☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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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23975 Park Sorrento, Suite 400
Calabasas, California
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91302
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(Address of Principal Executive Offices)
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(Zip Code)
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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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☐ |
June 30, 2021
(Unaudited) |
December 31,
2020 |
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Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 230,414 | $ | 243,152 | ||||
Commissions receivable, net
|
14,954 | 10,391 | ||||||
Prepaid expenses
|
10,402 | 10,153 | ||||||
Marketable debt securities,
available-for-sale
|
147,172 | 158,258 | ||||||
Advances and loans, net
|
2,657 | 2,413 | ||||||
Other assets
|
5,742 | 4,711 | ||||||
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|
|
|
|||||
Total current assets
|
411,341 | 429,078 | ||||||
Property and equipment, net
|
22,746 | 23,436 | ||||||
Operating lease
right-of-use
|
86,420 | 84,024 | ||||||
Marketable debt securities,
available-for-sale
|
97,514 | 47,773 | ||||||
Assets held in rabbi trust
|
11,178 | 10,295 | ||||||
Deferred tax assets, net
|
20,706 | 21,374 | ||||||
Goodwill and other intangible assets, net
|
49,843 | 52,053 | ||||||
Advances and loans, net
|
114,036 | 106,913 | ||||||
Other assets
|
3,986 | 4,176 | ||||||
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|
|
|
|||||
Total assets
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$ | 817,770 | $ | 779,122 | ||||
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Liabilities and stockholders’ equity
|
||||||||
Current liabilities:
|
||||||||
Accounts payable and other liabilities
|
$ | 20,959 | $ | 18,288 | ||||
Deferred compensation and commissions
|
48,169 | 58,106 | ||||||
Income tax payable
|
2,380 | 3,726 | ||||||
Operating lease liabilities
|
20,157 | 19,190 | ||||||
Accrued bonuses and other employee related expenses
|
23,854 | 21,007 | ||||||
|
|
|
|
|||||
Total current liabilities
|
115,519 | 120,317 | ||||||
Deferred compensation and commissions
|
32,191 | 38,745 | ||||||
Operating lease liabilities
|
61,293 | 59,408 | ||||||
Other liabilities
|
11,914 | 13,816 | ||||||
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|
|
|
|||||
Total liabilities
|
220,917 | 232,286 | ||||||
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|||||
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Commitments and contingencies
|
— | — | ||||||
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Stockholders’ equity:
|
||||||||
Preferred stock, $0.0001 par value:
|
||||||||
Authorized shares – 25,000,000; issued and outstanding shares – none at June 30, 2021
and December 31, 2020, respectively
|
—
|
—
|
||||||
Common stock, $0.0001 par value:
|
||||||||
Authorized shares – 150,000,000; issued and outstanding shares – 39,578,360 and 39,401,976 at June 30,
2021 and December 31, 2020, respectively
|
4 | 4 | ||||||
Additional
paid-in
capital
|
117,457 | 113,182 | ||||||
Retained earnings
|
477,620 | 431,076 | ||||||
Accumulated other comprehensive income
|
1,772 | 2,574 | ||||||
|
|
|
|
|||||
Total stockholders’ equity
|
596,853 | 546,836 | ||||||
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|
|||||
Total liabilities and stockholders’ equity
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$ | 817,770 | $ | 779,122 | ||||
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|
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Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues:
|
||||||||||||||||
Real estate brokerage commissions
|
$ | 252,903 | $ | 103,371 | $ | 415,699 | $ | 275,200 | ||||||||
Financing fees
|
28,214 | 12,703 | 46,057 | 28,054 | ||||||||||||
Other revenues
|
3,829 | 1,326 | 7,167 | 4,863 | ||||||||||||
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|
|
|
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|||||||||
Total revenues
|
284,946 | 117,400 | 468,923 | 308,117 | ||||||||||||
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|
|
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|||||||||
Operating expenses:
|
||||||||||||||||
Cost of services
|
178,585 | 73,743 | 287,688 | 187,500 | ||||||||||||
Selling, general and administrative
|
61,797 | 43,519 | 113,474 | 98,379 | ||||||||||||
Depreciation and amortization
|
2,959 | 2,752 | 5,956 | 5,216 | ||||||||||||
|
|
|
|
|
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|||||||||
Total operating expenses
|
243,341 | 120,014 | 407,118 | 291,095 | ||||||||||||
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|||||||||
Operating income (loss)
|
41,605 | (2,614 | ) | 61,805 | 17,022 | |||||||||||
Other income (expense), net
|
1,370 | 2,975 | 2,414 | 2,609 | ||||||||||||
Interest expense
|
(146 | ) | (213 | ) | (292 | ) | (496 | ) | ||||||||
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|
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|
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|||||||||
Income before provision for income taxes
|
42,829 | 148 | 63,927 | 19,135 | ||||||||||||
Provision for income taxes
|
11,297 | 42 | 17,383 | 5,959 | ||||||||||||
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|
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Net income
|
31,532 | 106 | 46,544 | 13,176 | ||||||||||||
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Other comprehensive income (loss):
|
||||||||||||||||
Marketable debt securities,
available-for-sale:
|
||||||||||||||||
Change in net unrealized gains
|
146 | 1,214 | (475 | ) | 717 | |||||||||||
Less: reclassification adjustment for net losses included in other income (expense), net
|
3 | 13 | 3 | 24 | ||||||||||||
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|
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Net change, net of tax of $51, $421, $(164) and $253 for the three and six months ended June 30, 2021 and 2020, respectively
|
149 | 1,227 | (472 | ) | 741 | |||||||||||
Foreign currency translation (loss) gain, net of tax of $0 for each of the three and six months ended June 30, 2021 and 2020
|
(217 | ) | (423 | ) | (330 | ) | 468 | |||||||||
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|||||||||
Total other comprehensive (loss) income
|
(68 | ) | 804 | (802 | ) | 1,209 | ||||||||||
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Comprehensive income
|
$ | 31,464 | $ | 910 | $ | 45,742 | $ | 14,385 | ||||||||
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Earnings per share:
|
||||||||||||||||
Basic
|
$ | 0.79 | $ | — | $ | 1.17 | $ | 0.33 | ||||||||
Diluted
|
$ | 0.78 | $ | — | $ | 1.16 | $ | 0.33 | ||||||||
Weighted average common shares outstanding:
|
||||||||||||||||
Basic
|
39,877 | 39,629 | 39,817 | 39,585 | ||||||||||||
Diluted
|
40,139 | 39,673 | 40,112 | 39,662 |
Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock |
Additional
Paid-In
Capital |
Stock Notes
Receivable From Employees |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2021
|
— | $ | — | 39,500,966 | $ | 4 | $ | 113,737 | $ | — | $ | 446,088 | $ | 1,840 | $ | 561,669 | |||||||||||||||||||||
Net and comprehensive income
(loss)
|
— | — | — | — | — | — | 31,532 | (68 | ) | 31,464 | |||||||||||||||||||||||||||
Stock-based award activity
|
|||||||||||||||||||||||||||||||||||||
Stock-based compensation
|
— | — | — | — | 2,662 | — | — | — | 2,662 | ||||||||||||||||||||||||||||
Shares issued pursuant to
employee stock purchase plan
|
— | — | 11,635 | — | 369 | — | — | — | 369 | ||||||||||||||||||||||||||||
Issuance of common stock for vesting of restricted stock units
|
— | — | 34,198 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock for unvested restricted stock awards
|
— | — | 12,492 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock for stock settled deferred consideration
|
— | — | 27,481 | — | 1,000 | — | — | — | 1,000 | ||||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards
|
— | — | (8,412 | ) | — | (311 | ) | — | — | — | (311 | ) | |||||||||||||||||||||||||
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|
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|
|
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|
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|
|
|
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|
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||||||||||||||||||||
Balance as of June 30, 2021
|
— | $ | — | 39,578,360 | $ | 4 | $ | 117,457 | $ | — | $ | 477,620 | $ | 1,772 | $ | 596,853 | |||||||||||||||||||||
