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Section 1: 8-K (8-K)

wd_Current_Folio_8K_ER

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K 

 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 

 

Date of Report (Date of earliest event reported):  November 8,  2017

 

Walker & Dunlop, Inc.

 

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Maryland

  

001-35000

  

80-0629925

(State or other Jurisdiction of Incorporation)

 

(Commission File Number)

 

(IRS Employer Identification No.)

 

 

 

 

7501 Wisconsin Avenue
Suite 1200E
Bethesda, MD

  

20814

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (301) 215-5500

 

 

                                         Not applicable                                   

(Former name or former address if changed since last report.)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

 

 Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

 


 

Item 2.02.  Results of Operations and Financial Condition.

 

On November 8, 2017, Walker & Dunlop, Inc. (the “Company”) issued a press release reporting its financial results for the quarter and year-to-date period ended September 30, 2017. A copy of this press release is furnished herewith as Exhibit 99.1 and is hereby incorporated by reference into this Item 2.02.

 

The information contained in this current report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

 

Item 9.01.  Financial Statements and Exhibits. 

 

(d)Exhibits.

 

The exhibit contained in this current report on Form 8-K shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.

 

 

 

 

Exhibit Number

   

Description

 

 

 

99.1

 

Press Release dated November 8, 2017

 

2


 

EXHIBIT INDEX

 

 

 

 

 

 

 

Exhibit Number

    

Description

 

 

 

99.1

 

Press Release dated November 8, 2017

 

 

3


 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

 

 

Walker & Dunlop, Inc.

 

 

 

(Registrant)

 

 

 

 

 

 

 

 

Date:  November 8, 2017

 

By:

/s/ Stephen P. Theobald

 

 

 

Executive Vice President, Chief Financial Officer and Treasurer

 

4


(Back To Top)

Section 2: EX-99.1 (EX-99.1)

wd_EX_99_1

Exhibit 99.1

Picture 2

Walker & Dunlop Reports Record Revenues and Transaction

Volume, Leading to 16% Growth in Net Income

Adjusted EBITDA Grows 24%

 

 

THIRD QUARTER 2017 HIGHLIGHTS

·

Record total transaction volume of $8.5 billion, up 70% from Q3 '16

·

Record total revenues of $179.7 million, up 16% from Q3 '16

·

Net income of $34.4 million, or $1.06 per diluted share, up 16% from Q3 '16

·

Adjusted EBITDA1 of $45.0 million, up 24% from Q3 '16

·

Servicing portfolio of $70.3 billion at September 30, 2017, up 19% from September 30, 2016

·

Net MSR additions from loan originations during the quarter totaled  $14.8 million

·

Share repurchases of $10.8 million at a weighted-average price of $47.07 per share

 

YEAR-TO-DATE 2017 HIGHLIGHTS

·

Total transaction volume of $19.6 billion,  a 50% increase from 2016

·

Total revenues of $504.7 million, a 27% increase from 2016

·

Net income of $112.2 million, or $3.49 per diluted share, a 45% increase from 2016

·

Adjusted EBITDA of $146.3 million, up 53% from 2016

·

Operating margin of 33% compared to 31% in 2016

·

Return on equity of 23% compared to 20% in 2016

 

Bethesda, MD – November 8, 2017Walker & Dunlop, Inc. (NYSE: WD) (the “Company”) reported third quarter 2017 net income of $34.4 million, or $1.06 per diluted share, representing a 16% increase in net income over the third quarter 2016. Total revenues for the third quarter 2017 were a record $179.7 million, a 16% increase from the prior-year third quarter. Adjusted EBITDA for the third quarter 2017 was $45.0 million, a 24% increase compared to the  third quarter 2016.

 

“Our third quarter financial results reflect continued success towards achieving our mission to build the premier commercial real estate finance company in the United States,” commented Chairman and CEO, Willy Walker. “$8.5 billion of total transaction volume, up 70% over last year, drove record quarterly revenues of $180 million and a 16% increase in net income over Q3 2016. Year-to-date earnings per diluted share of $3.49 puts us well on pace to deliver double-digit earnings growth for the fourth consecutive year. Given the fundamentals underlying commercial real estate, the demographic trends supporting multifamily housing, and Walker & Dunlop’s consistent growth and financial performance, we expect the momentum we have gained this year to continue into 2018 and beyond.”

