|
December 31, 2019
|
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Assets held in rabbi trust
|
$ |
9,452
|
$ |
—
|
$ |
9,452
|
$ |
|
$ |
8,268
|
$ |
—
|
$ |
8,268
|
$ |
—
|
||||||||||||||||
Cash equivalents
(1)
:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Commercial paper and other
|
|
$
|
5,087
|
|
|
$
|
—
|
|
|
$
|
5,087
|
|
|
$
|
—
|
|
|
$
|
1,599
|
|
|
$
|
1,599
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Money market funds
|
185,513
|
185,513
|
—
|
—
|
163,126
|
163,126
|
—
|
—
|
||||||||||||||||||||||||
|
$ |
190,600
|
$ |
185,513
|
$ |
5,087
|
$ |
—
|
$ |
164,725
|
$ |
164,725
|
$ |
—
|
$ |
—
|
||||||||||||||||
Marketable securities,
available-for-sale:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
U.S. treasuries
|
$ |
124,580
|
$ |
124,580
|
$ |
—
|
$ |
—
|
$ |
121,180
|
$ |
121,180
|
$ |
—
|
$ |
—
|
||||||||||||||||
U.S. government sponsored entities
|
—
|
—
|
—
|
—
|
3,505
|
—
|
3,505
|
—
|
||||||||||||||||||||||||
Corporate debt
|
26,172
|
—
|
26,172
|
—
|
11,951
|
—
|
11,951
|
—
|
||||||||||||||||||||||||
ABS and other
|
—
|
—
|
—
|
—
|
800
|
—
|
800
|
—
|
||||||||||||||||||||||||
|
$ |
150,752
|
$ |
124,580
|
$ |
26,172
|
$ |
—
|
$ |
137,436
|
$ |
121,180
|
$ |
16,256
|
$ |
—
|
||||||||||||||||
Long-term investments:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
U.S. treasuries
|
$ |
24,423
|
$ |
24,423
|
$ |
—
|
$ |
—
|
$ |
45,010
|
$ |
45,010
|
$ |
—
|
$ |
—
|
||||||||||||||||
U.S. government sponsored entities
|
1,355
|
—
|
1,355
|
—
|
1,507
|
—
|
1,507
|
—
|
||||||||||||||||||||||||
Corporate debt
|
26,471
|
—
|
26,471
|
—
|
31,837
|
—
|
31,837
|
—
|
||||||||||||||||||||||||
ABS and other
|
8,560
|
—
|
8,560
|
—
|
4,855
|
—
|
4,855
|
—
|
||||||||||||||||||||||||
|
$ |
60,809
|
$ |
24,423
|
$ |
36,386
|
$ |
—
|
$ |
83,209
|
$ |
45,010
|
$ |
38,199
|
$ |
—
|
||||||||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Contingent consideration
|
$ |
4,788
|
$ |
—
|
$ |
—
|
$ |
4,788
|
$ |
2,875
|
$ |
—
|
$ |
—
|
$ |
2,875
|
||||||||||||||||
Deferred compensation liability
|
$ |
8,241
|
$ |
8,241
|
$ |
—
|
$ |
—
|
$ |
7,893
|
$ |
7,893
|
$ |
—
|
$ |
—
|
||||||||||||||||
(1)
|
Included in cash and cash equivalents on the accompanying consolidated balance sheets. |
|
|
December 31,
|
|
|||||
|
|
2019
|
|
|
2018
|
|
||
Beginning balance
|
$ |
2,875
|
$ |
—
|
||||
Contingent consideration in connection with acquisitions
(1)
|
2,382
|
2,674
|
||||||
Change in fair value of contingent consideration
|
202
|
201
|
||||||
Payments of contingent consideration
|
(671
|
) |
—
|
|||||
Ending balance
|
$ |
4,788
|
$ |
2,875
|
||||
(1)
|
Contingent consideration in connections with acquisitions represents noncash investing activity. |
|
|
Fair Value at
December 31, 2019
|
|
|
Valuation Technique
|
|
|
Unobservable inputs
|
|
Range (Weighted
Average)
(1)
|
|
|||
Contingent consideration
|
$ |
4,788
|
Discounted cash flow
|
Expected life of cash flows
|
0.4-5.8
years (2.3 years)
|
|||||||||
|
|
|
Discount rate
|
3.6%-5.0%
|
||||||||||
|
|
|
Probability of achievement
|
33.0%-100.0%
(81.8%)
|
(1)
|
Unobservable inputs were weighted by the relative fair value of the instruments. |
|
|
Fair Value at
December 31, 2019
|
|
|
Valuation Technique
|
|
|
Unobservable inputs
|
|
|
Range (Weighted
Average)
(1)
|
|
||||
MSRs
|
$ |
2,204
|
Discounted cash flow
|
Constant prepayment rates
|
0.0%-20.0%
(10.0%)
|
|||||||||||
|
|
|
Constant default rate
|
2.0%-2.0%
|
||||||||||||
|
|
|
Loss severity
|
40.0%-40.0%
(40.0%)
|
||||||||||||
|
|
|
Discount rate
|
9.5%-9.7%
|
(1)
|
Weighted average is based on the 10% constant prepayment rate scenario which the Company uses as the reported fair value. |
11.
