QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
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(Address of Principal Executive Offices) |
(Zip Code) |
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
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☒ |
Accelerated filer |
☐ | |||
Non-accelerated filer |
☐ |
Smaller reporting company |
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Emerging growth company |
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Page |
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3 |
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4 |
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5 |
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6 |
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7 |
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27 |
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38 |
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39 |
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40 |
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40 |
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40 |
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41 |
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41 |
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41 |
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41 |
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42 |
March 31, 2020 (Unaudited) |
December 31, 2019 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
$ | |
$ | |
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Commissions receivable, net |
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Prepaid expenses |
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Income tax receivable |
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Marketable debt securities, available-for-sale (includes amortized cost and an allowance for credit losses of $ |
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Advances and loans, net |
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Other assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets, net |
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Marketable debt securities, available-for-sale (includes amortized cost and an allowance for credit losses of $ |
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Assets held in rabbi trust |
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Deferred tax assets, net |
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Goodwill and other intangible assets, net |
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Advances and loans, net |
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Other assets |
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Total assets |
$ | |
$ | |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable and other liabilities |
$ | |
$ | |
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Notes payable to former stockholders |
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Deferred compensation and commissions |
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Operating lease liabilities |
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Accrued bonuses and other employee related expenses |
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Total current liabilities |
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Deferred compensation and commissions |
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Operating lease liabilities |
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Other liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $ |
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Authorized shares – |
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Common stock, $ |
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Authorized shares – |
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Additional paid-in capital |
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Stock notes receivable from employees |
( |
) | ( |
) | ||||
Retained earnings |
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Accumulated other comprehensive income |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
$ | |
$ | |
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Three Months Ended March 31, |
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2020 |
2019 |
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Revenues: |
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Real estate brokerage commissions |
$ | |
$ |
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Financing fees |
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Other revenues |
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Total revenues |
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Operating expenses: |
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Cost of services |
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Selling, general and administrative expense |
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Depreciation and amortization expense |
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Total operating expenses |
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Operating income |
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Other (expense) income, net |
( |
) | |
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Interest expense |
( |
) | ( |
) | ||||
Income before provision for income taxes |
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Provision for income taxes |
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Net income |
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Other comprehensive (loss) income: |
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Marketable debt securities, available-for-sale: |
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Change in unrealized (losses) gains |
( |
) | |
|||||
Less: reclassification adjustment for net losses (gains) included in other (expense) income, net |
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( |
) | |||||
Net change, net of tax of $( |
( |
) | |
|||||
Foreign currency translation gain (loss), net of tax of $ |
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( |
) | |||||
Total other comprehensive income |
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Comprehensive income |
$ | |
$ | |
||||
Earnings per share: |
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Basic |
$ | |
$ | |
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Diluted |
$ | |
$ | |
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Weighted average common shares outstanding: |
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Basic |
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Diluted |
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Three Months Ended March 31, 2020 |
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Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Stock Notes Receivable From Employees |
Retained Earnings |
Accumulated Other Comprehensive Income |
Total |
||||||||||||||||||||||||||||||
Shares |
Amount |
Shares |
Amount |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
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$ |
( |
) |
$ |
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$ |
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$ |
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Cumulative effect of a change in accounting principle, net of tax |
— |
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— |
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( |
) |
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( |
) | |||||||||||||||||||||||||
Balance at January 1, 2020, as adjusted |
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( |
) |
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Net and comprehensive income |
— |
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— |
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Stock-based award activity |
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Stock-based compensation |
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Issuance of common stock for vesting of restricted stock units |
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Shares withheld related to net share settlement of stock-based awards |
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( |
) |
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( |
) |
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( |
) | ||||||||||||||||||||||||
Balance as of March 31, 2020 |
|
$ |
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$ |
|
$ |
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$ |
( |
) |
$ |
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$ |
|
$ |
|
|||||||||||||||||||
Three Months Ended March 31, 20 19 |
||||||||||||||||||||||||||||||||||||
Preferred Stock |
Common Stock |
Additional Paid-In Capital |
Stock Notes Receivable From Employees |
Retained Earnings |
Accumulated Other Comprehensive Income |
Total |
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Shares |
Amount |
Shares |
Amount |
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Balance at December 31, 2018 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
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$ |
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$ |
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Net and comprehensive income |
— |
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— |
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Stock-based award activity |
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Stock-based compensation |
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Issuance of common stock for vesting of restricted stock units |
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Shares withheld related to net share settlement of stock-based awards |
|
|
( |
) |
|
( |
) |
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|
( |
) | ||||||||||||||||||||||||
Balance as of March 31, 2019 |
|
$ |
|
|
$ |
|
$ |
|
$ |
( |
) |
$ |
|
$ |
|
$ |
|
|||||||||||||||||||
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Cash flows from operating activities |
||||||||
Net income |
$ | $ | ||||||
Adjustments to reconcile net income to net cash used in operating activities: |
||||||||
Depreciation and amortization expense |
||||||||
Amortization of right-of-use assets |
||||||||
Credit loss recovery |
( |
) | ( |
) | ||||
Stock-based compensation |
||||||||
Deferred taxes, net |
||||||||
Unrealized f oreign exchange lo ss |
||||||||
Net realized (gains) losses on marketable debt securities, available-for-sale |
( |
) | ||||||
Other non-cash items |
||||||||
Changes in operating assets and liabilities: |
||||||||
Commissions receivable |
( |
) | ||||||
Prepaid expenses |
( |
) | ||||||
Advances and loans |
( |
) | ( |
) | ||||
Other assets |
( |
) | ( |
) | ||||
Accounts payable and other liabilities |
( |
) | ||||||
Income tax receivable/payable |
||||||||
Accrued bonuses and other employee related expenses |
( |
) | ( |
) | ||||
Deferred compensation and commissions |
( |
) | ( |
) | ||||
Operating lease liabilities |
( |
) | ( |
) | ||||
Other liabilities |
( |
) | ||||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
Cash flows from investing activities |
||||||||
Acquisition, net of cash received |
( |
) | ||||||
Purchases of marketable debt securities, available-for-sale |
( |
) | ( |
) | ||||
Proceeds from sales and maturities of marketable debt securities, available-for-sale |
||||||||
Issuances of employee notes receivable |
( |
) | ||||||
Payments received on employee notes receivable |
||||||||
Purchase of property and equipment |
( |
) | ( |
) | ||||
Net cash provided by investing activities |
||||||||
Cash flows from financing activities |
||||||||
Taxes paid related to net share settlement of stock-based awards |
( |
) | ( |
) | ||||
Principal payments on stock appreciation rights liability |
( |
) | ||||||
Net cash used in financing activities |
( |
) | ( |
) | ||||
Effect of currency exchange rate changes on cash and cash equivalents |