 

Walker continued, “Walker & Dunlop was recently ranked number 17 in Fortune Magazine’s list of Fastest Growing Companies, reflecting our three-year track record of growth in revenues, earnings per share and total shareholder return. Just as exciting as our strong financial performance is how our brand and reputation across the industry have grown to create new business opportunities, such as the $1.9 billion financing of Greystar’s acquisition of Monogram Residential that closed during the third quarter. We have achieved these fantastic growth numbers by establishing a clear long-term mission, executing to annual strategic goals, recruiting and acquiring the most talented professionals in our industry, and exceeding our clients’ expectations every day.”

 

1

 


 

Picture 8

Third Quarter 2017 Earnings Release

 

THIRD QUARTER 2017 OPERATING RESULTS

 

 

 

 

 

 

 

 

 

 

 

 

 

TRANSACTION VOLUMES

(dollars in thousands)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

Fannie Mae

$

1,389,451

 

$

1,565,915

 

$

(176,464)

 

(11)

%

Freddie Mac

 

4,040,985

 

 

1,296,045

 

 

2,744,940

 

212

 

Ginnie Mae - HUD

 

263,714

 

 

382,602

 

 

(118,888)

 

(31)

 

Brokered

 

1,893,047

 

 

922,969

 

 

970,078

 

105

 

Interim Loans

 

26,375

 

 

76,475

 

 

(50,100)

 

(66)

 

Loan origination volume

$

7,613,572

 

$

4,244,006

 

$

3,369,566

 

79

%

Investment sales volume

 

935,960

 

 

788,232

 

 

147,728

 

19

 

Total transaction volume

$

8,549,532

 

$

5,032,238

 

$

3,517,294

 

70

%

 

Discussion of Results:

 

·

The increase in total transaction volume was largely the result of (i) an increase in the average number of mortgage bankers and brokers from 103 during the third quarter 2016 to 142 during the same period in 2017 and (ii) the origination of a $1.9 billion portfolio of Freddie Mac loans, the largest transaction in the Company’s history. There was no similar transaction during the third quarter 2016.

·

We continue to experience strong total transaction volume due to the continued strength of the commercial real estate and multifamily market, a low interest rate environment, and robust demand for rental properties.

·

A substantial increase in the average number of mortgage bankers with a primary expertise in brokered loan originations was the primary driver for the substantial increase in brokered loan origination volume.

·

The increase in investment sales volume year over year is due to an increase in the average number of investment sales professionals year over year and an improvement in the broader multifamily investment sales market.

 

 

 

 

 

 

 

 

 

 

 

 

SERVICING PORTFOLIO

(dollars in thousands)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

Fannie Mae

$

30,005,596

 

$

25,875,684

 

$

4,129,912

 

16

%

Freddie Mac

 

25,930,819

 

 

19,702,477

 

 

6,228,342

 

32

 

Ginnie Mae - HUD

 

8,878,899

 

 

9,254,830

 

 

(375,931)

 

(4)

 

Brokered

 

5,170,479

 

 

4,024,490

 

 

1,145,989

 

28

 

Interim Loans

 

298,889

 

 

264,508

 

 

34,381

 

13

 

Total servicing portfolio

$

70,284,682

 

$

59,121,989

 

$

11,162,693

 

19

%

Weighted-average servicing fee rate (basis points)

 

25.7

 

 

25.6

 

 

 

 

 

 

Weighted-average remaining term (years)

 

9.9

 

 

10.5

 

 

 

 

 

 

 

Discussion of Results:

 

·

Our servicing portfolio has experienced significant growth over the past year due to our record loan origination volumes and relatively few payoffs. Over the past 12 months, the Company has originated $23.3 billion of loans, $15.3 billion of which were GSE loans.

·

The decrease in the weighted-average remaining term is the result of the substantial increases in Fannie Mae, Freddie Mac, and brokered loans serviced, coupled with the decline in HUD loans serviced. Fannie Mae, Freddie Mac, and brokered loans typically have terms of 10 years or less, while HUD loans typically have terms of 30 years or more.

