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 ☒ No ☐

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 RegulationS-T during the preceding 12 months (or for such shorter time period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock, par value $0.0001 per share, of the registrant issued and outstanding as of ~~August 3, 2017~~May 4, 2018 was ~~38,117,290~~38,581,859 shares.


	June 30, 2017 (Unaudited)			December 31, 2016			March 31, 2018 (Unaudited)			December 31, 2017
Assets
Current assets:
Cash and cash equivalents	$	163,830		$	187,371		$	199,370		$	220,786
Commissions receivable		4,853			4,809			2,851			9,586
Prepaid expenses		6,950			8,094			7,432			9,661
Income tax receivable		—			1,182			—			1,308
Marketable securities, available-for-sale		72,333			27,454			94,826			73,560
Other assets, net		4,354			5,102			4,624			5,529

Total current assets		252,320			234,012			309,103			320,430
Prepaid rent		15,088			13,285			15,193			15,392
Property and equipment, net		17,074			16,355			17,097			17,153
Marketable securities, available-for-sale		51,325			77,475			35,573			52,099
Assets held in rabbi trust		8,380			7,337			8,756			8,787
Deferred tax assets, net		34,289			35,571			21,054			22,640
Other assets		21,470			9,981			26,191			23,163

Total assets	$	399,946		$	394,016		$	432,967		$	459,664


Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	9,098		$	10,133		$	6,482		$	9,202
Notes payable to former stockholders		1,035			986			1,035			1,035
Deferred compensation and commissions		30,449			44,754			26,913			49,180
Income tax payable		2,914			—			3,131			—
Accrued bonuses and other employee related expenses		14,642			22,303			10,741			23,842

Total current liabilities		58,138			78,176			48,302			83,259
Deferred compensation and commissions		40,123			44,455			38,969			49,361
Notes payable to former stockholders		7,651			8,686			7,651			7,651
Deferred rent and other liabilities		4,411			3,845			4,636			4,505

Total liabilities		110,323			135,162			99,558			144,776


Commitments and contingencies		—			—			—			—

Stockholders’ equity:
Preferred stock, $0.0001 par value:
Authorized shares – 25,000,000; issued and outstanding shares – none at June 30, 2017 and December 31, 2016, respectively		—			—
Authorized shares – 25,000,000; issued and outstanding shares – none at March 31, 2018 and December 31, 2017, respectively								—			—
Common stock, $0.0001 par value:
Authorized shares – 150,000,000; issued and outstanding shares – 38,117,290 and 37,882,266 at June 30, 2017 and December 31, 2016, respectively		4			4
Authorized shares – 150,000,000; issued and outstanding shares – 38,578,834 and 38,374,011 at March 31, 2018 and December 31, 2017, respectively								4			4
Additional paid-in capital		88,501			85,445			90,840			89,877
Stock notes receivable from employees		(4	)		(4	)		(4	)		(4	)
Retained earnings		200,116			172,599			242,095			224,071	��
Accumulated other comprehensive income		1,006			810			474			940

Total stockholders’ equity		289,623			258,854			333,409			314,888

Total liabilities and stockholders’ equity	$	399,946		$	394,016		$	432,967		$	459,664


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Revenues:
Real estate brokerage commissions	$	162,575		$	170,118		$	302,712		$	323,782		$	162,525		$	140,137
Financing fees		12,709			10,726			22,763			19,459			9,724			10,054
Other revenues		5,087			2,543			8,108			4,418			2,292			3,021

Total revenues		180,371			183,387			333,583			347,659			174,541			153,212

Operating expenses:
Cost of services		110,377			113,126			200,024			209,279			101,649			89,647
Selling, general and administrative expense		43,693			40,420			86,913			82,675
Selling, general, and administrative expense														48,053			43,220
Depreciation and amortization expense		1,303			1,009			2,600			2,015			1,375			1,297

Total operating expenses		155,373			154,555			289,537			293,969			151,077			134,164

Operating income		24,998			28,832			44,046			53,690			23,464			19,048
Other income (expense), net		997			618			1,833			848			1,209			836
Interest expense		(374	)		(384	)		(756	)		(775	)		(360	)		(382	)

Income before provision for income taxes		25,621			29,066			45,123			53,763			24,313			19,502
Provision for income taxes		10,052			11,542			17,554			21,424			6,302			7,502

Net income		15,569			17,524			27,569			32,339			18,011			12,000
Other comprehensive income:
Unrealized gains on marketable securities, net of tax of $111, $271, $176 and $721 for the three months ended June 30, 2017 and 2016 and the six months ended June 30, 2017 and 2016, respectively		174			426			221			1,106
Foreign currency translation (loss) gain, net of tax of $0 for each of the three months ended June 30, 2017 and 2016 and each of the six months ended June 30, 2017 and 2016		(23	)		(12	)		(25	)		35
Other comprehensive (loss) income:
Unrealized (losses) gains on marketable securities, net of tax of $(164) and $65 for the three months ended March 31, 2018 and 2017, respectively														(492	)		47
Foreign currency translation gain (loss), net of tax of $0 for each of the three months ended March 31, 2018 and 2017														39			(2	)

Total other comprehensive income		151			414			196			1,141
Total other comprehensive (loss) income														(453	)		45

Comprehensive income	$	15,720		$	17,938		$	27,765		$	33,480		$	17,558		$	12,045

Earnings per share:
Basic	$	0.40		$	0.45		$	0.71		$	0.83		$	0.46		$	0.31
Diluted	$	0.40		$	0.45		$	0.70		$	0.83		$	0.46		$	0.31
Weighted average common shares outstanding:
Basic		39,002			38,918			38,976			38,905			39,095			38,948
Diluted		39,132			39,054			39,118			39,008			39,250			39,108


	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Cash flows from operating activities
Net income	$	27,569		$	32,339		$	18,011		$	12,000
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization expense		2,600			2,015			1,375			1,297
(Recovery) provision for bad debt expense		(54	)		3			(106	)		(44	)
Stock-based compensation		3,981			3,100			2,613			1,866
Deferred taxes, net		1,139			661			1,750			1,179
Net realized (gains) losses on marketable securities, available-for-sale		(1	)		135
Tax benefit from stock-based award activity		—			171
Excess tax benefit from stock-based award activity		—			(171	)
Other non-cash items		37			243			55			(8	)
Changes in operating assets and liabilities:
Commissions receivable		(44	)		(1,207	)		6,735			1,500
Prepaid expenses		1,144			2,068			2,229			1,608
Prepaid rent		(1,803	)		(2,408	)		199			(1,315	)
Asset held in rabbi trust		(700	)		(1,263	)
Other assets		(10,625	)		(216	)		(2,109	)		(8,728	)
Accounts payable and accrued expenses		(989	)		(1,533	)		(2,682	)		(1,381	)
Income tax receivable/payable		4,096			9,352
Income tax receivable (payable)								4,439			(3,495	)
Accrued bonuses and other employee related expenses		(7,418	)		(15,653	)		(12,970	)		(14,113	)
Deferred compensation and commissions		(19,036	)		(15,837	)		(32,659	)		(28,106	)
Deferred rent obligation and other liabilities		566			461			131			654

Net cash provided by operating activities		462			12,260
Net cash used in operating activities								(12,989	)		(37,086	)
Cash flows from investing activities
Purchases of marketable securities, available-for-sale		(25,510	)		(60,839	)		(35,360	)		(23,014	)
Proceeds from sales and maturities of marketable securities, available-for-sale		7,215			50,847			30,067			4,741
Issuances of employee notes receivable		(344	)		(307	)		(125	)		(265	)
Payments received on employee notes receivable		6			2			3			3
Proceeds from sale of property and equipment		10			15			—			10
Purchase of property and equipment		(3,384	)		(4,252	)		(1,362	)		(1,367	)

Net cash used in investing activities		(22,007	)		(14,534	)		(6,777	)		(19,892	)
Cash flows from financing activities
Taxes paid related to net share settlement of stock-based awards		(1,402	)		(1,109	)		(1,650	)		(1,361	)
Proceeds from issuance of shares pursuant to employee stock purchase plan		392			402
Principal payments on notes payable to former stockholders		(986	)		(938	)
Excess tax benefit from stock-based award activity		—			171

Net cash used in financing activities		(1,996	)		(1,474	)		(1,650	)		(1,361	)

Net decrease in cash and cash equivalents		(23,541	)		(3,748	)		(21,416	)		(58,339	)
Cash and cash equivalents at beginning of period		187,371			96,185			220,786			187,371

Cash and cash equivalents at end of period	$	163,830		$	92,437		$	199,370		$	129,032


	Six Months Ended June 30,					Three Months Ended March 31,
	2017			2016		2018			2017
Supplemental disclosures of cash flow information
Interest paid during the period	$	1,881		$	563	$	1,553		$	15

Income taxes paid, net	$	12,318		$	11,240	$	113		$	9,818

Supplemental disclosures of noncash investing and financing activities
Reduction of accrued bonuses and other employee related expenses in settlement of employee notes receivable	$	243		$	198	$	131		$	235

Change in property and equipment included in accounts payable and accrued expenses	$	(46	)	$	741	$	(38	)	$	(142	)

Marcus & Millichap, Inc., (the “Company”, “Marcus & Millichap”, or “MMI”), a Delaware corporation, is a brokerage firm specializing in commercial real estate investment sales, financing, research and advisory services. As of ~~June 30, 2017,~~March 31, 2018, MMI operates 8078 offices in the United States and Canada through its wholly-owned subsidiary, Marcus & Millichap Real Estate Investment Services, Inc. (“MMREIS”), which includes the operations of Marcus & Millichap Capital Corporation (“MMCC”).

MMI was formed in June 2013 in preparation for Marcus & Millichap Company (“MMC”) tospin-off its majority owned subsidiary, MMREIS(“Spin-Off”). Prior to the initial public offering (“IPO”) of MMI, all of the preferred and common stockholders of MMREIS (including MMC and employees of MMREIS) contributed all of their outstanding shares to MMI, in exchange for new MMI common stock. As a result, MMREIS became a wholly-owned subsidiary of MMI. 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 of MMC. MMI completed its IPO on October 30, 2013.

The financial information presented in the accompanying unaudited condensed consolidated financial statements, has been prepared in accordance with rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for quarterly reports on Form10-Q andArticle 10-01 ofRegulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial 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 condensed consolidated financial position, results of operations and cash flows for the periods presented. 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, ~~2016~~2017 included in the Company’s Annual Report on Form10-K filed on March 16, ~~2017~~2018 with the SEC. The results of the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 are not necessarily indicative of the results to be expected for the ~~fiscal~~ year ending December 31, ~~2017,~~2018, or for other interim periods or future years.

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

The preparation of condensed consolidated financial statements in conformity with U.S. 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 condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The complete list of the Company’s accounting policies is included in the Company’s Annual Report on Form10-K filed on March 16, 2018 with the SEC.

The Company generates real estate brokerage commissions by acting as a broker for real estate owners or investors seeking to buy or sell commercial properties. The Company generates financing fees from securing financing on purchase transactions as well as fees earned from refinancing its clients’ existing mortgage debt and other financing activities. Other revenues include fees generated from consulting and advisory services, as well as referral fees from other real estate brokers. The Company’s contracts contain one performance obligation related to its real estate brokerage, financing and consulting and advisory services offered to buyers and sellers of commercial real estate and provide that it is operating as a principal in all its revenue generating activities. The Company does not have multiple-element arrangements, variable consideration, financing components, significant noncash consideration, licenses, long-term contracts with customers or other items affecting the transaction price. Accordingly, the Company determined that the transaction price is generally fixed and determinable and collectability is reasonably assured. The Company recognizes revenue in principally all cases at the close of escrow for real estate brokerage, close of loan for financing and when services are provided upon closing of the transaction for other revenues.

Certain ~~prior-period amounts~~costs related to the development or purchases ofinternal-use software are capitalized. Internal computer software costs that are incurred in the preliminary project stage are expensed as incurred. Direct consulting costs and certain payroll and related costs that are incurred during the development stage of a project are capitalized and amortized using the straight-line method over estimated useful lives ranging from 3 to 7 years. Capitalized costs are recorded in the property and equipment, net caption and amortization is recorded in the depreciation and amortization caption in the condensed consolidated ~~statements~~financial statements. Amortization begins for software that has been placed into production and is ready for its intended use. Postimplementation costs such as training, maintenance and support are expensed as incurred. The Company evaluates its capitalized software costs for impairment whenever events or changes in circumstances indicate that the carrying amount of ~~cash flows have been reclassified to conform to the current period presentation. These changes had no impact on the previously reported cash flow subtotals.~~such assets may not be recoverable.

Financial instruments that potentially subject the Company to a concentration of credit risk principally consist of cash and cash equivalents, due from independent contractors (included under other assets, net current and other assetsnon-current captions), investments in marketable securities,available-for-sale, security deposits (included under other assets,non-current caption) and commissions receivables. Cash and cash equivalents are placed with high-credit quality financial institutions and invested in high-credit quality money market funds and commercial paper.

Concentrations of marketable securities,available-for-sale are limited by the approved investment policy.

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 significant losses related to cash and cash equivalents.

The Company derives its revenues from a broad range of real estate investors, owners, and users in the United States and Canada, none of which individually represents a significant concentration of credit risk. The Company requires collateral on acase-by-case basis. The Company maintains allowances, as needed, for estimated credit losses based on management’s assessment of the likelihood of collection. For the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ no transaction represented 10% or more of total revenues. Further, while one or more transactions may represent 10% or more of commissions receivable at any reporting date, amounts due are typically collected within 10 days of settlement and, therefore, do not expose the Company to significant credit risk.

