Walker & Dunlop, Inc · NYSE:WD
Walker & Dunlop — Q3 2022 Earnings Presentation
22 slides from Walker & Dunlop's earnings presentation, Nov 9, 2022
Slide 1: Third Quarter 2022 Earnings
Q3 THIRD QUARTER 2022 EARNINGS November 9, 2022
Slide 2: Forward-Looking Statements
Forward-Looking Statements Some of the statements contained in this presentation 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
Slide 3: Rapid interest rate increases drove spread compression and lower gain on sale margin
R A P I D I N T E R E S T R AT E I N C R E A S E S D R O V E S I G N I F I C A N T SPREAD COMPRESSION AND LOWER GAIN ON SALE MARGIN1 Total Gain on Sale Margin 1.65% 1.23% 3 Q3'21 Q3'22 1) Gain on sale margin calculated by adding total origination fee margin and total MSR margin for the quarter
Slide 4: 17% market share puts W&D on track to remain Fannie Mae's largest lending partner
17% MARKET SHARE PUTS W&D ON TRACK TO REMAIN FA N N I E ’ S L A R G E S T L E N D I N G PA RT N E R Fannie Mae Market Share ($ in millions) 17.1% 15.0% 13.9% 12.4% 10.5% $11,363 $9,612 $8,678 $8,664 $6,883 2018 2019 2020 2021 YTD 2022 W&D Deliveries W&D Market Share #2 #1 #1 #1 FNM Rankings 4 1) Mar
Slide 5: Decline in non-cash MSRs resulted in lower total revenues while cash earnings grew
D E C L I N E I N N O N - C A S H M S R S R E S U LT E D I N L O W E R T O TA L R E V E N U E S W H I L E C A S H E A R N I N G S G R E W Total Revenues Diluted Earnings per Share Adjusted EBITDA1 Adjusted Diluted (in thousands) (in thousands) Earnings per Share2 $74,990 $1.55 $346,290 $2.21 $315,61
Slide 6: W&D promoter score increased in Q3
W&D PROMOTER SCORE INCREASED IN Q3 AS OUR TEAM MET CLIENTS’ NEEDS IN CHALLENGING CONDITIONS 100 90 91 80 70 60 50 40 44 30 20 10 0 Financial Services Average NPS W&D NPS 6 Source : https://customergauge.com/blog/nps-use-case-for-financial-services-companies
Slide 7: Capital Markets Q3 key financial metrics
C A P I TA L M A R K E T S Q3 KEY FINANCIAL METRICS (in thousands) Q3’22 Q3’21 % Change Total Revenues $183,374 $251,041 (27%) Total Expenses $132,995 $144,535 (8%) Net Income $37,628 $80,846 (53%) Adjusted EBITDA1 $119 $21,288 (99%) • Decline in total revenues due primarily to overall decrease in d
Slide 8: Servicing & Asset Management Q3 key financial metrics
S E RV I C I N G & A S S E T M A N A G E M E N T ( “ S A M ” ) Q3 KEY FINANCIAL METRICS (in thousands) Q3’22 Q3’21 % Change Total Revenues $134,488 $95,830 40% Income from Operations $48,312 $28,531 69% Net Income $36,376 $21,422 70% Adjusted EBITDA1 $107,517 $82,810 30% • Ended Q3’22 with total man
Slide 9: Corporate Q3 key financial metrics
C O R P O R AT E Q3 KEY FINANCIAL METRICS (in thousands) Q3’22 Q3’21 % Change Total Revenues ($2,251) ($581) 287% Net Income ($27,171) ($30,547) (11%) Adjusted EBITDA1 ($32,646) ($31,668) 3% • Segment net income and adjusted EBITDA will typically be negative for the Corporate segment • Variable comp
Slide 10: Revised 2022 Financial Outlook
REVISED 2022 FINANCIAL OUTLOOK FULL-YEAR 2022 TARGETS Diluted Earnings Per Share DOWN 15-20% Adjusted EBITDA HIGH SINGLE-DIGIT GROWTH Operating Margin 24% to 27% Return on Equity 15% to 18% 10
Slide 11: Revenue per employee is at the top of peer set
R E V E N U E P E R E M P L O Y E E I S AT T H E T O P O F P E E R S E T Revenue Per Employee1 (in millions) $0.9 $0.5 $0.5 $0.4 $0.3 $0.2 CIGI CWK 2 JLL 2 NMRK 2 CBRE WD (1) CIGI, CWK, JLL, CBRE, and NMRK calculated using 2021 revenues and employees as of 12/31/21; WD calculated using TTM 2022 reve
Slide 12: Escrow earnings are a natural hedge to increased interest rates
