Marcus & Millichap Inc (MMI) 2014 Q1 法說會逐字稿

Greetings and welcome to the Marcus & Millichap first quarter 2014 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen. Thank you. You may begin.

Thank you, operator. Good afternoon and welcome to Marcus & Millichap's 2014 first quarter conference call. With us today, Marcus & Millichap's President and Chief Executive Officer, John Kerin; Chief Strategy Officer, Hessam Nadji; and Chief Financial Officer, Marty Louie.

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

Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors including but not limited to; one, general economic conditions and commercial real estate market conditions including the recent conditions of the global markets and, in particular, the U.S. debt markets; two, the Company's ability to retain and attract transaction professionals; three, the Company's ability to retain its business philosophy and partnership culture; four, competitive pressures; five, the Company's ability to integrate new agents and sustain its growth; and six, other factors that the Company describes in its public filings including the risk factors included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2014.

Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that expectations will be attained. The Company undertakes no obligation not update any forward-looking statement, whether as a result of new information, future events, or otherwise.

In addition, certain of the financial information presented in this call represents non-GAAP financial measures. The Company's earnings release, which was issued this afternoon and is available on the Company's website, presents reconciliations to the appropriate GAAP measure and an explanation as to why the Company believes such non-GAAP financial measures are useful to investors.

Finally, this conference is being webcast. The webcast link is available on the Investor Relations section of our website at www.marcusmillichap.com along with a slide presentation that you may reference during our prepared remarks.

With that, it's now my pleasure to turn the call over to Marcus & Millichap's President and CEO, John Kerin. John?

Thank you, Lasse. And thank you, everyone, for joining us this afternoon to discuss our financial and operational results from the first quarter of 2014.

I will begin today's call with an overview of the Company's performance and a review of our operational highlights for the first quarter of 2014. Hessam Nadji, our Chief Strategy Officer, will follow with an update on general market conditions. And Marty Louie, our Chief Financial Officer, will conclude by providing additional details on the Company's financial results. We will then open up the call to your questions.

We are off to a strong start in 2014 with excellent results during the first quarter of the year. During the quarter, we were able to meet or exceed our goals for all the key metrics vital to our performance. This includes revenues, earnings, headcount, and productivity.

Before I highlight these specifics, let me reiterate that, in addition to our successful execution, there was also an unusual market factor in the year-over-year comparison for the quarter. As you might recall from our year-end 2013 earnings call, anticipation of the rising capital gains tax rates accelerated many transaction closings during 2012. This, in turn, elevated closings for 2012 and reduced sales activity for the first quarter of 2013.

At the top line, first quarter revenue was $114.6 million. It increased more than 65% compared to the same period in 2013. At the same time, adjusted EBITDA of $13.5 million was more than three-times higher than the prior year.

Our performance during the quarter was driven by ongoing strength in our core apartment and retail property types, particularly in our core private client segment dominated by sales in the $1 million to $10 million price range. Private clients have become increasingly active in the marketplace thanks to improved property fundamentals and low interest rates.

I'm also pleased to report that our efforts to expand our presence in certain specialty segments are on track. During the quarter, the Company's sales in office, multi-tenant shopping centers, seniors' housing, self-storage, and hospitality properties registered strong year-over-year growth.

In the first quarter of 2014 we had approximately $6.2 billion in transaction volume and over 1,600 closings, a new company high for the first quarter.

During the quarter, we averaged 1,312 total investment sales and financing professionals compared to 1,127 in the first quarter of 2013, registering a gain of 16%. Our management team's focus on increasing the number of experienced sales professionals resulted in 68 such additions in the 12 months ending March 31 of this past year. Experienced agents accounted for 16% of total additions in the last year.

Our brokerage platform generated approximately $4.4 billion in transaction volume with nearly 1,200 closings in the first quarter, reflecting year-over-year growth of 51% and 37% respectively. In terms of property type, multi-family accounted for 38% of the total transactions, retail came in at 44%, and office accounted for 6%. Industrial, land, hospitality, self-storage, and mixed-use, together totaled 12% of the total transactions.

Turning to geography, the Western United States represented our largest percentage of real estate brokerage transactional volume at roughly 41%, followed by the Midwest, Mountain, South region at 29%, and the South east region at 15%.