( |
) |
||||||
Net decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents at beginning of period |
||||||||
Cash and cash equivalents at end of period |
$ | $ | ||||||
Supplemental disclosures of cash flow information |
||||||||
Interest paid during the period |
$ | $ | ||||||
Income taxes paid, net |
$ | $ | ||||||
1. |
Description of Business and Basis of Presentation |
2. |
Accounting Policies and Recent Accounting Pronouncements |
3. |
Property and Equipment, Net |
March 31, 2020 |
December 31, |
|||||||
Computer software and hardware equipment |
$ | |
$ | |
||||
Furniture, fixtures, and equipment |
|
|
||||||
Less: accumulated depreciation and amortization |
( |
) | ( |
) | ||||
$ | |
$ | |
|||||
4. |
Operating Leases |
|
Three Months Ended March 31, |
|||||||
|
2020 |
2019 |
||||||
Operating lease cost: |
||||||||
Lease cost (1) |
$ |
|
$ |
|
||||
Variable lease cost (2) |
|
|
||||||
Sublease income |
( |
) | ( |
) | ||||
$ | |
$ | |
|||||
(1) |
Includes short-term lease cost and ROU asset amortization. |
(2) |
Primarily relates to common area maintenance, property taxes, insurance, utilities and parking. |
March 31, |
||||
Remainder of 2020 |
$ | |
||
2021 |
|
|||
2022 |
|
|||
2023 |
|
|||
2024 |
|
|||
Thereafter |
|
|||
Total future minimum lease payments |
|
|||
Less imputed interest |
( |
) | ||
Present value of operating lease liabilities |
$ | |
||
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Operating cash flow information: |
||||||||
Cash paid for amounts included in the measurement of operating lease liabilities |
$ | |
$ | |
||||
Noncash activity: |
||||||||
ROU assets obtained in exchange for operating lease liabilities |
$ |
|
$ |
|
||||
Tenant improvements owned by lessor related to ROU assets (1) |
$ | |
$ | |
(1) |
Reclassification from other assets current. |
March 31, 2020 |
December 31, 2019 |
|||||||
Weighted average remaining operating lease term |
|
|
||||||
Weighted average discount rate |
|
% | |
% |
5. |
Investments in Marketable Debt Securities |
March 31, 2020 |
||||||||||||||||||||
Amortized Cost |
Allowance for Credit Losses |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||||||
Short-term investments: |
||||||||||||||||||||
U.S. treasuries |
$ |
$ | $ | $ | $ | |||||||||||||||
U.S. government sponsored entities |
||||||||||||||||||||
Corporate debt |
( |
) | ||||||||||||||||||
ABS and other |
( |
) | ||||||||||||||||||
$ | $ | $ | $ | ( |
) | $ | ||||||||||||||
Long-term investments: |
||||||||||||||||||||
U.S. treasuries |
$ | $ | $ | $ | $ | |||||||||||||||
U.S. government sponsored entities |
||||||||||||||||||||
Corporate debt |
( |
) | ||||||||||||||||||
ABS and other |
( |
) | ||||||||||||||||||
$ | $ | $ | $ | ( |
) | $ | ||||||||||||||
December 31, 2019 |
||||||||||||||||
Amortized Cost |
Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
|||||||||||||
Short-term investments: |
||||||||||||||||
U.S. treasuries |
$ | $ | $ | ( |
) | $ | ||||||||||
U.S. government sponsored entities |
||||||||||||||||
Corporate debt |
||||||||||||||||
$ | $ | $ | ( |
) | $ |
|||||||||||
Long-term investments: |
||||||||||||||||
U.S. treasuries |
$ | $ | $ | $ | ||||||||||||
U.S. government sponsored entities |
( |
) | ||||||||||||||
Corporate debt |
( |
) | ||||||||||||||
ABS and other |
( |
) | ||||||||||||||
$ | $ | $ | ( |
) | $ | |||||||||||
March 31, 2020 |
||||||||||||||||||||||||
Less than 12 months |
12 months or |
Total |
||||||||||||||||||||||
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
Corporate debt |
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | ||||||||||||||
ABS and other |
( |
) | ( |
) | ||||||||||||||||||||
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | |||||||||||||||
December 31, 2019 |
||||||||||||||||||||||||
Less than 12 months |
12 months or greater |
Total |
||||||||||||||||||||||
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
Fair Value |
Gross Unrealized Losses |
|||||||||||||||||||
U.S. treasuries |
$ | $ | ( |
) | $ | $ | $ | $ | ( |
) | ||||||||||||||
U.S. government sponsored entities |
( |
) | ( |
) | ||||||||||||||||||||
Corporate debt |
( |
) | ( |
) | ||||||||||||||||||||
ABS and other |
( |
) | ( |
) | ||||||||||||||||||||
$ |
$ | ( |
) | $ | $ | ( |
) | $ | $ | ( |
) | |||||||||||||
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Gross realized gains (1) |
$ |
$ |
||||||
Gross realized losses (1) |
$ | $ | ( |
) | ||||
(1) |
Recorded in other (expense) income, net in the condensed consolidated statements of net and comprehensive income. The cost basis of securities sold were determined based on the specific identification method. |
March 31, 2020 |
December 31, 2019 |
|||||||||||||||
Amortized Cost |
Fair Value |
Amortized Cost |
Fair Value |
|||||||||||||
Due in one year or less |
$ | $ | $ | $ | ||||||||||||
Due after one year through five years |
||||||||||||||||
Due after five years through ten years |
||||||||||||||||
Due after ten years |
||||||||||||||||
$ | $ | $ | $ | |||||||||||||
Weighted average contractual maturity |
6. |
Acquisitions, Goodwill and Other Intangible Assets |
March 31, 2020 |
December 31, 2019 |
|||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
Gross Carrying Amount |
Accumulated Amortization |
Net Book Value |
|||||||||||||||||||
Goodwill and intangible assets: |
||||||||||||||||||||||||
Goodwill (1) |
$ | $ | $ | $ | $ | $ | ||||||||||||||||||
Intangible assets (2) |
( |
) | ( |
) | ||||||||||||||||||||
$ | $ | ( |
) | $ | $ | $ | ( |
) | $ | |||||||||||||||
(1) |
Represents additions from acquisitions. |
(2) |
Total weighted average amortization period was |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Beginning balance |
$ |
$ |
||||||
Additions from acquisitions |
||||||||
Impairment losses |
||||||||
Ending balance |
$ | $ | ||||||
March 31, 2020 |
||||
Remainder of 2020 |
$ | |||
2021 |
||||
2022 |
||||
2023 |
||||
2024 |
||||
Thereafter |
||||
$ | ||||
7. |
Selected Balance Sheet Data |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Beginning balance |
$ | $ | ||||||
Credit loss recovery |
( |
) | ( |
) | ||||
Write-offs |
( |
) | ( |
) | ||||
Ending balance |
$ | $ | ||||||
Current |
Non-Current |
|||||||||||||||
March 31, 2020 |
December 31, 2019 |
March 31, 2020 |
December 31, 2019 |
|||||||||||||
Mortgage servicing rights (“MSRs”), net of amortization |
$ | $ | $ | $ | ||||||||||||
Security deposits |
||||||||||||||||
Employee notes receivable (1) |
||||||||||||||||
Customer trust accounts and other |
||||||||||||||||
$ | $ | $ | $ | |||||||||||||
(1) |
Reduction of accrued bonuses and other employee related expenses in settlement of employee notes receivable were $ |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Beginning balance |
$ | $ | ||||||
Additions from acquisition |
||||||||
Additions |
||||||||
Amortization |
( |
) | ( |
) | ||||
Ending balance |
$ | $ | ||||||
Current |
Non-Current |
|||||||||||||||
March 31, 2020 |
December 31, 2019 |
March 31, 2020 |
December 31, 2019 |
|||||||||||||
Stock appreciation rights (“SARs”) liability (1) |
$ | $ | $ | $ | ||||||||||||
Commissions payable to investment sales and financing professionals |
||||||||||||||||
Deferred compensation liability (1) |
||||||||||||||||
Other |
||||||||||||||||
$ | $ | $ | $ | |||||||||||||
(1) |
The SARs and deferred compensation liability become subject to payout as a result of a participant no longer being considered as a service provider. As a result of the retirement of certain participants, estimated amounts to be paid to the participants within the next twelve months have been classified as current. |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
(Decrease) increase in the carrying value of the assets held in the rabbi trust (1) |
$ | ( |
) | $ | ||||
(Decrease) increase in the net carrying value of the deferred compensation obligation (2) |
$ | ( |
) | $ | ||||
(1) |
Recorded in other (expense) income, net in the condensed consolidated statements of net and comprehensive income. |
(2) |
Recorded in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income. |
Non-Current |
||||||||
March 31, 2020 |
December 31, 2019 |
|||||||
Deferred consideration and other (1) (2) |
$ | $ | ||||||
Contingent consideration (1) (2) |
||||||||
$ | $ | |||||||
(1) |
The current portions of deferred consideration in the amounts of $ |
(2) |
Deferred consideration in the aggregate amount of $ non-current portions, respectively. |
8. |
Notes Payable to Former Stockholders |
9. |
Related-Party Transactions |
10. |
Fair Value Measurements |
• | Level 1: |
• | Level 2: |
• | Level 3: |
March 31, 2020 |
December 31, 2019 |
|||||||||||||||||||||||||||||||
Fair Value |
Level 1 |
Level 2 |
Level 3 |
Fair Value |
Level 1 |
Level 2 |
Level 3 |
|||||||||||||||||||||||||
Assets: |
||||||||||||||||||||||||||||||||
Assets held in rabbi trust |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||
Cash equivalents (1) : |
||||||||||||||||||||||||||||||||
Commercial paper and other |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||
Money market funds |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
|||||||||||||||||
Marketable debt securities, available-for-sale: |
||||||||||||||||||||||||||||||||
Short-term investments: |
||||||||||||||||||||||||||||||||
U.S. treasuries |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||
U.S. government sponsored entities |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Corporate debt |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
ABS and other |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
|||||||||||||||||
Long-term investments: |
||||||||||||||||||||||||||||||||
U.S. treasuries |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||
U.S. government sponsored entities |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
Corporate debt |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
ABS and other |
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
|||||||||||||||||
Liabilities: |
||||||||||||||||||||||||||||||||
Contingent consideration |
$ | |
$ | |
$ | |
$ | |
$ | $ | |
$ | |
$ | ||||||||||||||||||
Deferred compensation liability |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
$ | |
||||||||||||||||
(1) |
Included in cash and cash equivalents on the accompanying condensed consolidated balance sheets. |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Beginning balance (1) |
$ | $ | ||||||
Contingent consideration in connection with acquisitions (2) |
||||||||
Change in fair value of contingent consideration |
( |
) | ||||||
Payments of contingent consideration |
||||||||
Ending balance |
$ | $ |
||||||
(1) |
Beginning balance for 2020 reflects the reclassification of $ |
(2) |
Contingent consideration in connections with acquisitions represents a noncash investing activity. |
Fair Value at March 31, 2020 |
Valuation Technique |
Unobservable inputs |
Range (Weighted Average) (1) |
|||||||||
Contingent consideration |
$ |
Discounted cash flow |
Expected life of cash flows |
|||||||||
Discount rate |
||||||||||||
Probability of achievement |
||||||||||||
Fair Value at December 31, 2019 |
Valuation Technique |
Unobservable inputs |
Range (Weighted Average) (1) |
|||||||||
Contingent consideration |
$ |
Discounted cash flow |
Expected life of cash flows |
|||||||||
Discount rate |
||||||||||||
Probability of achievement |
(1) |
Unobservable inputs were weighted by the relative fair value of the instruments. |
Fair Value at March 31, 2020 |
Valuation Technique |
Unobservable inputs |
Range (Weighted Average) (1) |
|||||||||
MSRs |
$ |
Discounted cash flow |
Constant prepayment rates |
|||||||||
Constant default rate |
||||||||||||
Loss severity |
||||||||||||
Discount rate |
Fair Value at December 31, 2019 |
Valuation Technique |
Unobservable inputs |
Range (Weighted Average) (1) |
|||||||||
MSRs |
$ |
Discounted cash flow |
Constant prepayment rates |
|||||||||
Constant default rate |
||||||||||||
Loss severity |
||||||||||||
Discount rate |
(1) |
Weighted average is based on the | % constant prepayment rate scenario which the Company uses as the reported fair value.
