Walker & Dunlop Reports 67% Growth in Transaction Volume As Revenue Grows 21% to $341 Million

Walker & Dunlop, Inc. (NYSE: WD) (the “Company” or “W&D”) reported total revenues of $340.8 million for the second quarter of 2022, an increase of 21% year over year. Second quarter total transaction volume was $22.5 billion, up 67% year over year, reflecting the Company’s expanding brand and ability to meet more of its client’s needs. Net income for the second quarter of 2022 was $54.3 million or $1.61 per diluted share, down 3% and 7%, respectively, from the second quarter of 2021, predominantly due to a decrease in non-cash mortgage servicing rights revenues. Second quarter 2022 adjusted EBITDA1 was $94.8 million, up 43% over the same period in 2021, driven by growth in cash revenues from services businesses. The Company’s Board of Directors declared a dividend of $0.60 per share for the third quarter of 2022. The Company had $151.3 million of cash as of June 30, 2022.

“Our exceptional second quarter financial results demonstrate the strong return on investment we’ve made in our people, brand, and technology over the past few years,” commented Willy Walker, Chairman and CEO. “The dramatic growth in our origination volume led to adjusted EBITDA growth of 43% year over year, reflecting our transition from a lending-centric mortgage bank to a broader, technology-enabled financial services company.”

Mr. Walker continued, “The multifamily market continues to perform exceptionally well from a credit and fundamentals standpoint. W&D enters the second half of 2022 with very strong pipelines across our business, particularly with the GSEs and HUD which supply counter-cyclical liquidity as other capital providers struggle to digest rising rates and recessionary fears. Walker & Dunlop’s business model is designed to perform through all cycles, with outperformance in both the pandemic-hobbled year of 2020 and Fed-induced free money year of 2021 as two dramatically different examples. The investments we’ve made in people, brand and technology have made us more relevant to our clients today than ever before, driving dramatic growth in our banking and brokerage volumes. The breadth of our platform, investments we continue to make in emerging, technologically-driven businesses, and corporate culture set us apart from the competition and will continue to drive financial success over the coming years.”

CONSOLIDATED SECOND QUARTER 2022 OPERATING RESULTS

TRANSACTION VOLUMES

(dollars in thousands)

Q2 2022

Q2 2021

$ Variance

% Variance

Fannie Mae

$

3,918,400

$

1,911,976

$

2,006,424

105

%

Freddie Mac

1,141,034

1,003,319

137,715

14

Ginnie Mae – HUD

201,483

672,574

(471,091)

(70)

Brokered (2)

9,258,490

6,280,578

2,977,912

47

Principal Lending and Investing (3)

131,551

318,237

(186,686)

(59)

Debt financing volume

$

14,650,958

$

10,186,684

$

4,464,274

44

%

Property sales volume

7,892,062

3,341,532

4,550,530

136

Total transaction volume

$

22,543,020

$

13,528,216

$

9,014,804

67

%

Discussion of Results:

  • Total debt financing volume increased 44% from the second quarter of 2021. This increase is reflective of strong GSE and brokered debt financing volumes, which increased 74% and 47%, respectively, year over year.
  • GSE volumes were largely driven by a 105% increase in our Fannie Mae lending activity, which included a $1.9 billion portfolio in the second quarter of 2022. As a result, our combined GSE market share for the quarter increased to 15% and our year-to-date market share rose to 14%.
  • HUD debt financing volumes decreased in the second quarter of 2022, as continued high levels of inflation and an increasing interest-rate environment during the quarter made the HUD product a less favorable source of financing for our multifamily properties. Despite this decline, our Agency debt financing volume increased 47% quarter over quarter, indicating continued strength in the overall multifamily financing market.
  • The 47% increase in brokered volume in the second quarter of 2022 reflects our continued ability to meet our clients’ broad range of capital needs, strong demand for all commercial real estate property types, and the impacts of our investments in people, brand and technology. We continue to see a benefit from our investments in acquiring and recruiting commercial mortgage bankers, the significant amount of capital being invested into U.S. commercial real estate, and our valued relationships with commercial real estate capital providers.
  • Property sales volume increased 136% in the second quarter of 2022 due to the significant growth in our property sales team over the past year in key markets and strong investor appetite for multifamily assets.

