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Operator: Greetings, and welcome to the Marcus & Millichap First Quarter 2026 Financial Results Conference Call. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Jacques Cornet. Thank you. You may begin.

Jacques Cornet: Thank you, operator. Good morning, and welcome to Marcus & Millichap’s First Quarter 2026 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, company’s ability to integrate new agents and sustain its growth and other factors discussed in the company’s filings, including its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2026.

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 call 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’s my pleasure to turn the call over to CEO, Hessam Nadji.

Hessam Nadji: Thank you, Jacques. On behalf of the entire Marcus & Millichap team, good morning, everybody, and welcome to our first quarter 2026 earnings call. We’re pleased to report a strong start to the year with revenue growth of 18% over the first quarter of 2025. This reflects improving market conditions, a more robust recovery in our private client business and further momentum in our financing division. Building on last year’s fourth quarter, our strong start is also driven by 2-plus years of persistent client outreach, frequent valuation updates and seller consultations that are now translating into transactions. Brokerage revenue grew nearly 12% year-over-year, while our financing business delivered a stellar 48% increase, demonstrating both the scaling of our capital markets platform and an improving lending environment.

Adjusted EBITDA improved to nearly $3 million from a loss of nearly $9 million a year ago as we start to benefit from expense leveraging with revenue recovery from the prolonged market disruption. MMI completed nearly 1,400 brokerage transactions in the first quarter, a 15% increase. Transactions per agent increased 11%, which we see as a key measure of productivity gains, particularly given the growth in our headcount over the past year. Improvements were broad with 7 of the 11 property types we service posting brokerage revenue growth for the quarter. Office transactions delivered the largest gains in several years, thanks to significant price resets and an improving space demand driven by a growing return to office mandates. Activity was also strong in multifamily, manufactured housing and single-tenant retail.

Our private client brokerage revenue improved 13% year-over-year and contributed the largest share of incremental brokerage revenue gains in the quarter. The strength was driven by a narrowing bid-ask spread, thanks to more realistic price expectations by sellers and more banks and credit unions returning to the market. We’re seeing broader acceptance by sellers that current interest rate levels represent the new normal, which is forcing more realism on valuations. Small and mid-cap multifamily and single-tenant properties, which were most affected by the interest rate shock and lender constraints are now seeing more transactions following the unusually sharp and prolonged correction we experienced since 2023. Our larger transaction segment delivered a 25% revenue increase in the quarter, reversing last year’s decline.

As I shared on our last quarter’s call, revenue from our $20 million-plus sales increased by 28% in 2024, clearly leading the recovery. In 2025, this segment faced a very tough comp, while institutions also became more selective and focused primarily on top-tier assets. During the first quarter, our IPA division, which drives the majority of our larger deals, leveraged a widening buyer pool and increasing appetite across the asset quality spectrum. As a general observation, price adjustments over the last 2 years point to a compelling entry point for investors, especially relative to replacement cost. MMI’s financing revenue reached $27 million in the quarter, a 48% increase, while total financing volume grew 60% across nearly 400 finance transactions.

Average deal size increased 36% as we executed larger and more complex transactions. This is a direct result of our successful recruiting and acquisition strategy over the past few years to attract highly experienced originators and finance boutique firms. Given the success in this strategy, we continue to focus on adding origination teams in key regions around the country. It is also critical to note that MMCC benefits from a deep bench of veteran originators who’ve been with the firm for many years and continue to thrive as we expand technology, lender relationships and collaboration with our sales brokers. A notable shift this quarter was toward acquisition financing, which accounted for 61% of originations, up from 50% a year ago. This trend is consistent with the rising transaction market, which enables more trades than refinancings and recapitalization.

As lenders feel the pressure to become more competitive, we’re seeing various metrics improve, particularly in higher loan-to-value ratios. At the same time, underwriting and sponsor qualification remained tight, still requiring more time and diligence from our originators and investment brokers to execute transactions. Lastly, our finance team used 188 unique lenders in the first quarter to provide our clients with a competitive advantage by leveraging our vast and growing network of qualified capital sources. Our auction services and loan sales business continue to gain traction and cross-generate referrals with our brokerage and financing teams. Auction revenue nearly doubled year-over-year in the first quarter, while revenue from loan sales and IPA Capital Markets increased 39%.

