Marcus & Millichap, Inc.

Previous wording

The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025, 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, 2024, filed with the SEC on February 27, 2025, 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, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025, 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, 2024, filed with the SEC on February 27, 2025, 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, 2025, we had 1,668 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, 2025, we closed 1,706 investment sales, financing and other transactions with total sales volume of approximately $9.4 billion. During the year ended December 31, 2024, we closed 7,836 investment sales, financing and other transactions with total sales volume of approximately $49.6 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, 2025, we had 1,640 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, 2025, we closed 2,070 and 3,776 investment sales, financing and other transactions with total sales volume of approximately $12.3 billion and $21.7 billion, respectively. During the year ended December 31, 2024, we closed 7,836 investment sales, financing and other transactions with total sales volume of approximately $49.6 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 leasing, 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, 2025, approximately 85% of our revenue was generated from real estate brokerage commissions, 13% from financing fees and 2% 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 leasing, 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, 2025, approximately 82% of our revenue was generated from real estate brokerage commissions, 15% 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 million - $10 million private client market, which contributed approximately 63% and 67% of our real estate brokerage commissions during the three months ended March 31, 2025 and 2024, respectively. The following table sets 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 million - $10 million private client market, which contributed approximately 66% and 63% of our real estate brokerage commissions during the three months ended June 30, 2025 and 2024, respectively, and approximately 65% of our real estate brokerage commissions during both the six months ended June 30, 2025 and 2024. The following table sets forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:

Previous wording

Within the broader economic context, commercial real estate fundamentals remain sturdy, with most property types delivering positive space absorption. Apartment demand remained robust through the first quarter of 2025, exceeding elevated construction completions and supporting modest but positive rent gains. Retail space demand was marginally negative for the quarter, but the resulting uptick in vacancy was minimal and may simply reflect a temporary market recalibration. Industrial space demand was positive for the quarter, and office space demand continued to gain momentum.

Current wording

Within the broader economic context, commercial real estate fundamentals remain sturdy, with most property types delivering positive space absorption. Apartment demand remained robust through the first half of 2025, exceeding elevated construction completions and supporting modest but positive rent gains. Retail space demand was marginally negative through the first half of 2025, but the resulting uptick in vacancy has been minimal. Industrial space demand has remained nominally positive, and office space demand has continued to gain momentum.

Previous wording

Although apartment and industrial construction remains elevated, the supply additions are concentrated in select markets and the pace of deliveries is tapering. Oversupply risks in most markets are beginning to diminish as elevated capital costs join rising tariffs on building materials and construction labor shortages to drive construction costs higher. Retail and office development was already low entering 2025, with little sign of a revival. Apartment starts have fallen by 76% from their peak in 2022 and industrial completions in 2025 are expected to fall to approximately 210 million square feet, their lowest level since 2014. As a result, receding new supply risks in 2025 should aid commercial real estate performance in the coming quarters.

Current wording

Although apartment and industrial construction remains elevated, the supply additions are concentrated in select markets and the pace of deliveries is tapering. Oversupply risks in most markets are beginning to diminish as elevated capital costs join rising tariffs on building materials and construction labor shortages to drive construction costs higher. Retail and office development was already low entering 2025, with little sign of a revival. Apartment starts have fallen by 77% from their peak in 2022, and industrial completions in 2025 are expected to fall to approximately 250 million square feet, their lowest level since 2015. As a result, receding new supply risks in 2025 should aid commercial real estate performance in the coming quarters.

Previous wording

The commercial real estate space demand outlook for 2025 remains uncertain. Core drivers including job creation, retail sales and modest gains in office attendance entering the second quarter of 2025 suggest positive momentum, but the broader economic climate could impact the trajectory either positively or negatively. If the U.S. economy enters a recession, space demand for all types of commercial real estate could be negatively impacted. However, if a trade war is averted and sentiment increases, space demand could be bolstered.

