Marcus & Millichap Inc.

11/06/2026 | Press release | Distributed by Public on 11/06/2026 16:15

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Unless the context requires otherwise, the words "Marcus & Millichap," "MMI," "we," the "Company," "us" and "our" refer to Marcus & Millichap, Inc., and its consolidated subsidiaries.
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements, including our expectations regarding the long-term outlook of the commercial real estate transaction market, and our positioning within it, our belief relating to the Company's long-term growth, our assessment of the key factors influencing the Company's business outlook, including the expectation for future changes in interest rates or inflation and their impact on commercial real estate demand, and the execution of our capital return program, including a semi-annual dividend and stock repurchase program. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management's good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
•general uncertainty in the capital markets, a worsening of economic conditions, and the rate and pace of economic recovery following an economic downturn;
•changes in our business operations;
•market trends in the commercial real estate market or the general economy, including the impact of inflation and changes to interest rates;
•our ability to attract and retain qualified senior executives, managers and investment sales and financing professionals;
•the impact of forgivable loans and related expense resulting from the recruitment and retention of agents;
•the impact of litigation and our success in appealing any judgments entered against us;
•the effects of increased competition on our business;
•our ability to successfully enter new markets or increase our market share;
•our ability to successfully expand our services and businesses and to manage any such expansions;
•our ability to retain existing clients and develop new clients;
•our ability to keep pace with changes in technology;
•any business interruption or technology failure, including cybersecurity risks and ransomware attacks, and any related impact on our brand reputation or clients;
•the failure to maintain the security of our information and technology networks, including personally identifiable and client information;
•changes in interest rates, availability of capital, tax laws, tariffs and trade regulations, executive orders, employment laws, or other government regulation affecting our business;
•our ability to successfully identify, negotiate, execute and integrate accretive acquisitions; and
•other risk factors included under "Risk Factors" in our most recent Annual Report on Form 10-K, this Quarterly Report on Form 10-Q or in any subsequent SEC report.
In addition, in this Quarterly Report on Form 10-Q, words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "goal," "expect," "predict," "potential," "should," and similar expressions, as they relate to our Company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.
Forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
The results of operations for the nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2026, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto
included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 26, 2026, including the "Risk Factors" section and the consolidated financial statements and notes included therein.
Overview
We are a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research, and advisory services. We have been the top commercial real estate investment broker in the United States based on the number of investment transactions for more than 15 years. As of September 30, 2026, we had 1,670 investment sales and financing professionals that are primarily exclusive independent contractors operating in 80 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three and nine months ended September 30, 2026, we closed 2,316 and 6,644 investment sales, financing and other transactions with total sales volume of approximately $13.8 billion and $40.0 billion, respectively. During the year ended December 31, 2025, we closed 8,818 investment sales, financing and other transactions with total sales volume of approximately $50.8 billion.
We generate revenue by collecting real estate brokerage commissions upon the sale, and financing fees upon the financing of commercial properties, by providing equity advisory services and loan sales, loan guarantees and providing consulting and advisory services. Real estate brokerage commissions are typically based upon the value of the property and financing fees are typically based upon the size of the loan. During the three months ended September 30, 2026, approximately 84% of our revenue was generated from real estate brokerage commissions, 13% from financing fees and 3% from other revenue, including consulting and advisory services.
We divide commercial real estate into four major markets, characterized by price:
•Properties priced less than $1 million;
•Private client market: properties priced from $1 million to up to but less than $10 million;
•Middle market: properties priced from $10 million to up to but less than $20 million; and
•Larger transaction market: properties priced from $20 million and above.
We are the industry leader in serving private clients in the $1 million - $10 million private client market, which contributed approximately 61% and 63% of our real estate brokerage commissions during the three months ended September 30, 2026 and 2025, respectively, and approximately 63% and 64% for the nine months ended September 30, 2026 and 2025, respectively. The following table sets forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:
Three Months Ended September 30,
2026 2025 Change
Real Estate Brokerage Number Volume Revenue Number Volume Revenue Number Volume Revenue
(in millions) (in thousands) (in millions) (in thousands) (in millions) (in thousands)
<$1 million 222 $ 135 $ 6,123 244 $ 151 $ 7,356 (22) $ (16) $ (1,233)
Private Client Market
($1 - <$10 million)
1,161 3,779 105,989 1,164 3,758 102,323 (3) 21 3,666
Middle Market
($10 - <$20 million)
121 1,671 30,501 106 1,405 26,139 15 266 4,362
Larger Transaction Market (≥$20 million) 80 3,824 31,492 72 3,044 26,348 8 780 5,144
1,584 $ 9,409 $ 174,105 1,586 $ 8,358 $ 162,166 (2) $ 1,051 $ 11,939
Nine Months Ended September 30,
2026 2025 Change
Real Estate Brokerage Number Volume Revenue Number Volume Revenue Number Volume Revenue
(in millions) (in thousands) (in millions) (in thousands) (in millions) (in thousands)
<$1 million 645 $ 381 $ 17,559 657 $ 396 $ 18,032 (12) $ (15) $ (473)
Private Client Market
($1 - <$10 million)
3,295 10,816 300,340 3,026 9,791 273,542 269 1,025 26,798
Middle Market
($10 - <$20 million)
283 3,888 71,861 262 3,540 66,251 21 348 5,610
Larger Transaction Market (≥$20 million) 239 11,708 89,459 191 9,306 69,380 48 2,402 20,079
4,462 $ 26,793 $ 479,219 4,136 $ 23,033 $ 427,205 326 $ 3,760 $ 52,014
Factors Affecting Our Business
Our business and our operating results, financial condition and liquidity are significantly affected by the number and size of commercial real estate investment sales and financing transactions that we close in any period. The number and size of these transactions are affected by our ability to recruit and retain investment sales and financing professionals, identify and contract properties for sale, and identify those that need financing and refinancing. We principally monitor the commercial real estate market through four factors, which generally drive our business. The factors are the economy, commercial real estate supply and demand, capital markets, and investor sentiment and investment activity.
