Marcus Millichap Inc

Previous wording

•changes in interest rates, availability of capital, tax laws, employment laws, or other government regulation affecting our business;

Current wording

•changes in interest rates, availability of capital, tax laws, employment laws, or other government regulation affecting our business, in each case as may be impacted by the 2024 presidential election;

Previous wording

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024, 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, 2023, filed with the SEC on February 27, 2024, including the “Risk Factors” section and the consolidated financial statements and notes included therein.

Current wording

The results of operations for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024, 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, 2023, filed with the SEC on February 27, 2024, including the “Risk Factors” section and the consolidated financial statements and notes included therein.

Previous wording

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 March 31, 2024, we had 1,722 investment sales and financing professionals that are primarily exclusive independent contractors operating in more than 80 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three months ended March 31, 2024, we closed 1,564 investment sales, financing and other transactions with total sales volume of approximately $9.7 billion. During the year ended December 31, 2023, we closed 7,546 investment sales, financing and other transactions with total sales volume of approximately $43.6 billion.

Current wording

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 June 30, 2024, we had 1,726 investment sales and financing professionals that are primarily exclusive independent contractors operating in more than 80 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three and six months ended June 30, 2024, we closed 1,800 and 3,364 investment sales, financing and other transactions with total sales volume of approximately $9.5 billion and $19.2 billion, respectively. During the year ended December 31, 2023, we closed 7,546 investment sales, financing and other transactions with total sales volume of approximately $43.6 billion.

Previous wording

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 by 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 March 31, 2024, approximately 85% of our revenue was generated from real estate brokerage commissions, 11% from financing fees and 4% from other real estate related services.

Current wording

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 by 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 June 30, 2024, approximately 86% of our revenue was generated from real estate brokerage commissions, 11% from financing fees and 3% from other real estate related services.

Previous wording

We are the industry leader in serving private clients in the $1-$10 million private client market, which contributed approximately 67% of our real estate brokerage commissions during both the three months ended March 31, 2024 and 2023. The following tables set forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:

Current wording

We are the industry leader in serving private clients in the $1-$10 million private client market, which contributed approximately 63% and 69% of our real estate brokerage commissions during the three months ended June 30, 2024 and 2023, respectively, and approximately 65% and 68% of our real estate brokerage commissions during the six months ended June 30, 2024 and 2023, respectively. The following tables set forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:

Previous wording

Although the fundamentals of most property types remain sound, with the notable exception of urban office, both lending and investor activity remain below the pre-pandemic historical norm and the expectation gap between buyers and sellers remains challenging. The demand for space will continue to be influenced by consumer and business sentiment as well as the broader economic outlook.

Current wording

Although the fundamentals of most property types remain sound, with the notable exception of urban office, both lending and investor activity remain below the pre-pandemic historical norm and the expectation gap between buyers and sellers remains challenging. The demand for space will continue to be influenced by consumer and business sentiment as well as the broader economic outlook. That said, should the Federal Reserve cut rates in the third quarter as expected, sentiment could shift and space demand could be lifted.

Previous wording

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. 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.

Current wording

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.

Previous wording

The capital markets remain at the heart of the commercial real estate transaction slowdown. The combination of sustained higher interest rates with tighter lender underwriting, reduced loan-to-value standards and a broad-based reduction in the volume of available debt capital have restrained market liquidity and forced investors to recalibrate their underwriting. This exacerbated the buyer/seller expectation gap and reduced trading throughout 2023 and into the first quarter of 2024.

Current wording

The capital markets remain at the heart of the commercial real estate transaction slowdown. The combination of sustained higher interest rates with tighter lender underwriting, reduced loan-to-value standards and a broad-based reduction in the volume of available debt capital have restrained market liquidity. This has forced investors to recalibrate their underwriting. This widened the buyer/seller expectation gap and reduced trading throughout 2023 and into the second quarter of 2024.

