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

SECOND QUARTER 2022 HIGHLIGHTS

  • Total transaction volume of $22.5 billion, up 67% from Q2’21
  • Total revenues of $340.8 million, up 21% from Q2’21
  • Net income of $54.3 million and diluted earnings per share of $1.61, down 3% and 7%, respectively, from Q2’21
  • Adjusted EBITDA1 of $94.8 million, up 43% from Q2’21
  • Servicing portfolio of $119.0 billion at June 30, 2022 up 6% from June 30, 2021
  • Declared quarterly dividend of $0.60 per share for the third quarter

YEAR-TO-DATE 2022 HIGHLIGHTS

  • Total transaction volume of $35.2 billion, up 56% from 2021
  • Total revenues of $660.3 million, up 31% from 2021
  • Net income of $125.5 million and diluted earnings per share of $3.73, up 10% and 6%, respectively, from 2021
  • Adjusted EBITDA1 of $157.5 million, up 24% from 2021

BETHESDA, Md., Aug. 4, 2022 /PRNewswire/ — Walker & Dunlop, Inc. (NYSE: WD) (the “Company” or “W&D”) reported total revenues of $340.8 million for the second quarter of 2022, an increase of 21% year over year. Second quarter total transaction volume was $22.5 billion, up 67% year over year, reflecting the Company’s expanding brand and ability to meet more of its client’s needs. Net income for the second quarter of 2022 was $54.3 million or $1.61 per diluted share, down 3% and 7%, respectively, from the second quarter of 2021, predominantly due to a decrease in non-cash mortgage servicing rights revenues. Second quarter 2022 adjusted EBITDA1 was $94.8 million, up 43% over the same period in 2021, driven by growth in cash revenues from services businesses. The Company’s Board of Directors declared a dividend of $0.60 per share for the third quarter of 2022. The Company had $151.3 million of cash as of June 30, 2022.

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

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

CONSOLIDATED SECOND QUARTER 2022 OPERATING RESULTS














TRANSACTION VOLUMES

(dollars in thousands)



Q2 2022



Q2 2021


$ Variance


% Variance

Fannie Mae


$

3,918,400


$

1,911,976


$

2,006,424


105

%

Freddie Mac



1,141,034



1,003,319



137,715


14


Ginnie Mae – HUD



201,483



672,574



(471,091)


(70)


Brokered (2)



9,258,490



6,280,578



2,977,912


47


Principal Lending and Investing (3)



131,551



318,237



(186,686)


(59)


Debt financing volume


$

14,650,958


$

10,186,684


$

4,464,274


44

%

Property sales volume



7,892,062



3,341,532



4,550,530


136


Total transaction volume


$

22,543,020


$

13,528,216


$

9,014,804


67

%

Discussion of Results:

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













MANAGED PORTFOLIO

(dollars in thousands, unless otherwise noted)



Q2 2022



Q2 2021


$ Variance


% Variance

Fannie Mae


$

57,122,414


$

51,077,660


$

6,044,754


12

%

Freddie Mac



36,886,666



37,887,969



(1,001,303)


(3)


Ginnie Mae – HUD



9,570,012



9,904,246



(334,234)


(3)


Brokered



15,190,315



13,129,969



2,060,346


16


Principal Lending and Investing



252,100



276,738



(24,638)


(9)


Total Servicing Portfolio


$

119,021,507


$

112,276,582


$

6,744,925


6

%

Assets under management



16,692,556



1,801,577



14,890,979


827


Total Managed Portfolio


$

135,714,063


$

114,078,159


$

21,635,904


19

%

Custodial escrow account balance at period end (in billions)


$

2.3


$

3.0







Weighted-average servicing fee rate (basis points)



24.9



24.5







Weighted-average remaining servicing portfolio term (years)



8.9



9.2







Discussion of Results:

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













KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)



Q2 2022



Q2 2021


$ Variance


% Variance

Walker & Dunlop net income


$

54,286


$

56,058


$

(1,772)


(3)

%

Adjusted EBITDA



94,844



66,514



28,330


43


Diluted EPS


$

1.61


$

1.73


$

(0.12)


(7)

%

Operating margin



22

%


26

%






Return on equity



14



18







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













Personnel expenses



49

%


50

%






Other operating expenses



11



7







Discussion of Results:

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













KEY CREDIT METRICS

(dollars in thousands)



Q2 2022



Q2 2021


$ Variance


% Variance

At-risk servicing portfolio (7)