·

Fewer than $3.0 billion of Agency loans are scheduled to mature over the next 15 months.

·

During the third quarter 2017, there were $4.0 billion of net loan additions to the servicing portfolio, $3.6 billion of which were Freddie Mac loans, reducing the weighted-average servicing fee from 26.5 basis points at June 30, 2017 to 25.7 basis points at September 30, 2017.

2


 

Picture 8

Third Quarter 2017 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES

(dollars in thousands)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

Loan origination fees

$

60,523

 

$

52,401

 

$

8,122

 

15

%

Gains attributable to MSRs

 

50,781

 

 

48,229

 

 

2,552

 

 5

 

Gains from mortgage banking activities

 

111,304

 

 

100,630

 

 

10,674

 

11

 

Servicing fees

 

44,900

 

 

37,134

 

 

7,766

 

21

 

Net warehouse interest income, LHFS

 

3,487

 

 

3,475

 

 

12

 

 -

 

Net warehouse interest income, LHFI

 

1,871

 

 

2,139

 

 

(268)

 

(13)

 

Escrow earnings and other interest income

 

5,804

 

 

2,630

 

 

3,174

 

121

 

Other revenues

 

12,370

 

 

8,778

 

 

3,592

 

41

 

Total revenues

$

179,736

 

$

154,786

 

$

24,950

 

16

%

Key revenue metrics (as a percentage of loan origination volume):

 

 

 

 

 

 

 

 

 

 

 

Origination related fees

 

0.79

%

 

1.23

%

 

 

 

 

 

Gains attributable to MSRs

 

0.67

 

 

1.14

 

 

 

 

 

 

Gains attributable to MSRs - Agency loans2

 

0.89

 

 

1.49

 

 

 

 

 

 

 

Discussion of Results:

 

·

The $1.9 billion portfolio of Freddie Mac loans originated during the third quarter 2017 had a significant impact on the increases in overall and Freddie Mac loan origination volumes, which led to an increase in gains from mortgage banking activities and impacted the key revenue metrics as more fully described below.

·

The increase in loan origination fees to a quarterly record of $60.5 million was largely driven by the increase in loan origination activity in the third quarter 2017 compared to the prior-year third quarter.

·

The increase in gains attributable to mortgage servicing rights (“MSRs”) was primarily the result of the substantial increase in Freddie Mac loan origination volume, partially offset by a decrease in Fannie Mae loan origination volume year over year and a 100% increase in floating-rate loan origination volume from the third quarter 2016 to the third quarter 2017. Fannie Mae loans are one of our most-profitable product types as they provide significant gains attributable to MSRs. We record relatively less MSR income on floating-rate loan originations as their estimated life is substantially shorter than fixed-rate loan originations.

·

The decrease in the origination related fees key metric was primarily due to the mix of loan origination volume and the large $1.9 billion Freddie Mac portfolio. Brokered loan origination volume as a percentage of total loan origination volume increased from 22% during the third quarter 2016 to 25% during the third quarter 2017. We receive lower origination fees on brokered loans than we do for Agency loans. Additionally, we generally receive lower origination fee rates on large portfolio transactions than we do on other types of transactions.

·

The decrease to the percentage of gains attributable to MSRs was due to the increase in Freddie Mac loan origination volume coupled with the decrease in Fannie Mae loan origination volume and the increase in floating-rate loan origination volume. Freddie Mac loan origination volume as a percentage of total loan origination volume increased from 31% during the third quarter 2016 to 53% during the current quarter. Additionally, Freddie Mac loan origination volume as a percentage of Agency loan origination volume increased from 40% during the third quarter 2016 to 71% during the current quarter.

·

During the past 12 months, the Company has originated $23.3 billion of loans, facilitating substantial growth in servicing fees year over year.

·

Escrow earnings benefitted from an increase in the average balance of escrow accounts outstanding from the third quarter 2016 to the third quarter 2017. Additionally, the average placement fees on our escrow accounts increased over the past year.

·

The increase in other revenues was principally due to an increase in revenues from investment sales activities, resulting primarily from the increase in investment sales volume.