Current wording

The commercial real estate space demand outlook for 2025 remains uncertain. Core drivers including job creation, retail sales and modest gains in office attendance through the second quarter of 2025 suggest positive momentum, but the broader economic climate could impact the trajectory either positively or negatively. If the U.S. economy enters a recession, space demand for all types of commercial real estate could be negatively impacted. However, if a trade war is averted, tariffs stabilize and sentiment increases, space demand could be bolstered.

Previous wording

The commercial real estate space demand outlook remains difficult to discern amid the dramatic policy shifts enacted by the new U.S. presidential administration. Increased uncertainty, falling sentiment and risks of a recession and higher inflation could slow decision making, causing commercial real estate space demand to falter. If the trade war deescalates and policy clarity emerges, commercial real estate space demand could be reinvigorated. Nonetheless, all commercial real estate property types have entered the new cycle on sound footing, suggesting a durable performance outlook.

Current wording

The commercial real estate space demand outlook remains difficult to discern amid the dramatic policy shifts enacted by the new U.S. presidential administration. Increased uncertainty, weakened sentiment and risks of a recession 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 have entered the new cycle on sound footing, suggesting a durable performance outlook.

Previous wording

Although interest rates had been trending lower entering 2025, the recent economic turmoil driven by aggressive trade policies has spurred increased interest rate volatility. Interest rate risks were exacerbated by President Trump’s threats to remove Jerome Powell as the head of the Federal Reserve, risking the independence of the Federal Reserve. While lender spreads had been tightening, the rising risk of inflation, policy uncertainty and financial market volatility have led to increased lender caution. Although debt capital liquidity remains strong, many lenders have increased their safety spreads, resulting in a modest increase in lending rates.

Current wording

Interest rate volatility following the rapid trade policy changes in early April has given way to range-bound movements, with the key 10-year treasury benchmark remaining near 4.5%. Interest rate risks have been exacerbated by President Trump’s threats to remove Jerome Powell as the head of the Federal Reserve, risking the independence of the Federal Reserve. While lender spreads had been tightening prior to April, the rising risk of inflation, policy uncertainty and financial market volatility have led to increased lender caution. Although debt capital liquidity remains strong, many lenders have increased their safety spreads, resulting in a modest increase in lending rates.

Previous wording

The combination of limited federal policy transparency and inflation risks posed by tariffs have caused the Federal Reserve to await further clarity before making any decisions on monetary policy. The prevailing sentiment by Wall Street is that the Federal Reserve will cut rates two or three times this year, but Chairman Powell has clearly stated that until clarity emerges, they will likely hold the overnight rate flat. Nonetheless, the Federal Reserve’s influence on longer term rates like the 10-year treasury, which more directly influence commercial real estate lending rates, is limited. Following the institution of the “Liberation Day” tariffs, international capital began to migrate out of U.S. bonds and financial assets, putting upward pressure on interest rates. Looking forward, long-term rates may be more influenced by international capital flows and treasury issuance than by the Federal Reserve.

Current wording

The combination of limited federal policy transparency and inflation risks posed by tariffs have caused the Federal Reserve to await further clarity before making any decisions on monetary policy. The prevailing sentiment by Wall Street is that the Federal Reserve will cut rates once or twice this year, but Chairman Powell has clearly stated that until clarity emerges, the Federal Reserve will likely hold the overnight rate flat. Nonetheless, the Federal Reserve’s influence on longer term rates like the 10-year treasury, which more directly influence commercial real estate lending rates, is limited. Following the institution of the “Liberation Day” tariffs, international capital began to migrate out of U.S. bonds and financial assets, putting upward pressure on interest rates. Looking forward, long-term rates may be more influenced by international capital flows and treasury issuance than by the Federal Reserve.

Previous wording

Although economic uncertainty together with financial market and interest rate volatility normally tend 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 the 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, but other hard assets have already experienced increased demand in the wake of the rapid policy shifts and financial market downturn.

