0001497770
false
0001497770
2024-05-02
2024-05-02
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 2, 2024
Walker & Dunlop, Inc.
(Exact name of registrant as specified in its charter)
Maryland 001-35000 80-0629925
(State or other Jurisdiction of Incorporation) (Commission File Number) (IRS Employer Identification No.)
7272 Wisconsin Avenue 20814
,
Suite 1300
Bethesda
,
MD
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:
(
301
)
215-5500
Not applicable
(Former name or former address if changed since last report.)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.01 Par Value Per Share WD New York Stock Exchange
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as
defined in Rule 405 of the Securities Act of 1933 ((s)230.405 of this chapter)
or Rule 12b-2 of the Securities Exchange Act of 1934 ((s)240.12b-2 of this
chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has
elected not to use the extended transition period for complying with any new
or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act.
1
Item 2.02. Results of Operations and Financial Condition.
On May 2, 2024 Walker & Dunlop, Inc. (the "Company") issued a press release
reporting its financial results for the quarter and year-to-date period ended
March 31, 2024. A copy of this press release is furnished herewith as Exhibit
99.1 and is hereby incorporated by reference into this Item 2.02.
The information contained in this current report on Form 8-K, including
Exhibit 99.1, shall not be deemed "filed" with the Securities and Exchange
Commission nor incorporated by reference in any registration statement filed
by the Company under the Securities Act of 1933, as amended.
Item
9.01. Financial Statements and Exhibits.
(d) Exhibits.
The exhibit contained in this current report on Form 8-K shall not be deemed
"filed" with the Securities and Exchange Commission nor incorporated by
reference in any registration statement filed by the Company under the
Securities Act of 1933, as amended.
Exhibit Description
Number
99.1 Press Release dated May 2, 2024
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Walker & Dunlop, Inc.
(Registrant)
Date: May 2, 2024 By: /s/ Gregory A. Florkowski
Gregory A. Florkowski
Executive Vice President and Chief Financial Officer
3
71,680
187,505
Total Servicing Portfolio
$
131,963,765
$
130,471,524
$
128,959,434
$
126,646,181
$
124,575,919
Assets under management
(10)
17,465,398
17,321,452
17,334,877
16,903,055
16,654,566
Total Managed Portfolio
$
149,429,163
$
147,792,976
$
146,294,311
$
143,549,236
$
141,230,485
Key Servicing Portfolio Metrics (end of period):
Custodial escrow deposit balance (in billions)
$
2.3
$
2.7
$
2.8
$
2.8
$
2.2
Weighted-average servicing fee rate (basis points)
24.0
24.1
24.2
24.3
24.3
Weighted-average remaining servicing portfolio term (years)
8.0
8.2
8.4
8.6
8.7
-------------------------------------------------------------------------------
(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.
14
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First quarter 2024 Earnings Release
KEY CREDIT METRICS
Unaudited
March 31, December 31, September June 30, March 31,
30,
(dollars in 2024 2023 2023 2023 2023
thousands)
Risk-sharing
servicing portfolio:
Fannie Mae $ 55,236,618 $ 54,583,555 $ 53,549,966 $ 52,383,701 $ 50,713,349
Full Risk
Fannie Mae 9,113,268 9,115,551 9,295,368 8,947,292 9,170,127
Modified Risk
Freddie Mac 69,510 23,415 23,415 23,515 23,515
Modified Risk
Total risk-sharing $ 64,419,396 $ 63,722,521 $ 62,868,749 $ 61,354,508 $ 59,906,991
servicing portfolio
Non-risk-sharing
servicing portfolio:
Fannie Mae $ - $ - $ 5,519 $ 25,561 $ 6,968
No Risk
Freddie Mac 39,595,876 39,307,130 38,632,721 38,263,685 38,161,283
No Risk
GNMA - HUD 10,595,841 10,460,884 10,320,520 10,246,632 10,027,781
No Risk
Brokered 17,312,513 16,940,850 17,091,925 16,684,115 16,285,391
Total non-risk-sharing $ 67,504,230 $ 66,708,864 $ 66,050,685 $ 65,219,993 $ 64,481,423
servicing portfolio
Total loans $ 131,923,626 $ 130,431,385 $ 128,919,434 $ 126,574,501 $ 124,388,414
serviced for others
Interim loans (full risk) 40,139 40,139 40,000 71,680 187,505
servicing portfolio
Total servicing portfolio $ 131,963,765 $ 130,471,524 $ 128,959,434 $ 126,646,181 $ 124,575,919
unpaid principal balance
Interim Loan Joint $ 711,541 $ 710,041 $ 736,320 $ 895,491 $ 894,829
Venture Managed Loans
(1)
At-risk servicing $ 59,498,851 $ 58,801,055 $ 57,857,659 $ 56,430,098 $ 54,898,461
portfolio
(2)
Maximum exposure to 12,088,698 11,949,041 11,750,068 11,346,580 11,132,473
at-risk portfolio
(3)
Defaulted 63,264 27,214 - 36,983 36,983