The Economy
Our business is dependent on economic conditions within the markets in which we operate. Changes in the economy on a global, national, regional, or local basis can have a positive or negative impact on our business. Economic indicators and projections related to job growth, unemployment, interest rates, retail spending and consumer confidence trends can have a positive or negative impact on our business. Overall market conditions, including global trade, interest rate changes, inflation, job creation, and global events can affect investor sentiment and, ultimately, the demand for our services from investors in real estate.
Despite numerous economic headwinds, the U.S. economy is proving to be durable and resilient. Job creation remains positive, with the addition of 612,000 new positions through September 30, 2026. Although the pace of job creation has decreased from the 2010-2019 annual average of more than 2,000,000 positions per year, the unemployment rate remains in the low four percent range. In addition, retail sales have remained robust, achieving 6.3% growth on a year-over-year basis as of September 30, and on an inflation adjusted basis, retail sales growth remains positive at 3.1%. Other positive economic indicators, including both the ISM manufacturing and non-manufacturing indexes, delivered readings of 55 for September 2026, reiterating a positive growth outlook. These trends support the consensus Blue Chip GDP growth forecast of 2.3% for the year.
The positive economic growth outlook remains challenged by elevated inflation and a rising interest rate climate. Brent Crude oil prices pushed well above $100 per barrel in October 2026, reinforcing upward pressure on gasoline and diesel prices. As of October 20, 2026, the national average price of gasoline was 44% higher than its pre-Middle East conflict level on February 27, 2026, while diesel was 68% higher. As a result, energy prices were 20.4% higher in September than a year prior and transportation prices were up by 7.8%. These inflationary drivers pushed the Producer Price Index to a 6.3% year-over-year gain and the Consumer Price Index to 3.7% annual growth, levels substantively above the Federal Reserve target of 2.0% inflation. In September, the Federal Reserve raised the overnight rate by 25 basis points to a lower bound of 3.75%, and the consensus outlook portends additional rate increases that could restrain economic growth in 2027. Despite rising interest rates, investor motivation to transact remains positive. Many investors have commercial real estate targeted capital for acquisitions, and some owners face impending debt maturities that will require refinancing or asset sales. In many cases, owners will be unable to refinance their properties due to the higher interest rates, forcing them to sell properties. Investors may lose their initial investment if they are unable to refinance their properties and, in some cases, lenders are agreeing to short sales. This is creating acquisition opportunities for investors with ready capital who can buy the property at a lower basis. While higher interest rates have expanded the buyer/seller expectation gap, the prospect of further interest rate increases may cause both buyers and sellers to meet the market more quickly than in past cycles.
While the Middle East conflict, tariffs and other policies have sustained elevated uncertainty, and the prospect of rising inflation and higher interest rates could force another commercial real estate repricing cycle, long-term drivers support the commercial real estate investment thesis. Positive demographics, limited and falling construction levels across all property types together with the hard asset benefits offered by commercial real estate in an elevated inflation cycle bolster the long-term commercial real estate investment outlook.
Commercial Real Estate Supply and Demand
Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control. These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds.
Multifamily housing demand has rebounded in 2026 after a slow second half of 2025. However, demand tapered in the third quarter of 2026, falling short of new completions to raise the national average vacancy rate by 10 basis points over the second quarter to 4.6%. Slowing job creation and household formation impacted the pace of new leases, but that trend was partially offset by increased tenant retention. Rising mortgage rates have restrained home sales as monthly payments have pressed higher, expanding the affordability gap between renting and owning a home. This is helping multifamily operators retain rental households for longer. The multifamily market is also benefiting from the slowing pace of new apartment completions, which were nearly 27% lower in the first three quarters of 2026 compared to the same period last year. That trend helped sustain vacancy levels below 5% on a national basis. While rent growth varies substantively by region, with Sun Belt metros still facing a meaningful supply overhang and modestly negative rent growth in several metros, the broader trend is positive. With multifamily completions expected to decline further through 2027, the prospect of strengthening property performance offers investors an improving outlook. Although rental housing demand could be restrained if the economy, job creation or household formation continues to weaken, the current outlook remains cautiously optimistic.
The retail and industrial sectors remain encumbered by tariffs, economic uncertainty and elevated shipping and transportation costs, but space demand for both property types remained positive in the third quarter of 2026. Through the end of the third quarter, industrial space completions have declined by 14.7% from the same period last year, while space demand has increased. Third quarter industrial space absorption outpaced new completions for the first time since the second quarter of 2022 helping to reduce the national average industrial vacancy rate to 7.6%, a 10 basis points reduction compared to the second quarter. The momentum shift also resulted in 1.1% annual rent growth, marking the strongest national rent gain since mid-year 2024. With new industrial construction expected to slow further, the sector appears to be reaching a positive turning point.
