Evelyn Infurna - Managing Director of IR Hessam Nadji - President and CEO Martin Louie - CFO.

Mitchell Germain - JMP Securities Peter Christiansen - Citibank Blaine Heck - Wells Fargo Joshua Lamers - William Blair.

Greetings, and welcome to the Marcus & Millichap's Second Quarter 2018 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Evelyn Infurna. Evelyn, please go ahead..

Thank you. Good afternoon, and welcome to Marcus & Millichap's Second Quarter 2018 Earnings Conference Call. With us today are President and Chief Executive Officer, Hessam Nadji; and Chief Financial Officer, Marty Louie.

Before I turn the call over to management, please remember that our prepared remarks and responses to questions may contain forward-looking statements. Words such as may, well, expect, believe, estimate, anticipate, goal and variations of these words and similar expressions are intended to identify forward-looking statements.

Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors, including, but not limited to, general economic conditions and commercial real estate market conditions; the company's ability to retain and attract transactional professionals; the company's ability to retain its business philosophy and partnership culture amid competitive pressures; the company's ability to integrate new agents and sustain its growth and other factors discussed in the company's public filings, including its annual report on Form 10-K, which has been filed with the Securities and Exchange Commission on March 16, 2018.

Although the company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can make no assurance that its expectations will be attained. The company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

In addition, certain of the financial information presented on this call represents non-GAAP financial measures.

The company's earnings release and earnings conference call presentation, which was issued this afternoon and is available on the company's website, presents reconciliations to the appropriate GAAP measures and explanations of why the company believes such non-GAAP measures are useful to investors. Finally, this conference call is being webcast.

The webcast link is available on the Investor Relations section of our website, www.marcusmillichap.com along with a slide presentation you may reference during the prepared remarks. With that, it is now my pleasure to turn the call over to Hessam..

Thank you, Evelyn. On behalf of the entire Marcus & Millichap team, good afternoon, and thank you for joining our Second Quarter 2018 Earnings Call.

I'm happy to report that the improvement in our performance metrics continued in the second quarter with a 10.6% year-over-year rise in revenue and an 18.5% increase in earnings, adjusted for a lower tax rate.

We posted growth in all market segments, grew our sales force by 92 professionals over the past year and successfully completed the acquisition of Pinnacle Financial.

Coming on the heels of a strong first quarter, these results are once again attributed to our expanded client outreach, increased marketing initiatives and investments in the Marcus & Millichap platform.

To give you some color, our expanded client outreach includes special topic investor webcast, additional local and offshore investor symposiums and local client outreach campaigns.

These are hallmarks of how we have helped investor strategize, and execute in all market conditions for 47 years and the result reflect our teams hard work and dedication to our clients.

We view the current market as net neutral, on one hand, last year's uncertainty regarding tax reform and the economy have faded with much improved investor's sentiment. Both the new tax law and latest economic indicators have been very positive for commercial real estate.

On the other hand, we're seeing the bid-ask spread, rising interest rate and new round of geopolitical on ease temper sales activity. This is reflected in a 2% year-over-year increase in overall commercial property sales volume during the quarter as estimated by RCA.

In contrast to this backdrop, we believe our 8% growth in brokerage transactions and 23% increase in volume point to additional share gains for MMI. Taking a closer look at the quarter, our Private Client transactions grew 6% with no worthy games in multifamily, hospitality, office and industrial sales.

This is a function of some market improvement in these segments over the last year as well as our ongoing diversification initiatives. Private Clients, remained a cornerstone of our business, accounting for nearly 70% of our transactions and tightly aligned with 84% of sales in the marketplace that consistently fall in this category.

We're seeing an increase in larger sales among Private Clients, which is one of the factors behind the growth in our mid-market and larger transactions this year. Sales of these segments grew 35% and 29%, respectively and marked improvement from significant declines in the first half of last year.