3


 

Picture 8

Third Quarter 2017 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSES

(dollars in thousands)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

Personnel

$

78,469

 

$

64,377

 

$

14,092

 

22

%

Amortization and depreciation

 

32,343

 

 

29,244

 

 

3,099

 

11

 

Provision for credit losses

 

 9

 

 

283

 

 

(274)

 

(97)

 

Interest expense on corporate debt

 

2,555

 

 

2,485

 

 

70

 

 3

 

Other operating expenses

 

11,664

 

 

9,685

 

 

1,979

 

20

 

Total expenses

$

125,040

 

$

106,074

 

$

18,966

 

18

%

Key expense metrics (as a percentage of total revenues):

 

 

 

 

 

 

 

 

 

 

 

Personnel expenses

 

44

%

 

42

%

 

 

 

 

 

Other operating expenses

 

 6

 

 

 6

 

 

 

 

 

 

 

Discussion of Results:

 

·

Fixed compensation costs increased following acquisitions during the fourth quarter 2016 and first quarter 2017 and due to hiring to support the growth of the Company, resulting in a substantial increase in the average headcount from 521 in the third quarter 2016 to 609 in the same period in 2017.

·

Variable compensation costs increased as a result of increased commissions expense resulting from the growth in total transaction volume and increases in bonus expense and performance-based stock compensation expense due to the Company’s improved financial performance year over year.  

·

The increase in personnel expense metric was due to the increase in variable compensation costs. Year to date, the personnel expense metric remained flat at 39% compared to the same period in the prior year. 

·

Amortization and depreciation costs increased due to the growth of the average balance of MSRs outstanding year over year. Over the past 12 months, we have added $91.2 million of MSRs, net of amortization and write offs due to prepayment.

 

 

 

 

 

 

 

 

 

 

 

 

KEY PERFORMANCE METRICS

(dollars in thousands, except per share amounts)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

Walker & Dunlop net income

$

34,378

 

$

29,628

 

$

4,750

 

16

%

Adjusted EBITDA

 

45,000

 

 

36,227

 

 

8,773

 

24

 

Diluted EPS

$

1.06

 

$

0.96

 

$

0.10

 

10

%

Operating margin

 

30

%

 

31

%

 

 

 

 

 

Return on equity

 

20

 

 

22

 

 

 

 

 

 

 

Discussion of Results:

 

·

The third quarter marks the 11th quarter out of the past 12 quarters that the Company has produced year-over-year net income and diluted EPS growth.

·

The increase in net income is largely attributable to the aforementioned increase in total revenues on record total transaction volume.

·

The increase in adjusted EBITDA was driven by increases in loan origination fees, servicing fees, escrow earnings and other interest income, and other revenues, partially offset by the increase in personnel costs.

·

The slight decrease in operating margin was driven primarily by the aforementioned increase in personnel expense.

·

The decrease in return on equity is largely related to a $143.2 million increase in stockholders’ equity over the past year due primarily to the $149.0 million of net income recorded over the past 12 months, partially offset by share repurchases and retirement.

4


 

Picture 8

Third Quarter 2017 Earnings Release

 

 

 

 

 

 

 

 

 

 

 

 

 

KEY CREDIT METRICS

(dollars in thousands)

 

Q3 2017

 

 

Q3 2016

 

$ Variance

 

% Variance

At risk servicing portfolio3

$

26,556,339

 

$

22,384,966

 

$

4,171,373

 

19

%

Maximum exposure to at risk portfolio4

 

5,420,386

 

 

4,602,118

 

 

818,268

 

18

 

60+ day delinquencies within at risk portfolio5

$

5,962

 

$

 —

 

$

5,962

 

N/A

%

Key credit metrics (as a percentage of the at risk portfolio):

 

 

 

 

 

 

 

 

 

 

 

60+ day delinquencies

 

0.02

%

 

0.00

%

 

 

 

 

 

Allowance for risk-sharing

 

0.01

 

 

0.02

 

 

 

 

 

 

Key credit metrics (as a percentage of maximum exposure):

 

 

 

 

 

 

 

 

 

 

 

Allowance for risk-sharing

 

0.07

%

 

0.07

%

 

 

 

 

 

Allowance for risk-sharing and guaranty obligation

 

0.78

 

 

0.75

 

 

 

 

 

 

 

Discussion of Results:

 

·

Our at risk servicing portfolio, which is comprised of loans subject to a defined risk-sharing formula, increased due to the significant level of Fannie Mae loan origination volume during the past year.  There was one loan 60+ day delinquent/defaulted in our at risk servicing portfolio at September 30, 2017, the first time in the past 10 quarters we have had a 60+ day delinquent/defaulted loan in our at risk servicing portfolio.

