MARCUS & MILLICHAP 2026 Q2 Earnings Call

Thank you, operator. Good morning, welcome to Marcus & Millichap's second quarter 2026 earnings conference call. With us today are President and Chief Executive Officer, Hessam Nadji, and Chief Financial Officer, Steve DeGennaro. Before I turn the call over to management, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal, and variations of these words and similar expressions are intended to identify forward-looking statements.

Actual results can differ materially from those implied by such forward-looking statements due to a variety of factors, including, but not limited to general economic conditions and commercial real estate market conditions, the company's ability to retain and attract transactional professionals, the company's ability to retain its business philosophy and partnership culture amid competitive pressures, the company's ability to integrate new agents and sustain its growth, and other factors discussed in the company's public filings, including its annual report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2026. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise.

In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release, which was issued this morning and is available on the company's website, includes a reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors. This conference call is being webcast. The webcast link is available on the investor relations section of the company's website at www.marcusmillichap.com, along with the slide presentation you may reference during the prepared remarks. With that, it's my pleasure to turn the call over to CEO, Hessam Nadji.

Thank you, Jacques. On behalf of the entire Marcus & Millichap team, good morning and welcome to our second quarter 2026 earnings call. I'm pleased to report that MMI had a strong second quarter, continuing the momentum from the first quarter and delivering the company's best first half since 2022. Total revenue increased 18% in the second quarter, with all business segments registering growth. Brokerage revenue for the quarter grew 18% year-over-year, and our financing business was up 15% as the company's recovery broadened. Private client and middle market brokerage segments posted more than 13% revenue growth, while larger transaction revenue jumped 43%. Over the last two years, private client and larger transactions moved at different trajectories due to a variety of factors. In the first half of 2026, however, the company achieved solid growth across the board for the first time since the market disruption began.

This is driven by our team's persistent client outreach finally resulting in more transactions as values adjust and healthier lender balance sheets foster more financing options across the full price spectrum. I'm also pleased to report significant progress in MMI's profitability in the quarter. During the market disruption, we remained committed to strengthening the company's leading brand, attracting and retaining top talent, and enhancing the infrastructure that supports growth. This strategy pressured our near-term earnings, largely due to the expensing of these investments, but it allowed us to keep strategic initiatives on track and maintain a high level of producer support when it mattered the most. Maximizing revenue growth per producer, positioning the company for market share gains, and gaining operating leverage in the recovery continue to guide our strategy. With this backdrop, net income for the quarter came in at $4 million, while adjusted EBITDA improved to $12 million.

Steve will elaborate on more details. We view this as a critical stepping stone toward more ambitious margin improvements as a better functioning market environment enables revenue growth. Looking at various revenue drivers, the largest contribution to the top-line results came from our private client brokerage business. Microcap multifamily and single-tenant retail deals continue to show improvement in trading volumes as significant price adjustments recalibrate to higher interest rates and as more banks and credit unions reengage in the marketplace. In the last 12 months, revenue from private client multifamily and single-tenant retail grew 19% and 16%, respectively. On the larger deals segment, major investors and institutions became highly selective last year after the initial wave of institutional capital returned to the market in 2024. Institutional investors are opting to pay a premium for top-tier assets in top-tier markets, widening the gap with older and lower quality assets.

Further price adjustments and the rising tide of loan maturities have driven increased activity in larger asset sales this year. Operating challenges in many markets and among many property types have also been the catalyst for inventory coming to market at more realistic prices. Our financing business delivered another strong quarter, with revenue up 15% on top of the 43.5% growth registered in the second quarter of 2025. Our expansion strategy into IPA Capital Markets, progress on expanding agency financing, investments in technology, and lender relationships continue to drive growth. MMI has become Freddie Mac and Fannie Mae's largest non-direct multifamily debt originator through our partnership with M&T Bank. We expect further expansion in our financing business as we emphasize collaboration between our sales and financing teams, evaluate strategic acquisitions, and add to the roster of experienced originators.

IPA Capital Markets, in particular, continues its expansion with highly experienced originators added this year. Refinancings picked up meaningfully during the quarter, accounting for 47% of revenue compared to 39% a year ago, as more owners were able to secure new loans in an improving environment. Lastly, on our financing, the team closed with 207 separate lenders during the quarter and 304 lenders for the first half of the year, illustrating our market-leading reach into a vast network of capital sources for MMI's clients as a key strategic advantage. Turning to our sales force, we ended the quarter with 1,575 investment sales professionals, up modestly on a year-over-year basis. As we've discussed previously, the first quarter is typically our highest attrition period. In addition, quarter-to-quarter variability is primarily due to our tightened performance standards, leading to faster separation from underperforming agents and trainees.

Our headcount composition and quarterly numbers also reflect an intentional shift toward heavier reliance on our expanded internship and fellowship programs as primary sources of the company's organic growth strategy. These channels are a slower path to nominal headcount growth. However, recent enhancements are starting to show higher productivity and higher retention rates among this cadre. At the same time, our focus on recruiting experienced professionals and teams remains on track with meaningful gains so far this year. Looking ahead at the broader market, we continue to see a balancing act between lingering uncertainty and higher interest rates on one hand, and more motivation among sellers to move forward with transactions on the other.

We enter 2026 expecting rate reductions by the Fed. The debate has since shifted to the degree and timing of potential rate hikes due to the Middle East war, its impact on energy prices, and resurging inflation. The 10-year Treasury yield is 50 basis points higher than the start of the year and 70 basis points higher than the low point prior to the start of the military conflict in February. As I've shared on previous calls, interest rate volatility challenges deal underwriting, marketing, making it more difficult to keep buyers, sellers, and lenders aligned, and getting deals across the finish line. As a result, we continue to experience extended transaction timelines. Our team is leveraging ample liquidity in the market with investors eager to act on realistically priced assets, particularly when there is a discount to replacement cost for buyers.

Many transactions that could not be brought together previously are now starting to work as bid-ask spreads narrow and net proceeds for borrowers improve thanks to more accommodating lenders. We believe this dynamic, combined with improving property fundamentals across most property types, supports the market's positive long-term trajectory, even as the recovery in the transaction cycle remains somewhat choppy. We're encouraged by early-stage dialogue with some acquisition targets, particularly on the financing side, which have emerged as the market improves. MMI is ideally positioned to sustain our strong balance sheet as well as our strategy to return capital to shareholders while maintaining a high level of liquidity for strategic acquisitions. With that, I will turn the call over to Steve for more details on our financial results.

Steve? Thank you, Assum. Total revenue for the second quarter was $203 million, an increase of 18% compared to $172 million in the second quarter of last year.

For the six-month period, total revenue was $374 million, also an increase of 18% compared to $317 million a year ago. Breaking down revenue by segment, real estate brokerage commissions were $167 million for the quarter, an increase of 18% year-over-year, and accounted for 82% of total revenue. We completed 1,530 brokerage transactions for total volume of $10 billion. Representing increases of 11% and 18%, respectively, compared to the second quarter of 2025. For the six-month period, brokerage commissions were $305 million, an increase of 15% compared to the prior year. Within brokerage, our core private client market business grew 14% year-over-year to $106 million.