The Northeast Mid-Atlantic region comprised roughly 15% of transactions. I'd like to point out that one of our key areas of growth within our geographic expansion initiatives is to improve our presence in the important Northeast Mid-Atlantic region. During the first quarter of 2014, our number of transactions in this region increased by more than 80% year-over-year, more than two-times the company-wide growth rate.

Moving on to results for Marcus & Millichap Capital Corporation, our financing platform, we had approximately $622 million in transaction volume with 288 closings in the first quarter. These results reflected year-over-year growth of 37% and 24% respectively. During the first quarter, we increased the number of financing professionals to an average of 76, up 15% year over year.

As we look forward to the remainder of the year, we expect a more normalized and still favorable market environment across the board. We are excited to see various parts of our growth strategy take form through some of the investments we have made in our brokerage support, client services, and various growth initiatives.

With the strength and size of the private client market as our foundation, we are in strong position to expand our market leadership in our core segments while increasing our coverage in certain specialty segments. At the same time, we will continue filling in our market presence geographically.

Our management team's investment brokerage experience and boots-on-the-ground approach continues to be a major advantage in executing our growth initiatives. The recent expansion of our specialty groups with tenured executives to support this growth effort is another important element.

Our brokerage tools and support systems are also constantly evolving. During the first quarter we introduced the latest generation of our company website, Marcus&Millichap.com with numerous enhancements. Our main goal with the new website is to streamline the process of connecting our clients with our team, our best real estate market research, and investment opportunities.

I am also pleased with the addition of a number of experienced brokerage teams to our company in various locations. These seasoned professionals chose our platform specifically because of our support systems, brand, and business development tools. We look forward to continued growth in the remainder of 2014.

And with that, I would like to now turn the call over to Hessam Nadji to speak further about the overall market conditions and industry trends. Hessam?

Thank you, John. Good afternoon, everybody. My comments today are intended to provide an overview of the commercial real estate market and therefore are not necessarily specific to Marcus & Millichap.

In the first quarter of 2014 we saw the continuation of four positive trends in commercial real estate investment. These include steady job creation, improving property fundamentals, low interest rates, and ample availability of financing.

During the quarter, nearly 600,000 jobs were created, following upward revisions to prior estimates, which is an important indicator of a strengthening labor market. We have now recovered almost all the 8.7 million jobs that were lost during the great recession. In fact, private sector employment is now well ahead of the 2008 peak, putting the economy on strong footing.

The steady but less than spectacular job creation trend that we've seen over the past few years resulted in an ideal combination of further occupancy improvements throughout all commercial property sectors, while keeping interest rates stable during the first quarter. In the four major property sectors, apartments maintained their lead with an average occupancy rate of 95% nationally. And retail occupancies edged up 30 basis points year over year to 93%. These are the two leading business segments for our company and we're seeing strong investor demand as a result of their healthy fundamentals. The industrial sector also showed further strength with a 92% occupancy rate, followed by office properties, which had an 84% occupancy rate at the end of the first quarter.

As I mentioned on our year-end call, the supply side of the market remains in check, which is setting the stage for an emerging rent-increase cycle. Construction starts during the quarter for office, retail, and industrial point to new supply levels that are well below long-term averages.

On the other hand, apartment construction is gaining momentum with 215,000 new units expected for 2014, which is the highest level in the last 10 years. This is naturally raising a lot of concerns of overbuilding but there are three key factors that we should keep in mind when considering the apartment market cycle.

First and foremost, renter demand is still very strong thanks to favorable demographics, job growth, and a significant drop in the homeownership rate. Secondly, we have to keep in mind that nearly half of the new construction is concentrated in just 10 markets. Now, this is a concern locally in some of these metros but it shows minimal new construction across the rest of the country. Last but not least, the vast majority of the apartment rental market is concentrated in private client-owned smaller properties that are workforce housing or otherwise your traditional Class-B and C assets. The construction we're seeing, on the other hand, is greatly concentrated in the high-end urban product designed for renters by choice in the higher income brackets. So, this impact on the broader market is limited.

Investment sales during the quarter showed gains across the board, rising approximately 20% based on our preliminary estimates on a year-over-year basis. This is partly due to the slowdown in sales around the first quarter of 2013 as a result of the higher capital gains tax rates taking effect, which John also referenced. More importantly, the combination of competitive yields compared to alternative investments, low interest rates, and the improving property fundamentals that I summarized earlier is driving investor demand for commercial real estate broadly.

