Marcus & Millichap, Inc.

Greetings. Welcome to Marcus and Millichap's third quarter 2024 financial results 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce John Cornet with ICR. Thank you. You may begin.

Thank you, operator. Good morning, and welcome to Marcus and Millichap's third quarter 2024 earnings conference call. With us today are President and Chief Executive Officer, Hossam Nagy, 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, 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 transaction 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 28, 2024. 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 a reconciliation to the appropriate gap measures and explains why the company believes such non-gap measures are useful to investors. The 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 made a difference during the prepared remarks. With that, it is my pleasure to turn the call over to CEO, Issam Najee.

Thank you, Jacques. On behalf of the entire Marcus Millichap team, good morning and welcome to our third quarter earnings call. MMI's results showed modest improvement in the third quarter, setting the stage for a measured but sustainable recovery in the transaction and financing markets. We believe that the underpinnings of a recovery cycle include the return of capital to the market as prices adjust, the Federal Reserve's shift towards lowering interest rates, MMI's record exclusive listing inventory, and notable improvement in our pipeline. Revenue for the third quarter was $169 million, up 4% compared to last year, with adjusted EBITDA at break-even and a net loss of $5.4 million. In addition to another sequential improvement, this is the first quarter with year-over-year revenue growth since the onset of the market disruption two years ago. Our EPS remains challenged by costs related to investments in talent, technology, and business development. We believe these initiatives and our strategy to remain on offense during the downturn will provide leverage in the recovery and strengthen our long-term competitiveness. The expensing of capital deployed for talent retention and acquisition is particularly important as revenue production among the leading producers we have added and retained has been greatly hampered in the downturn. We expect these top professionals to contribute significantly to the company's revenue growth in the recovery, enhance leverage, and support market share gains. The third quarter brought more conviction that capital is moving off the sidelines driven by four key catalysts. First, price adjustments across various property types have made current valuations more attractive relative to replacement costs and the market peak in March 2022. It appears that investor psychology is finally shifting toward missing out on buying opportunities while more sellers are coming to terms with realistic pricing. the momentum of institutional capital returning to the market, which we noted last quarter, continued to build during the third quarter. At the same time, private investors still grappled with tight lending requirements by banks and credit unions. Our results for the quarter correlate with this trend as private client revenue declined 4.3% year-over-year, while middle market and larger transaction revenue increased 4%, and 23.5% respectively. Second, the Fed's 50 basis point rate cut decisively signaled the beginning of an easing cycle, followed by yesterday's quarter point reduction. The Fed will likely move more gradually on further rate cuts due to a still strong economy and expectations that the election outcome may bring more inflationary policy. Third, The supply-demand dynamics are generally healthy across most property types, with few exceptions due to overbuilding. Construction starts are expected to decline significantly in 2025 and 2026, which will reduce new supply. This will be particularly positive for multifamily and industrial properties, which has seen the most construction in recent years. And lastly, A combination of pent-up demand from postponed transactions after two years of a dysfunctional market and increasing distress situations are driving more transactions. During the quarter, the company closed over 1,300 brokerage transactions, totaling $8.5 billion in volume. Shopping centers, industrial, self-storage, and institutional apartments serviced by our IPA division saw the most improvements. Single-tenant retail and smaller apartment sales remain hampered due to restrictive lending and persistent bid-ask spreads. Financing revenue was up 19.3%, and transactions increased by 15%, with total financing volume up 12% for the quarter. We closed over 300 financing transactions and secured capital for our clients through 150 separate lenders in one quarter. These numbers highlight improved financing capacity by non-bank lenders and the impact of our strategic initiatives. Middle market and larger transactions not only enhanced our brokerage revenue, but also boosted our financing revenue. In addition, our loan sales division continued to gain momentum, driven by increasing trade activity on both performing and distressed loans. Over the past five years, we've positioned our MMCC and IPA Capital Markets originators as leading finance intermediaries across all investor categories and deal sizes. The experienced talent, infrastructure expansion, and lender relationships we've added contributed to the improvements in the quarter and will drive future growth in our financing business. Moreover, this strategy is creating value for our sales professionals as they increasingly team up with our originators to win business. We continue to add experienced professionals across the firm, which helps mitigate the challenges we still face in growing the newer agent cadre. The market volatility of the past several years has kept our new agent fallout rate elevated, spurring expanded channels for attracting and training new talent to reverse this trend. This includes a significantly larger internship program and the deployment of regional recruiters focused on increasing our candidate pool. We remain dedicated to a dual strategy of experienced talent acquisition and development, as well as organic hiring and training, as both are pivotal to the company's future. Looking forward, perhaps the biggest challenge we face is the volatility in long-term interest rates, which have the most impact on commercial real estate trading and finance volumes. Since the Fed's rate reductions began, the 10-year Treasury yield has moved 70 basis points to 4.3% currently. Interest rate volatility over the last two and a half years severely impacted our sales force's productivity due to the frequent repricing of listings and transactions under contract. We anticipate a productivity improvement when rates settle as the Fed's easing cycle unfolds. At the macro level, inflation has decelerated toward the Fed's target, while job growth and retail sales have moderated but are still positive. This supports a soft landing scenario for the U.S. economy, pointing to a solidly positive picture for commercial real estate demand across the board. The election outcome is generally viewed as positive for business, taxes, and the economy, although much remains to be seen related to actual policy implementation over time. Regardless of the policy dynamics, commercial real estate is poised to attract more capital, maintain, if not improve, fundamentals, and begin a new cycle driven by more realistic pricing and compelling yields. Real estate values have come a long way in recalibrating to higher interest rates, but the path to increase sales and financing availability will face speed bumps along the way. Our strategy to continually enhance our platform, help our existing sales force maximize productivity, and further attract top talent positions us very well for solid growth and increased market share. On the capital allocation front, we have the benefit of a strong balance sheet and maintained a dual approach of returning capital to shareholders while driving business growth at the same time. We continue to strategically deploy capital by investing in proprietary technology and client services such as our auction division, and loan sales division, both of which are taking off nicely while pursuing strategic acquisition targets. Our ongoing investments in business development, direct client engagement, industry event participation, branding, and all the other activities we undertake every quarter to market the firm underscore our commitment to staying on offense and positioning the company for dominance in the market recovery. With that, I will turn the call over to Steve for additional insights into the quarter.