INVESTOR OVERVIEW
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 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 presentation 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-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) regulatory and or legislative changes to Freddie Mac, Fannie Mae or HUD, (3) our ability to retain and attract loan originators and other professionals, and (4) 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, as it may be updated or supplemented by our subsequent Quarterly Reports on Form 10-Q and other SEC filings. Such filings are available publicly on our Investor Relations web page atwww.walkerdunlop.com.
Non-GAAP Financial Measures
To supplement our financial statements presented in accordance with GAAP, we use adjusted EBITDA, a non-GAAP financial measure. The presentation of adjusted EBITDA 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 in addition to, and not as an alternative for, net income. Adjusted EBITDA represents net income before income taxes, interest expense on our term loan facility, and amortization and depreciation, adjusted for provision (benefit) for credit losses net of write-offs, stock-based incentive compensation charges, and fair value of expected net cash flows from servicing, net. Additionally, adjusted EBITDA further includes or excludes other significant non-cash items that are not part of our ongoing operations. Because not all companies use identical calculations, our presentation of
adjusted EBITDA may not be comparable to similarly titled measures of other companies. 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.
We use adjusted EBITDA 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 this non-GAAP measure, when read in conjunction with our GAAP financials, provides useful information to investors by offering:
● the ability to make more meaningful period-to-period comparisons of our ongoing operating results; ● the ability to better identify trends in our underlying business and perform related trend analyses; and ● a better understanding of how management plans and measures our underlying business
We believe that adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with our results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate our results of operations in conjunction with net income.
TA B L E O F C O N T E N T S
4
What Makes W&D a Compelling Investment
10
14
19
26
30
Strategic Growth Plan
Company Overview
Historical Financial Performance
Commercial Real Estate Market Trends
Transaction Platform
38
Servicing Portfolio & Mortgage Servicing Rights
W H AT M A K E S W & D A
C O M P E L L I N G I N V E S T M E N T
Diverse, Profitable, and
Proven Platform
Our mission is to build the premier
commercial real estate finance firm in the
United States.
With a broad range of financing solutions for
every type of commercial real estate asset and
investment sales services for multifamily
properties, Walker & Dunlop’s growth has
consistently outpaced the market.
Over the past five years (through 2019):
>
The total commercial real estate
market grew at a compound annual
rate of 9% according to the Mortgage
Bankers Association
>
Walker & Dunlop’s total transaction
volume grew at a compound annual
rate of 23%
Market-Leading Position
>
#1 Fannie Mae DUS® lender
>
#3 Freddie Mac Multifamily Approved
Seller/Servicer
>
#3 HUD Multifamily Lender based on
MAP initial endorsements
>
6.0% market share of the total
multifamily market in 2019
(1)Footnote (1): MBA Commercial Multifamily Real Estate Finance Forecast; January 2020
Long-Term Growth
Walker & Dunlop aims to grow annual revenues to $1
billion by the end of 2020, through the growth of debt
financing volume, property sales volume, our
commercial mortgage servicing portfolio, and our
asset management platform.
Return of Capital
Walker & Dunlop has returned capital to
shareholders while prioritizing using capital to make
strategic investments to grow its platform and
increase profitability.
During 2019, W&D repurchased 135 thousand
shares for $6.6 million and paid four quarterly
dividends of $0.30 per share for a total of $44 million
returned to shareholders.
In February 2020, the Board of Directors authorized
$50 million of share repurchases over a 12-month
Stable Revenue Sources
Walker & Dunlop is the 7
thlargest commercial
mortgage servicer in the United States as of
December 31, 2019 according to the Mortgage
Bankers Association. Our $100 billion servicing
portfolio (at June 30, 2020) provides a stable and
durable source of cash flow and income, ensuring
financial flexibility.
Management Team
Walker & Dunlop has an experienced management
team fully aligned to drive shareholder value by
taking additional market share and gaining access
to a broader client base.
$
100
B
900
+
$
32
B
40
M I S S I O N T O B U I L D T H E P R E M I E R
C O M M E R C I A L R E A L E S TAT E F I N A N C E
F I R M I N T H E U . S .
Walker & Dunlop provides customized financing
solutions to owners and operators of commercial
real estate properties across the United States
and is one of the largest commercial real estate
lenders in the country.
