Marcus & Millichap sees ongoing sequential revenue growth into Q4 2025 while expanding talent and technology investments

Earnings Call Insights: Marcus & Millichap, Inc. (MMI) Q3 2025

MANAGEMENT VIEW

* CEO Hessam Nadji reported "a strong quarter with total revenue increasing 15% over Q3 2024" and noted it was the fifth consecutive quarter of year-over-year revenue growth despite ongoing market disruption. Nadji highlighted that adjusted EBITDA reached $7 million for the quarter and stated, "excluding this reserve, the company's SG&A was modestly lower than the prior year, reflecting our ongoing focus on cost management while still making strategic investments in technology, talent and branding." He emphasized outperformance in transaction growth, stating "transaction growth of 25% for MMI versus an estimated market growth of 12%" and pointed to a 17% revenue increase and 22% transaction count increase in the private client brokerage business.
* Nadji announced new hires to the institutional client team: "the recent addition of 2 new executives, Andrew Laehy, who heads our IPA Multifamily division; and Dags Chen, our new Head of IPA Research," both with over 20 years of experience.
* Nadji highlighted that "financing revenue once again exhibited strong growth, up 28%," and mentioned progress in integrating sales and financing teams.
* Nadji reported, "our auction division...closed 191 sales through our auction platform, accounting for an estimated 25% share of total commercial property auctions in the U.S." He also noted the net addition of 29 investment brokers in the quarter.
* CFO Steve Degennaro stated, "total revenue for the third quarter was $194 million, an increase of 15% compared to $169 million for the same period in the prior year." He added, "real estate brokerage commissions for the third quarter accounted for 84% of total revenue or $162 million, an increase of 14% year-over-year." Degennaro reported, "for the third quarter, we reported net income of $240,000 or $0.01 per share, which includes an $0.08 per share charge for the legal reserve that we took in the quarter. This compares to a net loss of $5.4 million or $0.14 loss per share in the prior year."

OUTLOOK

* Nadji stated, "we remain cautiously optimistic about the start of a new sales and financing cycle as the market resets with measured improvement in the trading environment for 3 key reasons," citing expected Fed rate reductions, compelling asset price adjustments, and a pullback in new construction as drivers for future growth.
* Degennaro said, "for the fourth quarter, we anticipate quarter-over-quarter sequential revenue growth consistent with normal year-end seasonality." He added, "cost of services as a percentage of revenue should follow the usual pattern as revenue builds through the year and be sequentially higher than the third quarter."
* Degennaro stated, "SG&A for the fourth quarter should increase modestly on a dollar basis" after normalizing for the legal reserve.

FINANCIAL RESULTS

* Degennaro reported "real estate brokerage commissions for the third quarter accounted for 84% of total revenue or $162 million, an increase of 14% year-over-year," with transaction volume at $8.4 billion for nearly 1,600 transactions at an average commission rate of 1.9%.
* Private client business accounted for 63% of brokerage revenue or $102 million in the quarter, up from 62% and $87.5 million in the same period last year. Private client transactions grew 24% in volume and 22% in transaction count.
* Revenue from the financing business grew 28% year-over-year to $26 million, with a 34% increase in transaction volume totaling $2.9 billion across 406 transactions.
* SG&A expense was $73 million or 37.4% of revenue, including a $4 million legal reserve.
* Cash, cash equivalents and marketable securities were $382 million, a $49 million increase over last quarter. The company returned $10 million in capital to shareholders through a dividend paid in early October and repurchased nearly 265,000 shares for $8 million during the 9 months ended September 30.

