Marcus & Millichap, Inc.

Greetings and welcome to Marcus and Millichap's first quarter 2025 earnings conference call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Yag Khorne. Thank you. You may begin.

Thank you, operator. Good morning and welcome to Marcus and Millichap's first quarter 2025 earnings conference call. With us today are President and Chief Executive Officer, Hissam 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, 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 27, 2025. 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 of to the appropriate gap measures and explains why the company believes such non-gap measures are useful to investors. This conference 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 is my pleasure to turn the call over to CEO, Hassam Nagy.

Thank you, Jacques. On behalf of the entire Marcus Millichap team, good morning and welcome to our first quarter 2025 earnings call. The year was off to a positive start for MMI with first quarter revenue of $145 million. This was 12% higher than the first quarter of 2024 on the heels of a 44% year-over-year revenue increase in the fourth quarter of last year. The company's brokerage revenue grew nearly 13% year-over-year, while some improvement in the lending environment helped drive a 26% revenue increase in financing, which our team executed with 172 separate lenders during the quarter. This unique access demonstrates our ability to help clients navigate a still challenging marketplace. Adjusted EBITDA of negative $8.7 million reflected an improvement of 13% over the previous year as we tightly managed costs while remaining on offense by making strategic investments in the MMI platform. In looking beneath the headline numbers, a few trends are worth highlighting. First, it's safe to say that the market disruption we've battled over the last two plus years continued in the first quarter. Higher and still volatile interest rates are still a drag on Salesforce productivity, with listings taking longer to market and deal closings often requiring multiple price adjustments. Both of these factors significantly reduce business development capacity. Secondly, tightened underwriting and more limited lending from banks and credit unions, combined with a lingering bid-ask spread, are still hampering private client transactions. Sales in microcap apartments are particularly impacted, as many owners are postponing transactions in the hopes of improving market conditions. Single-tenant retail has also been challenged by a wide bid-ask spread, but posted some improvements in the quarter. As a result, brokerage revenue in the private client segment grew 6% during the quarter, compared to a 30% increase for middle market and larger transactions. Price corrections from the market peak and the return of major private and institutional capital to the market drove the increased activity in deals valued above $10 million. These investors are also placing greater emphasis on replacement costs as a key benchmark for investment decisions. This has become much more of a catalyst in recent quarters. The first quarter's more substantial growth in middle market and larger deals is also attributed to the expansion of our IPA division in investment brokerage and through larger financings executed by our IPA Capital Markets Group. IPA's average size transaction was $38 million for both sales and financing, which illustrates the company's recent expansion in larger account business. Lastly, our earnings are impacted by expenses related to strategic investments made over the past few years. These include retention and acquisition of top talent, proprietary technology, and expanding the MMI brand throughout the market disruption. We're also making pivotal investments in next generation analytics, back office production, and application of AI in our client targeting systems. Notwithstanding the near-term impact on our financial results We believe these long-term investments will position our sales force to be more competitive and capture stronger gains when market conditions improve. As for the timing of a sustained market recovery, we remain cautiously optimistic. Coming into 2025, the Fed's battle against inflation and goal of engineering a soft landing for the economy looked highly encouraging. Assuming the administration's willingness to negotiate, With trading partners comes to fruition, most forecasters believe the worst-case scenario on global trade wars will be avoided. In that case, the strong economic foundation, low unemployment, and healthy real estate fundamentals should spur a release of pent-up demand on commercial real estate transactions. We believe another catalyst for rising future transaction volumes will be a larger-scale resetting of prices. Our team is tracking numerous potential deals that will have to transact at some point. These would provide fresh comps that should bring more clarity on real-time valuations, help the market reset, and move forward more rapidly. Examples include multifamily assets acquired in 2021 and 2022 with short-term debt fund financing, distressed office and legacy retail assets, that many lenders will likely move off their portfolios, and previously extended loans terming out again in the next 12 to 18 months. We expect these trends to also propel our auction services and loan sales, both of which are seeing steady rise in activity. In the meantime, the main pillars of our strategy to persevere through this elongated market disruption are unwavering. These include aggressively pursuing recruiting and acquisition opportunities for experienced professionals, teams, and target companies, investing in vital technology, and expanding our brand through targeted client campaigns. The company's industry-leading market research and presence at marquee industry events are also critical to future growth. As an example, last month we hosted our second large-scale client webcast so far this year to help investors process incoming data and navigate a challenging market. These sessions garnered over 20,000 viewers and are one of the essential tools in keeping our team connected with clients and developing new relationships. To help streamline our decision-making, execution, and deployment of talent toward growth initiatives, we recently announced a management reorganization. As we shared in last week's press release on the topic, the key elements include the appointment of an enterprise-wide chief operating officer overseeing all brokerage operations and the creation of chief growth officer and chief client officer positions. These key leadership roles are specifically targeted toward accelerating our growth initiatives, particularly strategic partnership and investment opportunities. They also focus on advancing our Salesforce training and development programs and synthesizing market penetration plans and client service delivery across each of our specialty divisions. In addition, our most senior executives in charge of brokerage divisions have been promoted to oversee additional offices and bring their expertise to a larger segment of our Salesforce. I'm very excited about these changes and confident that they will help us move forward better and faster. Looking ahead, we continue to explore potential strategic acquisitions in our core business and adjacent business lines. Concurrently, the recruitment of experienced professionals and teams remains a bright spot as we consistently add talent with established books of business to our platform. This approach helps mitigate the elevated turnover of trainees and newer agents caused by the market disruption. This strategy is also enabling us to expand market coverage with minimal overlap among existing teams. We remain excited about MMI's growth prospects and reaping the benefits of the investments we've made to lead in the recovery. Let me note that revenue production for many of our talented veteran producers and market leaders who have joined the company in the last few years remains hampered by a disrupted market. Once our extremely capable sales force enters a better functioning market, driven by clarity on values and more stable interest rates, we expect their productivity to drive significant operating leverage. A strong balance sheet and strategic investments in talent and technology will further power our leading market position and maximize shareholder value over the long run. With that, I will turn the call over to Steve for more details on our results.