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Three Months Ended June 30, 2020 | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock |
Additional
Paid-In
Capital |
Stock Notes
Receivable From Employees |
Retained
Earnings |
Accumulated
Other Comprehensive Income |
Total | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||
Balance at March 31, 2020
|
— | $ | — | 39,272,429 | $ | 4 | $ | 105,601 | $ |
(4
|
)
|
$
|
401,308
|
$
|
2,383
|
$
|
509,292
|
||||||||||||||||||||
Net and comprehensive income
|
— | — | — | — | — | — | 106 | 804 | 910 | ||||||||||||||||||||||||||||
Stock-based award activity
|
|||||||||||||||||||||||||||||||||||||
Stock-based compensation
|
— | — | — | — | 2,536 | — | — | — | 2,536 | ||||||||||||||||||||||||||||
Shares issued pursuant to
employee stock purchase
|
— | — | 15,923 | — | 371 | — | — | — | 371 | ||||||||||||||||||||||||||||
Issuance of common stock for vesting of restricted stock units
|
— | — | 27,373 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Issuance of common stock for unvested restricted stock awards
|
— | — | 19,516 | — | — | — | — | — | — | ||||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards
|
— | — | (7,224 | ) | — | (200 | ) | — | — | — | (200 | ) | |||||||||||||||||||||||||
Reduction of stock notes receivable from employees
|
— | — | — | — | — | 4 | — | — | 4 | ||||||||||||||||||||||||||||
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||||||||||||||||||||
Balance as of June 30, 2020
|
— | $ | — | 39,328,017 | $ | 4 | $ | 108,308 | $ | — | $ | 401,414 | $ | 3,187 | $ | 512,913 | |||||||||||||||||||||
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Six Months Ended June 30, 2021 | ||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock |
Additional
Paid-In
Capital |
Stock Notes
Receivable From Employees |
Retained
Earnings |
Accumulated
Other Comprehensive Income (Loss) |
Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance at December 31, 2020
|
— | $ | — | 39,401,976 | $ | 4 | $ | 113,182 | $ | — | $ | 431,076 | $ | 2,574 | $ | 546,836 | ||||||||||||||||||||
Net and comprehensive income
(loss)
|
— | — | — | — | — | — | 46,544 | (802 | ) | 45,742 | ||||||||||||||||||||||||||
Stock-based award activity
|
||||||||||||||||||||||||||||||||||||
Stock-based compensation
|
— | — | — | — | 4,950 | — | — | — | 4,950 | |||||||||||||||||||||||||||
Shares issued pursuant to employee stock purchase plan
|
— | — | 11,635 | — | 369 | — | — | — | 369 | |||||||||||||||||||||||||||
Issuance of common stock for vesting of restricted stock units
|
— | — | 183,315 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock for unvested restricted stock awards
|
— | — | 12,492 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock for stock settled deferred consideration
|
— | — | 27,481 | — | 1,000 | — | — | — | 1,000 | |||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards
|
— | — | (58,539 | ) | — | (2,044 | ) | — | — | — | (2,044 | ) | ||||||||||||||||||||||||
|
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|
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|
|
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|
|
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|
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|||||||||||||||||||
Balance as of June 30, 2021
|
— | $ | — | 39,578,360 | $ | 4 | $ | 117,457 | $ | — | $ | 477,620 | $ | 1,772 | $ | 596,853 | ||||||||||||||||||||
|
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Six Months Ended June 30, 2020 | ||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock |
Additional
Paid-In
Capital |
Stock Notes
Receivable From Employees |
Retained
Earnings |
Accumulated
Other Comprehensive Income |
Total | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||||
Balance at December 31, 2019
|
— | $ | — | 39,153,195 | $ | 4 | $ | 104,658 | $ |
(4
|
)
|
$ | 388,271 | $ | 1,978 | $ | 494,907 | |||||||||||||||||||
Cumulative effect of a change in accounting principle, net of tax
|
— | — | — | — | — | — | (33 | ) | — | (33 | ) | |||||||||||||||||||||||||
|
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|
|||||||||||||||||||
Balance at January 1, 2020, as adjusted
|
— | — | 39,153,195 | 4 | 104,658 | (4 | ) | 388,238 | 1,978 | 494,874 | ||||||||||||||||||||||||||
Net and comprehensive income
|
— | — | — | — | — | — | 13,176 | 1,209 | 14,385 | |||||||||||||||||||||||||||
Stock-based award activity
|
||||||||||||||||||||||||||||||||||||
Stock-based compensation
|
— | — | — | — | 5,168 | — | — | — | 5,168 | |||||||||||||||||||||||||||
Shares issued pursuant to employee stock purchase plan
|
— | — | 15,923 | — | 371 | — | — | — | 371 | |||||||||||||||||||||||||||
Issuance of common stock for vesting of restricted stock units
|
— | — | 197,479 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Issuance of common stock for unvested restricted stock awards
|
— | — | 19,516 | — | — | — | — | — | — | |||||||||||||||||||||||||||
Shares withheld related to net share settlement of stock-based awards
|
— | — | (58,096 | ) | — | (1,889 | ) | — | — | — | (1,889 | ) | ||||||||||||||||||||||||
Reduction of stock notes receivable from
|
— | — | — | — | — | 4 | — | — | 4 | |||||||||||||||||||||||||||
|
|
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|
|
|
|
|
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|||||||||||||||||||
Balance as of June 30, 2020
|
— | $ | — | 39,328,017 | $ | 4 | $ | 108,308 | $ | — | $ | 401,414 | $ | 3,187 | $ | 512,913 | ||||||||||||||||||||
|
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Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Cash flows from operating activities
|
||||||||
Net income
|
$ | 46,544 | $ | 13,176 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
5,956 | 5,216 | ||||||
Amortization of
right-of-use
|
11,850 | 11,151 | ||||||
Credit loss recovery
|
(137 | ) | (78 | ) | ||||
Stock-based compensation
|
4,950 | 5,168 | ||||||
Deferred taxes, net
|
780 | 4,172 | ||||||
Unrealized foreign exchange (gains) losses
|
(560 | ) | 557 | |||||
Net realized gains on marketable debt securities,
available-for-sale
|
(10 | ) | (117 | ) | ||||
Other
non-cash
items
|
196 | 567 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Commissions receivable
|
(4,781 | ) | (5 | ) | ||||
Prepaid expenses
|
(239 | ) | 2,259 | |||||
Advances and loans
|
(7,086 | ) | (34,149 | ) | ||||
Other assets
|
(2,138 | ) | (1,059 | ) | ||||
Accounts payable and other liabilities
|
4,988 | (1,204 | ) | |||||
Income tax receivable/payable
|
(1,345 | ) | 775 | |||||
Accrued bonuses and other employee related expenses
|
3,005 | (18,168 | ) | |||||
Deferred compensation and commissions
|
(15,968 | ) | (31,425 | ) | ||||
Operating lease liabilities
|
(10,557 | ) | (9,016 | ) | ||||
Other liabilities
|
(1,982 | ) | 331 | |||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities
|
33,466 | (51,849 | ) | |||||
|
|
|
|
|||||
Cash flows from investing activities
|
||||||||
Acquisition of businesses, net of cash received
|
229 | (11,821 | ) | |||||
Purchases of marketable debt securities,
available-for-sale
|
(199,513 | ) | (95,266 | ) | ||||
Proceeds from sales and maturities of marketable debt securities,
available-for-sale
|
159,968 | 95,028 | ||||||
Issuances of employee notes receivable
|
(40 | ) | (211 | ) | ||||
Payments received on employee notes receivable
|
276 | 1 | ||||||
Purchase of property and equipment
|
(2,770 | ) | (4,190 | ) | ||||
|
|
|
|
|||||
Net cash used in investing activities
|
(41,850 | ) | (16,459 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities
|
||||||||
Taxes paid related to net share settlement of stock-based awards
|
(2,044 | ) | (1,889 | ) | ||||
Proceeds from issuance of shares pursuant to employee stock purchase plan
|
369 | 371 | ||||||
Principal payments on notes payable to former stockholders
|
— | (6,563 | ) | |||||
Principal payments on stock appreciation rights liability
|
(1,481 | ) | (1,251 | ) | ||||
Principal payments on deferred consideration
|
(1,302 | ) | — | |||||
|
|
|
|
|||||
Net cash used in financing activities
|
(4,458 | ) | (9,332 | ) | ||||
|
|
|
|
|||||
Effect of currency exchange rate changes on cash and cash equivalents
|
104 | (150 | ) | |||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents
|
(12,738 | ) | (77,790 | ) | ||||
Cash and cash equivalents at beginning of period
|
243,152 | 232,670 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period
|
$ | 230,414 | $ | 154,880 | ||||
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
Supplemental disclosures of cash flow information
|
||||||||
Interest paid during the period
|
$ | 714 | $ | 1,193 | ||||
|
|
|
|
|||||
Income taxes paid, net
|
$ | 17,897 | $ | 1,013 | ||||
|
|
|
|
1.
