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Marcus & Millichap, Inc. Reports Results for Third Quarter 2023

Marcus & Millichap, Inc. (the “Company”, “Marcus & Millichap”, or “MMI”) (NYSE: MMI), a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services, today reported its third quarter results.

Third Quarter 2023 Highlights Compared to Third Quarter 2022

  • Total revenue of $162.0 million, compared to $323.8 million
  • Brokerage commissions of $139.8 million, compared to $292.9 million
  • Private Client Market brokerage revenue of $91.5 million, compared to $165.5 million
  • Middle Market and Larger Transaction Market brokerage revenue of $42.8 million, compared to $120.1 million
  • Financing fees of $17.3 million, compared to $28.1 million
  • Net loss of $9.2 million, or $0.24 per common share, diluted, compared to net income of $21.4 million, or $0.53 per common share, diluted
  • Earnings were impacted by both lower revenue and expenses related to growth initiatives, including talent acquisition and retention
  • Adjusted EBITDA of $(6.6) million, compared to $36.6 million

Nine Months 2023 Highlights Compared to Nine Months 2022

  • Total revenue of $479.7 million, compared to $1.0 billion
  • Brokerage commissions of $415.2 million, compared to $934.5 million
  • Private Client Market brokerage revenue of $278.2 million, compared to $536.4 million
  • Middle Market and Larger Transaction Market brokerage revenue of $121.8 million, compared to $378.3 million
  • Financing fees of $51.0 million, compared to $91.4 million
  • Net loss of $23.8 million, or $0.61 per common share, diluted, compared to net income of $96.3 million, or $2.39 per common share, diluted
  • Earnings were impacted by expenses related to growth initiatives, including talent acquisition and retention
  • Adjusted EBITDA of $(15.1) million, compared to $151.4 million

“MMI’s third-quarter results reflect the prolonged market dislocation caused by the severe interest rate shock and financing constraints,” said Hessam Nadji, president and chief executive officer. “The widened bid/ask spread and high degree of uncertainty is limiting trading activity despite record capital on the sideline. Our strategy to focus on client service, support our team through MMI’s signature training, best practices sharing and culture of collaboration remains steadfast. Powered by our strong balance sheet and leading brand, we are leveraging the current period to attract leading professionals, pursue strategic investments and acquisitions and enhance our technology and brokerage tools.”

Mr. Nadji continued, “Looking ahead, we are positioning MMI to lead in the recovery, which may be delayed due to the Fed’s “higher for longer” stance on interest rates. Values are adjusting to higher interest rates and the Fed is nearing the end of its tightening cycle, two key factors in the transaction volume recovery. Complementary services such as our loan sales and auction divisions we have added in recent years are well-aligned to help lenders and investors execute in the current market. Despite the near-term challenges, our focus remains on fostering client relationships and building for the long term.”

Third Quarter 2023 Results Compared to Third Quarter 2022

Total revenue for the third quarter 2023 was $162.0 million, a decrease of 50.0% compared to $323.8 million for the third quarter 2022.

For real estate brokerage commissions, the average transaction size and the average commission per transaction decreased by 31.6% and 21.2%, respectively, compared to the third quarter 2022. The number of transactions decreased by 39.4%, reducing real estate brokerage commissions to $139.8 million, a 52.3% reduction from the same period in the prior year. Compared to the third quarter 2022, Private Client Market revenue decreased by 44.7%, and the combined Middle Market and Larger Transaction Market revenue decreased by 64.3%.

For financing fees, the average fee per transaction and the average transaction size increased by 11.9% and 8.7% respectively, while the number of transactions decreased by 46.7%, resulting in a decrease in financing fees to $17.3 million, a 38.6% reduction from the same period in the prior year.

Total operating expenses for the third quarter 2023 were $177.5 million, compared to $293.3 million for the same period in the prior year. The change was primarily due to reductions of 51.9% in cost of services and 5.2% in selling, general and administrative expenses, partially offset by a 24.4% increase in depreciation and amortization expenses. Cost of services as a percentage of total revenue decreased by 250 basis points to 64.6% compared to the same period during the prior year.