~~For~~During the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ the Company’s Canadian operations represented less than 1% of total revenues.

~~For~~During the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~one office represented 10% or more of total revenues. For the three months ended June 30, 2016 and six months ended June 30, 2017 and 2016,~~ no office represented 10% or more of total revenues.

The Company follows the guidance for segment reporting, which requires reporting information on operating segments in interim and annual financial statements. Substantially all of the Company’s operations involve the delivery of commercial real estate

services to its customers including real estate investment sales, financing and consulting and advisory services. Management makes operating decisions, assesses performance and allocates resources based on an ongoing review of these integrated operations, which constitute the Company’s only operating segment for financial reporting purposes.

In ~~March 2016,~~May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~No. 2016-09,~~~~Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”). ASU 2016-09 changes the accounting for share-based payment awards issued to employees. The Company adopted this new standard effective on January 1, 2017. The Company adopted the provisions of ASU 2016-09 on a prospective basis except for the change in the accounting for forfeitures, where the Company adopted the provision on a modified retrospective basis with a cumulative-effect adjustment as of January 1, 2017. The adoption of the new standard did not have a material impact on the Company’s condensed consolidated financial position or results of operations.

As a result of the adoption, in periods subsequent to December 31, 2016, windfall tax benefits, net are recorded as a discrete item in the Company’s provision for income taxes. See “Note 10 – “Income Taxes” for additional information. Prior to the adoption, any windfall tax benefits, net were recorded in additional paid in capital. Additionally, in periods subsequent to December 31, 2016, excess tax benefits for share-based payments were included in cash flows from operating activities rather than cash flows from financing activities. Further, the Company changed its accounting for forfeitures from estimating awards that are not expected to vest to recording forfeitures when they actually occur. The cumulative effect adjustment as of January 1, 2017 related to forfeitures was a charge to retained earnings of approximately $52,000 (net of tax) and is expected to have a minor impact on the timing of stock based compensation subsequent to January 1, 2017. See Note 9 – “Stock-Based Compensation Plans” for additional information.

~~In May 2014, the FASB issued ASU~~ No. 2014-09,Revenue from Contracts with Customers (“ASU2014-09”), which supersedes virtually all of the ~~current~~existing revenue recognition guidance under U.S. GAAP, and requires entities to recognize revenue for the transfer to a customer of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services. Subsequent to the issuance of ASU2014-09, the FASB issued ASUNo. 2015-14,Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, ASUNo. 2016-08,Revenue from Contacts with Customers: Principal Versus Agent Considerations, ASUNo. 2016-10,Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing, and ASUNo. 2016-12,Revenue from Contracts withCustomers: Narrow-Scope Improvements and Practical Expedients. The additional ASU’s clarified certain provisions of ASU2014-09 in response to recommendations from the Transition Resources Group established by the FASB and extended the required adoption of ASU2014-09 which is now effective for reporting periods beginning after December 15, ~~2017 and early adoption is permitted as of the original effective date.~~

~~ASU 2014-09 permits two implementation approaches, one requiring retrospective application of~~2017. The Company adopted the new standard ~~with restatement of prior years and one requiring prospective~~on January 1, 2018 using the modified retrospective application method.

The Company assessed the impact of the ~~new~~ standard ~~with disclosure~~and determined that its contracts contain one performance obligation related to its real estate brokerage, financing and consulting and advisory services offered to buyers and sellers of ~~results under old standards. For the Company, the new standard will be effective January 1, 2018.~~commercial real estate and provide that it is operating as a principal in all of its revenue generating activities. The Company does not have multiple-element arrangements, variable consideration, financing components, significant noncash consideration, licenses, or long-term contracts with ~~customers.~~customers or other items affecting the transaction price. The Company determined the transaction price is generally fixed and determinable and collectability is reasonably assured. Revenue was and will continue to be recognized in principally all cases at the close of escrow for real estate brokerage, close of loan for financing and when services are provided upon closing of the transaction for other revenues. Accordingly, the adoption of ASU2014-09, as clarified, ~~will~~does not have ~~a significant~~an effect inon the manner or timing of ~~its revenue recognition.~~the recognition of the Company’s revenue.

~~MARCUS & MILLICHAP, INC.~~In February 2018, the FASB issued ASUNo. 2018-02,Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (“ASU2018-02”). ASU2018-02 is effective for reporting periods beginning after December 15, 2018 and early adoption is permitted. ASU2018-02 permits Companies that elect to make the reclassification adjustment the option to apply the guidance retrospectively or to record the reclassification as of the beginning of the period of adoption. The Company adopted the new standard on January 1, 2018 and elected to make the reclassification adjustment pertaining to the stranded tax effects resulting from the enactment of the Tax Cuts and Jobs Act (the “Act”) from accumulated other comprehensive income to retained earnings as of the beginning of the period presented in the amount of $13,000.

In February 2016, the FASB issued ASUNo. 2016-02,Leases, to increase transparency and comparability by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company is still evaluating the impact of the new ~~standard.~~standard and has begun evaluating the population of all leases and related systems and internal control considerations. The Company will be required to adopt the new standard ineffective January 1, 2019, and the Company’s condensed consolidated balance sheets will be impacted by the recording of a lease liability and right of use asset for virtually all of its current operating leases. As of ~~June 30, 2017,~~March 31, 2018, the Company has remaining contractual obligations for operating leases (autos and office)~~, which~~ that aggregate approximately ~~$82.8~~$83.6 million. Accordingly, ~~we anticipate~~the Company anticipates that the adoption of the new standard will have a material impact on the Company’s condensed consolidated balance sheet. The amount of which and the potential impact on the condensed consolidated statements of net and comprehensive income and condensed consolidated statements of cash flows has yet to be determined.

In June 2016, the FASB issued ASUNo. 2016-13,Financial ~~Instruments -~~ Instruments—Credit Losses(“ASU2016-13”). ASU2016-13 is effective for reporting periods beginning after December 15, 2019 and early adoption is permitted. For the Company, the new standard will be effective January 1, 2020. Under ASU2016-13, the Company will be required to use an expected-loss model for its marketable securities,available-for sale, which requires that credit losses be presented as an allowance rather than as an impairment write-down.

Reversals of credit losses (in situations in which the estimate of credit losses declines) is permitted in the reporting period the change occurs. Current U.S. GAAP prohibits reflecting reversals of credit losses in current period earnings. At ~~June 30, 2017,~~March 31, 2018, the Company had ~~$123.7~~$130.4 million in marketable securities, available for sale which would be subject to this new standard. As of ~~June 30, 2017,~~March 31, 2018, these marketable securities, available for sale have an average credit rating of AA and no impairment write-downs have been recorded. The Company is currently evaluating the impact of this new standard on its investment policy and investments.

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


	June 30, 2017			December 31, 2016			March 31, 2018			December 31, 2017
Computer software and hardware equipment	$	15,968		$	14,583		$	16,543		$	16,247
Furniture, fixtures, and equipment		20,873			20,066			21,939			21,695
Less: accumulated depreciation and amortization		(19,767	)		(18,294	)		(21,385	)		(20,789	)

	$	17,074		$	16,355		$	17,097		$	17,153

During the ~~six~~three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ the Company wrote off approximately ~~$1.1 million~~$784,000 and ~~$1.5 million,~~$949,000 respectively, of fully depreciated computer software and hardware and furniture, fixtures and equipment.


	Current				Non-Current
	June 30,		December 31,		June 30,		December 31,		Current				Non-Current
	2017		2016		2017		2016		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Due from independent contractors, net^{(1) (2)}	$	1,585	$	2,231	$	20,028	$	8,702	$	2,713	$	3,672	$	24,798	$	21,726
Security deposits		—		—		1,134		1,059		—		—		1,161		1,158
Employee notes receivable⁽³⁾		273		314		246		132		351		366		177		255
Customer trust accounts and other		2,496		2,557		62		88		1,560		1,491		55		24

	$	4,354	$	5,102	$	21,470	$	9,981	$	4,624	$	5,529	$	26,191	$	23,163

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


	Current				Non-Current
	June 30,		December 31,		June 30,		December 31,		Current				Non-Current
	2017		2016		2017		2016		March 31, 2018		December 31, 2017		March 31, 2018		December 31, 2017
Stock appreciation rights (“SARs”) liability⁽¹⁾	$	1,734	$	1,366	$	19,681	$	20,949	$	1,895	$	1,662	$	18,706	$	20,217
Commissions payable to investment sales and financing professionals		27,802		42,781		12,917		17,101		23,635		46,257		12,501		21,924
Deferred compensation liability⁽¹⁾		913		607		7,525		6,405		1,383		1,261		7,762		7,220

	$	30,449	$	44,754	$	40,123	$	44,455	$	26,913	$	49,180	$	38,969	$	49,361

Prior to the IPO, certain employees of the Company were granted SARs under a stock-based compensation program assumed by MMC. In connection with the IPO, the SARs agreements were revised, the MMC liability of $20.0 million for the SARs was frozen as of March 31, 2013, and was transferred to MMI through a capital distribution. The SARs liability will be settled with each participant in ten annual installments in January of each year upon retirement or termination from service. Under the revised agreements, MMI is required to accrue interest on the outstanding balance beginning on January 1, 2014 at a rate based on the10-year treasury note plus 2%. The rate resets annually. The rates at January 1, 2018 and 2017 were 4.409% and ~~2016 were~~ 4.446% ~~and 4.273%~~, respectively. MMI recorded interest expense related to this liability of ~~$233,000~~$225,000 and ~~$228,000~~$233,000, for the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively and $466,000 and $457,000 for the six months ended June 30, 2017 and 2016,~~ respectively.

Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the Company made total payments (consisting of accumulated interest) of ~~$1.4~~$1.5 million classified as an operating cash flow in the deferred compensation and commissions caption in the accompanying condensed consolidated statements of cash ~~flow.~~flows.

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 as they relate to specific transactions closed. The Company has the 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.

A select group of management is eligible to participate in a Deferred Compensation Plan. The plan is a 409A plan and permits the participant to defer compensation up to limits as determined by the plan. Amounts are paid out generally when the participant is no longer a service provider; however, anin-service payout election is available to participants. Participants may elect to receive payouts as a lump sum or quarterly over a two to fifteen-year period. The Company elected to fund the Deferred Compensation Plan through company owned variable life insurance policies. 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, which is recorded in assets held in rabbi trust 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 trust assets are subject to the claims of MMI’s creditors. The Company may also, in its sole and absolute discretion, elect to withdraw at any time a portion of the trust assets by an amount by which the fair market value of the trust assets exceeds 110% of the aggregate deferred compensation liability represented by the participants’ accounts. Estimated payouts within the next twelve months for participants that have separated from service have been classified as current. During the ~~six~~three months ended ~~June 30, 2017,~~March 31, 2018, the Company made total payments to participants of ~~$74,000.~~$193,000.

The net change in the carrying value of the assets held in the rabbi trust and the net change in the carrying value of the deferred compensation liability, each exclusive of additional contributions, distributions and trust expenses consisted of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,				Three Months Ended March 31,
	2017		2016		2017		2016		2018		2017
Increase in the carrying value of the assets held in the rabbi trust⁽¹⁾	$	170	$	150	$	369	$	184	$	14	$	199

Increase in the net carrying value of the deferred compensation obligation⁽²⁾	$	188	$	151	$	399	$	188
Increase in the carrying value of the deferred compensation obligation⁽²⁾									$	—	$	211

Amortized cost and fair value of marketable securities,available-for-sale, by type of security consisted of the following (in thousands):


	June 30, 2017									December 31, 2016									March 31, 2018									December 31, 2017
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments:
U.S. treasuries	$	59,044	$	—	$	(141	)	$	58,903	$	24,987	$	—	$	(30	)	$	24,957	$	72,344	$	—	$	(171	)	$	72,173	$	57,712	$	—	$	(88	)	$	57,624
U.S. government sponsored entities		7,016		—		(12	)		7,004		2,497		—		—			2,497		10,536		—		(35	)		10,501		7,016		—		(8	)		7,008
Corporate debt securities		6,428		—		(2	)		6,426		—		—		—			—		12,165		—		(13	)		12,152		8,931		—		(3	)		8,928

	$	72,488	$	—	$	(155	)	$	72,333	$	27,484	$	—	$	(30	)	$	27,454	$	95,045	$	—	$	(219	)	$	94,826	$	73,659	$	—	$	(99	)	$	73,560

Long-term investments:
U.S. treasuries	$	16,338	$	11	$	(114	)	$	16,235	$	40,865	$	—	$	(229	)	$	40,636	$	4,553	$	—	$	(160	)	$	4,393	$	18,111	$	7	$	(164	)	$	17,954
U.S. government sponsored entities		5,454		—		(52	)		5,402		12,618		—		(58	)		12,560		1,737		—		(67	)		1,670		5,306		—		(62	)		5,244
Corporate debt securities		22,531		291		(48	)		22,774		17,841		74		(165	)		17,750		23,332		28		(304	)		23,056		22,505		268		(54	)		22,719
Asset-backed securities and other		6,891		36		(13	)		6,914		6,557		18		(46	)		6,529		6,485		9		(40	)		6,454		6,180		17		(15	)		6,182

	$	51,214	$	338	$	(227	)	$	51,325	$	77,881	$	92	$	(498	)	$	77,475	$	36,107	$	37	$	(571	)	$	35,573	$	52,102	$	292	$	(295	)	$	52,099

The amortized cost and fair value of the Company’s investments inavailable-for-sale securities that have been in a continuous unrealized loss position consisted of the following (in thousands):


	June 30, 2017					December 31, 2016					March 31, 2018					December 31, 2017
	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Loss			Fair Value		Unrealized Loss			Fair Value
Less than 12 months	$	(370	)	$	93,711	$	(491	)	$	86,105	$	(508	)	$	96,685	$	(158	)	$	63,229

12 months or longer	$	(12	)	$	697	$	(37	)	$	721	$	(282	)	$	28,880	$	(236	)	$	44,961

Gross realized gains and gross realized losses from the sales of the Company’savailable-for-sale securities consisted of the following (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,					Three Months Ended March 31,
	2017		2016		2017		2016			2018		2017
Gross realized gains⁽¹⁾	$	1	$	20	$	1	$	20		$	—	$	—

Gross realized losses⁽¹⁾	$	—	$	—	$	—	$	(155	)	$	—	$	—

The Company may sell certain of its marketable securities, available-for-sale prior to their stated maturities for strategic reasons including, but not limited to, anticipated capital requirements, anticipated credit deterioration, duration management or when a security no longer meets the criteria of the Company’s investment policy.

