UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

For the quarterly period ended SeptemberJune 30, 20132014

OR

For the transition period from                    to                    

Commission File Number: 001-36155

MARCUS & MILLICHAP, INC.

(Exact Namename of Registrantregistrant as Specifiedspecified in Itsits Charter)

(818) 212-2250

(Registrant’s Telephone Number, Including Area Code)telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ¨x    No  x¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

AsNumber of November 22, 2013, the registrant had 36,600,897 shares of common stock, par value $0.001 per share, of the registrant issued and outstanding.outstanding as of August 8, 2014 was 36,623,781 shares.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

Table of ContentsTABLE OF CONTENTS

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL1.FINANCIAL STATEMENTS

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollar amounts in thousands, except per share amounts)

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONSNET AND COMPREHENSIVE INCOME

(UNAUDITED)

(dollar and share amounts in thousands)thousands, except per share amounts)

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(dollar amounts in thousands, except share amounts)thousands)

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(UNAUDITED)

(in thousands)

See accompanying notes to condensed consolidated financial statements.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Description of businessBusiness

Marcus and& Millichap, Real Estate Investment Services, Inc., (the “Company”, “MMREIS”, “we”, “us”“Marcus & Millichap”, or “our”“MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. MMREISMMI operates 77 offices in the United States and Canada through its two wholly-owned subsidiaries, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”) and Marcus & Millichap Capital Corporation (“MMCC”).

Reorganization and Initial Public Offering

MMI was incorporatedformed in 1976 and prior to the completion of its initial public offering (the “IPO”) on November 5,June 2013 the Company was majority-owned byin preparation for Marcus & Millichap Company (“MMC”) andto spin-off its majority owned subsidiary, MMREIS (“Spin-Off”). Prior to the initial public offering (“IPO”) of MMI stock on October 30, 2013, all of the Company’s preferred and common stock outstanding was held bystockholders of MMREIS (including MMC and its affiliates or officers and employees of MMREIS) contributed all of their outstanding shares to the Company. In June 2013,Company, in preparationexchange for new MMI common stock, and MMREIS became MMI’s wholly-owned subsidiary. Thereafter, MMC distributed 80.0% of the spin-offshares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its real estate investment services business, orshares of MMI common stock for cancellation of indebtedness of MMC.

Prior to the Spin-Off, MMC formed Marcus & Millichap, Inc.MMI and MMREIS were affiliates under common control, and the assets and liabilities of MMREIS were recorded at carryover basis at the Spin-Off date. The historical financial statements of MMREIS, as the Company’s predecessor, have been presented as the historical financial statements of the Company for all periods prior to the Spin-Off from the beginning of the earliest period presented.

On November 5, 2013, MMI completed its Initial Public Offering (“Marcus & Millichap” or “MMI”IPO”). See Note 9 - Subsequent Events for additional information. of 6,900,000 shares of common stock at a price to the public of $12.00 per share.

Basis of Presentation

The financial information presented in the accompanying unaudited condensed consolidated financial statements, as of September 30, 2013, and for the three and nine month periods ended September 30, 2013 and 2012, have been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form 10–Q and Article 10-01 of Regulation S-X. Accordingly, somethey do not include all of the information and footnote disclosuresfootnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements have been condensed or omitted.statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements and notes include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the consolidated financial position, results of operations and cash flows for the periods presented. The results of the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the calendar year ending December 31, 2013, or for other interim periods or future years. These unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto for the year ended December 31, 2013 included in MMI’s Final Prospectusthe Company’s Annual Report on Form 10-K filed on March 21, 2014, with the SEC on October 31, 2013 pursuant to Rule 424(b)(5)SEC. The results of the Securities Actthree and six months ended June 30, 2014 are not necessarily indicative of 1933.the results to be expected for the fiscal year ending December 31, 2014, or for other interim periods or future years.

Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly ownedwholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosures at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Reclassifications

Certain prior-period amounts in the condensed consolidated statements of cash flows have been reclassified to conform to the current period presentation. These changes had no impact on the previously reported consolidated results of operations, financial condition, stockholders’ equity or on cash flows subtotals.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash due from affiliate, and receivables.cash equivalents and commissions receivable. Cash is placed with high-credit quality financial institutions. To reduce its credit risk, the Company monitors the credit standing of the financial institutions that hold the Company’s cash and cash equivalents. The Company historically has not experienced any losses in its cash and cash equivalent or due from affiliate. Theequivalents. For commissions receivable, the Company maintains allowances for estimated credit losses based on management’s assessment of the likelihood of collection. As of SeptemberJune 30, 20132014 and December 31, 2012,2013, no individual transaction accounted for 10% or more of commissions receivable.