Q&A

* Mitch Germain, Citizens JMP Securities, LLC: Asked about the ability to accelerate larger deal activity and the impact of hiring experienced producers. Nadji responded that "the strategy, both on the support levels of our existing IPA and senior Marcus & Millichap teams that are doing larger deals is unwavering, is on track. No changes at all have been executed there other than adding more leadership, adding a new Head of Research and investing more in expanding the IPA platform."
* Germain asked about customer motivation and price alignment. Nadji replied, "We're seeing more motivation to put property on the market because of the reality that there is no Fed miracle...The number of listings that are now basically aging or becoming unsellable at the expected price of the seller is dropping, which is telling us that the market is finding that realignment."
* Germain asked about profitability at higher revenue levels. Nadji explained, "the most important difference over the last, let's say, 6 years, 7 years of our operating structure is the fact that we have invested capital in talent acquisition, talent retention and essentially talent development at levels that the company hadn't engaged in prior to this period." Degennaro added, "we're kind of at that inflection point where you really see an acceleration of profitability, perhaps not all the way back to where we were at comparable revenue levels 6 years, 7 years, 8 years ago for reasons Hessam mentioned. But this is the inflection point."
* Blaine Heck, Wells Fargo Securities, LLC: Asked about the scale of bank and credit union lending expansion. Nadji replied, "There is a marked difference from even a year ago in just the number of lenders at any given time willing to give us quotes on certain assets, number one. Number two, with quotes coming back so out of market about a year ago, a good number of lender quotes were just not usable...we have more lenders signaling to us that they're back in the market and the quotes that are coming back are a lot closer to consummating a transaction than they were even a year ago."
* Heck asked about the auction business. Nadji explained, "we built the capabilities that are now in place organically by bringing on auction specialists...So the combination of auction specialist producers that are dedicated to the auction business...has made this very successful for us."
* Heck inquired about the litigation reserve. Nadji responded, "we do anywhere from 8,000 to 10,000 transactions a year. So inevitably, from time to time, disputes of varying nature will -- are going to arise, most of which go away in the normal course of business. A very small number of those actually go to trial. And this matter, unfortunately, which involves a disputed disclosure-related claim actually did go to trial. It certainly is an outlier."

SENTIMENT ANALYSIS

* Analysts focused on client motivation, price alignment, profitability challenges, and the expansion of lending, displaying a slightly positive but still cautious tone, especially regarding the pace of recovery and sustained profitability.
* Management maintained a confident and constructive tone, frequently highlighting growth, operational improvements, and strategic investments. Nadji's statements reflected optimism: "We remain cautiously optimistic about the start of a new sales and financing cycle."
* Compared to the previous quarter, analyst sentiment shifted from neutral to slightly positive as questions moved toward growth inflection and profitability, while management's confidence was more pronounced in both prepared remarks and responses, especially regarding operational leverage and market recovery.

QUARTER-OVER-QUARTER COMPARISON

* Management highlighted a 15% year-over-year revenue increase for Q3 2025, compared to 9% in Q2, and returned to profitability from a net loss in the prior quarter.
* Strategic focus expanded with the addition of institutional client team hires and further development of the auction business, with 191 auction platform sales in 2025 so far.
* Analysts in Q3 placed greater emphasis on profitability inflection and market alignment, while Q2 was more focused on navigating macro headwinds and cost structure.
* Management tone in Q3 was more assertive about operating leverage and growth, contrasting with the more cautious optimism in Q2.

RISKS AND CONCERNS

* Management noted ongoing macroeconomic uncertainty including "ongoing uncertainty around global macro conditions, inflation, tariff policy and the labor market."
* Degennaro discussed a $4 million legal reserve for a litigation matter, stating "we intend to aggressively appeal" and described it as an outlier rather than a systemic risk.
* Nadji highlighted persistently tight underwriting by lenders and a narrow margin of error on valuations among buyers and sellers as continued productivity challenges.

FINAL TAKEAWAY

Management conveyed confidence in Marcus & Millichap's ability to achieve continued sequential improvement, underpinned by strong revenue growth, expanded market share in private client and mid-market segments, and investments in talent and technology. The company remains focused on leveraging its platform, broadening institutional capabilities, and capitalizing on a diversified growth strategy while actively managing costs and maintaining a robust balance sheet. Looking ahead, Marcus & Millichap anticipates further revenue growth into the fourth quarter, supported by an improving market environment and ongoing operational enhancements.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mmi/earnings/transcripts]

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