E S C R O W E A R N I N G S A R E A N AT U R A L H E D G E T O I N C R E A S E D I N T E R E S T R AT E S Interest Expense and SAM Escrow Earnings Corporate Debt to TTM Adjusted EBITDA2 ratio3 (in millions) + $55-70 $100-$115 2.4x + $21 2.1x $55 $45 $34 FLAT $8 $8 At December 31, 2021 At September 3
Slide 13: WD stock outperforms peers throughout economic cycles
WD STOCK OUTPERFORMS PEERS THROUGHOUT ECONOMIC CYCLES 2011-2012 Share Price Performance (%) 80 60 65% 40 20 0 (20) (40) (60) 2020-2021 Share Price Performance (%) 150 132% 100 50 0 (50) (100) 13 WD CBRE JLL CIGI NMRK ABR CWK MMI Source: S&P Capital IQ
Slide 14: WD's diversified business model recovers quickly from market dislocation
WD’S DIVERSIFIED BUSINESS MODEL RECOVERS Q U I C K L Y F R O M P E R I O D S O F M A R K E T D I S L O C AT I O N 3-Year Total Shareholder Return (%) 200 150 100 50 46% 0 (50) (100) WD S&P 500 CRE Services Median1 Mortgage Originators Median 2 14 Source: S&P Capital IQ 1) Includes CBRE, CIGI, CWK, J
Slide 15: Business remains well positioned to achieve Drive to '25 goals
BUSINESS REMAINS WELL POSITIONED TO ACHIEVE DRIVE TO ‘25 GOALS Debt Financing Volume Property Sales Volume Servicing Portfolio (in billions) (in billions) (in billions) $65.0 $25.7 $160.0 $25.0 $53.5 $120.8 +$11B Achieved +$39B to achieve on TTM to achieve goal basis goal TTM 2022 2025 Goal TTM 2022
Slide 16: Appendix
APPENDIX
Slide 17: Consolidated Adjusted EBITDA reconciliation to consolidated net income
C O N S O L I D AT E D A D J U S T E D E B I T D A R E C O N C I L I A T I O N T O C O N S O L I D AT E D N E T I N C O M E Three months ended Three months ended Nine months ended Nine months ended (in thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Walker & Du
Slide 18: Debt to Adjusted EBITDA reconciliation to net income
D E B T T O A D J U S T E D E B I T D A R E C O N C I L I AT I O N T O N E T INCOME Twelve months ended Twelve months ended (in thousands) September 30, 2022 December 31, 2021 Walker & Dunlop Net Income $252,259 $265,762 Adjustments: Income tax expense 76,612 86,428 Interest expense 24,813 7,981 Amo
Slide 19: Adjusted net income and adjusted diluted EPS reconciliation
ADJUSTED NET INCOME AND ADJUSTED D I L U T E D E P S R E C O N C I L I AT I O N T O N E T I N C O M E Three months ended Three months ended Nine months ended Nine months ended (in thousands) September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 Walker & Dunlop Net Income $46,83
Slide 20: Adjusted EBITDA reconciliation by segment: Capital Markets
A D J U S T E D E B I T D A R E C O N C I L I AT I O N T O NET INCOME BY SEGMENT Capital Markets Three months ended September 30, Three months ended September 30, (in thousands) 2022 2021 Walker & Dunlop Net Income $37,628 $80,846 Adjustments: Income tax expense 12,751 25,660 Amortization and deprec
Slide 21: Adjusted EBITDA reconciliation by segment: SAM
A D J U S T E D E B I T D A R E C O N C I L I AT I O N T O NET INCOME BY SEGMENT SAM Three months ended September 30, Three months ended September 30, (in thousands) 2022 2021 Walker & Dunlop Net Income $36,376 $21,422 Adjustments: Income tax expense 12,110 7,040 Amortization and depreciation 57,239
Slide 22: Adjusted EBITDA reconciliation by segment: Corporate
A D J U S T E D E B I T D A R E C O N C I L I AT I O N T O NET INCOME BY SEGMENT Corporate Three months ended September Three months ended September (in thousands) 30, 2022 30, 2021 Walker & Dunlop Net Income ($27,171) ($30,547) Adjustments: Income tax expense (benefit) (17,329) (9,747) Interest exp