|
Stockholders’ Equity
|
12.
|
Stock-Based Compensation Plans
|
|
|
RSA Grants
to
Non-employee
Directors |
|
|
RSU Grants to
Employees |
|
|
RSU Grants to
Independent Contractors |
|
|
Total
|
|
|
Weighted-
Average Grant Date Fair Value Per Share |
|
|||||
Nonvested shares at December 31, 2017
(1)
|
30,732
|
500,859
|
450,264
|
981,855
|
$ |
23.90
|
||||||||||||||
Granted
|
12,852
|
142,760
|
102,466
|
258,078
|
34.94
|
|||||||||||||||
Vested
|
(16,488
|
) |
(146,122
|
) |
(171,114
|
) |
(333,724
|
) |
22.31
|
|||||||||||
Transferred
|
—
|
(23,755
|
) |
23,755
|
—
|
30.69
|
||||||||||||||
Forfeited/canceled
|
—
|
(1,960
|
) |
(12,674
|
) |
(14,634
|
) |
30.17
|
||||||||||||
Nonvested shares at December 31, 2018
(1)
|
27,096
|
471,782
|
392,697
|
891,575
|
$ |
27.59
|
||||||||||||||
Granted
|
12,806
|
260,274
|
82,050
|
355,130
|
38.51
|
|||||||||||||||
Vested
|
(22,422
|
) |
(186,311
|
) |
(191,883
|
) |
(400,616
|
) |
24.29
|
|||||||||||
Transferred
|
—
|
(8,136
|
) |
8,136
|
—
|
29.68
|
||||||||||||||
Forfeited/canceled
|
—
|
(12,494
|
) |
(33,520
|
) |
(46,014
|
) |
30.65
|
||||||||||||
Nonvested shares at December 31, 2019
(1)
|
17,480
|
525,115
|
257,480
|
800,075
|
$ |
33.91
|
||||||||||||||
Unrecognized stock-based compensation expense as of December 31, 2019
(2)
|
$ |
234
|
$ |
13,959
|
$ |
7,821
|
$ |
22,014
|
|
|||||||||||
Weighted average remaining vesting period (years) as of December 31, 2019
|
0.39
|
3.61
|
3.34
|
3.48
|
|
|||||||||||||||
(1)
|
Nonvested RSUs will be settled through the issuance of new shares of common stock. |
(2)
|
The total unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 3.48 years. |
|
||||
2021
|
60,373
|
|||
2022
|
281,193
|
|||
|
341,566
|
|||
|
|
Years Ended December 31,
|
|
|||||||||
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|||
ESPP
|
$ |
139
|
$ |
109
|
$ |
128
|
||||||
RSAs –
non-employee
directors
|
643
|
632
|
397
|
|||||||||
RSUs – employees
(1)
|
5,419
|
4,233
|
3,750
|
|||||||||
RSUs – independent contractors
(2)
|
3,077
|
7,009
|
4,870
|
|||||||||
|
$ |
9,278
|
$ |
11,983
|
$ |
9,145
|
||||||
(1)
|
2019 includes expense related to the acceleration of vesting of certain RSUs. |
(2)
|
The Company grants RSUs to independent contractors (i.e. investment sales and financing professionals), who are considered
non-employees.