loans
(4)
Defaulted loans as a percentage 0.11 % 0.05 % 0.00 % 0.07 % 0.07 %
of the at-risk portfolio
Allowance for risk-sharing as a 0.05 0.05 0.05 0.06 0.06
percentage of the at-risk portfolio
Allowance for risk-sharing as a 0.25 0.26 0.26 0.29 0.30
percentage of maximum exposure
-------------------------------------------------------------------------------
(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. 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.
(3) 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.
(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 have defaulted 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.
15
-------------------------------------------------------------------------------
First quarter 2024 Earnings Release
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
Unaudited
Quarterly Trends
(in Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
thousands)
Reconciliation of Walker & Dunlop
Net Income to Adjusted EBITDA
Walker & Dunlop $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Net Income
Income tax 2,864 10,331 7,069 10,491 7,135
expense
Interest expense 17,659 18,598 17,594 17,010 15,274
on corporate debt
Amortization and 55,891 56,015 57,479 56,292 56,966
depreciation
Provision (benefit) 524 636 421 (734) (10,775)
for credit losses
Net - - (2,008) (6,033) -
write-offs
(1)
Stock-based 6,230 5,374 7,427 7,898 7,143
compensation expense
MSR (20,898) (34,471) (35,375) (42,058) (30,013)
income
Write-off of unamortized premium - - - - (4,420)
from corporate debt repayment
Goodwill impairment, net of contingent - (500) - - -
consideration liability fair value adjustments
Adjusted $ 74,136 $ 87,582 $ 74,065 $ 70,501 $ 67,975
EBITDA
-------------------------------------------------------------------------------
(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.
16
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First quarter 2024 Earnings Release
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT
Unaudited
Capital Markets
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ (6,700) $ 504
Income tax expense (benefit) (1,744) 504
Interest expense on corporate debt 4,851 4,269
Amortization and depreciation 1,137 1,186
Stock-based compensation expense 4,057 4,863
MSR income (20,898) (30,013)
Adjusted EBITDA $ (19,297) $ (18,687)
Servicing & Asset Management
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ 43,283 $ 51,084
Income tax expense (benefit) 11,153 13,104
Interest expense on corporate debt 11,191 9,582
Amortization and depreciation 53,071 54,010
Provision (benefit) for credit losses 524 (10,775)
Net write-offs - -
Stock-based compensation expense 436 390
Write-off of unamortized premium from corporate debt repayment - (4,420)
Adjusted EBITDA $ 119,658 $ 112,975
Corporate
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ (24,717) $ (24,923)
Income tax expense (benefit) (6,545) (6,473)
Interest expense on corporate debt 1,617 1,423
Amortization and depreciation 1,683 1,770
Stock-based compensation expense 1,737 1,890
Adjusted EBITDA $ (26,225) $ (26,313)
17
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First quarter 2024 Earnings Release
ADJUSTED CORE EPS RECONCILIATION
Unaudited
Quarterly Trends
(in thousands) Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted Core Net Income
Walker & Dunlop Net Income $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Provision (benefit) for credit losses 524 636 421 (734) (10,775)
Net write-offs - - (2,008) (6,033) -
(1)
Amortization and depreciation 55,891 56,015 57,479 56,292 56,966
MSR income (20,898) (34,471) (35,375) (42,058) (30,013)
Goodwill impairment - 48,000 14,000 - -
Contingent consideration accretion and fair value adjustments 512 (47,637) (13,426) 176 177
Income tax expense adjustment (7,543) (5,916) (5,285) (2,227) (3,372)
(2)
Adjusted Core Net Income $ 40,352 $ 48,226 $ 37,264 $ 33,051 $ 39,648
Reconciliation of Diluted EPS to Adjusted core EPS
Walker & Dunlop Net Income $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Diluted weighted-average shares outstanding 33,048 32,941 32,895 32,851 32,816
Diluted EPS $ 0.35 $ 0.93 $ 0.64 $ 0.82 $ 0.79
Adjusted Core Net Income $ 40,352 $ 48,226 $ 37,264 $ 33,051 $ 39,648
Diluted weighted-average shares outstanding 33,048 32,941 32,895 32,851 32,816
Adjusted Core EPS $ 1.19 $ 1.42 $ 1.11 $ 0.98 $ 1.17
-------------------------------------------------------------------------------
(1)
The net write-off in Q2 2023 was related to the write off of the collateral-base
d 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."