The Company derives its revenues from a broad range of real estate investors owners, and usersowners in the United States and Canada, none of which individually represents a significant concentration of credit risk. For the three and ninesix months ended SeptemberJune 30, 20132014 and 2012,2013, no individual customer represented 10% or more of total revenues.

Recent Accounting Pronouncements

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers(dollar amounts“ASU 2014-09”), which supersedes virtually all of the current revenue recognition guidance under U.S. GAAP, and requires entities to recognize revenue for transfer to customer of promised goods or services in thousands, except share amounts)

Accounting Policies

Referan amount that reflects the consideration to MMI’s Final Prospectuswhich the entity expects to be entitled to receive in exchange for a complete discussionthose goods or services. ASU 2014-09 is effective for reporting periods beginning after December 15, 2016 and early adoption is not permitted. ASU 2014-09 permits two implementation approaches, one requiring retrospective application of all significant accounting policies. See Note 9 - Subsequent Events for additional information related to income taxesthe new standard with restatement of prior years and stock-based compensation.one requiring prospective application of the new standard with disclosure of results under old standards. For MMI, the new standard will be effective January 1, 2017. The Company is currently evaluating the impact of this new standard.

Property and equipment, net consist of the following:following (in thousands):

Furniture,The cost and accumulated depreciation of assets subject to capital leases is recorded in furniture, fixtures and equipment with a net book value of $39 and $160, are recorded under capital leaseswas not material as of September 30, 2013 and December 31, 2012, respectively.2013. The related depreciationCompany does not have any remaining capital lease obligations as of these assets is included in depreciation expense.June 30, 2014.

Payments for certain improvements to the Company’s leased office space are recorded as prepaid rent. Amortization of prepaid rent is recorded using the straight-line method over the shorter of the estimated economic life or lease term as an increasea charge to rent expense using the straight-line method.expense.

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Commissions Receivableand Other Receivables, Net

Commissions receivableand other receivables, net consisted of the following:following (in thousands):

The following table presents the changes in the allowance for doubtful accounts:accounts for the six months ended June 30, 2014 and 2013 (in thousands):

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Prepaid Expenses and Other Current Assets

Deferred Offering Costs

Deferred offering costs, consisting of legal, accounting and other fees and costs relating to the initial public offering, are capitalized and included in prepaid expenses and other current assets in the consolidated balance sheets. The deferred offering costs will be offset against the initial public offering proceeds upon the closing of the IPO which occurred on November 5, 2013. There were $3,157 of capitalized deferred offering costs as of September 30, 2013 and no similar costs as of December 31, 2012.

Other Assets

Other assets consisted of the following:following (in thousands):

Other Liabilities

Other liabilities consisted of the following:

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Deferred Compensation and Commissions

Deferred compensation and commissions consisted of the following:following (in thousands):

DuringSARs Liability

Prior to the fiscal year endedIPO, certain employees of MMI were granted stock appreciation rights (“SARs”) under a stock-based compensation program assumed by MMC (“Program”). The SARs agreements were revised and the MMC liability of $20.0 million for the SARs was frozen at March 31, 2001,2013, and was ultimately transferred to MMI through a capital contribution. The SARs liability will be settled with each participant in installments upon retirement or departure. Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014 at a rate based on the 10-year treasury note plus 2%. The rate resets annually. The rate at January 2, 2014 was 5.03%, and MMI recorded interest expense related to this liability of $251,000 and $502,000 for the three and six months ended June 30, 2014, respectively.

Commissions Payable

Certain investment sales professionals have the ability to earn additional commissions after meeting certain annual revenue thresholds. These commissions are recognized as cost of services in the period in which they are earned. The Company establishedhas the MMREIS ability to defer payment of certain commissions, at its election, for up to three years. Commissions payable that are not expected to be paid within twelve months are classified as long-term liabilities.