MANAGED PORTFOLIO

(dollars in thousands, unless otherwise noted)

Q2 2022

Q2 2021

$ Variance

% Variance

Fannie Mae

$

57,122,414

$

51,077,660

$

6,044,754

12

%

Freddie Mac

36,886,666

37,887,969

(1,001,303)

(3)

Ginnie Mae – HUD

9,570,012

9,904,246

(334,234)

(3)

Brokered

15,190,315

13,129,969

2,060,346

16

Principal Lending and Investing

252,100

276,738

(24,638)

(9)

Total Servicing Portfolio

$

119,021,507

$

112,276,582

$

6,744,925

6

%

Assets under management

16,692,556

1,801,577

14,890,979

827

Total Managed Portfolio

$

135,714,063

$

114,078,159

$

21,635,904

19

%

Custodial escrow account balance at period end (in billions)

$

2.3

$

3.0

Weighted-average servicing fee rate (basis points)

24.9

24.5

Weighted-average remaining servicing portfolio term (years)

8.9

9.2

Discussion of Results:

  • Our servicing portfolio continues to expand as a result of the strong debt financing volume over the past 12 months, partially offset by payoffs of loans.
  • During the second quarter of 2022, we added $2.8 billion of net loans to our servicing portfolio, and over the past 12 months, we added $6.7 billion of net loans to our servicing portfolio, 90% of which were Fannie Mae loans.
  • $5.4 billion of Agency loans in our servicing portfolio are scheduled to mature over the next two years. These loans represent only 5% of the total portfolio, with a relatively low weighted-average servicing fee of 19.7 basis points.
  • The increase in the overall weighted-average servicing fee was primarily due to an increase in Fannie Mae loans as a percentage of the overall servicing portfolio year over year.
  • The mortgage servicing rights (“MSRs”) associated with our servicing portfolio had a fair value of $1.3 billion as of June 30, 2022, compared to $1.2 billion as of June 30, 2021. We added net MSRs from originations of $2.2 million in the second quarter of 2022 and $63.2 million over the past 12 months.
  • Assets under management (“AUM”) as of June 30, 2022 consisted of $14.5 billion of Affordable funds, $1.3 billion of commercial real estate loans and funds, and $0.9 billion of loans in our interim lending joint venture. The year-over-year increase in AUM is driven by the acquisition of Alliant in the fourth quarter of 2021 that added $14.3 billion of Affordable assets under management upon closing.

KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)

Q2 2022

Q2 2021

$ Variance

% Variance

Walker & Dunlop net income

$

54,286

$

56,058

$

(1,772)

(3)

%

Adjusted EBITDA

94,844

66,514

28,330

43

Diluted EPS

$

1.61

$

1.73

$

(0.12)

(7)

%

Operating margin

22

%

26

%

Return on equity

14

18

Key Expense Metrics (as a percentage of total revenues):

Personnel expenses

49

%

50

%

Other operating expenses

11

7

Discussion of Results:

  • The decrease in Walker & Dunlop net income was a result of a 1% decrease in income from operations and a 7% increase in income tax expense. Although we increased our revenues by 21%, expenses increased 29% due primarily to the direct and indirect costs from the acquisitions we have made over the past year. Income tax expense increased primarily due to (i) an increased estimated annual effective tax rate largely from increased executive compensation and (ii) a reduction in realizable excess tax benefits due to a lower number of stock option exercises.
  • The increase in adjusted EBITDA was a result of higher servicing fees, property sales broker fees, and fees earned from assets under management. These increases were offset by increased commission costs from the 67% growth in total transaction volumes and increases in other operating expenses.
  • Operating margin decreased due to the aforementioned decrease in income from operations, despite an increase in total revenues.
  • Return on equity declined due to a 26% increase in stockholders’ equity over the past year combined with the decrease in net income.
  • Other operating expenses as a percentage of total revenues increased due to our overall growth in the past year which included additional expenses from acquired subsidiaries and increases in travel and entertainment costs year over year as those costs have resumed to pre-pandemic levels in 2022.