18
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Other interest income
$
3,799
$
2,100
$
1,699
81
%
Other revenues
1,128
(554)
1,682
(304)
Total revenues
$
4,927
$
1,546
$
3,381
219
%
Personnel
$
14,221
$
12,810
$
1,411
11
%
Amortization and depreciation
1,683
1,770
(87)
(5)
Interest expense on corporate debt
1,617
1,423
194
14
Other operating expenses
18,668
16,939
1,729
10
Total expenses
$
36,189
$
32,942
$
3,247
10
%
Income (loss) from operations
$
(31,262)
$
(31,396)
$
134
(0)
%
Income tax expense (benefit)
(6,545)
(6,473)
(72)
1
Walker & Dunlop net income (loss)
$
(24,717)
$
(24,923)
$
206
(1)
%
Key performance metric:
Adjusted EBITDA
$
(26,225)
$
(26,313)
$
88
(0)
%
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 total revenues
was primarily driven by the increase in interest income earned on our corporate cash balances due to a higher
short-term interest rate environment, combined with an increase in income from equity-method investments.
The increase in personnel expense was primarily related to an
increase in subjective bonus accrual, partially offset by a decrease
in salaries and benefits, driven by lower headcount as a result of
our workforce reduction undertaken in the second quarter of 2023.
The increase in other operating expenses was primarily the result of increased office and
software expenses in the first quarter of 2024, partially offset by decreased professional fees.
8
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First quarter 2024 Earnings Release
CAPITAL SOURCES AND USES
On May 1, 2024, the Company's Board of Directors declared a dividend of $0.65
per share for the second quarter of 2024. The dividend will be paid on May 31,
2024 to all holders of record of the Company's restricted and unrestricted
common stock as of May 16, 2024.
In January 2023, the Company entered into a lender joinder agreement and
amendment to our existing credit agreement that provided for an incremental
term loan with a principal amount of $200 million. The incremental term loan
bears interest at a rate equal to adjusted Term SOFR plus 3.00% per annum and
matures in December 2028. Proceeds from the debt were used to repay $116
million of debt assumed in an acquisition and to strengthen the balance sheet
for general corporate purposes.
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").
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.
-------------------------------------------------------------------------------
(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."
(3) Brokered transactions for life insurance companies, commercial banks, and other capital sources.
(4) Includes debt financing volumes from our interim loan program, our interim loan joint
venture, and Walker & Dunlop Investment Partners, Inc. ("WDIP") separate accounts.
(5) 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.
(6) 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.
(7) 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 have defaulted 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.
(8) Origination fees as a percentage of debt financing volume. Excludes the
income and debt financing volume from Principal Lending and Investing.
(9) MSR income as a percentage of debt financing volume. Excludes the
income and debt financing volume from Principal Lending and Investing.
(10) MSR income as a percentage of Agency debt financing volume.
9
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First quarter 2024 Earnings Release
CONFERENCE CALL INFORMATION
The Company will host a conference call to discuss its quarterly results on
Thursday, May 2, 2024 at 8:30 a.m. Eastern time
. Listeners can access the call 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
.
