Thank you for standing by. This is the conference operator. Welcome to Marcus and Millichap's First Quarter 2021 Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Evelyn Infurna, ICR for opening remarks. Please go ahead.

Thank you. Good morning and welcome to Marcus and Millichap's First Quarter 2021 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 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 or about 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 these 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 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 Hessam Nadji. Hessam?

Thank you, Evelyn. On behalf of the entire Marcus & Millichap team, good morning and thank you for joining our first quarter 2021 earnings call. I'm pleased to report that the first three months of 2021 for MMI were characterized by solid year-over-year earnings growth, rebuilding of our pipelines, further addition of experienced professionals and outperforming the broader market once again. The momentum we saw in the second half of 2020 has continued into this year. Solid top line results combined with ongoing cost containment generated adjusted EBITDA growth of nearly 15% over the first quarter of last year. Total revenue was down just 3.5% from a record first quarter in 2020, which was up nearly 19% over 2019. Our revenue trend is also noteworthy, given the expedited progress made since January 1 in rebuilding our pipeline and inventory levels after a record fourth quarter. Let me take a moment to acknowledge that these numbers reflect our clients' trust and our ability to help them solve problems reposition portfolios and rapidly act on market opportunities. These results would not be possible without the extreme dedication, work ethic and expertise of our sales and financing professionals in a market environment still impeded by the pandemic. Looking back, our pandemic response strategy clearly made a difference in the first quarter of this year. Our expanded research content intensified investor outreach, comprehensive and frequent internal communication and training, as well as investments in technology continued onward even as we speak. These initiatives helped generate leads, bring clients closer to our sales force and open opportunities. We're proud of the record number of investors who attend our webcast and find our research content and advisory services of value. We also benefited from contributions by new talent added to the MMI platform through nine acquisitions…

Thank you, Hessam. Our financial and operating performance in the first quarter was extremely encouraging, as we delivered nearly 15% year-over-year growth in both adjusted EBIDTA and net income. A year-over-year improvement on those key metrics demonstrates our ability to complete transactions in a challenging market and the favorable impact of our rapid response to the pandemic through tactical cost controls. We expanded our margins during the quarter and expect to improve further in the quarters ahead, as our top line continues to recover and we generate additional leverage in the business. Total revenue in the first quarter was $184 million, as compared to a largely pre pandemic record high revenue of $191 million in the first quarter a year ago. These results are particularly noteworthy following a record fourth quarter that resulted in reduced inventory and pipeline levels entering the quarter. Brokerage commissions for the first quarter accounted for approximately 88.5% of our total revenues and was lower by 5.3% year-over-year against a tough prior year comparable that grew 19%. Our private client business accounted for 65% of real estate brokerage revenue for the quarter, or $105 million as compared to a record $114 million in the comparable prior period. It should be noted that critical segments of this price tranche, including apartments and single-tenant net lease registered strong growth in the first quarter of last year making the comparison challenging. Brokerage revenue from our Middle Market Transactions accounted for 13% of real estate brokerage revenue and was lower by 9% year-over-year. Our larger transactions represented 19% of brokerage revenue for the first quarter and grew 5.1% year-over-year largely due to the strength of our IPA division in the quarter and on top of a 46% growth rate the prior year as Hessam noted. Moving on to MMCC. Financing…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Stephen Sheldon with William Blair. Please go ahead.

Thanks. Good morning. Great to see the continued traction with larger deals. I guess how much of that has been due to higher productivity compared with increased headcount within the IPA group? And how are you thinking about your potential to continue I guess growing market share in that category as we think about the next couple of years?

Good morning, Stephen. Good to have you on the call. It's a combination of both the factors that you just mentioned: additional teams coming on board with us and the productivity of our existing teams. As we have shared before, the larger business segment is more volatile. So you do have more of a choppy pattern over quarter-to-quarter or year-over-year. But what we're really encouraged about is the fact that the new talent that we've brought in over the past 18 to 24 months has been cult treated very well to the MMI platform, collaborating with other IPA and non IPA, frankly, producers and bring in a very consistent service delivery to our larger clients. And we are very confident that there is plenty of additional opportunity to recruit more teams and through technology, constant improvement to our support systems our underwriting our client outreach programs that are particularly targeted to institutions, both through IPA and frankly, the more senior agents at Marcus & Millichap are going to bring more and more growth opportunity to us. Their productivity is a key part of why we think this segment of the business is a very important one for us. It also weighs heavily toward our retention. As our agents spend more time with the company and mature and begin to do some larger deals, our ability to compete at that level becomes very important for retention. And of course, having expanded the platform for larger deals over the past several years through IPA, we become a lot more attractive as an alternative for many experienced folks out in the marketplace. But let me emphasize again, it really is a complementary strategy to our Private Client focus. And the two really go hand-in-hand. And that part of the appeal for many of the teams that have joined us, is the fact that they can have a private client business and team members can execute smaller transactions and private client type of marketing through the Marcus & Millichap brand and have the more senior team members and the key principles focused on the institutional business through IPA.

Got it. Yes, that makes sense. So a normal pipeline question, I guess, I'd call it. You talked last quarter about depleted pipeline, although, it seems like that may have recovered quickly. Where does the pipeline sit now? And then, I guess, secondarily on the potential tax changes, when would you expect the proposed Biden tax changes to potentially drive some more urgency within the market?

Sure. I'll take the first part of your question. First, the pipeline looks solid. We've seen continued improvement even in the last 30 days. And we're very encouraged by that, looking into the rest of the second quarter and of course the rest of the year. And so I will say that it is on a very positive track. Of course, we don't share the specifics on the pipeline itself, but it's -- let me just say, it's very encouraging. Related to the timing of when some of the noise around tax law changes may or may not affect decision-making for our clients is very hard to predict. There is a lot of concern. We're getting a lot of questions from our clients. We're going to be hosting several webcasts around this topic as we always do to bring perspective from experts -- subject matter experts from the industry to our client base. But I will say that most people realize that we're at a very early stage of this debate and discussion. And that experience tells us these things go through lots of changes before they're finalized. Nonetheless, we take it very seriously and we're preparing accordingly. That's why my comments -- my prepared comments really address the fact that, no matter what happens, we have a long-term growth plan, we have a diversification plan and we have plenty of capture opportunity even in our core private client business. And there might be some shifts and changes and a quarter or two of some recalibration. But long term, real estate is a very compelling investment. It has become even more compelling because of COVID in the way that the lack of overbuilding showed up, the quick recovery in some of the segments have already begun to show up and the fact that on a yield perspective. It is so competitive versus alternative investments in a low interest rate environment. So all those positives are not just going to vanish overnight.

Great. Thanks. And then I guess last one for me just as, I think you made a comment that you'd expect kind of a normal seasonality the kind of trends to play out. As we think about the second quarter you typically see a sequential uptick in the second quarter relative to the first on both revenue and adjusted EBITDA. No, you don't provide guidance, but have you seen anything out there that would change the normal seasonal pattern from the first to the second quarter?

Yes. Stephen, this is Steve. I'll take that. And that's the traditional seasonality that we've historically experienced is what we were referring to. And so, we, at this point, given what we see, that's where we see Q2 trending. We've got of course a little less visibility into the out quarters. But for Q2 we would expect to see us approaching the normal seasonality that we've experienced over the last many number of years.

Good to hear. Thank you very much.

Thanks, Stephen.

This concludes the question-and-answer session. I would like to turn the conference back over to Hessam Nadji for any closing remarks.

Thank you, operator, and thank you everyone for joining our call and we look forward to having you back next quarter. The call is adjourned.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.