Prior to the adoption of ASU No.
2018-07
on July 1, 2018, such awards were required to be measured at fair value at the end of each reporting period until settlement. Stock-based compensation expense was therefore impacted by the changes in the Company’s common stock price during each reporting period prior to the adoption. New awards after the date of adoption are measured based on the grant date closing price of the Company’s common stock consistent with awards made to the Company’s employees and
non-employee
directors.
|
13.
|
Income Taxes
|
|
Years Ended December 31,
|
|||||||||||
|
2019
|
|
|
2018
|
|
|
2017
|
|||||
United States
|
$
|
112,425
|
$
|
119,446
|
$
|
100,031
|
||||||
Foreign
|
(4,913
|
) |
(2,226
|
) |
(805
|
) | ||||||
|
$ |
107,512
|
$ |
117,220
|
$ |
99,226
|
||||||
|
December 31,
|
|||||||
|
2019
|
|
|
2018
|
||||
Deferred Tax Assets:
|
|
|
||||||
Accrued expenses and bonuses
|
$ |
2,481
|
$ |
2,258
|
||||
Bad debt and other reserves
|
2,744
|
1,840
|
||||||
Deferred compensation
|
13,346
|
13,337
|
||||||
Operating lease ROU assets, net
|
21,761
|
—
|
||||||
Stock-based compensation
|
7,847
|
8,912
|
||||||
Deferred rent
|
—
|
1,470
|
||||||
Net operating and capital loss carryforwards
|
3,612
|
2,335
|
||||||
Other comprehensive income
|
—
|
330
|
||||||
State taxes
|
139
|
11
|
||||||
Other
|
328
|
25
|
||||||
Deferred tax assets before valuation allowance
|
52,258
|
30,518
|
||||||
Valuation allowance
|
(3,921
|
) |
(2,570
|
) | ||||
Deferred Tax Assets
|
$ |
48,337
|
$ |
27,948
|
||||
Deferred Tax Liabilities:
|
|
|
||||||
Fixed assets
|
$ |
(4,422
|
) | $ |
(4,086
|
) | ||
Operating lease liabilities
|
(20,117
|
) |
—
|
|||||
Prepaid expenses
|
(940
|
) |
(789
|
) | ||||
Other comprehensive income
|
(552
|
) |
—
|
|||||
Other
|
(184
|
) |
(114
|
) | ||||
Deferred Tax Liabilities
|
(26,215
|
) |
(4,989
|
) | ||||
Deferred Tax Assets, Net
|
$ |
22,122
|
$ |
22,959
|
||||
|
|
Years Ended December 31,
|
|
|||||||||||||||||||||
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|||||||||||||||
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
|
Amount
|
|
|
Rate
|
|
||||||
Income tax expense at the federal statutory rate
|
$ |
22,578
|
21.0
|
% | $ |
24,616
|
21.0
|
% | $ |
34,729
|
35.0
|
% | ||||||||||||
State income tax expense, net of federal benefit
|
5,698
|
5.3
|
% |
4,550
|
3.9
|
% |
3,577
|
3.6
|
% | |||||||||||||||
Wind
fall tax benefits, net related to stock-based compensation
|
(196
|
) |
(0.2
|
)% |
(1,535
|
) |
(1.3
|
)% |
(2,568
|
) |
(2.6
|
)% | ||||||||||||
Change in valuation allowance
|
1,351
|
1.3
|
% |
677
|
0.6
|
% |
170
|
0.2
|
% | |||||||||||||||
Effect of rate and other changes on federal deferred taxes, net due to enactment of Tax Cuts and Jobs Act (“the Act”)
(1)
|
—
|
—
|
—
|
—
|
11,644
|
11.7
|
% | |||||||||||||||||
Permanent and other items
(2)
|
1,151
|
1.0
|
% |
1,655
|
1.4
|
% |
150
|
0.2
|
% | |||||||||||||||
|
$ |
30,582
|
28.4
|
% | $ |
29,963
|
25.6
|
% | $ |
47,702
|
48.1
|
% | ||||||||||||
(1)
|
On December 22, 2017, the Act was enacted, which significantly changed the U.S. corporate income tax laws by, among other items, reducing the U.S. corporate income tax rate to 21% from 35% starting in 2018, further limiting 162(m) deductions and creating a territorial tax system with a
one-time
mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. As a result of the Act, the Company revalued its deferred taxes, net due to the changes in the U.S. corporate statutory federal income tax rate and recorded a net charge of $11.6 million in the provision for income taxes in 2017. The Company’s accounting for income tax effects of the Act was completed as of December 31, 2018.