KEY CREDIT METRICS

(dollars in thousands)

Q2 2022

Q2 2021

$ Variance

% Variance

At-risk servicing portfolio (7)

$

51,905,985

$

46,866,767

$

5,039,218

11

%

Maximum exposure to at-risk portfolio (8)

10,525,093

9,517,609

1,007,484

11

Defaulted loans

$

78,659

$

48,481

$

30,178

62

%

Key credit metrics (as a percentage of the at-risk portfolio):

Defaulted loans

0.15

%

0.10

%

Allowance for risk-sharing

0.09

0.13

Key credit metrics (as a percentage of maximum exposure):

Allowance for risk-sharing

0.46

%

0.63

%

Discussion of Results:

  • Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased due to the significant level of Fannie Mae loans added to the portfolio during the past 12 months. As of June 30, 2022, there were two defaulted loans that were provisioned for in 2019 and one loan that was provisioned for in 2021. The two properties that defaulted in 2019 have been foreclosed on and final settlement of any losses will occur in the future upon disposition of the assets by Fannie Mae. The at-risk servicing portfolio continues to exhibit strong credit quality, with very low levels of delinquencies and strong operating performance of the underlying properties in the portfolio.
  • The on-balance sheet interim loan portfolio, which is comprised of loans for which we have full risk of loss, was $252.1 million at June 30, 2022 compared to $276.7 million at June 30, 2021. There was one defaulted loan in our interim loan portfolio at June 30, 2022, which was provisioned for in the third quarter of 2020. All other loans in the on-balance sheet interim loan portfolio are current and performing as of June 30, 2022. The interim loan joint venture holds $0.9 billion of loans as of June 30, 2022, compared to $0.6 billion as of June 30, 2021. We share in a small portion of the risk of loss, and as of June 30, 2022, all loans in the interim loan joint venture are current and performing.

SECOND QUARTER 2022 – FINANCIAL RESULTS BY SEGMENT

FINANCIAL RESULTS – CAPITAL MARKETS

(dollars in thousands)

Q2 2022

Q2 2021

$ Variance

% Variance

Loan origination and debt brokerage fees, net

$

102,085

$

105,583

$

(3,498)

(3)

%

Fair value of expected net cash flows from servicing, net (“MSR income”)

51,949

61,849

(9,900)

(16)

Property sales broker fees

46,386

22,454

23,932

107

Net warehouse interest income, LHFS

3,707

2,884

823

29

Other revenues

3,895

3,135

760

24

Total revenues

$

208,022

$

195,905

$

12,117

6

%

Personnel

$

138,913

$

119,994

$

18,919

16

%

Amortization and depreciation

810

18

792

4,400

Other operating expenses

4,583

3,598

985

27

Total expenses

$

144,306

$

123,610

$

20,696

17

%

Income from operations

$

63,716

$

72,295

$

(8,579)

(12)

%

Income tax expense

16,476

17,739

(1,263)

(7)

Walker & Dunlop net income

$

47,240

$

54,556

$

(7,316)

(13)

%

Key revenue metrics (as a percentage of debt financing volume):

Origination fee margin (4)

0.71

%

1.07

%

MSR margin (5)

0.36

0.63

Agency MSR margin (6)

0.99

1.72

Key performance metrics:

Operating margin

31

%

37

%

Adjusted EBITDA

$

16,880

$

14,215

$

2,665

19

%

Capital Markets – Discussion of Quarterly Results:

The Capital Markets segment includes our Agency lending, debt brokerage, property sales, and appraisal and valuation services.