Previous wording

The commercial real estate sector marked a fifth consecutive quarter of below average sales activity as persistent headwinds, including still-elevated interest rates, tightened lender underwriting and the buyer/seller expectation gap weighed on transactions. Although some signs of recovery have begun to emerge, with pre-transaction broker engagement gathering momentum, the market has yet to clearly signal a turning point. We believe a significant volume of investment capital remains undeployed waiting for economic, interest rate, financial market, geopolitical and commercial real estate pricing clarity. Additional price adjustments likely remain necessary to recalibrate values to higher interest rates, but the duration of the recalibration process will depend on the combination of Federal Reserve rate policies, political stability and the market forces driving long-term interest rates. Once investors re-engage in the market, it will likely take time to navigate the price discovery process and for sales activity to revive.

Current wording

The commercial real estate sector once again saw below average sales activity as investors contended with persistent headwinds including still-elevated interest rates, tightened lender underwriting and the buyer/seller expectation gap. Although some signs of recovery have begun to emerge, including more exclusive inventory being brought to market, a sustainable recovery in trading volumes has yet to clearly take hold. We believe a significant volume of investment capital remains undeployed waiting for economic, interest rate, financial market, geopolitical and commercial real estate pricing clarity. Should the Federal Reserve reduce rates in September, it will likely take time to navigate the price discovery process and for sales activity to revive.

Previous wording

Office properties, particularly those in the urban core, continue to face the greatest uncertainty and the greatest challenges in acquiring debt financing. Apartment financing, underpinned by Fannie Mae and Freddie Mac, has generally been the most attainable, with typically lower interest rates than other property types. However, the rapid interest rate spike relative to the sector's very low cap rates and the large apartment development pipeline together with slackening rent growth has impacted apartment sales. Defensive assets — such as single-tenant net lease properties backed by high-credit tenants — and medical office assets continue to receive buyer interest, but sales of these types of properties have also fallen as the flow of 1031 exchange capital coming from other property types has diminished. Ultimately, the market velocity will be dictated by a combination of the economic outlook, geopolitical forces, Federal Reserve action, interest rates and the narrowing of the buyer/seller expectation gap. If, and when, the Federal Reserve reduces rates, we believe commercial real estate sales activity should begin to increase toward its historical norm.

Current wording

Office properties, particularly those in the urban core, continue to face the greatest uncertainty and the greatest challenges in acquiring debt financing. In addition, signs of distress and the potential for additional foreclosures in this commercial real estate segment continue to rise. Apartment financing, underpinned by Fannie Mae and Freddie Mac, has generally been the most attainable, with typically lower interest rates than other property types. However, the rapid interest rate spike relative to the sector's very low cap rates and the large apartment development pipeline together with slackening rent growth has impacted apartment sales. Defensive assets — such as single-tenant net lease properties backed by high-credit tenants — and medical office assets continue to receive buyer interest, but sales of these types of properties have also fallen as the flow of 1031 exchange capital coming from other property types has diminished. Ultimately, the market velocity will be dictated by a combination of the economic outlook, geopolitical forces, Federal Reserve action, interest rates and the narrowing of the buyer/seller expectation gap. If, and when, the Federal Reserve reduces rates, we believe commercial real estate investment activity could gain momentum.

Previous wording

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 performance obligations.

Current wording

Other revenue includes fees generated from leasing, consulting and advisory services, 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 performance obligations.

Previous wording

The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff, as well as business development, marketing, and expensing of forgivable loans over the retention period of our sales and financing professionals. In addition, these costs include facilities costs (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction costs related to acquisitions, 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 (“2013 Plan”) and the 2013 Employee Stock Purchase Plan (“ESPP”).

Current wording

The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff, as well as business development, marketing, and expensing of forgivable loans over the retention period of our sales and financing professionals. In addition, these costs include facilities costs (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction costs related to acquisitions, 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”).

Previous wording

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.

Current wording

Depreciation expense consists of depreciation recorded on our computer software and hardware, 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.

Previous wording

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 benefit for income taxes includes the windfall tax benefits and shortfall expenses, net, from shares issued in connection with our 2013 Plan and ESPP.