Current wording

Although economic uncertainty together with financial market and interest rate volatility normally tend 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 the yield profile, supporting positive or neutral leverage in many markets and property types. In addition, the passage of the new tax act provides some benefits and additional clarity to the commercial real estate market. Bonus depreciation rules, increased state and local tax (“SALT”) allowances, and increased deductibility of interest paid on commercial real estate could bolster investment activity. Furthermore, by making many of the new tax rules permanent, investors can rely on greater tax policy certainty, allowing them to deploy longer-term investment strategies. Whether capital migrates to commercial properties will likely depend on the risk perception of the broader financial market, but other hard assets have already experienced increased demand in the wake of the rapid policy shifts and financial market downturn.

Previous wording

In the first quarter of 2025, commercial real estate transaction activity increased by 7% compared to the same quarter last year, led by velocity gains in seniors housing, retail and industrial property sales. Apartment transactions increased by 8% on a year-over-year basis, while office and hotel property sales activity declined. The transaction uptick reflects a narrowing of the expectation gap that began in the fourth quarter last year, but recent financial market volatility and uncertainty surrounding trade and the economy as a whole could re-widen expectations. Clarity on investor expectations in the new trade and economic climate have yet to fully emerge.

Current wording

In the second quarter of 2025, commercial real estate transaction activity increased by 12% compared to the same quarter last year, led by velocity gains in office and retail property sales. Apartment transactions increased by 12% on a year-over-year basis, while industrial and seniors housing sales flattened and hotel property sales activity declined. The transaction uptick reflects the continuance of transactions initiated in the first quarter when the expectation gap had narrowed, but recent financial market volatility and uncertainty surrounding trade and the economy could re-widen expectations. Clarity on investor expectations in the new trade and economic climate have yet to fully emerge.

Previous wording

Several metrics traditionally associated with rising transaction activity velocity, 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, interest rates, financial market trends, geopolitical and commercial real estate pricing clarity could ultimately suppress activity in 2025. 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. Another important factor influencing the investor outlook is the prospective renewal of the 2017 Tax Cuts and Jobs Act which includes several tax benefits that are supportive of commercial real estate investment including accelerated depreciation, pass-through entity deductions and Opportunity Zones. 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 policy stabilizes, uncertainty abates and investor sentiment rises, we believe commercial real estate investment activity could gain additional momentum.

Current wording

Several metrics traditionally associated with rising transaction activity velocity, 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, interest rates, financial market trends, geopolitical and commercial real estate pricing clarity could ultimately suppress activity in the second half of 2025. 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. Another important factor influencing the investor outlook is the renewal of many of the 2017 Tax Cuts and Jobs Act provisions. Accelerated depreciation, pass-through entity deductions, increases in Low Income Housing Tax Credit (LIHTC) allocations, increased SALT deductions and the renewal of Opportunity Zones could benefit commercial real estate investment. 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 policy stabilizes, uncertainty abates and investor sentiment rises, we believe commercial real estate investment activity could gain additional momentum.

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 Amended Plan and Amended 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) a change in the second quarter of 2025 from the annual effective tax rate (“AETR”) to the discrete method, (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 expenses, net, from shares issued in connection with our Amended Plan and Amended ESPP. For a discussion of our determination to change from the application of the AETR method for quarterly periods to the discrete method, please see 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

The following is a discussion of our results of operations for the three months ended March 31, 2025 and 2024. 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, 2025 and 2024. 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, 2025 and 2024, we closed 1,706 and 1,564 investment sales, financing and other transactions, respectively, with total sales volume of approximately $9.4 billion and $9.7 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, 2025 and 2024, we closed 2,070 and 1,800 investment sales, financing and other transactions, respectively, with total sales volume of approximately $12.3 billion and $9.5 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:

Previous wording

(1)Operating metrics exclude certain financing fees not directly associated to transactions.

Current wording

(1)Operating metrics exclude certain financing fees not directly associated with transactions.