These value-added services are effectively providing alternative marketing and sales channels to investors and lenders with ample growth opportunity ahead. On headcount, we ended the quarter with 1,621 investment brokers, up 87 from the first quarter of 2025. This includes a larger-than-usual seasonal reduction in sales force during the first quarter due to the proactive termination of 2- to 3-year agents in development who are falling short of key metrics. We are being more selective in recruiting and exercising tighter monitoring of sales performance for newer agents in their first 18 to 24 months with us. Going forward, more of the company’s organic growth strategy will shift towards reliance on our expanded internship program and our fellowship channel, both of which are generating higher-performing agents with more reliable production.

This shift would likely cause some noise in the net hiring data from quarter-to-quarter, but should be a better approach in the long term. Results from the recent expansion of our corporate recruiting team working hand-in-hand with our local market leaders have been encouraging as measured by the screening improvement and improved placements we’ve seen so far. We’re scaling this further with the recent hiring of an industry veteran recruiter focused entirely on adding experienced talent. The company’s technology investments continue to advance across multiple areas of the business, including our Central Support Services. This critical group is referred to as Brokerage Transaction Services or BTS, and provides financial analysis, document generation and marketing tools to support our sales force.

The central theme in our technology strategy is the scalable application of AI to drive efficiency gains throughout all aspects of the brokerage service continuum and various internal functions. While the power of AI applied to a particular brokerage team, a particular geographic market or property type is clearly measurable, our focus is on building scalable AI agents and tools that markedly improve sales force productivity across the firm. This is a bigger challenge than simply applying AI to a particular practice. Looking forward, we expect commercial real estate fundamentals to remain healthy with more catalysts emerging to drive the rising tide of transactions. Pricing has generally adjusted and continues to recalibrate by asset quality, while new construction is slowing dramatically.

This is especially critical for industrial and multifamily assets, which have seen record new inventory in the last few years. These factors are making the commercial real estate investment case increasingly compelling on a replacement cost basis. More of our clients are accepting that the pricing paradigm has shifted and lenders are facilitating the transition to a new cycle with more competitive terms. Notwithstanding some cooling of activity around the time of the conflict in the Middle East, our focused sales force, granular client-centric business model and local market expertise should drive growth amid ongoing macro political and economic developments. Our balance sheet remains a competitive advantage with approximately $335 million in cash and no debt.

MMI has achieved the flexibility to invest in our platform, continue to pursue its strategic acquisitions and return capital to shareholders all at the same time. The ability to maintain a strong balance sheet clearly stands out as a catalyst to accelerate growth as the next real estate cycle takes shape. We see substantial growth opportunity ahead with operating leverage from recent investments and the addition of talented individuals we brought on board over the past several years. With that, I will turn the call over to Steve for more details on our financial results. Steve?

Steve Degennaro: Thank you, Hassan. Total revenue for the first quarter was $171.5 million, an increase of 18% compared to $145 million in the prior year quarter. This represents the strongest first quarter revenue growth in 4 years. Breaking down revenue by segment, real estate brokerage commissions for the first quarter were $138 million, an increase of 12% year-over-year and accounted for 81% of total revenue. We completed 1,348 brokerage transactions for total volume of $7.9 billion, representing increases of 15% and 19%, respectively, compared to the first quarter of 2025. Average transaction size was $5.9 million, up 3% from a year ago. Average commission rate was 1.75%, a slight decrease of 11 basis points year-over-year, resulting from a modest mix shift towards larger transactions that carry lower commission rates.

Within brokerage, our core private client market accounted for 64% of brokerage revenue or $88 million in the quarter, an increase of 13% year-over-year. Private client transaction count was up 19% and dollar volume grew 22%, reflecting the broad-based improvement in this core segment and more realistic price expectations by sellers. This compares to $78 million or 63% of brokerage revenue in the first quarter of 2025. Revenue from middle market transactions was $20 million, 6% lower than prior year, while the larger transaction segment covering deals above $20 million accounted for 18% of brokerage revenue and $25 million, representing a 25% increase year-over-year. Revenue from our financing business was $27 million in the first quarter, an increase of 48% compared to $18 million in the prior year quarter.