|
(2)
|
Permanent items relate principally to compensation charges, qualified transportation fringe benefits, reversal of uncertain tax positions and meals and entertainment. |
14.
|
Retirement Plans
|
15.
|
Earnings per Share
|
|
|
Years Ended December 31,
|
|
|||||||||
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|||
Numerator (Basic and Diluted):
|
|
|
|
|||||||||
Net income
|
$ |
76,930
|
$ |
87,257
|
$ |
51,524
|
||||||
Denominator:
|
|
|
|
|||||||||
Basic
|
|
|
|
|||||||||
Weighted Average Common Shares Issued and Outstanding
|
39,083
|
38,637
|
38,142
|
|||||||||
Deduct: Unvested RSAs
(1)
|
(21
|
) |
(30
|
) |
(29
|
) | ||||||
Add: Fully vested DSUs
(2)
|
342
|
542
|
875
|
|||||||||
Weighted Average Common Shares Outstanding
|
39,404
|
39,149
|
38,988
|
|||||||||
Basic earnings per common share
|
$ |
1.95
|
$ |
2.23
|
$ |
1.32
|
||||||
Diluted
|
|
|
|
|||||||||
Weighted Average Common Shares Outstanding from above
|
39,404
|
39,149
|
38,988
|
|||||||||
Add: Dilutive effect of RSUs, RSAs & ESPP
|
144
|
234
|
112
|
|||||||||
Weighted Average Common Shares Outstanding
|
39,548
|
39,383
|
39,100
|
|||||||||
Diluted earnings per common share
|
$ |
1.95
|
$ |
2.22
|
$ |
1.32
|
||||||
Antidilutive shares excluded from diluted earnings per common share
(3)
|
348
|
137
|
512
|
|||||||||
(1)
|
RSAs were issued and outstanding to the
non-employee
directors and have a
one-year
or three-year vesting term subject to service requirements. See Note 12 – “Stock-Based Compensation Plans” for additional information.
|
(2)
|
Shares are included in weighted average common shares outstanding as the shares are fully vested but have not yet been delivered. See Note 12 – “Stock-Based Compensation Plans” for additional information. |
(3)
|
Primarily pertaining to RSU grants to the Company’s employees and independent contractors. |
16.
|
Commitments and Contingencies
|
17.
|
Subsequent Events
|
18.