|
Description of Business, Basis of Presentation and Recent Accounting Pronouncements
|
2.
|
Property and Equipment, Net
|
June 30,
2021 |
December 31,
2020 |
|||||||
Computer software and hardware equipment
|
$ | 31,007 | $ | 30,955 | ||||
Furniture, fixtures and equipment
|
23,809 | 23,418 | ||||||
Less: accumulated depreciation and amortization
|
(32,070 | ) | (30,937 | ) | ||||
|
|
|
|
|||||
$ | 22,746 | $ | 23,436 | |||||
|
|
|
|
3.
|
Operating Leases
|
Three Months Ended
June 30,
|
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Operating lease cost:
|
||||||||||||||||
Lease cost
(1)
|
$ | 6,512 | $ | 6,341 | $ | 13,101 | $ | 12,604 | ||||||||
Variable lease cost
(2)
|
1,241 | 1,215 | 2,641 | 2,611 | ||||||||||||
Sublease income
|
(19 | ) | (89 | ) | (52 | ) | (166 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 7,734 | $ | 7,467 | $ | 15,690 | $ | 15,049 | |||||||||
|
|
|
|
|
|
|
|
(1)
|
Includes short-term lease cost and ROU asset amortization.
|
(2)
|
Primarily relates to common area maintenance, property taxes, insurance, utilities and parking.
|
June 30, 2021 | ||||
Remainder of 2021
|
$ | 11,862 | ||
2022
|
19,536 | |||
2023
|
16,039 | |||
2024
|
13,913 | |||
2025
|
11,730 | |||
Thereafter
|
14,575 | |||
|
|
|||
Total future minimum lease payments
|
87,655 | |||
Less imputed interest
|
(6,205 | ) | ||
|
|
|||
Present value of operating lease liabilities
|
$ | 81,450 | ||
|
|
Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Operating cash flow information:
|
||||||||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$ | 11,764 | $ | 10,456 | ||||
Noncash activity:
|
||||||||
ROU assets obtained in exchange for operating lease liabilities
|
$ | 13,373 | $ | 6,334 | ||||
Tenant improvements owned by lessor related to ROU assets
(1)
|
$ | 881 | $ | 317 |
(1)
|
Reclassification from other assets current.
|
June 30, 2021 | December 31, 2020 | |||||||
Weighted average remaining operating lease term
|
4.84 years | 4.70 years | ||||||
Weighted average discount rate
|
3.0 | % | 3.1 | % |
4.
|
Investments in Marketable Debt Securities
|
June 30, 2021 | ||||||||||||||||||||
Amortized
Cost |
Allowance
for Credit Losses |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
||||||||||||||||
Short-term investments:
|
||||||||||||||||||||
U.S. treasuries
|
$ | 74,424 | $ | — | $ | 12 | $ | — | $ | 74,436 | ||||||||||
Corporate debt
|
72,718 | — | 19 | (1 | ) | 72,736 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 147,142 | $ | — | $ | 31 | $ | (1 | ) | $ | 147,172 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Long-term investments:
|
||||||||||||||||||||
U.S. treasuries
|
$ | 52,033 | $ | — | $ | 185 | $ | (22 | ) | $ | 52,196 | |||||||||
U.S. government sponsored entities
|
888 | — | 27 | (2 | ) | 913 | ||||||||||||||
Corporate debt
|
35,998 | — | 1,669 | (18 | ) | 37,649 | ||||||||||||||
Asset-backed securities (“ABS”) and other
|
6,569 | — | 189 | (2 | ) | 6,756 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 95,488 | $ | — | $ | 2,070 | $ | (44 | ) | $ | 97,514 | ||||||||||
|
|
|
|
|
|
|
|
|
|
December 31, 2020 | ||||||||||||||||||||
Amortized
Cost |
Allowance
for Credit Losses |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Fair
Value |
||||||||||||||||
Short-term investments:
|
||||||||||||||||||||
U.S. treasuries
|
$ | 75,887 | $ | — | $ | 88 | $ | (5 | ) | $ | 75,970 | |||||||||
U.S. government sponsored entities
|
32,439 | — | 8 | — | 32,447 | |||||||||||||||
Corporate debt
|
49,822 | — | 20 | (1 | ) | 49,841 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 158,148 | $ | — | $ | 116 | $ | (6 | ) | $ | 158,258 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Long-term investments:
|
||||||||||||||||||||
U.S. treasuries
|
$ | 3,375 | $ | — | $ | 266 | $ | — | $ | 3,641 | ||||||||||
U.S. government sponsored entities
|
1,114 | — | 38 | — | 1,152 | |||||||||||||||
Corporate debt
|
34,183 | — | 2,137 | (33 | ) | 36,287 | ||||||||||||||
ABS and other
|
6,509 | — | 195 | (11 | ) | 6,693 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
$ | 45,181 | $ | — | $ | 2,636 | $ | (44 | ) | $ | 47,773 | ||||||||||
|
|
|
|
|
|
|
|
|
|
June 30, 2021 | ||||||||||||||||||||||||
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Fair
Value |
Gross
Unrealized Losses |
Fair
Value |
Gross
Unrealized Losses |
Fair
Value |
Gross
Unrealized Losses |
|||||||||||||||||||
U.S. treasuries
|
$ | 36,576 | $ | (22 | ) | $ | — | $ | — | $ | 36,576 | $ | (22 | ) | ||||||||||
U.S. government sponsored entities
|
134 | (2 | ) | — | — | 134 | (2 | ) | ||||||||||||||||
Corporate debt
|
25,190 | (16 | ) | 145 | (3 | ) | 25,335 | (19 | ) | |||||||||||||||
ABS and other
|
250 | — | 223 | (2 | ) | 473 | (2 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 62,150 | $ | (40 | ) | $ | 368 | $ | (5 | ) | $ | 62,518 | $ | (45 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020 | ||||||||||||||||||||||||
Less than 12 months | 12 months or greater | Total | ||||||||||||||||||||||
Fair
Value |
Gross
Unrealized Losses |
Fair
Value |
Gross
Unrealized Losses |
Fair
Value |
Gross
Unrealized Losses |
|||||||||||||||||||
U.S. treasuries
|
$
|
41,702 | $ | (5 | ) | $ | — | $ | — |
$
|
41,702 | $ | (5 | ) | ||||||||||
Corporate debt
|
29,810 | (34 | ) | — | — | 29,810 | (34 | ) | ||||||||||||||||
ABS and other
|
546 | (6 | ) | 157 | (5 | ) | 703 | (11 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 72,058 | $ | (45 | ) |
$
|
157 | $ | (5 | ) | $ | 72,215 | $ | (50 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Gross realized gains
(1)
|
$ | 9 | $ | 79 | $ | 10 | $ | 132 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross realized losses
(1)
|
$ | — | $ | (15 | ) | $ | — | $ | (15 | ) | ||||||
|
|
|
|
|
|
|
|
(1)
|
Recorded in other income (expense), net in the condensed consolidated statements of net and comprehensive income. The cost basis of securities sold were determined based on the specific identification method.
|
June 30, 2021 | December 31, 2020 | |||||||||||||||
Amortized
Cost |
Fair Value |
Amortized
Cost |
Fair Value | |||||||||||||
Due in one year or less
|
$
|
147,142 | $ | 147,172 |
$
|
158,148 |
$
|
158,258 | ||||||||
Due after one year through five years
|
80,697 | 81,796 | 30,604 | 32,041 | ||||||||||||
Due after five years through ten years
|
10,045 | 10,824 | 10,022 | 11,044 | ||||||||||||
Due after ten years
|
4,746 | 4,894 | 4,555 | 4,688 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 242,630 |
$
|
244,686 | $ | 203,329 | $ | 206,031 | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average contractual maturity
|
1.8 years | 1.6 years |
5.