Phone:
(888) 256-1007
from within the United States; (773) 305-6853 from outside the United States
Confirmation Code:
4299257
Webcast Link:
https://event.webcasts.com/starthere.jsp?ei=1653643&tp_key=e4cfac9b39
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 incentive
compensation charges,
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."
10
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First quarter 2024 Earnings Release
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
.
CONTACT US
Headquarters Investors Media
: : :
7272 Wisconsin Avenue, Suite 1300 Kelsey Duffey Carol McNerney
Bethesda, Maryland 20814 Senior Vice President, Investor Relations Chief Marketing Officer
Phone Phone Phone
301.215.5500 301.202.3207 301.215.5515
info@walkeranddunlop.com investorrelations@walkeranddunlop.com info@walkeranddunlop.com
11
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First quarter 2024 Earnings Release
Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
March 31, December 31, September 30, June 30, March 31,
2024 2023 2023 2023 2023
(in thousands)
Assets
Cash and cash equivalents $ 216,532 $ 328,698 $ 236,321 $ 228,091 $ 188,389
Restricted cash 21,071 21,422 17,768 21,769 20,504
Pledged securities, at fair value 190,679 184,081 177,509 170,666 165,081
Loans held for sale, at fair value 497,933 594,998 758,926 1,303,686 934,991
Mortgage servicing rights 881,834 907,415 921,746 932,131 946,406
Goodwill 901,710 901,710 949,710 963,710 959,712
Other intangible assets 178,221 181,975 185,927 189,919 194,208
Receivables, net 250,406 233,563 265,234 242,397 224,776
Committed investments in tax credit equity 122,332 154,028 212,296 165,136 207,750
Other assets, net 565,194 544,457 552,414 589,919 651,235
Total assets $ 3,825,912 $ 4,052,347 $ 4,277,851 $ 4,807,424 $ 4,493,052
Liabilities
Warehouse notes payable $ 521,977 $ 596,178 $ 790,742 $ 1,342,187 $ 1,031,277
Notes payable 772,037 773,358 774,677 775,995 777,311
Allowance for risk-sharing obligations 30,124 31,601 30,957 32,410 33,087
Commitments to fund investments in tax credit equity 114,206 140,259 196,250 156,617 196,522
Other liabilities 651,660 764,822 754,234 775,718 739,759
Total liabilities $ 2,090,004 $ 2,306,218 $ 2,546,860 $ 3,082,927 $ 2,777,956
Stockholders' Equity
Common stock $ 331 $ 329 $ 328 $ 327 $ 327
Additional paid-in capital 427,184 425,488 420,062 412,182 405,303
Accumulated other comprehensive income (loss) (492) (479) (1,864) (1,465) (1,621)
Retained earnings 1,288,313 1,298,412 1,287,653 1,287,334 1,281,119
Total stockholders' equity $ 1,715,336 $ 1,723,750 $ 1,706,179 $ 1,698,378 $ 1,685,128
Noncontrolling interests 20,572 22,379 24,812 26,119 29,968
Total equity $ 1,735,908 $ 1,746,129 $ 1,730,991 $ 1,724,497 $ 1,715,096
Commitments and contingencies - - - - -
Total liabilities and stockholders' equity $ 3,825,912 $ 4,052,347 $ 4,277,851 $ 4,807,424 $ 4,493,052
12
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First quarter 2024 Earnings Release
Walker & Dunlop, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
Unaudited
Quarterly Trends
(in thousands, except Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
per share amounts)
Revenues
Origination $ 43,740 $ 66,208 $ 56,149 $ 64,968 $ 47,084
fees
MSR 20,898 34,471 35,375 42,058 30,013
income
Servicing 80,043 79,887 79,200 77,061 75,766
fees
Property sales 8,821 15,135 16,862 10,345 11,624
broker fees
Investment 13,520 537 13,362 16,309 15,173