As of ~~June 30, 2017,~~March 31, 2018, the Company considers the declines in market value of its marketable securities,available-for-sale to be temporary in nature and does not consider any of its investments other-than-temporarily impaired. The Company typically invests in highly-rated securities, and its investment policy generally limits the amount of credit exposure to any one issuer. The policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss and matching long-term liabilities. When evaluating an investment for other-than-temporary impairment the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates and the Company’s intent to sell, or whether it is more likely than not it will be required to sell the investment before recovery of the investment’s cost basis. The Company has no current intent to sell, and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, which may be at maturity. The Company may sell certain of its marketable securities,available-for-sale prior to their stated maturities for strategic reasons including, but not limited to, anticipated liquidity and capital requirements, anticipated credit deterioration, duration management or when a security no longer meets the criteria of the Company’s investment policy.

Amortized cost and fair value of marketable securities,available-for-sale, by contractual maturity consisted of the following (in thousands):


	June 30, 2017				December 31, 2016				March 31, 2018				December 31, 2017
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
Due in one year or less	$	72,488	$	72,333	$	27,484	$	27,454	$	95,045	$	94,826	$	73,659	$	73,560
Due after one year through five years		29,593		29,561		57,309		57,144		14,733		14,608		30,644		30,517
Due after five years through ten years		15,525		15,644		14,992		14,841		14,956		14,645		15,090		15,200
Due after ten years		6,096		6,120		5,580		5,490		6,418		6,320		6,368		6,382

	$	123,702	$	123,658	$	105,365	$	104,929	$	131,152	$	130,399	$	125,761	$	125,659

Weighted average contractual maturity		2.9 years				3.5 years				2.5 years				2.6 years

Actual maturities may differ from contractual maturities because certain borrowers have the right to prepay certain obligations with or without prepayment penalties.

In conjunction with theSpin-Off and IPO, notes payable to certain former stockholders of MMREIS were issued in settlement of restricted stock and SARs awards that were redeemed by MMREIS upon the termination of employment by the former stockholders (“the Notes”). Such ~~notes~~Notes had been previously assumed by MMC, and were transferred to the Company. The Notes are unsecured and bear interest at 5% with annual principal and interest installments with a final principal payment due during the second quarter of 2020. ~~During each of the six months ended June 30, 2017 and 2016, the Company made total payments on the Notes of $1.5 million, including principal and interest.~~

Accrued interest included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets pertaining to the Notes consisted of the following (in thousands):

Interest expense pertaining to the Notes consisted of the following (in thousands):

Prior to October 2013, the Company operated under a shared services arrangement with MMC whereby the Company was charged for actual costs specifically incurred on behalf of the Company or allocated to the Company on a pro rata basis. Beginning in October 2013, certain services are provided to the Company under a Transition Services Agreement (“TSA”) between MMC and the Company, which replaced thepre-IPO shared services arrangement. The TSA is intended to provide certain services until the Company acquires the services separately. During the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ the Company incurred net costs of ~~$43,000~~$72,000 and ~~$54,000~~$82,000 under the ~~TSA, respectively. During the six months ended June 30, 2017 and 2016, the Company incurred net costs of $125,000 and $124,000 under~~ TSA, respectively. These amounts are included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income.

MMC has wholly or majority owned subsidiaries that buy and sell commercial real estate properties. The Company performs certain brokerage and financing services related to transactions of the subsidiaries of MMC. For the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ the Company ~~generated~~earned real estate brokerage commissions and financing fees of ~~$120,000~~$2.6 million and ~~$793,000,~~$203,000, respectively, from transactions with subsidiaries of ~~MMC.~~MMC related to these services. The Company incurred cost of services of ~~$65,000~~$1.5 million and $476,000, respectively, related to these revenues. For the six months ended June 30, 2017 and 2016, the Company generated real estate brokerage commissions and financing fees of $323,000 and $2.4 million, respectively, from subsidiaries of MMC. The Company incurred cost of services of $187,000 and $1.4 million,$122,000, respectively, related to these revenues.

The Company has an operating lease with MMC for a single story office building located in Palo Alto, California, which expires on May 31, 2022. Rent expense for this lease aggregated $253,000 for each of the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016. Rent expense for this lease aggregated $506,000 for each of the six months ended June 30, 2017 and 2016.~~2017. Rent expense is included in selling, general and administrative expense in the accompanying condensed consolidated statements of net and comprehensive income.

As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, accounts payable and accrued expenses with MMC totaling ~~$92,000~~$101,000 and ~~$303,000,~~$91,000, respectively, remain unpaid and are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.

The Company makes advances tonon-executive employees fromtime-to-time. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, the aggregate principal amount for employee notes receivable was ~~$519,000~~$528,000 and ~~$446,000,~~$621,000, respectively, which is included in other assets, net current and other assetsnon-current captions in the accompanying condensed consolidated balance sheets. See Note 4 – “Selected Balance Sheet Data” for additional information.

As of ~~June 30, 2017,~~March 31, 2018, George M. Marcus, the Company’s founder andCo-Chairman, beneficially owned approximately ~~53%~~48% of the Company’s issued and outstanding common stock, including shares owned by Phoenix Investments Holdings, LLC and the Marcus Family ~~Foundation.~~Foundation II.

U.S. GAAP defines the fair value of a financial instrument as the amount that would be received from the sale of an asset in an orderly transaction between market participants at the measurement date. The Company is responsible for the determination of the value of the investment carried at fair value and the supporting methodologies and assumptions. The Company uses various pricing sources to validate the values utilized.

The degree of judgment used in measuring the fair value of financial instruments is generally inversely ~~correlates~~correlated with the level of observable valuation inputs. Financial instruments with quoted prices in active markets generally have more pricing observability and less judgment is used in measuring fair value. Financial instruments for which no quoted prices are available have less observability and are measured at fair value using valuation models or other pricing techniques that require more judgment.

Assets recorded at fair value are measured and classified in accordance with a fair value hierarchy consisting of the three “levels” based on the observability of inputs available in the marketplace used to measure the fair values as discussed below:

Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; or

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

Investment in marketable securities,available-for-sale and assets held in the rabbi trust are carried at fair value based on observable inputs available. All these securities are measured as Levels 1 or 2 as appropriate. The Company has no investments measured as Level 3.

The Company values its investments including assets held in rabbi trust, commercial paper, money market funds and investments in marketable securities,available-for-sale at fair value on a recurring basis. Fair values were determined for each individual security in the investment portfolio.

Assets carried at fair value are categorized into one of the three categories described above and consisted of the following (in thousands):


	June 30, 2017								December 31, 2016								March 31, 2018								December 31, 2017
	Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3		Fair Value		Level 1		Level 2		Level 3
Assets held in rabbi trust	$	8,380	$	—	$	8,380	$	—	$	7,337	$	—	$	7,337	$	—	$	8,756	$	—	$	8,756	$	—	$	8,787	$	—	$	8,787	$	—

Cash equivalents⁽¹⁾:
Commercial paper	$	13,936	$	—	$	13,936	$	—	$	9,987	$	—	$	9,987	$	—	$	7,945	$	—	$	7,945	$	—	$	11,441	$	—	$	11,441	$	—
Money market funds		124,502		124,502		—		—		142,503		142,503		—		—		165,027		165,027		—		—		157,788		157,788		—		—

	$	138,438	$	124,502	$	13,936	$	—	$	152,490	$	142,503	$	9,987	$	—	$	172,972	$	165,027	$	7,945	$	—	$	169,229	$	157,788	$	11,441	$	—

Marketable securities, available-for-sale:
Short-term investments:
U.S. treasuries	$	58,903	$	58,903	$	—	$	—	$	24,957	$	24,957	$	—	$	—	$	72,173	$	72,173	$	—	$	—	$	57,624	$	57,624	$	—	$	—
U.S. government sponsored entities		7,004		—		7,004		—		2,497		—		2,497		—		10,501		—		10,501		—		7,008		—		7,008		—
Corporate debt securities		6,426		—		6,426		—		—		—		—		—		12,152		—		12,152		—		8,928		—		8,928		—

	$	72,333	$	58,903	$	13,430	$	—	$	27,454	$	24,957	$	2,497	$	—	$	94,826	$	72,173	$	22,653	$	—	$	73,560	$	57,624	$	15,936	$	—

Long-term investments:
U.S. treasuries	$	16,235	$	16,235	$	—	$	—	$	40,636	$	40,636	$	—	$	—	$	4,393	$	4,393	$	—	$	—	$	17,954	$	17,954	$	—	$	—
U.S. government sponsored entities		5,402		—		5,402		—		12,560		—		12,560		—		1,670		—		1,670		—		5,244		—		5,244		—
Corporate debt securities		22,774		—		22,774		—		17,750		—		17,750		—		23,056		—		23,056		—		22,719		—		22,719		—
Asset-backed securities and other		6,914		—		6,914		—		6,529		—		6,529		—		6,454		—		6,454		—		6,182		—		6,182		—

	$	51,325	$	16,235	$	35,090	$	—	$	77,475	$	40,636	$	36,839	$	—	$	35,573	$	4,393	$	31,180	$	—	$	52,099	$	17,954	$	34,145	$	—

There were no transfers in or out of Level 1 and Level 2 during the three ~~and six~~ months ended ~~June 30, 2017.~~

The Company’s cash held in financial institutions, commissions receivable, amounts due from employees and investment sales and financing professionals (included in other assets, net current and other assets non-current captions), accounts payable and accrued expenses and commissions payable (included in deferred compensation and commissions current and deferred compensation and commissions non-current captions) are carried at cost, which approximates fair value based on their immediate or short-term maturities and terms which approximate current market rates, or for money market funds, quoted market rates, and are considered to be in the Level 1 classification.

The Company’s obligations under notes payable to former stockholders bear fixed interest rates. The Company has determined that the carrying value on these instruments approximates fair value. As the Company’s obligations under SARs liability (included in deferred compensation and commissions current and non-current captions) bear interest at a variable rate based on U.S. Treasuries, the Company has determined that the carrying value approximates the fair value.March 31, 2018.

As of ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, there were ~~38,117,290~~38,578,834 and ~~37,882,266~~38,374,011 shares of common stock, $0.0001 par value, issued and outstanding, which includes unvested restricted stock awards issued tonon-employee directors, respectively. See Note 1112 – “Earnings per Share” for additional information.

The Company has 25,000,000 authorized shares of preferred stock with a par value $0.0001 per share. At ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, there were no preferred shares issued or outstanding.

The components of accumulated other comprehensive income as of ~~June 30, 2017,~~March 31, 2018, by component, net of income taxes consisted of the following (in thousands):

The board of directors adopted the 2013 Omnibus Equity Incentive Plan (“2013 Plan”), which became effective upon the Company’s IPO. In February 2017, the board of directors approved an amendment to the 2013 Plan, which was approved by the shareholders in May 2017. Grants are made from time to time by the Company’s board of directors at its discretion subject to certain restrictions as to the number and value of shares that may be granted to any individual. Upon adoption of the 2013 Plan, 5,500,000 shares of common stock were initially reserved for the issuance of awards. Pursuant to the automatic ~~increase~~increases previously provided for in the 2013 Plan, the board of directors ~~have~~ approved share reserve increases aggregating 3,300,000. Pursuant to the amendment to the 2013 Plan referenced above, the automatic share increase provision was removed. At ~~June 30, 2017,~~March 31, 2018, there were ~~5,513,460~~5,502,845 shares available for future grants under the Plan.

Under the 2013 Plan, the Company has issued restricted stock awards (“RSAs”) tonon-employee directors and restricted stock units (“RSUs”) to employees and independent contractors. ~~All~~ RSAs vest in equal annual installments over aone-year or three-year period from the date of grant. All RSUs vest in equal annual installments over a five-year period from the date of grant. Any unvested awards are canceled upon termination of service. Awards accelerate upon death subject to approval by the compensation committee. As of March 31, 2018, there were no issued or outstanding options, SARs, performance units or performance shares awards.

During the ~~six~~three months ended ~~June 30, 2017, 250,551~~March 31, 2018, 258,930 shares of RSUs vested of which ~~255,709~~252,930 shares of common stock were delivered and ~~52,826~~48,107 shares of common stock were withheld to pay applicable required employee statutory withholding taxes based on the market value of the shares on the vesting date. The shares withheld for taxes were returned to the share reserve and are available for future issuance in accordance with provisions of the 2013 Plan.

During the six months ended June 30, 2017, as a result of the adoption of ASU 2016-09, any windfall tax benefits, net were recorded as a discrete item in the Company’s provision for income taxes. During the year ended December 31, 2016, the Company recorded windfall tax benefits, net in the amount of $2.7 million, including $171,000 recorded during the six months ended June 30, 2016 resulting from settlement of stock-based award activity. For the year ended December 31, 2016, such windfall tax benefits, net were excluded from the provision for income taxes and included as a component of additional paid-in capital when the awards were settled. See “Note 10 – “Income Taxes” for additional information.

