Walker & Dunlop Reports Second Quarter 2024 Financial Results

SECOND QUARTER 2024 HIGHLIGHTS

Total transaction volume of $8.4 billion, flat from Q2’23
Total revenues of $270.7 million, down 1% from Q2’23
Net income of $22.7 million and diluted earnings per share of $0.67, both down 18% from Q2’23
Adjusted EBITDA(1) of $80.9 million, up 15% from Q2’23
Adjusted core EPS(2) of $1.23, up 26% from Q2’23
Servicing portfolio of $132.8 billion as of June 30, 2024, up 5% from June 30, 2023
Declared quarterly dividend of $0.65 per share for the third quarter 2024

YEAR-TO-DATE 2024 HIGHLIGHTS

Total transaction volume of $14.8 billion, down 2% from 2023
Total revenues of $498.7 million, down 2% from 2023
Net income of $34.5 million and diluted earnings per share of $1.02, down 36% and 37%, respectively, from 2023
Adjusted EBITDA(1) of $155.1 million, up 12% from 2023
Adjusted core EPS(2) of $2.39, up 12% from 2023

Walker & Dunlop, Inc. (NYSE: WD) (the “Company,” “Walker & Dunlop,” or “W&D”) reported quarterly total transaction volume of $8.4 billion, in line with last year’s second quarter, which drove total revenues of $270.7 million, down 1% year over year. Net income for the second quarter of 2024 was $22.7 million, or $0.67 per diluted share, both down 18% year over year. Adjusted EBITDA increased 15% to $80.9 million, reflecting the strength of the Company’s recurring revenue streams and recovery in transaction volumes. Adjusted core EPS, which removes primarily non-cash revenues and expenses, was up 26% year over year to $1.23. The Company’s Board of Directors declared a dividend of $0.65 per share for the third quarter 2024.

"The second quarter of 2024 was the first quarter in almost two years with consistent rates and the ability for commercial real estate owners to transact, pushing Walker & Dunlop's total transaction volume up 32% from Q1'24 to $8.4 billion,” commented Walker & Dunlop Chairman and CEO Willy Walker. “Increased transaction volumes, combined with our durable, recurring revenue streams from servicing and asset management, generated 3% growth in adjusted core EPS and 9% growth in adjusted EBITDA from the first quarter, evident of the momentum building in the market.”

Mr. Walker continued, “It is clear that rate stability and the need to deploy, and recycle, capital is driving increased transaction volumes from owners of commercial real estate, and Walker & Dunlop is extremely well positioned to outperform and take advantage of that growth.”

________________________

(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)

Adjusted core EPS is a non-GAAP financial measure the Company presents to help investors better understand our operating performance. For a reconciliation of Adjusted core EPS to Diluted EPS, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Core EPS Reconciliation.”

CONSOLIDATED SECOND QUARTER 2024

OPERATING RESULTS

TRANSACTION VOLUMES

(in thousands)

Q2 2024

Q2 2023

$ Variance

% Variance

Fannie Mae

1,510,804

2,230,952

(720,148

)

(32

)

Freddie Mac

1,153,190

1,212,887

(59,697

)

Ginnie Mae - HUD

185,898

147,773

38,125

Brokered (1)

3,852,851

3,316,223

536,628

Principal Lending and Investing (2)

214,975

N/A

Debt financing volume (3)

6,917,718

6,907,835

9,883

Property sales volume

1,530,783

1,504,383

26,400

Total transaction volume (3)

8,448,501

8,412,218

36,283

(1)

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

(2)

Includes debt financing volumes from our interim loan program, our interim loan joint venture, and Walker & Dunlop Investment Partners, Inc. (“WDIP”) separate accounts.

(3)

Debt financing volume and total transaction volume increased less than 1% in Q2 2024.

DISCUSSION OF QUARTERLY RESULTS:

Debt financing volume and total transaction volume increased less than 1% in the second quarter of 2024. The increase in brokered volume was primarily offset by the decline in our transaction volume with Fannie Mae, largely reflective of Fannie Mae’s decline in debt financing volume.
The 16% increase in brokered volume was primarily the result of increased demand for capital, coupled with an increased supply of capital from life insurance companies, banks, CMBS and other private capital providers year over year.
Principal lending and investing volume, which represents originations for our investment management business, Walker & Dunlop Investment Partners (“WDIP”), increased primarily as a result of an increased supply of capital from new and existing funds managed by WDIP as well as an increase in market demand. Transaction activity was still limited in the second quarter of 2023 as the market was adjusting to a volatile rate environment and declining fundamentals for some asset classes.

MANAGED PORTFOLIO

(dollars in thousands, unless otherwise noted)

Q2 2024

Q2 2023

$ Variance

% Variance

Fannie Mae

64,954,426

61,356,554

3,597,872

Freddie Mac

39,938,411

38,287,200

1,651,211

Ginnie Mae - HUD

10,619,764

10,246,632

373,132

Brokered

17,239,417

16,684,115

555,302

Principal Lending and Investing

25,893

71,680

(45,787

)

(64

)

Total Servicing Portfolio

132,777,911

126,646,181

6,131,730

Assets under management

17,566,666

16,903,055

663,611

Total Managed Portfolio

150,344,577

143,549,236

6,795,341

Custodial escrow account balance at period end (in billions)

2.7

2.8

Weighted-average servicing fee rate (basis points)

24.1

24.3

Weighted-average remaining servicing portfolio term (years)

7.9

8.6

DISCUSSION OF QUARTERLY RESULTS:

Our servicing portfolio continues to expand with the addition of GSE debt financing volumes. Although debt financing volumes have been lower than in previous years, higher interest rates and lower levels of scheduled maturities have contributed to fewer loan payoffs within our servicing portfolio.
During the second quarter of 2024, we added $0.8 billion of net loans to our servicing portfolio, and over the past 12 months, we added $6.1 billion of net loans to our servicing portfolio, 92% of which were GSE or HUD (collectively, “Agency”) loans.
$11.0 billion of Agency loans in our servicing portfolio are scheduled to mature over the next two years. These loans, with a lower weighted-average servicing fee of 20.1 basis points, represent only 9% of the total Agency loans in our portfolio.
The mortgage servicing rights (“MSRs”) associated with our servicing portfolio had a fair value of $1.4 billion as of both June 30, 2024 and 2023.
Assets under management as of June 30, 2024 consisted of $15.2 billion of low-income housing tax credit (“LIHTC”) funds, $1.5 billion of debt funds, and $0.9 billion of equity funds managed by WDIP.

