Greetings and welcome to Marcus & Millichap's First Quarter 2025 Earnings Conference Call. As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Jacques Cornet. Thank you, you may begin.

Thank you, operator. Good morning and welcome to Marcus and Millichap's first quarter 2025 earnings conference call. With us today are President and Chief Executive Officer, Hessam Nadji, and Chief Financial Officer, Steve DeGennaro. Before I turn the call over to management, please remember that our prepared remarks and the responses to questions may contain forward-looking statements. Words such as may, will, expect, believe, estimate, anticipate, goal, and variations of these words and similar expressions are intended to identify forward-looking statements. Actual results can differ materially from those implied by such forward-looking statements due to a variety of factors, including but not limited to general economic conditions and commercial real estate market conditions, the company's ability to retain and attract transactional professionals, the company's ability to retain its business philosophy and partnership culture amid competitive pressures, the company's ability to integrate new agents and sustain its growth, and other factors discussed in the company's public filings, including its annual report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2025. Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events, or otherwise. In addition, certain financial information presented on this call represents non-GAAP financial measures. The company's earnings release, which was issued this morning and is available on the company's website, represents a reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors. This conference is being webcast. The webcast link is available on the investor relations section of the company's website at www.marcusmillichap.com, along with the slide presentation you may reference during the prepared remarks. With that, it is my pleasure to turn the call over to CEO, Hessam Nadji.

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

Thank you, Hessam. As mentioned, total revenue for the first quarter was up 12% to $145 million compared to $129 million in the prior year quarter. Breaking down revenue by segment, real estate brokerage commission for the first quarter accounted for 85% of total revenue or $124 million, an increase of 13% year-over-year. The increase was attributable to 18% growth in transaction volume of $6.7 billion across 1,175 transactions. Volume growth was partially offset by a 4% decline in the average commission rate. Average transaction size was $5.7 million, up from $5.1 million a year ago, reflecting a modest shift in transaction mix to middle and larger transactions with institutional investors, which also accounts for the change in average commission rate. Within brokerage, our core private client business accounted for 63% of revenue or $78 million. This compares to 67% and $73 million last year. Private client transactions were up 4% in dollar volume and 3% in number of transactions. Our middle market and larger transaction segments together accounted for 33% of brokerage revenue or $41 million compared to 29% and $32 million last year. Middle market and larger transactions combined were up 30% in dollar volume and 33% in number of transactions as institutional investors were notably more active during the quarter. Revenue in our financing business, which includes MMCC, grew 26% to $18 million in the first quarter compared to $14 million last year. The growth was attributable to both pricing and volume, driven by a 16% increase in volume and a 12% increase in the average commission rate. Fees from refinancing accounted for 50% of loan originations in the quarter compared to 51% last year. Overall, we closed 337 financing transactions totaling $1.9 billion in volume, up 44% and 16% year-over-year respectively. Other revenue, comprised primarily of leasing, consulting, and advisory fees, was $3.3 million in the first quarter compared to $5 million last year. Now looking at expenses, total operating expense for the quarter was $163 million compared to $149 million a year ago. Cost of services was $88 million for the quarter or 60.9% of revenue, an increase of 140 basis points over the same period last year due to revenue growth and production mix by agent tenure. SG&A during the quarter was $72 million compared to $69 million a year ago, a modest increase that reflects higher agent marketing support tied to last year's revenue and expenses related to talent acquisition and retention offset by continued expense management. For the first quarter, we reported a net loss of $4.4 million or $0.11 per share, a meaningful improvement compared with a net loss of $10 million and $0.26 per share in the prior year. We continue to believe the investments we've made in talent acquisition, our technology platform, and support services will be accretive in the eventual market recovery. Adjusted EBITDA was negative $8.7 million compared to negative $10.1 million in the prior year. The effective tax rate for the quarter was 68%. As we've discussed on prior calls, the tax rate can fluctuate quarter-to-quarter depending on the relationship between expenses that are non-deductible for tax purposes to projected pretax income for the full year. Therefore, the future tax rate can be unpredictable given the market uncertainty. Turning to the balance sheet, we continue to be well capitalized with no debt and $330 million in cash, cash equivalents, and marketable securities, a decrease from the year-end balance of $394 million. The decrease is typical for a first quarter and reflects seasonal outlays for current and deferred agent commissions, performance-based management compensation, and investments in talent. As a reminder, our deferred earnings program has a three-year vesting period. Therefore, the deferred commission payout in the quarter was larger than usual given the record revenue performance in 2022. During the quarter, we declared a semiannual dividend of $0.25 per share or approximately $10 million which was paid in the first week of April. In addition, since the start of the year, we opportunistically repurchased nearly 174,000 shares under our share repurchase program for $5.4 million. We now have $66 million remaining on the current share repurchase authorization. Over the past three years, we have returned a total of $187 million of capital to shareholders through a combination of dividends and share repurchases. We remain committed to a balanced, long-term capital allocation strategy which includes investing in technology, recruiting and retaining the best-in-class producers, strategic acquisitions, and returning capital to shareholders. Turning to the outlook for next quarter, while several metrics and leading indicators show signs of improvement, others reflect investor caution related to lack of clarity on tariffs, interest rates, and inflation. That said, we anticipate a continued recovery in transactional activity for the year, albeit at a moderated pace in the near term until there is greater clarity on trade and tax policies. For the second quarter, cost of services as a percentage of revenue should follow the historical pattern and be sequentially higher than the first quarter. SG&A is expected to be largely in line with the first quarter, reflecting the benefit of ongoing cost actions. As always, we remain hyper-focused on continuous client engagement with proactive outreach to help identify unique opportunities and provide thoughtful advice on how to navigate an otherwise choppy environment. Internally, the ongoing investments we are making in systems, talent, and market coverage position us well to capture growth as market conditions improve.