Activity under the 2013 Plan consisted of the following (dollars in thousands, except per share data):

As of ~~June 30, 2017, 930,419~~March 31, 2018, 578,618 fully vested deferred stock units (“DSUs”) remained outstanding. See “Amendments to Restricted Stock and SARs” section below and Note 1112 – “Earnings Per Share” for additional information. Future share settlements of DSUs by year consisted of the following:

In 2013, the Company adopted the 2013 Employee Stock Purchase Plan (“ESPP Plan”). The ESPP Plan qualifies under Section 423 of the IRS Code and provides for consecutive, ~~non-overlapping 6-month~~non-overlapping6-month offering periods. The offering periods generally start on the first trading day on or after May 15 and November 15 of each year. Qualifying employees may purchase shares of the Company stock at a 10% discount based on the lower of the market price at the beginning or end of the offering period, subject to IRS limitations. The Company determined that the ESPP Plan was a compensatory plan and is required to expense the fair value of the awards over each6-month offering period.

The ESPP Plan initially had 366,667 shares of common stock reserved and ~~258,949~~246,895 shares of common stock remain available for issuance for each of the periods at ~~June 30, 2017.~~March 31, 2018 and December 31, 2017, respectively. The ESPP Plan provides for annual increases in the number of shares available for issuance under the ESPP, equal to the least of (i) 366,667 shares, (ii) 1% of the outstanding shares on such date, or (iii) an amount determined by the board. Pursuant to the provisions of the ESPP Plan, the board of directors determined a share reserve increase was not required in the prior years. At ~~June 30, 2017,~~March 31, 2018, total unrecognized compensation cost related to the ESPP Plan was ~~$47,000~~$19,000 and is expected to be recognized over a weighted average period of ~~0.38~~0.12 years.

In connection with the IPO, the formula settlement value of all outstanding shares of stock held by the plan participants was removed, and all such shares of stock are subject to sales restrictions that lapse at a rate of 20% per year for five years if the participant remains employed by the Company. In the event of death or termination of employment after reaching the age of 67, 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. Of the original 3,689,326 shares subject to resale restriction, ~~1,475,730~~732,020 shares remain subject to sales restriction at ~~June 30, 2017.~~March 31, 2018.

Prior to the IPO, certain employees were granted SARs. As of March 31, 2013, the outstanding SARs were frozen at the liability amount, and will be paid out to each participant in installments upon retirement or departure under the terms of the revised SARs agreements. 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 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 (otherwise all unsettled shares of stock upon termination from service will be settled five years from the termination date, unless otherwise agreed to by the Company). In the event of death or termination of service after reaching the age of 67, 100% of the DSUs will be settled.

The Company adopted ASU 2016-09 on January 1, 2017 and changed its accounting for forfeitures on a prospective basis from estimating awards that are not expected to vest to recording forfeitures when they actually occur. Components of stock-based compensation are included in selling, general and administrative expense in the condensed consolidated statements of net and comprehensive income consisted of the following (in thousands, except common stock price):


	Three Months Ended June 30,				Six Months Ended June 30,						Three Months Ended March 31,
	2017		2016		2017			2016			2018		2017
Employee stock purchase plan	$	29	$	60	$	75		$	108		$	39	$	46
RSAs – non-employee directors		90		109		179			198			111		89
RSUs – employees		952		818		1,866			1,476			953		914
RSUs – independent contractors⁽¹⁾		1,044		788		1,861			1,318			1,510		817

	$	2,115	$	1,775	$	3,981		$	3,100		$	2,613	$	1,866

Common stock price at beginning of period	$	24.58	$	25.39	$	26.72		$	29.14		$	32.61	$	26.72
Common stock price at end of period	$	26.36	$	25.41	$	26.36		$	25.41		$	36.06	$	24.58
Increase (decrease) in stock price	$	1.78	$	0.02	$	(0.36	)	$	(3.73	)	$	3.45	$	(2.14	)

The Company’s effective tax rate for the three ~~and six~~ months ended ~~June 30,~~March 31, 2018 and 2017 was ~~39.2%~~25.9% and ~~38.9%~~38.5%, ~~compared to 39.7% and 39.8% for the three and six months ended June 30, 2016.~~respectively. The Company provides for the effects of income taxes in interim financial statements based on the Company’s estimate of its annual effective tax rate for the full year, which is based on forecasted income by jurisdiction where the Company operates, adjusted for the tax effects of items that relate discretely to the period, if any.

The provision for income taxes differs from the amount computed by applying the U.S. federal statutory ~~federal corporate income tax~~ rate ~~of 35%~~ to income before provision for income taxes and consisted of the following (in thousands):

On December 22, 2017, the Act was enacted, which significantly changed the U.S. corporate income tax laws by, among other items, reducing the U.S. corporate income tax rate to 21% from 35% starting in 2018, further limiting 162(m) deductions and creating a territorial tax system with aone-time mandatory tax on previously deferred foreign earnings of U.S. subsidiaries. As a result of the Act, the Company revalued its deferred taxes, net due to the changes in the U.S. corporate statutory federal income tax rate and recorded a net charge of $11.6 million in the provision for income taxes during the fourth quarter of 2017. Although the Company’s accounting for certain income tax effects of the Act is incomplete, it was determined that the $11.6 million charge is a reasonable estimate of those effects. As of March 31, 2018, this amount continues to be our best estimate of the impact of the Act in accordance with our understanding of the Act and the related guidance available.When the IRS issues additional guidance and regulations enabling the Company to finalize certain tax positions, the Company will be able to conclude whether any further adjustments are required to be made to its deferred tax assets, net balance as of December 31, 2017. Any adjustments to this provisional amount will be reported no later than the fourth quarter of 2018, as a component of the provision for income taxes in the reporting period in which any such adjustments are determined.

Basic and diluted earnings per share for the three months ended March 31, 2018 and 2017, respectively consisted of the following (in thousands, except per share data):

~~Basic and diluted earnings per share for the three and six months ended June 30, 2017 and 2016, respectively consisted of the following (in thousands, except per share data):~~

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”), which, as amended, matures on June 1, ~~2019.~~2020. The Company may borrow, repay and reborrow amounts under the Credit Facility until its maturity date, at which time all amounts outstanding under the Credit Facility must be repaid in full.

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 of which $533,000 was utilized at ~~June 30, 2017.~~March 31, 2018. 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. In connection with executing the Credit Agreement, as amended the Company paid bank fees and other expenses, which are being amortized over the remaining term of the Credit Agreement. The Company pays a commitment fee of up to 0.1% per annum, payable quarterly, based on the amount of unutilized commitments under the Credit Facility. The amortization and commitment fee is included in interest expense in the accompanying condensed consolidated statements of net and comprehensive income and was ~~$28,000~~$26,000 and ~~$29,000~~$27,000 during the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively and $55,000 and $59,000 during the six months ended June 30, 2017 and 2016,~~ respectively. As of ~~June 30, 2017,~~March 31, 2018, there were no amounts outstanding under the Credit Agreement.

The Credit Facility contains customary covenants, including financial and other covenant reporting requirements and events of default. Financial covenants 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 each quarter end and (ii) total funded debt to EBITDA not greater than 2.0:1.0 as of each quarter end both on a rolling4-quarter basis. The Credit Facility is secured by substantially all assets of the 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). As of ~~June 30, 2017,~~March 31, 2018, the Company was in compliance with all financial andnon-financial covenants.

The Company is subject to various legal proceedings and claims that arise in the ordinary course of business, some of which involve claims for damages that are substantial in amount. Most of these litigation matters are covered by insurance, which contain deductibles, exclusions, claim limits and aggregate policy limits. While the ultimate liability for these legal proceeding cannot be determined, the Company reviews the need for its accrual for loss contingencies quarterly and records an accrual for litigation related losses where the likelihood of loss is both probable and estimable. The Company believes that the ultimate resolution of the legal proceedings will not have a material adverse effect on its financial condition or results of operations. The Company accrues legal fees for litigation as the legal services are provided.

In connection with certain agreements with investment sales and financing professionals, the Company may agree to advance amounts to its investment sales and financing professionals upon reaching certain performance goals. Such commitments as of ~~June 30, 2017~~March 31, 2018 aggregated ~~$1.7~~$1.4 million.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context requires otherwise, the words “Marcus & Millichap,~~” “Marcus & Millichap Real Estate Investment Services,” “MMREIS,~~” “we,” the “Company,” “us” and “our” refer to Marcus & Millichap, Inc., Marcus & Millichap Real Estate Investment Services, Inc. and its other consolidated subsidiaries.

The following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of many factors. The results of operations for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 are not necessarily indicative of the results that may be expected for the full year ending December 31, ~~2017,~~2018, 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 Form10-Q and in conjunction with our Annual Report on Form10-K for the year ended December 31, ~~2016~~2017 filed with the SEC on March 16, ~~2017,~~2018, including the “Risk Factors” section and the consolidated financial statements and notes included therein.

We are a leading national brokerage firm specializing in commercial real estate investment sales, financing, 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 over the last 10 years.

As of ~~June 30, 2017,~~March 31, 2018, we had ~~1,749~~1,769 investment sales and financing professionals that are primarily exclusive independent contractors operating in 8078 offices who provide real estate brokerage and financing services to sellers and buyers of commercial real estate. We also offer market research, consulting and advisory services to our clients. During the three ~~and six~~ months ended ~~June 30, 2017,~~March 31, 2018, we closed ~~2,191 and 4,258~~2,085 investment sales, financing and other transactions with total volume of approximately ~~$11.3 billion and $19.8 billion, respectively.~~$9.8 billion. During the year ended December 31, ~~2016,~~2017, we closed ~~8,995~~8,979 sales, financing and other transactions with total volume of approximately ~~$42.3~~$42.2 billion.

We generate revenues by collecting real estate brokerage commissions upon the sale, and fees upon the financing, of commercial properties and by providing consulting and advisory services. Real estate brokerage commissions are typically based upon the value of the property, and financing fees are typically based upon the size of the loan. For the three months ended ~~June 30,~~March 31, 2018, approximately 93% of our revenues were generated from real estate brokerage commissions, 6% from financing fees and 1% from other revenues, including consulting and advisory services. During the year ended December 31, 2017, approximately 90% of our revenues were generated from real estate brokerage commissions, 7% from financing fees and 3% from other revenues, including consulting and advisory services. For the six months ended June 30, 2017, approximately 91% of our revenues were generated from real estate brokerage commissions, 7% from financing fees and 2% from other revenues, including consulting and advisory services. During the year ended December 31, 2016, approximately 92% of our revenues were generated from real estate brokerage commissions, 6% from financing fees and 2% from other revenues, including consulting and advisory services.

We divide commercial real estate into four major market segments, characterized by price:

Our strength is in serving private clients in the ~~$1-~~$1-$10 million private client market segment, which contributed approximately ~~69%~~65% and ~~66%~~71% of our real estate brokerage commissions during the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016, respectively and approximately 70% and 67% of our real estate brokerage commissions during the six months ended June 30, 2017 and 2016,~~ respectively. The following tables set forth the number of transactions, sales volume and revenues by commercial real estate market segment for real estate brokerage:


	Six Months Ended June 30,																					Three Months Ended March 31,
	2017						2016						Change									2018						2017						Change
Real Estate Brokerage	Number		Volume		Revenues		Number		Volume		Revenues		Number			Volume			Revenues
																						Number		Volume		Revenues		Number		Volume		Revenues		Number		Volume		Revenues
Real Estate Brokerage			(in millions)		(in thousands)				(in millions)		(in thousands)					(in millions)			(in thousands)					(in millions)		(in thousands)				(in millions)		(in thousands)				(in millions)		(in thousands)
		503	$	306	$	13,078		537	$	341	$	14,526		(34	)	$	(35	)	$	(1,448	)		245	$	162	$	6,868		242	$	142	$	5,994		3	$	20	$	874
Private client market ($1 - $10 million)		2,346		7,278		212,218		2,328		7,344		217,047		18			(66	)		(4,829	)		1,168		3,559		106,012		1,121		3,398		99,750		47		161		6,262
Middle market (³$10 - $20 million)		164		2,217		39,542		174		2,366		39,792		(10	)		(149	)		(250	)		113		1,605		27,271		88		1,202		19,154		25		403		8,117
Larger transaction market (³$20 million)		100		3,963		37,874		135		6,014		52,417		(35	)		(2,051	)		(14,543	)		59		2,589		22,374		38		1,748		15,239		21		841		7,135

		3,113	$	13,764	$	302,712		3,174	$	16,065	$	323,782		(61	)	$	(2,301	)	$	(21,070	)		1,585	$	7,915	$	162,525		1,489	$	6,490	$	140,137		96	$	1,425	$	22,388

We continue to increase our presence in the United States and Canada through execution of our growth strategies by targeting markets based on population, employment, level of commercial real estate sales, inventory and competitive opportunities where we believe the markets will benefit from our business model. The following charts set forth the percentage of transactions by region for real estate brokerage.

Our business and our operating results, financial condition and liquidity are significantly affected by the number and size of commercial real estate investment sales and financing transactions we close in any period. The number and size of these transactions are affected by our ability to recruit and retain investment sales and financing professionals, identify and contract properties for sale and those that need financing and refinancing. We principally monitor the commercial real estate market through ~~the~~ four factors, which generally drive our business. ~~They include~~These factors are the economy, commercial real estate supply and demand, capital markets and investment sentiment and investment activity.