$

51,905,985


$

46,866,767


$

5,039,218


11

%

Maximum exposure to at-risk portfolio (8)



10,525,093



9,517,609



1,007,484


11


Defaulted loans


$

78,659


$

48,481


$

30,178


62

%

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













Defaulted loans



0.15

%


0.10

%






Allowance for risk-sharing



0.09



0.13







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













Allowance for risk-sharing



0.46

%


0.63

%






Discussion of Results:

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

SECOND QUARTER 2022 – FINANCIAL RESULTS BY SEGMENT














FINANCIAL RESULTS – CAPITAL MARKETS

(dollars in thousands)



Q2 2022



Q2 2021



$ Variance


% Variance


Loan origination and debt brokerage fees, net


$

102,085


$

105,583


$

(3,498)


(3)

%

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



51,949



61,849



(9,900)


(16)


Property sales broker fees



46,386



22,454



23,932


107


Net warehouse interest income, LHFS



3,707



2,884



823


29


Other revenues



3,895



3,135



760


24


Total revenues


$

208,022


$

195,905


$

12,117


6

%

Personnel


$

138,913


$

119,994


$

18,919


16

%

Amortization and depreciation



810



18



792


4,400


Other operating expenses



4,583



3,598



985


27


Total expenses


$

144,306


$

123,610


$

20,696


17

%

Income from operations


$

63,716


$

72,295


$

(8,579)


(12)

%

Income tax expense



16,476



17,739



(1,263)


(7)


Walker & Dunlop net income


$

47,240


$

54,556


$

(7,316)


(13)

%

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

Origination fee margin (4)



0.71

%


1.07

%






MSR margin (5)



0.36



0.63







Agency MSR margin (6)



0.99



1.72







Key performance metrics:













Operating margin



31

%


37

%






Adjusted EBITDA


$

16,880


$

14,215


$

2,665


19

%

Capital Markets – Discussion of Quarterly Results:

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

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













FINANCIAL RESULTS – SERVICING & ASSET MANAGEMENT

(dollars in thousands)



Q2 2022



Q2 2021



$ Variance


% Variance


Loan origination and debt brokerage fees, net


$

520


$

1,889


$

(1,369)


(72)

%

Servicing fees



74,260



69,052



5,208


8


Investment management fees



10,282



3,815



6,467


170


Net warehouse interest income, LHFI



1,561



1,746



(185)


(11)


Escrow earnings and other interest income



6,648



1,768



4,880


276


Other revenues



39,280



6,885



32,395


471


Total revenues


$

132,551


$

85,155


$

47,396


56

%

Personnel


$

21,881


$

9,447


$

12,434


132

%

Amortization and depreciation



58,760



47,395



11,365


24


Provision (benefit) for credit losses



(4,840)



(4,326)



(514)


12


Other operating expenses



6,559



2,604



3,955


152


Total expenses


$

82,360


$

55,120


$

27,240


49

%

Income from operations


$

50,191


$

30,035


$

20,156


67

%

Income tax expense



12,850



7,475



5,375


72


Net income before noncontrolling interests


$

37,341


$

22,560


$

14,781


66

%

Less: net income (loss) from noncontrolling interests



(179)





(179)


N/A


Walker & Dunlop net income


$

37,520


$

22,560


$

14,960


66

%

Key performance metrics:













Operating margin



38

%


35

%






Adjusted EBITDA


$

105,062


$

73,703


$

31,359


43

%

Servicing & Asset Management – Discussion of Quarterly Results:

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

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













FINANCIAL RESULTS – CORPORATE

(dollars in thousands)



Q2 2022



Q2 2021



$ Variance


% Variance


Escrow earnings and other interest income


$

103


$

55


$

48


87

%

Other revenues



172



296



(124)


(42)


Total revenues


$

275


$

351


$

(76)


(22)

%

Personnel


$

7,574


$

11,980


$

(4,406)


(37)

%

Amortization and depreciation



1,533



1,097



436


40


Interest expense on corporate debt



6,412



1,760



4,652


264


Other operating expenses



25,053



13,546



11,507


85


Total expenses


$

40,572


$

28,383


$

12,189


43

%

Income from operations


$

(40,297)


$

(28,032)


$

(12,265)


44

%

Income tax expense



(9,823)



(6,974)



(2,849)


41


Walker & Dunlop net income


$

(30,474)


$

(21,058)