  • The decrease in loan origination fees and debt brokerage fees, net (“origination fees”) was the result of the decrease in our origination fee margin, partially offset by the increase in overall debt financing volume. The decline in the origination fee margin was largely due to the significant decline in HUD debt financing volume and the $1.9 billion Fannie Mae portfolio, which comprised just under 50% of our Fannie Mae debt financing volume for the quarter. Large portfolios such as the $1.9 billion Fannie Mae portfolio typically have lower origination fee margins, while HUD loans are our most profitable loan product.
  • The decrease in MSR income is attributable to the decrease in our MSR and Agency MSR margins, partially offset by the increase in overall debt financing volume. The decline the Agency MSR margin was primarily related to the $1.9 billion Fannie Mae portfolio, which had a lower servicing fee that is typical for large portfolios. The decrease in the MSR margin was the result of the decrease in the Agency MSR margin, coupled with an increase in our brokered debt financing volume as a percentage of overall debt financing volume.
  • The increase in property sales broker fees was driven by the 136% increase in property sales volume year over year, partially offset by a decrease in the property sales broker fee margin.
  • Personnel expense increased primarily as a result of (i) an increase in commissions expense due to the increase in property sales broker fees, partially offset by a decrease in origination fees; and (ii) an increase of $7.0 million in salaries and benefits costs due to (1) strategic acquisitions and hiring initiatives that contributed to an increase in our average bankers and brokers year over year. and (2) consolidating Apprise after our acquisition of GeoPhy, partially offset by a decrease in the accrual for subjective bonuses. The operating results for the second quarter of 2022 include compensation costs for Apprise, while the operating results for second quarter of 2021 do not as we accounted for our investment in Apprise under the equity method in 2021.

FINANCIAL RESULTS – SERVICING & ASSET MANAGEMENT

(dollars in thousands)

Q2 2022

Q2 2021

$ Variance

% Variance

Loan origination and debt brokerage fees, net

$

520

$

1,889

$

(1,369)

(72)

%

Servicing fees

74,260

69,052

5,208

8

Investment management fees

10,282

3,815

6,467

170

Net warehouse interest income, LHFI

1,561

1,746

(185)

(11)

Escrow earnings and other interest income

6,648

1,768

4,880

276

Other revenues

39,280

6,885

32,395

471

Total revenues

$

132,551

$

85,155

$

47,396

56

%

Personnel

$

21,881

$

9,447

$

12,434

132

%

Amortization and depreciation

58,760

47,395

11,365

24

Provision (benefit) for credit losses

(4,840)

(4,326)

(514)

12

Other operating expenses

6,559

2,604

3,955

152

Total expenses

$

82,360

$

55,120

$

27,240

49

%

Income from operations

$

50,191

$

30,035

$

20,156

67

%

Income tax expense

12,850

7,475

5,375

72

Net income before noncontrolling interests

$

37,341

$

22,560

$

14,781

66

%

Less: net income (loss) from noncontrolling interests

(179)

(179)

N/A

Walker & Dunlop net income

$

37,520

$

22,560

$

14,960

66

%

Key performance metrics:

Operating margin

38

%

35

%

Adjusted EBITDA

$

105,062

$

73,703

$

31,359

43

%

Servicing & Asset Management – Discussion of Quarterly Results:

The Servicing & Asset Management segment includes loan servicing, principal lending and investing, managing third-party capital invested in tax credit equity funds focused on the affordable housing sector and other commercial real estate, and real estate-related investment banking and advisory services, including housing market research.

  • The $6.7 billion net increase in the servicing portfolio over the past 12 months was the principal driver of the growth in servicing fees year over year, combined with the increase in the servicing portfolio’s weighted-average servicing fee.
  • Escrow earnings and other interest income increased as a result of higher escrow earnings due to higher short-term interest rates, partially offset by a slightly lower average escrow balance.
  • Other revenues and investment management fees increased principally due to the additions of fee income from Alliant and Zelman, with no comparable activity in the prior year as these acquisitions occurred in the second half of 2021.
  • Personnel expense increased year over year as principally a result of the acquisitions of Alliant and Zelman.
  • Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year and an increase in prepayment activity. Additionally, we had a $3.4 million increase in amortization of intangible assets from our strategic acquisitions in 2021.
  • The increase in other operating expenses was largely attributable to increases in office and other professional fees to support the continued growth in our operations as a result of recent acquisitions.

