confident in the long-term recovery of the commercial real estate transaction market and in our ability to capture a growing share of that opportunity. With that, operator, we can now open the call for Q&A.

We'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, and may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions.

Thank you. Our first question is from Mitch Germain with Citizens Bank.

Great, thanks. Hesam, your secret sauce has been the ability to tap into that private client network, you know, sourcing deals out of state and using your guest platform to be able to connect. your clients to deals. Are you seeing any competition or competitive pressures when it comes to your ability to tap into those customers?

Good morning, Mitch. Great to connect with you. Nothing unusual. We have the usual competitive forces, predominantly local, small firms, and maybe some regional boutiques. Some of our larger competitors do a modest amount of private client transactions, predominantly in the industrial sector. And we're not seeing anything unusual. The retention and recruiting competitiveness has always been there, and it remains. What's interesting is that we are able to attract more semi-experienced professionals from a lot of the boutiques and regional firms in the past several quarters because they're starting to see the benefits of being with a larger platform as the market improves. And we've had some successes there. Therefore, there's a little bit more focus on that between our recruiting department and our local market leaders. And one of the interesting trends that I can share is that even semi-experienced brokers that come into the Marcus and Millichap network really give us the feedback that going through our training program and being put through what our inexperienced hires go through really makes a visible difference in their performance and the way that they go about the business. So the training systems and support systems that we've had for years and we continue to refine every single day seem to be getting recognized as one of the key advantages, even from semi-experienced brokers from these local firms and boutiques.

That's super helpful. It seems like number of professionals, I think it's about a 50 person increase year over year. I'm curious to some, you know, what is the breakdown? You talked about the semi-professionals that have some, you know, kind of seasoning already. But, you know, if I think about that increase in the number of professionals from, you know, kind of year over year, you know, kind of how much of that is new and how much of that are individuals coming in with some knowledge and capabilities?

Generally, Mitch, somewhere around 25% of our hires are coming in with some experience. That number is increasing because of the fact that we're actually slowing down our top-of-the-funnel traditional inexperienced individual recruiting. As I mentioned in my comments, we're shifting a lot more aggressively toward our internship program, which we've expanded over the last couple of years, and have also added some new generation candidate testing and screening systems that are slowing down the nominal number of people coming in through the top of the funnel, but improving the quality. We're also relying more heavily on our fellowship program. Both the fellowship program and the internship program that have been enhanced over the last, let's say three years, are starting to show meaningful advantages as they graduate individuals and those individuals come back and join us as it is reflected in their productivity and their speed to becoming productive agents. So we're really encouraged by all that. And again, this arena of being able to attract semi-experienced brokers is also gaining traction. I wouldn't put too much on the percent of the net increase being experienced or not, only because there's going to be some noise in our net hiring sort of reported data because of all these changes that we're implementing to improve our organic growth part of the strategy. Let me also reiterate, Mitch, that the efforts to bring in very experienced individuals and teams has not slowed down at all. That's a sort of a G which has worked to our finance division. We started an IPA capital markets pretty much from scratch about five years ago. And that has become one of the largest contributors to our financing business growth and highly successful. In that arena, those experienced loan originators that are coming into the system, whether they had their own boutique firms in a couple of instances that we acquired or were at other brands or independent originators of really finding the ability to collaborate with our sales force and kind of be a member of the broader Marcus and Millichap network and the benefits of getting referrals and leads and being able to do joint pitches has also been identified as a major re-manage.

Yeah, Mitch, to add to that, I'm sorry, Mitch, to add to that, directionally, you'll start seeing the benefits of these various programs in our number of transactions per agent, which at least year-to-date, we're up 9%, 10%. So we'll start slowly seeing a- Last one, Steve, while I have you, just a clarification.

It's 913,000 shares acquired or bought back year-to-date, not in the quarter, correct?

That is correct. That is correct.

Great. Thanks, guys.

Thanks, Mitch.

Our next question is from Blaine Heck with Wells Fargo.

Great, thanks. Good morning, guys. Can you guys talk a little bit about any other potential business lines that you might be interested in exploring at this point, whether that be maybe on the leasing side or property management or anything else that might have given some of your peers a bit more of diversification or stabilization of revenue during times of volatility in the transaction market? Is that something you guys are looking into at all?