Selling, general and administrative expenses for the third quarter 2023 were $69.2 million, compared to $73.0 million, for the same period in 2022. The change was primarily due to a reduction in compensation-related costs, specifically performance-based bonuses for the third quarter 2023, partially offset by an increased investment in business development, marketing and other support related to the long-term talent acquisition and retention of sales and financing professionals.

Net loss for the third quarter 2023 was $9.2 million, or $0.24 per common share, diluted, compared to a net income of $21.4 million, or $0.53 per common share, diluted, for the same period in 2022. Adjusted EBITDA for the third quarter 2023 was $(6.6) million, compared to $36.6 million for the same period in the prior year, primarily as a result of the decrease in operating income.

Nine Months 2023 Results Compared to Nine Months 2022

Total revenues for the nine months ended September 30, 2023 were $479.7 million, compared to $1.0 billion for the same period in the prior year, a decrease of $559.6 million, or 53.8%. Total operating expenses for the nine months ended September 30, 2023 decreased by 42.5% to $521.9 million compared to $907.7 million for the same period in the prior year. Cost of services as a percent of total revenues decreased to 62.8%, down 170 basis points compared to the nine months of 2022. The Company’s net loss for the nine months ended September 30, 2023 was $23.8 million, or $0.61 per common share, diluted, compared to a net income of $96.3 million, or $2.39 per common share, diluted, for the same period in the prior year. Adjusted EBITDA for the nine months ended September 30, 2023 decreased to $(15.1) million, from $151.4 million for the same period in the prior year. As of September 30, 2023, the Company had 1,820 investment sales and financing professionals, compared to 1,880 at the end of the same period last year.

Capital Allocation

On August 1, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, with a payment date of October 6, 2023, to stockholders of record at the close of business on September 15, 2023.

During the nine months ended September 30, 2023, the Company repurchased 1,098,561 shares of common stock at an average price of $31.28 per share for a total price of $34.4 million.

After accounting for shares repurchased through October 31, 2023, Marcus & Millichap has approximately $71.5 million available to repurchase shares under its program. No time limit has been established for the completion of the program, and the repurchases are expected to be executed from time-to-time, subject to general business and market conditions and other investment opportunities, through open market purchases or privately negotiated transactions, including through Rule 10b5-1 plans.

Business Outlook

The economy and commercial real estate transaction market are expected to remain choppy through the remainder of 2023 as political and geopolitical instability together with higher interest rates and lender caution lengthen the price discovery process and the buyer/seller expectation gap remains wide. However, the Company believes it remains well positioned to achieve long-term growth.

The Company benefits from its experienced management team, infrastructure investments, industry-leading market research and proprietary technology. The size and fragmentation of the Private Client Market continues to offer long-term growth opportunities through consolidation. This highly fragmented market segment consistently accounts for over 80% of all commercial property sales transactions and over 60% of the commission pool. The top 10 brokerage firms led by MMI have an estimated 20% share of this segment by transaction count.

Key factors that may influence the Company’s business during the remainder of 2023 include:

  • Volatility in market sales and investor sentiment driven by:
    • The elevated cost and availability of debt capital
    • Higher interest rate fluctuations and the heightened bid-ask spread between buyers and sellers
    • Risks of potential recession and the resulting reduction of CRE space demand that results from uncertainty
    • Possible impact to investor sentiment related to potential tax and other policy changes which may contribute to transaction acceleration and/or future fluctuations in sales and financing activity
    • Rising operating costs driven by wages, insurance, taxes and construction materials
  • Volatility in each of the Company’s real estate markets
  • Increase in costs related to in-person events, client meetings, and conferences
  • Global geopolitical uncertainty, which may cause investors to refrain from transacting
  • The potential for acquisition activity and subsequent integration

Webcast and Call Information

Marcus & Millichap will host a live webcast today to discuss the financial results at 7:30 a.m. Pacific Time/10:30 a.m. Eastern Time. The webcast will be accessible through the Investor Relations section of Marcus & Millichap's website at ir.marcusmillichap.com and will be archived upon completion of the call. The Company encourages the use of the webcast due to potential extended wait times to access the conference call via dial-in.