Current wording

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 benefit for income taxes includes the windfall tax benefits and shortfall expenses, net, from shares issued in connection with our Amended Plan and Amended ESPP.

Previous wording

The following is a discussion of our results of operations for the three months ended March 31, 2024 and 2023. 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.

Current wording

The following is a discussion of our results of operations for the three and six months ended June 30, 2024 and 2023. 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.

Previous wording

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 March 31, 2024 and 2023, we closed more than 1,500 and 1,800 investment sales, financing and other transactions, respectively, with total sales volume of approximately $9.7 billion and $10.4 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

Current wording

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 June 30, 2024 and 2023, we closed more than 1,800 and 1,900 investment sales, financing and other transactions, respectively, with total sales volume of approximately $9.5 billion and $9.7 billion, respectively. During the six months ended June 30, 2024 and 2023, we closed more than 3,300 and 3,700 investment sales, financing and other transactions, respectively, with total sales volume of approximately $19.2 billion and $20.2 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

Previous wording

(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, operating income 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 loss, which is the most directly comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measure” below.

Current wording

(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 loss, operating income 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 loss, which is the most directly comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measure” below.

Previous wording

Our total revenue was $129.1 million for the three months ended March 31, 2024 compared to $154.8 million for the same period in 2023, a decrease of $25.7 million, or 16.6%. Total revenue decreased as a result of decreases in real estate brokerage commissions and financing fees, as described below. See “Factors Affecting Our Business” section for additional market information.

Current wording

Total revenue was $158.4 million for the three months ended June 30, 2024 compared to $162.9 million for the same period in 2023, a decrease of $4.5 million, or 2.8%. Total revenue decreased as a result of decreases in real estate brokerage commissions, as described below. See “Factors Affecting Our Business” for additional market information.

Previous wording

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 decreased to $76.9 million for the three months ended March 31, 2024 from $95.4 million for the same period in 2023, a decrease of $18.6 million, or 19.4%. The decrease was primarily due to decreased commission expenses driven by the related decreased revenue noted above. Cost of services as a percentage of total revenue decreased by 210 basis points to 59.5% compared to the same period in 2023 primarily due to our senior investment sales and financing professionals earning a lower amount of additional commissions due to lower revenue.

Current wording

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 decreased to $98.1 million for the three months ended June 30, 2024 from $101.2 million for the same period in 2023, a decrease of $3.1 million, or 3.0%. The decrease was primarily due to decreased commission expenses driven by the related decreased revenue noted above. Cost of services as a percentage of total revenue decreased by 20 basis points to 61.9% compared to the same period in 2023 primarily due to our senior investment sales and financing professionals earning a lower amount of additional commissions due to lower revenue.

Previous wording

Selling, general, and administrative expense. Selling, general and administrative expense for the three months ended March 31, 2024 decreased to $68.9 million, from $72.2 million compared to the same period in 2023, a decrease of $3.3 million or 4.6%. The decrease was primarily due to a reduction in marketing support and events attributable to lower revenue, partially offset by increased compensation-related costs. As a percentage of revenue, selling, general and administrative expense increased due to the fixed nature of certain of these expenses.

Current wording

Selling, general, and administrative expense. Selling, general and administrative expense for the three months ended June 30, 2024 decreased to $65.0 million, from $68.9 million compared to the same period in 2023, a decrease of $3.9 million or 5.7%. The decrease was primarily due to a reduction in marketing support and corporate bonus attributable to the lower revenue level.

Previous wording

Depreciation and amortization expense. Depreciation and amortization expense increased by an immaterial amount for the three months ended March 31, 2024 compared to the same period in 2023.

Current wording

Depreciation and amortization expense. Depreciation and amortization expense decreased by an immaterial amount for the three months ended June 30, 2024 compared to the same period in 2023.

Previous wording

The benefit for income taxes was $4.7 million for the three months ended March 31, 2024, compared to $5.6 million for the same period in 2023. The effective income tax rate for the three months ended March 31, 2024, was 32.2% compared to 49.1% for the same period in 2023. The majority of the reduction in the effective tax rate is due to the relationship of permanent and other items to pre-tax loss as presented in Note 10 - “Income Taxes” in the Notes to the Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q.