Good morning, Blaine. The answer is yes. And also, let me elaborate that the diversification and having more stable revenue streams, of course, is very important. But we view the synergies of various other businesses with our core business as importantly, and to some extent, maybe more importantly, in that we believe, for example, the expansion of our current leasing capabilities and footprint can be one of the most effective and largest needle-moving ways that the company can leverage its existing brand infrastructure and essentially boots on the ground to ramp up additional revenue from a new business line in markets where we don't have leasing. But as importantly, for whatever additional leasing professionals we would bring in to collaborate with our investment sales brokers and essentially deliver a more well-rounded overall service to the same client. And we've identified that as one of the most exciting expansion opportunities, particularly for multi-tenant retail and industrial, where we have great market share, especially on the retail side. We're leading brokerage firm by a number of deals and by volume, but there is so much more potential growth within multi-tenant retail and within industrial where we have a much smaller presence currently. So those have really been a priority in terms of ways that we can enhance the current value proposition, build up the current market share gains in our private client business in our investment brokerage core business, but at the same time, add a very logical additional revenue contributor and being able to leverage expenses of having the footprint and management capacity offices and so on and so forth. The other really important arena for us is to keep expanding our finance. Our success with M&P Bank is much more stable financing in the institutional arena, IPA multifamily division. Therefore, we now have even more confidence and conviction that scaling that capability can be a significant contributor to revenue and profits, but also, to your point, diversification. Other business lines we've been interested in for quite a while are appraisal and consultation. That industry is going through lots of change, of course, with AI and technology. Nonetheless, we really believe that the core need for an MAI-endorsed appraisal, both for internal purposes and as related to transaction-related appraisals, is here to stay. The process of getting to those appraisals is dramatically changing. So we have an eye out for tech-enabled appraisal and consultation groups that we might be able to acquire and then scale around. We've had a few conversations around that particular space in an M&A realm. And investment management has been another arena where we believe there are significant synergies within our existing brokerage and financing business. And all of this, by the way, wrapped around the private client market, and especially the middle quasi-institutional market, where a lot of our larger competitors are, for the most part, predominantly focused on Uber institutional and very large transactions, where IPA competes very effectively, but essentially one or two levels below that, by price point, is a greatly underserved and very fragmented market. And that comment relates to leasing, it relates to appraisals, it relates to investment management, And because of that, we believe we've got a lot of runway for creating external growth revenue and profit contribution channels, if you kind of look at all of those things that I just summarized. Great.

Thanks, Asam. That's really great to hear, and I look forward to updates on those initiatives. I guess, just to follow up, what percentage of NOI or revenue do you think those business lines, you know, leasing and financing in particular, but appraisal investment management as well, you know, what percentage do you think those could potentially end up contributing to overall operations?

You know, I'm not really trying to back into a predetermined percent of revenue in the way that we're exploring and actively talking to folks about bringing them on board or initiating an entry or expansion into some of these concepts. But it's fair to say that over the next five to seven years, a significant amount of our nominal growth and, of course, degree of diversification is going to come from these channels that I just summarized. But that also, Blaine, gives me an opportunity to reiterate that Marcus and Millichap is essentially committed to being the premier brokerage and finance intermediary for the commercial real estate industry. Many of our competitors have stated that they view the transaction market because of its volatility and understandably so as an arena where they don't want to invest. And therefore, they're really focusing on other activities and other businesses. And we wish them well and hope that works for them. we are not abandoning the core reason the company exists, which is to create value for buyers and sellers and to have long-term relationships with hopefully someday 100% of every owner of commercial assets in the United States and Canada. Lots of opportunities to do a better job in our core business and gain more share while adding these synergistic services. It's not a one or the other kind of a choice. It is an integrated choice, reinforcing who we know we are and we want to be even bigger.

That's really helpful. Maybe switching over to the cost side, you guys have talked about a focus on increasing profitability through cost controls, and you've discussed the investment that you made in technology and recruiting over the past few years. I guess, is that the main area of savings you see as you look forward? When should we expect to see that incremental margin improvement fully online? Just any guidelines for trends and margins you guys can provide, especially related to the cost side, would be really helpful.