The Company originates commercial real estate
loans for Fannie Mae, Freddie Mac, HUD, and its
on-balance sheet lending program through a joint
venture with Blackstone Mortgage Trust, and
brokers loans to life insurance companies, banks,
CMBS originators, and other capital providers.
Walker & Dunlop offers multifamily property sales
services through its property sales platform and
provides joint venture equity, preferred equity,
and bridge loans through its Registered
S T R AT E G I C G R O W T H P L A N
VISION 2020
E S T A B L I S H E D 1 / 1 / 2 0 1 5$1 BILLION
I N A N N U A L R E V E N U E S
$8
B
asset management
platform
$100
B
servicing portfolio
$30
B
annual debt
financing volume
$8
B
annual property
sales volume
$31.4 billion
$8 billion
$1.9 billion
$100 billion $0.9 billion
Debt Financing Volume Property Sales Assets Under Management Servicing Portfolio Total Revenues
2020 Progress (TTM)
V I S I O N 2 0 2 0 U P D AT E
12 1) For trailing twelve months ended June 30, 20202) At June 30, 2020
$30+
billion
billion
$8+
billion
$8+
billion
$100
billion
$1
2 0 2 0 F I N A N C I A L O U T L O O K
2020 Goals
Earnings Per Share
Double digit growth
Operating Margin
28% to 30%
Return on Equity
18% to 20%
C O M PA N Y O V E RV I E W
1937
One of the first companies to use FHA insurance for single-family home loans
1947
First life company correspondent appointed1971
Arranged the first off-balance-sheet financing for the U.S. government
1988
Named one of the first Fannie Mae DUS® Lenders2009
Acquired Column Guaranteed LLC2010
Initial Public Offering on New York Stock Exchange2012
Acquired CWCapital LLCO U R H I S T O R Y
We have a track record of making strategic acquisitions that have driven strong growth and
diversification over time.
F O U N D E D I P O
2014
Acquired Johnson Capital2015
Acquired Engler Financial Group2016
Acquired George Elkins Mortgage Banking Acquired2017
Acquired Deerwood Real Estate Capital2018
Acquired JCR Capital Acquired Atlanta iCap2019
Acquired Enodo2020
Acquired AKS Capital, and MSF Real Estate CapitalWilly Walker
| Chairman & Chief Executive Officer
[email protected]
16
>
Joined Company in 2003 and is third generation of Walker family leadership
>
Became President in 2005, CEO in 2007, and Chairman in 2010
>
Has led Company through period of significant growth including IPO and
multiple acquisitions
>
Serves on the Boards of Children’s National Medical Center, the Real
Estate Roundtable, Mortgage Bankers Association, and St. Albans School
>
Prior to joining Walker & Dunlop, Mr. Walker was President of the European
and Latin American Divisions of TeleTech, a global business process
outsourcing company
Howard Smith
| President
[email protected]
Stephen Theobald
| Chief Financial Officer
[email protected]
>
Joined Company in 1980 and became member of management team in 1988
>
Named Executive Vice President and Chief Operating Officer in 2004 and
assumed role of President in 2015
>
Oversees loan origination and investment sales operations and is a member
of the Board of Directors
>
Past Chairman of the Advisory Council to the Fannie Mae DUS Peer Group;
Member of the National Multi Housing Council Board of Directors
>
BA from Washington & Lee University
>
Joined company in 2013
>
Responsible for financial planning and reporting, accounting, investor
relations, servicing, asset management, and marketing, as well as
overseeing overall strategic financial direction of the Company
Paula Pryor
| EVP & Chief Human Resources Officer
[email protected]
18
Richard Lucas
| EVP & General Counsel
[email protected]
>
Joined Company in 2009
>
Responsible for leading the human resources function, including enabling
best-in-class benefits and compensation, career and leadership
development, talent management, workforce planning, change management,
and employee relations
>
Prior to joining Walker & Dunlop, Ms. Pryor entered the financial services
industry as a human resources manager with CapitalSource, Inc.