Previous wording

Total revenue was $145.0 million for the three months ended March 31, 2025 compared to $129.1 million for the same period in 2024, an increase of $15.9 million, or 12.3%. Total revenue increased as a result of increases in real estate brokerage commissions and financing fees, partially offset by a reduction in other revenue, as described below. See “Factors Affecting Our Business” for additional market information.

Current wording

Total revenue was $172.3 million for the three months ended June 30, 2025 compared to $158.4 million for the same period in 2024, an increase of $13.9 million, or 8.8%. Total revenue increased as a result of increases in real estate brokerage commissions and financing fees, partially offset by a reduction in other revenue, as described below. See “Factors Affecting Our Business” for additional market information.

Previous wording

Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $123.6 million for the three months ended March 31, 2025 from $109.5 million for the same period in 2024, an increase of $14.1 million, or 12.9%. The increase was the result of total sales volume increasing by 17.6%, partially offset by a reduction of seven basis points in the average commission rate earned during the three months ended March 31, 2025 compared to the same period in 2024, caused by the shift in the proportion of transactions to the Middle Market and Larger Transaction Market from the Private Client Market, as Middle Market and Larger Transaction Markets typically earn lower commission rates. Private Client Market revenue increased by 6.2%, and the combined Middle Market and Larger Transaction Market revenue increased by 29.6%.

Current wording

Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $141.4 million for the three months ended June 30, 2025 from $135.4 million for the same period in 2024, an increase of $6.0 million, or 4.4%. The increase was the result of total sales volume increasing by 11.8%, partially offset by a reduction of 13 basis points in the average commission rate earned during the three months ended June 30, 2025 compared to the same period in 2024. The reduction in the average commission rate is primarily the result of the increase in the average transaction size as larger transactions generally have smaller commission rates. Private Client Market revenue increased by 10.3%, while the combined Middle Market and Larger Transaction Market revenue decreased by 6.6%. The overall average transaction size increased by 3.4%.

Previous wording

Financing fees. Revenue from financing fees increased to $18.1 million for the three months ended March 31, 2025 from $14.4 million for the same period in 2024, an increase of $3.7 million, or 25.7%, resulting primarily from a 16.1% increase in total financing volume and an eight basis point increase in the average fee rate during the three months ended March 31, 2025 compared to the same period in 2024.

Current wording

Financing fees. Revenue from financing fees increased to $26.3 million for the three months ended June 30, 2025 from $18.3 million for the same period in 2024, an increase of $8.0 million, or 43.5%, resulting primarily from a 86.0% increase in total financing volume, partially offset by 12 basis point decrease in the average fee rate during the three months ended June 30, 2025 compared to the same period in 2024. The reduction in the average fee rate is primarily the result of the increase in the average transaction size as larger transactions generally have smaller commission rates.

Previous wording

Total operating expenses were $162.7 million for the three months ended March 31, 2025 compared to $149.2 million for the same period in 2024, an increase of $13.5 million, or 9.1%. The change was primarily due to an increase of $11.5 million in cost of services as described below.

Current wording

Total operating expenses were $181.3 million for the three months ended June 30, 2025 compared to $166.4 million for the same period in 2024, an increase of $14.9 million, or 9.0%. The change was primarily due to an increase of $8.5 million in cost of services and an increase of $6.5 million in selling, general and administrative expense as described below.

Previous wording

Depreciation and amortization expense. Depreciation and amortization expense decreased to $2.8 million for the three months ended March 31, 2025 from $3.4 million compared to the same period in 2024, a decrease of $0.6 million, or 16.7%. The decrease primarily relates to accelerated amortization and impairment of certain intangible assets recorded in the second half of 2024 resulting from changes in estimates.

Current wording

Depreciation and amortization expense. Depreciation and amortization expense decreased to $3.1 million for the three months ended June 30, 2025 from $3.3 million compared to the same period in 2024, a decrease of $0.2 million, or 5.3%. The decrease primarily relates to accelerated amortization and impairment of certain intangible assets recorded in the second half of 2024 resulting from changes in estimates.