Like industrial, retail space demand strengthened in the third quarter to outpace completions, with the national average vacancy rate down to 4.8%, a 10 basis point reduction compared to the second quarter of 2026. The positive momentum supported a modest improvement in rent growth. Although inflation, weak hiring and the erosion of wage-growth support pose a headwind for the retail sector, inflation adjusted core retail sales continue to gain ground, rising by 2.2% on a year-over-year basis as of September. If the sector sustains momentum, retail property performance should continue to make headway, especially as new space additions remain very limited.
Demand for office space continues to grow as companies increasingly bring more of their workforce into the office. Office space absorption has been positive for ten consecutive quarters, with annual gains on par with the 10-year average prior to the pandemic. While space demand has been concentrated in Class A properties and suburban areas of primary markets, the gains have been sufficient to reduce the vacancy rate by 150 basis points from its peak of 17.3% in the first quarter of 2024. Opportunistic investors who have acquired office assets at a significant discount and who anticipate an extended office property recovery cycle have boosted office property transaction activity.
The commercial real estate space demand outlook is difficult to discern amid the dramatic policy shifts enacted by the U.S. presidential administration. Increased uncertainty, weakened sentiment and higher inflation could slow decision making, causing commercial real estate space demand to falter. If policy clarity emerges, commercial real estate space demand could be reinvigorated. Nonetheless, all commercial real estate property types aside from office properties entered the new cycle on sound footing, suggesting a durable performance outlook.
Capital Markets
Credit and liquidity issues in the financial markets have a direct impact on the flow of capital to the commercial real estate market. Real estate purchases are often financed with debt, and as a result, credit and liquidity impact transaction activity and prices. Movements of interest rates in one direction, whether increasing or decreasing, could adversely or positively affect the operations and income potential of commercial real estate properties, as well as lender and equity underwriting for real estate investments. These changes directly influence investor demand for commercial real estate investments and what they are willing to pay. Furthermore, the use of debt or loan-to-value ratios can shift along with lender confidence and underwriting standards. At times of heightened uncertainty or liquidity issues, loan-to-values decline, requiring buyers to provide more equity and take more risk to close deals.
The sustained upward pressure on interest rates in the third quarter, with elevated prospects of future rate increases by the Federal Reserve, have begun to spur investors to adapt their strategies. While many investors had hoped for rates to fall, the evolving outlook suggests that is unlikely. As a result, both buyers and sellers are increasingly motivated to take action before interest rates rise further. For investors facing impending mortgage maturities, many must decide whether to sell assets or refinance them at significantly higher interest rates. While some lenders may offer investors in good standing extensions of existing terms, fewer lenders are doing so than in past years. As a result, investors with loans that were originated five years ago at mortgage rates in the mid-3% range now face a refinance rate in the mid-6% to mid-7% range depending on the asset and borrower. The refinance terms also frequently require a significant additional cash infusion. As a result, investors may need to sell their properties at a loss, in some cases partnering with their lender to short sell the property for less than the current loan amount. By the same token, many buyers are expediting the purchase process as they attempt to lock-in their financing ahead of additional rate increases. Lending liquidity remains healthy, but prevailing interest rates now stand 30-50 basis points higher than they were 90 days ago.
Although economic uncertainty combined with financial market and interest rate volatility normally tends to increase investor caution, capital flows into commercial real estate could potentially be bolstered. As a "hard asset" with some level of resistance to inflation, recessions and financial market volatility, investment into commercial real estate could benefit from the current economic climate. The repricing of commercial real estate assets over the last three years has enhanced their yield profile, supporting positive or neutral leverage in many markets and property types. Whether capital migrates to commercial properties will likely depend on the risk perception of the broader financial market.
Investor Sentiment and Investment Activity
We facilitate investors buying, selling, and financing properties in order to generate commissions. Investors' desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity. In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups and estate planning.
Commercial real estate transaction activity increased by 6% in the third quarter of 2026 compared to the same period in 2025, led by gains in institutional grade industrial, office and single tenant retail property sales. In the third quarter, industrial transactions priced $20 million and higher surged to 1,133 transactions while office and single tenant retail transactions above $20 million increased by 89% and 278% respectively. Third quarter transaction velocity of property types priced between $2.5 million and $10 million edged down by 8% compared to the same quarter last year while the $10 million to $20 million segment was flat. The commercial real estate investment climate remains challenged by rising interest rates, slowed job creation and slowing household formation. However, if the conflict in the Middle East reaches a resolution, inflation could abate, alleviating some of the interest rate pressure. Nonetheless, commercial real estate has historically offered some inflation resistance and has delivered durable returns when financial market turbulence rises, so commercial real estate could emerge as a favored alternative investment option.
Several metrics traditionally associated with rising transaction activity, including increased exclusive inventory being brought to market and rising requests for Broker Opinions of Value, suggest that transactional momentum could be sustained in the coming quarters. Nonetheless, the variety of potential headwinds facing the sector, including the economy, rising inflation, rising interest rates, financial market trends, geopolitical and commercial real estate pricing clarity, could suppress activity. In the current uncertain climate, defensive assets such as single-tenant net lease properties backed by high-credit tenants and medical office assets continue to receive buyer interest. Apartment properties, supported by positive long-term drivers, including robust demographics of the renter-aged population and the high cost of homeownership, is also a favored property segment. Ultimately, market velocity will be dictated by a combination of the economic outlook,
financial market trends, geopolitical forces, Federal Reserve action, interest rates and the buyer/seller expectation gap. If trade and foreign policy stabilize, uncertainty abates and investor sentiment rises, we believe commercial real estate investment activity could gain additional momentum.