>
Prior to joining CapitalSource, Ms. Pryor started her career in human
resources with Katzenbach Partners, now known as the Katzenbach Center
at Strategy&, part of the PWC global network
>
BA from the University of Richmond and MA from Georgetown University
>
Joined Company in 2010
>
Responsible for legal, human resources, and office services groups
>
Administrative oversight of Company’s Internal Audit function; leads Risk
Committee
>
Prior to joining Walker & Dunlop, Mr. Lucas was General Counsel for Hilton
Worldwide, Inc., a global hospitality company
>
Prior to joining Hilton, he was a partner at the law firm of Arnold & Porter LLP
in Washington, D.C., where he was in private practice for 18 years
H I S T O R I C A L F I N A N C I A L
P E R F O R M A N C E
E X C E P T I O N A L G R O W T H S I N C E 2 0 1 0
I P O
20
Total Revenues
Net Income
(as of December 31Price Per Share
st)24%
CAGRTotal Transaction
Volume
29%
Q U A R T E R LY A N D A N N U A L T O TA L
T R A N S A C T I O N V O L U M E
Total Transaction Volume by Quarter
(in millions)
Mix of Transaction Volume by Year
$4,348 $2,616 $5,012 $4,849 $5,941 $3,787 $5,389 $6,032 $6,193 $7,306 $4,937 $5,032 $8,550 $7,652 $8,907 $4,687 $6,261 $8,312 $9,353 $9,813 $17,759 $19,298 $27,906 $28,047 $31,967 28% 36% 28% 28% 25% 36% 22% 29% 25% 20% 23% 22% 26% 29% 32% 9% 13% 11% 10% 17% 3% 5% 5% 4% 3% 1% 2% 1% 4% 3%
T O TA L R E V E N U E S & E A R N I N G S P E R
S H A R E
22
Total Revenues
(in thousands)
Diluted Earnings Per Share
$468,198 $575,276 $711,857 $725,246 $817,219 2015 2016 2017 2018 2019 $2.62 $3.57 $6.47 $4.96 $5.45 2015 2016 2017 2018 2019
$1.79 per share associated with one-time Q4'17 tax benefit from the Tax Cuts and Jobs Act
19% 21% 23% 19% 18%
O P E R AT I N G M A R G I N & R O E
Operating Margin
Return on Equity
29%
32% 33%
29%
S C A L E D P L AT F O R M D R I V E S
O P E R AT I N G E F F I C I E N C Y
24
W&D has generated over $1 million of revenue per employee for the past four years
$969
$1,111
$1,188
$1,081
$1,068
15% 20% 25% 30% 35% $200 $400 $600 $800 $1,000 $1,200 $1,4002015
2016
2017
2018
2019
in t hous andsRevenue per employee
Operating margin
(1) Total annual revenues divided by average number of employees during the year
A D J U S T E D E B I T D A H A S D O U B L E D
S I N C E 2 0 1 5
Strong cash flow has allowed us to
both invest in the business and return
capital to shareholders
>
Increased quarterly dividend by 20% to
$0.36 per share in February 2020
>
Repurchased 135 thousand shares totaling
$6.6 million in 2019
•
In February 2020, Board of Directors
authorized share repurchases of up to
$50 million over a 12-month period
>
Funded on-balance sheet loans
>
Made several acquisitions over past three
years (including the acquisition of two debt
brokerage firms in early 2020) which have
led to growth and scale in the platform
Adjusted EBITDA
(1) (in thousands) $124,279 $129,928 $200,950 $220,081 $247,907C O M M E R C I A L R E A L E S TAT E M A R K E T
T R E N D S
$ 3 . 7 T R I L L I O N I N C R E D E B T
O U T S TA N D I N G
Multifamily vs. Non-Multifamily
(in billions)By Lender
(in billions) $1,531 $2,130 $1,417 $504 $744 $561 $435C R E M A R K E T S H A R E H A S
I N C R E A S E D D R A M AT I C A L LY T O 1 3 %
28 $184 $244 $358 $400 $504 $490 $530 $574 $601 $124 2.2% 2.9% 2.3% 2.8% 3.2% 3.4% 4.7% 4.4% 4.4% 13.2% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% $100,000,000,000 $200,000,000,000 $300,000,000,000 $400,000,000,000 $500,000,000,000 $600,000,000,000 $700,000,000,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 2020*Total Commercial Real Estate Mortgage Originations