11. |
Stockholders’ Equity |
12. |
Stock-Based Compensation Plans |
RSA Grants to Non-employee Directors |
RSU Grants to Employees |
RSU Grants to Independent Contractors |
Total |
Weighted- Average Grant Date Fair Value Per Share |
||||||||||||||||
Nonvested shares at December 31, 2019 |
$ | |||||||||||||||||||
Granted |
||||||||||||||||||||
Vested |
( |
) | ( |
) | ( |
) | ||||||||||||||
Transferred |
( |
) | ||||||||||||||||||
Forfeited/canceled |
( |
) | ( |
) | ( |
) | ||||||||||||||
Nonvested shares at March 31, 2020 (1) |
$ | |||||||||||||||||||
Unrecognized stock-based compensation expense as of March 31, 2020 (2) |
$ | $ | $ | $ | ||||||||||||||||
Weighted average remaining vesting period (years) as of March 31, 2020 |
||||||||||||||||||||
(1) |
Nonvested RSUs will be settled through the issuance of new shares of common stock. |
(2) |
The total unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately |
March 31, 2020 |
||||
2021 |
||||
2022 |
||||
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
ESPP |
$ | $ | ||||||
RSAs – non-employee directors |
||||||||
RSUs – employees (1) |
||||||||
RSUs – independent contractors |
||||||||
$ | $ | |||||||
(1) |
Includes expense related to the acceleration of vesting of certain RSUs. |
13. |
Income Taxes |
Three Months Ended March 31, |
||||||||||||||||
2020 |
2019 |
|||||||||||||||
Amount |
Rate |
Amount |
Rate |
|||||||||||||
Income tax expense at the federal statutory rate |
$ | % | $ | % | ||||||||||||
State income tax expense, net of federal benefit |
% | % | ||||||||||||||
Windfall tax benefits, net related to stock-based compensation |
( |
) | ( |
)% | ( |
) | ( |
)% | ||||||||
Change in valuation allowance |
% | % | ||||||||||||||
Permanent and other items (1) |
% | % | ||||||||||||||
$ |
% | $ |
% | |||||||||||||
(1) | Permanent items relate principally to compensation charges, qualified transportation fringe benefits, reversal of uncertain tax positions, meals and entertainment and our tax-exempt deferred compensation plan assets. |
14. |
Earnings per Share |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Numerator (Basic and Diluted): |
||||||||
Net income |
$ | $ | ||||||
Denominator: |
||||||||
Basic |
||||||||
Weighted average common shares issued and outstanding |
||||||||
Deduct: Unvested RSAs (1) |
( |
) | ( |
) | ||||
Add: Fully vested DSUs (2) |
||||||||
Weighted Average Common Shares Outstanding |
||||||||
Basic earnings per common share |
$ | $ | ||||||
Diluted |
||||||||
Weighted Average Common Shares Outstanding from above |
||||||||
Add: Dilutive effect of RSUs, RSAs & ESPP |
||||||||
Weighted Average Common Shares Outstanding |
||||||||
Diluted earnings per common share |
$ | $ | ||||||
Antidilutive shares excluded from diluted earnings per common share (3) |
||||||||
(1) |
RSAs were issued and outstanding to the non-employee directors and have a -year or -year vesting term subject to service requirements. See Note 12 – “Stock-Based Compensation Plans” for additional information. |
(2) |
Shares are included in weighted average common shares outstanding as the shares are fully vested but have not yet been delivered. See Note 12 – “Stock-Based Compensation Plans” for additional information. |
(3) |
Primarily pertaining to RSU grants to the Company’s employees and independent contractors. |
15. |
Commitments and Contingencies |
16. |
Subsequent Events |
• | Properties priced less than $1 million; |
• | Private client market: |
• | Middle market: |
• | Larger transaction market: |
Three Months Ended March 31, |
||||||||||||||||||||||||||||||||||||
2020 |
2019 |
Change |
||||||||||||||||||||||||||||||||||
Real Estate Brokerage |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
Number |
Volume |
Revenues |
|||||||||||||||||||||||||||
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
(in millions) |
(in thousands) |
|||||||||||||||||||||||||||||||
<$1 million |
216 |
$ | 136 |
$ | 5,742 |
201 |
$ | 131 |
$ | 5,288 |
15 |
$ | 5 |
$ | 454 |
|||||||||||||||||||||
Private client market ($1 - $10 million) |
1,242 |
4,001 |
114,264 |
1,060 |
3,320 |
96,058 |
182 |
681 |
18,206 |
|||||||||||||||||||||||||||
Middle market ( ≥ $10 - $20 million) |
91 |
1,222 |
22,668 |
92 |
1,245 |
23,580 |
(1 |
) | (23 |
) | (912 |
) | ||||||||||||||||||||||||
Larger transaction market ( ≥ $20 million) |
66 |
3,083 |
29,155 |
52 |
2,407 |
20,011 |
14 |
676 |
9,144 |
|||||||||||||||||||||||||||
1,615 |
$ | 8,442 |
$ | 171,829 |
1,405 |
$ | 7,103 |
$ | 144,937 |
210 |
$ | 1,339 |
$ | 26,892 |
||||||||||||||||||||||
Three Months Ended March 31, |
||||||||
Real Estate Brokerage |
2020 |
2019 |
||||||
Average Number of Investment Sales Professionals |
1,889 |
1,818 |
||||||
Average Number of Transactions per Investment Sales Professional |
0.85 |
0.77 |
||||||
Average Commission per Transaction |
$ | 106,396 |
$ | 103,158 |
||||
Average Commission Rate |
2.04 |
% | 2.04 |
% | ||||
Average Transaction Size (in thousands) |
$ | 5,227 |
$ | 5,056 |
||||
Total Number of Transactions |
1,615 |
1,405 |
||||||
Total Sales Volume (in millions) |
$ | 8,442 |
$ | 7,103 |
||||
Three Months Ended March 31, |
||||||||
Financing (1) |
2020 |
2019 |
||||||
Average Number of Financing Professionals |
89 |
106 |
||||||
Average Number of Transactions per Financing Professional |
5.37 |
3.66 |
||||||
Average Fee per Transaction |
$ | 30,900 |
$ | 33,541 |
||||
Average Fee Rate |
0.84 |
% | 0.89 |
% | ||||
Average Transaction Size (in thousands) |
$ | 3,670 |
$ | 3,763 |
||||
Total Number of Transactions |
478 |
388 |
||||||
Total Financing Volume (in millions) |
$ | 1,754 |
$ | 1,460 |
(1) |
Operating metrics calculated excluding certain financing fees not directly associated with transactions. |
Three Months Ended March 31, 2020 |
Percentage of Revenue |
Three Months Ended March 31, 2019 |
Percentage of Revenue |
Change |
||||||||||||||||||||
Dollar |
Percentage |
|||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Real estate brokerage commissions |
$ | 171,829 |
90.1 |
% | $ | 144,937 |
90.2 |
% | $ | 26,892 |
18.6 |
% | ||||||||||||
Financing fees |
15,351 |
8.0 |
13,732 |
8.5 |
1,619 |
11.8 |
% | |||||||||||||||||
Other revenues |
3,537 |
1.9 |
2,038 |
1.3 |
1,499 |
73.6 |
% | |||||||||||||||||
Total revenues |
190,717 |
100.0 |
160,707 |
100.0 |
30,010 |
18.7 |
% | |||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Cost of services |
113,757 |
59.6 |
91,688 |
57.1 |
22,069 |
24.1 |
% | |||||||||||||||||
Selling, general and administrative expense |
54,860 |
28.8 |
48,918 |
30.4 |
5,942 |
12.1 |
% | |||||||||||||||||
Depreciation and amortization expense |
2,464 |
1.3 |
1,832 |
1.1 |
632 |
34.5 |
% | |||||||||||||||||
Total operating expenses |
171,081 |
89.7 |
142,438 |
88.6 |
28,643 |
20.1 |
% | |||||||||||||||||
Operating income |
19,636 |
10.3 |
18,269 |
11.4 |
1,367 |
7.5 |
% | |||||||||||||||||
Other (expense) income, net |
(366 |
) | (0.2 |
) | 3,375 |
2.1 |
(3,741 |
) | (110.8 |
)% | ||||||||||||||
Interest expense |
(283 |
) | (0.1 |
) | (349 |
) | (0.2 |
) | 66 |
(18.9 |
)% | |||||||||||||
Income before provision for income taxes |
18,987 |
10.0 |
21,295 |
13.3 |
(2,308 |
) | (10.8 |
)% | ||||||||||||||||
Provision for income taxes |
5,917 |
3.1 |
5,657 |
3.6 |
260 |
4.6 |
% | |||||||||||||||||
Net income |
$ | 13,070 |
6.9 |
% | $ | 15,638 |
9.7 |
% | $ | (2,568 |
) | (16.4 |
)% | |||||||||||
Adjusted EBITDA (1) |
$ | 22,378 |
11.7 |
% | $ | 23,159 |
14.4 |
% | $ | (781 |
) | (3.4 |
)% | |||||||||||
(1) |
Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as an alternative to net income, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, see “Non-GAAP Financial Measure.” |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Net income |
$ | 13,070 |
$ | 15,638 |
||||
Adjustments: |
||||||||
Interest income and other (1) |
(2,003 |
) | (2,541 |
) | ||||
Interest expense |
283 |
349 |
||||||
Provision for income taxes |
5,917 |
5,657 |
||||||
Depreciation and amortization |
2,464 |
1,832 |
||||||
Stock-based compensation |
2,632 |
2,341 |
||||||
Non-cash MSR activity (2) |
15 |
(117 |
) | |||||
Adjusted EBITDA (3) |
$ | 22,378 |
$ | 23,159 |
||||
(1) |
Other includes net realized gains (losses) on marketable debt securities available-for-sale. |
(2) |
Non-cash MSR activity includes the assumption of servicing obligations. |
(3) |
The decrease in Adjusted EBITDA for the three months ended March 31, 2020 compared to the same period in 2019 is primarily due to a higher proportion of operating expenses compared to total revenues. |
Three Months Ended March 31, |
||||||||
2020 |
2019 |
|||||||
Net cash used in operating activities |
$ | (52,793 |
) | $ | (38,598 |
) | ||
Net cash provided by investing activities |
13,097 |
24,073 |
||||||
Net cash used in financing activities |
(2,940 |
) | (2,026 |
) | ||||
Effect of currency exchange rate changes on cash and cash equivalents |
(274 |
) | — |
|||||
Net decrease in cash and cash equivalents |
(42,910 |
) | (16,551 |
) | ||||
Cash and cash equivalents at beginning of period |
232,670 |
214,683 |
||||||
Cash and cash equivalents at end of period |
$ | 189,760 |
$ | 198,132 |
||||
Change in Interest Rates |
Approximate Change in Fair Value of Investments Increase (Decrease) |
|||
2% Decrease |
$ | 2,703 |
||
1% Decrease |
$ | 1,469 |
||
1% Increase |
$ | (2,114 |
) | |
2% Increase |
$ | (4,228 |
) |
• | Any impairment in value of our investments in marketable debt securities, available-for-sale, tangible or intangible assets, which could be recorded as a result of weaker economic conditions. |
• | A potential negative impact on the health of our employees and investment sales and financing professionals, particularly if a significant number of them are impacted, could result in a deterioration in our ability to ensure business continuity during a disruption. |
• | If significant portions of our workforce are unable to work effectively, including because of quarantines, facility closures, ineffective remote work arrangements or technology failures or limitations, our operations would be adversely impacted. |
Exhibit No. |
Description | |||
10.1* |
||||
31.1* |
||||
31.2* |
||||
32.1** |
||||
101 |
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Net and Comprehensive Income, (iii) Condensed Consolidated Statements of Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | |||
104 |
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* |
Filed herewith. |
** |
Furnished, not filed. |
Marcus & Millichap, Inc . | ||||||
Date: |
May 11, 2020 |
By: |
/s/ Hessam Nadji | |||
Hessam Nadji President and Chief Executive Officer (Principal Executive Officer) | ||||||
Date: |
May 11, 2020 |
By: |
/s/ Martin E. Louie | |||
Martin E. Louie Chief Financial Officer (Principal Financial Officer) |
Exhibit 10.1
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement (Agreement) is made as of January 1, 2020 (Effective Date) (by and between L5K Investments, Inc. (CONSULTANT), and Marcus & Millichap, Inc. (Marcus & Millichap) wherein Marcus & Millichap engages CONSULTANT to provide consulting services. Therefore, CONSULTANT and Marcus & Millichap agree as follows:
1. | TERM & CANCELLATION |
1.1 The Agreement shall commence on the Effective Date and continue until terminated by either Party in its discretion upon thirty (30) days written notice. Such termination shall not prejudice any rights and remedies herein.
2. | SERVICES & COMPENSATION |
2.1. CONSULTANT will provide Marcus & Millichap with the services identified in Exhibit A attached hereto (Services). In consideration for the above consulting services, Marcus & Millichap shall pay CONSULTANT a fee as set forth in Exhibit A (Fee). Any Fee due to CONSULTANT shall be the full and complete payment owed under this Agreement. Marcus & Millichap shall reimburse CONSULTANT any expenses related to business travel, attending meetings or other events on behalf of Marcus & Millichap. Any such expense above $2,500 must be approved in advance by the CEO.