While we're encouraged by the continued long-term growth in these segments, our recent numbers demonstrate the higher variability in larger transactions, which we have pointed out before. This is why we believe it is best to view our business on a long-term basis.

With that said, let me point out that strong growth in our institutional brokerage referenced to as IPA or Institutional Property Advisers, is also contributing to our results.

More importantly, our IPA business has been incremental in the growth of many of our tenured brokers and the retention of countless clients that are moving upstream and price point. Our key internal metrics for the quarter, including die-deals and marketing timelines were stable.

Our financing business, MMCC, posted second quarter revenue growth of 23% year-over-year. The increase in refinancing activity was a primary factor as well as contributions from our PGIM and ReadyCap programs we introduced earlier and recent acquisition of Pinnacle Financial.

Over the past 18 months, we've seen an ebb and flow in the rate of change in sales versus refinancing as our team helps clients select and execute the best option that meets their objectives at the time.

In recent months, rising interest rates have generated greater demand for refinancing among many investors that are choosing to hold assets for longer in the current market environment. I'm also pleased to announce the hiring of Dave Shillington, as President of MMCC.

Dave has over 30 years of experience in all aspects of commercial property lending and brings extensive experience in creating financing platforms, working directly with major borrowers, hiring and training producers.

Most recently, Dave was the senior executive with KeyBanc, where he held multiple positions including CEO, for the agency lending division, which he created for the bank. His experience in banking, agency Conduit and CMBS lending, are key areas to present growth opportunities for MMCC.

And as a reminder, Bill Hughes will be with us as an advisor for the next several months to help with this transition. We are grateful to built for this 22 years of service in establishing and leading MMCC. Turning to hiring.

We've added 92 sales and financing professionals over the past 12 months, as I mentioned earlier, with improved results during the second quarter. In the current, low unemployment environment, we're highly focused on leveraging our local management, technology, large and diverse inventory and comprehensive training programs to attract new recruits.

We're seeing success with our mentorship and internship programs, and most importantly, the hiring of experienced professionals, especially on the financing side. As I've mentioned on our previous call, because of the current employment and market conditions, our sales force growth numbers are likely to be more variable from quarter-to-quarter.

Our outlook for the economy, real estate fundamentals and capital markets remain stable. Economic growth has ticked into a higher gear, overbuilding is still limited to a few pockets and loan performance is generally healthy, thanks to a lack of overleveraging during the cycle.

More recently, the new tax law has started to shore up buyer demand and spur corporate investments. Yes, overall property sales volume in the market is likely to remain generally stable, as a positive forces I just outlined, pop up against the offsetting trends I touched on earlier.

In this environment, we expect the second half of the year to be more challenging in light of tougher comps against our strong results in the second half of last year.

Our longer-term focus remains laser sharp on retaining and supporting our team, continuing to add talented professionals and constantly improving the platform and the brand, including our proprietary tools and client services.

We believe these strategies will create shareholder value, as we gradually increase our market share in a large and fragmented market, particularly the Private Investor segment. To complement organic growth, we have made additional strives in dialogue with target acquisitions and continue to see more alignment on valuation.

These targeted firms, view of the long-term benefits to the Association and synergies with MMI is also becoming more clear, as we increase our visibility and share our long-term strategy with the industry.

As such, pursuing accretive acquisitions and what we believe to be a favorable window of opportunity remains our capital deployment priority at this time. We continue to strengthen our balance sheet, which we view as a competitive advantage. I will now turn the call over to Marty to discuss results in more detail.

Marty?.

Thanks, Hessam. I'll be discussing our second quarter results in greater detail. Total revenue in the second quarter grew nearly 11% year-over-year to $199 million, driven by real estate brokerage commissions, which accounted for 91% of our total revenue and grew a healthy 12% to $182 million.

A second sequential quarter of strong performance in our middle and large transaction businesses as well as an easier sales comparison to the prior year also contributed to these results. Revenue in the Private Client segment grew 5.1% on a year-over-year basis, driven by a 6% increase in the number of transactions.