KEY PERFORMANCE METRICS

(in thousands, except per share amounts)

Q2 2024

Q2 2023

$ Variance

% Variance

Walker & Dunlop net income

22,663

27,635

(4,972

)

(18

)

Adjusted EBITDA

80,931

70,501

10,430

Diluted EPS

0.67

0.82

(0.15

)

(18

)

Adjusted core EPS

1.23

0.98

0.25

Operating margin

Return on equity

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

Personnel expenses

Other operating expenses

DISCUSSION OF QUARTERLY RESULTS:

Net income and diluted EPS both decreased 18% in the second quarter of 2024, compared to the same period in 2023, primarily driven by lower non-cash MSR revenues from lower Fannie Mae loan originations year over year, and a higher provision for loan losses. The 22% decrease in income from operations was partially offset by a lower estimated annual effective tax rate in the second quarter of 2024 than the second quarter of 2023 due to the timing of executive bonus compensation expense. The deductibility of executive compensation is limited for income tax purposes.
Adjusted EBITDA increased 15% year over year largely due to higher servicing fees, and placement fees and other interest income, partially offset by an increase in other operating expenses. Additionally, there were no net write-offs in the second quarter of 2024 compared to net writes-offs of $6.0 million in the second quarter of 2023.
Adjusted core EPS, which excludes, among other items, the impacts of non-cash MSR revenues and amortization, the provision for credit losses, and acquisition-related costs, such as amortization of intangible assets, was $1.23 in the second quarter of 2024, an increase of 26% year over year.
Operating margin decreased primarily due to changes in our non-cash activity, including: (i) a decline of MSR income due to lower Fannie Mae volume, and (ii) a change from a small benefit for credit losses in 2023 to a provision for credit losses in 2024. Additionally, other operating expenses increased year over year.
Return on equity declined primarily due to the 18% decrease in net income, partially offset by a less than 1% decrease in stockholders’ equity year over year.

KEY CREDIT METRICS

(in thousands)

Q2 2024

Q2 2023

$ Variance

% Variance

At-risk servicing portfolio (1)

60,122,274

56,430,098

3,692,176

Maximum exposure to at-risk portfolio (2)

12,222,290

11,346,580

875,710

Defaulted loans (3)

48,560

36,983

11,577

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

Defaulted loans

0.08

0.07

Allowance for risk-sharing

0.05

0.06

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

Allowance for risk-sharing

0.25

0.29

__________________

(1)

At-risk servicing portfolio is defined as the balance of Fannie Mae Delegated Underwriting and Servicing (“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.

(2)

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.

(3)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e., loans where we have assessed a probable loss). Other loans that are delinquent but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here.

DISCUSSION OF QUARTERLY RESULTS:

Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased primarily due to the level of Fannie Mae loans added to the portfolio during the past 12 months. We take credit risk exclusively on loans backed by multifamily assets and have no credit exposure to losses in any other sector of the commercial real estate lending market.
As of June 30, 2024, five at-risk loans were in default with an aggregate unpaid principal balance (“UPB”) of $48.6 million compared to two at-risk loans with an aggregate UPB of $37.0 million that were in default as of June 30, 2023. The collateral-based reserve on defaulted loans was $5.6 million and $3.5 million as of June 30, 2024 and June 30, 2023, respectively. The approximately 3,000 other loans in the at-risk servicing portfolio continue to exhibit strong credit quality, with very low levels of delinquencies and strong operating performance of the underlying properties in the portfolio.
During the first quarter of 2024, we repurchased a Fannie Mae loan for $13.5 million in cash. We have an immaterial reserve for credit losses related to this loan. In 2023, we received repurchase requests from Freddie Mac related to two loans with UPBs of $11.4 million and $34.8 million, respectively. We entered into a forbearance and indemnification agreement with Freddie Mac that, among other things, delayed the repurchases of these loans for six and 12 months, respectively, and transferred the risk of loss for both loans from Freddie Mac to Walker & Dunlop in the first quarter of 2024. As of June 30, 2024, our estimate of the fair value of the indemnification agreements was $4.6 million, an increase of $2.6 million from March 31, 2024, which is included in the provision for credit losses for the second quarter of 2024.

SECOND QUARTER 2024 FINANCIAL RESULTS BY SEGMENT

Interest expense on corporate debt is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s use of that corporate debt. Income tax expense is determined at a consolidated corporate level and allocated to each segment proportionally based on each segment’s income from operations, except for significant, one-time tax activities, which are allocated entirely to the segment impacted by the tax activity. The following details explain the changes in these expense items at a consolidated corporate level:

Interest expense on corporate debt increased 5% from the second quarter of 2023, primarily as a result of an increase in interest rates year over year, as our term loan carries a floating interest rate.
Income tax expense decreased $2.6 million, or 25%, from the second quarter of 2023, primarily as a result of the 22% decrease in income from operations, as well as a decrease in the effective tax rate from 29% to 28% year over year.

FINANCIAL RESULTS - CAPITAL MARKETS

(in thousands)

Q2 2024

Q2 2023

$ Variance

% Variance

Loan origination and debt brokerage fees, net ("Origination fees")

63,841

64,574

(733

)

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

33,349

42,058

(8,709

)

(21

)

Property sales broker fees

11,265

10,345

920

Net warehouse interest income (expense), loans held for sale ("LHFS")

(1,950

)

(2,752

)

802

(29

)

Other revenues

11,665

11,760

(95

)

Total revenues

118,170

125,985

(7,815

)

Personnel

92,480

93,067

(587

)

Amortization and depreciation

1,138

1,089

Interest expense on corporate debt

5,299

4,727

572

Other operating expenses

4,642

5,200

(558

)

(11

)

Total expenses

103,559

104,083

(524

)

Income (loss) from operations

14,611

21,902

(7,291

)

(33

)

Income tax expense (benefit)

3,359

5,572

(2,213

)

(40

)

Net income (loss) before noncontrolling interests

11,252

16,330

(5,078

)

(31

)

Less: net income (loss) from noncontrolling interests

213

223

(10

)

Walker & Dunlop net income (loss)

11,039

16,107

(5,068

)

(31

)

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

Origination fee rate (1)

0.95

0.93

MSR rate (2)

0.50

0.61

Agency MSR rate (3)

1.17

Key performance metrics:

Operating margin

Adjusted EBITDA

(8,532

)

(10,334

)

1,802

(17

)

_______________________

(1)

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

(2)

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

(3)

MSR income as a percentage of Agency debt financing volume.

