Walker & Dunlop, Inc

Good day and welcome to the Q2 2024 Walker & Dunlop Inc. Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kelsey Duffy. Please go ahead, ma'am.

Thank you, Lisa. Good morning, everyone. Thank you for joining Walker & Dunlop's second quarter 2024 Earnings Call. I have with me this morning our Chairman and CEO, Willie Walker, and our CFO, Greg Borkowski. This call is being webcast live on our website and a recording will be available later today. Both our earnings press release and website provide details on accessing the archive webcast. This morning, we posted our earnings release and presentation to the investor relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willie and Greg will touch on during the call. Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA, and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are non-historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations and actual results may differ materially. Walker & Dunlap is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise. We expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I will now turn the call over to Willie.

Thank you, Kelsey, and good morning, everyone. We held Walker & Dunlop's annual summer conference in Sun Valley, Idaho, two weeks ago with some of the largest and most active investors in commercial real estate. The sentiment at the conference was that after two years of rising interest rates and limited investment activity, it is time to get active again. Q2 2024 was the first quarter in almost two years with consistent rates and the ability for commercial real estate owners to transact. And with the 10-year treasury falling below 4%, momentum is building in the market. W&D is very well positioned to benefit from the recovery of the commercial real estate transactions market and new growth cycle. As shown on slide three, Q2 transaction volume was highlighted by debt brokerage of $3.9 billion. up 16% year-over-year. This growth is reflective of our talented capital markets team finding a diverse and deep market of capital for our clients' borrowing needs. Financing volumes for the GSEs were down 23% year-over-year to $2.7 billion. The GSEs have been sluggish in their lending over the past 18 months, but we are seeing them lean in on deals over the past month and expect higher volumes from them in the second half of 2024. Investment sales volume of $1.5 billion is a good start to the market recovery, up 31% from Q1 of this year. But let's make sure we understand both where the market was and what the WND team can do. We did $7.9 billion of multifamily investment sales in Q2 of 2022 versus $1.5 billion this past quarter. The market has a long way to recover, and our team has tremendous capacity. Our investment sales pipeline continues to grow, and it is very evident that with lower rates and the need for CRE owners to return capital to investors and deploy new capital, transaction volumes are growing nicely. Our investment sales market presence and team is extremely strong, and as property sales volumes pick up, it will benefit investment sales, debt placement, valuation services, investment banking, and our affordable housing business. A prize, our technology-enabled evaluation business saw volumes grow 26% year over year as property sales returned to the market. Walker & Dunlop Affordable Equity closed on its newest fund of $163 million at the start of Q2, and it's seeing demand from both investors and developers of affordable housing. Capital raising and employment are the day-to-day drivers of this business, as is investment realization when assets exit their rent restriction period. W&D Affordable Equity has not sold many assets over the past two years, but as the market heals, we will see a pickup in sales and realized gains. Our small balance lending business has maintained market share with Fannie and Freddie, and we are focused on using our technology to enhance and market a product that will allow us to take market share from our regional banks. This business has significant opportunity to grow as transaction activity resumes. HUD financing, part of our affordable housing group, grew volumes 26% year over year. And while HUD volumes are relatively small in comparison to our other debt businesses, HUD loans are a fantastic financing option for our customers and generate great mortgage servicing rights. Finally, Zellman Research and Investment Banking revenues were down slightly on the quarter, but will grow as the market recovers and transaction volumes accelerate. Total Q2 transaction volume of $8.4 billion coupled with the consistent and growing servicing income generated by our $133 billion loan servicing portfolio, generated Q2 diluting earnings per share of 67 cents, down 18% year-over-year, mostly due to lower GSE volumes and the commensurate non-cash mortgage servicing rights. Adjusted core EPS, however, which strips out non-cash revenue and expenses, grew 26% to $1.23, while adjusted EBITDA grew 15% to $81 million on the quarter. Having weathered the brunt of the great tightening and beginning to see transaction volumes return, these financial results are very strong and reflective of our teamwork, excellent business model, recurring revenue streams, and ability to invest in our people, brand, and technology during the past two years of market volatility. As we look forward to a market recovery in transaction volumes, We will continue to invest in our business by adding bankers and brokers who focus on meeting not only the needs of the owners of traditional assets where people live, work, shop, and play, but also new economy assets where people work where they sleep, play without moving their bodies, travel without staying in a hotel, and where the housing of data and digits is increasingly important for the future of our society and our world. As Greg will discuss in a moment, WND's credit portfolio remains extremely strong. Our discipline of taking credit risk only on multifamily properties continues to pay dividends as other asset classes incur losses. And while our portfolio is neither perfect nor without losses, given we were the largest lender on multifamily properties in the United States in 2020 and the seventh largest provider of capital to commercial real estate in 2023, As shown on this slide, our credit discipline and minimal losses are truly outstanding. While I'm focused on credit, I'd like to thank our Chief Credit Officer, David Levy, for his magnificent career and 12 years of exceptional work at Walker & Dunlop. David has earned his retirement in many, many ways, and we wish him much happiness going forward. I will turn the call over to Greg to discuss our financial and credit performance in greater detail. and then return with some thoughts about what we see ahead in the back half of the year. Greg?