FINANCIAL RESULTS – CORPORATE

(dollars in thousands)

Q2 2022

Q2 2021

$ Variance

% Variance

Escrow earnings and other interest income

$

103

$

55

$

48

87

%

Other revenues

172

296

(124)

(42)

Total revenues

$

275

$

351

$

(76)

(22)

%

Personnel

$

7,574

$

11,980

$

(4,406)

(37)

%

Amortization and depreciation

1,533

1,097

436

40

Interest expense on corporate debt

6,412

1,760

4,652

264

Other operating expenses

25,053

13,546

11,507

85

Total expenses

$

40,572

$

28,383

$

12,189

43

%

Income from operations

$

(40,297)

$

(28,032)

$

(12,265)

44

%

Income tax expense

(9,823)

(6,974)

(2,849)

41

Walker & Dunlop net income

$

(30,474)

$

(21,058)

$

(9,416)

45

%

Key performance metric:

Adjusted EBITDA

$

(27,098)

$

(21,404)

$

(5,694)

27

%

Corporate – Discussion of Quarterly Results:

  • Personnel expense decreased primarily due to a decrease in performance based variable compensation that is partially offset by increases in salaries and benefits due to the growth in our average headcount to support our growth and acquisitions.
  • In the fourth quarter of 2021, we refinanced our senior secured term loan and increased the principal balance from $292 million to $600 million. The term loan carries an interest rate of SOFR plus a 10-basis point credit spread adjustment (with a floor of 50 basis points) plus a 225 basis point spread, leading to additional interest expense in the second quarter of 2022 compared to the same period last year. In addition to the debt refinancing, we incurred additional interest expense related to a fixed-rate note payable assumed in the acquisition of Alliant in the fourth quarter of 2021.
  • Other operating expenses increased in the second quarter primarily due to: (i) an increase in legal and other professional fees and office expenses related to our recent acquisitions and overall growth; and (ii) an increase in travel and entertainment expenses, which were still impacted by the effects of the pandemic in the second quarter of 2021.

CONSOLIDATED YEAR-TO-DATE 2022 OPERATING RESULTS

YEAR-TO-DATE OPERATING RESULTS AND KEY PERFORMANCE METRICS

(dollars in thousands)

YTD Q2 2022

YTD Q2 2021

$ Variance

% Variance

Debt financing volume

$

23,785,975

$

17,835,303

$

5,950,672

33

%

Property sales volume

11,423,752

4,737,292

6,686,460

141

Total transaction volume

$

35,209,727

$

22,572,595

$

12,637,132

56

%

Total revenues

660,292

505,699

154,593

31

Total expenses

496,692

358,231

138,461

39

Walker & Dunlop net income

$

125,495

$

114,110

$

11,385

10

%

Adjusted EBITDA

157,480

127,181

30,299

24

Diluted EPS

$

3.73

$

3.52

$

0.21

6

%

Operating margin

25

%

29

%

Return on equity

16

19

Discussion of Results:

  • The increase in total transaction volume was primarily driven by a 72% increase in Fannie Mae debt financing volume, a 41% increase in brokered debt financing volume, and a 141% increase in property sales volume, partially offset by a 54% decline in HUD debt financing volume.
  • The increase in Walker & Dunlop net income was primarily a result of an 11% increase in income from operations.
  • The increase in adjusted EBITDA was largely driven by an increase in cash revenues from increased transaction volume and revenues from Alliant and Zelman, with no comparable revenue in the prior year, partially offset by increases in personnel expenses and other operating expenses from those aforementioned acquisitions.
  • Operating margin declined principally due to higher variable compensation costs resulting from the 56% growth in total transaction volume over the past year.
  • Return on equity declined due to a 26% increase in stockholders’ equity over the past year, partially offset by the increase in net income.

YEAR-TO-DATE 2022 – FINANCIAL RESULTS BY SEGMENT

YEAR-TO-DATE FINANCIAL RESULTS – CAPITAL MARKETS

(dollars in thousands)

YTD Q2 2022

YTD Q2 2021

$ Variance

% Variance

Loan origination and debt brokerage fees, net

$

183,908

$

180,878

$

3,030

2

%

Fair value of expected net cash flows from servicing, net (“MSR income”)

104,679

119,784

(15,105)

(13)

Property sales broker fees

69,784

31,496

38,288

122

Net warehouse interest income, LHFS

7,237

5,343

1,894

35

Other revenues

6,658

5,695

963

17

Total revenues

$

372,266

$

343,196

$

29,070

8

%

Personnel

$

237,639

$

192,629

$

45,010

23

%

Amortization and depreciation

810

539

271

50

Other operating expenses

10,694

7,000

3,694

53

Total expenses

$

249,143

$

200,168

$

48,975

24

%

Income from operations

$

123,123

$

143,028

$

(19,905)