In terms of composition, in the broader marketplace the private client segment, again typically in the $1 million to $10 million range, accounted for 85% of transactions in the past 12 months. For Marcus & Millichap, this segment comprised nearly 80% of revenues, reflecting, once again, the alignment of our core business with this vital and most active part of the market.

On our last call I had also mentioned the movement of capital to secondary and tertiary markets and Class-B and C assets as yields in the primary markets and higher-end assets have compressed. We saw this trend play out again during the first quarter as more investors seeking higher returns moved capital into these types of investments. But equally important, we're seeing more lenders become active in secondary markets and opportunistic investment lending. I do want to point out that, despite the increased competition among lenders, loan underwriting and buyer qualification still remains very tight.

This is another favorable trend for our platform, given the emphasis of our model on helping investors move capital across all property types and geographic locations as well as the emphasis we've placed on expansion of MMCC, Marcus & Millichap Capital Corporation.

Looking ahead, all key economic and commercial real estate indicators point to the continuation of the positive forces we've just summarized. April's better than expected job growth confirms our previous expectation that we shared for moderately stronger job gains in 2014 as well as modest increases in interest rates. We also maintain that the eventual rise in interest rates should be measured and balanced with the expected uptick in the pace of job creation and, therefore, expected increase in commercial real estate demand. The only major concern we have on the horizon is the potential escalation of geopolitical factors and/or an unexpected event that would disrupt capital markets.

With that, I'll turn the call over to Marty for an in-depth look at our financials. Marty?

Thank you, Hessam. Now, turning to our first quarter 2014 numbers in more detail.

Total revenues for the first quarter of 2014 were $114.6 million compared to $69.4 million for the same period in the prior year for an increase of $45.2 million or 65.2%. The increase in total revenues is primarily a result of increases in revenue from real estate brokerage commissions.

Revenues from real estate brokerage commissions increased to $104.7 million in the quarter from $61.2 million for the same period last year, an increase of $43.6 million or 71.2%. Revenues from financing fees generated from our Marcus & Millichap Capital Corporation, or MMCC, increased to $6.1 million from $5 million in the first quarter of last year for an increase of just over $1 million or 21.7%. Other revenues of $3.7 million were up 18.5% compared to last year.

As John explained earlier, our first quarter revenues growth was very strong. However, since a portion of our year-over-year growth was due to investors' actions related to the rise in capital gains tax rates effective January of 2013, we expect year-over-year growth rates to be more balanced in the remaining quarters of 2014.

Now, let's take a closer look at some of the key revenue drivers within our real estate brokerage platform, which generated more than 90% of Marcus & Millichap's total revenue in the period. For the first quarter, sales volume was $4.4 billion or up just over 50% from $2.9 billion in the first quarter of last year. The total number of transactions was 1,181 for an increase of just over 37% from 861 transactions for the first quarter of last year.

The increase was primarily driven by a combination of a 16.5% increase in the average number of investment sales professionals, 37% increase in the number of investment sales transactions, a 24.8% increase in the average commission, and a 10% increase in the average transaction size in the first quarter of 2014 as compared to the same period last year. Most of the movement in commission size and productivity is due to the normalization of these metrics compared to the first quarter of 2013.

Now, moving on to our operating expenses. Total operating expenses for the first quarter of 2014 were $102.5 million compared to $66.7 million for the same period in the prior year for an increase of $35.8 million.

The increase was primarily driven by a combination of a 16.5% increase in the average number of investment sales professionals, 37% increase in the number of investment sales transactions, a 24.8% increase in the average commission, and a 10% increase in the average transaction size in the first quarter of 2014 as compared to the same period last year. Most of the movement in commission size and productivity is due to the normalization of these metrics compared to the first quarter of 2013.

In addition, selling, general, and administrative expenses increased by $8.6 million or just close to 35% primarily due to; one, an increase in management performance-related compensation driven by an increase in the operating results during the first quarter of 2014 as compared to the same period in 2013. Secondly, an increase in salaries and related benefits driven by an increase in the headcount in the areas of sales recruiting, sales force support, and corporate in connection with our projected growth and with us being a public company. Third, an increase in legal costs and reserves. And, finally, an increase in third-party service and professional fees primarily driven by operating as a public company.

Our effective tax rate was 41.5% for the first quarter of 2014 as compared to 43.5% in the first quarter of 2013. The 200 basis points difference in the tax rate was attributable to being a standalone taxpayer.