$

(9,416)


45

%

Key performance metric:













Adjusted EBITDA


$

(27,098)


$

(21,404)


$

(5,694)


27

%

Corporate – Discussion of Quarterly Results:

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

CONSOLIDATED YEAR-TO-DATE 2022 OPERATING RESULTS














YEAR-TO-DATE OPERATING RESULTS AND KEY PERFORMANCE METRICS

(dollars in thousands)



YTD Q2 2022



YTD Q2 2021


$ Variance


% Variance

Debt financing volume


$

23,785,975


$

17,835,303


$

5,950,672


33

%

Property sales volume



11,423,752



4,737,292



6,686,460


141


Total transaction volume


$

35,209,727


$

22,572,595


$

12,637,132


56

%

Total revenues



660,292



505,699



154,593


31


Total expenses



496,692



358,231



138,461


39


Walker & Dunlop net income


$

125,495


$

114,110


$

11,385


10

%

Adjusted EBITDA



157,480



127,181



30,299


24


Diluted EPS


$

3.73


$

3.52


$

0.21


6

%

Operating margin



25

%


29

%






Return on equity



16



19







Discussion of Results:

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

YEAR-TO-DATE 2022 – FINANCIAL RESULTS BY SEGMENT














YEAR-TO-DATE FINANCIAL RESULTS – CAPITAL MARKETS

(dollars in thousands)



YTD Q2 2022



YTD Q2 2021



$ Variance


% Variance


Loan origination and debt brokerage fees, net


$

183,908


$

180,878


$

3,030


2

%

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



104,679



119,784



(15,105)


(13)


Property sales broker fees



69,784



31,496



38,288


122


Net warehouse interest income, LHFS



7,237



5,343



1,894


35


Other revenues



6,658



5,695



963


17


Total revenues


$

372,266


$

343,196


$

29,070


8

%

Personnel


$

237,639


$

192,629


$

45,010


23

%

Amortization and depreciation



810



539



271


50


Other operating expenses



10,694



7,000



3,694


53


Total expenses


$

249,143


$

200,168


$

48,975


24

%

Income from operations


$

123,123


$

143,028


$

(19,905)


(14)

%

Income tax expense



29,323



32,354



(3,031)


(9)


Walker & Dunlop net income


$

93,800


$

110,674


$

(16,874)


(15)

%

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

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













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

(dollars in thousands)



YTD Q2 2022



YTD Q2 2021



$ Variance


% Variance


Loan origination and debt brokerage fees, net


$

1,007


$

2,473


$

(1,466)


(59)

%

Servicing fees



146,941



135,030



11,911


9


Investment management fees



22,930



6,551



16,379


250


Net warehouse interest income, LHFI



2,804



3,842



(1,038)


(27)


Escrow earnings and other interest income



8,406



3,767



4,639


123


Other revenues



61,529



11,657



49,872


428


Total revenues


$

243,617


$

163,320


$

80,297


49

%

Personnel


$

40,519


$

16,558


$

23,961


145

%

Amortization and depreciation



113,691



92,773



20,918


23


Provision (benefit) for credit losses



(14,338)



(15,646)



1,308


(8)


Other operating expenses



12,678



4,857



7,821


161


Total expenses


$

152,550


$

98,542


$

54,008


55

%

Income from operations


$

91,067


$

64,778


$

26,289


41

%

Income tax expense



21,689



14,653



7,036


48


Net income before noncontrolling interests


$

69,378


$

50,125


$

19,253


38

%

Less: net income (loss) from noncontrolling interests



(858)





(858)


N/A


Walker & Dunlop net income


$

70,236


$

50,125


$

20,111


40

%

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

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













YEAR-TO-DATE FINANCIAL RESULTS – CORPORATE

(dollars in thousands)



YTD Q2 2022



YTD Q2 2021



$ Variance


% Variance


Escrow earnings and other interest income


$

148


$

173


$

(25)


(14)

%

Other revenues



44,261



(990)



45,251


(4,571)


Total revenues


$

44,409


$

(817)


$

45,226


(5,536)

%

Personnel


$

34,391


$

28,449


$

5,942


21

%

Amortization and depreciation



2,754



2,069



685


33


Interest expense on corporate debt



12,817



3,525



9,292


264


Other operating expenses



45,037



25,478



19,559


77


Total expenses


$

94,999


$

59,521


$

35,478


60

%

Income from operations


$

(50,590)


$

(60,338)


$

9,748


(16)

%

Income tax expense



(12,049)



(13,649)



1,600


(12)


Walker & Dunlop net income


$

(38,541)


$

(46,689)


$

8,148


(17)

%

Corporate – Discussion of Year-to-Date Results:

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

CAPITAL SOURCES AND USES

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

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

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

(1)

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



(2)

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



(3)

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



(4)

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



(5)

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



(6)

MSR income as a percentage of Agency debt financing volume.