|
Acquisitions, Goodwill and Other Intangible Assets
|
June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||
Gross
Carrying Amount |
Accumulated
Amortization |
Net Book
Value |
Gross
Carrying Amount |
Accumulated
Amortization |
Net Book
Value |
|||||||||||||||||||
Goodwill and intangible assets:
|
||||||||||||||||||||||||
Goodwill
|
$
|
34,071 | $ | — |
$
|
34,071 |
$
|
33,375 | $ | — |
$
|
33,375 | ||||||||||||
Intangible assets
(1)
|
23,974 | (8,202 | ) | 15,772 | 24,745 | (6,067 | ) | 18,678 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
$ | 58,045 | $ | (8,202 | ) | $ | 49,843 | $ | 58,120 | $ | (6,067 | ) | $ | 52,053 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Total weighted average amortization period was 5.53 years and 5.57 years as of June 30, 2021 and December 31, 2020, respectively.
|
Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Beginning balance
|
$
|
33,375 |
$
|
15,072 | ||||
Additions from acquisitions
(1)
|
696 | 9,247 | ||||||
Impairment losses
|
— | — | ||||||
|
|
|
|
|||||
Ending balance
|
$ | 34,071 | $ | 24,319 | ||||
|
|
|
|
(1)
|
The 2021 addition represents a measurement period adjustment.
|
June 30, 2021 | ||||
Remainder of 2021
|
$ | 1,738 | ||
2022
|
3,474 | |||
2023
|
3,407 | |||
2024
|
2,891 | |||
2025
|
2,671 | |||
Thereafter
|
1,591 | |||
|
|
|||
$ | 15,772 | |||
|
|
6.
|
Selected Balance Sheet Data
|
Advances and
Loans |
Commissions
Receivable |
Total | ||||||||||
Beginning balance as of January 1, 2021
|
$ | 563 | $ | 94 |
$
|
657 | ||||||
Credit recovery
|
(53 | ) | (84 | ) | (137 | ) | ||||||
Write-offs
|
(36 | ) | — | (36 | ) | |||||||
|
|
|
|
|
|
|||||||
Ending balance as of June 30, 2021
|
$ | 474 | $ | 10 | $ | 484 | ||||||
|
|
|
|
|
|
Advances and
Loans |
Commissions
Receivable |
Total | ||||||||||
Beginning balance as of January 1, 2020
|
$ | 512 | $ | 32 |
(1)
|
$
|
544 | |||||
Credit loss (recovery) expense
|
(79 | ) | 1 | (78 | ) | |||||||
Write-offs
|
(32 | ) | — | (32 | ) | |||||||
|
|
|
|
|
|
|||||||
Ending balance as of June 30, 2020
|
$ | 401 | $ | 33 | $ | 434 | ||||||
|
|
|
|
|
|
(1)
|
Includes cumulative-effect adjustment related to the adoption of ASU
No. 2016-13,
Financial Instruments - Credit Losses
|
Current |
Non-Current
|
|||||||||||||||
June 30,
2021 |
December 31,
2020 |
June 30,
2021 |
December 31,
2020 |
|||||||||||||
Mortgage servicing rights (“MSRs”), net of amortization
|
$
|
— | $ | — |
$
|
1,993 | $ | 1,897 | ||||||||
Security deposits
|
— | — | 1,475 | 1,461 | ||||||||||||
Employee notes receivable
(1)
|
113 | 185 | 12 | 246 | ||||||||||||
Customer trust accounts and other
|
5,629 | 4,526 | 506 | 572 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 5,742 | $ | 4,711 | $ | 3,986 | $ | 4,176 | |||||||||
|
|
|
|
|
|
|
|
(1)
|
Reduction of accrued bonuses and other employee related expenses in settlement of employee notes receivable were $10 and $0 for the six months ended June 30, 2021 and 2020, respectively. See Note 7 – “Related-Party Transactions” for additional information.
|
Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Beginning balance
|
$ | 1,897 | $ | 2,002 | ||||
Additions
|
366 | 384 | ||||||
Amortization
|
(270 | ) | (253 | ) | ||||
|
|
|
|
|||||
Ending balance
|
$ | 1,993 | $ | 2,133 | ||||
|
|
|
|
Current |
Non-Current
|
|||||||||||||||
June 30,
2021 |
December 31,
2020 |
June 30,
2021 |
December 31,
2020 |
|||||||||||||
Stock appreciation rights (“SARs”) liability
(1)
|
$
|
2,225 | $ | 2,162 |
$
|
14,690 | $ | 16,671 | ||||||||
Commissions payable to investment sales and financing professionals
|
44,379 | 54,082 | 10,405 | 15,306 | ||||||||||||
Deferred compensation liability
(1)
|
1,250 | 1,519 | 7,096 | 6,768 | ||||||||||||
Other
|
315 | 343 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 48,169 | $ | 58,106 | $ | 32,191 | $ | 38,745 | |||||||||
|
|
|
|
|
|
|
|
(1)
|
The SARs and deferred compensation liability become subject to payout as a result of a participant no longer being considered a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to the participants within the next twelve months have been classified as current.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Increase (decrease) in the carrying value of the assets held in the rabbi trust
(1)
|
$
|
657 |
$
|
1,124 |
$
|
990 |
$
|
(264 | ) | |||||||
|
|
|
|
|
|
|
|
|||||||||
Increase (decrease) in the net carrying value of the deferred compensation obligation
(2)
|
$ | 503 | $ | 973 | $ | 763 | $ | (300 | ) | |||||||
|
|
|
|
|
|
|
|
(1)
|
Recorded in other income (expense), net in the condensed consolidated statements of net and comprehensive income.
|
(2)
|
Recorded in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income.
|
Non-Current
|
||||||||
June 30,
2021 |
December 31,
2020 |
|||||||
Deferred consideration
(1) (2)
|
$
|
5,797 |
$
|
8,582 | ||||
Contingent consideration
(1) (2)
|
5,026 | 4,219 | ||||||
Other
|
1,091 | 1,015 | ||||||
|
|
|
|
|||||
$ | 11,914 | $ | 13,816 | |||||
|
|
|
|
(1)
|
The current portions of deferred consideration in the amounts of $6,201 and $6,666 as of June 30, 2021 and December 31, 2020, respectively, are included in accounts payable and other liabilities in the condensed consolidated balance sheets. The current portions of contingent consideration in the amounts of $1,791 and $1,353 as of June 30, 2021 and December 31, 2020, respectively, are included in accounts payable and other liabilities in the condensed consolidated balance sheets.
|
(2)
|
Includes a measurement period adjustment and a reduction in deferred consideration settled in stock made during the six months ended June 30, 2021, which represents a noncash investing activity. See Note 5 – “Acquisitions, Goodwill and Other Intangible Assets” for additional information.
|
7.
|
Related-Party Transactions
|
8.