Current wording

The provision for income taxes was $2.1 million for the three months ended June 30, 2024, compared to $2.7 million for the same period in 2023. The effective income tax rate for the three months ended June 30, 2024, was (61.1)% compared to (45.5)% for the same period in 2023. The change in the effective tax rate is primarily due to the relationship of permanent and other items and the change in the valuation allowance to pre-tax loss as presented in Note 10 - “Income Taxes” in the Notes to the Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q.

Previous wording

Real estate brokerage commissions. Revenue from real estate brokerage commissions decreased to $109.5 million for the three months ended March 31, 2024 from $135.0 million for the same period in 2023, a decrease of $25.6 million, or 18.9%. The number of transactions decreased by 13.8% and the average transaction size decreased by 7.9%, which drove a decrease of revenue of 19.2% in the Private Client Market and a decrease of 20.1% in the combined Middle Market and Larger Transaction Market. The average commission rate increased by four basis points during the three months ended March 31, 2024 compared to the same period in 2023 as a result of a shift in the proportion of transactions from the Middle Market and Larger Transaction Market as smaller transactions typically earn higher commission rates.

Current wording

Real estate brokerage commissions. Revenue from real estate brokerage commissions decreased to $244.9 million for the six months ended June 30, 2024 from $275.4 million for the same period in 2023, a decrease of $30.5 million, or 11.1%. The decrease was the result of total sales volume decreasing by 12.6%, partially offset by the impact of a three basis point increase in the average commission rate earned for the six months ended June 30, 2024 compared to the same period in 2023. Private Client Market revenue decreased by 15.4% and the combined Middle Market and Larger Transaction Market decreased by 2.7%.

Previous wording

Financing fees. Revenue from financing fees decreased to $14.4 million for the three months ended March 31, 2024 from $15.9 million for the same period in 2023, a decrease of $1.4 million, or 9.1%, resulting primarily from a 16.1% decrease in the number of financing transactions. This decrease was partially offset by an increase in the average transaction size of 14.6% and an increase in the average fee per transaction of 1.4%.

Current wording

Financing fees. Revenue from financing fees decreased to $32.7 million for the six months ended June 30, 2024 from $33.8 million for the same period in 2023, a decrease of $1.0 million, or 3.1%, resulting primarily from a decrease of 10 basis points in the average fee rate, partially offset by a 3.4% increase in total financing volume.

Previous wording

Other revenue. Other revenue increased to $5.2 million for the three months ended March 31, 2024 from $3.9 million for the same period in 2023, an increase of $1.3 million, or 34.1%. The increase was primarily driven by increases in fees generated from leasing activity during the three months ended March 31, 2024, compared to the same period in 2023.

Current wording

Other revenue. Other revenue increased to $9.9 million for the six months ended June 30, 2024 from $8.5 million for the same period in 2023, an increase of $1.3 million, or 15.7%. The increase was primarily driven by increases in leasing fees partially offset by decreases in consulting and advisory services during the six months ended June 30, 2024, compared to the same period in 2023.

Previous wording

Our total operating expenses were $149.2 million for the three months ended March 31, 2024 compared to $170.9 million for the same period in 2023, a decrease of $21.6 million, or 12.7%. Cost of services decreased by $18.6 million and selling, general, and administrative expenses decreased by $3.3 million, as described below.

Current wording

Our total operating expenses were $315.6 million for the six months ended June 30, 2024 compared to $344.4 million for the same period in 2023, a decrease of $28.8 million, or 8.4%. Cost of services decreased by $21.6 million and selling, general, and administrative expenses decreased by $7.2 million, as described below.

Previous wording

Other income, net increased to $5.6 million for the three months ended March 31, 2024 from $4.8 million compared to the same period in 2023. The increase of $0.8 million was primarily driven by an increase in interest income as a result of rebalancing the Company's investments.

