Marcus & Millichap, Inc.

Greetings. Welcome to the Marcus and Miller Chat fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I'll now turn the conference over to your host, Tom Shearer. You may begin.

Thank you. Good morning and welcome to Marcus and Millichap's fourth quarter 2021 earnings conference call. With us today are President and Chief Executive Officer Hassam Najee and Chief Financial Officer Steve DiGennaro. 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 March 1, 2021. 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 represents reconciliation to the appropriate gap measures and explains why the company believes such non-gap measures are useful for investors. This conference call is being webcast. The webcast link is available on the investor relations section of our website at www.marcusmillichap.com along with a slide presentation you may reference during the prepared remarks. With that, it's my pleasure to turn the call over to CEO Hassam Najee. Thank you, Tom.

On behalf of the entire Marcus Millichap team, good morning and welcome to our fourth quarter 2021 earnings call. I am proud to report an exceptional fourth quarter and calendar year, marking Marcus Millichap's best revenue and earnings performance in our 50-year history. Our team delivered fourth quarter revenue of $495 million last adjusted EBITDA of $88 million, and net income of $62 million. For the year, we achieved $1.3 billion of total revenue, $213 million of adjusted EBITDA, and $142 million of net income. Compared to the fourth quarter of 2020, which was also a record at the time, revenue nearly doubled and adjusted EBITDA more than doubled. For the full year, revenue was up 81% compared to 2020 and 61% compared to 2019, which is an important pre-pandemic benchmark for us. To put these milestones in perspective, in the fourth quarter alone, we closed 4,300 transactions and over $34 billion in sales and financing volume, bringing the year's total to more than 13,200 closings, and over $84 billion in volume. This translates to 53 closings per business day for the year and 70 for the fourth quarter. Our outstanding sales force, support personnel, and management team worked tirelessly within a hampered working environment to achieve these record results, which were months in the making. There is no doubt that 2021, especially the fourth quarter, was defined by record trading volumes in the market with low interest rates, ample liquidity, and an improving economy. Heightened motivation to sell ahead of anticipated tax law changes and the consummation of previously delayed or canceled transactions added further market momentum. Most importantly for us, compared to 2019, Again, going back to pre-pandemic levels, MMI's transactions were up by 40% last year versus an estimated market improvement of 25%. Our ability to capitalize on these catalysts and have performed the market was driven by several initiatives deployed over the past several years. These include investments to enhance technology, major increase in the productivity of our tenured professionals, nine acquisitions executed in recent years, which made significant contributions to 2021's numbers, and the ongoing addition of experienced professionals. Our strategy to grow our private client segment and diversify into larger institutional transactions through our IPA division has proved to be effective and offers ample growth opportunity ahead. The integration of of private and institutional capital for us is a clear differentiating strength. Fourth quarter private client revenue grew 78% year-over-year and 65% for the full year compared to 2020 and 42% over 2019. Middle market and larger transactions together represented 38% of our brokerage revenue in 2021 compared to 29% in 2019. This illustrates the tremendous growth of these segments over the past two years. As larger private investors and institutions reentered the real estate market last year, our unique ability to serve their needs, expand their investment options, and generate competitive offers for their assets was highly effective. Our expansion strategy in financing generated revenue growth of 55% year-over-year and 61% over 2019, for MMCC. Our tenured originators capitalized on the market opportunity and teamed up with our sales force to help clients together more than ever. The addition of Mission Capital, Metropolitan Capital, and LMI in 2020 also contributed to MMCC's results. In the fourth quarter, we announced a new strategic alliance with M&T Bank to expand our agency lending capabilities in the multifamily space, which is already adding transactions to the pipeline. From a product type perspective, we benefited from the strength of the multifamily and single-tenant net lease segments as favored asset classes by investors seeking stability. As the economic recovery gained steam, we also saw a surge in investor demand for recovery segments, including shopping centers, hotels, and self-storage assets. Our success in expanding our industrial market coverage also contributed as demand for these assets was at record levels. Despite solid improvement, office and seniors' housing are still lagging due to a higher degree of uncertainty surrounding these segments. As anticipated and messaged previously, Our biggest challenge in 2021 was the residual losses of newer professionals who started with us in 2019 and 2020 and struggled with the disruption caused by the pandemic. Their training and development have been hampered by the need to convert these traditional in-person interactions to virtual sessions. We are continuing to facilitate a return to office initiative throughout the firm while upholding health and safety standards. In more recent months, the tight employment market has also presented hiring and retention challenges for the newer cadre of professionals. Losses of newer professionals were more than offset by the consistent production of experienced producers brought on over the past few years and the success of our acquisitions. In addition, many of our teams are hiring aggressively, enabling us to leverage our tenured professionals as mentors. The company is also expanding its highly successful sales internship program by targeting recent graduates from real estate schools all over the country and sales professionals from other industries. It'll take some time to reverse recent headcount trends, but we expect these steps to expand our sales force and market coverage in the long term. Now, looking ahead, we're encouraged by the continuation of favorable market conditions for our business. On the macro environment, inflation, shortage of qualified workers, rising interest rates, and slower economic growth are capturing headlines. The market cycle is naturally shifting from last year's initial recovery boost and record low interest rates. Several factors point to strong demand for commercial real estate in our view, including above average rent growth, compelling yields compared to alternative investments, and the fact that real estate is widely viewed as an inflation hedge. Rising rents and improving occupancies combined with lender spread compression are absorbing a large portion of interest rate increases and supporting valuations in most markets and property types. Proposals for tax law changes have shifted in a favorable direction for real estate investment. Meanwhile, the passage of any changes to the tax code remains uncertain at this time. The primary concern for the market outlook is the Fed's balancing of the tightening cycle with continued economic growth. Shifting internally, we're encouraged by the key metrics that we always monitor, including a low rate of canceled transactions, shortened marketing timelines, and healthy growth in our pipeline entering 2022 as compared to a year ago. The typical transition time needed to replenish the pipeline after a strong quarter has been offset by the positive market momentum as well as our expanded platform in the current cycle. To this point, in early January, we announced the addition of the Eisendrath Finance Group, led by Brian Eisendrath, who has been an industry-leading multifamily finance professional for many years and a leading agency lending originator. The combination of our M&T partnership and the addition of Brian's team positions us very well to expand our multifamily financing business in 2022 and beyond, particularly in the IPA segment. Our Fortress balance sheet remains a source of continued growth. Scaling our acquisitions and further investing in proprietary tools and technology remain our top capital deployment priorities. We are encouraged by active dialogue with key acquisition targets. In closing out 2021, we're pleased to be in the great position of aggressively pursuing growth strategies, having ample capital to keep the company protected, and in a strong operating position, and initiating a dividend policy as announced yesterday. We are particularly pleased that our expanded capital allocation strategy includes regular dividend supplemented by a special dividend given our strong balance sheet. Steve will provide more details on this policy. Let me express my sincere thanks to our clients for their relationships with us, our team for your relentless and passionate work to make 2021 a true milestone and especially to our long-term shareholders who have believed in MMI and our commitment to excellence. I will now turn the call over to Steve for more details on our financial results. Steve?