(dollars in billions)
Source: Mortgage Bankers Association
S I G N I F I C A N T G S E L E N D I N G
C A PA C I T Y R E M A I N I N G I N 2 0 2 0
Fannie Mae Volumes
(in billions)
Freddie Mac Volumes
(in billions)>
The current FHFA scorecard sets Fannie Mae and Freddie Mac’s multifamily lending capacity at $100 billion each
through five quarters ending Q4’20
>
After lending a combined $64 billion in the first half of 2020, Fannie and Freddie have approximately $100 billion of
lending capacity left in 2020
YTD Volume YTD Volume $28.8 28.9 $42.4 $55.3 $67.1 $65.4 $70.2 $81.9 $25.9 $28.3 $47.3 $56.8 $73.2 $78.0 $78.4 $82.4 Remaining
T R A N S A C T I O N P L AT F O R M
S U C C E S S F U L R E C R U I T I N G H A S
Rate Lock
to Closing
Rate lock & forward sell the loan. At this point, W&D recognizes income
Loan closes
Loan Application
Loan is sourced by oneof W&D’s originators The loan & borrower are pre-screened, W&D’s investment committee is engaged
Loan application is completed
Underwriting
Loan goes throughunderwriting process at W&D inclusive of property visits and inspections
Investment committee does final review and approves loan
A G E N C Y L O A N F I N A N C I N G P R O C E S S
32
GOAL: To facilitate efficient, timely loan origination without compromising effective
risk-management controls
Post-Closing
Loan sits on warehouse prior to delivery to investor Loan is delivered to investor. FNM / FRE recognize volume at time of delivery Asset management & loan servicing takes over management of the loan 5-30 Days> W&D received one of the first Fannie Mae
DUS licenses in 1988 and has grown to be > W&D became a Freddie Mac Multifamily Seller/Servicer with the acquisition of Column > W&D gained a HUD license with acquisition of Column Guaranteed in 2009
A G E N C Y L E N D I N G
Fannie Mae
(loan originations in millions)
Freddie Mac
(loan originations in millions)HUD
(loan originations in millions)$5,013 $7,001 $7,894 $7,806 $8,045 2015 2016 2017 2018 2019 $6,326 $4,234 $7,891 $6,972 $6,380 2015 2016 2017 2018 2019 $592 $880 $1,358 $999 $848 2015 2016 2017 2018 2019
G S E L E A D E R S H I P P O S I T I O N I N 2 0 1 9
34
2019
Fannie Mae
1 Walker & Dunlop
2 CBRE
3 Wells Fargo
4 Berkadia
5 Greystone
6 PGIM Real Estate
Finance
7 Capital One
8 KeyBank
9 Arbor
10 Newmark Knight Frank
2019
Freddie Mac
1 CBRE
2 Berkadia
3 Walker & Dunlop
4 Newmark Knight Frank
5 HFF
6 Capital One
7 Wells Fargo
8 Greystone
9 KeyBank
10 JLL
2018
Fannie Mae
1 Wells Fargo
2 Walker & Dunlop
3 Berkadia
4 CBRE
5 Newmark Knight Frank
6 Greystone
7 Capital One
8 KeyBank
9 PGIM Real Estate
Finance
10 Arbor
2018
Freddie Mac
1 CBRE
2 Berkadia
3 HFF
4 Walker & Dunlop
5 KeyBank
6 Wells Fargo
7 Newmark Knight Frank
8 Capital One
9 JLL
10 Greystone
D E B T B R O K E R A G E
The debt brokerage team is known for creative structured financing of all real estate asset classes. The acquisition of
Johnson Capital in 2014 doubled the size of the debt brokerage team and expanded geographic presence in the West
and Southwest. Walker & Dunlop has continued to grow its brokered loan originations through hiring and
acquisitions, including the acquisitions of Elkins in 2016, Deerwood in 2017, iCap in 2018, and both AKS Capital
Partners and MSF Real Estate Capital in January 2020.
