Walker & Dunlop Reports First Quarter 2025 Financial Results

FIRST QUARTER 2025 HIGHLIGHTS

• Total transaction volume of $7.0 billion, up 10% from Q1'24
• Total revenues of $237.4 million, up 4% from Q1'24
• Net income of $2.8 million and diluted earnings per share of $0.08, both down 77% from Q1'24
• Adjusted EBITDA⁽¹⁾ of $65.0 million, down 12% from Q1'24
• Adjusted core EPS⁽²⁾ of $0.85, down 29% from Q1'24
• Servicing portfolio of $135.6 billion as of March 31, 2025, up 3% from March 31, 2024
• Declared quarterly dividend of $0.67 per share for the second quarter 2025

Walker & Dunlop, Inc. (NYSE:WD) (the "Company", "Walker & Dunlop" or "W&D") reported first quarter total transaction volume of $7.0 billion, up 10% year over year. Total revenues were $237.4 million for the first quarter of 2025, a 4% increase year over year, while total expenses were up 8%. Although transaction activity and total revenues grew, total expenses increased largely due to increased personnel expenses, the write-off of unamortized issuance costs from our corporate debt paydown, and an increase in the provision for credit losses. Those increased costs drove net income down for the first quarter of 2025 to $2.8 million, or $0.08 per diluted share, both down 77% year over year. Adjusted EBITDA was also down 12% in the first quarter of 2025, and adjusted core EPS, which primarily removes the impact of non-cash revenues and expenses, was down 29%, against the first quarter of 2024. The Company's Board of Directors declared a dividend of $0.67 per share for the second quarter of 2025.

"2025 began with continued improvement in transaction volumes and revenues, up 10% and 4%, respectively, from Q1 2024, as the US commercial real estate market began to transition from higher rates and dramatically lower transaction activity to the beginning of the next investment cycle," commented Walker & Dunlop Chairman and CEO Willy Walker. "W&D's Q1 GAAP net income was down significantly due to increased severance expense, fees associated with a corporate debt issuance, and credit losses that are normal for this time in the credit cycle. Adjusted core net income and adjusted EBITDA were down materially less, reflecting the strength of W&D's business model and durable profit streams."

Walker continued, "There is a growing sense that the pent-up demand for financing and capital deployment in commercial real estate is going to drive transaction volumes higher over the coming months and years. The initial deregulatory changes at HUD and the GSEs are welcome, and it is our assumption that the Trump Administration continues to work on getting short and long-term interest rates down. W&D will continue to invest in our Capital Markets platform to meet our clients' growing needs and expand as the next cycle takes off. Our outlook for 2025, and our guidance, have not changed."

DISCUSSION OF RESULTS:

• Total transaction volume increased 10% in the first quarter of 2025 to $7.0 billion from the first quarter of 2024.
• Transaction volumes with Fannie Mae and Freddie Mac (collectively, the "GSEs") increased 24% year over year, led by a 67% increase in Fannie Mae volumes. Walker & Dunlop continues to be a top GSE lender.
• Property sales volume increased 58% in the first quarter of 2025, outperforming the 36% year-over-year increase in market-wide multifamily property sales volume, according to Real Capital Analytics. Multifamily property sales activity in the first quarter of 2024 reached its lowest levels since the Great Financial Crisis, and the growth in 2025 reflects increasing demand for multifamily assets based on the strength of the fundamentals underlying the sector.
• Multifamily completions reached an all-time high 585,000 units in 2024, particularly in high demand sunbelt markets, according to RealPage. Yet absorption remained extremely strong, with 663,000 units, outpacing supply for the first time since 2021. The cost of owning a single-family home has increased dramatically since the beginning of the Great Tightening, and new construction starts in multifamily have fallen to just 234,000 units. The strength of those fundamentals, coupled with low unemployment, have improved investment conviction in the multifamily sector and driven the strength in our property sales and GSE lending volumes in the first quarter of 2025.
• HUD debt financing volumes increased in the first quarter of 2025, as our team executed well in the face of a challenging market environment. Walker & Dunlop was ranked as the second largest HUD lender for HUD's fiscal year ended September 30, 2024.
• The decrease in brokered debt financing volume was driven by volatility in the market during the first quarter of 2025, which caused investors to remain selective on transaction timing. The supply of capital from life insurance companies, banks, commercial mortgage-backed securities, and other private capital providers remains strong, and the demand for commercial real estate assets is expected drive increased acquisition and financing activity throughout the remainder of the year.