CAPITAL MARKETS - DISCUSSION OF QUARTERLY RESULTS:

The Capital Markets segment includes our Agency lending, debt brokerage, property sales, appraisal and valuation services, investment banking, and housing market research businesses.

The decreases in our MSR income and MSR rate were primarily attributable to the 32% decrease in Fannie Mae debt financing volume. Fannie Mae volume as a percentage of total transaction volume decreased from 27% in the second quarter of 2023 to 18% in the second quarter of 2024. Additionally, the weighted-average duration of Fannie Mae loans decreased year over year due to the continued high interest rate environment. Partially offsetting these factors was an increase in the weighted-average servicing fee (“WASF”) on Fannie Mae loans. Fannie Mae loans have higher WASF than our other products, producing higher MSR income than our other product types.
There were no other significant changes from the second quarter of 2023 to the second quarter of 2024.

FINANCIAL RESULTS - SERVICING & ASSET MANAGEMENT

(in thousands)

Q2 2024

Q2 2023

$ Variance

% Variance

Origination fees

1,493

394

1,099

279

Servicing fees

80,418

77,061

3,357

Investment management fees

14,822

16,309

(1,487

)

Net warehouse interest income, loans held for investment ("LHFI")

366

1,226

(860

)

(70

)

Placement fees and other interest income

37,170

32,337

4,833

Other revenues

13,963

15,513

(1,550

)

(10

)

Total revenues

148,232

142,840

5,392

Personnel

20,077

21,189

(1,112

)

Amortization and depreciation

53,173

53,550

(377

)

Provision (benefit) for credit losses

2,936

(734

)

3,670

(500

)

Interest expense on corporate debt

10,946

10,707

239

Other operating expenses

6,728

9,946

(3,218

)

(32

)

Total expenses

93,860

94,658

(798

)

Income (loss) from operations

54,372

48,182

6,190

Income tax expense (benefit)

16,521

14,787

1,734

Net income (loss) before noncontrolling interests

37,851

33,395

4,456

Less: net income (loss) from noncontrolling interests

(2,581

)

(2,337

)

(244

)

Walker & Dunlop net income (loss)

40,432

35,732

4,700

Key performance metrics:

Operating margin

Adjusted EBITDA

124,502

108,459

16,043

SERVICING & ASSET MANAGEMENT - DISCUSSION OF QUARTERLY RESULTS:

The Servicing & Asset Management segment includes loan servicing, principal lending and investing, management of 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.

The $6.1 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, partially offset by a slight decrease in the servicing portfolio’s WASF.
Investment management fees decreased primarily as a result of a decline in revenue from our Principal Investing funds due to lower asset sales year over year.
Placement fees and other interest income increased primarily as a result of higher placement fees earned on escrow deposits related to higher short-term interest rates.
Other revenues primarily decreased as a result of lower syndication revenues related to lower equity syndication volume year over year.
The provision for credit losses in 2024 was primarily attributable to losses related to the forbearance and indemnification agreement with Freddie Mac as noted above. The benefit for credit losses in 2023 was driven by an update in our collateral-based reserve for a property that was settled with Fannie Mae.
Other operating expenses decreased primarily as a result of decreased miscellaneous expenses year over year, largely from our affordable operations.

FINANCIAL RESULTS - CORPORATE

(in thousands)

Q2 2024

Q2 2023

$ Variance

% Variance

Other interest income

3,870

3,049

821

Other revenues

404

741

(337

)

(45

)

Total revenues

4,274

3,790

484

Personnel

20,510

19,049

1,461

Amortization and depreciation

1,732

1,653

Interest expense on corporate debt

1,629

1,576

Other operating expenses

21,189

15,584

5,605

Total expenses

45,060

37,862

7,198

Income (loss) from operations

(40,786

)

(34,072

)

(6,714

)

Income tax expense (benefit)

(11,978

)

(9,868

)

(2,110

)

Walker & Dunlop net income (loss)

(28,808

)

(24,204

)

(4,604

)

Key performance metric:

Adjusted EBITDA

(35,039

)

(27,624

)

(7,415

)

CORPORATE - DISCUSSION OF QUARTERLY RESULTS:

The Corporate segment consists of corporate-level activities including accounting, information technology, legal, human resources, marketing, internal audit, and various other corporate groups (“support functions”). The Company does not allocate costs from these support functions to its other segments in presenting segment operating results.

The increase in personnel expense was primarily driven by increases in variable compensation arrangements, including our subjective bonus compensation expense.
Other operating expenses increased primarily due to increases in travel and entertainment costs, as we held an all company retreat in the second quarter of 2024, something we did not do in 2023. The retreat is an important part of the Walker & Dunlop community and corporate culture. Annual increases in multi-year software and data contracts used throughout our business also contributed to the increase in other operating expenses.

YEAR-TO-DATE 2024 CONSOLIDATED OPERATING RESULTS

Interest expense on corporate debt increased $3.2 million, or 10%, from the second quarter of 2023, primarily as a result of an increase in interest rates year over year, as our term loan carries a floating interest rate.
Income tax expense decreased $6.9 million, or 39%, from the second quarter of 2023, primarily as a result of the 41% decrease in income from operations.

OPERATING RESULTS AND KEY PERFORMANCE METRICS

(in thousands)

YTD Q2 2024

YTD Q2 2023

$ Variance

% Variance

Debt financing volume

12,145,026

11,733,633

411,393

Property sales volume

2,697,934

3,399,065

(701,131

)

(21

)

Total transaction volume

14,842,960

15,132,698

(289,738

)

Total revenues

498,735

511,361

(12,626

)

Total expenses

456,859

440,744

16,115

Walker & Dunlop net income

34,529

54,300

(19,771

)

(36

)

Adjusted EBITDA

155,067

138,476

16,591

Diluted EPS

1.02

1.61

(0.59

)

(37

)

Adjusted core EPS

2.39

2.14

0.25

Operating margin

Return on equity

DISCUSSION OF YEAR-TO-DATE-RESULTS:

The decrease in total transaction volume was primarily driven by a 22% decrease in Agency debt financing volume and a 21% decrease in property sales volume, partially offset by the 26% increase in brokered debt financing volume.
The 36% decrease in Walker & Dunlop net income was primarily a result of a 41% decrease in income from operations driven by: (i) a decline in non-cash MSR revenues from lower Agency financing volume; (ii) higher provision for loan loss expense in 2024 compared to a net benefit in 2023; (iii) a write-off of debt premium related to the payoff of fixed-rate debt in 2023 with no comparable activity in 2024; and (iv) lower investment banking revenues year over year as we closed the largest investment banking transaction in our history in 2023 with no similar transaction this year. These were partially offset by an increase in losses allocated to noncontrolling interests.
The increase in adjusted EBITDA was primarily the result of increased placement fees and other interest income, higher servicing fees, and decreased personnel expenses, partially offset by decreases in origination fees, investment banking revenues, and an increase in other operating expenses. Additionally, there were no net write offs in 2024 compared to $6.0 million in 2023.
Diluted EPS decreased 37% year over year, compared to a 12% increase in our adjusted core EPS year over year. As explained above, the decrease in income from operations year over year was driven largely by reductions in non-cash revenues or atypical transaction related drivers, like a debt refinancing, which are removed from adjusted core EPS. Diluted EPS incorporates the impact of those items and decreased year over year, while adjusted core EPS excludes those items and reflects the year over year growth of our recurring revenue streams.
Operating margin decreased primarily due to changes in our non-cash activity, including: (i) a decline of MSR income due to lower Fannie Mae volume, and (ii) a change from a large benefit for credit losses in 2023 to a provision for credit losses in 2024. Additionally, other operating expenses increased year over year.
Return on equity declined due to a 36% decrease in net income, partially offset by a less than 1% decrease in stockholders’ equity year over year.

YEAR-TO-DATE 2024

FINANCIAL RESULTS BY SEGMENT

FINANCIAL RESULTS - CAPITAL MARKETS

(in thousands)

YTD Q2 2024

YTD Q2 2023

$ Variance

% Variance

Origination fees

107,541

111,530

(3,989

)

MSR income

54,247

72,071

(17,824

)

(25

)

Property sales broker fees

20,086

21,969

(1,883

)

Net warehouse interest income (expense), LHFS

(3,524

)

(4,441

)

917

(21

)

Other revenues

21,717

28,860

(7,143

)

(25

)

Total revenues

200,067

229,989

(29,922

)

(13

)

Personnel

171,667

183,529

(11,862

)

Amortization and depreciation

2,275

—

Interest expense on corporate debt

10,150

8,996

1,154

Other operating expenses

9,694

10,844

(1,150

)

(11

)

Total expenses

193,786

205,644

(11,858

)

Income (loss) from operations

6,281

24,345

(18,064

)

(74

)

Income tax expense (benefit)

1,615

6,076

(4,461

)

(73

)

Net income (loss) before noncontrolling interests

4,666

18,269

(13,603

)

(74

)

Less: net income (loss) from noncontrolling interests

327

1,658

(1,331

)

(80

)

Walker & Dunlop net income (loss)

4,339

16,611

(12,272

)

(74

)

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

Origination fee margin

0.90

0.95

MSR margin

0.46

0.61

Agency MSR margin

1.14

1.19

Key performance metrics:

Operating margin

Adjusted EBITDA

(27,829

)

(29,021

)

1,192

)

CAPITAL MARKETS - DISCUSSION OF YEAR-TO-DATE-RESULTS:

The decrease in origination fees was primarily the result of a change in the mix of our debt financing volume, driven by an increase in brokered debt financing volume as a percentage of total debt financing volume and a decrease in Fannie Mae volume as a percentage of total debt financing volume, partially offset by an increase in overall debt financing volume. The change in the mix of our debt financing volume also led to the drop in the origination fee margin. Fannie Mae debt financing is our most-profitable product, while brokered debt financing is our least profitable.
The decrease in MSR income is primarily attributable to a 33% decrease in Fannie Mae debt financing volume. Additionally, the weighted-average duration of Fannie Mae loans decreased year over year due to the continued high interest rate environment. Partially offsetting these factors was an increase in the WASF on Fannie Mae loans.
The decrease in other revenues was primarily related to the closing of the largest investment banking deal in the Company’s history, a $7.5 million transaction, which closed in the first quarter of 2023, with no comparable activity in 2024.
Personnel expenses decreased primarily due to a decrease in commission costs on lower origination and property sales broker fees, combined with a decrease in other personnel costs due to lower headcount. Our lower headcount was due to a workforce reduction undertaken in the second quarter of 2023.

FINANCIAL RESULTS - SERVICING & ASSET MANAGEMENT

(in thousands)

YTD Q2 2024

YTD Q2 2023

$ Variance

% Variance

Origination fees

1,533

522

1,011

194

Servicing fees

160,461

152,827

7,634

Investment management fees

28,342

31,482

(3,140

)

(10

)

Net warehouse interest income, LHFI

824

2,916

(2,092

)

(72

)

Placement fees and other interest income

72,773

61,161

11,612

Other revenues

25,534

27,128

(1,594

)

Total revenues

289,467

276,036

13,431

Personnel

38,132

36,530

1,602

Amortization and depreciation

106,244

107,560

(1,316

)

Provision (benefit) for credit losses

3,460

(11,509

)

14,969

(130

)

Interest expense on corporate debt

22,137

20,289

1,848

Other operating expenses

11,851

11,426

425

Total expenses

181,824

164,296

17,528

Income (loss) from operations

107,643

111,740

(4,097

)

Income tax expense (benefit)

27,674

27,891

(217

)

Net income (loss) before noncontrolling interests

79,969

83,849

(3,880

)

Less: net income (loss) from noncontrolling interests

(3,746

)

(2,967

)

(779

)

Walker & Dunlop net income (loss)

83,715

86,816

(3,101

)

Key performance metrics:

Operating margin

Adjusted EBITDA

244,159

221,434

22,725

SERVICING & ASSET MANAGEMENT - DISCUSSION OF YEAR-TO-DATE-RESULTS:

The $6.1 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, partially offset by a decrease in the servicing portfolio’s weighted-average servicing fee.
Investment management fees decreased primarily as a result of a decline in revenue from our LIHTC funds due to fewer dispositions year over year.
Placement fees and other interest income increased largely as a result of higher placement fees earned on those escrow deposits due to higher short-term interest rates.
The provision for credit losses in 2024 was primarily attributable to the estimated fair value of the liability related to the forbearance and indemnification agreements with Freddie Mac noted above, partially offset by a small benefit for risk-sharing obligations resulting from an update to our historical loss rate and forecast-period loss rate. The benefit for credit losses in 2023 was primarily due to the annual update of our historical loss rate and forecast-period loss rates that resulted in a decrease to the calculated expected credit losses.