This was driven by 60% growth in dollar volume to $3.1 billion across 398 financing transactions, representing an 18% improvement in transaction count. Average transaction size grew 36% to $7.8 million, reflecting our expanding footprint in larger institutional and agency loan originations. The average origination fee rate was modestly lower, consistent with the larger deal mix. Other revenue, which includes leasing, consulting, advisory and ancillary fees, was $6.5 million in the first quarter compared to $3.3 million in the prior year, an increase of 98%. This change primarily reflects growth in our loan sales and advisory services, consistent with the trend of rising distressed and transitional loan sales. Turning to expense. Total operating expense for the first quarter was approximately $177 million, an increase of just 9% on 18% revenue growth, reflecting improved operating expense leverage.

Cost of services was $104 million or 60.4% of revenue, a favorable improvement of 50 basis points compared to prior year. Selling, general and administrative expense was $71 million, essentially flat compared to the prior year. In addition to ongoing cost containment, the first quarter’s typical expenses were somewhat lower due to the last-minute cancellation of the company’s annual sales award trip due to security concerns. As a percentage of revenue, SG&A improved substantially to 42% compared to 49% in the first quarter of 2025, reflecting the operating leverage in our model as revenue scales. For the first quarter, net loss was $3 million or $0.08 loss per share compared to a net loss of $4 million or $0.11 loss per share in the prior year, an improvement of 30%.

On a pretax basis, the loss of $2 million this quarter represents a notable operating improvement from the prior year loss of $14 million. Tax expense for the quarter was $900,000. As Hessam mentioned, we are pleased to see adjusted EBITDA for the first quarter improving significantly to $3 million compared to negative $9 million in the prior year quarter. This represents more than $11 million of year-over-year improvement and reflects the combination of strong revenue growth, a controlled cost structure and the operating leverage I mentioned. Moving to the balance sheet. We remain in an exceptionally strong financial position with no debt and $335 million in cash, cash equivalents and marketable securities as of the end of the first quarter.

The sequential reduction of approximately $64 million from year-end is typical for a first quarter and primarily reflects current and deferred agent commission payouts, performance-based management compensation and investments in production talent. A key distinction in the first quarter of 2026, however, is our share repurchase activity, where we repurchased approximately $23 million of our common stock in the quarter at a weighted average price of $26.22 per share. This compares to less than $1 million in share repurchases in the first quarter of last year. Excluding the impact of repurchases, the underlying business consumed significantly less cash this quarter than in either of the prior 2 first quarters, reflecting improved operating cash generation as revenue recovers.

Since inception of our dividend and share repurchase programs, we have returned approximately $251 million in capital to shareholders. As a continuation of our commitment to the return of capital to shareholders, our Board recently approved an additional authorization of $70 million for the share repurchase program, bringing our total available authorization to $90 million. No time limit has been established for the completion of the program and repurchases will continue to be executed opportunistically through open market purchases and Rule 10b5-1 plans, subject to market conditions and other capital priorities. 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.

Looking ahead, we see several constructive catalysts for continued growth balanced against the near-term macro uncertainty that Hessam described. Second quarter revenue is expected to reflect continued year-over-year improvement, building on Q1 momentum. As always, the sequential increase from Q1 to Q2 reflects normal seasonality with transaction volume typically building as the year progresses. While we are encouraged by April results, we remain mindful of the geopolitical and macroeconomic variables, which could moderate the pace of activity. Cost of services in the second quarter is expected to remain in the range of 62% to 63.5% of revenue, consistent with revenue building throughout the year. SG&A in the second quarter should reflect modest year-over-year growth in absolute dollars, driven by continued investment in agent support programs and technology infrastructure, partially offset by our ongoing efficiency initiatives.