DISCUSSION OF RESULTS:

• Our servicing portfolio continues to expand as a result of additional Agency debt financing volumes over the past 12 months, partially offset by principal paydowns and loan payoffs.
• During the first quarter of 2025, we added $0.4 billion of net loans to our servicing portfolio, and over the past 12 months, we added $3.7 billion of net loans to our servicing portfolio, almost all of which were Agency loans.
• $10.3 billion of Agency loans in our servicing portfolio are scheduled to mature over the next two years. These loans, with a weighted-average servicing fee of 28.9 basis points, represent only 9% of the total Agency loans in our portfolio.
• The mortgage servicing rights ("MSRs") associated with our servicing portfolio had a fair value of $1.4 billion as of both March 31, 2025 and 2024.
• Assets under management as of March 31, 2025 consisted of $16.0 billion of low-income housing tax credit ("LIHTC") funds, $1.5 billion of debt funds and $0.9 billion of equity funds managed by WDIP. The 6% increase in assets under management was driven by increases in all three categories.

DISCUSSION OF KEY PERFORMANCE METRICS:

• Walker & Dunlop net income and diluted EPS both decreased 77% in the first quarter of 2025, as the increase in total expenses outpaced the increase in total revenues. Additionally, our effective tax rate increased year over year, as described below. The decrease in net income also drove the decrease in return on equity to 1% for the first quarter of 2025.
• The increase in personnel expenses as a percentage of total revenues for the first quarter of 2025 was principally the result of increases in severance expense and variable compensation related to the growth in total transaction volume. Other operating expenses as a percentage of total revenues increased during the first quarter of 2025 largely due to the acceleration of unamortized debt issuance costs related to refinancing our corporate debt.
• Adjusted EBITDA decreased 12%, primarily due to decreases in placement fees and other interest income and investment management fees and an increase in personnel expense. These changes were partially offset by increases in loan origination and debt brokerage fees, net ("origination fees") and servicing fees.
• Adjusted core EPS decreased to $0.85 in the first quarter of 2025 from $1.19 in the first quarter of 2024. The decrease was primarily driven by an increase in personnel expense and a decrease in investment management fees in the first quarter of 2025 compared to the first quarter of 2024, partially offset by increases in origination fees, servicing fees, and property sales broker fees.

DISCUSSION OF KEY CREDIT METRICS:

• Our at-risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased primarily due to the level of Fannie Mae loans added to the portfolio during the past 12 months. We take credit risk exclusively on loans backed by multifamily assets and have no credit exposure to losses in any other sector of the commercial real estate lending market.
• As of March 31, 2025, eight at-risk loans were in default with an aggregate unpaid principal balance ("UPB") of $108.5 million compared to six at-risk loans in default with an aggregate UPB of $63.3 million as of March 31, 2024. The collateral-based reserves on defaulted loans were $7.5 million and $5.1 million as of March 31, 2025 and 2024, respectively. The approximately 3,200 remaining loans in the at-risk servicing portfolio continue to exhibit strong credit quality, with low levels of delinquencies and strong operating performance of the underlying properties in the portfolio.
• During 2024, the Company received requests to repurchase five GSE loans. As of March 31, 2025, the Company has repurchased three of the loans in full and still has forbearance and indemnification agreements in place for the other two loans. The Company foreclosed on one of the repurchased loans and now holds an immaterial Other Real Estate Owned ("OREO") asset. The aggregate balance of assets not yet repurchased was $46.1 million as of March 31, 2025, all of which will require a cash outlay over the coming year. All repurchased and indemnified loans are delinquent and in non-accrual status.
• We recorded a provision for credit losses of $3.7 million in the first quarter of 2025, primarily related to the newly defaulted loans this quarter, combined with a slight increase to our risk-sharing obligations resulting from an increase in the at-risk servicing portfolio.