The Company's adjusted EBITDA for the first quarter was $13.5 million or just under 12% of total sales compared to $4.1 million or 5.8% of total sales for the first quarter of last year.

Turning to our balance sheet, our cash balance at March 31, 2014 was $83.3 million compared to cash balance of $101 million at December 31, 2013. The lower cash balance was primarily due to payments related to management's 2013 performance compensation, deferred commissions to agents, and income tax payments during the first quarter.

The Company's use of cash is typically related to limited working capital needs during the year and payments of taxes. Other than outstanding principal balance of the notes payable to former shareholders totaling $12.4 million and SARS liability of approximately $20 million, both relating to an accounting for the IPO at the end of year of 2013, the Company has virtually no debt.

In summary, the Company had a very strong operational and financial performance in the first quarter and we are looking forward to an excellent result for the remainder of 2014.

That concludes our prepared remarks. Thank you for your attention. And, at this time, I'd like to open up the call to questions. Operator?

Thank you. We will now be conducting a question and answer session. (Operator Instructions) Mitch Germain, JMP Securities.

Good afternoon. Congrats on the great quarter.

Thank you.

Thanks.

Just curious, why is it so hard to increase your presence in the office and industrial sectors relative to some of the other sectors?

This is Hessam, Mitch. I'm not sure if I would agree that it's so hard. It's just, for us, it has been more of a recent focus, given the fact that the Company really grew its footprint in the early 2000's using our main property types of core expertise, apartments and retail. And then, really, in our growth plan, we sized the markets and our strategy was to expand into the other property types.

So it does require different training. It does require a different background and tools that are customized to office and industrial. And has, really, more recently, in the last two years or so, become more of a focus.

Got you. And has the public currency since the IPO, has that helped your efforts in recruiting experienced professionals?

Yes, it has. I mean we've always been looking for experienced professionals. I think the fact that we're a public company today has given us bigger exposure for groups to even contact us in some cases to see what we're all about. But I think it's helped us a lot.

And then those tuck-in type deals, I mean I know it's only been two quarters, but how would you characterize the pipeline for those sort of transactions now?

This is Hessam again. We're actively talking to a number of experienced teams around the country. It's really not all that unusual in terms of the number of discussions that we have. And also, an additional comment on your question regarding the currency. It's really more about the Company getting more visibility as a public firm and the additional branding that has occurred because of our public status than it is directly related to the currency. Because the experienced teams that we've hired really are more excited and engaged with our platform and our management support and tools than they are really to currency.

Got you. Two more for me. One, are the private clients, are they sensitive to interest rate moves? Or are they kind of underwriting those gradual increases that you referenced in your prepared comments?

Well, I think everybody in some way shape or form is sensitive to interest rate moves but I think the private clients are flexible enough to be able to look at a project and decide whether or not it's a good project if interest rates are going to go up a quarter or a half a point at some point. So, I think everybody is underwriting and everybody's preference is a little bit different. But we've seen interest rates rise a number of times including last year a little bit and we didn't really miss a beat as far as our productivity and our closings.

Right. And then thoughts on a potential dividend?

Yes, Mitch. This is Marty. The thing is, is that we'll continue to monitor our cash position and our future cash needs. And we'll make the recommendations to the board at the appropriate time.

Great. Thanks, everyone.

Thank you.

Thank you. Keane McCarthy, William Blair.

Hey, guys. Thanks for taking my question. First, I mean the average number of transactions per sales broker increased pretty nicely to a little under 1 and I know, Marty, you had said that some of that increase was just because of reverting back a little bit from the normalization of Q1 of 2013. But still, I mean that ticks up nicely from that .75 in Q1 of 2012. So, I was just curious if there are any specific inputs for that increase. Like were some of the more tenured brokers doing the lion's share of the work or just some of the less experienced guys ramping up a little bit sooner?

This is John, Keane. Yes, I think some of our -- we started to recruit 18, 20, 24 months ago to start to develop more agents. And as the agents develop they do more transactions. So, I think you're right on, along the lines that some of the agents have matured and started to do more transactions and also the fact that 2012 we closed a lot of transactions. It took us little bit of time to reload and I think that, in the first quarter of 2013, you saw the effects of the reloading.