Deferred Compensation Plan (the Deferred Compensation Plan) for aLiability

A select group of management. Themanagement is eligible to participate in a Deferred Compensation Plan has similar characteristics ofPlan. The plan is a 401(k)409A plan and providespermits the Deferred Compensation Plan participants additional flexibility in terms of contribution and distribution elections. Participants may electparticipant to invest in various equity and debt securities offered withindefer compensation up to limits as determined by the Deferred Compensation Plan program.plan. The Company choseelected to fund the Deferred Compensation Plan through variable life insurance policies purchased for the participants’ benefit. The Deferred Compensation Plan is managed by a third-party institutional fund manager, and the deferred compensation and investment earnings are held as a Company asset in a rabbi trust. This trust, accountwhich is recorded in investments held in rabbi trust caption in the accompanying condensed consolidated balance sheets. The assets in the trust are restricted unless the Company becomes insolvent, as defined in the Deferred Compensation Plan, in which case the Deferred Compensation Plan’strust assets are subject to the claims of the Company’sMMI’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time all or a portion of the trust assets by an amount by which the fair market value of the Deferred Compensation Plan’strust assets exceeds 110% of the aggregate amount credited to the Deferred Compensation Plan’s participants’ accounts, as defined by the Deferred Compensation Plan.accounts.

The deferred compensation liability is included in other liabilities on the consolidated balance sheets as reflected above. The net change in the carrying value of the investment assets and the related obligation are recorded in other income, net and selling, general, and administrative expense, respectively in the condensed consolidated statements of operations.

Amounts due from (to) affiliates consisted ofnet and comprehensive income and were not material during the following:

Prior tothree and six months ended June 30, 2013, the majority of the cash generated2014 and used in the Company’s operations was held in bank accounts with one financial institution that were included in a sweep arrangement with MMC. Pursuant to a treasury management service agreement with that financial institution, the cash was swept daily into MMC’s money market account. The Company collected interest income from MMC at the same interest rate as MMC earned on the money market account. Historically, other than for a 2-week period around MMC’s March 31 fiscal year end, the Company had a receivable from MMC for the cash that was swept. When the sweep arrangement was not in effect, during the week before and the week after March 31, the Company’s cash balances remained in the Company’s bank accounts. As of June 30, 2013, the sweep arrangement with MMC was permanently terminated.2013.

MMC has a credit agreement under which, the Company, along with many other entities controlled by MMC, was a guarantor as of September 30, 2013. The credit agreement comprises two components, a line of credit and a term loan which mature on September 26, 2015 and June 1, 2019, respectively. There are certain covenants that the Company is required to comply with, such as providing an annual audit report, and quarterly financial statements. The Company would be required to satisfy the outstanding obligation upon an event of default as defined in the credit agreement. Under the terms of the guarantee, there is not a specific allocation of liability related to the Company as all guarantors would be combined for paying specific claims. The Company’s guarantee for each component of the credit agreement expires on the respective maturity date. The maximum amount of future

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)Other Liabilities

Other liabilities consisted of the following (in thousands):

payments

In conjunction with the Spin-Off and IPO, notes payable to certain former stockholders of MMREIS that were issued in settlement of restricted stock and SARs awards that were redeemed by MMREIS upon the termination of employment by these former stockholders (“the Notes”), and had been previously assumed by MMC, were transferred to the Company. The Notes are unsecured and bear interest at 5% with annual principal and interest installments payable until April 14, 2020. Accrued interest pertaining to the Notes was $108,000 and $425,000 as of June 30, 2014 and December 31, 2013, respectively and was recorded in accounts payable and accrued expenses caption in the accompanying condensed consolidated balance sheets. During the three and six months ended June 30, 2014, interest expense in the amount of $151,000 and $303,000, respectively was recorded in the accompanying condensed consolidated statements of net and comprehensive income. During the six months ended June 30, 2014, the Company could be requiredmade payments of $1.5 million and of this amount, $851,000 pertained to makeprincipal and $618,000 pertained to interest.

On June 18, 2014, the Company entered into a Credit Agreement with Wells Fargo Bank, National Association (“Bank”), dated as of June 1, 2014 (the “Credit Agreement”). The Credit Agreement provides for a $60.0 million principal amount senior secured revolving credit facility that is guaranteed by all of the Company’s domestic subsidiaries (the “Credit Facility”) and matures on June 1, 2017. The Company may borrow, repay and reborrow amounts under the guaranteeCredit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility must be repaid in full. In connection with executing the Credit Agreement, the Company paid bank fees and other expenses in the aggregate amount of $224,000, which are being amortized over the term of the Credit Agreement. The amortization is included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income. The Company must pay a commitment fee of up to 0.1% per annum, payable quarterly, based on the amount of unutilized commitments under the Credit Facility. As of June 30, 2014, there were no amounts outstanding under the Credit Agreement.