As Hessam mentioned, this market segment continues to be the bedrock of our national platform performance with significant room for growth. Our results were also enhanced by a 35% increase in our middle market segment, combined with a 29% increase in our large transaction business.

While these segments tend to be more variable, there growth reflects the benefits of diversification and expanded market coverage by MMI. These segments combined accounted for 31% of our year-to-date brokerage revenue compared to 26% a year ago.

During the quarter, we executed 2,357 transactions, which is an increase of 7.6% from the prior year and a new second quarter record. Total sales volume for the quarter slightly increased year-over-year to $11.4 billion, excluding an unusually large transaction, we closed in Q2 of 2017, our volume would be up nearly 6%.

Revenue from financing fees generated by MMCC rose nearly 23% to $15.6 million for the quarter, primarily due to a 13% increase in refinancing activity over the prior year. We also reported growth in our financing headcount, which as we have mentioned before, would be somewhat volatile as we shift towards recruiting more experienced individuals.

Other revenue, which is comprised primarily of consulting and advisory fees, along with referral fees from other real estate brokers, was $2.2 million in the second quarter compared to $5.1 million in Q2 of 2017. This was primarily due to a large advisory fee we recognized last year.

On a normalized basis, the year-over-year variants in other revenue would've been nominal. Total operating expenses for the second quarter increased 9.7% year-over-year to $171 million, driven by higher cost of services and higher SG&A. Cost of services increased 8.6% during the quarter to $120 million.

However, as a percent of total revenue, cost of services improved by 110 basis points to 60.1%. The primary reason for this improvement is that more transactions were closed by less tenured agents, who are typically on lower commission splits. This trend was also impacted by the large consulting fee closing Q2 of last year that I referenced earlier.

The quarters decline in the average commission rate is unusual and should not be viewed as a trend. Turning to SG&A. Over the past few years, we put a lot of emphasis on increasing strategic investments to create competitive advantages for our team, while managing other costs.

As our revenue growth has improved, we've been able to achieve expense leveraging, which has remained a major focus. SG&A was $49.1 million compared to $43.7 million in Q2 of last year.

The growth in SG&A was mainly due to higher costs associated with investments in the business development activities of our brokers, stock-based compensation and additional professional fees tied to being a public company.

We are pleased to report that for the second quarter of 2018, net income was $22.2 million or $0.56 per diluted share compared to $15.6 million or $0.40 per diluted share in 2017 for an increase of 40%. Our tax rate for the quarter was 26.9% versus 39.2% during the period last year.

Adjusted EBITDA increased by 17.6% to $33.7 million during the quarter, while our adjusted EBITDA margin increased 100 basis points to 16.9% due to revenue growth outpacing expense growth. We expect variability from quarter-to-quarter but the margin direction is positive as we look long term.

We will continue to invest in our sales professionals and platform in order to make sure our brokers are in the best position to execute for our clients and continue to take market share. As such, we expect the level of spending for the second half of this year to be consistent with the first half.

From a balance sheet perspective, Marcus & Millichap continues to be well positioned to grow its business organically and pursue selective acquisitions. Our liquidity levels are very healthy, ending the quarter with cash and cash equivalents and core cash investments of approximately $322 million.

As a reminder, we managed our balance sheet with consideration towards reserves covering liabilities, the cyclicality of our industry as well as growth initiatives including strategic acquisitions. As you know, during the second quarter, we acquired Pinnacle Financial.

Pinnacle is integrating quickly into the Marcus & Millichap platform with mutual benefits and business opportunities, already starting to surface for our investment sales force, loan originators and the Pinnacle team. Before closing, I'd like to discuss several key items and highlights, which may have an impact on our results for the balance of 2018.

First, we've had four consecutive quarters of revenue growth and had benefited from easier comparisons in the first half of the year. Comparisons to the prior year's quarters were preferably become more difficult and considering a generally flat market environment.