(7)

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




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



(8)

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

CONFERENCE CALL INFORMATION

The Company will host a conference call to discuss its quarterly results on Thursday, August 4, 2022 at 8:30 a.m. Eastern time. Listeners can access the webcast via the link: https://walkerdunlop.zoom.us/webinar/register/WN_3KzScGmYQ1eHcJbaPOUnDg  or by dialing +1 408 901 0584, Webinar ID 844 4342 0334, Password 270631. 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.

ABOUT WALKER & DUNLOP

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

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, a non-GAAP financial measure. The presentation of adjusted EBITDA 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 in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility and Alliant’s note payable, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, and non-cash charges associated with the extinguishment of long-term debt, and the gain associated with the revaluation of our previously held equity-method investment in connection with our acquisition of GeoPhy. Because not all companies use identical calculations, our presentation of adjusted EBITDA may not be comparable to similarly titled measures of other companies. 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.

We use adjusted EBITDA 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 this non-GAAP measure, when read in conjunction with the Company’s GAAP financials, provides 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 adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company’s results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company’s results of operations in conjunction with net income on both a consolidated and segment basis. For more information on adjusted EBITDA, 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) regulatory and/or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, (4) risks related to our recently completed acquisitions, including our ability to integrate and achieve the expected benefits of such acquisitions, and (5) 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, 


2022


2022


2021


2021


2021

(in thousands)










Assets















Cash and cash equivalents

$

151,252


$

141,375


$

305,635


$

318,188


$

326,518

Restricted cash


34,361



41,584



42,812



34,875



15,842

Pledged securities, at fair value


149,560



148,647



148,996



148,774



146,548

Loans held for sale, at fair value


931,516



703,629



1,811,586



2,711,900



1,718,444

Loans held for investment, net


247,243



216,620



269,125



233,685



272,033

Mortgage servicing rights


978,745



976,554



953,845



929,825



915,519

Goodwill


937,881



908,744



698,635



333,249



266,465

Other intangible assets


207,024



211,405



183,904



8,454



1,553

Derivative assets


59,810



112,023



37,364



85,486



36,751

Receivables, net


236,786



249,305



212,019



106,228



80,196

Committed investments in tax credit equity


187,393



223,771



177,322





Other assets, net


413,201



405,974



364,746



206,198



163,252

Total assets

$

4,534,772


$

4,339,631


$

5,205,989


$

5,116,862


$

3,943,121
















Liabilities















Warehouse notes payable

$

1,125,677


$

924,280


$

1,941,572


$

2,848,579


$

1,823,982

Notes payable


719,210



726,555



740,174



289,763



290,498

Allowance for risk-sharing obligations


48,475



53,244



62,636



61,607



60,329

Derivative liabilities


17,176



12,400



6,403



13,263



30,411

Commitments to fund investments in tax credit equity


173,740



206,605



162,747





Other liabilities


784,719



779,376



714,250



519,714



444,406

Total liabilities

$

2,868,997


$

2,702,460


$

3,627,782


$

3,732,926


$

2,649,626
















Stockholders’ Equity















Common stock

$

323


$

324


$

320


$

312


$

310

Additional paid-in capital


403,668



387,009



393,022



271,562



255,676

Accumulated other comprehensive income (loss)


(222)



1,588



2,558



2,737



2,578

Retained earnings


1,229,712



1,205,384



1,154,252



1,090,506



1,034,931

Total stockholders’ equity

$

1,633,481


$

1,594,305


$

1,550,152


$

1,365,117


$

1,293,495

Noncontrolling interests


32,294



42,866



28,055



18,819



Total equity

$

1,665,775


$

1,637,171


$

1,578,207


$

1,383,936


$

1,293,495

Commitments and contingencies










Total liabilities and stockholders’ equity

$

4,534,772


$

4,339,631


$

5,205,989


$

5,116,862


$

3,943,121

 

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 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