3. | CONFIDENTIALITY |
3.1 With respect to the sharing of confidential and proprietary information and solicitation, CONSULTANT and Marcus & Millichap agree to the terms and conditions of this Paragraph 3. The provisions of this Paragraph 3 shall be binding upon CONSULTANT and its principals, employees, agents, officers, directors, and contractors (collectively Consultant Parties), and CONSULTANT shall indemnify, defend, and hold Marcus & Millichap harmless for any violations of such provisions by Consultant Parties.
3.2 Confidential Information is to be construed broadly to include, but not be limited to all information regarding conveyed under or in furtherance of the Services to be provided, including all financial, proprietary information, and other information relating to Marcus & Millichap or its affiliates, related entities, employees, officers, contractors, and salespersons, including without limitation, any information or material pertaining to products, formulae, specifications, designs, processes, plans, policies, procedures, employees, salespersons, work conditions, legal and regulatory affairs, assets, inventory, discoveries, trademarks, patents, packaging, distribution, sales, marketing, expenses, financial statements and data; business strategies, methodologies, and endeavors; software, hardware, APIs, and IS systems and technologies; customer, client, agent, salesperson, and supplier lists and procurement and retention; costs of goods, services, and relationships with third parties. Confidential Information also includes any notes, analyses, compilations, studies or other material or documents prepared by the recipient party which contain, reflect or are based, in whole or in part, on the Confidential Information. Confidential Information further includes this Agreement, and all discussions and communications. Information will not be considered Confidential Information if: (a) at the time of disclosure or thereafter, it is or becomes part of the public domain without the fault or action of either party; (b) a party can show through tangible records that it already knew the information before it was disclosed; or (c) a party obtained such information through legitimate, competitive means or from a third party without breach of an obligation of confidentiality that is known to the receiving party. The Parties understand and agree that all Confidential Information provided to the other is being provided for the sole purpose of facilitating this Agreement, that no Confidential Information would be provided otherwise, and that such Confidential Information may be used for no other purpose.
1
3.3 CONSULTANT understands that Marcus & Millichap is a publicly held company, which is subject to securities laws, and CONSULTANT and its representatives, agents, employees, directors, and officers cannot trade in Marcus & Millichap, Inc. stock on the basis of material non-public information.
4. | MISCELLANEOUS |
4.1. Assignment. Neither party may assign this Agreement, or any interest, right or obligation under it, either voluntarily or by operation of law, without the written consent of the other party.
4.2. Independent Contractor. Nothing contained in this Agreement or in the relationship of CONSULTANT and Marcus & Millichap shall be deemed to constitute an employee/employer relationship, partnership, joint venture, or any other relationship between CONSULTANT and Marcus & Millichap except for the independent contractor relationship described in this Agreement. CONSULTANTS authority is limited solely to performing the Services set forth herein in accordance with the terms of this Agreement. CONSULTANT does not have any authority to execute any agreements for or on behalf of Marcus & Millichap and is not granted any authority to assume or create any obligation or liability or to make any representation, covenant, agreement or warranty, express or implied, on Marcus & Millichaps behalf or to bind Marcus & Millichap in any manner.
4.3 Authority. Each party represents that it has the authority to enter and sign this Agreement. The individuals signing this Agreement represent that they are authorized signatories.
4.4 Survival. This Agreement is binding upon the parties hereto and their respective successors and assigns. The term CONSULTANT and Marcus & Millichap includes affiliates, successors, and assigns.
4.5 Law and Interpretation. This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to its conflicts of laws principles, with venue in Los Angeles Superior Court. This Agreement shall not be construed negatively against a party based on that partys drafting of the Agreement.
4.6 Severability. If any provision of this Agreement is held invalid, illegal or unenforceable for any reason, the provision shall be modified by the court to render it enforceable, and the remainder of the provisions will continue in full force and effect as if this Agreement had been executed with the invalid provision eliminated.
4.7 Entire Agreement. Nothing herein shall modify any rights or obligations of the parties hereto under any outstanding equity agreements, or any provisions governing Consultants post-employment obligations under the Employment Agreement dated March 31, 2016. This Agreement constitutes the entire agreement between CONSULTANT and Marcus & Millichap regarding the subject matter herein and supersedes all prior discussions. No modification of this Agreement will be effective unless made in writing and signed by both CONSULTANT and Marcus & Millichap.
CONSULTANT | Marcus & Millichap | |||||||
By: |
By: | |||||||
Name: |
Mitch LaBar | Name: | Hessam Nadji | |||||
Title: |
President |
|
Title: | President |
2
EXHIBIT A
SERVICES AND COMPENSATION
The following describes the scope of Services under the Agreement and related compensation. CONSULTANT shall provide the Services on the dates reasonably requested by Marcus & Millichap in writing.
DESCRIPTION OF SERVICE |
COMPENSATION | |
CONSULTANT shall provide Marcus & Millichap with the following Services:
Executive, operational, and project management consulting and advisement. Such services are to be performed by Mitchell R. LaBar as directed by Marcus & Millichaps Chief Executive Officer. CONSULTANT and Marcus & Millichap expect such Services to require approximately twenty-five (25) hours per month. |
Marcus & Millichap shall pay CONSULTANT a Fee as follows, which shall be the entire payment for the Services.
Fee: $10,000 per month. CONSULTANT shall provide Marcus & Millichap with a W-9 for such payments. |
Acknowledged and Agreed | ||||||||
Initials: |
Initials: | |||||||
CONSULTANT |
Marcus & Millichap | |||||||
Date: |
1/21/2020 | 11:00:14 PST |
Date: | 1/23/20 |
3
Exhibit 31.1
Certification of Chief Executive Officer of Marcus & Millichap, Inc. pursuant to
Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Hessam Nadji, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Marcus & Millichap, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 11, 2020 | /s/ Hessam Nadji | |||||
Hessam Nadji President and Chief Executive Officer |
Exhibit 31.2
Certification of Chief Financial Officer of Marcus & Millichap, Inc. pursuant to
Rule 13a-14(a) under the Exchange Act,
as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Martin E. Louie, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Marcus & Millichap, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 11, 2020 | /s/ Martin E. Louie | |||||
Martin E. Louie Chief Financial Officer |
Exhibit 32.1
Certifications of Chief Executive Officer and Chief Financial Officer of Marcus & Millichap, Inc. Pursuant to
Rule 13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the quarterly report of Marcus & Millichap, Inc. on Form 10-Q for the period ended March 31, 2020 as filed with the Securities and Exchange Commission on the date hereof (the Report), we, Hessam Nadji, President and Chief Executive Officer of the Company, and Martin E. Louie, Chief Financial Officer of the Company, certify, to the best of our knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: | May 11, 2020 | /s/ Hessam Nadji | ||||||
Hessam Nadji President and Chief Executive Officer (Principal Executive Officer) |
Date: | May 11, 2020 | /s/ Martin E. Louie | ||||||||
Martin E. Louie Chief Financial Officer (Principal Financial Officer) |
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Stock-Based Compensation Plans (Tables) |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Awards Under 2013 Omnibus Equity Incentive Plan | Activity under the 2013 Plan consisted of the following (dollars in thousands, except weighted average per share data):
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Schedule of Future Share Settlements |
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Stock-Based Compensation Expense | Components of stock-based compensation are included in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income and consisted of the following (in thousands):
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Operating Leases - Schedule of Operating Lease Cost, Included in Selling, General and Administrative Expense (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2020 |
Mar. 31, 2019 |
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Operating lease cost: | ||
Lease cost | $ 6,263 | $ 5,909 |
Variable lease cost | 1,396 | 1,206 |
Sublease income | (77) | (88) |
Total operating lease cost | $ 7,582 | $ 7,027 |
Accounting Policies and Recent Accounting Pronouncements |
3 Months Ended | ||
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Mar. 31, 2020 | |||
Accounting Policies [Abstract] | |||
Accounting Policies and Recent Accounting Pronouncements |
Accounting Policies The complete list of the Company’s accounting policies is included in the Company’s Annual Report on Form 10-K filed on March 2, 2020 with the SEC. The following are updated, or new accounting policies related to the adoption of the credit losses standard.Cash and Cash Equivalents The Company considers cash equivalents to include short-term, highly liquid investments with maturities of three months or less when purchased. Portions of the balance of cash and cash equivalents were held in financial institutions, various money market funds with fixed and floating net asset values and short-term commercial paper. Money market funds have floating net asset values and may be subject to gating or liquidity fees. The Company assesses short-term commercial papers for impairment in connection with investments in marketable debt securities, available-for-sale. The likelihood of realizing material losses from cash and cash equivalents, including the excess of cash balances over federally insured limits, is remote.Commissions Receivable, Net Commissions receivable, net consists of commissions earned on brokerage and financing transactions for which payment has not yet been received. The Company evaluates the need for an allowance for credit losses based on consideration of historical experience, current conditions and forecasts of future economic conditions. The majority of commissions receivable are settled within 10 days after the close of escrow. The allowance for credit losses for commissions receivable was not material as of March 31, 2020 and December 31, 2019. Advances and Loans, Net Advances and loans, net includes amounts advanced and loans due from the Company’s investment sales and financing professionals. In order to attract and retain highly skilled professionals, from time to time, the Company advances funds to its investment sales and financing professionals. The advances are typically in the form of forgivable loans that have terms that are generally between 5 and 10 years. The principal amount of a forgivable loan and accrued interest are forgiven over the term of the loan, so long as the investment sales and financing professionals continue to be a service provider with the Company, or upon achieving contractual performance criteria. Amounts forgiven are charged to selling, general and administrative expense at the time the amounts are forgiven. If the investment sales and financing professional’s relationship with the Company is terminated before the amount advanced is forgiven, the unforgiven amount becomes due and payable. The Company evaluates the need for an allowance for credit losses based on amounts advanced and expected forgiveness, in consideration of historical experience, current conditions and forecasts of future economic conditions. Estimated credit losses, net of any reversals, are charged to credit loss expense included in selling, general and administrative expense. Amounts are generally written off when amounts are determined to be no longer collectable. Accrued interest, when applicable, has historically been immaterial. The Company, from time to time, enters into various agreements with certain of its investment sales and financing professionals whereby these individuals receive loans. The notes receivable along with stated interest, are typically collected from future commissions or repaid based on the terms stipulated in the respective agreements that are generally between 1 and 7 years . The Company evaluates the need for an allowance for credit losses for the loans based on historical experience, current conditions and reasonable and forecasts of future economic conditions. Estimated credit losses, net of any reversals, are charged to credit loss expense included in selling, general and administrative expense. Amounts are generally written off when amounts are determined to be no longer collectable. Investments in Marketable Debt Securities, Available-for-Sale The Company maintains a portfolio of investments in a variety of fixed and variable rate debt securities, including U.S. treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities (“ABS”) and other. The Company considers its investments in marketable debt securities to be available-for-sale, and accordingly are recorded at their fair values. The Company determines the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along with accretion and amortization of purchase premiums and discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other (expense) income, net in the condensed consolidated statements of net and comprehensive income. The Company typically invests in highly-rated debt securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The policy requires substantially all investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss and matching long-term liabilities.The Company reviews quarterly its investment portfolio of all securities in an unrealized loss position to determine if an impairment charge or credit reserve is required. The Company excludes accrued interest from both the fair value and the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and measuring an impairment. An investment is impaired if the fair value is less than its amortized cost basis. Impairment relating to credit losses is recorded through a reduction in the amortized cost of the security or an allowance for credit losses and credit loss expense (included in selling, general and administrative expense), limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded as a credit loss is recorded through other comprehensive income (loss), net of applicable taxes. The Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables. The Company evaluates write-off of accrued interest receivable by the major security-type level at the time credit loss exists for the underlying security.Determining whether a credit loss exists requires a high degree of judgment and the Company considers both qualitative and quantitative factors in making its determination. The Company evaluates its intent to sell, or whether the Company will more likely than not be required to sell, the security before recovery of its amortized cost basis. For all