Secondly, improvements in our mid-market and larger sales have contributed significantly to our results so far in 2018. Although, we expect continued long-term growth in these market segments, there are more variables, the sales trends that can change from quarter-to-quarter. I'd like to now open up the call for Q&A.

Operator?.

[Operator Instructions] Our first question today is coming from Mitchell Germain from JMP Securities. Your line is now live..

A new leadership MMCC.

Hessam, does Dave share a similar philosophy with how he wants to run that business with regards to how you're thinking about that?.

Absolutely. We really came together with Dave because of his diverse background in a variety of property types, in particular most recently as related to agency lending for apartments in a variety of ways that both of our apartment business and other property types, financing can be expanded and experience a lot more growth.

So he brings a variety of skills and experiences and relationships that we are very excited about. We believe there can be a very nice plug-in bolt-on to our vision of where MMCC can go and he brings a lot of know how we need in making all that happen..

I know, in your prepared comments, you talked about the diversification in the quarter. If I look at your year-to-date results, seems like multifamily and retail as percentage of total transactions are actually up year-over-year.

Are you seeing any less success in terms of your ability to capture office and storage, lodging, whatever other sectors? Or, I think, it's challenging there or are you happy with how things are progressing there?.

No we're not seeing any special or particular challenge in the diversification strategy shifted a lot of those property types take longer to ramp-up, because they require different type of training, take for example office or even multi-tenant shopping centers, and especially, hospitality.

They'll ramp-up and the training required for those very specialized product types is very different than apartments and, let's say, single-tenant retail. So it is much more of a process for us, both in terms of the recruiting and the training. But we've had very good success with all of those initiatives.

If anything we're looking at ways to make it go even faster. And also, Mitch, as you know, we've talked about this before, even our core apartment business, our core retail business, still offer plenty of room for growth.

So from quarter-to-quarter, those trends may change, but the long-term vision of - really expanding and all these segments is still the same..

Last one for me. In previous discussions that we've had, you talked about tax reform and that it's still had provided some uncertainty among your customer base as they were looking for additional clarity on the legislation. And we're 6 months now past the - or I guess 6 months - 8 months to the year, I should say.

And certainly past the adoption of that legislation.

Has your customer base feel a little more confident about the plan and legislation and what it means to them and is that resulted in a little more certainty to transact?.

The short answer is, yes. The biggest positive impact has been the removal of this very large macro cloud of uncertainty that we experienced a year ago throughout 2017. Just the removal of that cloud of uncertainty has really boosted investor confidence and investor sentiment.

In terms of the mechanics and the technicalities of ruling on a dozen most commonly asked topics and questions as to how actual tax treatment would be applied on a property-by-property basis. A lot of our clients are still having issues, getting clarity, and their tax professionals are helping them.

We continue to hold webcasts, we continue to hold different forums to help facilitate that. So that's why the process of the benefit from these favorable provisions coming into the market has been really slow. So it's, for sure, without a doubt, a net positive.

We're seeing more a capital formation, more buyer interest, more buyer demand, not only because tax reforms or a variety of reasons, obviously, the asset class is still performing very well.

But this is an added benefit that we're hearing more and more about just for you to trickle through the actual execution of more transactions, it's taking more time..

Our next question is coming from Peter Christiansen from Citibank. Your line is now live..

So if I look at the sequential improvement in deals to wrap on a brokerage side - real estate brokerage side, it climb pretty quickly, even more than last year's sequential compare even against with - arguably wasn't an easier comp to begin with. And I think Marty alluded to the more deals were closed by juniors.

I'm just wondering, if you can explain that dynamic a little bit more.

What was going on? And then maybe separately any qualitative remarks on completion periods or inventories? And how is that trending?.

I'll try to answer your question in different parts. First, on the product client-side.