FINANCIAL RESULTS - CORPORATE

(in thousands)

YTD Q2 2024

YTD Q2 2023

$ Variance

% Variance

Other interest income

7,669

5,149

2,520

Other revenues

1,532

187

1,345

719

Total revenues

9,201

5,336

3,865

Personnel

34,731

31,859

2,872

Amortization and depreciation

3,415

3,423

)

Interest expense on corporate debt

3,246

2,999

247

Other operating expenses

39,857

32,523

7,334

Total expenses

81,249

70,804

10,445

Income (loss) from operations

(72,048

)

(65,468

)

(6,580

)

Income tax expense (benefit)

(18,523

)

(16,341

)

(2,182

)

Walker & Dunlop net income (loss)

(53,525

)

(49,127

)

(4,398

)

Key performance metric:

Adjusted EBITDA

(61,263

)

(53,937

)

(7,326

)

CORPORATE - DISCUSSION OF YEAR-TO-DATE-RESULTS:

Total revenues increased as a result of higher interest income earned on our corporate and fund cash balances due to the elevated short-term interest rate environment, combined with an increase in income from equity-method investments.
The increase in personnel expense was primarily related to increases in variable compensation, including our subjective bonus compensation expense, partially offset by decreases in salaries and benefits and stock compensation expenses, driven by lower headcount as a result of our workforce reduction undertaken in the second quarter of 2023 and the departure of two executives.
The increase in other operating expenses was primarily the result of increased travel and entertainment, software, and miscellaneous expenses year over year.

CAPITAL SOURCES AND USES

On August 7, 2024, the Company’s Board of Directors declared a dividend of $0.65 per share for the third quarter of 2024. The dividend will be paid on September 6, 2024, to all holders of record of the Company’s restricted and unrestricted common stock as of August 22, 2024.

In May 2024, the Company entered into a second amendment to the existing credit agreement that, among other things, decreased the interest rate of the incremental $200 million borrowing by 0.75% per annum, to Term SOFR plus 2.25% per annum, and combined the incremental term loan with the initial term loan to create a single fungible $800 million senior secured term loan.

On February 14, 2024, our Board of Directors authorized the repurchase of up to $75.0 million of the Company’s outstanding common stock over a 12-month period ending February 23, 2025 (“2024 Share Repurchase Program”). We have not repurchased any shares of common stock under the 2024 Share Repurchase Program.

Any purchases made pursuant to the 2024 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.

CONFERENCE CALL INFORMATION

Listeners can access the Company’s quarterly conference call for more information regarding our financial results via the dial-in number and webcast link below. Presentation materials related to the conference call will be posted to the Investor Relations section of the Company’s website prior to the call. An audio replay will also be available on the Investor Relations section of the Company’s website, along with the presentation materials.

Earnings Call:

Thursday, August 8, 2024 at 8:30am EDT

Phone:

(888) 256-1007 from within the United States; (773) 305-6853 from outside the United States

Confirmation Code:

5034007

Webcast Link:

https://event.webcasts.com/starthere.jsp?ei=1655292&tp_key=5b0e21c116

ABOUT WALKER & DUNLOP

Walker & Dunlop (NYSE: WD) is one of the largest commercial real estate finance and advisory services firms in the United States. Our ideas and capital create communities where people live, work, shop, and play. The diversity of our people, breadth of our brand and technological capabilities make us one of the most insightful and client-focused firms in the commercial real estate industry.

NON-GAAP FINANCIAL MEASURES

To supplement our financial statements presented in accordance with United States generally accepted accounting principles (“GAAP”), the Company uses adjusted EBITDA, adjusted core net income, and adjusted core EPS, which are non-GAAP financial measures. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. When analyzing our operating performance, readers should use adjusted EBITDA, adjusted core net income, and adjusted core EPS in addition to, and not as an alternative for, net income and diluted EPS.

Adjusted core net income and adjusted core EPS represent net income adjusted for amortization and depreciation, provision (benefit) for credit losses, net write-offs, the fair value of expected net cash flows from servicing, net, the income statement impact from periodic revaluation and accretion associated with contingent consideration liabilities related to acquired companies, and other one-time adjustments, such as goodwill impairment. Adjusted EBITDA represents net income before income taxes, interest expense on our corporate debt, and amortization and depreciation, adjusted for provision (benefit) for credit losses, net write-offs, stock-based compensation expense, the fair value of expected net cash flows from servicing, net, the write-off of the unamortized balance of premium associated with the repayment of a portion of our corporate debt, goodwill impairment, and contingent consideration liability fair value adjustments when the fair value adjustment is a triggering event for a goodwill impairment assessment. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants. Because not all companies use identical calculations, our presentation of adjusted EBITDA, adjusted core net income and adjusted core EPS may not be comparable to similarly titled measures of other companies.

We use adjusted EBITDA, adjusted core net income, and adjusted core EPS to evaluate the operating performance of our business, for comparison with forecasts and strategic plans and for benchmarking performance externally against competitors. We believe that these non-GAAP measures, when read in conjunction with the Company's GAAP financial information, provide useful information to investors by offering:

the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;
the ability to better identify trends in the Company's underlying business and perform related trend analyses; and
a better understanding of how management plans and measures the Company's underlying business.

We believe that these non-GAAP financial measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that these non-GAAP financial measures should only be used to evaluate the Company's results of operations in conjunction with the Company’s GAAP financial information. For more information on adjusted EBITDA, adjusted core net income, and adjusted core EPS, refer to the section of this press release below titled “Adjusted Financial Measure Reconciliation to GAAP” and “Adjusted Financial Measure Reconciliation to GAAP By Segment.”

FORWARD-LOOKING STATEMENTS

Some of the statements contained in this press release may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, projections, plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. In some cases, you can identify forward-looking statements by the use of forward-looking terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” or “potential” or the negative of these words and phrases or similar words or phrases that are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans, or intentions.

The forward-looking statements contained in this press release reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause actual results to differ significantly from those expressed or contemplated in any forward-looking statement.