Current wording

Other income, net increased to $10.4 million for the six months ended June 30, 2024 from $9.7 million for the same period in 2023. The increase of $0.7 million was primarily driven by an increase in interest income as a result of rebalancing the Company's investments.

Previous wording

In this Quarterly Report on Form 10-Q, we include a non-GAAP financial measure, Adjusted EBITDA. We define Adjusted EBITDA as net (loss) income before (i) interest income, (ii) interest expense, (iii) (benefit) provision 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

Current wording

In this Quarterly Report on Form 10-Q, we include a non-GAAP financial measure, Adjusted EBITDA. We define Adjusted EBITDA as net loss before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, cash equivalents, and restricted cash, (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 loss, operating income 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 loss, to Adjusted EBITDA is as follows (in thousands):

Previous wording

Our primary sources of liquidity are cash, cash equivalents, and restricted cash, cash flows from operations, marketable debt securities, available-for-sale and, if necessary, borrowings under our Credit Agreement (as defined herein). In order to enhance yield to us, 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, the Company has not experienced any restrictions or gating fees on its 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, cash equivalents, and restricted cash, proceeds from the sale of marketable debt securities, available-for-sale or availability under our Credit Agreement.

Current wording

Our primary sources of liquidity are cash, cash equivalents, and restricted cash, cash flows from operations, marketable debt securities, available-for-sale and, if necessary, borrowings under our Credit Agreement (as defined herein). In order to enhance yield to us, 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, the Company has not experienced any restrictions or gating fees on its 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, net of restricted cash, cash equivalents, and proceeds from the sale of marketable debt securities, available-for-sale or availability under our Credit Agreement.

Previous wording

Our total cash, cash equivalents, and restricted cash balance decreased by $80.2 million to $90.6 million at March 31, 2024, compared to $170.8 million at December 31, 2023. The following table sets forth our summary cash flows for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

Our total cash, cash equivalents, and restricted cash balance decreased by $8.8 million to $162.0 million at June 30, 2024, compared to $170.8 million at December 31, 2023. The following table sets forth our summary cash flows for the six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

Cash flows used in operating activities were $51.0 million for the three months ended March 31, 2024 compared to $101.2 million for the same period in 2023. The $50.2 million decrease in cash flows used in operating activities for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to decreased bonus, deferred commission and compensation and advances and loans payments in the current year compared to the same period in prior year, partially offset by decreased operating income as discussed above. The cash flows from operating activities are also affected by the timing of certain cash receipts and payments.

Current wording

Cash flows used in operating activities were $50.2 million for the six months ended June 30, 2024 compared to $94.8 million for the same period in 2023. The $44.6 million decrease in cash flows used in operating activities for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to decreased payments for bonuses, deferred commission and compensation and advances and loans payments in the current year compared to the same period in prior year, partially offset by decreased operating income as discussed above. The larger bonus and commission payments made in the 2023 period primarily related to amounts accrued in 2022. The cash flows from operating activities are also affected by the timing of certain cash receipts and payments.

Previous wording

Cash flows used in investing activities were $21.6 million for the three months ended March 31, 2024 compared to cash flows provided by investing activities of $117.4 million for the same period in 2023. The $139.0 million decrease in cash flows from investing activities for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a net decrease of $139.2 million in net proceeds from sales and maturities of securities in 2024 compared to the same period in 2023.

Current wording

Cash flows provided by investing activities were $58.8 million for the six months ended June 30, 2024 compared to $82.4 million for the same period in 2023. The $23.6 million decrease in cash flows from investing activities for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a net decrease of $24.9 million in net proceeds from sales and maturities of securities in 2024 compared to the same period in 2023. Net proceeds from marketable debt securities, available-for-sale during the six month period ended June 30, 2023 were used to fund stock repurchases.

Previous wording

Cash flows used in financing activities were $7.5 million for the three months ended March 31, 2024 compared to $24.0 million for the same period in 2023. The decrease of $16.5 million in cash flows used in financing activities for the three months ended March 31, 2024 compared to the same period in 2023 was primarily due to a decrease of $16.1 million in stock repurchases in 2024 compared to the same period in 2023 .