We are seeing more activity, and I will attribute the vast majority of that increase in our internal initiatives, reaching out to our more clients, some of the examples that I shared in my formal remarks, we shared with you last quarter also, things like tax reform webcast have drawn in somewhere between, I think, we are up to 14,000 attendees of our core Private Client's that have needed guidance and market commentary about this particular topic.

So it's really been driven by the fact that gets the headwinds of 2017, we went out and really increase our activity levels, and you're beginning to see the ongoing share growth in the Private Client segment and the fact that the numbers have improved as a result of that.

The actual market environment itself is healthy, but it's not accelerating, as it's basically relatively flat. So as in terms of the mix of transactions in the quarter, as Marty mentioned, there was some skewing because of a large transaction that was paid out at a much higher commission rate last year that had an influence.

And from quarter-to-quarter, Peter, you're going to get different mix, sometimes newer agents, a lot of times teaming up with our more senior agents, will come across a larger transaction on have a client that they're working on or they're working with that has a Private Client deal, but also have some larger assets to decide to sell or refinance.

So in a given quarter that mix could change, the key message that Marty was sharing is that, as the cycle was matured, we've seen time and again that our more senior agents tend to account for a larger portion of the revenue. So the decline in the commission payout isn't necessarily a long-term trend, and we wanted to make sure we point that out..

But does that imply that more juniors to skew, tilted more towards juniors implies that your seniors are busy?.

It really - I would not read any big trend into 1 quarter's data..

And then a bit of a theoretical question, I don't know, I think it's been like three or four years since you have been public, and you've kept this Private Client range at the $1 million to $10 million range.

Do you still think that's a fair benchmark or perhaps maybe that should be increased?.

I would suspect that you might have us listening device in some of our planning discussions, Peter, because just a couple of day ago, we were having a discussion about the fact that you know the market environment over the past 5 years has changed.

Obviously, there has been a lot of price depreciation and what would've been a $9 million deal 3, 4, 5 years ago, is now clearly in the $10 million to $15 million price range. So we're actually looking at the same question.

We haven't determined any final re-benchmarking of the way that we slice and dice the data, but it is definitely something that is on our minds as well. The point, though, is that, remember, 84% of transactions still happen under $10 million.

And even in the segments above the $10 million price range, the $10 million to $20 million, in particular, the private investor, the entrepreneurial individual, the family, the 4% to 5% partnership that have pulled their capital together and bought some assets, they still make up a significant portion of the real estate ownership beyond the $10 million, particular cutoff.

So our Private Client base isn't just limited to $1 million to $10 million or $1 million to $15 million. They are now playing up and down the full-spectrum evaluation, including $20 million-plus, $50 million-plus in some cases. Now those are more rare.

So we look more holistically at our client base and one of the advantage to the company that we've been able to grow up with a client base, we started with 47 years ago who are the "mom-and-pop investors" who today are very sophisticated quasi-institutional but still private clients.

So the price points, a little bit of a guideline, but they're not - they don't really define who our customers are..

Our next question is coming from Blaine Heck from Wells Fargo. Your line is now live..

Hessam, you mentioned that the strong financing fees are driven by growth and the refinancing transaction, so hoping we could get a little bit more color on that are part of the business.

Number one, is any specific segment of the market driving that increase in refinancing? And then, number two, you mentioned that the increase in interest rate is spurring some additional demand to refinance.

So I guess how far do you think that tenure needs to go before it starts to make less economic sense to refinance, and we actually see a slowdown in some of that refinancing business?.

Yes, that the refinancing wave is ebb and flow, as I mentioned in my former remarks over the past couple of years. And I don't know if there is a particular interest rate level at which you're going to see a change across the board or anything.

But what is clear is that in this market environment, where there is no distress and there has been a lot of appreciation, and there is some trade, the perception of trade risk among a lot of owners that are comfortable with their asset and where they would normally maybe trade into another asset for a higher yield.

They are more comfortable holding onto their asset at this particular point of the cycle.