Key Financial Measures and Indicators
Revenue
Our revenue is primarily generated from our real estate investment sales business. In addition to real estate brokerage commissions, we generate revenue from financing fees and from other revenue, which are primarily comprised of leasing, consulting and advisory fees.
Because our business is transaction oriented, we rely on investment sales and financing professionals to continually develop leads, identify properties to sell and finance, market those properties and close the sale or financing in a timely manner to generate a consistent flow of revenue. While our sales volume is impacted by seasonality factors, the timing of closings is also dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting in the $1 million to $10 million private client market. These factors can cause transactions to be accelerated or delayed beyond our control. Further, commission rates earned are generally inversely related to the value of the property sold or financed. As we have expanded our business into the middle and larger transaction markets, we have seen our overall commission rates fluctuate from period-to-period as a result of changes in the relative mix of the number and volume of investment sales transactions closed in the middle and larger transaction markets as compared to the $1 million to $10 million private client market. These factors may result in period-to-period variations in our revenue that differ from historical patterns.
A small percentage of our transactions include retainer fees and/or breakage fees. Retainer fees are credited against a success-based fee paid upon the closing of a transaction or a breakage fee. Transactions that are terminated before completion will sometimes generate breakage fees, which are usually calculated as a set amount or a percentage of the fee we would have received had the transaction closed.
Real Estate Brokerage Commissions
We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or investors seeking to buy properties. Revenue from real estate brokerage commissions is recognized at the close of escrow.
Financing Fees
We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients' existing mortgage debt. We recognize financing fee revenue at the time the loan closes, and we have no remaining significant obligations in connection with the transaction.
To a lesser extent, we also earn fees on loan performance, equity advisory services, loan sales, loan guarantees and ancillary services associated with financing activities. We recognize guarantee fees over the term of the guarantee and other fees when we have no further obligations, generally upon the closing of the transaction.
Other Revenue
Other revenue includes fees generated from consulting and advisory services, leasing, as well as referral fees from other real estate brokers, and are recognized when services are provided, upon closing of the transaction or when we have no further obligations.
Operating Expenses
Our operating expenses consist of cost of services, selling, general and administrative expenses and depreciation and amortization. The significant components of our expenses are further described below.
Cost of Services
The majority of our cost of services expense is variable commissions paid to our investment sales and financing professionals and compensation-related costs related to our financing activities. Commission expenses are directly
attributable to providing services to our clients for investment sales and financing services. Most of our investment sales and financing professionals are independent contractors and are paid commissions; however, because there are some who are employees and initially paid a salary, costs of services also include employee-related compensation, employer taxes and benefits for those employees. The commission rates we pay to our investment sales and financing professionals vary based on individual contracts negotiated and are generally higher for the more experienced professionals. Some of our most senior investment sales and financing professionals can also earn additional commissions after meeting certain annual financial thresholds. These additional commissions are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional commissions are generally deferred for a period of three years, at our election, and paid at the end of the third calendar year. Cost of services also includes referral fees paid to other real estate brokers where we are the principal service provider. Cost of services, therefore, can vary based on the commission structure of the investment sales and financing professionals that closed transactions in any particular period.
Selling, General and Administrative Expenses
The largest expense component within selling, general and administrative expenses is compensation for our management team and sales and support staff, as well as business development, marketing, and expensing of forgivable loans provided to our investment sales and financing professionals over the contractual term of the loan. In addition, these costs include facility costs (excluding depreciation and amortization), sales and events, licenses and subscriptions, legal, information technology, telecommunications, changes in fair value for contingent and deferred consideration and other administrative expenses. Also included in selling, general and administrative are expenses for stock-based compensation to non-employee directors, employees and independent contractors (i.e. investment sales and financing professionals) under the Amended and Restated 2013 Omnibus Equity Incentive Plan (the "Amended Plan") and the Amended and Restated 2013 Employee Stock Purchase Plan (the "Amended ESPP").
Depreciation and Amortization Expense
Depreciation expense consists of depreciation recorded on our computer software and hardware equipment, as well as our furniture, fixtures and equipment. Depreciation is recognized over estimated useful lives ranging from three to seven years for assets. Amortization expense consists of amortization recorded on intangible assets amortized on a straight-line basis using a useful life between one and seven years.
Other Income, Net
Other income, net primarily consists of interest income, realized gains and losses on our marketable debt securities, available-for-sale, net gains or losses on our deferred compensation plan assets, foreign currency gains and losses and other non-operating income and expenses.
Interest Expense
Interest expense primarily consists of interest expense associated with the stock appreciation rights ("SARs") liability, and our Credit Agreement (as defined herein in Item 2).
Provision (benefit) for Income Taxes
We are subject to U.S. and Canadian federal taxes and individual state and local taxes based on the income generated in the jurisdictions in which we operate. Our effective tax rate fluctuates as a result of (i) changes in our annual effective tax rate applied to current pre-tax income (loss), (ii) the change in the mix of our activities in the jurisdictions in which we operate due to differing tax rates in those jurisdictions and (iii) the impact of permanent items, including compensation charges, qualified transportation fringe benefits, uncertain tax positions, meals and entertainment and tax-exempt deferred compensation plan assets. Our provision (benefit) for income taxes includes the windfall tax benefits and shortfall tax expenses, net, from shares issued in connection with our Amended Plan and Amended ESPP.
We record deferred taxes, net based on the tax rate expected to be in effect at the time those items are expected to be recognized for tax purposes.
Results of Operations
The following is a discussion of our results of operations for the three and nine months ended September 30, 2026 and 2025. The tables included in the period comparisons below provide summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results.