management fees
Net warehouse interest (1,116) (2,077) (2,031) (1,526) 1
income (expense)
Placement fees and 39,402 45,210 43,000 35,386 30,924
other interest income
Other 22,751 34,965 26,826 28,014 28,161
revenues
Total $ 228,059 $ 274,336 $ 268,743 $ 272,615 $ 238,746
revenues
Expenses
Personnel $ 111,463 $ 125,865 $ 136,507 $ 133,305 $ 118,613
Amortization and 55,891 56,015 57,479 56,292 56,966
depreciation
Provision (benefit) 524 636 421 (734) (10,775)
for credit losses
Interest expense 17,659 18,598 17,594 17,010 15,274
on corporate debt
Goodwill - 48,000 14,000 - -
impairment
Fair value adjustments to contingent - (48,500) (14,000) - -
consideration liabilities
Other operating 28,843 34,355 28,529 30,730 24,063
expenses
Total $ 214,380 $ 234,969 $ 240,530 $ 236,603 $ 204,141
expenses
Income from $ 13,679 $ 39,367 $ 28,213 $ 36,012 $ 34,605
operations
Income tax 2,864 10,331 7,069 10,491 7,135
expense
Net income before $ 10,815 $ 29,036 $ 21,144 $ 25,521 $ 27,470
noncontrolling interests
Less: net income (loss) from (1,051) (2,563) (314) (2,114) 805
noncontrolling interests
Walker & Dunlop $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
net income
Net change in unrealized gains (losses) on pledged (13) 1,385 (399) 156 (53)
available-for-sale securities, net of taxes
Walker & Dunlop $ 11,853 $ 32,984 $ 21,059 $ 27,791 $ 26,612
comprehensive income
Effective 21% 26% 25% 29% 21%
Tax Rate
Basic earnings $ 0.35 $ 0.94 $ 0.64 $ 0.82 $ 0.80
per share
Diluted earnings 0.35 0.93 0.64 0.82 0.79
per share
Cash dividends paid 0.65 0.63 0.63 0.63 0.63
per common share
Basic weighted-average 32,978 32,825 32,737 32,695 32,529
shares outstanding
Diluted weighted-average 33,048 32,941 32,895 32,851 32,816
shares outstanding
13
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First quarter 2024 Earnings Release
SUPPLEMENTAL OPERATING DATA
Unaudited
Quarterly Trends
(in thousands, except per share Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
data and unless otherwise noted)
Transaction
Volume:
Components of Debt
Financing Volume
Fannie $ 903,368 $ 1,692,405 $ 1,739,332 $ 2,230,952 $ 1,358,708
Mae
Freddie 974,926 1,308,263 1,072,048 1,212,887 975,737
Mac
Ginnie Mae 14,140 316,960 86,557 147,773 127,599
- HUD
Brokered 3,319,074 2,885,454 3,149,457 3,316,223 2,363,754
(1)
Principal Lending 15,800 218,750 - - -
and Investing
(2)
Total Debt $ 5,227,308 $ 6,421,832 $ 6,047,394 $ 6,907,835 $ 4,825,798
Financing Volume
Property 1,167,151 2,877,399 2,508,073 1,504,383 1,894,682
Sales Volume
Total Transaction $ 6,394,459 $ 9,299,231 $ 8,555,467 $ 8,412,218 $ 6,720,480
Volume
Key Performance
Metrics:
Operating 6 % 14 % 10 % 13 % 14 %
margin
Return on 3 7 5 7 6
equity
Walker & Dunlop $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
net income
Adjusted 74,136 87,582 74,065 70,501 67,975
EBITDA
(3)
Diluted 0.35 0.93 0.64 0.82 0.79
EPS
Adjusted 1.19 1.42 1.11 0.98 1.17
core EPS
(4)
Key Expense Metrics (as a
percentage of total revenues):
Personnel 49 % 46 % 51 % 49 % 50 %
expenses
Other operating 13 13 11 11 10
expenses
Key Revenue Metrics (as a percentage
of debt financing volume):
Origination 0.84 % 1.05 % 0.93 % 0.93 % 0.97 %
fee rate
(5)
MSR rate 0.40 0.56 0.58 0.61 0.62
(6)
Agency 1.10 1.04 1.22 1.17 1.22
MSR rate
(7)
Other
Data:
Market capitalization $ 3,406,853 $ 3,719,589 $ 2,433,494 $ 2,586,519 $ 2,489,200
at period end
Closing share price $ 101.06 $ 111.01 $ 74.24 $ 79.09 $ 76.17