While forward-looking statements reflect our good faith projections, assumptions and expectations, they are not guarantees of future results. Furthermore, we disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes, except as required by applicable law. Factors that could cause our results to differ materially include, but are not limited to: (1) general economic conditions and multifamily and commercial real estate market conditions, (2) changes in interest rates, (3) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (4) our ability to retain and attract loan originators and other professionals, (5) success of our various investments funded with corporate capital, and (6) changes in federal government fiscal and monetary policies, including any constraints or cuts in federal funds allocated to HUD for loan originations.

For a further discussion of these and other factors that could cause future results to differ materially from those expressed or contemplated in any forward-looking statements, see the section titled “Risk Factors” in our most recent Annual Report on Form 10-K and any updates or supplements in subsequent Quarterly Reports on Form 10-Q and our other filings with the SEC. Such filings are available publicly on our Investor Relations web page at www.walkerdunlop.com.

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

Unaudited

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2023

(in thousands)

Assets

Cash and cash equivalents

208,095

216,532

328,698

236,321

228,091

Restricted cash

35,460

21,071

21,422

17,768

21,769

Pledged securities, at fair value

197,936

190,679

184,081

177,509

170,666

Loans held for sale, at fair value

814,883

497,933

594,998

758,926

1,303,686

Mortgage servicing rights

850,831

881,834

907,415

921,746

932,131

Goodwill

901,710

949,710

963,710

Other intangible assets

174,467

178,221

181,975

185,927

189,919

Receivables, net

272,827

250,406

233,563

265,234

242,397

Committed investments in tax credit equity

151,674

122,332

154,028

212,296

165,136

Other assets

567,515

565,194

544,457

552,414

589,919

Total assets

4,175,398

3,825,912

4,052,347

4,277,851

4,807,424

Liabilities

Warehouse notes payable

810,114

521,977

596,178

790,742

1,342,187

Notes payable

770,707

772,037

773,358

774,677

775,995

Allowance for risk-sharing obligations

30,477

30,124

31,601

30,957

32,410

Commitments to fund investments in tax credit equity

134,493

114,206

140,259

196,250

156,617

Other liabilities

695,813

651,660

764,822

754,234

775,718

Total liabilities

2,441,604

2,090,004

2,306,218

2,546,860

3,082,927

Stockholders' Equity

Common stock

331

329

328

327

Additional paid-in capital

407,426

427,184

425,488

420,062

412,182

Accumulated other comprehensive income (loss)

415

(492

)

(479

)

(1,864

)

(1,465

)

Retained earnings

1,288,728

1,288,313

1,298,412

1,287,653

1,287,334

Total stockholders’ equity

1,696,900

1,715,336

1,723,750

1,706,179

1,698,378

Noncontrolling interests

36,894

20,572

22,379

24,812

26,119

Total equity

1,733,794

1,735,908

1,746,129

1,730,991

1,724,497

Commitments and contingencies

—

Total liabilities and stockholders' equity

4,175,398

3,825,912

4,052,347

4,277,851

4,807,424

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income and Comprehensive Income

Unaudited

Quarterly Trends

Six months ended

June 30,

(in thousands, except per share amounts)

Q2 2024

Q1 2024

Q4 2023

Q3 2023

Q2 2023

2024

2023

Revenues

Origination fees

65,334

43,740

66,208

56,149

64,968

109,074

112,052

MSR income

33,349

20,898

34,471

35,375

42,058

54,247

72,071

Servicing fees

80,418

80,043

79,887

79,200

77,061

160,461

152,827

Property sales broker fees

11,265

8,821

15,135

16,862

10,345

20,086

21,969

Investment management fees

14,822

13,520

537

13,362

16,309

28,342

31,482

Net warehouse interest income (expense)

(1,584

)

(1,116

)

(2,077

)

(2,031

)

(1,526

)

(2,700

)

(1,525

)

Placement fees and other interest income

41,040

39,402

45,210

43,000

35,386

80,442

66,310

Other revenues

26,032

22,751

34,965

26,826

28,014

48,783

56,175

Total revenues

270,676

228,059

274,336

268,743

272,615

498,735

511,361

Expenses

Personnel

133,067

111,463

125,865

136,507

133,305

244,530

251,918

Amortization and depreciation

56,043

55,891

56,015

57,479

56,292

111,934

113,258

Provision (benefit) for credit losses

2,936

524

636

421

(734

)

3,460

(11,509

)

Interest expense on corporate debt

17,874

17,659

18,598

17,594

17,010

35,533

32,284

Goodwill impairment

—

48,000

14,000

—

Fair value adjustments to contingent consideration liabilities

—

(48,500

)

(14,000

)

—

Other operating expenses

32,559

28,843

34,355

28,529

30,730

61,402

54,793

Total expenses

242,479

214,380

234,969

240,530

236,603

456,859

440,744

Income from operations

28,197

13,679

39,367

28,213

36,012

41,876

70,617

Income tax expense

7,902

2,864

10,331

7,069

10,491

10,766

17,626

Net income before noncontrolling interests

20,295

10,815

29,036

21,144

25,521

31,110

52,991

Less: net income (loss) from noncontrolling interests

(2,368

)

(1,051

)

(2,563

)

(314

)

(2,114

)

(3,419

)

(1,309

)

Walker & Dunlop net income

22,663

11,866

31,599

21,458

27,635

34,529

54,300

Net change in unrealized gains (losses) on pledged available-for-sale securities, net of taxes

907

(13

)

1,385

(399

)

156

894

103

Walker & Dunlop comprehensive income

23,570

11,853

32,984

21,059

27,791

35,423

54,403

Effective Tax Rate

Basic earnings per share

0.67

0.35

0.94

0.64

0.82

1.02

1.62

Diluted earnings per share

0.67

0.35

0.93

0.64

0.82

1.02

1.61

Cash dividends paid per common share

0.65

0.63

1.30

1.26

Basic weighted-average shares outstanding

33,121

32,978

32,825

32,737

32,695

33,050

32,612

Diluted weighted-average shares outstanding

33,154

33,048

32,941

32,895

32,851

33,101

32,834

SUPPLEMENTAL OPERATING DATA

Unaudited

Quarterly Trends

Six months ended

June 30,

(in thousands, except per share data and unless otherwise noted)

Q2 2024

Q1 2024

Q4 2023

Q3 2023

Q2 2023

2024

2023

Transaction Volume:

Components of Debt Financing Volume

Fannie Mae

1,510,804

903,368

1,692,405

1,739,332

2,230,952

2,414,172

3,589,660

Freddie Mac

1,153,190

974,926

1,308,263

1,072,048

1,212,887

2,128,116

2,188,624

Ginnie Mae - HUD

185,898

14,140

316,960

86,557

147,773

200,038

275,372

Brokered (1)