|
Selected Quarterly Financial Data (Unaudited)
|
|
|
Three Months Ended
|
|
|||||||||||||||||||||||||||||
|
|
Dec. 31
|
|
|
Sep. 30
|
|
|
Jun. 30
|
|
|
Mar. 31
|
|
|
Dec. 31
|
|
|
Sep. 30
|
|
|
Jun. 30
|
|
|
Mar. 31
|
|
||||||||
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2019
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
|
2018
|
|
||||||||
Consolidated Financial Statement Data:
|
|
(in thousands, except per share data)
|
|
|||||||||||||||||||||||||||||
Total revenues
|
$ |
237,908
|
$ |
198,220
|
$ |
209,593
|
$ |
160,707
|
$ |
230,283
|
$ |
210,590
|
$ |
199,402
|
$ |
174,541
|
||||||||||||||||
Cost of services
|
155,196
|
124,147
|
127,847
|
91,688
|
148,469
|
132,896
|
119,869
|
101,649
|
||||||||||||||||||||||||
Operating income
|
27,104
|
24,072
|
26,978
|
18,269
|
32,489
|
27,384
|
28,950
|
23,464
|
||||||||||||||||||||||||
Net income
|
20,721
|
19,292
|
21,279
|
15,638
|
26,225
|
20,854
|
22,167
|
18,011
|
||||||||||||||||||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Basic
|
$ |
0.53
|
$ |
0.49
|
$ |
0.54
|
$ |
0.40
|
$ |
0.67
|
$ |
0.53
|
$ |
0.57
|
$ |
0.46
|
||||||||||||||||
Diluted
|
$ |
0.52
|
$ |
0.49
|
$ |
0.54
|
$ |
0.40
|
$ |
0.66
|
$ |
0.53
|
$ |
0.56
|
$ |
0.46
|
Exhibit 4.2
DESCRIPTION OF THE REGISTRANTS SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES
EXCHANGE ACT OF 1934
Marcus & Millichap, Inc. (we, our, us, or the Company) has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: our common stock. The following summary of the terms of our common stock is based upon our amended and restated certificate of incorporation and our amended and restated bylaws. This summary does not purport to be complete and is subject to, and is qualified in its entirety by express reference to, the applicable provisions of our amended and restated certificate of incorporation and our amended and restated bylaws, which are filed as exhibits to our Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our amended and restated certificate of incorporation, our amended and restated bylaws and the applicable provisions of the Delaware General Corporation Law (the DGCL) for more information.
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 175,000,000 shares, of which 150,000,000 shares, par value $0.0001 per share, are designated as common stock, and 25,000,000 shares, par value $0.0001 per share, are designated as preferred stock. The holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Subject to preferences that may be applicable to any then outstanding preferred stock, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared by our board of directors out of funds legally available for that purpose. In the event of the liquidation, dissolution or winding up of the Company, the holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities, subject to the prior distribution rights of any preferred stock then outstanding. Holders of common stock have no preemptive or conversion rights or other subscription rights. All outstanding shares of common stock are fully paid and non-assessable.
Certain Effects of Authorized but Unissued Stock
We have shares of common stock and preferred stock available for future issuance without stockholder approval. These additional shares may be used for a variety of corporate purposes, including future public offerings to raise additional capital, to facilitate corporate acquisitions or to pay as a dividend on the capital stock.
The existence of unissued and unreserved common stock and preferred stock may enable our board of directors to issue shares to persons friendly to current management or to issue preferred stock with terms that could render more difficult or discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise, thereby protecting the continuity of our management. In addition, the issuance of preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders would receive dividend payments and payments upon liquidation.
Anti-Takeover Effects of the DGCL and Our Certificate of Incorporation and Bylaws
Our amended and restated certificate of incorporation and our amended and restated bylaws contain certain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us. These provisions and certain provisions of the DGCL, which are summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us.
Limits on Ability of Stockholders to Act by Written Consent or Call a Special Meeting
Our amended and restated certificate of incorporation provides that our stockholders may not act by written consent, which may lengthen the amount of time required to take stockholder actions. As a result, a holder controlling a majority of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws.
In addition, our amended and restated bylaws provide that special meetings of the stockholders may be called only by the chairperson of the board, the Chief Executive Officer or our board of directors. Stockholders may not call a special meeting, which may delay the ability of our stockholders to force consideration of a proposal or for holders controlling a majority of our capital stock to take any action, including the removal of directors.
Requirements for Advance Notification of Stockholder Nominations and Proposals
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of our board of directors or a committee of our board of directors. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. These provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirers own slate of directors or otherwise attempting to obtain control of us.
Board Classification
Our board of directors is divided into three classes, one class of which is elected each year by our stockholders. The directors in each class serve three-year terms. A third party may be discouraged from making a tender offer or otherwise attempting to obtain control of us as it is it more difficult and time-consuming for stockholders to replace a majority of the directors on a classified board.