Previous wording

Other income, net decreased to $4.0 million for the three months ended March 31, 2025 from $5.6 million for the same period in 2024. The decrease of $1.6 million was primarily driven by a decrease in interest income due to a decreased average yield on our investments and a decrease in the investment gains and loss related to the assets held in the rabbi trust during the period compared to the same period in prior year.

Current wording

Other income, net increased to $5.5 million for the three months ended June 30, 2025 from $4.8 million for the same period in 2024. The increase of $0.7 million was primarily driven by an increase investment gain related to the assets held in the rabbi trust, partially offset by decreased interest income due to a decreased average yield on the Company's investments during the period compared to the same period in prior year.

Previous wording

The benefit for income taxes was $9.5 million for the three months ended March 31, 2025, compared to $4.7 million for the same period in 2024. The effective income tax rate for the three months ended March 31, 2025, was 68.2% compared to 32.2% for the same period in 2024. The net increase in the effective tax rate is primarily due to the relationship of permanent items, the change in the valuation allowance and the change in the state income tax benefit 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 $7.3 million for the three months ended June 30, 2025, compared to $2.1 million for the same period in 2024. The effective income tax rate for the three months ended June 30, 2025, was (194.5)% compared to (61.1)% for the same period in 2024. The change in the effective tax rate is primarily due to the application of the discrete method for the three and six months ended June 30, 2025 compared to the annual effective tax rate method for the three and six months ended June 30, 2024 as discussed 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

Other revenue. Other revenue decreased to $3.3 million for the three months ended March 31, 2025 from $5.2 million for the same period in 2024, a decrease of $1.9 million, or 36.8%, resulting primarily from a decrease in leasing fees.

Current wording

Other revenue. Other revenue decreased to $7.9 million for the six months ended June 30, 2025 from $9.9 million for the same period in 2024, a decrease of $2.0 million, or 20.0%, resulting primarily from a decrease in leasing fees.

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 increased to $88.3 million for the three months ended March 31, 2025 from $76.9 million for the same period in 2024. Cost of services as a percentage of total revenue increased by 140 basis points to 60.9% compared to the same period in 2024 primarily due to our senior investment sales and financing professionals earning a higher amount of additional commissions.

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 increased to $195.0 million for the six months ended June 30, 2025 from $174.9 million for the same period in 2024 as a result of increased revenue. Cost of services as a percentage of total revenue increased by 50 basis points to 61.4% compared to the same period in 2024 primarily due to our senior investment sales and financing professionals earning a higher amount of additional commissions.

Previous wording

Selling, general, and administrative expense. Selling, general and administrative expense for the three months ended March 31, 2025 increased to $71.6 million, from $68.9 million for the same period in 2024, an increase of $2.6 million or 3.8%. The increase was primarily due to (i) an increase in compensation related costs and (ii) increased investment in business development, marketing and other support related to the long-term talent acquisition and retention of our investment sales and financing professionals.

Current wording

Selling, general, and administrative expense. Selling, general and administrative expense for the six months ended June 30, 2025 increased to $143.1 million, from $133.9 million for the same period in 2024, an increase of $9.2 million or 6.9%. The increase was primarily due to (i) an increase in compensation related costs and (ii) increased investment in business development, marketing and other support related to the long-term talent acquisition and retention of our investment sales and financing professionals.

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 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) 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

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 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 loss, to Adjusted EBITDA is as follows (in thousands):

Previous wording

Our total cash, cash equivalents, and restricted cash balance decreased by $3.7 million to $149.7 million at March 31, 2025, compared to $153.4 million at December 31, 2024. The following table sets forth our summary cash flows for the three months ended March 31, 2025 and 2024 (in thousands):

Current wording

Our total cash, cash equivalents, and restricted cash balance decreased by $67.4 million to $86.0 million at June 30, 2025, compared to $153.4 million at December 31, 2024. The following table sets forth our summary cash flows for the six months ended June 30, 2025 and 2024 (in thousands):

Previous wording

Cash flows used in operating activities were $52.8 million for the three months ended March 31, 2025 compared to $51.0 million for the same period in 2024. The $1.8 million increase in cash flows used in operating activities for the three months ended March 31, 2025 compared to the same period in 2024 relates to a number of factors that are largely offsetting. These factors include a reduction in net loss, more than offset by increased payments for bonuses and deferred compensation and commissions in the current year compared to the same period in prior year and the effect of the timing of certain cash receipts and payments.