For those unable to access the webcast, callers from the United States and Canada should dial 1-877-407-9208 ten minutes prior to the scheduled call time. International callers should dial 1-201-493-6784.

Replay Information

For those unable to participate during the live broadcast, a telephonic replay of the call will also be available from 1:30 p.m. Eastern Time on Friday, November 3, 2023 through 11:59 p.m. Eastern Time on Friday, November 17, 2023 by dialing 1-844-512-2921 in the United States and Canada or 1-412-317-6671 internationally and entering passcode 13740771.

About Marcus & Millichap, Inc.

Marcus & Millichap, Inc. is a leading national brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of September 30, 2023, the Company had 1,820 investment sales and financing professionals in more than 80 offices who provide investment brokerage and financing services to sellers and buyers of commercial real estate. The Company also offers market research, consulting and advisory services to our clients. Marcus & Millichap closed 5,599 transactions during the nine months ended September 30, 2023, with a sales volume of $31.7 billion. For additional information, please visit www.MarcusMillichap.com.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This release includes forward-looking statements, including the Company’s business outlook for 2023, expectations for future interest rates and inflation, the execution of our capital return program, and expectations for a return to growth. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

  • general uncertainty in the capital markets, a worsening of economic conditions, and the rate and pace of economic recovery following an economic downturn;
  • changes in our business operations;
  • market trends in the commercial real estate market or the general economy, including the impact of rising inflation and higher interest rates;
  • our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals;
  • the effects of increased competition on our business;
  • our ability to successfully enter new markets or increase our market share;
  • our ability to successfully expand our services and businesses and to manage any such expansions;
  • our ability to retain existing clients and develop new clients;
  • our ability to keep pace with changes in technology;
  • any business interruption or technology failure, including cyber and ransomware attacks, and any related impact on our reputation;
  • changes in interest rates, availability of capital, tax laws, employment laws or other government regulation affecting our business;
  • our ability to successfully identify, negotiate, execute and integrate accretive acquisitions; and
  • other risk factors included under “Risk Factors” in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

In addition, in this release, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” "goal," “expect,” “predict,” “potential,” “should” and similar expressions, as they relate to our Company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this release. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We have not filed our Form 10-Q for the quarter ended September 30, 2023. As a result, all financial results described in this earnings release should be considered preliminary, and are subject to change to reflect any necessary adjustments or changes in accounting estimates, that are identified prior to the time we file our Form 10-Q.

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(Unaudited)

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Revenue:

 

 

 

 

 

 

 

Real estate brokerage commissions

$

139,817

 

 

$

292,889

 

 

$

415,193

 

 

$

934,483

 

Financing fees

 

17,257

 

 

 

28,099

 

 

 

51,021

 

 

 

91,363

 

Other revenue

 

4,952

 

 

 

2,852

 

 

 

13,470

 

 

 

13,415

 

Total revenue

 

162,026

 

 

 

323,840

 

 

 

479,684

 

 

 

1,039,261

 

Operating expenses:

 

 

 

 

 

 

 

Cost of services

 

104,628

 

 

 

217,360

 

 

 

301,218

 

 

 

670,170

 

Selling, general and administrative

 

69,192

 

 

 

73,004

 

 

 

210,321

 

 

 

227,380

 

Depreciation and amortization

 

3,637

 

 

 

2,924

 

 

 

10,312

 

 

 

10,167

 

Total operating expenses

 

177,457

 

 

 

293,288

 

 

 

521,851

 

 

 

907,717

 

Operating (loss) income

 

(15,431

)

 

 

30,552

 

 

 

(42,167

)

 

 

131,544

 

Other income, net

 

4,422

 

 

 

978

 

 

 

14,122

 

 

 

967

 

Interest expense

 

(241

)

 

 

(229

)

 

 

(672

)

 

 

(547

)

(Loss) income before (benefit) provision for income taxes

 

(11,250

)

 

 

31,301

 

 

 

(28,717

)

 

 

131,964

 

(Benefit) provision for income taxes

 

(2,010

)

 

 

9,939

 

 

 

(4,915

)

 

 

35,651

 