2022


2021

Revenues





















Loan origination and debt brokerage fees, net

$

102,605


$

82,310


$

139,421


$

123,242


$

107,472


$

184,915


$

183,351

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


51,949



52,730



77,879



89,482



61,849



104,679



119,784

Servicing fees


74,260



72,681



72,808



70,628



69,052



146,941



135,030

Property sales broker fees


46,386



23,398



54,808



33,677



22,454



69,784



31,496

Investment management fees


10,282



12,648



13,699



2,564



3,815



22,930



6,551

Net warehouse interest income


5,268



4,773



7,340



5,583



4,630



10,041



9,185

Escrow earnings and other interest income


6,751



1,803



2,178



2,032



1,823



8,554



3,940

Other revenues


43,347



69,101



39,056



19,082



10,316



112,448



16,362

Total revenues

$

340,848


$

319,444


$

407,189


$

346,290


$

281,411


$

660,292


$

505,699






















Expenses





















Personnel

$

168,368


$

144,181


$

195,670


$

170,181


$

141,421


$

312,549


$

237,636

Amortization and depreciation


61,103



56,152



61,405



53,498



48,510



117,255



95,381

Provision (benefit) for credit losses


(4,840)



(9,498)



1,093



1,266



(4,326)



(14,338)



(15,646)

Interest expense on corporate debt


6,412



6,405



2,690



1,766



1,760



12,817



3,525

Other operating expenses


36,195



32,214



36,484



24,836



19,748



68,409



37,335

Total expenses

$

267,238


$

229,454


$

297,342


$

251,547


$

207,113


$

496,692


$

358,231

Income from operations

$

73,610


$

89,990


$

109,847


$

94,743


$

74,298


$

163,600


$

147,468

Income tax expense


19,503



19,460



30,117



22,953



18,240



38,963



33,358

Net income before noncontrolling interests

$

54,107


$

70,530


$

79,730


$

71,790


$

56,058


$

124,637


$

114,110

Less: net income (loss) from noncontrolling interests


(179)



(679)



(201)



69





(858)



Walker & Dunlop net income

$

54,286


$

71,209


$

79,931


$

71,721


$

56,058


$

125,495


$

114,110

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


(1,810)



(970)



(179)



159



768



(2,780)



610

Walker & Dunlop comprehensive income

$

52,476


$

70,239


$

79,752


$

71,880


$

56,826


$

122,715


$

114,720






















Basic earnings per share

$

1.63


$

2.14


$

2.46


$

2.23


$

1.75


$

3.77


$

3.57

Diluted earnings per share


1.61



2.12



2.42



2.21



1.73



3.73



3.52

Cash dividends paid per common share


0.60



0.60



0.50



0.50



0.50



1.20



1.00






















Basic weighted-average shares outstanding


32,388



32,219



31,343



31,064



31,019



32,304



30,922

Diluted weighted-average shares outstanding


32,694



32,617



31,956



31,459



31,370



32,657



31,322

 

SUPPLEMENTAL OPERATING DATA

Unaudited



Quarterly Trends


Six months ended


















June 30, 


(in thousands, except per share data)

Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


2022


2021


Transaction Volume:






















Components of Debt Financing Volume

















Fannie Mae

$

3,918,400


$

1,998,374


$

2,585,100


$

3,271,765


$

1,911,976


$

5,916,774


$

3,445,000


Freddie Mac


1,141,034



987,849



1,546,883



2,591,906



1,003,319



2,128,883



2,016,039


Ginnie Mae – HUD


201,483



391,693



523,899



522,093



672,574



593,176



1,294,707


Brokered (1)


9,258,490



5,643,081



12,684,294



6,402,862



6,280,578



14,901,571



10,583,070


Principal Lending and Investing (2)


131,551



114,020



474,873



472,142



318,237



245,571



496,487


Total Debt Financing Volume

$

14,650,958


$

9,135,017


$

17,815,049


$

13,260,768


$

10,186,684


$

23,785,975


$

17,835,303


Property Sales Volume


7,892,062



3,531,690



9,287,312



5,230,093



3,341,532



11,423,752



4,737,292


Total Transaction Volume

$

22,543,020


$

12,666,707


$

27,102,361


$

18,490,861


$

13,528,216


$

35,209,727


$

22,572,595
























Key Performance Metrics:






















Operating margin


22

%


28

%


27

%


27

%


26

%


25

%


29

%

Return on equity


14



19



23



22



18



16



19


Walker & Dunlop net income

$

54,286


$

71,209


$

79,931


$

71,721


$

56,058


$

125,495


$

114,110


Adjusted EBITDA (3)