FIRST QUARTER 2025

FINANCIAL RESULTS BY SEGMENT

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

• Interest expense on corporate debt, which pays a variable interest rate, decreased 12% year over year, primarily due to a 100-basis point decrease in short-term interest rates year over year. Our corporate debt carries a floating rate of interest tied to one-month Secured Overnight Financing Rate ("SOFR") that resets monthly and decreases in that index rate directly impact our cost of borrowing. Additionally, in the first quarter of 2025, we refinanced our corporate debt, writing off $4.2 million of unamortized debt issuance costs, as detailed in the Capital Sources and Uses section below. The impact of this write-off is included in other operating expenses and allocated to each of the segments proportionally in the same manner as corporate debt expense.
• Income tax expense decreased 12% from the first quarter of 2024. The decline was largely attributable to a 62% decline in income from operations, partially offset by a change in excess tax benefits year over year. The Company recognized a $1.3 million shortfall from realizable excess tax benefits recognized during the first quarter of 2025 compared to a benefit of $0.6 million during the first quarter of 2024, resulting from changes between the grant date fair value and vesting date fair value of share-based compensation awards that vested during the first quarter of 2025.

CAPITAL MARKETS – DISCUSSION OF QUARTERLY RESULTS:

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

• The increase in origination fees was the result of the increase in our Fannie Mae and HUD debt financing volume, partially offset by declines in our Freddie Mac and brokered transactions volume. Our Fannie Mae and HUD debt financing volume as a percentage of our overall debt financing volume increased from 18% for the first quarter of 2024 to 33% of our volume for the first quarter of 2025, which led to an increase in the origination fee rate as our Fannie Mae and HUD executions have higher origination fee rates than Freddie Mac and brokered executions.
• The increase in our MSR income was similarly driven by the increase in Fannie Mae and HUD debt financing volume, partially offset by a decrease in the weighted-average service fee rate on Fannie Mae debt financing volume. Fannie Mae is our most-profitable debt financing product.
• Property sales broker fees increased year over year as a result of the 58% increase in property sales volumes, partially offset by a decrease in the property sale fee rate.
• The increase in other revenues was primarily related to an increase in investment banking revenues year over year, driven by several M&A transactions that closed during the first quarter of 2025.
• Personnel expense increased in the first quarter of 2025 primarily due to an increase in commission expenses related to the growth in transaction volumes and severance expense. Severance expense increased largely as a result of the separation of several underperforming producers. We expect to recognize around $5 million of severance and related expenses from separations during the first half of 2025, with $2.4 million of that expense recognized in the first quarter of 2025.

SERVICING & ASSET MANAGEMENT – DISCUSSION OF QUARTERLY RESULTS:

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

• The $3.7 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 a small increase in the average servicing fee rate.
• Investment management fees decreased primarily due to a reduction in the accrual for investment management fees from our LIHTC funds that are driven by asset dispositions within the funds and a decrease in realization revenues from our private credit investment management strategies.
• Placement fees and other interest income decreased largely as a result of a decline in our placement fees on escrow deposits, which declined primarily as a result of lower placement fee rates due to the lower average short-term interest rate environment in the first quarter of 2025 compared to the same period in 2024.
• The decrease in other revenues was primarily related to a decrease in income from equity method investments and a reduction in syndication fees related to the decline in gross equity raised within our LIHTC investment management strategies year over year.
• Personnel costs increased largely due to small increases in (i) salaries resulting from standard annual increase for employees, (ii) severance expense related to the pending sale of a subsidiary, and (iii) production bonuses.
• The increase in amortization and depreciation was primarily driven by an increase in amortization of mortgage servicing rights.
• The increase in provision for credit losses was attributable to changes in (i) the provision associated with risk-sharing loans collectively evaluated, (ii) the provision for risk-sharing loans with collateral-based reserves, and (iii) the provision for other credit losses. During the first quarter of 2024, we had a large benefit for credit losses associated with our risk-sharing loans collectively evaluated compared to a small provision for credit losses during the first quarter of 2025. The change from a benefit to a provision year over year related to the annual update to our historical loss factor. In 2024, the historical loss factor decreased significantly, while in 2025, it remained unchanged. Partially offsetting the increase in provision for credit losses associated with collectively evaluated at-risk loans were decreases in the provisions for loans evaluated based on property collateral and for other credit losses. The provision for credit losses associated with collateral-based reserves decreased as we had two defaults in the first quarter of 2025 compared to three defaults in the first quarter of 2024. The decrease in the provision for other credit losses was the result of decreased repurchase request activity year over year.