No Cumulative Voting
Our amended and restated certificate of incorporation and amended and restated bylaws do not permit cumulative voting in the election of directors. Cumulative voting allows a stockholder to vote a portion or all of its shares for one or more candidates for seats on our board of directors. Without cumulative voting, a minority stockholder may not be able to gain as many seats on our board of directors as the stockholder would be able to gain if cumulative voting were permitted. The absence of cumulative voting makes it more difficult for a minority stockholder to gain a seat on our board of directors to influence our boards decision regarding a takeover.
Amendment of Charter and Bylaws Provisions
The amendment of the above provisions of our amended and restated certificate of incorporation requires the approval by holders of at least two thirds of our outstanding capital stock entitled to vote generally in the election of directors. The amendment of our bylaws requires approval by the holders of at least two thirds of our outstanding capital stock entitled to vote generally in the election of directors.
Delaware Anti-Takeover Statute
We are subject to Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging, under certain circumstances, in a business combination with an interested stockholder for a period of three years following the date the person became an interested stockholder unless:
|
prior to the date of the transaction, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; |
|
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, calculated as provided under Section 203; or |
|
at or subsequent to the date of the transaction, the business combination is approved by our board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder. |
Generally, a business combination includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. An interested stockholder is a person who, together with affiliates and associates, owns or, within three years prior to the determination of interested stockholder status, did own 15% or more of a corporations outstanding voting stock. We expect the existence of this provision to have an anti-takeover effect with respect to transactions our board of directors does not approve in advance. We anticipate that Section 203 may also discourage attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
The provisions of the DGCL and the provisions of our amended and restated certificate of incorporation and amended and restated bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC, 6201 15th Avenue, Brooklyn, NY 11219. Its phone number is (800) 937-5449.
Listing
Our common stock is listed on the New York Stock Exchange under the symbol MMI.
Exhibit 10.14
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIRST AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT (this Amendment) is entered into as of November 27, 2019, by and between MARCUS & MILLICHAP, INC., a Delaware corporation (Borrower), and WELLS FARGO BANK, NATIONAL ASSOCIATION (Bank).
RECITALS
WHEREAS, Borrower is currently indebted to Bank pursuant to the terms and conditions of that certain Amended and Restated Credit Agreement between Borrower and Bank dated as of May 28, 2019, as amended from time to time (Credit Agreement).
WHEREAS, Bank and Borrower have agreed to certain changes in the terms and conditions set forth in the Credit Agreement and have agreed to amend the Credit Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Amendment. Section 5.6. of the Credit Agreement is hereby deleted in its entirety, and the following substituted therefor:
SECTION 5.6. LOANS AND ADVANCES. With respect to Borrower and the other Obligors on a combined basis, make any loans or advances to or investments in any person or entity, except for (i) loans and advances to or in one or more persons or entities, which are considered employees or independent contractors up to an aggregate amount not to exceed $120,000,000 outstanding at any one time (in addition to acquisitions allowed under Section 5.4 above and any obligations listed on Schedule 5.2 attached hereto) so long as all of the of the following conditions are satisfied: (x) both before and after any such loan or advance Borrower has Unencumbered Liquid Assets plus availability under the Line of Credit of not less than $30,000,000, (y) there exists no Event of Default, nor any act, condition or event which with the giving of notice or the passage of time or both would constitute an Event of Default, and no such Event of Default or potential Event of Default results after giving effect to the loan or advance, and (z) Total Funded Debt to EBITDA on a Pro Forma Basis will not exceed 1.5:1.0, (ii) loans, advances and investments to or in non-Obligor entities that are organized outside the United States up to an aggregate amount not to exceed $35,000,000 outstanding at any one time, and (iii) investments in marketable securities pursuant to Borrowers investment policy as approved by its Board of Directors from time to time.
2. Affirmation. Except as specifically provided herein, all terms and conditions of the Credit Agreement remain in full force and effect, without waiver or modification. All terms defined in the Credit Agreement shall have the same meaning when used in this Amendment. This Amendment and the Credit Agreement shall be read together, as one document.