securities in an unrealized loss position, the Company evaluates, among other items, the extent and length of time the fair market value of a security is less than its amortized cost, time to maturity, duration, seniority, the financial condition of the issuer including credit ratings, any changes thereto and relative default rates, leverage ratios, availability of liquidity to make principle and interest payments, performance indicators of the underlying assets, analyst reports and recommendations and changes in base and market interest rates. If qualitative and quantitative analysis is sufficient to conclude that an impairment related to credit losses does not exist, the Company typically does not perform further quantitative analysis to estimate the present value of cash flows expected to be collected from the debt security. Estimates of expected future cash flows are the Company’s best estimate based on past events, current conditions and reasonable and supportable economic forecasts. Concentrations of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and cash equivalents, investments in marketable debt securities, available-for-sale, security deposits (included under other assets, non-current) and commissions receivable, net. Cash and cash equivalents are placed with high-credit quality financial institutions and invested in high-credit quality money market funds and commercial paper. Concentrations of marketable debt securities, available-for-sale are limited by the approved investment policy.To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds that represent amounts recorded as cash and cash equivalents. The Company historically has not experienced any significant losses related to cash and cash equivalents. The Company derives its revenues from a broad range of real estate investors, owners, and users in the United States and Canada, none of which individually represents a significant concentration of credit risk. The Company maintains allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For the three months ended March 31, 2020 and 2019, no transaction represented 10% or more of total revenues. Further, while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk. During the three months ended March 31, 2020 and 2019, the Company’s Canadian operations represented approximately 2% and 1% of total revenues, respectively. During the three months ended March 31, 2020, one office represented 10% or more of total revenues. During the three months ended March 31, 2019, no office represented 10% or more of total revenues. Recent Accounting Pronouncements Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses 2016-13”). The new standard requires the use of an expected-loss model for financial assets measured at amortized cost and marketable debt securities, available-for sale, which requires that identified credit losses be presented as an allowance rather than as an impairment write-down. Reversals of credit losses (in situations in which the estimate of credit losses declines) is permitted in the reporting period that the change occurs. Previously, U.S. GAAP prohibited reflecting any reversals of impairment charges. The Company adopted the new standard on January 1, 2020 using the modified-retrospective transition method for assets measured at amortized cost other than marketable debt securities, available-for-sale, which was adopted using a prospective transition approach as required by the new standard. On the adoption date, the Company recorded a cumulative-effect adjustment related to an allowance for credit losses related to commissions receivable and advances and loans, net of tax in the amount of $33,000 with the offset to retained earnings as of the beginning of the period presented after adoption. The adoption of ASU 2016-13 did not have a material impact on the Company’s investment policy and impairment model for marketable debt securities, available-for-sale. The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and measuring an impairment.In August 2018, the FASB issued ASU No. 2018-15, Internal-Use Software (Subtopic 350-40)—Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license), by permitting a customer in a cloud computing arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The Company adopted the new standard effective January 1, 2020 using the prospective method. The adoption of ASU 2018-15 did not have a material effect on the Company’s condensed consolidated financial statements.Pending Adoption In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes 2019-12”). ASU 2019-12 is effective for reporting periods beginning after December 15, 2020 with early adoption permitted. For the Company, the new standard will be effective on January 1, 2021. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions including the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities related to outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes such as step-up in tax basis for goodwill and interim recognition of enactment of tax laws or rate changes. The Company is currently evaluating the impact of this new standard and does not expect ASU 2019-12 to have a material effect on its condensed consolidated financial statements.In March 2020, the FASB issued ASU No.
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting 2020-04”). ASU 2020-04 provides temporary optional exceptions to the guidance in U.S. GAAP on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. ASU 2020-04 is effective for all entities upon issuance and may be applied prospectively to contract modifications through December 31, 2022. The guidance applies to the Company’s Credit Agreement (see Note 15 – “Commitments and Contingencies”), which references LIBOR, and will generally allow it to account for and present a modification as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. As of March 31, 2020, the Company has not drawn funds from the credit facility. The Company continues to evaluate the impact of this new standard and does not expect ASU 2020-04 to have a material effect on its condensed consolidated financial statements. |
Related-Party Transactions |
3 Months Ended | ||
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Mar. 31, 2020 | |||
Related Party Transactions [Abstract] | |||
Related-Party Transactions |
Shared and Transition Services Certain services are provided to the Company under a Transition Services Agreement (“TSA”) between MMC and the Company. The TSA is intended to provide certain services until the Company acquires the services separately. Under the TSA, the Company incurred net costs during the three months ended March 31, 2020 and 2019 of $26,000 and $43,000, respectively. These amounts are included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income. Brokerage and Financing Services with the Subsidiaries of MMC MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. The Company performs certain brokerage and financing services related to transactions of the subsidiaries of MMC. For the three months ended March 31, 2020 and 2019, the Company earned real estate brokerage commissions and financing fees of $766,000 and $882,000, respectively, from transactions with subsidiaries of MMC related to these services. The Company incurred cost of services of $453,000 and $522,000, respectively, related to these revenues. Operating Lease with MMCC The Company has an operating lease with MMC for a single-story office building located in Palo Alto, California, which expires on May 31, 2022. The related operating lease cost was $333,000 for the three months ended March 31, 2020 and 2019, respectively. Operating lease cost is included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income. See Note 4 – “Operating Leases” for additional information. Accounts Payable and Other Liabilities with MMC As of March 31, 2020, and December 31, 2019, accounts payable and other liabilities with MMC totaling $86,000 and $88,000, respectively, remain unpaid and are included in accounts payable and other liabilities in the accompanying condensed consolidated balance sheets. Other The Company makes advances to non-executive employees from time-to-time. At March 31, 2020, and December 31, 2019, the aggregate principal amount for employee notes receivable was $598,000 and $388,000, respectively, which is included in other assets (current and non-current) in the accompanying condensed consolidated balance sheets. See Note 7 – “Selected Balance Sheet Data” for additional information.As of March 31, 2020, George M. Marcus, the Company’s founder and
Co-Chairman, beneficially owned approximately 40% of the Company’s issued and outstanding common stock, including shares owned by Phoenix Investments Holdings, LLC and the Marcus Family Foundation II. |
Investments in Marketable Debt Securities |
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Investments, Debt and Equity Securities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment in Marketable Debt Securities |
Amortized cost, allowance for credit losses, gross unrealized gains/losses in accumulated other comprehensive income (loss) and fair value of marketable debt securities,
available-for-sale, by type of security consisted of the following (in thousands):
The Company’s investments in
available-for-sale debt securities that have been in a continuous unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the following (in thousands):
Gross realized gains and gross realized losses from the sales of the Company’s
available-for-sale debt securities consisted of the following (in thousands):
The Company invests its excess cash in a diversified portfolio of fixed and variable rate debt securities to meet current and future cash flow needs. All investments are made in accordance with the Company’s approved investment policy. As of March 31, 2020, the portfolio had an average credit rating of AA+ and weighted term to final maturity of 1.8 years, with 54 securities in the portfolio with an unrealized loss aggregating $1.0 million, or 0.6% of amortized cost, and an average credit rating of A. As of March 31, 2020, the Company performed an impairment analysis and determined an allowance for credit losses was not required. The Company determined that it did not have an intent to sell and it was not more likely than not that the Company would be required to sell any security based on its current liquidity position, or to maintain compliance with its investment policy, specifically as it relates to minimum credit ratings. The Company evaluated the securities with an unrealized loss considering severity of loss, credit ratings, specific credit events during the period since acquisition, overall likelihood of default, market sector, potential impact from the current economic situation and a review of an issuer’s liquidity and financial strength, as needed. The Company concluded that it would receive all scheduled interest and principle payments. The Company, therefore, determined qualitatively that the unrealized loss was related to changes in interest rates and other market factors and that no allowance for credit losses was required. Amortized cost and fair value of marketable debt securities,
available-for-sale, by contractual maturity consisted of the following (in thousands, except weighted average data):
Actual maturities may differ from contractual maturities because certain issuers have the right to prepay certain obligations with or without prepayment penalties. |
CONDENSED CONSOLIDATED STATEMENTS OF NET AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Income Statement [Abstract] | ||
Marketable debt securities net change, tax | $ (168) | $ 288 |
Foreign currency translation gain (loss), tax | $ 0 | $ 0 |
Stock-Based Compensation Plans - Schedule of Future Share Settlements (Detail) - 2013 Omnibus Equity Incentive Plan [Member] - Deferred stock units [Member] |
Mar. 31, 2020
shares
|
---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
2021 | 60,373 |
2022 | 281,193 |
Total | 341,566 |
Selected Balance Sheet Data - Components of Deferred Compensation and Commissions (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items] | ||
SARs liability | $ 2,162 | $ 2,080 |
Commissions payable to investment sales and financing professionals | 21,159 | 40,235 |
Deferred compensation liability | 1,553 | 1,553 |
Other | 379 | 433 |
Deferred compensation and commissions, current | 25,253 | 44,301 |
SARs liability | 16,138 | 18,122 |
Commissions payable to investment sales and financing professionals | 6,391 | 20,818 |
Deferred compensation liability | 5,691 | 6,688 |
Other, non-current | 0 | 0 |
Deferred compensation and commissions, non-current | $ 28,220 | $ 45,628 |
Selected Balance Sheet Data - Schedule of Other Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Other Assets [Line Items] | ||
Other assets Current | $ 2,871 | $ 3,185 |
Other assets Non-Current | 4,365 | 4,347 |
Mortgage servicing rights [Member] | ||
Other Assets [Line Items] | ||
Other assets Current | 0 | 0 |
Other assets Non-Current | 1,950 | 2,002 |
Security deposits [Member] | ||
Other Assets [Line Items] | ||
Other assets Current | 0 | 0 |
Other assets Non-Current | 1,391 | 1,345 |
Employee Notes Receivable [Member] | ||
Other Assets [Line Items] | ||
Other assets Current | 166 | 65 |
Other assets Non-Current | 432 | 323 |
Customer trust accounts and other [Member] | ||
Other Assets [Line Items] | ||
Other assets Current | 2,705 | 3,120 |
Other assets Non-Current | $ 592 | $ 677 |
Acquisitions, Goodwill and Other Intangible Assets - Summary of Goodwill and Intangible Assets (Parenthetical) (Detail) |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
Business Combinations [Abstract] | ||
Weighted average amortization intangible assets | 5 years | 4 years 4 months 13 days |
Fair Value Measurements - Schedule of Reconciliation of Contingent Consideration Measured at Fair Value on Recurring Basis (Parenthetical) (Detail) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2020
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Reclassification to deferred consideration | $ 1,401 |
Notes Payable to Former Stockholders - Additional Information (Detail) - USD ($) $ in Millions |
Apr. 30, 2020 |
Mar. 31, 2020 |
---|---|---|
Debt Instrument [Line Items] | ||
Principal payments on notes payable to former stockholders | $ 6.6 | |
Restricted Stock - Notes Payable [Member] | ||
Debt Instrument [Line Items] | ||
Unsecured notes interest rate | 5.00% |
Operating Leases - Schedule of Supplemental Cash Flow Information and Noncash Activity Related to Operating Leases (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Operating cash flow information: | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ 5,223 | $ 4,842 |
Noncash activity: | ||
ROU assets obtained in exchange for operating lease liabilities | 3,109 | 3,227 |
Tenant improvements owned by lessor related to ROU assets | $ 317 | $ 1,306 |
Investments in Marketable Securities - Additional Information (Detail) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2020
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale, securities in unrealized loss positions, accumulated loss | $ 1,046 | $ 22 |
Allowance for credit losses | $ 0 | |
Weighted average contractual maturity | 1 year 9 months 18 days | 1 year 8 months 12 days |
Fitch, AA+ Rating [Member] | Moody's, Aaa Rating [Member] | Standard & Poor's, AA+ Rating [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Weighted average contractual maturity | 1 year 9 months 18 days | |
Fitch, A Rating [Member] | Moody's, A1 Rating [Member] | Weighted Average Credit A Rating [Member] | ||
Schedule of Available-for-sale Securities [Line Items] | ||
Available-for-sale, securities number of positions | 54 | |
Available-for-sale, securities in unrealized loss positions, accumulated loss | $ 1,000 | |