·

The on-balance sheet interim-loan portfolio, which is comprised of loans for which the Company has full risk of loss, was $152.8 million at September 30, 2017 compared to $264.5 million at September 30, 2016. All of the Company’s interim loans are current and performing at September 30, 2017.  We expect to see a continued decline in this portfolio as most of our future loan originations are expected to go to our interim loan joint venture instead of our balance sheet.

YEAR-TO-DATE 2017 OPERATING RESULTS

   

Total transaction volume for the nine months ended September 30, 2017 was $19.6 billion compared to $13.0 billion for the same period last year, a 50% increase. Our total transaction volume for the first nine months of 2017 is greater than our total transaction volume for all of 2016.

   

Total revenues for the nine months ended September 30, 2017 were $504.7 million compared to $396.9 million for the same period last year, a 27% increase. The change in total revenues was largely driven by a 24% increase in gains from mortgage banking activities and a 28% increase in servicing fees.

   

Total expenses during the nine months ended September 30, 2017 and 2016 were $337.8 million and $272.3 million, respectively. The 24% increase in total expenses was due primarily to increases in personnel expenses, amortization and depreciation costs, and other operating expenses. Personnel expenses as a percentage of total revenues held steady year over year at 39%.

   

Operating margin for the nine months ended September 30, 2017 and 2016 was 33% and 31%, respectively. Increased scale in the business year over year provided a lift to operating margin, as revenues grew 27% while expenses increased only 24%.

   

Net income for the nine months ended September 30, 2017 was $112.2 million compared to net income of $77.1 million for the same period last year, a 45% increase. The increase in net income is due to a 34% increase in income from operations combined with a lower increase in income tax expense. The lower income tax rate is related to an increase of excess tax benefits of $8.6 million in 2017. Diluted earnings per share grew 39% from $2.51 for the nine months ended September 30, 2016 to $3.49 for the same period in 2017.

   

For the nine months ended September 30, 2017 and 2016, adjusted EBITDA was $146.3 million and $95.7 million, respectively. The 53% increase was driven by significant growth in origination fees and servicing fees, partially offset by a large increase in personnel expenses. 


1  Adjusted EBITDA is a non-GAAP financial measure the Company presents to help investors better understand our operating performance.  For a reconciliation of adjusted EBITDA to net income, refer to the sections of this press release below titled “Non-GAAP Financial Measures” and “Adjusted Financial Metric Reconciliation to GAAP.” 

5


 

Picture 8

Third Quarter 2017 Earnings Release

 

2  The fair value of the expected net cash flows associated with the servicing of the loan, net of any guaranty obligations retained, as a percentage of Agency volume.

3  At risk servicing portfolio is defined as the balance of Fannie Mae DUS loans subject to the risk-sharing formula described below, as well as a small number of Freddie Mac loans on which we share in the risk of loss. Use of the at risk portfolio provides for comparability of the full risk-sharing and modified risk-sharing loans because the provision and allowance for risk-sharing obligations are based on the at risk balances of the associated loans. Accordingly, we have presented the key statistics as a percentage of the at risk portfolio.

 

For example, a $15 million loan with 50% risk-sharing has the same potential risk exposure as a $7.5 million loan with full DUS risk sharing. Accordingly, if the $15 million loan with 50% risk-sharing were to default, we would view the overall loss as a percentage of the at risk balance, or $7.5 million, to ensure comparability between all risk-sharing obligations. To date, substantially all of the risk-sharing obligations that we have settled have been from full risk-sharing loans. 

4  Represents the maximum loss we would incur under our risk-sharing obligations if all of the loans we service, for which we retain some risk of loss, were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. The maximum exposure is not representative of the actual loss we would incur.

