Thank you for standing by. This is the conference operator. Welcome to Marcus & Millichap's Third Quarter 2020 Earnings Conference Call. As a reminder all participants are in a listen mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Evelyn Infurna. Please go ahead.

Thank you. Good afternoon and welcome to Marcus and Millichap's Third Quarter 2020 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 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 could differ materially from those implied by such forward-looking statements due to a variety of factors including, but not limited to the COVID-19 pandemic, 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 March 1, 2020. Although the company believes the expectations reflected in such forward-looking statements are based on reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statements 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 afternoon and is available on the company's website represents reconciliation to the appropriate GAAP measures and explains why the company believes such non-GAAP measures are useful to investors. Finally, this conference is being webcast. The webcast link is available on the Investor Relations section of our website 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 Hessam Nadji. Hessam?

Thank you, Evelyn. On behalf of the entire Marcus & Millichap team, good afternoon and thank you for joining our third quarter 2020 earnings call. We'd like to extend our well-wishes for health and safety to everyone on the call. I'm pleased to report significant progress in overcoming the COVID-19 market disruption. During the third quarter, MMI registered sequential increase of 35% in total revenue and transactions or 552 more deals over the second quarter. The company's earnings advanced with pre-tax income of nearly $8 million and positive cash flow from operations of $24 million, after essentially working hard to breakeven and met the initial shock of the pandemic. We executed over 2100 transaction and $9.1 billion in volume, including 442 financing transactions, closed with a 182 separate lenders in the third quarter. As a key illustration of our ability to connect buyers and sellers even in a disrupted market, 44% of our brokers transactions were ultimately acquired by an out of state buyer. This is a testament to our vast bio relationships and extensive market coverage. Above all, these numbers reflect our team's unwavering client commitment, problem solving and execution skills, especially in a difficult market environment. Internally several factors supported the quarter's improved momentum, starting with the resurrection of many deals and listings that had been delayed or cancelled. Our investor education webcasts intensified direct marketing and business development campaigns were also instrumental in connecting our sales force with as many investors as possible. In all, we have conducted 25 market overview webcast attracting nearly 90000 investors, that's 90000 investors and generated 121 research publications and video segments since the onset of the pandemic. The market environment became moderately more constructive during the quarter, as many lenders that re-entered the market and expanded financing options for investors. The…

Thanks, Hessam. Before I review our results, I want to express my enthusiasm for having joined Marcus & Millichap as CFO. I've been on board now for 90-days. But this is my first opportunity to speak to you in this forum so I thought it would be helpful to share some of my initial observations. At a high level, I've been impressed by the culture, the incredible attention to detail and the focus on execution in the business. Of course our balance sheet is extremely strong with cash and core cash investments of almost $9 per share which is well above our peers and no debt. That has helped us remain on the offensive. The company also has an expense management culture. There is certainly a willingness to make tough decisions and act swiftly. There is also a growth and opportunity driven culture that is constantly searching to fill geographic and product type gaps in our portfolio. As we look at acquisitions culture, fit, and economics are appropriately important factors and how we evaluate M&A deals. I also see opportunities for improvement in the business. Scaling for growth requires that we constantly reassess our processes and likely invest more in technology. We cut costs in the spring in response to the pandemic, but as the business comes back, we will invest differently from how we did previously with a heightened focus on innovation. Continuing on the theme of scale, we can scale our acquisition capabilities and turn the M&A process into a strategic advantage. It allows us to leverage our strong balance sheet to be disruptive at a time when there is market displacement. The company's growth plan is very well-aligned with my experience and I'm very excited to contribute to MMIs future. Turning now to the results we are…

Thank you. [Operator Instructions] We now have a question from the line of Blaine Heck with Wells Fargo. Please go ahead.

Great. Thanks. Good afternoon. Can you just talk about the opportunities that you guys see in front of you with respect to acquisitions? Clearly you are getting a large one done this quarter. I think it's probably the largest since I've been covering you guys. So should we expect a little bit of a pause as you integrate Mission Capital? Are you actively working on other deals and if so can you comment at all on the size of potential acquisitions? Will they be similar to Mission or smaller like the others that you have done over the last few years?

Hi Blaine. It's Hessam here. I'll take that one. Thanks for asking the question. We are actively in discussions with a number of firms and really targeting firms based on service needs, market coverage needs and compatibility of culture and making sure that one plus one really equals three both for the target firm and for us, it's not so much by size. So we have dialog going on with some larger firms and some smaller boutique firms both at the same time and we are actively pursuing those discussions. The integration of Mission, it is something we're excited about, it's well underway. We've been thinking about it for some time as our discussions with them became more serious and realistic. And so the advantage of having a management team that's ready to absorb a great addition like Michigan and integrate it fairly quickly doesn't take us away from being able to talk to new opportunities.

Okay. That makes sense. And kind of related to that in the past few years and I think part of your growth plan has been to expand into additional property types in the brokerage business. How do you think the crisis will impact us? Do you think as the investment sales market recovers, you guys can use that recovery to springboard into those sectors or is it maybe a case of where you stick to your core competencies throughout the recovery and put off the expansion into other sectors for when things are a little bit more normal or stable?

Sure. The good news is we have so much runway in every property type, including those that are considered our core segments apartments retail offer plenty of additional growth opportunity for us. There are plenty of markets where we can add more capacity to even those long-term stable segments for us as well as expansion into office, industrial, especially. We're very excited about our industrial expansion plans, and of course MMCC, that's the good news. We're not really hampered by the limitation of the market opportunity in any of the product types. So our discussions range in all the different property types as well as MMCC, of course, that's as we've said many times the significant growth opportunity for us. And with a transaction like Mission where we can actually add another service line like loan sales loan advisory capabilities and they're structured finance debt and equity, which is very complementary to our core mortgage business makes it even more synergistic and more exciting. So we are looking at all of the above and making sure that it's once again about cultural compatibility, growth opportunity and making sure that we're not overlapping an acquisition with a product type or a market where we already have a lot of coverage. The less overlap there is the better of course the fit will be. So that's -- if anything that's a very important criterion in the way we're target firms.

Okay. That makes a lot of sense. Last one for me. Hessam, clearly, we're still waiting on the election results. But can you give us any sort of idea how the lead up to the affected transaction volumes were there more investors on the sideline just kind of waiting for some clarity? Or do you think on the opposite side, do you think there was any deal flow that could have been attributable to investors trying to get out in front of the potential regulatory changes? 1031 exchange is probably being the biggest of those.

We've been watching that very carefully for the past several months and looking for any trends. I would say that availability of financing and improvement in financing coupled with a lot of investors that were just absorbing the shock of the pandemic in the second quarter coming back into the market really drove the improved transaction activity both in the market and for us in the third quarter far more so than the coming election on either side. Whether somebody decided to wait or somebody decided to accelerated transaction really didn't get influenced much by the election cycle to the best of our knowledge. I'm sure there are some specific cases where somebody made a decision one way or another, but I will also say that the split Congress and what appears to a Biden White House is giving some comfort to the markets in that things will be pretty fairly balanced and no radical changes are likely to come out of that dynamic. As you said, we don't know the final outcome of course, but so far the markets have had a sigh of relief.

Got it. Okay. Thank you guys.

Thank you.

Mr. Nadji, I'm showing there are no further questions at this time. I will now turn the call back to you.

Great. Thank you operator and thanks to all of you for joining our call. We look forward to having you on our year-end earnings call and seeing some of you on our virtual sessions coming up between now and then. Thank you very much.

That does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a great day.