Borrowings under the Credit Agreement are available for general corporate purposes and working capital. The Credit Facility includes a $10.0 million sublimit for the issuance of standby letters of credit. Borrowings under the Credit Facility will bear interest, at the Company’s option, at either the (i) Base Rate (defined as the highest of (a) the Bank’s prime rate, (b) the Federal Funds Rate plus 1.5% and (c) one-month LIBOR plus 1.5%), or (ii) at a variable rate between 0.875% and 1.125% above LIBOR, based upon the total funded debt to EBITDA ratio.

The Credit Facility contains customary covenants, including financial and other covenants (which require the Company, on a combined basis with its guarantors, to maintain (i) an EBITDAR Coverage Ratio (as defined in the Credit Agreement) of not less than 1.25:1.0 as of September 30, 2013each quarter end on a rolling 4-quarter basis and (ii) total funded debt to EBITDA not greater than 2.0:1.0) as of each quarter end on a rolling 4-quarter basis, reporting requirements and events of default. The Credit Facility is equal to the amount outstanding of $56,900 ($39,400 outstanding on the line of credit and $17,500 advanced under the term loan componentsecured by substantially all assets of the line)Company, including pledges of 100% of the stock or other equity interest of each subsidiary except for the capital stock of a controlled foreign corporation (as defined in the Internal Revenue Code). The maximum amountAs of future payments thatJune 30, 2014, the Company could be required to make under the guarantee as of December 31, 2012 was equal to the amount outstanding of $49,700 ($30,700 outstanding on the line of credit and $19,000 advanced under the term loan component of the line). At December 31, 2012 and September 30, 2013, MMC was in compliance with all debt covenants under the terms of the line of credit agreement. The Company was released from the guaranty effective November 5, 2013 in connection with the Spin-Offfinancial and the IPO.non-financial covenants.

Total dividends declared

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Shared and paid for the nine months ended September 30, 2013 and 2012 were $31,181 and $15,654, respectively. Total dividends declared but not paid for nine months ended September 30, 2013 and 2012 were $6,500 and $0, respectively. In October 2013, dividends in the amount of $6,500 were paid.Transition Services

Under a shared services arrangement with MMC, MMC providedMMREIS was charged $1.0 million for reimbursement of health insurance premiums, $109,000 for general and administrative expenses and $186,000 in shared services to the Company. Duringduring the three months ended SeptemberJune 30, 2013 and 2012, the Company incurred $493MMREIS was charged $1.8 million for reimbursement of health insurance premiums, $389,000 for general and $486, respectively under theadministrative expenses and $403,000 in shared services arrangement. Duringduring the ninesix months ended SeptemberJune 30, 2013 and 2012, the Company incurred $896 and $834, respectively, to MMC pursuant to this arrangement. 2013.

In connection with the IPO, the shared services arrangement with MMC was replaced by a Transition Services Agreement between MMIthe Company and MMC that became effective uponon October 31, 2013 whereby MMC provides certain services to the completionCompany for a limited period of time. During the IPO. In accordance with the Transition Services Agreement,three and six months ended June 30, 2014, $0 and $1.0 million, respectively was incurred for reimbursement to MMC will continue to incur certainfor health insurance premiums and $53,000 and $187,000, respectively for other costs, which are included in selling, general, and administrative expenses on behalfexpense in the accompanying condensed consolidated statements of MMI. See Note 9 - Subsequent Events for additional information.

Amounts representingnet and comprehensive income. Effective April 2014, MMI has its own health insurance premiums incurred byplan. As of June 30, 2014 and December 31, 2013, $74,000 and $506,000, respectively, remains unpaid and included in accounts payable and other accrued expenses – related party in the accompanying condensed consolidated balance sheets.

Financing and Brokerage Services with the Subsidiaries of MMC on behalf of the Company for three months ended September 30, 2013 and 2012 were $1,018, and $1,090, respectively. Amounts representing health insurance premiums incurred by MMC on behalf of the Company for nine months ended September 30, 2013 and 2012 were $2,823, and $2,661, respectively. Such expenses, paid by MMC on behalf of the Company, were allocated based on individual employee coverage costs.

DuringFor the three months ended SeptemberJune 30, 2014 and 2013, the Company recorded real estate brokerage commissions and 2012, MMC incurred $112 and $112, respectively in general and administrative expenses on behalf of the Company. During the nine months ended September 30, 2013 and 2012, MMC incurred $501 and $470, respectively in general and administrative expenses on behalf of the Company. Expenses incurred by MMC, such as rent, corporate compensation, and other corporate costs, are allocated on a pro rata basis.

The Company earned interest income from MMCfinancing fees of $0 and $35 for the three months ended September 30, 2013$67,500, respectively, and 2012, respectively. The Company earned interest incomecost of services of $0 and $40,500, respectively from MMC of $74 and $95 for the nine months ended September 30, 2013 and 2012, respectively.