As for taxes, the effective tax rate remains difficult to predict given the proximity to breakeven profitability. The rate is driven primarily by the mix of deductible and nondeductible expenses relative to projected annual pretax income and to a certain extent, by the distribution of income between our U.S. and Canadian operations. In the near-term, pretax income and adjusted EBITDA are more meaningful measures of operating performance. That said, for the second quarter, tax expense is anticipated to be in the range of $500,000 to $1.5 million. In summary, the first quarter demonstrated that the investments we have made over the past several years in talent, technology and the breadth of our platform are translating into measurable financial results.

Strong revenue growth, meaningful improvement in adjusted EBITDA and favorable operating leverage all point to a business model that is scaling effectively as the transaction environment recovers. Our balance sheet provides us the flexibility to simultaneously invest in growth, return capital to shareholders and pursue strategic opportunities. The combination of financial strength and operational momentum is a defining characteristic of this company. With that, operator, we can now open the call for questions and answers.

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Operator: [Operator Instructions] And the first question comes from the line of Mitch Germain with Citizens Bank.

Mitch Germain: So Hessam, are your customers more immune to rate movements given that it seems to be kind of part of everyday life at this point?

Hessam Nadji: Mitch, no, they’re not immune and they’re actually very sensitive to it. They have become used to the volatility that you just spoke of over the past 3 years. And the pent-up demand for transactions that have been delayed for the last couple of years is trumping the interest rate volatility effect in my opinion and observations as I travel around the country in that many of them are now convinced that their hopes for a Fed miracle or interest rates drop, at least somewhat close to where we were is not in the making. And therefore, you can’t really count on that to return valuations anywhere close to where we were at peak. Plus there are some operational challenges in some of the markets and product types around the country. There’s maturing loans that are still having a hard time being refinanced. And all of that is causing more demand to bring product to market despite the interest rate volatility that we’ve seen in the last 90 days.

Mitch Germain: Got you. That’s helpful. I think you mentioned 188 unique lenders, if I’m not mistaken, this quarter. I know you probably don’t have the number in front of you, but I’m just curious kind of where did that stand, I don’t know, maybe 2, 3 years ago? I mean, how has that environment changed?

Hessam Nadji: It certainly has been one of our advantages throughout the cycle and even prior to the Fed rate shock, we were one of the largest providers of access to multiple types of lenders. It did tighten down quite a bit, especially in 2023 and 2024, particularly on the bank and credit union side of the equation, which, of course, is the primary source of private capital financing. If you remember in 2023, regional banks, in particular, were hit very hard. So options were fewer. But once again, that created an opportunity for us to illustrate our advantage to our clients because we would shop for them so aggressively and enabled that process through a lot of new technology that actually interconnects our 100-plus originators so that within the team, the knowledge of which lender is in the market for type of — what type of deal and what price point was being shared real-time, and that helped us become a lot more efficient.

I would say that in the last 2 quarters, we’ve seen a significant improvement in the return of banks and credit unions back into this, if you will, active network of lenders. And there’s no question that in ’23 and 2024, that number would have been measurably less.

Mitch Germain: And last one for me. Larger transaction activity, clearly, pretty decent amount of growth this quarter. Was that a function of your hiring or do you think that just the price expectations amongst the sellers have become a bit more reasonable or did both basically contribute to that?

Hessam Nadji: It was contributions from both factors. Predominantly, though, it was transactions that didn’t consummate last year because of a pricing gap that finally cleared the market in Q1 and a number of our clients that had been hesitant to bring product to market because the pricing expectation just wasn’t going to be met, capitulating to more realistic price expectations. I would say that the vast majority of what we closed had been in some form of discussion, analysis, valuation between the seller and our IPA teams and the veteran Marcus & Millichap agents who do larger transactions for probably a better part of a year. So that’s an indication of the fact that the overall business execution is still taking extra time and our ability to help clients just requires a lot more handholding and nurturing of their internal process for coming up with their strategy and then execution.

Operator: That does conclude the question-and-answer session. I would like to turn the floor back over to Hessam Nadji for any closing comments.

Hessam Nadji: Thank you, operator, and our thanks to everyone who attended this call. We look forward to seeing some of you on the road and to having you back for our Q2 earnings call. The session is adjourned.

Operator: Thank you, ladies and gentlemen. That does conclude today’s teleconference. We thank you for your participation. You may disconnect your lines at this time.

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