at period end
Average 1,323 1,341 1,344 1,385 1,440
headcount
Components of Servicing
Portfolio (end of period):
Fannie $ 64,349,886 $ 63,699,106 $ 62,850,853 $ 61,356,554 $ 59,890,444
Mae
Freddie 39,665,386 39,330,545 38,656,136 38,287,200 38,184,798
Mac
Ginnie Mae 10,595,841 10,460,884 10,320,520 10,246,632 10,027,781
- HUD
Brokered 17,312,513 16,940,850 17,091,925 16,684,115 16,285,391
(8)
Principal Lending 40,139 40,139 40,000 71,680 187,505
and Investing
(9)
Total Servicing $ 131,963,765 $ 130,471,524 $ 128,959,434 $ 126,646,181 $ 124,575,919
Portfolio
Assets under 17,465,398 17,321,452 17,334,877 16,903,055 16,654,566
management
(10)
Total Managed $ 149,429,163 $ 147,792,976 $ 146,294,311 $ 143,549,236 $ 141,230,485
Portfolio
Key Servicing Portfolio
Metrics (end of period):
Custodial escrow deposit $ 2.3 $ 2.7 $ 2.8 $ 2.8 $ 2.2
balance (in billions)
Weighted-average servicing 24.0 24.1 24.2 24.3 24.3
fee rate (basis points)
Weighted-average remaining 8.0 8.2 8.4 8.6 8.7
servicing portfolio term (years)
-------------------------------------------------------------------------------
(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.
14
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First quarter 2024 Earnings Release
KEY CREDIT METRICS
Unaudited
March 31, December 31, September June 30, March 31,
30,
(dollars in 2024 2023 2023 2023 2023
thousands)
Risk-sharing
servicing portfolio:
Fannie Mae $ 55,236,618 $ 54,583,555 $ 53,549,966 $ 52,383,701 $ 50,713,349
Full Risk
Fannie Mae 9,113,268 9,115,551 9,295,368 8,947,292 9,170,127
Modified Risk
Freddie Mac 69,510 23,415 23,415 23,515 23,515
Modified Risk
Total risk-sharing $ 64,419,396 $ 63,722,521 $ 62,868,749 $ 61,354,508 $ 59,906,991
servicing portfolio
Non-risk-sharing
servicing portfolio:
Fannie Mae $ - $ - $ 5,519 $ 25,561 $ 6,968
No Risk
Freddie Mac 39,595,876 39,307,130 38,632,721 38,263,685 38,161,283
No Risk
GNMA - HUD 10,595,841 10,460,884 10,320,520 10,246,632 10,027,781
No Risk
Brokered 17,312,513 16,940,850 17,091,925 16,684,115 16,285,391
Total non-risk-sharing $ 67,504,230 $ 66,708,864 $ 66,050,685 $ 65,219,993 $ 64,481,423
servicing portfolio
Total loans $ 131,923,626 $ 130,431,385 $ 128,919,434 $ 126,574,501 $ 124,388,414
serviced for others
Interim loans (full risk) 40,139 40,139 40,000 71,680 187,505
servicing portfolio
Total servicing portfolio $ 131,963,765 $ 130,471,524 $ 128,959,434 $ 126,646,181 $ 124,575,919
unpaid principal balance
Interim Loan Joint $ 711,541 $ 710,041 $ 736,320 $ 895,491 $ 894,829
Venture Managed Loans
(1)
At-risk servicing $ 59,498,851 $ 58,801,055 $ 57,857,659 $ 56,430,098 $ 54,898,461
portfolio
(2)
Maximum exposure to 12,088,698 11,949,041 11,750,068 11,346,580 11,132,473
at-risk portfolio
(3)
Defaulted 63,264 27,214 - 36,983 36,983
loans
(4)
Defaulted loans as a percentage 0.11 % 0.05 % 0.00 % 0.07 % 0.07 %
of the at-risk portfolio
Allowance for risk-sharing as a 0.05 0.05 0.05 0.06 0.06
percentage of the at-risk portfolio
Allowance for risk-sharing as a 0.25 0.26 0.26 0.29 0.30
percentage of maximum exposure
-------------------------------------------------------------------------------
(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. 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.
(3) 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.
(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 have defaulted 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.