Doesn't mean that because they reified a year from now, they may not decide to transact but for the time being, given all dynamics that we know about and the propensity to really get comfortable with things like your cash flow, having nearly known and become comfortable with your asset, if you've done any improvements to your asset, those are all the kinds of reasons plus interest rate.

They're going to a lot of our client decisions to rebuy the particular time versus transact. And remember, the financing team that we have spends their time developing direct relationships with borrowers. They also partner with our investment sales brokers, of course, as a team to do the financing transactions.

But in the course of developing those borrower relationships, they are always going to be looking at what is right for the client. And from quarter-to-quarter, from even year-to-year, you could see that ebb and flow favor REFIS for a while versus sales for a while.

And that's why we think it's so important to be out in the market, increase the presence of MMCC. So that we're touching even more potential borrowers or sellers and be able to cross-sell as the clients needs shift.

But in the first half of this year, because of the rise in interest rates, and if you will, some resistance to trade to other assets that we would normally see, we saw more of refinancings happen..

And then second question, clearly, the larger market transaction segment increased quite a bit, up 29% year-over-year.

How much of that was due to an easier comp this quarter versus just better execution on that segment? And then, year-to-date, that segments made up about 15% of your transaction, which is the same as the full year 2017, but you cited, it has a place to grow the business in the earnings release.

So I guess, how should we think about that segment, as a percentage of your overall transactions going forward?.

So the first part of your question, the larger property sales in 2016 were very strong for us and then there was as big pull back and reduction in 2017. So this year's performance being benchmarked against pretty large decline, especially in the first half of 2017, is a pretty big component of our year-over-year percentage increases. So you are right.

That has pretty big role to play in the 2018 trends. From a long-term perspective, as I've said earlier, it's about growing with the client, more and more of our clients over time, we want to move up in terms of price points. And it's essential for us to be able to execute transactions for them and grow along with their needs.

And so that really is the defining reason we create our institutional property advisors at the upper end of that price range in terms of client retention over a long term period.

We're also seeing, and we believe for a long time, the convergence of capital from institutions being in the form of partnerships with private investor, general partners and local market experts, that convergence of hybrid investors, private investors that are basically, managing institutional capital is only going to grow, because the demand for real estate investment is going to grow from all sources of capital, which is another reason, it's important for us to be the forefront of these larger transactions.

But what that doesn't mean is that we're going to abandon or reduce the focus on our microcap $1 million to $5 million, $1 million $10 million bread-and-butter market coverage, which the company was founded on, and we are so strong on it, because it's still is very fragmented. It's huge and it offers a lot of growth opportunity.

So we're not really trying to grow in one area at the cost of another. We have the good fortune of having a tremendous market opportunity in all price segments..

So I guess there is no sort of formal target that you want to be at as far as a percentage of deals from each segment? Is that a fair way to look at it?.

Yes, that's a fair way to look at it, because I think some - some kind of formal target, kind of imposes limitations, in a way where as a natural growth of our maturing sales force, which we hope to continually see mature as they stay with the company over the long term and client retention, more and more clients, for sure, are doing larger transactions, and we want to be part of that in the long term..

[Operator Instructions] Our next question today is coming from Joshua Lamers from William Blair. Your line is now live..

First, I just want to get your comments on trends and your 2 larger property types, both multi-family and retail.

Just kind of year-over-year net completions, absorption and then also on the retail side, whether or not kind of the turmoil that we saw for the last year, 1.5 years, has calm down and what the investor perspective maybe on those 2 property types?.

Sure. Let me address apartments first, because it is an important property type for us. And we continue to see a bifurcation of the apartment market.

In that there is virtually no new supply in the workforce housing, commonly referred to as Class B and C apartments, which is big, vast majority of the rental stock in United States and the vast majority of the business that we conduct. So that large part of the bell curve is still performing very well, almost fully occupied with solid demand growth.