Net (loss) income

$

(9,240

)

 

$

21,362

 

 

$

(23,802

)

 

$

96,313

 

 

 

 

 

 

 

 

 

(Loss) earnings per share:

 

 

 

 

 

 

 

Basic

$

(0.24

)

 

$

0.53

 

 

$

(0.61

)

 

$

2.40

 

Diluted

$

(0.24

)

 

$

0.53

 

 

$

(0.61

)

 

$

2.39

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

38,492

 

 

 

40,086

 

 

 

38,740

 

 

 

40,038

 

Diluted

 

38,492

 

 

 

40,302

 

 

 

38,740

 

 

 

40,358

 

MARCUS & MILLICHAP, INC.

KEY OPERATING METRICS SUMMARY

(Unaudited)

Total sales volume was approximately $11.4 billion for the three months ended September 30, 2023, encompassing 1,846 transactions consisting of $7.4 billion for real estate brokerage (1,361 transactions), $1.9 billion for financing (276 transactions) and $2.1 billion in other transactions, including consulting and advisory services (209 transactions). Total sales volume was $31.7 billion for the nine months ended September 30, 2023, encompassing 5,599 transactions consisting of $22.1 billion for real estate brokerage (4,062 transactions), $5.3 billion for financing (839 transactions) and $4.3 billion in other transactions, including consulting and advisory services (698 transactions). As of September 30, 2023, the Company had 1,723 investment sales professionals and 97 financing professionals. Key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

Real Estate Brokerage

2023

 

2022

 

2023

 

2022

Average Number of Investment Sales Professionals

 

1,733

 

 

 

1,792

 

 

 

1,757

 

 

 

1,823

 

Average Number of Transactions per Investment

   Sales Professional

 

0.79

 

 

 

1.25

 

 

 

2.31

 

 

 

3.88

 

Average Commission per Transaction

$

102,731

 

 

$

130,405

 

 

$

102,214

 

 

$

132,213

 

Average Commission Rate

 

1.88

%

 

 

1.63

%

 

 

1.88

%

 

 

1.70

%

Average Transaction Size (in thousands)

$

5,462

 

 

$

7,981

 

 

$

5,442

 

 

$

7,781

 

Total Number of Transactions

 

1,361

 

 

 

2,246

 

 

 

4,062

 

 

 

7,068

 

Total Sales Volume (in millions)

$

7,433

 

 

$

17,926

 

 

$

22,107

 

 

$

54,999

 

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

Financing (1)

2023

 

2022

 

2023

 

2022

Average Number of Financing Professionals

 

96

 

 

 

87

 

 

 

95

 

 

 

86

 

Average Number of Transactions per Financing

   Professional

 

2.88

 

 

 

5.95

 

 

 

8.83

 

 

 

20.17

 

Average Fee per Transaction

$

50,062

 

 

$

44,751

 

 

$

49,606

 

 

$

44,363

 

Average Fee Rate

 

0.73

%

 

 

0.70

%

 

 

0.79

%

 

 

0.74

%

Average Transaction Size (in thousands)

$

6,904

 

 

$

6,350

 

 

$

6,288

 

 

$

6,021

 

Total Number of Transactions

 

276

 

 

 

518

 

 

 

839

 

 

 

1,735

 

Total Financing Volume (in millions)

$

1,906

 

 

$

3,289

 

 

$

5,276

 

 

$

10,447

(1) 

 

Operating metrics exclude certain financing fees not directly associated to transactions.

The following table sets forth the number of transactions, sales volume and revenue by commercial real estate market segment for real estate brokerage:

 

Three Months Ended September 30,

 

 

 

2023

 

2022

 

Change

Real Estate Brokerage

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

<$1 million

208

 

$

122

 

$

5,511

 

243

 

$

154

 

$

7,252

 

(35

)

 

$

(32

)

 

$

(1,741

)

Private Client Market

($1 – <$10 million)

1,014

 

 

3,344

 

 

91,466

 

1,658

 

 

5,885

 

 

165,534

 

(644

)

 

$

(2,541

)

 

$

(74,068

)

Middle Market

($10 – <$20 million)