3. Borrower Representations and Certifications. Borrower hereby remakes all representations and warranties contained in the Credit Agreement and reaffirms all covenants set forth therein. Borrower further certifies that as of the date of this Amendment there exists no Event of Default as defined in the Credit Agreement, nor any condition, act or event which with the giving of notice or the passage of time or both would constitute any such Event of Default.
[Signatures are on Next Page]
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed as of the day and year first written above.
MARCUS & MILLICHAP, INC. |
WELLS FARGO BANK, NATIONAL ASSOCIATION |
|||||||
By: |
/s/ Martin E. Louie |
By: |
/s/ Jamie Chen |
|||||
Name: Martin E. Louie | Name: Jamie Chen | |||||||
Title: Senior Vice President and CFO | Title: Senior Vice President |
By: |
/s/ Kurt Schwarz |
|
Name: Kurt Schwarz | ||
Title: Vice President Finance and Chief Accounting Officer |
2
Exhibit 21.1
Subsidiaries of the Registrant
Name of Subsidiary |
State or Other Jurisdiction of Incorporation or Organization |
|
Marcus & Millichap Real Estate Investment Services, Inc. | California | |
Marcus & Millichap REIS of Atlanta, Inc. | Georgia | |
Marcus & Millichap REIS of Chicago, Inc. | California | |
Marcus & Millichap REIS of Florida, Inc. | California | |
Marcus & Millichap REIS of Nevada, Inc. | California | |
Marcus & Millichap REIS of North Carolina, Inc. | California | |
Marcus & Millichap REIS of Seattle, Inc. | California | |
Marcus & Millichap REIS Canada, Inc. | New Brunswick, Canada | |
Marcus & Millichap Capital Corporation | California | |
Mark One Capital, Inc. | Delaware | |
MMI Servicing, Inc. | Delaware | |
Services DInvestissement Immobilier Marcus & Millichap Québec Inc. / Marcus & Millichap Real Estate Investment Services Québec Inc. (formerly McGill Commercial Inc.) |
Quebec, Canada |
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) |
Registration Statement (From S-3 No. 333-224821) of Marcus & Millichap, Inc. Prospectus of Marcus & Millichap, Inc. for the registration of 2,000,000 shares of its common stock; and |
(2) |
Registration Statements (Form S-8 Nos. 333-192506 and 333-216738) pertaining to the 2013 Omnibus Equity Incentive Plan and the 2013 Employee Stock Purchase Plan of Marcus & Millichap, Inc.; |
of our reports dated March 2, 2020, with respect to the consolidated financial statements of Marcus & Millichap, Inc. and the effectiveness of internal control over financial reporting of Marcus & Millichap, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2019.
/s/ Ernst & Young LLP |
Los Angeles, California |
March 2, 2020 |
Exhibit 31.1
Certification of Chief Executive Officer of Marcus & Millichap, Inc. pursuant to
Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Hessam Nadji, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Marcus & Millichap, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 2, 2020 |
/s/ Hessam Nadji |
|
Hessam Nadji | ||
President and Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer of Marcus & Millichap, Inc. pursuant to
Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Martin E. Louie, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Marcus & Millichap, Inc.; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) |
Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) |
Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. |
The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: March 2, 2020 |
/s/ Martin E. Louie | |
Martin E. Louie Chief Financial Officer |
Exhibit 32.1
Certifications of Chief Executive Officer and Chief Financial Officer of Marcus & Millichap, Inc. Pursuant to
Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Marcus & Millichap, Inc. on Form 10-K for the year ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Hessam Nadji, President and Chief Executive Officer of Marcus & Millichap, Inc. and Martin E. Louie, Chief Financial Officer of Marcus & Millichap, Inc., certify, to the best of our knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) |
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Marcus & Millichap, Inc. |
Date: |
March 2, 2020 | /s/ Hessam Nadji | ||||||
Hessam Nadji | ||||||||
President and Chief Executive Officer | ||||||||
(Principal Executive Officer) | ||||||||
Date: | March 2, 2020 |
/s/ Martin E. Louie |
||||||
Martin E. Louie | ||||||||
Chief Financial Officer | ||||||||
(Principal Financial Officer) |