15
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First quarter 2024 Earnings Release
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP
Unaudited
Quarterly Trends
(in Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
thousands)
Reconciliation of Walker & Dunlop
Net Income to Adjusted EBITDA
Walker & Dunlop $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Net Income
Income tax 2,864 10,331 7,069 10,491 7,135
expense
Interest expense 17,659 18,598 17,594 17,010 15,274
on corporate debt
Amortization and 55,891 56,015 57,479 56,292 56,966
depreciation
Provision (benefit) 524 636 421 (734) (10,775)
for credit losses
Net - - (2,008) (6,033) -
write-offs
(1)
Stock-based 6,230 5,374 7,427 7,898 7,143
compensation expense
MSR (20,898) (34,471) (35,375) (42,058) (30,013)
income
Write-off of unamortized premium - - - - (4,420)
from corporate debt repayment
Goodwill impairment, net of contingent - (500) - - -
consideration liability fair value adjustments
Adjusted $ 74,136 $ 87,582 $ 74,065 $ 70,501 $ 67,975
EBITDA
-------------------------------------------------------------------------------
(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.
16
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First quarter 2024 Earnings Release
ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT
Unaudited
Capital Markets
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ (6,700) $ 504
Income tax expense (benefit) (1,744) 504
Interest expense on corporate debt 4,851 4,269
Amortization and depreciation 1,137 1,186
Stock-based compensation expense 4,057 4,863
MSR income (20,898) (30,013)
Adjusted EBITDA $ (19,297) $ (18,687)
Servicing & Asset Management
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ 43,283 $ 51,084
Income tax expense (benefit) 11,153 13,104
Interest expense on corporate debt 11,191 9,582
Amortization and depreciation 53,071 54,010
Provision (benefit) for credit losses 524 (10,775)
Net write-offs - -
Stock-based compensation expense 436 390
Write-off of unamortized premium from corporate debt repayment - (4,420)
Adjusted EBITDA $ 119,658 $ 112,975
Corporate
Three months ended
March 31,
(in thousands) 2024 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA
Walker & Dunlop Net Income (Loss) $ (24,717) $ (24,923)
Income tax expense (benefit) (6,545) (6,473)
Interest expense on corporate debt 1,617 1,423
Amortization and depreciation 1,683 1,770
Stock-based compensation expense 1,737 1,890
Adjusted EBITDA $ (26,225) $ (26,313)
17
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First quarter 2024 Earnings Release
ADJUSTED CORE EPS RECONCILIATION
Unaudited
Quarterly Trends
(in thousands) Q1 2024 Q4 2023 Q3 2023 Q2 2023 Q1 2023
Reconciliation of Walker & Dunlop Net Income to Adjusted Core Net Income
Walker & Dunlop Net Income $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Provision (benefit) for credit losses 524 636 421 (734) (10,775)
Net write-offs - - (2,008) (6,033) -
(1)
Amortization and depreciation 55,891 56,015 57,479 56,292 56,966
MSR income (20,898) (34,471) (35,375) (42,058) (30,013)
Goodwill impairment - 48,000 14,000 - -
Contingent consideration accretion and fair value adjustments 512 (47,637) (13,426) 176 177
Income tax expense adjustment (7,543) (5,916) (5,285) (2,227) (3,372)
(2)
Adjusted Core Net Income $ 40,352 $ 48,226 $ 37,264 $ 33,051 $ 39,648
Reconciliation of Diluted EPS to Adjusted core EPS
Walker & Dunlop Net Income $ 11,866 $ 31,599 $ 21,458 $ 27,635 $ 26,665
Diluted weighted-average shares outstanding 33,048 32,941 32,895 32,851 32,816
Diluted EPS $ 0.35 $ 0.93 $ 0.64 $ 0.82 $ 0.79
Adjusted Core Net Income $ 40,352 $ 48,226 $ 37,264 $ 33,051 $ 39,648
Diluted weighted-average shares outstanding 33,048 32,941 32,895 32,851 32,816
Adjusted Core EPS $ 1.19 $ 1.42 $ 1.11 $ 0.98 $ 1.17
-------------------------------------------------------------------------------
(1)
The net write-off in Q2 2023 was related to the write off of the collateral-base
d 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."
18
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