Key Operating Metrics
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We also believe these metrics are relevant to investors' and others' assessment of our financial condition and results of operations. During the three months ended September 30, 2026 and 2025, we closed 2,316 and 2,289 investment sales, financing and other transactions, respectively, with total sales volume of approximately $13.8 billion and $12.2 billion, respectively. During the nine months ended September 30, 2026 and 2025, we closed 6,644 and 6,065 investment sales, financing and other transactions, respectively, with total sales volume of approximately $40.0 billion and $33.9 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Real Estate Brokerage 2026 2025 2026 2025
Average number of investment sales professionals
1,564 1,554 1,597 1,558
Average number of transactions per investment sales professional
1.01 1.02 2.79 2.65
Average commission per transaction
$ 109,915 $ 102,248 $ 107,400 $ 103,289
Average commission rate
1.85 % 1.94 % 1.79 % 1.85 %
Average transaction size (in thousands)
$ 5,940 $ 5,270 $ 6,005 $ 5,569
Total number of transactions
1,584 1,586 4,462 4,136
Total brokerage sales volume (in millions)
$ 9,409 $ 8,358 $ 26,793 $ 23,033
Three Months Ended
September 30, 		Nine Months Ended
September 30,
Financing (1)
2026 2025 2026 2025
Average number of financing professionals
102 101 102 101
Average number of transactions per financing professional
4.15 4.02 12.75 11.41
Average fee per transaction
$ 51,652 $ 50,246 $ 54,077 $ 49,176
Average fee rate
0.76 % 0.71 % 0.74 % 0.69 %
Average transaction size (in thousands)
$ 6,830 $ 7,065 $ 7,341 $ 7,108
Total number of transactions
423 406 1,301 1,152
Total financing sales volume (in millions)
$ 2,889 $ 2,868 $ 9,550 $ 8,188
(1)Operating metrics exclude certain financing fees not directly associated to transactions.
Comparison of Three Months Ended September 30, 2026 and 2025
Below are key operating results for the three months ended September 30, 2026 compared to the three months ended September 30, 2025 (dollars in thousands):
Three Months Ended September 30, 2026 Percentage
of
Revenue 		Three Months Ended September 30, 2025 Percentage
of
Revenue 		Change
Dollars Percentage
Revenue:
Real estate brokerage commissions $ 174,105 83.6 % $ 162,166 83.6 % $ 11,939 7.4 %
Financing fees 26,980 12.9 26,292 13.6 688 2.6 %
Other revenue 7,283 3.5 5,434 2.8 1,849 34.0 %
Total revenue 208,368 100.0 193,892 100.0 14,476 7.5 %
Operating expenses:
Cost of services 133,452 64.0 120,996 62.4 12,456 10.3 %
Selling, general and administrative 73,517 35.3 72,527 37.4 990 1.4 %
Depreciation and amortization 2,305 1.1 2,743 1.4 (438) (16.0) %
Total operating expenses 209,274 100.4 196,266 101.2 13,008 6.6 %
Operating loss (906) (0.4) (2,374) (1.2) 1,468 61.8 %
Other income, net 3,656 1.8 4,041 2.0 (385) (9.5) %
Interest expense (155) (0.1) (197) (0.1) 42 (21.3) %
Income before provision for income taxes 2,595 1.3 1,470 0.7 1,125 76.5 %
Provision for income taxes 1,588 0.8 1,230 0.6 358 29.1 %
Net income $ 1,007 0.5 % $ 240 0.1 % $ 767 319.6 %
Adjusted EBITDA (1)
$ 8,241 4.0 % $ 6,889 3.6 % $ 1,352 19.6 %
(1)Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income (loss), operating income (loss) or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss), which is the most directly comparable U.S. GAAP financial measure, see "Non-GAAP Financial Measure" below.
Revenue
Our total revenue was $208.4 million for the three months ended September 30, 2026 compared to $193.9 million for the same period in 2025, an increase of $14.5 million, or 7.5%. Total revenue primarily increased as a result of increases in real estate brokerage commissions and financing fees, as described below. See the "Factors Affecting Our Business" section for additional market information.
Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $174.1 million for the three months ended September 30, 2026 from $162.2 million for the same period in 2025, an increase of $11.9 million, or 7.4%. The increase was primarily attributed to a 12.6% increase in total sales volume, partially offset by a nine basis point decrease in the average commission rate earned. The Middle Market and Larger Transaction Market revenue increased by 18.1% and the Private Client Market revenue increased by 3.6%.
Financing fees. Revenue from financing fees increased to $27.0 million for the three months ended September 30, 2026 from $26.3 million for the same period in 2025, an increase of $0.7 million, or 2.6%. The increase was primarily attributed to a 0.7% increase in the total financing volume and a five basis point increase in the average fee rate earned compared to the same period in 2025.
Other revenue. Other revenue increased to $7.3 million for the three months ended September 30, 2026 from $5.4 million for the same period in 2025, an increase of $1.8 million, or 34.0%. The increase was primarily driven by increases in leasing fees and consulting fees during the three months ended September 30, 2026 compared to the same period in 2025.
Total Operating Expenses
Our total operating expenses were $209.3 million for the three months ended September 30, 2026 compared to $196.3 million for the same period in 2025, an increase of $13.0 million, or 6.6%. Cost of services increased by $12.5 million, partially offset by a decrease of $0.4 million in depreciation and amortization expense as described below.