Hey, Keane. It's Marty. And I think you'll that in those metrics we did get an increase in our average fee percentage too. So, I think that is in correlation with what John kind of alluded to, that we increased our number of transactions in the $1 million to $10 million.

Okay. And then regarding office expansion, I think you guys have recently opened three offices in Canada as well as extended the IPA capability into the Portland market. So, nice expansion there. But I was just curious; what are the driving forces behind that expansion? And then, just to get your mindset, on average, what is kind of the duration where those offices transition from being maybe a net cost to a net benefit center?

This is Hessam. I'll answer the first part of the question that has to do with the strategy for Canada and the IPA expansion.

On the Canadian side of it, obviously, I think most people recognize that, of the 12% or so commercial real estate sales that directly attributable to foreign investors, Canadian investors make up the lion's share of that; roughly 35%, 40% of that. So, about $12 billion of capital was invested by Canadian investors in the U.S. last year. And so, it's a significant cross-border movement of capital. And, for our system of servicing the private client in particular that's looking for different investment options and being able to, basically, leverage our platform for that audience, it was a natural expansion of what we do. And so, strategically it made a lot of sense for that expansion.

As far as IPA is concerned, we are growing that part of our business in a very strategic fashion because of some presence in major metros that are value-add to what we do nationally. Boston was another major metro where we brought in a very experienced team to IPA. But, again, as a reminder, really, IPA is an extension of our private client market because so many of our private clients are now investing in larger deals and our institutional capability certainly has become far more competitive. But it's much more of a supplement to our core business focus of the private client.

Marty, do you want to answer the second part of the question regarding the --

Yes, sure. Yes, no problem. Yes, there is cost related to opening up new offices, especially in a different country. So, provided that the market continues to progress and the property economics continue to stay positive, I wouldn't be surprised if, by the end 2015, that we're in the black.

Okay. Thanks. And then shifting focus to MMCC a little bit, just curious how you evaluate what a successful MMCC presence looks like. Maybe if you could provide like a bookend in terms of internal capture rate from your guys' end and maybe a more established office gives you guys versus one of your newest ones provides.

This is John. What's a success? I really believe that -- here's what we've done year over year in our capture rate. We moved our capture rate up from 4 --

From 4.4 to --

To 8.1. So that's something we focused on and we talked about that at the end of last year too. As far offices that are more mature, absolutely. I mean you have a lot of senior agents. You have a lot senior originators. They're going to probably do more transactions.

And, again, what we were talking about before was we had some offices that did not even have any representation. We've actually filled in some of that over the last quarter. Where we maybe only had -- we have 12 offices right now that don't have representation from our mortgage origination side of it. But the numbers are up. Like we talked about, a gain of 16% quarter over quarter. So, we're moving in the right direction.

Yes. I think if you look at the productivity levels of those loan originators for the last couple Q1's, that we have increased year over year for the last two, three, four years.

Yes, definitely. Okay. And then, last question for me. Just given you guys' scale in the private client segment, I think with, what? over 70-plus offices is there a way that we can think of kind of cross-platform transactions this quarter? And maybe how that's compared to previous periods? And I guess what I'm trying to understand or better appreciate is kind of the market connectivity or the holistic view that you give the seller or buyer. So, basically, just a larger inventory set that they can choose from versus some of the peers out there.

Well, let me see if I can take a stab at that one. This is Hessam. What happens frequently is that you have a private client that has worked with us over the years. They have built up some equity in a number of properties. And we're seeing more and more of those clients wanting to consolidate their equity into fewer, higher-quality assets. It really has to do with wealth transfer, estate planning, and so on and so forth. So, just in the last, I would say, two to three years we've seen a growing number of our private clients become active bidders on our institutional inventory, which is why we created IPA and we've now created a platform for our more senior agents that are doing some institutional business to make this capability available to our private client.

And then, going the other way, we're seeing a lot of our institutional clients and funds co-invest with the joint venture partners that are really local operators that operate in that $10 million to $20 million. That seems to be their sweet spot. They don't really go under $10 million that often but, again, because of our footprint and market presence, we're able to help them match their capital with the right inventory. So, that's how we're basically bridging the private and instutional capital market. I hope that answers your question.

Yes. I guess maybe asked a different way, is there a way to kind of quantitatively tell us as far as how many of the transactions that you guys are doing are maybe the potential buyer is located in Southern California and his representation is a Southern California broker but maybe they've got a nice piece of property in the Northeast or the Midwest. Can you maybe speak to is there a percentage of the transactions that are kind of that cross-metro angle?