(14)

%

Income tax expense

29,323

32,354

(3,031)

(9)

Walker & Dunlop net income

$

93,800

$

110,674

$

(16,874)

(15)

%

Capital Markets – Discussion of Year-to-Date Results:

  • The decrease in MSR income was primarily related to the decrease in the percentage of Agency debt financing volume year over year. Agency debt financing volume decreased from 38% in 2021 to 36% in 2022. Additionally, the profitability of our debt financing volume declined.
  • The increase in property sales broker fees was driven by the 141% increase in property sales volume year over year, partially offset by a decline in the property sales broker fee margin.
  • Personnel expense increased primarily as a result of (i) an increase in commissions expense due to the increases in origination fees and property sales broker fees; (ii) an increase in salaries and benefits costs due to strategic acquisitions and hiring initiatives that contributed to an increase in total bankers and brokers year over year; and (iii) an increase in total compensation costs as a result of consolidating Apprise after our acquisition of GeoPhy. The operating results for the year-to-date period in 2022 include compensation costs for Apprise, while the operating results for the same period in 2021 do not as we accounted for our investment in Apprise under the equity method in the prior year.
  • The increase in other operating expenses was largely attributable to increases in travel and entertainment, which are attributable to our overall growth over the past year and low costs in this area in the first half of 2021 due to the pandemic.

YEAR-TO-DATE FINANCIAL RESULTS – SERVICING & ASSET MANAGEMENT

(dollars in thousands)

YTD Q2 2022

YTD Q2 2021

$ Variance

% Variance

Loan origination and debt brokerage fees, net

$

1,007

$

2,473

$

(1,466)

(59)

%

Servicing fees

146,941

135,030

11,911

9

Investment management fees

22,930

6,551

16,379

250

Net warehouse interest income, LHFI

2,804

3,842

(1,038)

(27)

Escrow earnings and other interest income

8,406

3,767

4,639

123

Other revenues

61,529

11,657

49,872

428

Total revenues

$

243,617

$

163,320

$

80,297

49

%

Personnel

$

40,519

$

16,558

$

23,961

145

%

Amortization and depreciation

113,691

92,773

20,918

23

Provision (benefit) for credit losses

(14,338)

(15,646)

1,308

(8)

Other operating expenses

12,678

4,857

7,821

161

Total expenses

$

152,550

$

98,542

$

54,008

55

%

Income from operations

$

91,067

$

64,778

$

26,289

41

%

Income tax expense

21,689

14,653

7,036

48

Net income before noncontrolling interests

$

69,378

$

50,125

$

19,253

38

%

Less: net income (loss) from noncontrolling interests

(858)

(858)

N/A

Walker & Dunlop net income

$

70,236

$

50,125

$

20,111

40

%

Servicing & Asset Management – Discussion of Year-to-Date Results:

  • The $6.7 billion net increase in the servicing portfolio over the past 12 months was the principal driver of the growth in servicing fees year over year, combined with an increase in the servicing portfolio’s weighted-average servicing fee.
  • Escrow earnings and other interest income increased as a result of higher escrow earnings due to higher short-term interest rates.
  • Other revenues and investment management fees increased principally due to the additions of income from Alliant and Zelman, with no comparable activity in the prior year as these acquisitions occurred in the second half of 2021.
  • Personnel expense increased substantially year over year as a result of increased compensation costs due to our acquisitions and hiring initiatives.
  • Amortization and depreciation increased as a result of the growth in the average balance of MSRs outstanding year over year and an increase in prepayment activity. Additionally, we had a $6.8 million increase in amortization of intangible assets from our strategic acquisitions in 2021.
  • The increase in other operating expenses was largely attributable to increases in office expenses and other professional fees to support the continued growth in our operations.

