Release Date: May 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Walker & Dunlop Inc (WD, Financial) reported a strong debt brokerage volume of $3.3 billion, up 40% year over year, highlighting robust capital sourcing capabilities.
- Adjusted EBITDA for Q1 was $74 million, marking a 9% increase from the previous year, demonstrating financial stability and growth.
- The company's servicing and asset management business contributed significantly to adjusted EBITDA, benefiting from lower portfolio runoff and a conservative credit culture.
- Investments in technology, particularly in the small balance lending and appraisal businesses, have led to increased efficiencies and revenue growth.
- Walker & Dunlop Inc (WD) launched a new technology portal for servicing clients, enhancing client engagement and reducing licensing fees.
Negative Points
- Q1 diluted earnings per share were down 56% year over year at $0.35, impacted by market volatility and rising interest rates.
- Total transaction volume closed at $6.4 billion, a decrease of 5% from Q1 of the previous year, reflecting challenging market conditions.
- The company experienced a slow start with the GSEs (Government-Sponsored Enterprises) in Q1, which could impact future performance if not improved.
- Walker & Dunlop Inc (WD) reported a decrease in revenues from Walker & Dunlop affordable equity by 9% in Q1 compared to the same period last year.
- Despite strong brokerage activities, the investment sales team closed only $1.2 billion of transaction volume, significantly lower than peak levels.
Q & A Highlights
Q: When you look at the landscape, do you see any interesting market share gain opportunities? It's clear that the banks are going to pull back in commercial real estate lending and W&D is a specialist in multifamily creator of credit products, interest earning assets. Could it potentially increase its market share in the business? Where do you see the biggest opportunities for that.
A: William Walker - Walker & Dunlop Inc - Chairman of the Board of Directors, Chief Executive Officer: Good morning, Jade, and thanks for joining us. The first thing is obviously to maintain our leadership position and with the GSEs, given their role in the market and given the mortgage servicing rights that we generate when we originate loans at the GSEs. So after a slow Q1, as I just said, and as Greg just said, our pipeline looks good for Q2 and we're seeing them step into the market more and hydro had a slow start to the year end. And one of those businesses that quite honestly, the amount of time. It takes to get a loan done at HUD.
Q: What trends are you seeing maybe on a forward looking basis on the credit it seems like you're not concerned, but I would hope for a comment on Greg went through in great detail on the loans that we focus on pre-purchased as well as on a very small delinquency number relative to the size of the portfolio. Actually also underscore 92% of our Irish portfolio is fixed rate loans.
A: William Walker - Walker & Dunlop Inc - Chairman of the Board of Directors, Chief Executive Officer: And I also pointed out that the agencies, and we have very few maturities in 2024, and that's all good from a credit standpoint. It obviously puts a lot of it puts the onus on our origination team to go outside of Walker & Dunlop's portfolio and find new loans. But investors have to remember Walker & Dunlop when I joined this firm in 2003, we had a $5 billion servicing portfolio. So the growth from $5 billion to $132 billion has been going out and essentially stealing deal flow from the competition. And as I said in my prepared remarks, over 75% of our Q2 or loan originations were new loans to Walker & Dunlop. We have a track record of doing that, and we'll continue to do that.
Q: Good morning, Willy and team. Thanks for taking the question for Willy. You commented about the GSEs and I think I don't want to misquote you, but your view that they would we've worked very hard to meet their $70 billion goal this year.
A: William Walker - Walker & Dunlop Inc - Chairman of the Board of Directors, Chief Executive Officer: Again, let me just jump in on that. Just let me just jump in on that. What Greg said was it is our expectation that they repeat 23 volumes in 24, which says that right now or expectations of the two of them come in somewhere in the mid 50s and not at that job $1 billion number. Why would we love for them to get to that $70 billion number, but what we're essentially saying is we're parity what they told us in Q1, which is they told us in Q1. We think 24 will be a redo of 23.
Q: Great. Good morning. Thanks for taking my questions. There's been a lot of talk about CRE maturities increasing this year and that yes, there's some of those maturities that were extensions that had been pushed in 2023, and you talked about a bit earlier in the call, but just given where rates have gone. Are you anticipating that the 2024 maturity wall could be pushed out further and have a negative impact on transaction volumes from extension activities that something that you saw happening in the first quarter, Brian, we clearly saw it.
A: William Walker - Walker & Dunlop Inc - Chairman of the Board of Directors, Chief Executive Officer: And I guess when we look at the maturity schedules and we're looking at an annual maturity schedule and not necessarily February, March, June or July, what have you? But we clearly saw a lot of sort of extensions in Q1. And I would also say to you that I mean, Q1 was a the psychology of the market was coming into rate cuts in March were ready to have a lower cost to capital. And let's just wait and then all of a sudden that shifted and everyone's Oh, gosh.
Q: Just with your commentary on the brokered volumes shifting to more non multi-family property types. Is that expected to does your pipeline suggests it will continue into 2Q? And do you think you're properly?
A: William Walker - Walker & Dunlop Inc - Chairman of the Board of Directors, Chief Executive Officer: Good question very much the pipeline shows that there is continued growth in that line of business. And I would tell you, Derek, that the low rates, the coupon rates that we are deploying that capital at in some instances, just make my eyes spend in the sense that it's a silver plus 400 dealer to get to 1011% coupon rate. The there is a lot of debt. There's a lot of equity capital out there. There's also a lot of debt capital out there. I don't need to tell you that every major private equity firm has a big debt fund and they're all looking for opportunistic lending.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