Yeah, Blaine, this is Steve. Our all themes getting to increased profitability. And that comes from two aspects, $5 million got us to essentially break even. So revenue growth and leverage. We're seeing that here as we, you know, particularly here in Q2. So you've got top line growth, obviously, that will create efficiency and leverage. And then on the cost side, investments in our infrastructure that increase and improve workflows, processes, create efficiency, whether that's with AI or just additional applications and tools. But we're doing a lot more in the area of data capture to improve productivity, whether it's in underwriting, whether it's in, you know, how we, you know, down to how we close the books, how proposals get done, how BORs get done as well. So there's two aspects. There's the cost containment, making smart investments, but then there's the leverage generated by improved revenue at these levels and above.

So, Glenn, the only thing I'll add is that one of our focuses is to redeploy current costs to new areas, where as we evaluate the firm formally twice a year at midpoint, midyear, and year end for our budgeting purposes, and really have a zero-based budgeting process and re-examine everything every year, we're looking at ways to take the current cost structure and focus more of the capital on client-facing, lead-generating, and innovations around marketing that enables the individual producer to do what they do quicker and better and for the company to contribute more attribution to their revenue growth. And that's another important aspect of our cost-related strategy. And as we've looked at the company every time, there's always room for tightening. There's always room for making sure there's no waste or duplication of effort. But in general, we've been pretty disciplined in making sure the costs don't basically get a life of their own or become, you know, runaway on a year-over-year basis. Because it's easy to react to a recovering market as transaction velocity is picking up and the average agent feels like they need another analyst, an office feels like they need one or two more graphic production folks. it's very important to use this period of a market recovery to also be rethinking about the model in which we provide the support at a lower cost at the same time so you're not just essentially throwing more bodies and dollars at a recovering market okay great that's all really helpful maybe just putting it all together and I'm sure this is an impossible question to

answer, but, you know, you guys have shown solid improvement in revenue, NOI, and EBITDA this year, but, you know, EBITDA levels are still materially off the peak levels of 150 to 200 million. We saw in 21 and 22, you know, understanding that those were, you know, uniquely positive environments. Do you feel like those levels are even achievable or repeatable or stabilized or kind of optimal We'll eat it somewhere lower than that. And do you have any sense of kind of how long it might take to get back to whatever that stabilized level is, excluding any major kind of needle moving transactions?

We absolutely have conviction that we will return to very exciting profitability levels and much better operating margins. The composition of how we get there from an expense allocation perspective is changing rapidly. If you look at the industry, Blaine, and look at Marcus Milchap's cost structure, a very large portion of our expenses that show up on EPS every quarter are non-cash expenses related to the expensing of investments we've made, predominantly on talent acquisition and retention. That is by far the largest cost increase if you look at MMI in 2025 versus, say, 2018 or 2019 pre-pandemic. That's a reflection of how the industry has become much more competitive, and we've been right there to compete. The timing of that investment, of course, coincided with an incredibly high level of volatility in the market from the pandemic on, in that the last three years, the talent retained and acquired has not been in a normal operating environment where they can essentially produce what they're capable of producing, 100% based on a mechanical market breakdown because of the interest rate shock and everything else that we've talked about. Therefore, as the market improves and becomes more functional, the leveraging of expenses on the revenue growth side of it will really start to make a material difference, as Steve just mentioned. So it's really important for us to take a look at where the expense increases are occurring, and is there an ROI for every line item that increases the company's cost structure? So that's one element that will be different because the composition of our P&L has changed in the last five to seven years. Therefore, the focus on revenue per agent, the focus on ROI per expense category becomes really important on how fast we can get to that $150 million pre-tax level that you're recalling, and whether it takes the same amount of revenue to generate that pre-tax income, or we have to think about different ways to get to that profitability by adding other revenue streams because it is costing more to be competitive in the investment brokerage arena, which is absolutely the case, as you well know.

Thanks, Hassan. Appreciate the thoughtful answers. Thank you, Blaine.

Thank you. There are no further questions at this time. I would like to hand the floor back over to Hesam Najee for any closing remarks.

Thank you, Operator, and thank you for joining our second quarter earnings call. We look forward to seeing a lot of you on the road and to have you back on our next call.

The session is adjourned.

This concludes today's conference.

You may disconnect your lines at this time. Thank you again for your participation.