Current wording

Cash flows used in financing activities were $17.2 million for the six months ended June 30, 2024 compared to $52.4 million for the same period in 2023. The decrease of $35.1 million in cash flows used in financing activities for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to a decrease of $34.4 million in stock repurchases in 2024 compared to the same period in 2023.

Previous wording

We believe that our existing balances of cash, cash equivalents, and restricted cash, 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 the foreseeable future. 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 March 31, 2024, cash, cash equivalents, and restricted cash and marketable debt securities, available-for-sale, aggregated $346.3 million.

Current wording

We believe that our existing balances of cash, 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 the foreseeable future. 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 June 30, 2024, cash, excluding restricted cash, cash equivalents, and marketable debt securities, available-for-sale, aggregated $325.0 million.

Previous wording

We have a credit agreement with Wells Fargo Bank, National Association (as amended, the “Credit Agreement”) which provides for a $10.0 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2024. The Company is monitoring covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under our Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 12 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q for additional information on the Credit Agreement.

Current wording

Our credit agreement with Wells Fargo Bank, National Association (as amended, the “Credit Agreement”) provides for a $10.0 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025. The Company maintains a $10.0 million restricted cash balance in support of the Credit Agreement. The Company is monitoring covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under our Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 12 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q for additional information on the Credit Agreement.

Previous wording

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 March 31, 2024, the Company has agreed to a maximum aggregate guarantee obligation of $186.8 million relating to loans with an unpaid balance of $1,120.7 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 records a loan-loss obligation and is required to provide cash collateral to MTRCC for this obligation.

Current wording

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 June 30, 2024, the Company has agreed to a maximum aggregate guarantee obligation of $194.7 million relating to loans with an unpaid balance of $1,168.3 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 records a loan-loss obligation and posted cash collateral of $532,000 to MTRCC for this obligation as of June 30, 2024.

Previous wording

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, 2023 through the date the condensed consolidated financial statements were issued, other than for the payment on April 5, 2024 of a semi-annual regular dividend of $0.25 per share on outstanding common stock declared by our Board of Directors on February 8, 2024, aggregating $10.1 million.

Current wording

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, 2023 through the date the condensed consolidated financial statements were issued, other than commitments that are already disclosed in the accompanying notes to the condensed consolidated financial statements.

Previous wording

The annual Consumer Price Index (“CPI”) inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981, then fell to 3.1% in November 2023. Since then, the headline CPI inflation rate has trended upward to a reading of 3.5% in March 2024. In 2022 through 2023, the Federal Reserve increased the federal funds rate to the 5.25%-5.5% range in an effort to combat inflation, which has had an adverse impact on commercial real estate transactions. We have had to increase the wages we pay our employees due to inflationary pressures. Furthermore, our clients are also affected by inflation and increased interest rates. The inflation volatility in the first quarter of 2024 has raised questions about whether and when the Federal Reserve will reduce interest rates. At the beginning of the year, there were broad expectations that the Federal Reserve would make several rate cuts in 2024, but expectations have been pared back to just one or two rate reductions this year. The uncertainty surrounding the interest rate outlook continues to restrain investor transaction activity in the commercial real estate market.

Current wording

The annual CPI inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981, then fell to 3.1% in November 2023. In the first quarter of 2024, the headline CPI inflation rate trended upward to a reading of 3.5% in March 2024, but it has since been reduced to 3.0% and is likely to continue to decline. In 2022 through 2023, the Federal Reserve increased the federal funds rate to the 5.25%-5.5% range in an effort to combat inflation, which has had an adverse impact on commercial real estate transactions. The inflation volatility in the first quarter of 2024 raised questions about whether and when the Federal Reserve will reduce interest rates. At the beginning of the year, there were broad expectations that the Federal Reserve would make several rate cuts in 2024, but expectations were pared back to just one or two rate reductions this year. The uncertainty surrounding the interest rate outlook continues to restrain investor transaction activity in the commercial real estate market.