Over 257 Capital Sources
Securitized
Lenders
Commercial
Banks
Life
Insurance
Companies
Pension
Funds
Credit
Companies
Hedge
Funds
Savings
Banks
26%
4- YEAR COMPOUND ANNUAL GROWTH RATEBrokered Loan Originations
(in millions)
$4,122 $4,189
$7,327
$8,398
P R I N C I PA L L E N D I N G A N D I N V E S T I N G
36
Principal Lending and Investing originations include interim loans and
preferred equity investments.
Interim loans
>
Through a joint venture with Blackstone Mortgage Trust (BXMT)
W&D originates, holds, and finances multifamily bridge loans
before they become eligible for permanent agency financing.
W&D contributes 15% of the equity capital to the venture, and
BXMT contributes 85%.
>
W&D uses its balance sheet to provide short-term bridge loans
to borrowers seeking to acquire or reposition multifamily
properties that do not currently qualify for permanent financing.
Once the property is ready for permanent financing, W&D can
facilitate a transition to Fannie Mae, Freddie Mac or HUD
financing.
>
JCR Capital, W&D’s fund management business, provides
transitional loans on all asset classes for its separately
managed accounts.
Preferred equity investments
>
Under certain circumstances, W&D may use its balance sheet
to make preferred equity investments to assist borrowers in
acquiring or repositioning properties.
Principal Lending and Investing Volume
(in millions) $185 $420 $314 $1,159 $936 2015 2016 2017 2018 201950%
4- YEAR COMPOUND ANNUAL GROWTH RATE>
In April 2015, Walker & Dunlop completed the
acquisition of 75% of certain assets of Engler
Financial Group, adding multifamily property sales
to its platform
>
Since the acquisition, the synergies between
multifamily property sales and debt financing have
allowed Walker & Dunlop to capture additional
financing business and tap into new clients
>
During 2019, Walker & Dunlop added 20 property
sales brokers to its platform, more than doubling
the size of the team
>
Walker & Dunlop’s goal is to continue to expand its
M U LT I FA M I LY P R O P E R T Y S A L E S
Property Sales Volume
(in millions) $1,520 $2,574 $3,031 $2,713 $5,39337%
4- YEAR COMPOUND ANNUAL GROWTH RATES E RV I C I N G P O R T F O L I O &
M O R T G A G E S E RV I C I N G R I G H T S
$ 9 3 B I L L I O N C O M M E R C I A L
S E RV I C I N G P O R T F O L I O
> As of December 31, 2019, the servicing portfolio had a weighted average remaining life of 9.6 years and a weighted average servicing fee of 23.2 bps
Total Servicing Portfolio
(in millions)Income Received from Servicing
(in thousands)> Unlike single family loans, multifamily loans are prepayment protected. As of December 31, 2019, approximately 86% of W&D’s servicing fees were protected against prepayments.
> Over the next two years, only $4.1 billion of Agency loans are scheduled to mature $50,212 $63,081 $74,310 $85,689 $93,225
at Decemberat Decemberat Decemberat Decemberat December
$139,720
$163,582
$218,726
$266,118
I N H E R E N T VA L U E O F S E RV I C I N G
P O R T F O L I O
40
The fair value of our mortgage servicing rights as of December 31, 2019 was $911 million, compared to
our net book value of $719 million, indicating a substantial amount of inherent value
Book Value vs. Fair Value of MSRs
(in millions)$670.1 $718.8
$858.7 $910.5
at December 31, 2018 at December 31, 2019
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 I N C O M E
For the year ended December 31,
(in thousands) 2019 2018 2017 2016 2015
Walker & Dunlop Net Income $173,373 $161,439 $211,127 $113,897 $82,128
Adjustments:
Income tax expense 57,121 51,908 21,827 71,740 52,771
Interest expense 14,359 10,130 9,745 9,851 9,918
Amortization and depreciation 152,472 142,134 131,246 111,427 98,173
Provision (benefit) for credit losses 7,273 808 (243) (612) 1,644
Net write-offs _ _ _ (1,757) (808)
Stock compensation expense 24,075 23,959 21,134 18,477 14,084
Gains attributable to mortgage servicing rights (1) (180,766) (172,401) (193,886) (192,825) (133,631) Unamortized issuance costs from early debt
extinguishment _ 2,104 _ _ _
Adjusted EBITDA $247,907 $220,081 $200,950 $129,928 $124,279