Current wording

Cash flows used in operating activities were $31.8 million for the six months ended June 30, 2025 compared to $50.2 million for the same period in 2024. The $18.3 million decrease in cash flows used in operating activities for the six months ended June 30, 2025 compared to the same period in 2024 primarily relates to a reduction in advances and loans in the current year compared to the same period in prior year and the effect of the timing of certain cash receipts and payments.

Previous wording

Cash flows provided by investing activities were $57.2 million for the three months ended March 31, 2025 compared to cash flows used in investing activities of $21.6 million for the same period in 2024. The $78.8 million increase in cash flows provided by investing activities for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to a net increase of $77.6 million in proceeds from sales and maturities of securities, net of purchases of securities in 2025 compared to the same period in 2024.

Current wording

Cash flows used by investing activities were $10.1 million for the six months ended June 30, 2025 compared to cash flows provided by investing activities of $58.8 million for the same period in 2024. The $68.9 million increase in cash flows used by investing activities for the six months ended June 30, 2025 compared to the same period in 2024 was primarily due to an increase of $69.8 million in the amount of purchases of securities, net of proceeds from sales and maturities of securities in 2025 compared to the same period in 2024.

Previous 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 March 31, 2025, cash, excluding restricted cash, cash equivalents, and marketable debt securities, available-for-sale, aggregated $319.5 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 maturities and possible sales 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, 2025, cash, excluding restricted cash, cash equivalents, and marketable debt securities, available-for-sale, aggregated $321.8 million.

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, 2025, the Company has agreed to a maximum aggregate guarantee obligation of $326.3 million relating to loans with an unpaid balance of $2,011.9 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, and the Company has recorded an allowance for losses of $(159,000) as of March 31, 2025 related to these guarantee obligations. The Company is required to provide cash collateral to MTRCC for this obligation, and this is reflected as $0.7 million of restricted cash as of March 31, 2025, which is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheet.

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, 2025, the Company has agreed to a maximum aggregate guarantee obligation of $371.1 million relating to loans with an unpaid balance of $2,281.0 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, and the Company has recorded an allowance for losses of $161,000 as of June 30, 2025 related to these guarantee obligations. The Company is required to provide cash collateral to MTRCC for this obligation, and this is reflected as $0.8 million of restricted cash as of June 30, 2025, which is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheets.

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, 2024 through the date the condensed consolidated financial statements were issued, other than for the payment on April 4, 2025 of a semi-annual regular dividend of $0.25 per share on outstanding common stock declared by our Board of Directors on February 6, 2025, aggregating $10.2 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, 2024 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 CPI inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981. CPI inflation has since fallen to 2.4% as of March 2025. 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 had an adverse impact on commercial real estate transactions. In the latter part of 2024, the Federal Reserve lowered the overnight rate by 100 basis points to the 4.25%-4.5% range, which was a positive trend for investors, but the 10-year treasury rate has remained range-bound in the low- to mid-4% range keeping the cost of debt capital elevated.

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. CPI inflation fell to 2.4% as of March 2025, but has since risen to 2.7%. 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 had an adverse impact on commercial real estate transactions. In the latter part of 2024, the Federal Reserve lowered the overnight rate by 100 basis points to the 4.25%-4.5% range, which was a positive trend for investors, but the 10-year treasury rate has remained range-bound in the low- to mid-4% range keeping the cost of debt capital elevated.