YEAR-TO-DATE FINANCIAL RESULTS – CORPORATE

(dollars in thousands)

YTD Q2 2022

YTD Q2 2021

$ Variance

% Variance

Escrow earnings and other interest income

$

148

$

173

$

(25)

(14)

%

Other revenues

44,261

(990)

45,251

(4,571)

Total revenues

$

44,409

$

(817)

$

45,226

(5,536)

%

Personnel

$

34,391

$

28,449

$

5,942

21

%

Amortization and depreciation

2,754

2,069

685

33

Interest expense on corporate debt

12,817

3,525

9,292

264

Other operating expenses

45,037

25,478

19,559

77

Total expenses

$

94,999

$

59,521

$

35,478

60

%

Income from operations

$

(50,590)

$

(60,338)

$

9,748

(16)

%

Income tax expense

(12,049)

(13,649)

1,600

(12)

Walker & Dunlop net income

$

(38,541)

$

(46,689)

$

8,148

(17)

%

Corporate – Discussion of Year-to-Date Results:

  • As part of the GeoPhy acquisition, we acquired the other 50% ownership interest in Apprise. The revaluation of our existing 50% ownership interest in Apprise resulted in a $39.6 million increase in other revenues. The remaining increase principally relates to income from our other equity method investments.
  • Personnel expense increased primarily as a result of (i) increased salaries and benefits costs due to an increase in the average headcount year over year; and (ii) an increase in stock-based compensation expense associated with our performance share plans due to our financial performance and increased headcount, partially offset by a decrease in compensation expense related to the Company’s deferred compensation plan due to declines in the fair value of the assets held by participants in the plan.
  • Interest expense on corporate debt increased due to the increase in the principal balance of our debt outstanding in the fourth quarter of 2021 and the assumption of Alliant’s note payable following the acquisition in the fourth quarter of 2021.
  • Other operating expenses increased due to: (i) an increase in legal and other professional fees and office expenses related to our recent acquisitions and overall growth, (ii) an increase in travel and entertainment expenses, which were still impacted by the effects of the pandemic in the first half of 2021, and (iii) rent-related costs due to the lease for our new headquarters.

CAPITAL SOURCES AND USES

On August 3, 2022, the Company’s Board of Directors declared a dividend of $0.60 per share for the third quarter of 2022. The dividend will be paid on September 2, 2022 to all holders of record of the Company’s restricted and unrestricted common stock as of August 18, 2022.

On February 2, 2022, our Board of Directors authorized the repurchase of up to $75.0 million of the Company’s outstanding common stock over the coming one-year period (“2022 Share Repurchase Program”). During the first quarter of 2022, the Company did not repurchase any shares of its common stock under the 2022 Share Repurchase Program. During the second quarter of 2022, the Company repurchased 0.1 million shares of its common stock under the share repurchase program at a weighted average price of $101.77 per share and immediately retired the shares, reducing stockholders’ equity by $11.1 million. As of June 30, 2022, the Company had $63.9 million of authorized share repurchase capacity remaining under the 2022 Share Repurchase Program.

Any future purchases made pursuant to the 2022 Share Repurchase Program will be made in the open market or in privately negotiated transactions from time to time as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

(1)

Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled “Non-GAAP Financial Measures,” “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP by Segment.”

(2)

Brokered transactions for life insurance companies, commercial banks, and other capital sources.

(3)

Includes debt financing volumes from our interim loan program, our interim loan joint venture, and WDIP separate accounts.

(4)

Loan origination and debt brokerage fees, net as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(5)

MSR income as a percentage of debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(6)

MSR income as a percentage of Agency debt financing volume.

(7)

At-risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at-risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at-risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at-risk portfolio.

For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at-risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans.

(8)

Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

ABOUT WALKER & DUNLOP

Walker & Dunlop (NYSE: WD) is one of the largest providers of capital to the commercial real estate industry in the United States, enabling real estate owners and operators to bring their visions of communities — where people live, work, shop and play — to life. Our people, brand, and technology make W&D one of the most insightful and customer-focused firms in our industry.  With more than 1,400 employees across every major U.S. market, Walker & Dunlop has consistently been named one of Fortune‘s Great Places to Work® and is committed to making the commercial real estate industry more inclusive and diverse while creating meaningful social, environmental, and economic change in our communities.