75

 

 

1,002

 

 

18,647

 

188

 

 

2,527

 

 

46,901

 

(113

)

 

$

(1,525

)

 

$

(28,254

)

Larger Transaction

   Market (≥$20 million)

64

 

 

2,965

 

 

24,193

 

157

 

 

9,360

 

 

73,202

 

(93

)

 

$

(6,395

)

 

$

(49,009

)

 

1,361

 

$

7,433

 

$

139,817

 

2,246

 

$

17,926

 

$

292,889

 

(885

)

 

$

(10,493

)

 

$

(153,072

)

 

Nine Months Ended September 30,

 

 

 

2023

 

2022

 

Change

Real Estate Brokerage

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

Number

 

Volume

 

Revenue

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

 

 

 

(in millions)

 

(in thousands)

<$1 million

600

 

$

358

 

$

15,214

 

728

 

$

450

 

$

19,711

 

(128

)

 

$

(92

)

 

$

(4,497

)

Private Client Market

($1 – <$10 million)

3,054

 

 

10,169

 

 

278,207

 

5,285

 

 

18,929

 

 

536,433

 

(2,231

)

 

$

(8,760

)

 

$

(258,226

)

Middle Market

($10 – <$20 million)

218

 

 

2,923

 

 

53,440

 

581

 

 

7,849

 

 

150,117

 

(363

)

 

$

(4,926

)

 

$

(96,677

)

Larger Transaction

   Market (≥$20 million)

190

 

 

8,657

 

 

68,332

 

474

 

 

27,771

 

 

228,222

 

(284

)

 

$

(19,114

)

 

$

(159,890

)

 

4,062

 

$

22,107

 

$

415,193

 

7,068

 

$

54,999

 

$

934,483

 

(3,006

)

 

$

(32,892

)

 

$

(519,290

)

MARCUS & MILLICHAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except for shares and par value)

 

 

September 30, 2023

(unaudited)

 

December 31,

2022

Assets

 

 

 

Current assets:

 

 

 

Cash, cash equivalents, and restricted cash

$

224,174

 

 

$

235,873

 

Commissions receivable

 

14,751

 

 

 

8,453

 

Prepaid expenses

 

6,457

 

 

 

9,411

 

Income tax receivable

 

9,404

 

 

 

8,682

 

Marketable debt securities, available-for-sale (amortized cost of $116,989 and $254,682

   at September 30, 2023 and December 31, 2022, respectively, and $0 allowance for

   credit losses)

 

116,713

 

 

 

253,434

 

Advances and loans, net

 

3,567

 

 

 

4,005

 

Other assets, current

 

14,796

 

 

 

7,282

 

Total current assets

 

389,862

 

 

 

527,140

 

Property and equipment, net

 

28,088

 

 

 

27,644

 

Operating lease right-of-use assets, net

 

96,878

 

 

 

87,945

 

Marketable debt securities, available-for-sale (amortized cost of $74,776 and $72,819 at

   September 30, 2023 and December 31, 2022, respectively, and $0 allowance for credit

   losses)

 

70,510

 

 

 

68,595

 

Assets held in rabbi trust

 

10,065

 

 

 

9,553

 

Deferred tax assets, net

 

46,009

 

 

 

41,321

 

Goodwill and other intangible assets, net

 

52,087

 

 

 

55,696

 

Advances and loans, net

 

178,952

 

 

 

169,955

 

Other assets, non-current

 

9,662

 

 

 

15,859

 

Total assets

$

882,113

 

 

$

1,003,708

 

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable and accrued expenses

$

9,151

 

 

$

11,450

 

Deferred compensation and commissions

 

46,143

 

 

 

75,321

 

Operating lease liabilities

 

18,272

 

 

 

16,984

 

Accrued bonuses and other employee related expenses

 

15,342

 

 

 

38,327

 

Other liabilities, current

 

14,450

 

 

 

9,933

 

Total current liabilities

 

103,358

 

 

 

152,015

 

Deferred compensation and commissions

 

45,151

 

 

 

64,461

 

Operating lease liabilities

 

73,924

 

 

 

65,109

 