|
Fair Value Measurements
|
• |
Level
1:
|
• |
Level
2:
|
• |
Level
3:
|
June 30, 2021 | December 31, 2020 | |||||||||||||||||||||||||||||||
Fair Value | Level 1 | Level 2 | Level 3 | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||
Assets held in rabbi trust
|
$
|
11,178 |
$
|
— |
$
|
11,178 |
$
|
— |
$
|
10,295 |
$
|
— |
$
|
10,295 |
$
|
— | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Cash equivalents
(1)
:
|
||||||||||||||||||||||||||||||||
Commercial paper and other
|
$ | 1,800 | $ | — | $ | 1,800 | $ | — | $ | 9,399 | $ | — | $ | 9,399 | $ | — | ||||||||||||||||
Money market funds
|
167,441 | 167,441 | — | — | 158,271 | 158,271 | — | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 169,241 | $ | 167,441 | $ | 1,800 | $ | — | $ | 167,670 | $ | 158,271 | $ | 9,399 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable debt securities,
available-for-sale:
|
||||||||||||||||||||||||||||||||
Short-term investments:
|
||||||||||||||||||||||||||||||||
U.S. treasuries
|
$ | 74,436 | $ | 74,436 | $ | — | $ | — | $ | 75,970 | $ | 75,970 | $ | — | $ | — | ||||||||||||||||
U.S. government sponsored entities
|
— | — | — | — | 32,447 | — | 32,447 | — | ||||||||||||||||||||||||
Corporate debt
|
72,736 | — | 72,736 | — | 49,841 | — | 49,841 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 147,172 | $ | 74,436 | $ | 72,736 | $ | — | $ | 158,258 | $ | 75,970 | $ | 82,288 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term investments:
|
||||||||||||||||||||||||||||||||
U.S. treasuries
|
$ | 52,196 | $ | 52,196 | $ | — | $ | — | $ | 3,641 | $ | 3,641 | $ | — | $ | — | ||||||||||||||||
U.S. government sponsored entities
|
913 | — | 913 | — | 1,152 | — | 1,152 | — | ||||||||||||||||||||||||
Corporate debt
|
37,649 | — | 37,649 | — | 36,287 | — | 36,287 | — | ||||||||||||||||||||||||
ABS and other
|
6,756 | — | 6,756 | — | 6,693 | — | 6,693 | — | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 97,514 | $ | 52,196 | $ | 45,318 | $ | — | $ | 47,773 | $ | 3,641 | $ | 44,132 | $ | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration
|
$ | 6,817 | $ | — | $ | — | $ | 6,817 | $ | 5,572 | $ | — | $ | — | $ | 5,572 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred consideration
|
$ | 11,998 | $ | — | $ | 11,998 | $ | — | $ | 15,248 | $ | — | $ | 15,248 | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred compensation liability
|
$ | 8,346 | $ | 8,346 | $ | — | $ | — | $ | 8,287 | $ | 8,287 | $ | — | $ | — | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets.
|
Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Beginning balance
|
$ | 5,572 | $ | 3,387 | ||||
Contingent consideration in connection with acquisitions
(1)
|
(100 | ) | 1,800 | |||||
Change in fair value of contingent consideration
|
1,345 | 21 | ||||||
Payments of contingent consideration
|
— | — | ||||||
|
|
|
|
|||||
Ending balance
|
$ | 6,817 | $ | 5,208 | ||||
|
|
|
|
(1)
|
Contingent consideration in connection with acquisitions represents a noncash investing activity. Six months ended June 30, 2021 relates to a measurement period adjustment. See Note 5 – “Acquisitions, Goodwill and Other Intangible Assets” for additional information.
|
(1)
|
Unobservable inputs were weighted by the relative fair value of the instruments.
|
|
|
Fair Value at
June 30, 2021 |
|
|
Valuation Technique
|
|
Unobservable inputs
|
|
Range
(Weighted Average)
(1)
|
|
||
MSRs
|
|
$
|
2,367
|
|
|
Discounted cash flow
|
|
Constant prepayment rates
|
|
|
0.0%-20.0% (10.0%)
|
|
|
|
|
Constant default rate
|
|
|
0.3%-4.5% (1.2%)
|
|
|||||
|
|
|
Loss severity
|
|
|
26.2%-31.4% (28.0%)
|
|
|||||
|
|
|
Discount rate
|
|
|
10.0%-10.0% (10.0%)
|
|
|||||
|
|
Fair Value at
December 31, 2020 |
|
|
Valuation Technique
|
|
Unobservable inputs
|
|
Range
(Weighted Average)
(1)
|
|
||
MSRs
|
|
$
|
2,135
|
|
|
Discounted cash flow
|
|
Constant prepayment rates
|
|
|
0.0%-20.0% (10.0%)
|
|
|
|
|
Constant default rate
|
|
|
0.3%-4.1% (1.1%)
|
|
|||||
|
|
|
Loss severity
|
|
|
26.2%-31.4% (28.0%)
|
|
|||||
|
|
|
Discount rate
|
|
|
10.0%-10.0% (10.0%)
|
|
(1)
|
Weighted average is based on the 10% constant prepayment rate scenario which the Company uses as the reported fair value.
|
9.
|
Stockholders’ Equity
|
10.
|
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, 2020
(1)
|
16,728 | 637,650 | 264,001 | 918,379 |
$
|
33.73 | ||||||||||||||
Granted
|
12,492 | 247,469 | 15,386 | 275,347 |
$
|
38.57 | ||||||||||||||
Vested
|
(16,728 | ) | (155,379 | ) | (27,936 | ) | (200,043 | ) |
$
|
32.31 | ||||||||||
Transferred
|
— | (3,220 | ) | 3,220 | — |
$
|
31.05 | |||||||||||||
Forfeited/canceled
|
— | (16,476 | ) | (3,585 | ) | (20,061 | ) |
$
|
33.05 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Nonvested shares at June 30, 2021
(1)
|
12,492 | 710,044 | 251,086 | 973,622 |
$
|
34.86 | ||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Unrecognized stock-based compensation expense as of June 30, 2021
(2)
|
$ | 378 | $ | 23,442 | $ | 6,634 | $ | 30,454 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average remaining vesting period (years) as of June 30, 2021
|
0.84 | 3.75 | 2.99 | 3.55 | ||||||||||||||||
|
|
|
|
|
|
|
|
(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 3.55 years.
|
June 30, 2021 | ||||
2021
|
60,373 | |||
2022
|
281,193 | |||
|
|
|||
341,566 | ||||
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
ESPP
|
$
|
24 |
$
|
36 |
$
|
74 |
$
|
83 | ||||||||
RSAs –
non-employee
directors
|
113 | 213 | 224 | 373 | ||||||||||||
RSUs – employees
|
1,747 | 1,514 | 3,201 | 3,170 | ||||||||||||
RSUs – independent contractors
|
778 | 773 | 1,451 | 1,542 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
$ | 2,662 | $ | 2,536 | $ | 4,950 | $ | 5,168 | |||||||||
|
|
|
|
|
|
|
|
11.
|
Income Taxes
|
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||||||||||||||||||
Amount | Rate | Amount | Rate | Amount | Rate | Amount | Rate | |||||||||||||||||||||||||
Income tax expense at the federal statutory rate
|
$ | 8,994 | 21.0 | % | $ | 31 | 21.0 | % | $ | 13,425 | 21.0 | % | $ | 4,018 | 21.0 | % | ||||||||||||||||
State income tax expense, net of federal benefit
|
1,999 | 4.7 | % | (69 | ) | (46.8 | )% | 3,046 | 4.8 | % | 950 | 5.0 | % | |||||||||||||||||||
(Windfall) shortfall tax benefits, net related to stock-based
compensation
|
(52 | ) | (0.1 | )% | 90 | 61.2 | % | (79 | ) | (0.1 | )% | 73 | 0.4 | % | ||||||||||||||||||
Change in valuation allowance
|
17 | 0.0 | % | 96 | 65.4 | % | 188 | 0.3 | % | 460 | 2.4 | % | ||||||||||||||||||||
Permanent and other items
(1)
|
339 | 0.8 | % | (106 | ) | (72.4 | )% | 803 | 1.2 | % | 458 | 2.3 | % | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
$ | 11,297 | 26.4 | % | $ | 42 | 28.4 | % | $ | 17,383 | 27.2 | % | $ | 5,959 | 31.1 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Permanent items relate principally to compensation charges, qualified transportation fringe benefits and meals and entertainment.