Our business is dependent on economic conditions within the markets in which we operate. Changes in the economy on a global, national, regional or local basis can have a positive or a negative impact on our business. Economic indicators and projections related to job growth, unemployment, interest rates, ~~construction~~retail spending and ~~vacancies~~confidence trends can have a positive or a negative impact on our business. Overall market conditions can have an effect on investor sentiment and, ultimately, the demand for our services from investors in real estate. ~~Our national footprint allows us to support our clients~~Elevated consumer and business confidence in ~~balancing the opportunities and risks of changing regional economic conditions. We believe the U.S. economy remains durable, given the moderate economic gains through~~ the first ~~half~~quarter, likely invigorated by the new tax law, supported steady economic growth. Consumption, business investment and hiring all maintained a sound pace of ~~2017. Job creation through~~growth in the first ~~six months in 2017 was on-par with~~quarter, pointing to a positive outlook for the ~~same period in 2016,~~year. Risks to the outlook include stock market volatility, prospects of a trade war and ~~unemployment~~rising geopolitical risk, all of which have the potential to disrupt confidence levels and economic growth. While the stimulus of tax reductions has ~~tightened, supporting moderate wage growth.~~begun to fuel spending, we believe additional gains could be impeded should additional clarification of the tax law not emerge soon. Congress’ inability to pass needed technical corrections to the tax law and the slow emergence of guidance from the IRS could erode some of the potential lift. It is widely anticipated that the new leadership of the Federal Reserve will continue to cautiously exert upward pressure on interest rates to contain inflation risk. We believe sentiment about economic expansion in ~~2017~~2018 remains ~~elevated, but has begun to trickle lower amid uncertainty surrounding fiscal policy, taxes, deregulation and other initiatives by the Trump administration that continue to weigh on sentiment.~~conservatively optimistic.

Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by factors beyond our control. These factors include the supply of commercial real estate coupled with user demand for these properties and the performance of real estate assets when compared with other ~~investments~~investment alternatives, such as stocks and bonds. Despite the generally moderate pace of economic growth over the past eight years, we believe commercial real estate offers a compelling option for investors, as real estate fundamentals generally remain balanced. Theslow-but-steady economic gains ~~have~~ generated demand while keeping construction levels limited for most property types on a national scale, although construction ~~has begun to elevate~~is elevated for some property types in certain metropolitan areas. ~~We believe~~The prospects of a modest lift in economic growth, spurred by the ~~maturing cycle, combined~~stimulus of the new tax law, in conjunction with positive demographics should sustain demand levels on a macro basis, keeping vacancy levels tight through the ~~current uncertainty around forecasted~~coming year. Rent growth ~~inflation trends and interest rates have caused investors and lenders~~has begun to ~~assume more cautious underwriting assumptions resulting in a slowdown in sales. Furthermore, many investors are delaying transactions in anticipation~~flatten for several property types, but the overall momentum continues to be positive. The extension of more clarity regarding tax reform, regulatory easing and economic initiatives. We believe a boost to investor sentiment is possible with clarity on government policies and growth initiatives. We believe that these factorsthe positive outlook should ~~continue to support long-term~~enable commercial real estate investors to advance their underwriting models with greater confidence, supporting investor demand ~~and therefore, demand~~ for ~~our brokerage and financing services.~~the sector.

Credit and liquidity issues in the financial markets have a direct impact on the flow of capital to the commercial real estate market. Real estate purchases are often financed with debt and, as a result, credit and liquidity impact transaction activity and prices. Changes in interest rates, as well as steady and protracted movements of interest rates in one direction, whether ~~increase~~increases or ~~decrease,~~decreases, could adversely or positively affect the operations and income potential of commercial real estate properties. These changes also influence the demand of investors for commercial real estate investments. We believe indications from the U.S. Federal Reserve of future interest rate increases, a reduction of the Federal Reserve balance sheet, uncertainty as to the impact of new fiscal policies, stock market volatility and ~~the volatility in~~rising longer term interest rates ~~has created~~remain a short-term headwind for real estate transactions. In addition, a recent change of the Chairperson of the Federal Reserve could alter Federal Reserve policies and have a meaningful impact on interest rates and investor activity. We ~~continue~~have continued to see disciplined underwriting from lenders, who have tightened their underwriting standards modestly, as well as ample liquidity in the market. ~~However, we have seen transactions taking longer to close since late 2016, with buyers exhibiting increased caution in their acquisition process.~~

We rely on investors to buy and sell properties in order to generate commissions. Investors’ desires to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity. In addition, our private clients are often motivated to buy, sell and/or refinance properties due to personal circumstances such as death, divorce, partnership breakups and estate planning. We believe that we are in a maturing real estate cycle. ~~Through~~During the ~~first half of 2017,~~last two years, the sales transaction market has continued to step-down from peak levels set in 2015. ~~The combination of~~We believe the maturing cycle, combined with volatility in financial markets, inflation trends and rising interest ~~rate volatility together with uncertainty surrounding the Trump administration’s tax reform, regulatory easing and infrastructure initiatives~~rates have caused ~~a portion of the active~~ investors and lenders to assume a more ~~wait-and-see attitude toward investment decisions. Once additional clarity regarding these policies emerges, we believe~~cautious underwriting assumptions resulting in the slowdown in sales. Furthermore, although investor sentiment has risen since the new tax law was enacted, many investors ~~will begin to revive their activity levels based on their ability to better understand~~are still grappling with the ~~market for commercial real estate.~~complex new rules, further delaying transactions. We believe ~~that~~the boost to investor sentiment generated by the new tax law, together with the healthy property fundamentals and lack of over-leveraging during the past several years should likely manifest in rising transaction activity as additional guidance from the IRS emerges and as tax professionals provide investors with more guidance on how the new rules can be applied. We believe that these factors should continue to support ~~an active, but more tempered, market environment.~~long-term commercial real estate investor demand and, therefore, demand for our brokerage and financing services.

~~Management has determined that each of~~We follow the ~~Company’s offices~~guidance for segment reporting, which requires reporting information on ~~a consolidated basis represent individual~~ operating segments ~~with similar economic characteristics that meet~~in interim and annual financial statements. Substantially all of our operations involve the ~~criteria for aggregation into a single reportable~~delivery of commercial real estate services to our customers including real estate investment sales, financing and consulting and advisory services. Management makes operating decisions, assesses performance and allocates resources based on an ongoing review of these integrated operations, which constitute only one operating segment for financial ~~statement~~reporting purposes.

Our revenues are primarily generated from our real estate investment sales business. In addition to real estate brokerage commissions, we generate revenues from financing fees and from other revenues, which are primarily comprised of consulting and advisory fees.

Our business is transaction oriented and, as such, we rely on investment sales and financing professionals to continually develop leads, identify properties to sell, market those properties and close the sale timely to generate a consistent flow of revenue. While our sales volume is impacted by seasonality factors, the timing of closings is also dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting in the ~~$1-~~$1-$10 million private client market segment. These factors can cause transactions to be accelerated or delayed beyond our control. Further, commission rates earned are generally inversely related to the value of the property sold. As a result of our expansion into the middle and larger transaction market segments, we have seen our overall commission rates fluctuate fromperiod-to-period as a result of changes in the relative mix of the number and volume of transactions closed in the middle and larger transaction market segments as compared to the ~~$1-~~$1-$10 million private client market segment. These factors may result inperiod-to-period variations in our revenues that differ from historical patterns.

A small percentage of our transactions include retainer fees and/or breakage fees. Retainer fees are credited against a success-based fee upon the closing of a transaction or a breakage fee. Transactions that are terminated before completion will sometimes generate breakage fees, which are usually calculated as a set amount or a percentage of the fee we would have received had the transaction closed.

We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or investors seeking to buy properties. Revenues from real estate brokerage commissions are typically recognized at the close of escrow.

We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients’ existing mortgage debt. We recognize financing fee revenues at the time the loan closes and we have no remaining significant obligations for performance in connection with the transaction. To a lesser extent, we also earn ancillary fees associated with financing activities.

Other revenues include fees generated from consulting and advisory services performed by our investment sales professionals, as well as referral fees from other real estate brokers. Revenues from these services are recognized as they are performed and completed.

Our operating expenses consist of cost of services, selling, general and administrative expenses and depreciation and amortization. The significant components of our expenses are further described below.

The majority of our cost of services expense is ~~commission expense.~~variable commissions paid to our investment sales professionals and compensation-related costs related to our financing activities. Commission expenses are directly attributable to providing services to our clients for investment sales and financing services. Most of our investment sales and financing professionals are independent contractors and are paid commissions; however, there are some who are initially paid a salary and certain of our financing professionals are employees and, as such, costs of services also include employee-related compensation, employer taxes and benefits for those employees. The commission rates we pay to our investment sales and financing professionals vary based on individual contracts negotiated and are generally higher for the more experienced professionals. Some of our most senior investment sales and financing professionals also have the ability to earn additional commissions after meeting certain annual revenue thresholds. These additional commissions are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional commissions are generally deferred for a period of three years, at the Company’s election, and paid at the beginning of the fourth calendar year. Cost of services also includes referral fees paid to other real estate brokers where the Company is the principal service provider. Cost of services, therefore, can vary based on the commission structure of the independent contractors that closed transactions in any particular period.

The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff. In addition, these costs include facilities costs (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources and other administrative expenses. Also included in selling, general and administrative are expenses for stock-based compensation tonon-employee directors, employees and independent contractors (i.e. investment sales and financing professionals) under the 2013 Omnibus Equity Incentive Plan, as amended (“2013 Plan”) and the 2013 Employee Stock Purchase Plan (“2013 ESPP Plan”).

Depreciation and amortization expense consists of depreciation and amortization recorded on our computer software and hardware and furniture, fixture and equipment. Depreciation and amortization are provided over estimated useful lives ranging from three to seven years for owned assets or over the lesser of the asset estimated useful lives or the related lease term for leasehold improvements.

Other income (expense), net primarily consists of interest income, net gains or losses on our deferred compensation plan assets, ~~interest income and~~ realized gains and losses on our marketable securities,available-for-sale, foreign currency gains and losses and othernon-operating gains and losses.

Interest expense primarily consists of interest expense associated with the stock appreciation rights (“SARs”) liability, notes payable to former stockholders and our credit agreement.

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 the change in the mix of our activities in the jurisdictions we operate due to differing tax rates in those ~~jurisdictions and other permanent items. Prior to December 31, 2016,~~jurisdictions. Our provision for income taxes includes the windfall tax benefits, net from shares issued in connection with our 2013 Plan and 2013 ESPP ~~Plan were recorded~~Plan.

We record deferred taxes, net based on the tax rate expected to ~~additional paid~~be in ~~capital. Effective January 1,~~effect at the time those items are expected to be recognized for tax purposes. On December 22, 2017, ~~as a result of~~ the ~~adoption of ASU 2016-09,~~~~Improvements~~Tax Cuts and Jobs Act (the “Act”) was enacted, which reduced the U.S. federal statutory tax rate from 35% to ~~Employee Share-Based Payment Accounting~~~~(“ASU 2016-09”), any windfall tax benefits, net are recorded~~21% beginning in ~~the Company’s provision for income taxes.~~2018.

We have a long history and significant expertise in our core property types of multifamily, retail, office and industrial. We have expanded our expertise in the specialty property types by hiring and assigning specialty directors to coordinate our national presence in these property types and expand our market share. The following tables set forth the number and sales volume (dollars in billions) of investment sales, financing and other transactions for the three ~~and six~~ months ended ~~June 30, 2017~~March 31, 2018 compared to the same periods in ~~2016~~2017 by property type:


	Three Months Ended June 30,														Three Months Ended March 31,
	2017				2016				Change						2018				2017				Change
	Number		Volume		Number		Volume		Number			Volume			Number		Volume		Number		Volume		Number			Volume
Core Property Types:
Multifamily		818	$	6.0		837	$	5.3		(19	)	$	0.7			770	$	5.2		759	$	4.0		11		$	1.2
Retail		882		3.3		904		3.1		(22	)		0.2			814		2.4		803		2.5		11			(0.1	)
Office		158		0.7		155		0.6		3			0.1			139		0.6		172		0.6		(33	)		—
Industrial		81		0.3		60		0.2		21			0.1			68		0.4		78		0.3		(10	)		0.1

Total Core Property Types		1,939	$	10.3		1,956	$	9.2		(17	)	$	1.1			1,791	$	8.6		1,812	$	7.4		(21	)	$	1.2

Specialty Property Types:
Hospitality		61	$	0.3		67	$	0.3		(6	)	$	—			66	$	0.4		41	$	0.2		25		$	0.2
Land																75		0.2		83		0.2		(8	)		—
Self-Storage		51		0.3		41		0.2		10			0.1			50		0.2		44		0.2		6			—
Land		57		0.1		23		0.1		34			—
Seniors Housing																22		0.1		16		0.2		6			(0.1	)
Manufactured Housing		21		0.1		65		0.2		(44	)		(0.1	)		18		0.1		18		0.1		—			—
Seniors Housing		7		0.1		15		0.2		(8	)		(0.1	)
Mixed - Use / Other		55		0.1		90		0.4		(35	)		(0.3	)		63		0.2		53		0.2		10			—

Total Specialty Property Types		252	$	1.0		301	$	1.4		(49	)	$	(0.4	)		294	$	1.2		255	$	1.1		39		$	0.1

		2,191	$	11.3		2,257	$	10.6		(66	)	$	0.7			2,085	$	9.8		2,067	$	8.5		18		$	1.3

   Six Months Ended June 30,
   2017    2016    Change
   Number    Volume    Number    Volume    Number Volume
Core Property Types:

Multifamily
   1,577    $ 10.0    1,562    $ 9.6    15 $ 0.4
Retail
   1,685    5.8    1,746    5.8    (61 ) —
Office
   330    1.3    278    1.1    52 0.2
Industrial
   159    0.6    122    0.4    37 0.2










Total Core Property Types
   3,751    $ 17.7    3,708    $ 16.9    43 $ 0.8










Specialty Property Types:

Hospitality
   102    $ 0.5    125    $ 0.7    (23 ) $ (0.2 )
Self-Storage
   95    0.5    93    0.6    2 (0.1 )
Land
   140    0.3    122    0.4    18 (0.1 )
Seniors Housing
   23    0.3    31    0.9    (8 ) (0.6 )
Manufactured Housing
   39    0.2    62    0.2    (23 ) —
Mixed - Use / Other
   108    0.3    154    0.6    (46 ) (0.3 )






��



Total Specialty Property Types
   507    $ 2.1    587    $ 3.4    (80 ) $ (1.3 )










   4,258    $ 19.8    4,295    $ 20.3    (37 ) $ (0.5 )

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. During each of the three months ended ~~June 30,~~March 31, 2018 and 2017, ~~and 2016,~~ we closed ~~more than~~nearly 2,100 ~~and 2,200~~ investment sales, financing and other transactions with total volume of approximately ~~$11.3~~$9.8 billion and $10.6 billion, respectively. During each of the six months ended June 30, 2017 and 2016, we closed more than 4,200 investment sales, financing and other transactions with total volume of approximately $19.8 billion and $20.3$8.5 billion, respectively. Such key metrics for real estate brokerage and financing activities are as follows:


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
Real Estate Brokerage	2017			2016			2017			2016			2018			2017
Average Number of Investment Sales Professionals		1,627			1,496			1,628			1,487			1,670			1,629
Average Number of Transactions per Investment Sales Professional		1.00			1.12			1.91			2.13			0.95			0.91
Average Commission per Transaction	$	100,108		$	101,563		$	97,241		$	102,011		$	102,539		$	94,115
Average Commission Rate		2.24	%		1.99	%		2.20	%		2.02	%		2.05	%		2.16	%
Average Transaction Size (in thousands)	$	4,479		$	5,098		$	4,421		$	5,061		$	4,994		$	4,359
Total Number of Transactions		1,624			1,675			3,113			3,174			1,585			1,489
Total Sales Volume (in millions)	$	7,274		$	8,540		$	13,764		$	16,065		$	7,915		$	6,490

	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
Financing(1)	2017			2016			2017			2016			2018			2017
Average Number of Financing Professionals		94			97			97			97			91			100
Average Number of Transactions per Financing Professional		4.34			4.18			8.24			7.99			3.56			3.91
Average Fee per Transaction	$	31,150		$	26,484		$	28,489		$	25,108		$	29,040		$	25,714
Average Fee Rate		0.92	%		0.79	%		0.89	%		0.81	%		0.93	%		0.86	%
Average Transaction Size (in thousands)	$	3,400		$	3,367		$	3,199		$	3,095		$	3,111		$	2,990
Total Number of Transactions		408			405			799			775			324			391
Total Sales Volume (in millions)	$	1,387		$	1,363		$	2,556		$	2,399		$	1,008		$	1,169

Following is a discussion of our results of operations for the three months ended ~~June 30, 2017~~March 31, 2018 and ~~2016.~~2017. The tables included in the period comparisons below provide summaries of our results of operations. Theperiod-to-period comparisons of financial results are not necessarily indicative of future results.

Comparison of Three Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~

Below are key operating results for the three months ended ~~June 30, 2017~~March 31, 2018 compared to the three months ended ~~June 30, 2016~~March 31, 2017 (dollar and share amounts in thousands, except per share amounts):


	Three Months Ended June 30,			Percentage of			Three Months Ended June 30,			Percentage of			Change						Three Months Ended March 31, 2018			Percentage of Revenue				Three Months Ended March 31, 2017			Percentage of Revenue				Change
	2017			Revenue			2016			Revenue			Dollar			Percentage									Dollar							Percentage
Revenues:
Real estate brokerage commissions	$	162,575			90.1	%	$	170,118			92.8	%	$	(7,543	)		(4.4	)%	$	162,525			93.1	%			$	140,137				91.5	%		$	22,388			16.0	%
Financing fees		12,709			7.0			10,726			5.8			1,983			18.5			9,724			5.6				10,054			6.6				(330	)		(3.3	)
Other revenues		5,087			2.9			2,543			1.4			2,544			100	%		2,292			1.3				3,021			1.9				(729	)��		(24.1	)

Total revenues		180,371			100.0			183,387			100.0			(3,016	)		(1.6	)		174,541			100.0				153,212			100.0				21,329			13.9

Operating expenses:
Cost of services		110,377			61.2			113,126			61.7			(2,749	)		(2.4	)		101,649			58.2				89,647			58.5				12,002			13.4
Selling, general, and administrative expense		43,693			24.2			40,420			22.0			3,273			8.1			48,053			27.6				43,220			28.2				4,833			11.2
Depreciation and amortization expense		1,303			0.7			1,009			0.6			294			29.1			1,375			0.8				1,297			0.9				78			6.0

Total operating expenses		155,373			86.1			154,555			84.3			818			0.5			151,077			86.6				134,164			87.6				16,913			12.6

Operating income		24,998			13.9			28,832			15.7			(3,834	)		(13.3	)		23,464			13.4				19,048			12.4				4,416			23.2
Other income (expense), net		997			0.6			618			0.3			379			61.3			1,209			0.7				836			0.5				373			44.6
Interest expense		(374	)		(0.3	)		(384	)		(0.2	)		10			(2.6	)		(360	)		(0.2	)			(382	)		(0.2	)			22			(5.8	)

Income before provision for income taxes		25,621			14.2			29,066			15.8			(3,445	)		(11.9	)		24,313			13.9				19,502			12.7				4,811			24.7
Provision for income taxes		10,052			5.6			11,542			6.2			(1,490	)		(12.9	)		6,302			3.6				7,502			4.9				(1,200	)		(16.0	)

Net income	$	15,569			8.6	%		17,524			9.6	%	$	(1,955	)		(11.2	)%	$	18,011			10.3	%		$	12,000			7.8	%		$	6,011			50.1	%

Adjusted EBITDA⁽¹⁾	$	28,668			15.9	%	$	31,755			17.3	%	$	(3,087	)		(9.7	)%	$	27,433			15.7	%		$	22,422			14.6	%		$	5,011			22.3	%

Earnings per share:
Basic	$	0.40					$	0.45											$	0.46						$	0.31
Diluted	$	0.40					$	0.45											$	0.46						$	0.31
Weighted average common shares outstanding:
Basic		39,002						38,918												39,095							38,948
Diluted		39,132						39,054												39,250							39,108

Our total revenues were ~~$180.4~~$174.5 million for the three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$183.4~~$153.2 million for the same period in ~~2016, a decrease~~2017, an increase of ~~$3.0~~$21.3 million, or ~~1.6%~~13.9%. Total revenues ~~decreased~~increased primarily as a result of ~~a decrease~~an increase in real estate brokerage commissions, partially offset by ~~increases~~decreases in financing fees and other revenues.

Real estate brokerage commissions. Revenues from real estate brokerage commissions ~~decreased~~increased to ~~$162.6~~$162.5 million for the three months ended ~~June 30, 2017~~March 31, 2018 from ~~$170.1~~$140.1 million for the same period in ~~2016,~~2017, an increase of $22.4 million, or 16.0%. The increase was primarily driven by the increase in sales volume (22.0%) and number of investment sales transactions (6.4%). These increases were partially offset by a decrease in average commission rates (11 basis points) due to a larger proportion of our transactions that closed in the>$20 million larger transaction market segment, which generate lower commission rates.

Financing fees. Revenues from financing fees decreased to $9.7 million for the three months ended March 31, 2018 from $10.1 million for the same period in 2017, a decrease of ~~$7.5~~$0.3 million, or ~~4.4%~~3.3%. The decrease was primarily driven by ~~the~~a decrease in sales volume ~~(14.8%~~(13.8%). due to an outsized growth in refinancing transactions during the three months ended March 31, 2017 with no such similar growth during the three months ended March 31, 2018. This decrease was partially offset by an increase in average ~~commission~~fee rates ~~(25~~(7 basis points) due to ~~a larger proportion of lower priced transactions, which generate higher commission rates.~~overall improved rates across all loan types.

~~Financing fees.~~Other revenues. ~~Revenues from financing fees increased~~Other revenues decreased to ~~$12.7~~$2.3 million for the three months ended ~~June 30, 2017~~March 31, 2018 from ~~$10.7~~$3.0 million for the same period in ~~2016, an increase~~2017, a decrease of ~~$2.0~~$0.7 million, or ~~18.5%~~24.1%. The ~~increase~~decrease was primarily driven by ~~growth~~decreases in ~~sales volume (1.8%) and an increase in average fee rates (13 basis points).~~

~~Other revenues.~~ Other revenues increased to $5.1 million for the three months ended June 30, 2017 from $2.5 million for the same period in 2016, an increase of $2.5 million, or 100%. The increase was primarily driven by a large consulting and advisory services ~~fee~~ during the three months ended ~~June 30, 2017 with no such comparable fee during~~March 31, 2018 compared to the same period in ~~2016.~~2017.

Our total operating expenses were ~~$155.4~~$151.1 million for the three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$154.6~~$134.2 million for the same period in ~~2016,~~2017, an increase of ~~$0.8~~$16.9 million, or ~~0.5%~~12.6%. The increase was primarily ~~driven by~~due to increases in ~~selling, general and administrative costs and depreciation and amortization, as described below. These increases were partially offset by a decrease in costs~~cost of services, which are ~~predominately~~ variable commissions paid to the Company’s investment sales professionals and compensation related costs in connection with our financing ~~activities.~~activities, selling, general and administrative costs and to a lesser extent depreciation and amortization, as described below.

Cost of services.Cost of services increased to $101.6 million for the three months ended ~~June 30, 2017 decreased $2.7 million, or 2.4% to $110.4 million~~March 31, 2018 from ~~$113.1~~$89.6 million for the same period in ~~2016.~~2017, an increase of $12.0 million, or 13.4%. The ~~decrease~~increase was primarily due to ~~decreased~~increased commission expenses driven by the related ~~decreased~~increased revenues noted above. Cost of services as a percent of total revenues decreased to ~~61.2%~~58.2% compared to ~~61.7%~~58.5% for the same period in ~~2016~~2017 primarily due to a decrease in the proportion of transactions closed by our more senior investment sales professionals who are compensated generally at higher commission rates. Traditionally, cost of services as a percent of total revenues is lower during the three-month periods ended March 31 as certain investment professionals may earn additional commissions ~~rates, partially offset by an increase~~later in ~~referral fees.~~the year after meeting annual revenue thresholds.

Selling, general and administrative expense.Selling, general and administrative expense increased to $48.1 million for the three months ended ~~June 30, 2017 increased $3.3 million, or 8.1%, to $43.7 million~~March 31, 2018 from ~~$40.4~~$43.2 million for the same period in ~~2016.~~2017, an increase of $4.8 million, or 11.2%. Increases in our selling, general and administrative expense have been driven by our growth plans and investments in technology, sales and marketing tools and marketing and expansion of our services supporting our investment sales and financing professionals. These initiatives have primarily driven (i) a ~~$1.3~~$1.8 million increase in sales operations support and promotional marketing expenses to support ~~increased~~ sales ~~activity;~~activity, (ii) a ~~$0.5~~$1.7 million increase in compensation related costs, including salaries and related benefits and management performance compensation primarily due to changes in bonus accruals and (iii) a $0.6 million increase in facilities expenses due to expansion of existing ~~offices and (iii) a $0.5 million increase in other expense categories, net primarily driven by our expansion and growth.~~offices. In addition, selling, general and administrative expense increased due to ~~(i)~~ a $0.7 million increase in ~~legal costs and accruals and (ii) a $0.3 million increase in~~ stock-based compensation ~~expense due to~~driven by fluctuations in our stock price and incremental stock-based awards since ~~second~~the first quarter of ~~2016.~~2017.

Depreciation and amortization expense.Depreciation and amortization expense increased to ~~$1.3~~$1.4 million for the three months ended ~~June 30, 2017~~March 31, 2018 from ~~$1.0~~$1.3 million for the same period in ~~2016,~~2017, an increase of ~~$0.3~~$0.1 million, or ~~29.1%~~6.0%. ~~The increase is primarily driven by our expansion and growth plans.~~

Other income (expense), net increased to ~~$1.0~~$1.2 million for the three months ended ~~June 30, 2017~~March 31, 2018 from ~~$0.6~~$0.8 million for the same period in ~~2016.~~2017. The increase was primarily driven by an increase in interest income on our investments in marketable securities, ~~available-for-sale.~~available-for-sale, partially offset by a decrease in the value of our deferred compensation plan assets held in the rabbi trust.

There were no significant changes in interest expense for the three months ended ~~June 30, 2017~~March 31, 2018 compared to the same period in ~~2016.~~2017.

The provision for income taxes was ~~$10.1~~$6.3 million for the three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$11.5~~$7.5 million in the same period in ~~2016,~~2017, a decrease of ~~$1.5~~$1.2 million, or ~~12.9%~~16.0%. The effective income tax rate for the three months ended ~~June 30, 2017~~March 31, 2018 was ~~39.2%~~25.9% compared ~~with 39.7%~~to 38.5% for the same period in ~~2016.~~2017. The decrease in the effective tax rate was primarily due to ~~a lower valuation allowance required~~the decrease in the federal statutory rate from 35% to 21%. Permanent items and other increased in 2018 compared to the prior year period due to changes in tax laws under the Act, primarily relating to additional limitations for ~~our Canadian operations in 2017.~~deductions under IRC 162(m) and deduction disallowance for entertainment expenses.