Cost of services. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities. Cost of services increased to $133.5 million for the three months ended September 30, 2026 from $121.0 million for the same period in 2025, an increase of $12.5 million, or 10.3%. The increase was primarily due to increased commission expenses driven by the related increased revenue discussed above. Cost of services as a percentage of total revenue increased by 160 basis points to 64.0% compared to the same period in 2025 primarily due to our senior investment sales and financing professionals earning higher commissions in 2026.
Selling, general and administrative expense. Selling, general and administrative expense increased to $73.5 million for the three months ended September 30, 2026 compared to $72.5 million for the same period in 2025, an increase of 1.4%. The net increase of $1.0 million is primarily due to an increase in IT related costs partially offset by a decrease in litigation costs. In the third quarter of 2025, a $4.0 million legal accrual was recorded related to an ongoing litigation matter.
Depreciation and amortization expense. Depreciation and amortization expense decreased to $2.3 million for the three months ended September 30, 2026 from $2.7 million for the same period in 2025, a decrease of $0.4 million, or 16.0%. The decrease primarily relates to assets that were fully depreciated.
Other Income, Net
Other income, net decreased to $3.7 million for the three months ended September 30, 2026 from $4.0 million for the same period in 2025. The $0.3 million decrease is primarily due to a lower average yield on the Company's investments and to a reduction of the invested assets during the period compared to the same period in prior year.
Interest Expense
Interest expense decreased by an immaterial amount for the three months ended September 30, 2026 compared to the same period in 2025, and primarily relates to interest expense on our SARs liability.
Provision for Income Taxes
The provision for income taxes was $1.6 million for the three months ended September 30, 2026, compared to $1.2 million for the same period in 2025. The effective income tax rate for the three months ended September 30, 2026 was 61.2%, compared to 83.7% for the same period in 2025. The effective tax rate for the three months ended September 30, 2026 was determined using the estimated annual effective tax rate method, whereas the effective tax rate for the same period in 2025 was determined using the discrete method. The lower effective tax rate for the three months ended September 30, 2026 compared to the same period in 2025 was primarily due to non-deductible items, state income taxes, and shortfall tax expenses, net, related to stock-based compensation, as well as higher pre-tax income in the current period, which reduced the relative impact of these items. Refer to Note 10 - "Income Taxes" of our accompanying Notes to Condensed Consolidated Financial Statements for additional information.
Comparison of Nine Months Ended September 30, 2026 and 2025
Below are key operating results for the nine months ended September 30, 2026 compared to the nine months ended September 30, 2025 (dollars in thousands):
Nine Months Ended September 30, 2026 Percentage
of
Revenue 		Nine Months Ended September 30, 2025 Percentage
of
Revenue 		Change
Dollars Percentage
Revenue:
Real estate brokerage commissions $ 479,219 82.2 % $ 427,205 83.6 % $ 52,014 12.2 %
Financing fees 84,092 14.4 70,681 13.8 13,411 19.0 %
Other revenue 19,439 3.4 13,320 2.6 6,119 45.9 %
Total revenue 582,750 100.0 511,206 100.0 71,544 14.0 %
Operating expenses:
Cost of services 363,755 62.4 315,962 61.8 47,793 15.1 %
Selling, general and administrative 216,420 37.2 215,629 42.2 791 0.4 %
Depreciation and amortization 7,044 1.2 8,745 1.7 (1,701) (19.5) %
Total operating expenses 587,219 100.8 540,336 105.7 46,883 8.7 %
Operating loss (4,469) (0.8) (29,130) (5.7) 24,661 (84.7) %
Other income, net 11,611 2.0 13,518 2.6 (1,907) (14.1) %
Interest expense (448) (0.1) (584) (0.1) 136 (23.3) %
Income (loss) before provision (benefit) for income taxes 6,694 1.1 (16,196) (3.2) 22,890 141.3 %
Provision (benefit) for income taxes 4,878 0.8 (979) (0.2) 5,857 598.3 %
Net income (loss) $ 1,816 0.3 % $ (15,217) (3.0) % $ 17,033 111.9 %
Adjusted EBITDA (1)
$ 23,306 4.0 % $ (397) (0.1) % $ 23,703 (2)
(1)Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles ("U.S. GAAP") and should not be considered as an alternative to net income (loss), operating income (loss) or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income (loss), which is the most directly comparable U.S. GAAP financial measure, see "Non-GAAP Financial Measure" below.
(2)Percentage not meaningful.
Revenue
Our total revenue was $582.8 million for the nine months ended September 30, 2026 compared to $511.2 million for the same period in 2025, an increase of $71.5 million, or 14.0%. Total revenue primarily increased as a result of increases in real estate brokerage commissions and financing fees, as described below. See the "Factors Affecting Our Business" section for additional market information.
Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $479.2 million for the nine months ended September 30, 2026 from $427.2 million for the same period in 2025, an increase of $52.0 million, or 12.2%. The increase was primarily attributed to a 16.3% increase in total sales volume, partially offset by a six basis point decrease in the average commission rate earned compared to the same period in 2025. The decrease in the average commission rate was primarily driven by a shift in revenue from the Private Client Market to the Larger Transaction Market, which generally earns lower commission rates. For the nine months ended September 30, 2026, the Larger Transaction Market included certain transactions with sales volume exceeding $300 million individually, which more significantly reduced the average commission rate earned. The Middle Market and Larger Transaction Market revenue increased by 18.9%, while the Private Client Market revenue increased by 9.8%.