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Numerator (Basic and Diluted):
|
||||||||||||||||
Net income
|
$ | 31,532 | $ | 106 | $ | 46,544 | $ | 13,176 | ||||||||
Change in value for stock settled consideration
|
(42 | ) | — | 10 | — | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted net income
|
$ | 31,490 | $ | 106 | $ | 46,554 | $ | 13,176 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
||||||||||||||||
Basic
|
||||||||||||||||
Weighted average common shares issued and outstanding
|
39,549 | 39,306 | 39,491 | 39,261 | ||||||||||||
Deduct: Unvested RSAs
(1)
|
(14 | ) | (19 | ) | (16 | ) | (18 | ) | ||||||||
Add: Fully vested DSUs
(2)
|
342 | 342 | 342 | 342 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding
|
39,877 | 39,629 | 39,817 | 39,585 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$ | 0.79 | $ | — | $ | 1.17 | $ | 0.33 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
||||||||||||||||
Weighted average common shares outstanding from above
|
39,877 | 39,629 | 39,817 | 39,585 | ||||||||||||
Add: Dilutive effect of RSUs, RSAs & ESPP
|
149 | 44 | 182 | 77 | ||||||||||||
Add: Contingently issuable shares
(3)
|
113 | — | 113 | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Weighted average common shares outstanding
|
40,139 | 39,673 | 40,112 | 39,662 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
$ | 0.78 | $ | — | $ | 1.16 | $ | 0.33 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Antidilutive shares excluded from diluted earnings per common share
(4)
|
48 | 738 | 275 | 636 | ||||||||||||
|
|
|
|
|
|
|
|
(1)
|
RSAs were issued and outstanding to the
non-employee
directors and have a
one-year
vesting term subject to service requirements. See Note 10 – “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 10 – “Stock-Based Compensation Plans” for additional information.
|
(3)
|
Relates to contingently issuable stock settled consideration.
|
(4)
|
Primarily pertaining to RSU grants to the Company’s employees and independent contractors.
|
13.
|
Commitments and Contingencies
|
• |
Properties priced less than $1 million;
|
• |
Private client market:
|
• |
Middle market:
|
• |
Larger transaction market:
|
Three Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | Change | ||||||||||||||||||||||||||||||||||
Real Estate Brokerage
|
Number | Volume | Revenues | Number | Volume | Revenues | Number | Volume | Revenues | |||||||||||||||||||||||||||
(in millions) | (in thousands) | (in millions) | (in thousands) | (in millions) | (in thousands) | |||||||||||||||||||||||||||||||
<$1 million
|
297 | $ | 200 | $ | 7,618 | 192 | $ | 118 | $ | 4,518 | 105 | $ | 82 | $ | 3,100 | |||||||||||||||||||||
Private client market ($1 - <$10 million)
|
1,767 | 5,675 | 158,136 | 793 | 2,614 | 70,817 | 974 | 3,061 | 87,319 | |||||||||||||||||||||||||||
Middle market ($10 - <$20 million)
|
156 | 2,134 | 41,745 | 43 | 618 | 11,591 | 113 | 1,516 | 30,154 | |||||||||||||||||||||||||||
Larger transaction market (
³
$20 million)
|
110 | 5,551 | 45,404 | 47 | 2,074 | 16,445 | 63 | 3,477 | 28,959 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
2,330 | $ | 13,560 | $ | 252,903 | 1,075 | $ | 5,424 | $ | 103,371 | 1,255 | $ | 8,136 | $ | 149,532 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, | ||||||||||||||||||||||||||||||||||||
2021 | 2020 | Change | ||||||||||||||||||||||||||||||||||
Real Estate Brokerage
|
Number | Volume | Revenues | Number | Volume | Revenues | Number | Volume | Revenues | |||||||||||||||||||||||||||
(in millions) | (in thousands) | (in millions) | (in thousands) | (in millions) | (in thousands) | |||||||||||||||||||||||||||||||
<$1 million
|
524 | $ | 349 | $ | 13,756 | 408 | $ | 254 | $ | 10,260 | 116 | $ | 95 | $ | 3,496 | |||||||||||||||||||||
Private client market ($1 - <$10 million)
|
2,967 | 9,343 | 263,559 | 2,035 | 6,615 | 185,081 | 932 | 2,728 | 78,478 | |||||||||||||||||||||||||||
Middle market ($10 - <$20 million)
|
234 | 3,201 | 62,346 | 134 | 1,840 | 34,259 | 100 | 1,361 | 28,087 | |||||||||||||||||||||||||||
Larger transaction market (
³
$20 million)
|
193 | 9,531 | 76,038 | 113 | 5,157 | 45,600 | 80 | 4,374 | 30,438 | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
3,918 | $ | 22,424 | $ | 415,699 | 2,690 | $ | 13,866 | $ | 275,200 | 1,228 | $ | 8,558 | $ | 140,499 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
Real Estate Brokerage
|
2021 | 2020 | 2021 | 2020 | ||||||||||||
Average Number of Investment Sales Professionals
|
1,934 | 1,926 | 1,946 | 1,908 | ||||||||||||
Average Number of Transactions per Investment Sales Professional
|
1.20 | 0.56 | 2.01 | 1.41 | ||||||||||||
Average Commission per Transaction
|
$ | 108,542 | $ | 96,159 | $ | 106,100 | $ | 102,305 | ||||||||
Average Commission Rate
|
1.87 | % | 1.91 | % | 1.85 | % | 1.98 | % | ||||||||
Average Transaction Size (in thousands)
|
$ | 5,820 | $ | 5,045 | $ | 5,723 | $ | 5,155 | ||||||||
Total Number of Transactions
|
2,330 | 1,075 | 3,918 | 2,690 | ||||||||||||
Total Sales Volume (in millions)
|
$ | 13,560 | $ | 5,424 | $ | 22,424 | $ | 13,866 | ||||||||
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
Financing
(1)
|
2021 | 2020 | 2021 | 2020 | ||||||||||||
Average Number of Financing Professionals
|
85 | 87 | 86 | 88 | ||||||||||||
Average Number of Transactions per Financing Professional
|
8.05 | 4.38 | 13.70 | 9.76 | ||||||||||||
Average Fee per Transaction
|
$ | 34,783 | $ | 30,260 | $ | 32,972 | $ | 30,616 | ||||||||
Average Fee Rate
|
0.82 | % | 1.00 | % | 0.86 | % | 0.91 | % | ||||||||
Average Transaction Size (in thousands)
|
$ | 4,228 | $ | 3,021 | $ | 3,824 | $ | 3,382 | ||||||||
Total Number of Transactions
|
684 | 381 | 1,178 | 859 | ||||||||||||
Total Financing Volume (in millions)
|
$ | 2,892 | $ | 1,151 | $ | 4,504 | $ | 2,905 |
(1)
|
Operating metrics exclude certain financing fees not directly associated to transactions.
|
Three Months
Ended June 30, 2021 |
Percentage
of Revenue |
Three Months
Ended June 30, 2020 |
Percentage
of Revenue |
Change | ||||||||||||||||||||
Dollar | Percentage | |||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Real estate brokerage commissions
|
$ | 252,903 | 88.8 | % | $ | 103,371 | 88.1 | % | $ | 149,532 | 144.7 | % | ||||||||||||
Financing fees
|
28,214 | 9.9 | 12,703 | 10.8 | 15,511 | 122.1 | % | |||||||||||||||||
Other revenues
|
3,829 | 1.3 | 1,326 | 1.1 | 2,503 | 188.8 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues
|
284,946 | 100.0 | 117,400 | 100.0 | 167,546 | 142.7 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Cost of services
|
178,585 | 62.7 | 73,743 | 62.8 | 104,842 | 142.2 | % | |||||||||||||||||
Selling, general and administrative
|
61,797 | 21.7 | 43,519 | 37.1 | 18,278 | 42.0 | % | |||||||||||||||||
Depreciation and amortization
|
2,959 | 1.0 | 2,752 | 2.3 | 207 | 7.5 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total operating expenses
|
243,341 | 85.4 | 120,014 | 102.2 | 123,327 | 102.8 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating income (loss)
|
41,605 | 14.6 | (2,614 | ) | (2.2 | ) | 44,219 |
nm
|
(2)
|
|||||||||||||||
Other income (expense), net
|
1,370 | 0.5 | 2,975 | 2.5 | (1,605 | ) | (53.9 | )% | ||||||||||||||||
Interest expense
|
(146 | ) | 0.0 | (213 | ) | (0.2 | ) | 67 | (31.5 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Income before provision for income taxes
|
42,829 | 15.1 | 148 | 0.1 | 42,681 |
nm
|
(2)
|
|||||||||||||||||
Provision for income taxes
|
11,297 | 4.0 | 42 | 0.0 | 11,255 |
nm
|
(2)
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
$ | 31,532 | 11.1 | % | $ | 106 | 0.1 | % | $ | 31,426 |
nm
|
(2)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjusted EBITDA
(1)
|
$ | 48,110 | 16.9 | % | $ | 4,150 | 3.5 | % | $ | 43,960 |
nm
|
(2)
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
(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.”