Thank you. We will now begin the question and answer session. The first question comes from Young Ku with Wells Fargo. Please go ahead.

Yes, great. Thank you. Good morning out there. Thank you for your commentary on kind of macro-level thoughts. I was wondering if you can provide some additional color on what your clients are talking about or thinking about by the different product types and whether you're seeing any different thought process for each different ones?

Sure. This is Hessam. Good morning. I would say that there hasn't been much shift in the sentiment toward different property types in the first quarter. We continue to see a lot of enthusiasm for retail as retail has made a significant comeback structurally from years of very limited new construction and the repositioning of a lot of properties post e-commerce; both multi-tenant and single-tenant demand showed improvement in the first quarter. Multifamily is bifurcated. The private client smaller multifamily, as I mentioned in my formal remarks, continues to be hampered by bid-ask spreads and very tight underwriting by banks and credit unions while larger multifamily is really garnering more institutional capital and is transacting much more because of the fact that capital has come back into the market, and the higher price points, 20 million plus, 25 million plus range, have seen a bigger price correction from peak. Therefore, the replacement cost factor has become a much bigger catalyst for larger, more institutional multifamily. We're really seeing some recovery in the office market just in terms of the return to office metrics as well as kind of a bottoming as perceived by investors on values, and industrial remains a favorite asset, although the trend for us was relatively flat on a year-over-year basis. Self-storage continues to be a very popular product type, although there are some bid-ask spread issues in that segment as well. We saw some improvement in that segment in the first quarter and of course the overall financing improvement was very noticeable in the first quarter.

Thank you for that. And are you also seeing some distinction between the different geographical locations based on the recently announced tariff announcements?

Not so much. In looking at the first quarter, the trends around the country were fairly consistent. There is still a gap between the growth markets such as Georgia, Florida, and Texas in particular where you have the benefit of a lot of in-migration, including business migration as well, really catching investors' appetite for future growth. I've actually traveled quite a bit over the past few months and spent some time in Florida. The demographic numbers are very impressive when you look at the next five-year forecast in those particular states, but Florida stands out. And therefore, at a time of uncertainty, investors sort of shift their focus on those kinds of metrics, maybe even more so than usual. But we're seeing a comeback really in markets like Denver and Seattle where there's been some overbuilding and the pipeline of new construction, especially for multifamily, has pulled back significantly. Some of those metros with solid economic bases that have suffered from some overbuilding are showing some improvement. That was noticeable in the first quarter as well.

And how would you rate Southern California among the markets?

Interestingly enough, the tragedy from the fires has strengthened the rental market, as you can imagine, for the wrong reasons, of course. But California in general, if you look at the national landscape, based on my travels and a lot of investor interactions, has kind of been the diamond in the rough. It lagged in the recovery. It has, of course, a number of local political issues and growth limitations. But nonetheless, because of the price adjustments and relative kind of a lagged but now positive recovery on job growth and a little bit of a healthier economic outlook, we've seen a lot of capital want to come back into California. So I would say that the beginning of maybe a new cycle in the state, especially on the other side of some of the macro concerns that I commented on in my formal remarks.

Got it. Thank you. And I'm not sure how much of your business is done with foreign investors, but could you talk about what you're seeing on that end, given the kind of the sentiment shift that we've been noticing recently?

Well, foreign investments as a category for the entire industry haven't really been a needle mover in macro trends for commercial real estate. There are periods of surge in capital that have come in over the years and periods of a little bit of a drought. For us, it's a very small portion of our business and we haven't seen any change. The private client business is so much driven by really private investors and families that invest in real estate throughout the United States, and we haven't seen any change in sentiment. But usually, if you look at the long-term averages, the private capital component of total, the CRE transactions in the U.S., averages somewhere between 10% to 15%. So it has not been the moving factor at a macro level.

Great. Thank you. And just one last question. It looks like you guys did a little bit of stock repurchase during the quarter and perhaps after post Q1. I was wondering what your appetite is to kind of deploy capital further for stock repurchases?

Yes, Young, this is Steve. I'll take that. Yes, you're correct. During the quarter, we did repurchase a few shares and then were more active after the quarter in total about $5.5 million worth of repurchases. Of course, as we've expressed before, return of capital to shareholders is just one leg in our capital allocation strategy. We mentioned in total over the last three years, $187 million in capital return to shareholders in addition to obviously the investments we've made in technology and the platform. And while M&A has been less active over the last several years, we have been very active in bringing on individual teams and high-producing individuals, which we found to be much more financially appropriate investments versus large acquisitions.

Great. Thank you, Steve.

Thank you. Ladies and gentlemen, we have reached the end of the question and answer session. I would now like to turn the floor over to Hessam Nadji, CEO of Marcus & Millichap for closing comments.

Thank you, operator. And thank you everyone for joining our call. We look forward to seeing some of you on the road and to have you back on our next quarterly call. Thank you very much. The call is adjourned.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.