94,844



62,636



109,667



72,430



66,514



157,480



127,181


Diluted EPS


1.61



2.12



2.42



2.21



1.73



3.73



3.52
























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

















Personnel expenses


49

%


45

%


48

%


49

%


50

%


47

%


47

%

Other operating expenses


11



10



9



7



7



10



7


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

















Origination fee margin (4)


0.71

%


0.90

%


0.80

%


0.95

%


1.07

%


0.78

%


1.04

%

MSR margin (5)


0.36



0.58



0.45



0.70



0.63



0.44



0.69


Agency MSR margin (6)


0.99



1.56



1.67



1.40



1.72



1.21



1.77
























Other Data:






















Market capitalization at period end

$

3,113,884


$

4,192,900


$

4,835,508


$

3,540,501


$

3,239,332








Closing share price at period end

$

96.34


$

129.42


$

150.88


$

113.50


$

104.38








Average headcount


1,406



1,353



1,128



1,084



1027






























Components of Servicing Portfolio (end of period):

















Fannie Mae

$

57,122,414


$

54,000,550


$

53,401,457


$

52,317,953


$

51,077,660








Freddie Mac


36,886,666



36,965,185



37,138,836



38,039,014



37,887,969








Ginnie Mae – HUD


9,570,012



9,954,262



9,889,289



9,894,893



9,904,246








Brokered (7)


15,190,315



15,115,619



15,035,439



13,429,801



13,129,969








Principal Lending and Investing (8)


252,100



221,649



235,543



238,713



276,738








Total Servicing Portfolio

$

119,021,507


$

116,257,265


$

115,700,564


$

113,920,374


$

112,276,582








Assets under management (9)


16,692,556



16,687,112



16,437,865



2,309,332



1,801,577








Total Managed Portfolio

$

135,714,063


$

132,944,377


$

132,138,429


$

116,229,706


$

114,078,159






























Key Servicing Portfolio Metrics:

















Custodial escrow account balance (in billions)

$

2.3


$

2.5


$

3.7


$

3.0


$

3.0








Weighted-average servicing fee rate (basis points)


24.9



25.0



24.9



24.6



24.5








Weighted-average remaining servicing portfolio term (years)


8.9



9.1



9.2



9.2



9.2








 

(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)

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

(5)

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

(6)

MSR income as a percentage of Agency debt financing volume.

(7)

Brokered loans serviced primarily for life insurance companies.

(8)

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

(9)

Alliant & WDIP assets under management and interim loans serviced for our interim loan joint venture. Alliant assets under management were acquired in December 2021.

 

KEY CREDIT METRICS

Unaudited



June 30, 


March 31,


December 31,


September 30,


June 30, 


(dollars in thousands)

2022


2022


2021


2021


2021


Risk-sharing servicing portfolio:
















Fannie Mae Full Risk

$

47,461,520


$

46,194,756


$

45,581,476


$

44,069,885


$

42,444,569


Fannie Mae Modified Risk


9,651,421



7,794,710



7,807,853



8,235,475



8,617,020


Freddie Mac Modified Risk


23,715



23,715



33,195



36,883



36,894


Total risk-sharing servicing portfolio

$

57,136,656


$

54,013,181


$

53,422,524


$

52,342,243


$

51,098,483


















Non-risk-sharing servicing portfolio:
















Fannie Mae No Risk

$

9,473


$

11,084


$

12,127


$

12,593


$

16,071


Freddie Mac No Risk


36,862,951



36,941,470



37,105,641



38,002,131



37,851,075


GNMA – HUD No Risk


9,570,012



9,954,262



9,889,289



9,894,893



9,904,246


Brokered


15,190,315



15,115,619



15,035,438



13,429,801



13,129,969


Total non-risk-sharing servicing portfolio

$

61,632,751


$

62,022,435


$

62,042,495


$

61,339,418


$

60,901,361


Total loans serviced for others

$

118,769,407


$

116,035,616


$

115,465,019


$

113,681,661


$

111,999,844


Interim loans (full risk) servicing portfolio


252,100



221,649



235,543



238,713



276,738


Total servicing portfolio unpaid principal balance

$

119,021,507


$

116,257,265


$

115,700,562


$

113,920,374


$

112,276,582


















Interim Loan Joint Venture Managed Loans (1)