3,852,851

3,319,074

2,885,454

3,149,457

3,316,223

7,171,925

5,679,977

Principal Lending and Investing (2)

214,975

15,800

218,750

—

230,775

—

Total Debt Financing Volume

6,917,718

5,227,308

6,421,832

6,047,394

6,907,835

12,145,026

11,733,633

Property Sales Volume

1,530,783

1,167,151

2,877,399

2,508,073

1,504,383

2,697,934

3,399,065

Total Transaction Volume

8,448,501

6,394,459

9,299,231

8,555,467

8,412,218

14,842,960

15,132,698

Key Performance Metrics:

Operating margin

Return on equity

Walker & Dunlop net income

22,663

11,866

31,599

21,458

27,635

34,529

54,300

Adjusted EBITDA (3)

80,931

74,136

87,582

74,065

70,501

155,067

138,476

Diluted EPS

0.67

0.35

0.93

0.64

0.82

1.02

1.61

Adjusted core EPS (4)

1.23

1.19

1.42

1.11

0.98

2.39

2.14

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

Personnel expenses

Other operating expenses

Key Revenue Metrics (as a percentage of debt financing volume):

Origination fee rate (5)

0.95

0.84

1.05

0.93

0.90

0.95

MSR rate (6)

0.50

0.40

0.56

0.58

0.61

0.46

0.61

Agency MSR rate (7)

1.17

1.10

1.04

1.22

1.17

1.14

1.19

Other Data:

Market capitalization at period end

3,311,629

3,406,853

3,719,589

2,433,494

2,586,519

Closing share price at period end

98.20

101.06

111.01

74.24

79.09

Average headcount

1,321

1,323

1,341

1,344

1,385

Components of Servicing Portfolio (end of period):

Fannie Mae

64,954,426

64,349,886

63,699,106

62,850,853

61,356,554

Freddie Mac

39,938,411

39,665,386

39,330,545

38,656,136

38,287,200

Ginnie Mae - HUD

10,619,764

10,595,841

10,460,884

10,320,520

10,246,632

Brokered (8)

17,239,417

17,312,513

16,940,850

17,091,925

16,684,115

Principal Lending and Investing (9)

25,893

40,139

40,000

71,680

Total Servicing Portfolio

132,777,911

131,963,765

130,471,524

128,959,434

126,646,181

Assets under management (10)

17,566,666

17,465,398

17,321,452

17,334,877

16,903,055

Total Managed Portfolio

150,344,577

149,429,163

147,792,976

146,294,311

143,549,236

Key Servicing Portfolio Metrics (end of period):

Custodial escrow deposit balance (in billions)

2.7

2.3

2.7

2.8

Weighted-average servicing fee rate (basis points)

24.1

24.0

24.1

24.2

24.3

Weighted-average remaining servicing portfolio term (years)

7.9

8.0

8.2

8.4

8.6

_________________

(1)

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

(2)

Includes debt financing volumes from our interim lending platform, our interim lending joint venture, and WDIP separate accounts.

(3)

This is a non-GAAP financial measure. For more information on adjusted EBITDA, refer to the section above titled “Non-GAAP Financial Measures.”

(4)

This is a non-GAAP financial measure. For more information on adjusted core EPS, refer to the section above titled “Non-GAAP Financial Measures.”

(5)

Origination fees 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 debt financing volume. Excludes the income and debt financing volume from Principal Lending and Investing.

(7)

MSR income as a percentage of Agency debt financing volume.

(8)

Brokered loans serviced primarily for life insurance companies.

(9)

Consists of interim loans not managed for our interim loan joint venture.

(10)

Walker & Dunlop Affordable Equity, assets under management, commercial real estate loans and funds managed by WDIP, and interim loans serviced for our interim loan joint venture.

KEY CREDIT METRICS

Unaudited

June 30,

March 31,

December 31,

September 30,

June 30,

(dollars in thousands)

2024

2023

Risk-sharing servicing portfolio:

Fannie Mae Full Risk

55,915,670

55,236,618

54,583,555

53,549,966

52,383,701

Fannie Mae Modified Risk

9,038,756

9,113,268

9,115,551

9,295,368

8,947,292

Freddie Mac Modified Risk

69,510

23,415

23,515

Total risk-sharing servicing portfolio

65,023,936

64,419,396

63,722,521

62,868,749

61,354,508

Non-risk-sharing servicing portfolio:

Fannie Mae No Risk

—

5,519

25,561

Freddie Mac No Risk

39,868,901

39,595,876

39,307,130

38,632,721

38,263,685

GNMA - HUD No Risk

10,619,764

10,595,841

10,460,884

10,320,520

10,246,632

Brokered

17,239,417

17,312,513

16,940,850

17,091,925

16,684,115

Total non-risk-sharing servicing portfolio

67,728,082

67,504,230

66,708,864

66,050,685

65,219,993

Total loans serviced for others

132,752,018

131,923,626

130,431,385

128,919,434

126,574,501

Interim loans (full risk) servicing portfolio

25,893

40,139

40,000

71,680

Total servicing portfolio unpaid principal balance

132,777,911

131,963,765

130,471,524

128,959,434

126,646,181

Interim Loan Joint Venture Managed Loans (1)

570,299

711,541

710,041

736,320

895,491

At-risk servicing portfolio (2)

60,122,274

59,498,851

58,801,055

57,857,659

56,430,098

Maximum exposure to at-risk portfolio (3)

12,222,290

12,088,698

11,949,041

11,750,068

11,346,580

Defaulted loans(4)

48,560

63,264

27,214

—

36,983

Defaulted loans as a percentage of the at-risk portfolio

0.08

0.11

0.05

0.00

0.07

Allowance for risk-sharing as a percentage of the at-risk portfolio

0.05

0.06

Allowance for risk-sharing as a percentage of maximum exposure

0.25

0.26

0.29

______________________

(1)

This balance consists entirely of interim loan joint venture managed loans. We indirectly share in a portion of the risk of loss associated with interim loan joint venture managed loans through our 15% equity ownership in the joint venture. We had no exposure to risk of loss for the loans serviced directly for our interim loan joint venture partner. The balance of this line is included as a component of assets under management in the Supplemental Operating Data table.

(2)

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.