Percentage of amortized cost | 0.60% |
Acquisitions, Goodwill and Other Intangible Assets - Summary of Goodwill and Intangible Assets (Detail) - USD ($) $ in Thousands |
Mar. 31, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Goodwill, gross carrying amount | $ 19,062 | $ 15,072 | ||
Intangible assets, gross carrying amount | 14,851 | 9,050 | ||
Goodwill and intangible assets, gross carrying amount, total | 33,913 | 24,122 | ||
Goodwill, accumulated amortization | 0 | 0 | ||
Intangible assets, accumulated amortization | (2,659) | (1,810) | ||
Goodwill, net book value | 19,062 | 15,072 | $ 11,459 | $ 11,459 |
Intangible assets, net book value | 12,192 | 7,240 | ||
Goodwill and intangible assets, net book value | $ 31,254 | $ 22,312 |
Acquisitions, Goodwill and Other Intangible Assets (Tables) |
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Summary of Goodwill and Intangible Assets, Net | Goodwill and intangible assets, net consisted of the following (in thousands):
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Summary of Changes in Carrying Carrying Amount of Goodwill | The changes in the carrying amount of goodwill consisted of the following (in thousands):
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Schedule of Estimated Amortization Expense for Intangible Assets | Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the following (in thousands):
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Description of Business and Basis of Presentation (Policies) |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Description of Business | Description of Business Marcus & Millichap, Inc., (the “Company”, “Marcus & Millichap”, or “MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of March 31, 2020, MMI operates 82 offices in the United States and Canada through its wholly-owned subsidiaries, including the operations of Marcus & Millichap Capital Corporation. |
Reorganization and Initial Public Offering | Reorganization and Initial Public Offering MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) to
spin-off its majority owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”). Prior to the initial public offering (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result, MMREIS became a wholly-owned subsidiary of MMI. Thereafter, MMC distributed 80.0% of the shares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of indebtedness of MMC. MMI completed its IPO i n . |
Basis of Presentation | Basis of Presentation The financial information presented in the accompanying unaudited condensed consolidated financial statements, has been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form
10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed on March 2, 2020 with the SEC. The results of the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, for other interim periods or future years. |
Consolidation | Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Segment Reporting | Segment Reporting The Company follows U.S. GAAP for segment reporting, which requires reporting information on operating segments in interim and annual financial statements. Substantially all of the Company’s operations involve the delivery of commercial real estate services to our customers including real estate investment sales, financing (including mortgage servicing) and consulting and advisory services. Management makes operating decisions, assesses performance and allocates resources based on an ongoing review of these integrated operations, which constitute the Company’s only operating segment for financial reporting purposes. |
Reclassifications | Reclassifications Certain prior-period amounts in the condensed consolidated balance sheet and statement of cash flows, Note 7 – “Selected Balance Sheet Data” and Note 10 – “Fair Value Measurements” have been reclassified to conform to the current period presentation. These changes had no impact on the previously reported condensed consolidated results of operations. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers cash equivalents to include short-term, highly liquid investments with maturities of three months or less when purchased. Portions of the balance of cash and cash equivalents were held in financial institutions, various money market funds with fixed and floating net asset values and short-term commercial paper. Money market funds have floating net asset values and may be subject to gating or liquidity fees. The Company assesses short-term commercial papers for impairment in connection with investments in marketable debt securities,
available-for-sale. The likelihood of realizing material losses from cash and cash equivalents, including the excess of cash balances over federally insured limits, is remote. |
Commissions Receivable, Net | Commissions Receivable, Net Commissions receivable, net consists of commissions earned on brokerage and financing transactions for which payment has not yet been received. The Company evaluates the need for an allowance for credit losses based on consideration of historical experience, current conditions and forecasts of future economic conditions. The majority of commissions receivable are settled within 10 days after the close of escrow. The allowance for credit losses for commissions receivable was not material as of March 31, 2020 and December 31, 2019. |
Advances and Loans, Net | Advances and Loans, Net Advances and loans, net includes amounts advanced and loans due from the Company’s investment sales and financing professionals. In order to attract and retain highly skilled professionals, from time to time, the Company advances funds to its investment sales and financing professionals. The advances are typically in the form of forgivable loans that have terms that are generally between 5 and 10 years. The principal amount of a forgivable loan and accrued interest are forgiven over the term of the loan, so long as the investment sales and financing professionals continue to be a service provider with the Company, or upon achieving contractual performance criteria. Amounts forgiven are charged to selling, general and administrative expense at the time the amounts are forgiven. If the investment sales and financing professional’s relationship with the Company is terminated before the amount advanced is forgiven, the unforgiven amount becomes due and payable. The Company evaluates the need for an allowance for credit losses based on amounts advanced and expected forgiveness, in consideration of historical experience, current conditions and forecasts of future economic conditions. Estimated credit losses, net of any reversals, are charged to credit loss expense included in selling, general and administrative expense. Amounts are generally written off when amounts are determined to be no longer collectable. Accrued interest, when applicable, has historically been immaterial. The Company, from time to time, enters into various agreements with certain of its investment sales and financing professionals whereby these individuals receive loans. The notes receivable along with stated interest, are typically collected from future commissions or repaid based on the terms stipulated in the respective agreements that are generally between 1 and 7 years . The Company evaluates the need for an allowance for credit losses for the loans based on historical experience, current conditions and reasonable and forecasts of future economic conditions. Estimated credit losses, net of any reversals, are charged to credit loss expense included in selling, general and administrative expense. Amounts are generally written off when amounts are determined to be no longer collectable. |
Investments in Marketable Securities, Available-for-Sale | Investments in Marketable Debt Securities, Available-for-Sale The Company maintains a portfolio of investments in a variety of fixed and variable rate debt securities, including U.S. treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities (“ABS”) and other. The Company considers its investments in marketable debt securities to be available-for-sale, and accordingly are recorded at their fair values. The Company determines the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along with accretion and amortization of purchase premiums and discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other (expense) income, net in the condensed consolidated statements of net and comprehensive income. The Company typically invests in highly-rated debt securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The policy requires substantially all investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss and matching long-term liabilities.The Company reviews quarterly its investment portfolio of all securities in an unrealized loss position to determine if an impairment charge or credit reserve is required. The Company excludes accrued interest from both the fair value and the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and measuring an impairment. An investment is impaired if the fair value is less than its amortized cost basis. Impairment relating to credit losses is recorded through a reduction in the amortized cost of the security or an allowance for credit losses and credit loss expense (included in selling, general and administrative expense), limited by the amount that the fair value is less than the amortized cost basis. Impairment that has not been recorded as a credit loss is recorded through other comprehensive income (loss), net of applicable taxes. The Company made an accounting policy election to not measure an allowance for credit losses for accrued interest receivables. The Company evaluates write-off of accrued interest receivable by the major security-type level at the time credit loss exists for the underlying security.Determining whether a credit loss exists requires a high degree of judgment and the Company considers both qualitative and quantitative factors in making its determination. The Company evaluates its intent to sell, or whether the Company will more likely than not be required to sell, the security before recovery of its amortized cost basis. For all securities in an unrealized loss position, the Company evaluates, among other items, the extent and length of time the fair market value of a security is less than its amortized cost, time to maturity, duration, seniority, the financial condition of the issuer including credit ratings, any changes thereto and relative default rates, leverage ratios, availability of liquidity to make principle and interest payments, performance indicators of the underlying assets, analyst reports and recommendations and changes in base and market interest rates. If qualitative and quantitative analysis is sufficient to conclude that an impairment related to credit losses does not exist, the Company typically does not perform further quantitative analysis to estimate the present value of cash flows expected to be collected from the debt security. Estimates of expected future cash flows are the Company’s best estimate based on past events, current conditions and reasonable and supportable economic forecasts. |
Concentration of Credit Risk | Concentrations of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and cash equivalents, investments in marketable debt securities, available-for-sale, security deposits (included under other assets, non-current) and commissions receivable, net. Cash and cash equivalents are placed with high-credit quality financial institutions and invested in high-credit quality money market funds and commercial paper. Concentrations of marketable debt securities, available-for-sale are limited by the approved investment policy.To reduce its credit risk, the Company monitors the credit standing of the financial institutions money market funds that represent amounts recorded as cash and cash equivalents. The Company historically has not experienced any significant losses related to cash and cash equivalents. The Company derives its revenues from a broad range of real estate investors, owners, and users in the United States and Canada, none of which individually represents a significant concentration of credit risk. The Company maintains allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For the three months ended March 31, 2020 and 2019, no transaction represented 10% or more of total revenues. Further, while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk. During the three months ended March 31, 2020 and 2019, the Company’s Canadian operations represented approximately 2% and 1% of total revenues, respectively. During the three months ended March 31, 2020, one office represented 10% or more of total revenues. During the three months ended March 31, 2019, no office represented 10% or more of total revenues. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Adopted In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments—Credit Losses 2016-13”). The new standard requires the use of an expected-loss model for financial assets measured at amortized cost and marketable debt securities, available-for sale, which requires that identified credit losses be presented as an allowance rather than as an impairment write-down. Reversals of credit losses (in situations in which the estimate of credit losses declines) is permitted in the reporting period that the change occurs. Previously, U.S. GAAP prohibited reflecting any reversals of impairment charges. The Company adopted the new standard on January 1, 2020 using the modified-retrospective transition method for assets measured at amortized cost other than marketable debt securities, available-for-sale, which was adopted using a prospective transition approach as required by the new standard. On the adoption date, the Company recorded a cumulative-effect adjustment related to an allowance for credit losses related to commissions receivable and advances and loans, net of tax in the amount of $33,000 with the offset to retained earnings as of the beginning of the period presented after adoption. The adoption of ASU 2016-13 did not have a material impact on the Company’s investment policy and impairment model for marketable debt securities, available-for-sale. The Company elected the practical expedient to exclude accrued interest from both the fair value and the amortized cost basis of marketable debt securities, available-for-sale, for the purposes of identifying and measuring an impairment.In August 2018, the FASB issued ASU No. 2018-15, Internal-Use Software (Subtopic 350-40)—Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract 2018-15”). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license), by permitting a customer in a cloud computing arrangement that is a service contract to capitalize certain implementation costs as if the arrangement was an internal-use software project. The Company adopted the new standard effective January 1, 2020 using the prospective method. The adoption of ASU 2018-15 did not have a material effect on the Company’s condensed consolidated financial statements.Pending Adoption In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes 2019-12”). ASU 2019-12 is effective for reporting periods beginning after December 15, 2020 with early adoption permitted. For the Company, the new standard will be effective on January 1, 2021. ASU 2019-12 simplifies the accounting for income taxes by eliminating certain exceptions including the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities related to outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes such as step-up in tax basis for goodwill and interim recognition of enactment of tax laws or rate changes. The Company is currently evaluating the impact of this new standard and does not expect ASU 2019-12 to have a material effect on its condensed consolidated financial statements.In March 2020, the FASB issued ASU No.