Financing fees. Revenue from financing fees increased to $84.1 million for the nine months ended September 30, 2026 from $70.7 million for the same period in 2025, an increase of $13.4 million, or 19.0%. The increase was primarily
attributed to a 16.6% increase in the total financing volume and a five basis point increase in the average fee rate earned compared to the same period in 2025.
Other revenue. Other revenue increased to $19.4 million for the nine months ended September 30, 2026 from $13.3 million for the same period in 2025, an increase of $6.1 million, or 45.9%. The increase was primarily driven by increases in leasing fees and consulting fees during the nine months ended September 30, 2026 compared to the same period in 2025.
Total Operating Expenses
Our total operating expenses were $587.2 million for the nine months ended September 30, 2026 compared to $540.3 million for the same period in 2025, an increase of $46.9 million, or 8.7%. Cost of services increased by $47.8 million, partially offset by a decrease of $1.7 million in depreciation and amortization expense as described below.
Cost of services. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities. Cost of services increased to $363.8 million for the nine months ended September 30, 2026 from $316.0 million for the same period in 2025, an increase of $47.8 million, or 15.1%. The increase was primarily due to increased commission expenses driven by the related increased revenue discussed above. Cost of services as a percentage of total revenue increased by 60 basis points to 62.4% compared to the same period in 2025 primarily due to our senior investment sales and financing professionals earning higher commissions in 2026.
Selling, general and administrative expense. Selling, general and administrative expense increased to $216.4 million for the nine months ended September 30, 2026 compared to $215.6 million for the same period in 2025, an increase of 0.4%. The net increase of $0.8 million is primarily due to an increase in IT related costs partially offset by a decrease in litigation costs. In the third quarter of 2025, a $4.0 million legal accrual was recorded related to an ongoing litigation matter.
Depreciation and amortization expense. Depreciation and amortization expense decreased to $7.0 million for the nine months ended September 30, 2026 from $8.7 million for the same period in 2025, a decrease of $1.7 million, or 19.5%. The decrease primarily relates to assets that were fully depreciated.
Other Income, Net
Other income, net decreased to $11.6 million for the nine months ended September 30, 2026 from $13.5 million for the same period in 2025. The $1.9 million decrease primarily relates to a lower average yield on the Company's investments and to a reduction of the invested assets during the period compared to the same period in the prior year.
Interest Expense
Interest expense decreased by an immaterial amount for the nine months ended September 30, 2026 compared to the same period in 2025, and primarily relates to interest expense on our SARs liability.
Provision (benefit) for Income Taxes
The provision for income taxes was $4.9 million for the nine months ended September 30, 2026, compared to a benefit for income taxes of $1.0 million for the same period in 2025. The effective income tax rate for the nine months ended September 30, 2026 was 72.9% compared to 6.0% for the same period in 2025. The increase in the effective tax rate for the nine months ended September 30, 2026, compared to the same period in 2025, primarily reflects the use of the estimated AETR methodology in 2026, compared to the discrete method in 2025. In addition, the effective tax rate for the nine months ended September 30, 2026 was impacted by the change from a pre-tax loss in the prior-year period compared to pre-tax income in the current-year period, as well as the relative impact of non-deductible items, state income taxes, and shortfall tax expenses, net, related to stock-based compensation. Refer to Note 10 - "Income Taxes" of our accompanying Notes to Condensed Consolidated Financial Statements for additional information.
Non-GAAP Financial Measure
In this Quarterly Report on Form 10-Q, we include a non-GAAP financial measure, Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before (i) interest income and other, including interest on marketable debt
securities, available-for-sale and cash, cash equivalents, and restricted cash, and net realized gains (losses) on marketable debt securities, available-for-sale, (ii) interest expense, (iii) provision (benefit) for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. We use Adjusted EBITDA in our business operations to evaluate the performance of our business, develop budgets and measure our performance against those budgets, among other things. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate our overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. We find Adjusted EBITDA to be a useful management metric to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income (loss), operating loss or any other measures calculated in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. A reconciliation of the most directly comparable U.S. GAAP financial measure, net income (loss), to Adjusted EBITDA is as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2026 2025 2026 2025
Net income (loss) $ 1,007 $ 240 $ 1,816 $ (15,217)
Adjustments:
Interest income and other (1)
(3,605) (3,487) (11,067) (11,898)
Interest expense 155 197 448 584
Provision (benefit) for income taxes 1,588 1,230 4,878 (979)
Depreciation and amortization 2,305 2,743 7,044 8,745
Stock-based compensation 6,791 5,966 20,187 18,368
Adjusted EBITDA $ 8,241 $ 6,889 $ 23,306 $ (397)
(1)Other includes net realized gains (losses) on marketable debt securities, available-for-sale.
Liquidity and Capital Resources
Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, marketable debt securities, available-for-sale and, if necessary, borrowings under the Credit Agreement (as defined herein in Item 2). We have invested a portion of our cash in money market funds and fixed and variable income debt securities, in accordance with our investment policy approved by the Board of Directors. Certain of our investments in money market funds may not maintain a stable net asset value and may impose a discretionary liquidity fee. To date, we have not experienced any restrictions on our ability to redeem funds from money market funds. Although we have historically funded our operations through operating cash flows, there can be no assurance that we can continue to meet our cash requirements entirely through our operations, cash and cash equivalents, proceeds from the sale of marketable debt securities, available-for-sale or availability under the Credit Agreement.