(3)

(4)

Defaulted loans represent loans in our Fannie Mae at-risk portfolio that are probable of foreclosure or that have foreclosed and for which we have recorded a collateral-based reserve (i.e. loans where we have assessed a probable loss). Other loans that are delinquent but not foreclosed or that are not probable of foreclosure are not included here. Additionally, loans that have foreclosed or are probable of foreclosure but are not expected to result in a loss to us are not included here

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

Unaudited

Quarterly Trends

Six months ended

June 30,

(in thousands)

Q2 2024

Q1 2024

Q4 2023

Q3 2023

Q2 2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income

22,663

11,866

31,599

21,458

27,635

34,529

54,300

Income tax expense

7,902

2,864

10,331

7,069

10,491

10,766

17,626

Interest expense on corporate debt

17,874

17,659

18,598

17,594

17,010

35,533

32,284

Amortization and depreciation

56,043

55,891

56,015

57,479

56,292

111,934

113,258

Provision (benefit) for credit losses

2,936

524

636

421

(734

)

3,460

(11,509

)

Net write-offs (1)

—

(2,008

)

(6,033

)

—

(6,033

)

Stock-based compensation expense

6,862

6,230

5,374

7,427

7,898

13,092

15,041

MSR income

(33,349

)

(20,898

)

(34,471

)

(35,375

)

(42,058

)

(54,247

)

(72,071

)

Write-off of unamortized premium from corporate debt repayment

—

(4,420

)

Goodwill impairment, net of contingent consideration liability fair value adjustments

—

(500

)

—

Adjusted EBITDA

80,931

74,136

87,582

74,065

70,501

155,067

138,476

______________________

(1)

The net write-off in Q2 2023 was related to the write off of the collateral-based reserves related to a loan held for investment.

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT

Unaudited

Capital Markets

Three months ended June 30,

Six months ended June 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

11,039

16,107

4,339

16,611

Income tax expense (benefit)

3,359

5,572

1,615

6,076

Interest expense on corporate debt

5,299

4,727

10,150

8,996

Amortization and depreciation

1,138

1,089

2,275

Stock-based compensation expense

3,982

4,229

8,039

9,092

MSR income

(33,349

)

(42,058

)

(54,247

)

(72,071

)

Adjusted EBITDA

(8,532

)

(10,334

)

(27,829

)

(29,021

)

Servicing & Asset Management

Three months ended June 30,

Six months ended June 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

40,432

35,732

83,715

86,816

Income tax expense (benefit)

16,521

14,787

27,674

27,891

Interest expense on corporate debt

10,946

10,707

22,137

20,289

Amortization and depreciation

53,173

53,550

106,244

107,560

Provision (benefit) for credit losses

2,936

(734

)

3,460

(11,509

)

Net write-offs(1)

—

(6,033

)

—

(6,033

)

Stock-based compensation expense

494

450

929

840

Write-off of unamortized premium from corporate debt repayment

—

(4,420

)

Adjusted EBITDA

124,502

108,459

244,159

221,434

Corporate

Three months ended June 30,

Six months ended June 30,

(in thousands)

2024

2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

Walker & Dunlop Net Income (Loss)

(28,808

)

(24,204

)

(53,525

)

(49,127

)

Income tax expense (benefit)

(11,978

)

(9,868

)

(18,523

)

(16,341

)

Interest expense on corporate debt

1,629

1,576

3,246

2,999

Amortization and depreciation

1,732

1,653

3,415

3,423

Stock-based compensation expense

2,386

3,219

4,124

5,109

Adjusted EBITDA

(35,039

)

(27,624

)

(61,263

)

(53,937

)

____________________

(1)

The net write-off in Q2 2023 was related to the write off of the collateral-based reserves related to a loan held for investment.

ADJUSTED CORE EPS RECONCILIATION

Unaudited

Quarterly Trends

Six months ended

June 30,

(in thousands)

Q2 2024

Q1 2024

Q4 2023

Q3 2023

Q2 2023

2024

2023

Reconciliation of Walker & Dunlop Net Income to Adjusted Core Net Income

Walker & Dunlop Net Income

22,663

11,866

31,599

21,458

27,635

34,529

54,300

Provision (benefit) for credit losses

2,936

524

636

421

(734

)

3,460

(11,509

)

Net write-offs(1)

—

(2,008

)

(6,033

)

—

(6,033

)

Amortization and depreciation

56,043

55,891

56,015

57,479

56,292

111,934

113,258

MSR income

(33,349

)

(20,898

)

(34,471

)

(35,375

)

(42,058

)

(54,247

)

(72,071

)

Goodwill impairment

—

48,000

14,000

—

Contingent consideration accretion and fair value adjustments

822

512

(47,637

)

(13,426

)

176

1,334

353

Income tax expense adjustment(2)

(7,413

)

(7,543

)

(5,916

)

(5,285

)

(2,227

)

(16,063

)

(5,990

)

Adjusted Core Net Income

41,702

40,352

48,226

37,264

33,051

80,947

72,308

Reconciliation of Diluted EPS to Adjusted core EPS

Walker & Dunlop Net Income

22,663

11,866

31,599

21,458

27,635

34,529

54,300

Diluted weighted-average shares outstanding

33,154

33,048

32,941

32,895

32,851

33,101

32,834

Diluted EPS

0.67

0.35

0.93

0.64

0.82

1.02

1.61

Adjusted Core Net Income

41,702

40,352

48,226

37,264

33,051

80,947

72,308

Diluted weighted-average shares outstanding

33,154

33,048

32,941

32,895

32,851

33,101

32,834

Adjusted Core EPS

1.23

1.19

1.42

1.11

0.98

2.39

2.14

____________________

(1)

The net write-off in Q2 2023 was related to the write off of the collateral-based reserves related to a loan held for investment.

(2)

Income tax impact of the above adjustments to adjusted core net income. Uses quarterly or annual effective tax rate as disclosed in the Condensed Consolidated Statements of Income and Comprehensive Income in this “press release.”

Category: Earnings

View source version on businesswire.com: https://www.businesswire.com/news/home/20240808652219/en/

Headquarters: 7272 Wisconsin Avenue, Suite 1300 Bethesda, Maryland 20814 Phone 301.215.5500 info@walkeranddunlop.com

Investors: Kelsey Duffey Senior Vice President, Investor Relations Phone 301.202.3207 investorrelations@walkeranddunlop.com

Media: Carol McNerney Chief Marketing Officer Phone 301.215.5515 info@walkeranddunlop.com

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