The Company issues loans to employees and concurrently recognizes an employee notes receivable. At September 30, 2013 and December 31, 2012, the aggregate principal amount outstanding was $384 and $1,157, respectively, which are included in employee notes receivable in the consolidated balance sheets.

MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. The Company has performed financing and brokerage services related to these transactions with thecertain subsidiaries of MMC. FinancingFor the six months ended June 30, 2014 and 2013, the Company recorded real estate brokerage service revenuecommissions and financing fees of $60,000 and $382,000, respectively, and cost of services of $36,000 and $228,000, respectively from these transactions with thecertain subsidiaries of MMC.

Operating Lease with MMC totaled $0 and $394 for the three months ended September 30, 2013 and September 30, 2012, respectively and $382 and $1,013 for the nine months ended September 30, 2013 and September 30, 2012, respectively. Commission expense for these transactions totaled $0 and $212 for the three months ended September 30, 2013 and 2012, respectively and $238 and $591 for the nine months ended September 30, 2013 and September 30, 2012, respectively.

The Company has an operating lease with MMC for an office located in Palo Alto, California. The lease expires April 30, 2015. Rent expense for this office totaled $109 and $69$109,500 for each of the three months ended SeptemberJune 30, 2014 and 2013, respectively which is included in selling, general, and 2012, respectively.administrative expense in the accompanying condensed consolidated statements of net and comprehensive income. Rent expense totaled $289$219,000 and $208$179,000 for the ninesix months ended SeptemberJune 30, 2014 and 2013, respectively, which is included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income.

Other

Following the IPO, Mr. Marcus, the Company’s founder and Co-Chairman, continues to own indirectly approximately 67% of the Company’s fully diluted shares, including shares to be issued upon settlement of vested deferred stock units, or DSUs.

Total dividends declared and paid to MMC for the six months ended June 30, 2013 were $24.7 million.

Prior to its termination on June 30, 2013, the Company was subject to a cash sweep arrangement with MMC. Under the arrangement, the Company’s cash was swept daily into an MMC money market account. The Company received interest on the balances held in the sweep accounts. The Company earned interest of $33,000 and September$74,000 on the balances for the three and six months ended June 30, 2012,2013, respectively.

The Company, from time-to-time makes advances to non-executive employees. At June 30, 2014 and December 31, 2013, the aggregate principal amount for employee loans outstanding was $423,000 and $419,000, respectively which is included in employee notes receivable in the accompanying condensed consolidated balance sheets.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

The Company is part of a consolidated federal income tax return and a combined unitary California tax return that is filed by MMC. The Company and MMC have a tax-sharing agreement whereby the Company provides for income taxes in its consolidated statements of income using an effective tax rate of 43.5%. The amount derived represents a receivable or obligation of the Company from (to) MMC that the Company generally settles on a current basis. In addition, all deferred tax assets and liabilities are recorded by MMC. As part of the IPO, the tax sharing agreement with MMC was terminated effective October 31, 2013. See Note 4 – Related-Party Transactions and Note 9 - Subsequent Events for additional information.

The provision for income taxes attributable to the Company consists of the following:

The provision (benefit) for income taxes for the three and nine months ended September 30, 2013 and 2012, differs from the amounts computed by applying the statutory federal corporate income tax rate of 35% to earnings before income taxes as a result of the following:

ASC 820,Fair Value Measurement (“ASC 820”) establishes the accounting guidance for fair value is defined asmeasurements that applies to all financial assets and financial liabilities that are being measured and reported on a fair value basis. Under the priceaccounting guidance, the Company makes fair value measurements that would be received to sell an assetare classified and disclosed in one of the following three categories:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or paid to transfer a liabilityliabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the principal or most advantageous market for anfull term of the asset or liability, in an orderly transaction betweenor

Level 3: Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The hierarchy below lists three levels ofConsideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Investments held in a rabbi trust are carried at fair value based on the extentand considered to which inputs used in measuring fair value are observablebe in the market. We categorize eachLevel 1 classification.

Fair Value of our fair value measurements in one of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. This hierarchy prioritizes the inputs into three broad levels as follows:

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Financial Instruments

The fair values of the Company’s financial instruments, including such items in the condensed consolidated financial statement captions as cash and cash equivalents, commissions and notes receivable, due from (to) affiliates,other receivables, net, accounts payable and accrued expenses and commissions payable, approximate their carrying valuesare carried at cost, which approximates fair value based on their nature,immediate or short-term maturities and terms that approximate current market terms and interest rates, which approximate current fair value market rates andthese financial instruments are considered to be in the Level 1 classification.