2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting 2020-04”). ASU 2020-04 provides temporary optional exceptions to the guidance in U.S. GAAP on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate. ASU 2020-04 is effective for all entities upon issuance and may be applied prospectively to contract modifications through December 31, 2022. The guidance applies to the Company’s Credit Agreement (see Note 15 – “Commitments and Contingencies”), which references LIBOR, and will generally allow it to account for and present a modification as an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. As of March 31, 2020, the Company has not drawn funds from the credit facility. The Company continues to evaluate the impact of this new standard and does not expect ASU 2020-04 to have a material effect on its condensed consolidated financial statements. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
The Company’s effective tax rate for the three months ended March 31, 2020 and 2019 was 31.2% and 26.6%, respectively. The Company provides for the effects of income taxes in interim financial statements based on the Company’s estimate of its annual effective tax rate for the full year, which is based on forecasted income by jurisdiction where the Company operates, adjusted for the tax effects of items that relate discretely to the period, if any. The provision for income taxes differs from the amount computed by applying the U.S. federal statutory rate to income before provision for income taxes and consisted of the following (dollars in thousands):
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Related-Party Transactions - Additional Information (Detail) - USD ($) |
3 Months Ended | ||
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Mar. 31, 2020 |
Mar. 31, 2019 |
Dec. 31, 2019 |
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Related Party Transaction [Line Items] | |||
Operating lease cost | $ 6,263,000 | $ 5,909,000 | |
Aggregate principal amount for employee notes receivable | 598,000 | $ 388,000 | |
MMC [Member] | |||
Related Party Transaction [Line Items] | |||
Real estate brokerage commissions and financing fees from transactions with subsidiaries of Marcus & Millichap Company | 766,000 | 882,000 | |
Commission expenses for transactions with subsidiaries of Marcus & Millichap Company | 453,000 | 522,000 | |
Operating lease cost | 333,000 | 333,000 | |
Accounts payable and other liabilities - related party | 86,000 | $ 88,000 | |
MMC [Member] | Transition Services Agreement [Member] | |||
Related Party Transaction [Line Items] | |||
Selling, general and administrative expense | $ 26,000 | $ 43,000 | |
George M. Marcus [Member] | |||
Related Party Transaction [Line Items] | |||
Beneficial ownership percentage | 40.00% |
Acquisitions, Goodwill and Other Intangible Assets - Additional Information (Detail) |
3 Months Ended |
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Mar. 31, 2020
Segment
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Business Combinations [Abstract] | |
Number of reporting units | 1 |
Operating Leases - Maturities of lease liabilities (Detail) $ in Thousands |
Mar. 31, 2020
USD ($)
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Lessee, Operating Lease, Liability, Payment, Due [Abstract] | |
Remainder of 2020 | $ 15,952 |
2021 | 19,294 |
2022 | 15,342 |
2023 | 12,065 |
2024 | 9,887 |
Thereafter | 14,838 |
Total future minimum lease payments | 87,378 |
Less imputed interest | (7,986) |
Present value of operating lease liabilities | $ 79,392 |
Property and Equipment, Net (Tables) |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment, Net | Property and equipment, net consisted of the following (in thousands):
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Earnings per Share |
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Earnings per Share |
Basic and diluted earnings per share for the three months ended March 31, 2020 and 2019, respectively consisted of the following (in thousands, except per share data):
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Selected Balance Sheet Data (Tables) |
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Schedule of Allowance for Credit Losses for Advances and Loans | Allowance for credit losses for advances and loans consisted of the following (in thousands):
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Schedule of Other Assets | Other assets consisted of the following (in thousands):
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Summary of Net Change in Carrying Value of MSRs | The net change in the carrying value of MSRs consisted of the following (in thousands):
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Scedule of Deferred Compensation and Commissions | Deferred compensation and commissions consisted of the following (in thousands):
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Summary of Net Change in Carrying Value of Assets Held in Rabbi Trust and Deferred Compensation Liability |
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Summary of Other Liabilities | Other liabilities consisted of the following (in thousands):
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Operating Leases - Additional Information (Detail) - USD ($) $ in Millions |
Mar. 31, 2020 |
Dec. 31, 2019 |
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Leases [Abstract] | ||
Operating lease right-of-use assets | $ 114.5 | $ 111.1 |
Operating lease right-of-use assets, accumulated amortization | $ 26.0 | $ 20.6 |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and liabilities at Fair Value on Recurring Basis | Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):
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Schedule of Reconciliation of Contingent Consideration Measured at Fair Value on Recurring Basis | Assuming the achievement of the applicable performance criteria and/or service and time requirements, the Company anticipates these earn-out payments will be made over the next to -year period. Changes in fair value are included in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income. A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):
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Fair Value Liabilities Measured On Recurring Basis Valuation Techniques |
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Fair Value Liabilities Measured On NonRecurring Basis Valuation Techniques |
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Description of Business and Basis of Presentation - Additional Information (Detail) |
3 Months Ended |
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Mar. 31, 2020
Office
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Class of Stock [Line Items] | |
Number of offices in the United States and Canada | 82 |
Formation date | 2013-06 |
Percentage of common stock distributed | 80.00% |
IPO MMI [Member] | |
Class of Stock [Line Items] | |
IPO completion date | Nov. 05, 2013 |
Description of Business and Basis of Presentation |
3 Months Ended | ||
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Mar. 31, 2020 | |||
Accounting Policies [Abstract] | |||
Description of Business and Basis of Presentation |
Description of Business Marcus & Millichap, Inc., (the “Company”, “Marcus & Millichap”, or “MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of March 31, 2020, MMI operates 82 offices in the United States and Canada through its wholly-owned subsidiaries, including the operations of Marcus & Millichap Capital Corporation. Reorganization and Initial Public Offering MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) to spin-off its majority owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”). Prior to the initial public offering (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result, MMREIS became a wholly-owned subsidiary of MMI. Thereafter, MMC distributed 80.0% of the shares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of indebtedness of MMC. MMI completed its IPO i n .Basis of Presentation The financial information presented in the accompanying unaudited condensed consolidated financial statements, has been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the condensed consolidated financial position, results of operations and cash flows for the periods presented. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed on March 2, 2020 with the SEC. The results of the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020, for other interim periods or future years.Consolidation The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Segment Reporting The Company follows U.S. GAAP for segment reporting, which requires reporting information on operating segments in interim and annual financial statements. Substantially all of the Company’s operations involve the delivery of commercial real estate services to our customers including real estate investment sales, financing (including mortgage servicing) and consulting and advisory services. Management makes operating decisions, assesses performance and allocates resources based on an ongoing review of these integrated operations, which constitute the Company’s only operating segment for financial reporting purposes. Reclassifications Certain prior-period amounts in the condensed consolidated balance sheet and statement of cash flows, Note 7 – “Selected Balance Sheet Data” and Note 10 – “Fair Value Measurements” have been reclassified to conform to the current period presentation. These changes had no impact on the previously reported condensed consolidated results of operations. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements |
U.S. GAAP defines the fair value of a financial instrument as the amount that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of fair value and the supporting methodologies and assumptions. The Company uses various pricing sources and third parties to provide and validate the values utilized. The degree of judgment used in measuring the fair value of financial instruments is generally inversely correlated with the level of observable valuation inputs. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment. Assets recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of the three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:
Recurring Fair Value Measurements The Company values its investments including commercial paper and floating net asset value money market funds recorded in cash and cash equivalents, investments in marketable debt securities, available-for-sale, assets held in the rabbi trust, deferred compensation liability and contingent consideration at fair value on a recurring basis. Fair values for investments included in cash and cash equivalents and marketable debt securities, available-for-sale were determined for each individual security in the investment portfolio and all these securities are Level 1 or 2 measurements as appropriate. Fair values for assets held in the rabbi trust and related deferred compensation liability were determined based on the cash surrender value of the company owned variable life insurance policies and underlying investments in the trust, and are Level 2 and Level 1 measurements, respectively. Contingent consideration in connection with acquisitions, is carried at fair value and determined on a contract-by-contract basis, calculated using a probability weighted discounted cash flow model based on the probability of achieving EBITDA and other performance and service requirements, and is a Level 3 measurement. During the three months ended March 31, 2020, the Company considered the economic impact of COVID-19 and current and future interest rates in its determination of fair value for the contingent consideration. The Company is uncertain to the extent of the volatility in the unobservable inputs in the foreseeable future. Assets and liabilities carried at fair value on a recurring basis consisted of the following (in thousands):
There were no transfers in or out of Level 3 during the three months ended March 31, 2020 and 2019. As of March 31, 2020 and December 31, 2019, contingent consideration has a maximum undiscounted payment of $7.0 million and $7.3 million, respectively. Assuming the achievement of the applicable performance criteria and/or service and time requirements, the Company anticipates these
earn-out payments will be made over the next to -year period. Changes in fair value are included in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income. A reconciliation of contingent consideration measured at fair value on a recurring basis consisted of the following (in thousands):
Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial liabilities measured at fair value on a recurring basis consisted of the following (dollars in thousands):