Cash Flows
Our total cash, cash equivalents, and restricted cash balance increased by $27.3 million to $189.2 million at September 30, 2026, compared to $161.9 million at December 31, 2025. The following table sets forth our summary cash flows for the nine months ended September 30, 2026 and 2025 (in thousands):
Nine Months Ended September 30,
2026 2025
Net cash provided by operating activities $ 27,853 $ 20,389
Net cash provided by (used in) investing activities 42,117 (29,211)
Net cash used in financing activities (42,362) (27,425)
Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash (306) 162
Net increase (decrease) in cash, cash equivalents, and restricted cash 27,302 (36,085)
Cash, cash equivalents, and restricted cash at beginning of period 161,921 153,445
Cash, cash equivalents, and restricted cash at end of period $ 189,223 $ 117,360
Operating Activities
Cash flows provided by operating activities were $27.9 million for the nine months ended September 30, 2026 compared to $20.4 million for the same period in 2025. The $7.5 million increase in cash flows provided by operating activities for the nine months ended September 30, 2026 compared to the same period in 2025 was primarily due to a $17.0 million decrease in net losses, as discussed above, and a $19.0 million decrease in the change in deferred compensation and commissions, partially offset by a $23.6 million decrease in advances and loans and an $8.0 million increase in prepaid expenses in the nine months ended September 30, 2026 compared to the same period in 2025. The cash flows provided by operating activities were also affected by the timing of certain cash receipts and payments.
Investing Activities
Cash flows provided by investing activities were $42.1 million for the nine months ended September 30, 2026 compared to cash flows used in investing activities of $29.2 million for the same period in 2025. The $71.3 million increase in cash provided by investing activities for the nine months ended September 30, 2026 compared to the same period in 2025 was primarily due to an increase in net proceeds of $71.6 million from sales, purchases, and maturities of securities.
Financing Activities
Cash flows used in financing activities were $42.4 million for the nine months ended September 30, 2026 compared to $27.4 million for the same period in 2025. The $15.0 million increase in cash flows used in financing activities is primarily due to the $17.5 million increase in cash paid for stock repurchases in the 2026 period compared to the same period in 2025.
Liquidity
We believe that our existing balances of cash and cash equivalents, cash flows expected to be generated from our operations, and proceeds from the sale of marketable debt securities, available-for-sale will be sufficient to satisfy our operating requirements for at least the next 12 months and beyond. If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could prevent us from funding acquisitions or otherwise financing our growth or operations. As of September 30, 2026, cash (excluding restricted cash), cash equivalents, and marketable debt securities, available-for-sale, aggregated $370.8 million.
Credit Agreement
We have a credit agreement with Wells Fargo Bank, National Association (as amended, the "Credit Agreement") which provides for a $10 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2027. As of September 30, 2026, there were no amounts outstanding under
the Credit Agreement. We monitor covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under the Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 13 - "Commitments and Contingencies" of our accompanying Notes to Condensed Consolidated Financial Statements for additional information on the Credit Agreement.
Off Balance Sheet Arrangements
The Company, in connection with the Strategic Alliance with M&T Realty Capital Corporation ("MTRCC"), has agreed to provide loan opportunities that may be funded through MTRCC's agreement with Fannie Mae, which requires MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can assume a portion of MTRCC's guarantee obligation to Fannie Mae of loan opportunities presented to and closed by MTRCC. As of September 30, 2026, the Company has agreed to a maximum aggregate guarantee obligation of $525.5 million relating to loans with an unpaid balance of $3,207.1 million. The maximum guarantee obligation is not representative of the actual loss we would incur. The Company would be liable for this amount only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The Company has recorded an allowance for losses of $255,000 as of September 30, 2026 related to these guarantee obligations. The Company is required to provide cash collateral to MTRCC for this obligation and this is reflected as $2.0 million of restricted cash as of September 30, 2026, which is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheet.
Material Cash Requirements
There have been no material changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 through the date on which the condensed consolidated financial statements were issued, other than for the payment of $9.5 million on April 3, 2026 of a semi-annual regular dividend of $0.25 per share on outstanding common stock declared by our Board of Directors on February 10, 2026. On July 31, 2026, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, with a payment date of October 6, 2026, to stockholders of record at the close of business on September 15, 2026, of which $9.5 million was paid on October 6, 2026.
Inflation
Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand, which may be affected by uncertain or changing economic and market conditions, including inflation/deflation arising in connection with and in response to various macroeconomic factors and impact of increased interest rates on the broader economy.
The annual CPI inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981. CPI inflation fell to 2.4% as of March 2025 and ended 2025 at 2.7%. In May 2026, largely due to the surge in oil and gas prices caused by the Middle East conflict, inflation increased to 4.2% before retreating to 3.4% in July as the cease fire allowed increased crude oil to navigate the Strait of Hormuz, lowering energy costs. Since then, the price of oil, gasoline and diesel have boosted inflation, taking the rate to 3.7% as of September with leading indicators such as energy inflation and the Producer Price Index suggesting inflation will increase. Although tariffs will likely play a role in the inflation outlook, the greater inflation risks largely center on the duration of the Middle East conflict and the amount of damage done to infrastructure. The uncertainty surrounding these variables has increased expectations of additional rate increases by the Federal Reserve in the coming months.
Looking forward, inflation could rise as the impact of tariffs flow through to consumers and if the Middle East conflict and closure of the Strait of Hormuz continues for an extended period. At this time, these variables remain opaque, clouding the inflation and interest rate outlook.
Critical Accounting Estimates
We prepare our financial statements in accordance with U.S. GAAP. In applying many of these accounting principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective and our actual results may change based on changing
circumstances or changes in our analyses. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. There were no significant changes in our critical accounting policies, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on February 26, 2026.
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