Investments heldAs the Company’s obligations under notes payable to former stockholders and certain employee and agent notes receivable bear fixed interest rates that approximate the rates currently offered to the Company for similar debt instruments, the Company has determined that the carrying value on these instruments approximates fair value. As the Company’s obligations under SARs liability (included in a rabbi trust accountdeferred compensation and commissions caption) bear variable interest rates, the Company has determined that the carrying value approximates the fair value. These are considered to be in the Level 1 classification. See Note 3 – Selected Balance Sheet Data for additional information.

Common Stock

As of June 30, 2014 and December 31, 2013, there were 36,623,781 and 36,600,897 shares of common stock, $0.0001 par value, issued and outstanding, respectively, including 52,884 and 30,000 restricted stock awards issued to the non-employee directors.

The Company currently does not intend to pay a regular dividend. The Company will evaluate its dividend policy in the future. Any declaration and payment of future dividends to holders of the Company’s common stock will be at the discretion of the board of directors and will depend on many factors, including the Company’s financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that the board of directors deems relevant.

Preferred Stock

The Company has 25,000,000 authorized shares of preferred stock with a par value $0.0001 per share. At June 30, 2014 and December 31, 2013, there were no preferred shares issued or outstanding.

MARCUS & MILLICHAP, REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Prior to the IPO

Restricted Common Stock and SARs

Prior to the CompanyIPO, MMREIS granted options and SARs under a stock-based compensation award program (the “Program”). The options were exercisable into shares of unvested restricted common stock. The Program was administered by the board of directors. The board determined the terms of an award, including the amount, number of rights or shares, and vesting period, among others. Options issued generally had terms of one year or less and the restrictedless. Restricted common stock issued upon exercise of thestock options generally vested over three to five years.years, and stock options typically were exercised immediately for a note receivable. The exercise price of the options was based upon a formula equivalent to the net book value of common stock as of the end of the fiscal year immediately preceding the date of issuance. The Company had not formally reserved any shares of its common stock for future stock awards under

During the Program.

In prior yearsthree and during the ninesix months ended SeptemberJune 30, 2013, employees of the CompanyMMREIS exercised 0 and 750 stock options, respectively, through the issuance of notes receivable. Cash payments on notes receivable were presented as an increase in consolidated stockholders’ equity. Such notes bore interest at a rate of 5% or 6% per annum and were due in defined installments on various remaining dates through April 15, 2016, which was consistent with the vesting periods of the restricted common stock.

There were no redemptions or cancelations of stock options during the three and ninesix months ended SeptemberJune 30, 2013 or September 30, 2012.

The following is a summary of the Company’s stock option activity:

The following is a summary of the Company’s restricted common stock activity:

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

The following is a summary of the Company’s SARs activity:

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

2013.

Stock-basedStock-Based Compensation Expense and Deemed Capital Contribution (Distribution) From MMC

Historically, MMC assumed the Company’sMMREIS’s obligation with respect to any appreciation in the value of the underlying vested awards and SARs in excess of the employees’ exercise price. MMC was deemed to make a capital contribution to the Company’sMMREIS’s additional paid-in capital equal to the amount of compensation expense recorded, net of the applicable taxes. Based on the tax-sharing agreement between the CompanyMMREIS and MMC, the tax deduction on the compensation expense recorded by the CompanyMMREIS was allocated to MMC. MMC recorded the liability related to the appreciation in the value of the underlying stock and SARs in its consolidated financial statements. To the extent of any depreciation in the value of the underlying vested awards and SARs (limited to the amount of any appreciation previously recorded from the employees’ original exercise price), compensation expense was reduced and MMC was deemed to receive a capital distribution.

The total compensation cost related to unvested stock and SARs was generally recognized over approximately four years. Restricted common stock issued upon exercise of stock options was generally vested over three to five years and stock options typically were exercised immediately for a note receivable.

The total formula-settlement value and total compensation cost related to non-vested stock and SARs are as follows:

During the three months ended September 30, 2013 and 2012, total stock based compensation expense was $2,053 and $1,760, respectively. During the nine months ended September 30, 2013 and 2012, total stock based compensation expense was $4,679 and $3,943, respectively.

The total fair value of stock and SARs that vested during the nine months ended September 30 was as follows:

In conjunction with the IPO, the vesting of all unvested restricted stock and all unvested SARs was accelerated. See Note 9 - Subsequent Events for additional information.