We calculate our provision for income taxes using an annual effective tax rate based on projected taxable income for the year adjusted for the effects of permanent and discrete items. Deferred taxes are adjusted for significant changes in temporary items in the period in which they occur. The future effective tax rate may vary from this estimated annual effective rate due to several factors, including but not limited to, the level of state and foreign jurisdiction activity, future changes in tax laws, the amount of future book versus income tax items that are permanent in nature and changes, if any, in a valuation allowance related to deferred tax assets.

~~As a result of the adoption of ASU 2016-09, effective as of January 1, 2017, the provision~~The provisions for income taxes ~~for the three months ended June 30, 2017~~ includes the difference in book and tax deductions associated with the settlement of shares under the Company’s 2013 Plan and certain disqualifying dispositions of shares issued under our 2013 ESPP Plan. ~~Such tax benefits were recorded directly to additional paid-in capital for the three months ended June 30, 2016.~~

~~Below are key operating results for the six months ended June 30, 2017 compared to the six months ended June 30, 2016 (dollar and share amounts in thousands, except per share amounts):~~

Our total revenues were $333.6 million for the six months ended June 30, 2017 compared to $347.7 million for the same period in 2016, a decrease of $14.1 million, or 4.0%. Total revenues decreased primarily as a result of a decrease in real estate brokerage commissions, partially offset by increases in financing fees and other revenues.

~~Real estate brokerage commissions.~~ Revenues from real estate brokerage commissions decreased to $302.7 million for the six months ended June 30, 2017 from $323.8 million for the same period in 2016, a decrease of $21.1 million, or 6.5%. The decrease was driven by the decrease in sales volume (14.3%). This decrease was partially offset by an increase in average commission rates (18 basis points) due to a larger proportion of lower priced transactions, which generate higher commission rates.

~~Financing fees.~~ Revenues from financing fees increased to $22.8 million for the six months ended June 30, 2017 from $19.5 million for the same period in 2016, an increase of $3.3 million, or 17.0%. The increase was driven by growth in sales volume (6.5%) and an increase in average fee rates (8 basis points).

~~Other revenues.~~ Other revenues increased to $8.1 million for the six months ended June 30, 2017 from $4.4 million for the same period in 2016, an increase of $3.7 million, or 83.5%. The increase was driven by an increase in consulting and advisory services during the six months ended June 30, 2017 as compared to the same period in 2016. The increase in consulting and advisory services was primarily driven by a large fee during the second quarter of 2017 with no such comparable fee during the same period in 2016.

Our total operating expenses were $289.5 million for the six months ended June 30, 2017 compared to $294.0 million for the same period in 2016, a decrease of $4.4 million, or 1.5%. The decrease was primarily due to a decrease in cost of services, which are predominately variable commissions paid to the Company’s investment sales professionals and compensation related costs in connection with our financing activities. This decrease is partially offset by increases in selling, general and administrative costs and depreciation and amortization expense, as described below.

~~Cost of services.~~Cost of services for the six months ended June 30, 2017 decreased approximately $9.3 million, or 4.4% to $200.0 million from $209.3 million for the same period in 2016. The decrease was primarily due to decreased commission expenses driven by the related decreased revenues noted above. Cost of services as a percent of total revenues decreased to 60.0% for the six months ended June 30, 2017 compared to 60.2% for the same period in 2016 primarily due to a decrease in the proportion of transactions closed by our more senior investment sales professionals who are compensated generally at higher commissions rates, partially offset by an increase in referral fees.

~~Selling, general and administrative expense.~~ Selling, general and administrative expense for the six months ended June 30, 2017 increased $4.2 million, or 5.1%, to $86.9 million from $82.7 million for the same period in 2016. Increases in our selling, general and administrative expense have been driven by our growth plans and investments in technology, sales and marketing tools and marketing and expansion of our services supporting our investment sales and financing professionals. These initiatives have primarily driven (i) a $1.4 million increase in facilities expenses due to expansion of existing offices; (ii) a $1.3 million increase in sales and promotional marketing expenses to support increased sales activity and (iii) a $1.0 million increase in other expense categories, net, primarily driven by our expansion and growth. In addition, selling, general and administrative expense increased due to (i) a $0.3 million increase in legal costs and accruals and (ii) a $0.9 million increase in stock-based compensation expense due to fluctuations in our stock price and incremental stock-based awards since second quarter of 2016. These increases were partially offset by a $0.7 million decrease in compensation related costs, including salaries and related benefits and management performance compensation.

~~Depreciation and amortization expense.~~ Depreciation and amortization expense increased to $2.6 million for the six months ended June 30, 2017 from $2.0 million for the same period in 2016, an increase of $0.6 million, or 29.0%. The increase is primarily driven by our expansion and growth.

Other income (expense), net increased to $1.8 million for the six months ended June 30, 2017 from $0.8 million for the same period in 2016. The increase was primarily driven by an increase in interest income on our investments in marketable securities, available-for-sale and value of our deferred compensation plan assets held in the rabbi trust. The increase was partially offset by realized losses on our investments in marketable securities, available-for-sale, primarily due to a security sold during the first quarter of 2016, which no longer met our investment policy criteria.

~~There were no significant changes in interest expense for the six months ended June 30, 2017 compared to the same period in 2016.~~

The provision for income taxes was $17.6 million for the six months ended June 30, 2017 compared to $21.4 million in the same period in 2016, a decrease of $3.9 million, or 18.1%. The effective income tax rate for the six months ended June 30, 2017 was 38.9%, compared with 39.8%, for the same period in 2016. The decrease in the effective tax rate was primarily due to a lower valuation allowance required for our Canadian operations in 2017 and an increase in discrete tax benefits, including the effect of tax windfalls, net from shares issued in connection with our 2013 Plan and 2013 ESPP Plan.

We calculate our provision for income taxes using an annual effective tax rate based on projected taxable income for the year adjusted for the effects of permanent and discrete items. Deferred taxes are adjusted for significant changes in temporary items in the period in which they occur. The future effective tax rate may vary from this estimated annual effective rate due to several factors including, but not limited to, the level of state and foreign jurisdiction activity, future changes in tax laws, the amount of future book versus income tax items that are permanent in nature and changes, if any, in a valuation allowance related to deferred tax assets.

As a result of the adoption of ASU 2016-09, effective as of January 1, 2017, the provision for income taxes for the six months ended June 30, 2017 includes the difference in book and tax deductions associated with the settlement of shares under the Company’s 2013 Plan and certain disqualifying dispositions of shares issued under our 2013 ESPP Plan. Such tax benefits were recorded directly to additional paid-in capital for the six months ended June 30, 2016.

In this quarterly report on Form10-Q, we include anon-GAAP financial measure, adjusted earnings before interest income/expense, taxes, depreciation and amortization and stock-based compensation, or Adjusted EBITDA. We define Adjusted EBITDA as net income before (i) interest income and other, including net realized gains (losses) on marketable securities,available-for-sale and cash and cash equivalents, (ii) interest expense, (iii) provision for income taxes, (iv) depreciation and amortization and (v) stock-based compensation expense. 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 an analytical tool and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. generally accepted accounting principles (“U.S. GAAP”). We find Adjusted EBITDA as a useful tool to assist in evaluating performance because Adjusted EBITDA eliminates items related to capital structure, taxes andnon-cash stock-based compensation charges. In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures calculated in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.

A reconciliation of the most directly comparable U.S. GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2017			2016			2018			2017
Net income	$	15,569		$	17,524		$	27,569		$	32,339		$	18,011		$	12,000
Adjustments:
Interest income and other⁽¹⁾		(745	)		(479	)		(1,370	)		(731	)		(1,228	)		(625	)
Interest expense		374			384			756			775			360			382
Provision for income taxes(2)		10,052			11,542			17,554			21,424			6,302			7,502
Depreciation and amortization		1,303			1,009			2,600			2,015			1,375			1,297
Stock-based compensation		2,115			1,775			3,981			3,100			2,613			1,866

Adjusted EBITDA⁽²⁾⁽³⁾	$	28,668		$	31,755		$	51,090		$	58,922		$	27,433		$	22,422

Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, marketable securities,available-for-sale and, if necessary, borrowings under our credit agreement. In order to enhance yield to us, we have invested a portion of our cash in money market funds and in fixed and variable income debt securities, in accordance with our investment policy approved by the board of directors. Certain of our investments in money market funds may not maintain a stable net asset value and may impose fees on redemptions and/or gate fees. Although we have historically funded our operations through operating cash flows, there can be no assurance that we can continue to meet our cash requirements entirely through our operations, cash and cash equivalents, proceeds from the sale of marketable securities,available-for-sale or availability under our credit agreement.

Cash held in our Canadian operations aggregated ~~$386,000~~$296,000 and ~~$404,000~~$421,000 at ~~June 30, 2017~~March 31, 2018 and December 31, ~~2016,~~2017, respectively.

Our total cash and cash equivalents balance decreased by ~~$23.5~~$21.4 million to ~~$163.8~~$199.4 million at ~~June 30, 2017,~~March 31, 2018 compared to ~~$187.4~~$220.8 million at December 31, ~~2016.~~2017. The following table sets forth our summary cash flows for the ~~six~~three months ~~June 30,~~ended March 31, 2018 and 2017 ~~and 2016~~ (in thousands):


	Six Months Ended June 30,						Three Months Ended March 31,
	2017			2016			2018			2017
Net cash provided by operating activities	$	462		$	12,260
Net cash used in operating activities							$	(12,989	)	$	(37,086	)
Net cash used in investing activities		(22,007	)		(14,534	)		(6,777	)		(19,892	)
Net cash used in financing activities		(1,996	)		(1,474	)		(1,650	)		(1,361	)

Net decrease in cash and cash equivalents		(23,541	)		(3,748	)		(21,416	)		(58,339	)
Cash and cash equivalents at beginning of period	$	187,371		$	96,185		$	220,786		$	187,371
Cash and cash equivalents at end of period	$	163,830		$	92,437		$	199,370		$	129,032

Cash flows ~~provided by~~used in operating activities were ~~$0.5~~$13.0 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$12.3~~$37.1 million for the same period in ~~2016.~~2017. Net cash ~~provided by~~used in operating activities is driven by our net income adjusted fornon-cash items and changes in operating assets and liabilities. The ~~$11.8~~$24.1 million ~~decrease~~improvement in operating cash flows ~~provided by operating activities~~ for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to the same period in ~~2016~~2017 was primarily due to differences in timing of payments and receipts, ~~an increase~~a decrease in advances to ~~the Company’s~~our investment sales and financing professionals, a ~~decrease~~change in bonus accruals ~~related to our reduced operating results~~ and a ~~reduction~~lower proportion of operating expenses compared to revenues. These improvements in operating cash flows were partially offset by a decrease in the deferral of certain discretionary and other commissions. ~~Additionally,~~We traditionally experience net cash used in operating activities during the ~~Company made distributions of $1.4 million of~~three-month periods ended March 31 since bonuses and certain deferred commissions related to the ~~SARs liability~~prior year(s) are typically paid during the first quarter of ~~2017 with no such comparable payments during~~ the ~~six months ended June 30, 2016.~~new year.

Cash flows used in investing activities were ~~$22.0~~$6.8 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared ~~to $14.5~~$19.9 million ~~cash flows used in investing activities~~ for the same period in ~~2016.~~2017. The ~~change~~improvement in investing cash flows ~~used in investing activities~~ for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to the same period in ~~2016~~2017 was primarily due to $5.3 million in net purchases of marketable securities,available-for-sale for the three months ended March 31, 2018 compared to $18.3 million in net purchases of marketable securities, ~~available-for-sale for the six months ended June 30, 2017 compared to $10.0 million net purchases of marketable securities,~~ available-for sale for the same period in ~~2016.~~2017.

Cash flows used in financing activities were ~~$2.0~~$1.7 million for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to ~~$1.5~~$1.4 million for the same period in ~~2016.~~2017. The change in cash flows used in financing activities for the ~~six~~three months ended ~~June 30, 2017~~March 31, 2018 compared to the same period in ~~2016~~2017 was ~~primarily~~ impacted by ~~net changes in stock-based award activity and~~ taxes paid related to net share settlement of stock-based awards. See Note 910 – “Stock-Based Compensation Plans” of our Notes to Condensed Consolidated Financial Statements for additional information.

We believe that our existing balances of cash and cash equivalents, cash flows expected to be generated from our operations, proceeds from the sale of marketable securities,available-for-sale and borrowings available under the credit agreement will be sufficient to satisfy our operating requirements for at least the next twelve months. 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, among other factors, to fund acquisitions or to otherwise finance our growth or operations. In addition, our notes payable to former stockholders and SARs liability have provisions, which could accelerate repayment of outstanding principal and accrued interest and adversely impact our liquidity.

There have been no material changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form10-K for the year ended December 31, ~~2016 other than an increase of operating lease obligations of $6.5 million due to new or extended leases.~~2017.

Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand, which may be affected by general economic conditions including inflation. However, to date, we do not believe that general inflation has had a material impact upon our operations.