Nonrecurring Fair Value Measurements In accordance with U.S. GAAP, from time to time, the Company measures certain assets at fair value on a nonrecurring basis. The Company reviews the carrying value of MSRs, intangibles, goodwill and other assets for indications of impairment at least annually . When indications of potential impairment are identified, the Company may be required to determine the fair value of those assets and record an adjustment for the carrying amount in excess of the fair value determined. Any fair value determination would be based on valuation approaches, which are appropriate under the circumstances and utilize Level 2 and Level 3 measurements as required. MSRs are recorded at fair value upon acquisition of a servicing contract. The Company has elected the amortization method for the subsequent measurement of MSRs. MSRs are carried at the lower of amortized cost or fair value. MSRs are a Level 3 measurement. The Company’s MSRs do not trade in an active, open market with readily observable prices. The estimated fair value of the Company’s MSRs were developed using a discounted cash flow model that calculates the present value of estimated future net servicing income. The model considers contractual provisions and assumptions of market participants including specified servicing fees, prepayment assumptions, delinquency rates, late charges, other ancillary revenue, costs to service and other economic factors. The Company periodically reassesses and adjusts, when necessary, the underlying inputs and assumptions used to reflect observable market conditions and assumptions that a market participant would consider in valuing an MSR asset. Management made revisions to the assumptions used in the determination of fair value for MSRs considering the economic impact of the COVID-19 pandemic on default rates related to the specific types and underlying collateral of the various serviced loans, interest rates, refinance rates and current government and private sector responses to the pandemic. The fair value of the MSRs approximated the carrying value at March 31, 2020 and December 31, 2019 after consideration of the revisions to the various assumptions. See Note 7 – “Selected Balance Sheet Data – Other Assets – MSRs” for additional information. As market conditions change, the Company will re-evaluate assumptions used in the determination of fair value for MSRs and is uncertain to the extent of the volatility in the unobservable inputs in the foreseeable future.Quantitative information about the valuation technique and significant unobservable inputs used in the valuation of the Company’s Level 3 financial assets measured at fair value on a nonrecurring basis consisted of the following (dollars in thousands):
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Acquisitions, Goodwill and Other Intangible Assets |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions, Goodwill and Other Intangible Assets |
Through acquisitions, the Company expanded its network of its real estate sales professionals and provided further diversification to its real estate brokerage services. Acquisitions are accounted for as a business combination, and the results are included in the condensed consolidated financial statements beginning on the acquisition date. The aggregate consideration generally includes: (i) cash paid at closing and (ii) the fair value of contingent and deferred consideration using a probability-weighted, discounted cash flow estimate on achieving certain financial metrics or service and time requirements. Contingent and deferred consideration are included in accounts payable and other liabilities and other liabilities captions in the condensed consolidated balance sheets. The goodwill recorded as part of the acquisitions primarily arises from the acquired assembled workforce and commercial sales platform. The Company expects all of the goodwill to be tax deductible, with the tax-deductible amount of goodwill related to the contingent and deferred consideration to be determined once the cash payments are made to settle any contingent and deferred consideration. The goodwill resulting from acquisitions is allocated to the Company’s one reporting unit. Goodwill and intangible assets, net consisted of the following (in thousands):
The changes in the carrying amount of goodwill consisted of the following (in thousands):
Estimated amortization expense for intangible assets by year for the next five years and thereafter consisted of the following (in thousands):
The Company evaluates goodwill and intangible assets for impairment annually in the fourth quarter. In addition to the annual impairment evaluation, the Company evaluates at least quarterly whether events or circumstances have occurred in the period subsequent to the annual impairment testing which indicate that it is more likely than not an impairment loss has occurred. As of March 31, 2020, the Company considered the COVID-19 pandemic as a triggering event and evaluated its goodwill and intangibleassets for impairment testing. The Company considered the impact from the COVID-19 induced economic slowdown and current projected recovery timeframes and their impact on goodwill and intangible assets. The Company concluded that as of March 31, 2020, there was no impairment of its goodwill and intangible assets. |
Earnings per Share - Computation of Basic and Diluted Earnings Per Share, Including Antidilutive Securities Excluded from Computation of Earnings Per Share (Parenthetical) (Detail) - Restricted Stock Awards [Member] - 2013 Omnibus Equity Incentive Plan [Member] |
3 Months Ended |
---|---|
Mar. 31, 2020 | |
Minimum [Member] | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Vesting period | 1 year |
Maximum [Member] | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Vesting period | 3 years |
Stock-Based Compensation Plans - Amendments to Restricted Stock and SARs - Additional Information (Detail) - Deferred stock units [Member] |
Oct. 30, 2013 |
---|---|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
DSU settlement to common stock percentage | 20.00% |
Employee termination age | 67 years |
Percentage of shares of deferred stock units settled in the event of death or termination after reaching age 67 | 100.00% |
Selected Balance Sheet Data - Schedule of Other Assets (Parenthetical) (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Other Assets [Line Items] | ||
Reduction of accrued bonuses and other employee related expenses in settlement of employee notes receivable | $ 0 | $ 60 |
Acquisitions, Goodwill and Other Intangible Assets - Summary of Net Change in Carrying Value of Goodwill (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Goodwill [Roll Forward] | ||
Beginning balance | $ 15,072 | $ 11,459 |
Additions from acquisitions | 3,990 | 0 |
Impairment losses | 0 | 0 |
Ending balance | $ 19,062 | $ 11,459 |
Selected Balance Sheet Data - Summary of Net Change in Carrying Value of Assets Held in Rabbi Trust and Deferred Compensation Liability (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Balance Sheet Related Disclosures [Abstract] | ||
Increase (decrease) in the carrying value of the assets held in the rabbi trust | $ (1,388) | $ 703 |
Increase (decrease) in the net carrying value of the deferred compensation obligation | $ (1,273) | $ 685 |
Operating Leases - Schedule of Other Information Related to Operating Leases (Detail) |
Mar. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases, Operating [Abstract] | ||
Weighted average remaining operating lease term | 5 years 14 days | 5 years 14 days |
Weighted average discount rate | 3.70% | 3.80% |
Investments in Marketable Securities - Gross Realized Gains and Losses from Sale of Available for Sale Securities (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Investments, Debt and Equity Securities [Abstract] | ||
Gross realized gains | $ 53 | $ 35 |
Gross realized losses | $ 0 | $ (47) |
Fair Value Measurements - Additional Information (Detail) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020
USD ($)
|
Mar. 31, 2019
USD ($)
|
Dec. 31, 2019
USD ($)
|
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Fair value, assets, level 3 transfers, amount | $ 0 | $ 0 | |
Contingent consideration, maximum undiscounted payment | $ 7,000,000.0 | $ 7,300,000 | |
Measurement Input, Constant Prepayment Rate [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Servicing Asset, Measurement Input | 0.1 | 0.1 | |
Recurring [Member] | Maximum [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Earn-out period for contingent consideration | 7 years | ||
Recurring [Member] | Minimum [Member] | |||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||
Earn-out period for contingent consideration | 1 year |
Fair Value Measurements - Schedule of Reconciliation of Contingent Consideration Measured at Fair Value on Recurring Basis (Detail) - Contingent Consideration [Member] - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Mar. 31, 2019 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Beginning balance | $ 3,387 | $ 2,875 |
Contingent consideration in connection with acquisitions | 0 | 0 |
Change in fair value of contingent consideration | (225) | 48 |
Payments of contingent consideration | 0 | 0 |
Ending balance | $ 3,162 | $ 2,923 |
Selected Balance Sheet Data - Schedule of Other Liabilities (Parenthetical) (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2020 |
Dec. 31, 2019 |
|
Other liabilities [Line Items] | ||
Reclassification to deferred consideration | $ 1,401 | |
Reclassification to deferred consideration, current portion | 560 | |
Reclassification to deferred consideration, noncurrent portion | 841 | |
Accounts payable and other liabilities [Member] | ||
Other liabilities [Line Items] | ||
Deferred consideration current | 1,783 | $ 560 |
Contingent Consideration | $ 664 | $ 678 |
Investments in Marketable Securities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments, Debt and Equity Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amortized Cost and Fair Value of Marketable Securities, Available-for-Sale, by Type of Security | Amortized cost, allowance for credit losses, gross unrealized gains/losses in accumulated other comprehensive income (loss) and fair value of marketable debt securities,
available-for-sale, by type of security consisted of the following (in thousands):
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Available-for-Sale Debt Securities in a Continuous Unrealized Loss Position | The Company’s investments in
available-for-sale debt securities that have been in a continuous unrealized loss position, for which an allowance for credit losses has not been recorded, by type of security consisted of the following (in thousands):
|
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Gross Realized Gains and Losses from Sale of Available for Sale Securities | Gross realized gains and gross realized losses from the sales of the Company’s
available-for-sale debt securities consisted of the following (in thousands):
|
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Schedule of Amortized Cost and Fair Value of Marketable Securities, Available-for-Sale, by Contractual Maturity | Amortized cost and fair value of marketable debt securities,
available-for-sale, by contractual maturity consisted of the following (in thousands, except weighted average data):
|
Subsequent Events |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2020 | |||
Subsequent Events [Abstract] | |||
Subsequent Events |
In April 2020, the Company completed the acquisition of a commercial real estate finance intermediary specializing in arranging debt and equity for commercial real estate on behalf of developers, investors and owners in the United States. In connection with agreements in principal with investment sales and financing professionals and business acquisitions, the Company entered into commitments through the date these condensed consolidated financial statements were issued, aggregating $17.9 million. Such commitments to investment sales and financing professionals may be subject to various conditions. During the second quarter of 2020, the Company’s management approved, committed to and initiated a plan to reduce its controllable expenses, including layoffs, furloughs and a reduction of salaries of senior executives, management and key Company personnel. To date, the plan included a reduction of the Company’s employee workforce of approximately 20%. The Company does not expect to incur material one-time terminations benefits related to this plan. |
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