|
(2)
|
Not meaningful
|
Six Months
Ended June 30, 2021 |
Percentage
of Revenue |
Six Months
Ended June 30, 2020 |
Percentage
of Revenue |
Change | ||||||||||||||||||||
Dollar | Percentage | |||||||||||||||||||||||
Revenues:
|
||||||||||||||||||||||||
Real estate brokerage commissions
|
$ | 415,699 | 88.7 | % | $ | 275,200 | 89.3 | % | $ | 140,499 | 51.1 | % | ||||||||||||
Financing fees
|
46,057 | 9.8 | 28,054 | 9.1 | 18,003 | 64.2 | % | |||||||||||||||||
Other revenues
|
7,167 | 1.5 | 4,863 | 1.6 | 2,304 | 47.4 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues
|
468,923 | 100.0 | 308,117 | 100.0 | 160,806 | 52.2 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating expenses:
|
||||||||||||||||||||||||
Cost of services
|
287,688 | 61.4 | 187,500 | 60.9 | 100,188 | 53.4 | % | |||||||||||||||||
Selling, general and administrative
|
113,474 | 24.2 | 98,379 | 31.9 | 15,095 | 15.3 | % | |||||||||||||||||
Depreciation and amortization
|
5,956 | 1.3 | 5,216 | 1.7 | 740 | 14.2 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total operating expenses
|
407,118 | 86.9 | 291,095 | 94.5 | 116,023 | 39.9 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating income
|
61,805 | 13.1 | 17,022 | 5.5 | 44,783 | 263.1 | % | |||||||||||||||||
Other income (expense), net
|
2,414 | 0.5 | 2,609 | 0.8 | (195 | ) | (7.5 | )% | ||||||||||||||||
Interest expense
|
(292 | ) | 0.0 | (496 | ) | (0.1 | ) | 204 | (41.1 | )% | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Income before provision for income taxes
|
63,927 | 13.6 | 19,135 | 6.2 | 44,792 | 234.1 | % | |||||||||||||||||
Provision for income taxes
|
17,383 | 3.7 | 5,959 | 1.9 | 11,424 | 191.7 | % | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Net income
|
$ | 46,544 | 9.9 | % | $ | 13,176 | 4.3 | % | $ | 33,368 | 253.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Adjusted EBITDA
(1)
|
$ | 73,805 | 15.7 | % | $ | 26,528 | 8.6 | % | $ | 47,277 | 178.2 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
(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.”
|
Three Months Ended
June 30, |
Six Months Ended
June 30, |
|||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Net income
|
$ | 31,532 | $ | 106 | $ | 46,544 | $ | 13,176 | ||||||||
Adjustments:
|
||||||||||||||||
Interest income and other
(1)
|
(436 | ) | (1,198 | ) | (967 | ) | (3,201 | ) | ||||||||
Interest expense
|
146 | 213 | 292 | 496 | ||||||||||||
Provision for income taxes
|
11,297 | 42 | 17,383 | 5,959 | ||||||||||||
Depreciation and amortization
|
2,959 | 2,752 | 5,956 | 5,216 | ||||||||||||
Stock-based compensation
|
2,662 | 2,536 | 4,950 | 5,168 | ||||||||||||
Non-cash
MSR activity
(2)
|
(50 | ) | (301 | ) | (353 | ) | (286 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA
(3)
|
$ | 48,110 | $ | 4,150 | $ | 73,805 | $ | 26,528 | ||||||||
|
|
|
|
|
|
|
|
(1)
|
Other includes net realized gains (losses) on marketable debt securities,
available-for-sale.
|
(2)
|
Non-cash
MSR activity includes the assumption of servicing obligations.
|
(3)
|
The increase in Adjusted EBITDA for the three and six months ended June 30, 2021, compared to the same period in 2020 is primarily due to an increase in total revenues and a lower proportion of operating expenses compared to total revenues.
|
Six Months Ended
June 30, |
||||||||
2021 | 2020 | |||||||
Net cash provided by (used in) operating activities
|
$ | 33,466 | $ | (51,849 | ) | |||
Net cash used in investing activities
|
(41,850 | ) | (16,459 | ) | ||||
Net cash used in financing activities
|
(4,458 | ) | (9,332 | ) | ||||
|
|
|
|
|||||
Effect of currency exchange rate changes on cash and cash equivalents
|
104 | (150 | ) | |||||
|
|
|
|
|||||
Net decrease in cash and cash equivalents
|
(12,738 | ) | (77,790 | ) | ||||
Cash and cash equivalents at beginning of period
|
243,152 | 232,670 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period
|
$ | 230,414 | $ | 154,880 | ||||
|
|
|
|
Change in Interest Rates
|
Approximate Change in
Fair Value of Investments Increase (Decrease) |
|||
2% Decrease
|
$ | 2,417 | ||
1% Decrease
|
$ | 1,700 | ||
1% Increase
|
$ | (3,043 | ) | |
2% Increase
|
$ | (6,085 | ) |
• |
a lump sum of one full year of annual base salary as of the date of termination;
|
• |
a lump sum equal to the full amount of the target bonus for the full year in which the termination occurred or the previous year, whichever is less, to be calculated as if 100% of all corporate and personal performance objectives were achieved;
|
• |
a full acceleration of all outstanding and unvested restricted stock units (“RSUs”) at the time of termination;
|
• |
reimbursement for the full amount of the employer and participant share of the premiums for continued coverage of the participant and participant’s spouse and dependents under the Company’s Welfare Benefits, pursuant to COBRA as applicable, for a period of one year after the date of termination or until and to the extent the employee is covered by comparable Welfare Benefits, whichever occurs first, and in the event such continued coverage is not allowed by law or the Company’s Welfare Benefits plans, the participant shall be entitled to the cash equivalent of the premiums for such benefits; and
|
• |
up to Twenty-Five Thousand Dollars ($25,000) toward appropriate executive-level outplacement or job search assistance during a period not to extend beyond December 31 of the second calendar year following the termination of employment.
|
• |
full acceleration of all outstanding and unvested restricted stock awards (“RSAs”) .
|
Exhibit No.
|
Description
|
|
10.1†* | Change in Control Policy dated August 3, 2021 | |
10.2†* | Amended & Restated Death & Disability Policy dated August 3, 2021 | |
31.1* | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1** | Certifications of Chief Executive Officer and Chief Financial Officer 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. | |
101* |
The following financial statements from the Company’s Quarterly Report on Form
10-Q
for the quarter ended June 30, 2021, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Net and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed 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) |
*
|
Filed herewith.
|
**
|
Furnished, not filed.
|
† |
Indicates management contract or compensatory plan.
|
Marcus
& Millichap, Inc
|
||||||||
Date: |
August 6, 2021
|
By: |
/s/ Hessam Nadji
|
|||||
Hessam Nadji
President and Chief Executive Officer
(Principal Executive Officer)
|
||||||||
Date: |
August 6, 2021
|
By: |
/s/ Steven F. DeGennaro
|
|||||
Steven F. DeGennaro
Chief Financial Officer
(Principal Financial Officer)
|
Exhibit 10.1
Marcus & Millichap, Inc.
Change in Control Policy
Objective: The purpose of this Change in Control Policy is to ensure that the equity ownership of senior management is protected upon (i) a possible change of control of the Company; and (ii) to align the Companys policy with best practices.