A lot of demand from buyers, compressing or stable yields and the trading activity has been very healthy but not really growing, again, because a lot of sellers are opting to hold onto the properties at this particular point in time.

On the institutional and larger apartment side of the equation, there has been some movement in cap rates, some increase in vacancies, even some rental concessions in a few metros mainly because all the new product, 300,000 or so units that have been built, are concentrated in that high-end, upper scale part of the marketplace.

So there has been some concern of overbuilding, in fact, there has been pocket of overbuilding. But even there, if you look at the whole apartment industry, 50%, almost somewhere between 40% to 50% of the new product being developed in apartments, is concentrated in 10 metros. So some of those 10 metros are definitely seeing an overhang of new supply.

But as an industry, if anything we still have a housing shortage. So the buyer demand is strong. There, within the whole sector, the issue is the bid-ask spread with slowed velocity down. It's just buyer, seller expectation, in a very healthy fundamentals kind of environment.

On the retail side, even more important to bifurcate, because within retail, the single tenant, and at least smaller retail, is performing very differently than the multi-tenant standard community center, neighborhood center, shopping center a category, especially when it comes to high credit and quality location type of single tenant at least, which is still very much in demand versus shopping centers where, again, the further you go out from population centers and job notes.

And the older the center gets, the bigger the bid-ask spread and the larger the price correction. So the ripple effect of all the concerns on retail are still playing out, but they're playing out very differently in the different types of retail. And I would not generalize the retail performance.

For us, we're definitely seeing a slow-down in transaction activity both in the market and to some extent in terms of our activity on the multi-tenant side, more so than any other side of the retail business, particularly, in among older shopping centers in suburban areas..

And then over the last couple of quarters, this one is from the comments made about expansion of offices.

And I'm wondering whether that is in order to capture some growth opportunities and maybe second tier or third tier cities that are moving into or whether you're still seeing sort of broad growth opportunities in your more tenured markets as well as some newer markets?.

It's really a combination of both. But when we look at some of the metros that over the next 10 to 20 years are going to put up amazing growth numbers like Dallas, Denver, Seattle, South Florida.

We just have to really think a long term and be there for capturing the demographic movement, the in-migration, the job creation in some of these growth markets. I would - you can put Portland, Oregon into the segment and there are many others.

And then there is markets like Manhattan, Los Angeles, very established markets for us, very large metros in which, we believe, over the next 10 years, we'll take even more share. And the sooner we can accommodate growth, the sooner we can increase our market penetration and market share.

So it's been a combination of both of where we think a metro is going to grow from it is today and a very large metros in which we think we can play a bigger part..

And then last one for me, just because there was a headline around across. Compass, the traditional residential brokerage company announced today or maybe as earlier this week that they're going to be moving into commercial brokerage.

And I'm just wondering if you're beginning to see on the early end here, given some of the inventory constraints in the residential side.

If you're beginning to see a bit more competitive pressure from some of the traditional residential brokerages, like Caldwell or Re/Max or whether the competitive environment is about the same there as it always has been?.

You know the residential industry is dabbling and commercial real estate is always been part of the industry. And it's a very different model in terms of the value proposition to the client. The real value of the platform and what it does for the individual investor of the commercial asset, both on the sales side and the buy side.

And so it's very much of a different business. We're not seeing any major changes in the way that is affecting our business. It does produce some competition because of some of the commission structure and so on. But again, it's a low service and more of a commodity type of a set up than our value-added brokerage.

But the real answer to your question, we're not really seeing any difference. But I did read the Compass is in now venturing and have done a lot of interesting things regarding technology, and it is something that we track, and we take any type of competitive pressure very, very seriously..

We reached at the end of our question-and-answer session. I'd like to turn the floor back over to management for any further closing comments..

Thank you, Operator. And now I want to thank everyone for participating on our call this quarter, and we look forward to seeing you on the road and on our next quarterly call. Thank you, very much..

Thank you. That's concludes today's teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today..