Other liabilities, non-current

 

10,327

 

 

 

8,614

 

Total liabilities

 

232,760

 

 

 

290,199

 

Commitments and contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

Preferred stock, $0.0001 par value:

 

 

 

Authorized shares – 25,000,000; issued and outstanding shares – none at September 30,

   2023 and December 31, 2022, respectively

 

 

 

 

 

Common stock, $0.0001 par value:

 

 

 

Authorized shares – 150,000,000; issued and outstanding shares – 38,546,059 and

   39,255,838 at September 30, 2023 and December 31, 2022, respectively

 

4

 

 

 

4

 

Additional paid-in capital

 

145,220

 

 

 

131,541

 

Retained earnings

 

507,045

 

 

 

585,581

 

Accumulated other comprehensive loss

 

(2,916

)

 

 

(3,617

)

Total stockholders’ equity

 

649,353

 

 

 

713,509

 

Total liabilities and stockholders’ equity

$

882,113

 

 

$

1,003,708

 

MARCUS & MILLICHAP, INC.

OTHER INFORMATION

(Unaudited)

Adjusted EBITDA Reconciliation

Adjusted EBITDA, which the Company defines as net (loss) income before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, cash equivalents, and restricted cash, (ii) interest expense, (iii) (benefit) provision for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. The Company uses Adjusted EBITDA in its business operations to evaluate the performance of its business, develop budgets and measure its performance against those budgets, among other things. The Company also believes that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate its overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation or as a substitute for analysis of the Company’s results as reported under U.S. generally accepted accounting principles (“U.S. GAAP”). The Company finds Adjusted EBITDA to be a useful management metric to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. Considering the foregoing limitations, the Company does not rely solely on Adjusted EBITDA as a performance measure and also considers its U.S. GAAP results. Adjusted EBITDA is not a measurement of the Company’s financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures calculated in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.

A reconciliation of the most directly comparable U.S. GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands):

 

Three Months Ended

September 30,

 

Nine Months Ended

September 30,

 

2023

 

2022

 

2023

 

2022

Net (loss) income

$

(9,240

)

 

$

21,362

 

 

$

(23,802

)

 

$

96,313

 

Adjustments:

 

 

 

 

 

 

 

Interest income and other (1)

 

(4,721

)

 

 

(2,365

)

 

 

(13,201

)

 

 

(3,959

)

Interest expense

 

241

 

 

 

229

 

 

 

672

 

 

 

547

 

(Benefit) provision for income taxes

 

(2,010

)

 

 

9,939

 

 

 

(4,915

)

 

 

35,651

 

Depreciation and amortization

 

3,637

 

 

 

2,924

 

 

 

10,312

 

 

 

10,167

 

Stock-based compensation

 

5,446

 

 

 

4,544

 

 

 

15,808

 

 

 

12,675

 

Adjusted EBITDA

$

(6,647

)

 

$

36,633

 

 

$

(15,126

)

 

$

151,394

(1) 

Other includes net realized gains (losses) on marketable debt securities available-for-sale.

Glossary of Terms

  • Private Client Market segment: transactions with values from $1 million to up to but less than $10 million
  • Middle Market segment: transactions with values from $10 million to up to but less than $20 million
  • Larger Transaction Market segment: transactions with values of $20 million and above
  • Acquisitions: acquisition of businesses accounted for as a business combination in accordance with generally accepted accounting standards

Certain Adjusted Metrics

Real Estate Brokerage

Following are actual and as adjusted metrics excluding any large transactions in our real estate brokerage business in excess of $300 million:

 

 

Three Months Ended

September 30, 2023

 

Nine Months Ended

September 30, 2023

 

(actual)

 

(as adjusted)

 

(actual)

 

(as adjusted)

Total Sales Volume Decrease

 

(58.5

)%

 

(54.7

)%

 

(59.8

)%

 

(56.6

)%

Average Commission Rate Increase

 

15.3

%

 

11.2

%

 

10.6

%

 

5.6

%

Average Transaction Size Decrease

 

(31.6

)%

 

(25.4

)%

 

(30.1

)%

 

(24.6

)%

 

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