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 decrease in other revenues was primarily due to a decrease in miscellaneous revenues.
• Personnel expense increased primarily due to an increase in salaries, benefits, and stock compensation due to an increase in average headcount, partially offset by a decrease in subjective bonuses tied to company performance and a $1.2 million decrease in other compensation expenses.
• The increase in other operating expenses was primarily related to increased professional fees, coupled with the write-off of unamortized issuance costs related to the partial paydown of our term loan in the first quarter of 2025, with no comparable activity in 2024.

CAPITAL SOURCES AND USES

On April 30, 2025, the Company's Board of Directors declared a dividend of $0.67 per share for the second quarter of 2025. The dividend will be paid on May 29, 2025, to all holders of record of the Company's restricted and unrestricted common stock as of May 15, 2025.

On March 14, 2025, the Company completed an offering of $400 million aggregate principal amount of senior unsecured notes due 2033. The notes bear interest at a rate equal to 6.625% per annum. The notes are guaranteed on a senior unsecured basis by certain of the Company's subsidiaries. Concurrently with the closing of the notes offering, the Company paid down its senior secured term loan to a balance of $450.0 million and then amended and restated the senior secured term loan agreement for the remaining $450.0 million balance to extend the maturity date of the term loan agreement to 2032 and provide for a separate three-year $50 million revolving credit facility. The Company wrote-off $4.2 million of the unamortized deferred issuance costs related to the $800 million senior secured term loan as a result of paying down the remaining balance to $450.0 million.

The $450 million term loan facility under the amended and restated credit agreement will initially bear interest at a rate equal to SOFR plus 2.00%. Following the first full fiscal quarter ending after the closing date, the applicable interest margin on the term loan facility will be subject to a 25 basis points step down if the Company's total leverage ratio (as defined in the amended and restated credit agreement) is equal to or less than 2.00 to 1.00. The Company's Consolidated Corporate Leverage ratio as of March 31, 2025 was 2.70 to 1.00. The amended and restated credit agreement also includes for a separate three-year, $50 million revolving credit facility that bears interest at a rate equal to SOFR plus 1.75%.

On February 12, 2025, 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 starting from February 21, 2025 (the "2025 Share Repurchase Program"). As of March 31, 2025, we have not repurchased any shares of common stock under the 2025 Share Repurchase Program. Any purchases made pursuant to the 2025 Share Repurchase Program will be made in the open market or in privately negotiated transactions, from time to time, as permitted by federal securities laws and other legal requirements. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The repurchase program may be suspended or discontinued at any time.

CONFERENCE CALL INFORMATION

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

ABOUT WALKER & DUNLOP

Walker & Dunlop (NYSE:WD) is one of the largest commercial real estate finance and advisory services firms in the United States and internationally. Our ideas and capital create communities where people live, work, shop, and play. Our innovative people, breadth of our brand, and our 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 based on the final resolution of the defaulted loans or collateral, 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, goodwill impairment and other adjustments. 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 based on the final resolution of the defaulted loans or collateral, stock-based incentive compensation charges, the fair value of expected net cash flows from servicing, net, the write-off of the unamortized balance of deferred issuance costs associated with the repayment of a portion of our corporate debt, goodwill impairment, and contingent consideration liability fair value adjustments when the fair value adjustment is a triggering event for a goodwill impairment assessment. Furthermore, adjusted EBITDA is not intended to be a measure of free cash flow for our management's discretionary use, as it does not reflect certain cash requirements such as tax and debt service payments. The amounts shown for adjusted EBITDA may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which are further adjusted to reflect certain other cash and non-cash charges that are used to determine compliance with financial covenants. Because not all companies use identical calculations, our presentation of adjusted EBITDA, adjusted core net income and adjusted core EPS may not be comparable to similarly titled measures of other companies.

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

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

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

FORWARD-LOOKING STATEMENTS

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

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

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

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