Walker & Dunlop, Inc

Good day and welcome to the Q3 2024 Walker and Dunlop earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelsey Duffy. Please go ahead.

Thank you, Ruth. Good morning, everyone. Thank you for joining Walker and Dunlop's third 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 a 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 not 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 & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, and 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. Our third quarter financial results reflect an improving market that benefited from healthy fundamentals in commercial real estate that are attracting capital to the market and driving an increase in acquisition and financing activity. It is our expectation the market continues to improve over the next several years, and that our investments in the people of Walker & Dunlop, our brand, and our technology position us very well to grow our financial results from the top and bottom line and continue expanding our market presence in the commercial real estate financing and services market. We closed $11.6 billion of total transaction volume in Q3, up 36% from Q3 2023, and up 37% sequentially from Q2 2024. It increased deal flow and revenues. It grew delivered earnings per share 33% year-over-year to $0.85 per share. Adjusted EBITDA and adjusted core EPS, which strip out non-cash revenues and expenses, were both up 7%. As shown on slide 4, $11.6 billion of Q3 transaction volume included $3.6 billion of property sales, up 44% year-over-year. Property sales volume grew from $1.2 billion in Q1 to $1.5 billion in Q2 to $3.6 billion in Q3, and with a healthy Q4 pipeline, shows a terrific trend in multifamily sales activity. While these volumes are still well below our pre-tightening peak in Q2 of 2022, our national presence and exceptional brand will allow us to scale transaction volumes significantly without adding headcount. Danny Mae and Freddie Mac were sluggish market participants in the first half of the year, but both stepped back into the market in the third quarter. They closed $3.5 billion of loans with the GSEs in Q3, a welcome pickup in volume. Due to date, the GSEs deployed a combined $68 billion and have plenty of lending capacity in Q4 before they get close to their $140 billion 2024 lending caps. Our GSE financing pipeline is robust. setting us up for a strong finish with both Fannie and Freddie. We will continue booking non-cash MSRs to drive future cash earnings and adjusted EBITDA. The three factors that can contribute to an increase in MSR revenue are higher GSE loan volumes, higher servicing fees, and longer loan duration. We saw a meaningful uptick in GSE loan volumes in Q3, and as such, MSR revenue was up 23% year-over-year. The other two variables, average servicing fee and loan duration, did not change significantly in Q3 from the previous several quarters and are still below our historical averages. Servicing fees, which compressed dramatically as interest rates and borrowing costs rose, should revert to historic levels as the yield curve and rates normalize. With regard to duration, borrowers have been picking shorter duration, typically five years, for their borrowing with the belief that rates will come back down. Depending on the rate environment and the U.S. government's fiscal outlook, it is our assumption that borrowers start going long again and increasing loan terms back to 10 years. Given that mortgage servicing rights are the present value of future servicing income, continued increases in loan volume with a reversion to normalize servicing fees and term should have a significant impact on WMD's revenues and gap earnings. over the next cycle. W&D affordable housing is an important growth area as Fannie, Freddie and HUD focus on affordable lending, and the need for low income housing tax credits expands. Our HUD lending volumes grew over 200% to $272 million in Q3, while W&D affordable equity revenues were down 37% due to a decline in tax credit syndications and asset dispositions during the quarter. W&D Affordable Equity has been a very consistent contributor to our financial performance, and we are confident that syndication and disposition volumes will pick up. The growth in HUD volumes on the quarter is fantastic to see, and due to our team's strong finish to the HUD fiscal year, W&D moved up from the fifth largest HUD multifamily lender in the country to the second largest in 2024. This is wonderful news and makes W&D number one with Fannie, number two with HUD, and number three with Freddie. This is exactly the success and scale we envisioned for W&D in the agency financing market. We entered the third quarter with $134 billion servicing portfolio that continues to generate stable recurring revenues with very strong underlying credit fundamentals. The cash flows from servicing bolstered Walker & Deloff's adjusted core EPS and adjusted EBITDA throughout the great tightening and will continue to generate consistent high margin earnings going forward. As we enter the next cycle, growth and loan origination volumes will increase mortgage servicing rights we book and provide the opportunity to raise and deploy more capital at Walker & Dunlop Investment Partners. The servicing and asset management revenues that these two businesses generate are wonderful sources of revenue and earnings in up cycles and also paramount in down cycles. This is W&D's longstanding business model. With a capital markets platform that helps our clients acquire and finance assets in up markets, and also have the recurring revenue streams from servicing and asset management to weather the inevitable down cycles in commercial real estate. As we transition away from the great tightening and towards a more robust investing and refinancing market for commercial real estate, BND's business model and team are well positioned for growth. I'll now 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 in the fourth quarter and beyond. Greg?