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Series A Redeemable Preferred Stock

Prior to the IPO, the Company had 1,000 shares of Series A Redeemable Preferred Stock (Series A Preferred) issued and outstanding as of September 30, 2013 and December 31, 2012. The terms are discussed below.

Following the IPO, MMI has 25,000 authorized shares of preferred stock with a par value $0.0001 per share. See Note 9 - Subsequent Events for additional information.

Dividends

Prior to the IPO, the stockholders of Series A Preferred were entitled to receive dividends, payable in preference and priority to any distribution on common stock, at a rate determined by the Board of Directors, when and as declared by the Board of Directors. The right to dividends on the Series A Preferred was not cumulative, and no right accrued to the holders of Series A Preferred by reason of the fact that dividends on such shares were not declared and paid in any prior year, nor are any undeclared or unpaid dividends entitled to bear or accrue interest. No dividends were paid with respect to common stock unless Series A Preferred stockholders received a dividend return in such year in the amount of $10 for each outstanding share of Series A Preferred. To the extent that dividends were declared on any common share, a dividend in an equal amount was to be paid on each outstanding share of Series A Preferred.

Total preferred dividends declared and paid for the nine months ended September 30, 2013 and 2012 were $31,181 and $15,654, respectively. Total preferred dividends declared on the Series A Preferred but not paid for nine months ended September 30, 2013 and 2012 were $6,500, and $0, respectively. No dividends were declared for common stock for the nine months ended September 30, 2013 and 2012. In October 2013, dividends in the amount of $6,500 were paid for Series A Preferred.

Liquidation Preference

In the event of voluntary or involuntary liquidation, the Series A Preferred stockholders were entitled to be paid, before any payment was to be made in respect of the Company’s common stock, an amount equal to $10 per share of Series A Preferred plus all accrued but unpaid dividends for each share of Series A Preferred. If, upon liquidation, the assets of the Company available for distribution to its stockholders were insufficient to pay the holders of Series A Preferred, the entire remaining assets of the Company available for distribution would have been distributed ratably among the holders of the Series A Preferred in proportion to the full amount to which they would have otherwise been respectively entitled.

After the payment or setting apart for payment to the holders of the Series A Preferred, the remaining assets and funds of the Company available for distribution to the stockholders would have been distributed among the holders of common stock pro rata on the basis of the number of shares of common stock then outstanding.

Redemption

The Company was permitted to redeem any or all shares of Series A Preferred by paying an amount equal to $10 per share plus all declared and unpaid dividends with respect to such shares at the redemption date. Series A Preferred shares were not convertible into common stock.

Voting Rights

The Series A Preferred stockholders did not have voting rights.

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

Dividends

Prior to the IPO, the Company distributed substantially all of its net income to MMC in the form of cash dividends. Following the IPO, MMI does not intend to pay a regular dividend. We will evaluate our dividend policy in the future. Any declaration and payment of future dividends to holders of MMI common stock will be at the discretion of the board of directors and will depend on many factors, including MMI’s financial condition, earnings, cash flows, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends and other considerations that our board of directors deems relevant.

The Spin-Off and Initial Public Offering

On November 5, 2013, MMI completed its IPO of 6,900,000 shares of common stock at a price to the public of $12.00 per share. MMI sold 4,173,413 shares of common stock in the IPO, including 900,000 shares of common stock pursuant to the exercise of the underwriters’ option to purchase additional shares. Selling stockholders sold an aggregate of 2,726,587 shares in the IPO at the same price to the public. MMI did not receive any proceeds from the sale of the shares by the selling stockholders.

The IPO generated net proceeds to MMI of approximately $42,701, including the underwriters’ full exercise of their option to purchase additional shares and after deducting the underwriters’ discount of $3,506 and IPO related expenses estimated to be $3,874. Prior to the completion of the IPO, the shareholders of MMREIS contributed all of the outstanding shares of capital stock of MMREIS to MMI in exchange for MMI common stock, pursuant to which MMREIS became MMI’s wholly owned subsidiary, Thereafter, MMC distributed 80.0% of the shares of MMI common stock to MMC’s shareholders and exchanged the remaining portion of its shares of MMI common stock for cancellation of indebtedness.

Following the IPO, MMI has 25,000 authorized shares of preferred stock with a par value $0.0001 per share, none of which are outstanding.

Related Party Transactions

The Company was historically part of a consolidated federal income tax return and a combined unitary California tax return that were filed by MMC. The Company and MMC had a tax-sharing agreement whereby the Company provided for income taxes in its consolidated statements of income using an effective tax rate of 43.5%. As part of the IPO, the Company’s tax sharing agreement with MMC was terminated effective October 31, 2013.