General terms: Upon a Change in Control of Marcus & Millichap, Inc. (the Company) (Trigger #1) and either:
|
(A) a termination of Executive by the Company without Cause (as defined below) occurs within 12 months (possible Trigger #2a); OR |
|
(B) a voluntary termination (with 30-days notice) by the Executive for Good Reason (as defined below) occurs within 12 months (possible Trigger #2b). |
Roles Covered |
Change in Control Benefits |
|
Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Chief Operating Officer, Executive Vice Presidents/Group Managers & other C-Suite Executives; Non-Section 16 reporting Division Managers, Specialty Directors, Corporate Department heads and other senior executives designated by the Board |
a lump sum of one full year of Annual Base Salary as of the date of termination; a lump sum equal to the full amount of the target bonus for the full year in which the termination occurred or the previous year, whichever is less, to be calculated as if 100% of all corporate and personal performance objectives were achieved; full acceleration of all outstanding and unvested RSUs at the time of termination; reimbursement for the full amount of the employer and employee share of the premiums for continued coverage of the employee and employees spouse and dependents under the Companys Welfare Benefits, pursuant to COBRA as applicable, for a period of one year after the date of termination of this Agreement or until and to the extent the employee is covered by comparable Welfare Benefits, whichever occurs first, and in the event such continued coverage is not allowed by law or the Companys Welfare Benefits plans, the employee shall be entitled to the cash equivalent of the premiums for such benefits; and up to Twenty-Five Thousand Dollars ($25,000) toward appropriate executive-level outplacement or job search assistance during a period not to extend beyond December 31 of the second calendar year following the termination of employment. |
And upon a Change in Control of the Company (single Trigger event), Members of the Board of Directors would be entitled to receive full acceleration of all outstanding and unvested RSAs.
1
Definitions:
Change in Control means the occurrence of any of the following:
(a) The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, if the Companys shareholders immediately prior to such merger, consolidation or reorganization cease to directly or indirectly own immediately after such merger, consolidation or reorganization at least a majority of the combined voting power of the continuing or surviving entitys securities outstanding immediately after such merger, consolidation or other reorganization;
(b) The consummation of the sale, transfer or other disposition of all or substantially all of the Companys assets (other than (x) to a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the Company, (y) to a corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the common stock of the Company or (z) to a continuing or surviving entity described in (a), above in connection with a merger, consolidation or corporate reorganization which does not result in a Change in Control under (a), above;
(c) A change in the effective control of the Company which occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by Directors whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purposes of this clause, if any Person (as defined below in (d)) is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change in Control;
(d) The consummation of any transaction as a result of which any Person, other than George Marcus, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing at least fifty percent (50%) of the total voting power represented by the Companys then outstanding voting securities. For purposes of this Paragraph (iv), the term person shall have the same meaning as when used in sections 13(d) and 14(d) of the Exchange Act but shall exclude:
(1) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or an affiliate of the Company;
(2) a corporation or other entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the common stock of the Company;
(3) the Company; and
(4) a corporation or other entity of which at least a majority of its combined voting power is owned directly or indirectly by the
Company; or
(e) A complete winding up, liquidation or dissolution of the Company.
2
A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Companys incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Companys securities immediately before such transactions.
Good Reason would be defined as one or more of the following occurring:
(a) the Company assigns to the Executive any duties inconsistent in any material respect with the Executives position prior to the Change in Control, including status, offices, titles, and reporting requirements, authority, duties or responsibilities or any other action by the Company which results in a material diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof by the Executive; provided, however, that a reduction in duties, authority or responsibilities solely by virtue of the Company being acquired and made part of a larger entity will not constitute Good Reason;
(b) the Company materially reduces the Executives Annual Base Salary (except where there is a reduction applicable to all similarly situated executive officers generally) or fails to provide the Executive with the benefits provided for prior to the Change in Control, each as the same may be increased from time to time, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive;
(c) the Company requires Executive to relocate to an office that is greater than thirty-five (35) miles from the Executives office as of the date of Change in Control, provided that the new office is more than thirty-five (35) miles from the Executives home, except for required travel on the Companys business to an extent substantially consistent with the Executives present business travel obligations.
Executive will not resign for Good Reason without first providing the Company with written notice of the acts or omissions constituting the grounds for Good Reason within sixty (60) days of the initial existence of the grounds for Good Reason and a reasonable cure period of not less than thirty (30) days following the date the Company receives such notice during which such condition must not have been cured.
Cause would be defined as, any of the following:
(a) Executives conviction of, or plea of guilty to, a felony or crime involving moral turpitude;
(b) Executives personal dishonesty directly affecting the Business; Executives willful misconduct or gross negligence (which is not cured within 30 days after prior written notice to the Executive from the Companys Board of Directors unless not curable or such misconduct or gross negligence is injurious to the Business);
3
(c) Executives breach of a fiduciary duty involving personal profit to the Executive;
(d) Executives commission of an act of fraud, embezzlement or misappropriation against the Company;
(e) Executives intentional failure to substantially perform duties after written notice to the Executive from the Companys Board of Directors that, in the reasonable judgment of the Companys Board of Directors the Executive has failed to perform Executives duties (except to the extent cured by Executive within 30 days following such written notice from the Companys Board of Directors); or
(f) Executives breach of his or her employment agreement, including but not limited to, any breach of any applicable restrictive covenants.
Adopted: August 3, 2021
4
Exhibit 10.2
Marcus & Millichap, Inc.
Amended & Restated Death & Disability Policy
Objective: The purpose of this Amended & Restated Death & Disability Policy is to ensure that equity ownership is protected upon (i) the death or disability of a member of senior management; and (ii) to align the Companys policy with best practices.
Death: Upon a termination of employment because of death, if the employee has been with the Company for at least one year, the Company will provide to the executives estate:
Roles Covered |
Death Benefits |
|
Members of the Board of Directors; Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, Chief Operating Officer, Executive Vice Presidents/Group Managers & other C-Suite Executives; Non-Section 16 reporting Division Managers, Regional Managers and other senior executives designated by the Board |
full acceleration of all outstanding and unvested RSUs (RSAs for Members of the Board of Directors) at the time of termination. |
1
Disability: Upon a termination of employment because of Disability (as defined below), if the employee has been with the Company for at least one year, the Company will provide to executive:
Roles Covered |
Disability Benefits |
|
Members of the Board of Directors; Chief Executive Officer; Chief Financial Officer, Chief Administrative Officer, Chief Operating Officer, Executive Vice Presidents/Group Managers & other C-Suite Executives; Non-Section 16 reporting Division Managers, Regional Managers and other senior executives designated by the Board |
full acceleration of all outstanding and unvested RSUs (RSAs for Members of the Board of Directors) at the time of termination; and
reimbursement for the full amount of the employer and employee share of the premiums for continued coverage of the employee and employees spouse and dependents under the Companys Welfare Benefits, pursuant to COBRA as applicable, for a period of one year after the date of termination of this Agreement or until and to the extent the employee is covered by comparable Welfare Benefits, whichever occurs first, and in the event such continued coverage is not allowed by law or the Companys Welfare Benefits plans, the employee shall be entitled to the cash equivalent of the premiums for such benefits (not applicable to Members of the Board of Directors). |
Notwithstanding the foregoing, if the employee finds other employment during the payment period, then the employee shall promptly notify the Company in writing of the date and terms of such employment and the Company shall be entitled to reduce the amount payable to the employee during the period from the commencement of such other employment by the cash compensation received and to be received by the employee for services rendered in connection with such other employment. The Company reserves the right to provide this benefit through a policy of insurance.
Definitions:
Disabled or Disability shall mean the following: the inability of such Executive to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than 12 months, as provided in Sections 22(e)(3) and 409A(a)(2)(c)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
Adopted: August 3, 2021
2
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 quarterly report on Form 10-Q 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: August 6, 2021 |
/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, Steven F. DeGennaro, certify that:
1. |
I have reviewed this quarterly report on Form 10-Q 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: August 6, 2021 |
/s/ Steven F. DeGennaro |
|||||
Steven F. DeGennaro 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 quarterly report of Marcus & Millichap, Inc. on Form 10-Q for the period ended June 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Hessam Nadji, President and Chief Executive Officer of the Company, and Steven F. DeGennaro, Chief Financial Officer of the Company, 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 the Company. |
Date: |
August 6, 2021 |
/s/ Hessam Nadji |
||||||
Hessam Nadji President and Chief Executive Officer (Principal Executive Officer) |
||||||||
Date: |
August 6, 2021 |
/s/ Steven F. DeGennaro |
||||||
Steven F. DeGennaro Chief Financial Officer (Principal Financial Officer) |