Okay. I have a better understanding of your question now. I would say at least somewhere between 30% to 40% of our transactions involve an out-of-area buyer. Now that could be somebody that is buying from Northern California into Southern California or it could be somebody who's buying from New York into Southern California.

The more important point is that, because of our information sharing and the platform that we have in place and that 1,300 of our professionals have access to the inventory, is the fact that they're exposing that inventory to literally hundreds of potential buyers and then tens of potential bidders in every situation -- the best and final buyer represents the numbers that I was talking about but the marketing process and the bidding process actually open up the marketing to a far larger number of people from out of market. That's the whole essence of how our system works.

Okay. Thanks, guys.

Thank you.

(Operator Instructions) Phil Stiller, Citi.

Hi, guys. Let me add my congratulations on a good quarter. I guess I wanted to ask about revenue seasonality as a start. I think, Marty, on the last call you talked about first quarter representing somewhere between 17% to 20% of revenue. I know the year-over-year comp was very easy this quarter. But, is there anything that you guys saw in the first quarter or are seeing in the pipeline that suggests that that historical pattern shouldn't hold this year?

Hi, Phil. Yes, we really did have a great Q1 but I think, if you look at our current pipeline as well as the seasonality weighting, the seasonal weighting of the Q1's during the frothy year or years like 2004 through 2006, I think I wouldn't really be surprised if the seasonality weighting of Q1 at the end of the year ends up being like 1 or 2 points higher than the high side of my range.

Okay, that's helpful. And then the average transaction size in the brokerage business, I guess you were up 10%. I understand the normalization of the commission rate impacting the commission size. But was there anything unique that drove a 10% increase in transaction size this quarter?

Yes. I think if you look at this Q1 compared to the Q1 of 2013, I think you'll -- we notice a higher number of transactions in what we call hyper-transactions. Those are transactions in the $10 million to $20 million range. But, in terms of the fee increase, the increase in our fee percentage, we've definitely seen a large increase in our core business, the $1 to $10 million where the fee percentages are higher.

Okay, that makes sense. And then, John, I think you mentioned retail was 44%, which is bigger than multi-family. Are you guys seeing any changes in the retail dynamic? I know that's normally the second largest segment. So, it seems like it was a pretty good growth year over year.

Right. So, 44% was really the transaction volume. And we did a lot of single-tenant net lease transactions this quarter. That segment of the business was up greatly. So, that's where there's smaller $1 million to $3 million transactions, a lot of them took place. And that's why the percentage of transactions was higher on the retail. But, the volume was higher on the apartments, sales volume.

Okay. Is that a change in the market dynamics? Are you seeing a lot of demand for those types of transactions?

There's no real change in the dynamics but I mean there's always demand for those types of properties. What happens sometimes, we'll exchange a client out of an apartment building and put him into a triple net deal because they want the ease of management. So, we've been working with that for the last 15 years. So there's really no change in dynamics.

And then, last question, you guys did a lot of hiring last year. Obviously, good first quarter. But, can you read anything into how the agents you hired during 2013 are performing so far?

They're performing basically like they've performed for the history of our company. But one of the things we tried to do is we need to bulk up our hiring. We needed to be able to go to marketplaces and be able to have representation on the ground in certain product types like office and industrial.

But, the key right now for us is really to look at developing these agents, number one. And, number two is to look at experienced agents in the marketplace because we think we have the amount or close to the amount of optimal agents that we need in our company and we still need more. But, at the same time, developing these people that we've hired and also going after a different segment of agent, people who have more experience, I think is really where we're moving to as far as a strategy is concerned. But recruiting is still very important for us. But I think we may be changing the way we do things that we didn't do things like that in the past. So, we're really looking to find experienced people in the marketplace.

Okay. But it sounds the agents that you did hire last year seem to be producing right on track?

Right. And the experienced people we hired last year did very well, too.

Okay, great. Thanks, guys.

Thank you.

Thank you. That is all the questions we have in queue at this time. I'd like to turn the floor back over to management for closing remarks.

Well, thanks very much. And thanks again for your support and participating in today's call. We'd also like to remind everyone that we'll be presenting next month in the William Blair Growth Stock conference in Chicago and we hope to see many of you there. Thank you and have a great day.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.