The Company will file as a stand-alone tax entity in the future and will account for income taxes under the asset and liability method. Deferred tax assets and liabilities will be recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and for tax losses and tax credit carryforwards, if any. Deferred tax assets and liabilities will be measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

As part of the IPO, MMI and MMC entered into a transition services agreement, pursuant to which MMC will provide certain services to the Company for a limited period of time, including, but not limited to, the sharing of costs relating to certain insurance coverages and health plans, legal services and information technology management.

Amendments to Restricted Stock and SARs

In conjunction with the IPO, the vesting of all unvested restricted stock and all unvested SARs was accelerated. Following the IPO, future equity award issuances are recorded by the Company.

During the three and six months ended June 30, 2013, the Company recorded a capital contribution, net of taxes of $1.2 million and $1.5 million, respectively related to total stock based compensation expense of $2.2 million and $2.6 million, respectively.

Amendments to Restricted Stock and SARs

The SARs were frozen at the liability amount, calculated as of March 31, 2013, which will be paid out to each participant in installments upon retirement or departure under the terms of the existing program. The frozen SAR account balances will be credited with interest on an annual basis.revised SARs agreements. See Note 3-“Selected Balance Sheet Data” for additional information. To replace beneficial ownership in the SARs, the difference between the book value liability and the fair value of the awards was granted to plan participants in the form of deferred stock units, or DSUs, which were fully vested upon receipt and will be settled in actual stock at a rate of 20% per year if the participant remains employed by the Company during that period (or otherwise all unsettled shares of stock upon termination of employment will be settled five years from the termination date). In addition, the formula settlement value of all outstanding shares of stock held by the plan participants was removed, and all such shares of stock will

MARCUS & MILLICHAP REAL ESTATE INVESTMENT SERVICES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(dollar amounts in thousands, except share amounts)

beare subject to sales restrictions that lapse at a rate of 20% per year for five years if the participant remains employed by the Company. Additionally, in the event of death or termination of employment after reaching the age of 67, 100% of the DSUs will be settled and 100% of the shares of stock will be released from the resale restriction. Further, 100% of the shares of stock will be released from the resale restriction upon the consummation of a change of control of the Company.

The modification, grant

MARCUS & MILLICHAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the IPO

2013 Omnibus Equity Incentive Plan

In October 2013, the board of replacement awards and acceleration of vesting of restricted stock and SARs and grants of other stock-based compensation awards pursuant todirectors adopted the 2013 Omnibus Equity Incentive Plan or(the “2013 Plan”), which became effective upon the Company’s IPO. The 2013 Plan, in general authorizes for the granting of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards (RSAs), restricted stock units (RSUs), performance units and performance shares to the Company’s employees, independent contractors, directors and consultants and subsidiary corporations’ employees and consultants as selected from time to time by the Company’s board of directors at its discretion.

In connection with the approval of the 2013 Plan, are expected to result in non-cash stock-based compensation charges of approximately $30,000 to $35,000 in the fourth quarter of 2013. Following the IPO, grant of replacement awards and future equity award issuances will be recorded by MMI and will no longer result in a deemed capital contribution (distribution) to MMC.

2013 Omnibus Equity Incentive Plan

MMICompany reserved 5,500,000 shares of common stock for the issuance of awards under the 2013 Plan. At June 30, 2014, there were 2,237,587 shares available for future equitygrants under the Plan.

In February 2014, the Company granted an aggregate of 38,088 RSUs to certain sales and financing professionals, who are exclusive independent contractors. The awards issuancesvest 20% per year on the grant anniversary date beginning in 2015. The unvested awards are canceled upon termination of service.

In May 2014, the Company granted an aggregate of 41,314 RSUs to certain sales and 366,667 sharesfinancing professionals, who are exclusive independent contractors and aggregate of 6,991 RSUs to certain employees. In each case, the awards vest 20% per year on the grant anniversary date beginning in 2015. The unvested awards are canceled upon termination of service.

In May 2014, the Company granted an aggregate of 22,884 RSAs to non-employee directors. RSAs are issued and outstanding and vest 33-1/3% per year on the grant anniversary date beginning in 2015. The unvested awards are canceled upon termination of service.

RSUs/ RSAs

The following table summarizes the Company’s vested and nonvested RSU and RSA activity under the 2013 Plan for future issuancesthe six month period ended June 30, 2014 (dollars in thousands, except per share data):