We prepare our financial statements in accordance with U.S. GAAP. In applying many of these accounting principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our condensed consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances. These assumptions, estimates and/or judgments, however, are often subjective and our actual results may change based on changing circumstances or changes in our analyses. If actual amounts are ultimately different from our estimates, the revisions are included in our results of operations for the period in which the actual amounts become known. There were no material changes in our critical accounting policies, as disclosed in in our Annual Report on Form10-K for the year ended December 31, ~~2016.~~2017 except for the following:

For information regarding recent accounting pronouncements, see Note 12 – ~~“Description of business, basis of presentation~~“Accounting Policies and ~~recent accounting pronouncements”~~Recent Accounting Pronouncements” of our Notes to Condensed Consolidated Financial Statements.

We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including U.S. government and federal agency securities, corporate debt securities, ~~and~~ asset backed ~~securities.~~securities and other. As of ~~June 30, 2017,~~March 31, 2018, the fair value of investments in marketable securities,available-for-sale was ~~$123.7~~$130.4 million. The primary objective of our investment activity is to maintain the safety of principal, provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes. While our intent is not to sell these investment securities prior to their stated maturities, we may choose to sell any of the securities for strategic reasons including, but not limited to, anticipated capital requirements, anticipation of credit deterioration, duration management and when a security no longer meets the criteria of the Company’s investment policy. We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average rating (exclusive of cash and cash equivalents) was AA as of ~~June 30, 2017.~~March 31, 2018. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.

Currently, our portfolio of investments predominantly consists of fixed interest rate debt securities; however, a portion of our investment portfolio may consist of variable interest rate debt securities. Our investments in fixed interest rate debt securities are subject to market risk. Changes in prevailing interest rates may adversely impact their fair market value should interest rates generally rise or fall. Accordingly, we also may have interest rate risk with the variable rate debt securities as the income produced may decrease if interest rates fall. The following table sets forth the impact on the fair value of our investments from changes in interest rates based on the duration of the securities (dollars in thousands):


Change in Interest Rates	Approximate Change in Fair Value of Investments Increase (Decrease)			Approximate Change in Fair Value of Investments Increase (Decrease)
2% Decrease	$	4,040		$	3,928
1% Decrease	$	2,255		$	1,972
1% Increase	$	(2,254	)	$	(1,972	)
2% Increase	$	(4,508	)	$	(3,942	)

Due to the nature of our business and the manner in which we conduct our operations, we believe we do not face any material interest rate risk with respect to other assets and liabilities, equity price risk or other market risks. The functional currency of our Canadian operations is the Canadian dollar. We are exposed to foreign currency exchange rate risk for the settlement of transactions of the Canadian operations as well as unrealized translation adjustments. To date, realized foreign currency exchange rate gains and losses have not been material.

As of ~~June 30, 2017,~~March 31, 2018, our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures defined in Rules13a-15(e) and15d-15(e) under the Exchange Act. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~June 30, 2017,~~March 31, 2018, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated by and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, or that the degree of compliance with the policies or procedures may not deteriorate. Because of its inherent limitations, disclosure controls and procedures may not prevent or detect all misstatements. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

There were no changes in our internal control over financial reporting during the quarter ended ~~June 30, 2017~~March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We are involved in claims and legal actions arising in the ordinary course of our business, some of which involve claims for damages that are substantial in amount. Most of these litigation matters are covered by insurance which contain deductibles, exclusions, claim limits and aggregate policy limits. Such litigation and other proceedings may include, but are not limited to, actions relating to commercial relationships, standard brokerage disputes like the alleged failure to disclose physical or environmental defects or property expenses or contracts, the alleged inadequate disclosure of matters relating to the transaction like the relationships among the parties to the transaction, potential claims or losses pertaining to the asset, vicarious liability based upon conduct of individuals or entities outside of our control, general fraud claims, conflicts of interest claims, employment law claims, including claims challenging the classification of our ~~investment~~ sales professionals as independent contractors, claims alleging violations of state consumer fraud statutes and intellectual property. While the ultimate liability for these legal proceeding cannot be determined, ~~the Company reviews~~we review the need for ~~its~~our accrual for loss contingencies quarterly and records an accrual for litigation related losses where the likelihood of loss is both probable and estimable. We do not believe, based on information currently available to us, that the final outcome of these proceedings will have a material adverse effect on our consolidated financial position, results of operations or cash flows.

For information on our legal proceedings, see Note 1213 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements.

There have been no material changes from the risk factors described in our Annual Report on Form10-K for the year ended December 31, ~~2016.~~2017.

The documents listed in the Exhibit Index of this quarterly report on Form 10-Q are incorporated by reference or are filed with this quarterly report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

~~Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.~~

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		35-2478370
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

23975 Park Sorrento, Suite 400 Calabasas, California		91302
(Address of Principal Executive Offices)		(Zip Code)


		Page

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Condensed Consolidated Balance Sheets at ~~June 30, 2017~~March 31, 2018 (Unaudited) and December 31, ~~2016~~2017		3
	Condensed Consolidated Statements of Net and Comprehensive Income for the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (Unaudited)		4
	Condensed Consolidated Statement of Stockholders’ Equity for the ~~Six~~Three Months Ended ~~June 30, 2017~~March 31, 2018 (Unaudited)		5
	Condensed Consolidated Statements of Cash Flows for the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2018 and 2017 ~~and 2016~~ (Unaudited)		6
	Notes to Condensed Consolidated Financial Statements (Unaudited)		8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		2223
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		3435
Item 4.	Controls and Procedures		35

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings		36
Item 1A.	Risk Factors		36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3.	Defaults upon Senior Securities		36
Item 4.	Mine Safety Disclosures		36
Item 5.	Other Information		36
Item 6.	Exhibits		3637

SIGNATURES

EXHIBIT INDEX


	RSA Grants to Non-employee Directors			RSU Grants to Employees			RSU Grants to Independent Contractors			Total			Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2016		29,112			566,480			454,838			1,050,430		$	22.38

Granted
February 2017		—			139,013			7,272			146,285
May 2017		13,986			8,156			11,652			33,794

Total granted		13,986			147,169			18,924			180,079			27.17
Vested		(15,918	)		(134,347	)		(116,204	)		(266,469	)		20.00
Transferred		—			(24,302	)		24,302			—			26.63
Forfeited/canceled		—			(19,414	)		—			(19,414	)		23.79

Nonvested shares at June 30, 2017⁽¹⁾		27,180			535,586			381,860			944,626		$	23.93


Unrecognized stock-based compensation expense as of June 30, 2017⁽²⁾	$	663		$	12,183		$	7,927		$	20,773


Weighted average remaining vesting period (years) as of June 30, 2017		2.20			3.46			2.50			3.05


	RSA Grants to Non-employee Directors		RSU Grants to Employees			RSU Grants to Independent Contractors			Total			Weighted- Average Grant Date Fair Value Per Share
Nonvested shares at December 31, 2017		30,732		500,859			450,264			981,855		$	23.90

Granted
February 2018		—		106,419			20,293			126,712
March 2018		—		15,000			—			15,000

Total Granted		—		121,419			20,293			141,712			32.43
Vested		—		(132,325	)		(126,605	)		(258,930	)		20.59
Transferred		—		—			—			—			—
Forfeited/canceled		—		(1,960	)		(4,598	)		(6,558	)		29.21

Nonvested shares at March 31, 2018⁽¹⁾		30,732		487,993			339,354			858,079		$	26.27

Unrecognized stock-based compensation expense as of March 31, 2018⁽²⁾	$	423	$	12,669		$	10,154		$	23,246

Weighted average remaining vesting period (years) as of March 31, 2018		1.60		3.54			2.69			3.14


	Preferred Stock				Common Stock					Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings					Total
	Shares		Amount		Shares			Amount		Additional Paid-In Capital			Stock Notes Receivable From Employees			Retained Earnings			Accumulated Other Comprehensive Income		Total
Balance as of December 31, 2016		—	$	—		37,882,266		$	4	$	85,445		$	(4	)	$	172,599		$	810	$	258,854

Cumulative effect of a change in accounting principle, net of tax		—		—		—			—		85			—			(52	)		—		33

Balance at January 1, 2017, as adjusted		—		—		37,882,266			4		85,530			(4	)		172,547			810		258,887
Net and comprehensive income		—		—		—			—		—			—			27,569			196		27,765

Stock-based award activity
Stock-based compensation		—		—		—			—		3,981			—			—			—		3,981
Shares issued pursuant to employee stock purchase plan		—		—		18,155			—		392			—			—			—		392
Issuance of common stock for unvested restricted stock awards		—		—		13,986			—		—			—			—			—		—
Issuance of common stock for vesting of restricted stock units		—		—		255,709			—		—			—			—			—		—
Shares withheld related to net share settlement of stock-based awards		—		—		(52,826	)		—		(1,402	)		—			—			—		(1,402	)

Balance as of June 30, 2017		—	$	—		38,117,290		$	4	$	88,501		$	(4	)	$	200,116		$	1,006	$	289,623


	Unrealized gains and (losses) of available-for- sale securities			Foreign currency translation ⁽²⁾			Total
Beginning balance, December 31, 2016	$	(255	)	$	1,065		$	810
Other comprehensive income (loss) before reclassifications		221			(25	)		196
Amounts reclassified from accumulated other comprehensive income (loss)⁽¹⁾		—			—			—

Net current-period other comprehensive income (loss)		221			(25	)		196

Ending balance, June 30, 2017	$	(34	)	$	1,040		$	1,006


	Unrealized gains and (losses) of available-for- sale securities			Foreign currency translation ⁽³⁾		Total
Beginning balance, December 31, 2017	$	(62	)	$	1,002	$	940
Cumulative effect of change in accounting principle⁽¹⁾		(13	)		—		(13	)

Balance at January 1, 2018, as adjusted		(75	)		1,002		927

Other comprehensive (loss) income before reclassifications		(492	)		39		(453	)
Amounts reclassified from accumulated other comprehensive (loss) income⁽²⁾		—			—		—

Net current-period other comprehensive (loss) income		(492	)		39		(453	)

Ending balance, March 31, 2018	$	(567	)	$	1,041	$	474


	June 30, 2017
2017		351,801
2018		351,796
2021		60,373
2022		166,449

		930,419


	Three Months Ended June 30
	2017						2016						Change
	Number		Volume		Revenues		Number		Volume		Revenues		Number			Volume			Revenues
Real Estate Brokerage			(in millions)		(in thousands)				(in millions)		(in thousands)					(in millions)			(in thousands)
<$1 million		261	$	164	$	7,084		284	$	182	$	7,935		(23	)	$	(18	)	$	(851	)
Private client market ($1 - $10 million)		1,225		3,880		112,468		1,216		3,759		112,578		9			121			(110	)
Middle market (³$10 - $20 million)		76		1,015		20,388		101		1,364		22,739		(25	)		(349	)		(2,351	)
Larger transaction market (³$20 million)		62		2,215		22,635		74		3,235		26,866		(12	)		(1,020	)		(4,231	)

		1,624	$	7,274	$	162,575		1,675	$	8,540	$	170,118		(51	)	$	(1,266	)	$	(7,543	)


	Six Months Ended June 30,			Percentage of			Six Months Ended June 30,			Percentage of			Change
	2017			Revenue			2016			Revenue			Dollar			Percentage
Revenues:
Real estate brokerage commissions	$	302,712			90.7	%	$	323,782			93.1	%	$	(21,070	)		(6.5	)%
Financing fees		22,763			6.8			19,459			5.6			3,304			17.0
Other revenues		8,108			2.5			4,418			1.3			3,690			83.5

Total revenues		333,583			100.0			347,659			100.0			(14,076	)		(4.0	)

Operating expenses:
Cost of services		200,024			60.0			209,279			60.2			(9,255	)		(4.4	)
Selling, general, and administrative expense		86,913			26.1			82,675			23.8			4,238			5.1
Depreciation and amortization expense		2,600			0.7			2,015			0.6			585			29.0

Total operating expenses		289,537			86.8			293,969			84.6			(4,432	)		(1.5	)

Operating income		44,046			13.2			53,690			15.4			(9,644	)		(18.0	)
Other income (expense), net		1,833			0.5			848			0.3			985			nm
Interest expense		(756	)		(0.2	)		(775	)		(0.2	)		19			(2.5	)

Income before provision for income taxes		45,123			13.5			53,763			15.5			(8,640	)		(16.1	)
Provision for income taxes		17,554			5.2			21,424			6.2			(3,870	)		(18.1	)

Net income	$	27,569			8.3	%		32,339			9.3	%	$	(4,770	)		(14.7	)%

Adjusted EBITDA⁽¹⁾	$	51,090			15.3	%	$	58,922			16.9	%	$	(7,832	)		(13.3	)%

Earnings per share:
Basic	$	0.71					$	0.83
Diluted	$	0.70					$	0.83
Weighted average common shares outstanding:
Basic		38,976						38,905
Diluted		39,118						39,008


			~~Marcus & Millichap, Inc~~.

~~Date:~~	~~August 9, 2017~~	~~By:~~	~~/s/ Hessam Nadji~~
			~~Hessam Nadji~~ ~~President and Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date:~~	~~August 9, 2017~~	~~By:~~	~~/s/ Martin E. Louie~~
			~~Martin E. Louie~~ ~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~


Exhibit No.		Description

31.1*		Certification of Chief Executive Officer pursuant to Rule13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Chief Financial Officer pursuant to Rule13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**		Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Rule13a-14(b) under the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Document

101.LAB*		XBRL Taxonomy Label Linkbase Document

101.PRE*		XBRL Taxonomy Presentation Linkbase Document


			Marcus & Millichap, Inc.

Date:	May 10, 2018	By:	/s/ Hessam Nadji
			Hessam Nadji President and Chief Executive Officer (Principal Executive Officer)

Date:	May 10, 2018	By:	/s/ Martin E. Louie
			Martin E. Louie Chief Financial Officer (Principal Financial Officer)

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Smaller reporting company

Emerging growth company