$

899,287


$

930,296


$

848,196


$

918,518


$

629,532


















At-risk servicing portfolio (2)

$

51,905,985


$

50,176,521


$

49,573,263


$

48,209,532


$

46,866,767


Maximum exposure to at-risk portfolio (3)


10,525,093



10,178,454



10,056,584



9,784,054



9,517,609


Defaulted loans


78,659



78,659



78,659



48,481



48,481


















Defaulted loans as a percentage of the at-risk portfolio


0.15

%


0.16

%


0.16

%


0.10

%


0.10

%

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


0.09



0.11



0.13



0.13



0.13


Allowance for risk-sharing as a percentage of maximum exposure


0.46



0.52



0.62



0.63



0.63


 

(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.

 

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP

Unaudited



Quarterly Trends


Six months ended


















June 30, 


(in thousands)

Q2 2022


Q1 2022


Q4 2021


Q3 2021


Q2 2021


2022


2021


Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA

















Walker & Dunlop Net Income

$

54,286


$

71,209


$

79,931


$

71,721


$

56,058


$

125,495


$

114,110


Income tax expense


19,503



19,460



30,117



22,953



18,240



38,963



33,358


Interest expense on corporate debt


6,412



6,405



2,690



1,766



1,760



12,817



3,525


Amortization and depreciation


61,103



56,152



61,405



53,498



48,510



117,255



95,381


Provision (benefit) for credit losses


(4,840)



(9,498)



1,093



1,266



(4,326)



(14,338)



(15,646)


Net write-offs















Stock-based compensation expense


10,329



11,279



9,637



10,708



8,121



21,608



16,237


Gain from revaluation of previously held equity-method investment




(39,641)









(39,641)




Unamortized issuance costs from corporate debt retirement






2,673










Fair value of expected net cash flows from servicing, net


(51,949)



(52,730)



(77,879)



(89,482)



(61,849)



(104,679)



(119,784)


Adjusted EBITDA

$

94,844


$

62,636


$

109,667


$

72,430


$

66,514


$

157,480


$

127,181


 

ADJUSTED FINANCIAL MEASURE RECONCILIATION TO GAAP BY SEGMENT

Unaudited



Capital Markets


Three months ended

  June 30,



Six months ended

  June 30,

(in thousands)

2022


2021


2022


2021

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA







Walker & Dunlop Net Income

$

47,240


$

54,556


$

93,800


$

110,674

Income tax expense


16,476



17,739



29,323



32,354

Amortization and depreciation


810



18



810



539

Stock-based compensation expense


4,303



3,751



8,882



7,563

Fair value of expected net cash flows from servicing, net


(51,949)



(61,849)



(104,679)



(119,784)

Adjusted EBITDA

$

16,880


$

14,215


$

28,136


$

31,346














Servicing & Asset Management


Three months ended

  June 30,



Six months ended

  June 30,

(in thousands)

2022


2021


2022


2021

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA







Walker & Dunlop Net Income

$

37,520


$

22,560


$

70,236


$

50,125

Income tax expense


12,850



7,475



21,689



14,653

Amortization and depreciation


58,760



47,395



113,691



92,773

Provision (benefit) for credit losses


(4,840)



(4,326)



(14,338)



(15,646)

Stock-based compensation expense


772



599



1,557



1,217

Adjusted EBITDA

$

105,062


$

73,703


$

192,835


$

143,122














Corporate


Three months ended

  June 30,



Six months ended

  June 30,

(in thousands)

2022


2021


2022


2021

Reconciliation of Walker & Dunlop Net Income to Adjusted EBITDA







Walker & Dunlop Net Income

$

(30,474)


$

(21,058)


$

(38,541)


$

(46,689)

Income tax expense


(9,823)



(6,974)



(12,049)



(13,649)

Interest expense on corporate debt


6,412



1,760



12,817



3,525

Amortization and depreciation


1,533



1,097



2,754



2,069

Stock-based compensation expense


5,254



3,771



11,169



7,457

Gain from revaluation of previously held equity-method investment






(39,641)



Adjusted EBITDA

$

(27,098)


$

(21,404)


$

(63,491)


$

(47,287)













 

Cision View original content:https://www.prnewswire.com/news-releases/walker–dunlop-reports-67-growth-in-transaction-volume-as-revenue-grows-21-to-341-million-301599624.html

SOURCE Walker & Dunlop, Inc.

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