5  Includes loans that are not 60+ days delinquent but have defaulted.

 

 

Conference Call Information

 

The Company will host a conference call to discuss its quarterly results on Wednesday, November 8, 2017 at 8:30 a.m. Eastern time. Analysts and investors interested in participating are invited to call (866)  952-7525 from within the United States or (203) 518-9908 from outside the United States and are asked to reference the Conference ID: WDQ317. A simultaneous webcast of the call will be available on the Investor Relations section of the Walker & Dunlop website at http://www.walkerdunlop.com. 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), headquartered in Bethesda, Maryland, is one of the largest commercial real estate services and finance companies in the United States providing financing and investment sales to owners of multifamily and commercial properties. Walker & Dunlop, which is included in the S&P SmallCap 600 Index, has over 600 professionals in 28 offices across the nation with an unyielding commitment to client satisfaction.

 

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, 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 for credit losses net of write-offs, stock-based incentive compensation charges, non-cash revenues such as gains attributable to MSRs, and mark-to-market effects from CMBS activities. 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 the Company's GAAP financials, provides useful information to investors by offering:

 

·

the ability to make more meaningful period-to-period comparisons of the Company's on-going operating results;

6


 

Picture 8

Third Quarter 2017 Earnings Release

 

·

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 adjusted EBITDA has limitations in that it does not reflect all of the amounts associated with the Company's results of operations as determined in accordance with GAAP and that adjusted EBITDA should only be used to evaluate the Company's results of operations in conjunction with net income. For more information on adjusted EBITDA, refer to the section of this press release below titled “Adjusted Financial Metric Reconciliation to GAAP.”

 

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) 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 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.

 

Contacts:

 

 

 

Investors:

Media:

Kelsey Montz

Susan Weber

Investor Relations

Chief Marketing Officer

Phone 301.202.3207

Phone 301.215.5515

investorrelations@walkeranddunlop.com

info@walkeranddunlop.com

 

Phone  301.215.5500

 

7501 Wisconsin Avenue, Suite 1200E

Bethesda, Maryland 20814

 

 

7


 

\\walkerdunlop.com\DFS\Shares\Marketing\!2017 Letterhead\Logos and PMS Colors\WalkerDunlop_horizontal_CMYK.jpg

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

    

June 30,

    

March 31,

    

December 31,

    

September 30, 

 

2017

 

2017

 

2017

 

2016

 

2016

(in thousands)

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

 

(unaudited)

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

85,363

 

$

53,338

 

$

50,745

 

$

118,756

 

$

83,887

Restricted cash

 

17,179

 

 

15,768

 

 

9,313

 

 

9,861

 

 

14,370

Pledged securities, at fair value

 

95,102

 

 

92,401

 

 

86,900

 

 

84,850

 

 

81,933

Loans held for sale, at fair value

 

3,275,761

 

 

1,608,025

 

 

1,230,311

 

 

1,858,358

 

 

1,299,028

Loans held for investment, net

 

152,050

 

 

167,540

 

 

311,242

 

 

220,377

 

 

261,915

Servicing fees and other receivables, net

 

34,476

 

 

34,794

 

 

35,882

 

 

29,459

 

 

28,316

Derivative assets

 

43,853

 

 

24,991

 

 

15,446

 

 

61,824

 

 

33,796

Mortgage servicing rights

 

587,909

 

 

573,159

 

 

562,530

 

 

521,930

 

 

496,678

Goodwill and other intangible assets

 

124,571

 

 

124,621

 

 

124,670

 

 

97,372

 

 

91,340

Other assets

 

84,196

 

 

71,398

 

 

54,499

 

 

49,645

 

 

39,854

Total assets

$

4,500,460

 

$

2,766,035

 

$

2,481,538

 

$

3,052,432

 

$

2,431,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and other liabilities

$

255,785

 

$

229,471

 

$

205,100

 

$

232,231

 

$

202,533

Performance deposits from borrowers

 

16,575

 

 

14,894

 

 

9,424

 

 

10,480

 

 

13,885

Derivative liabilities

 

175

 

 

500

 

 

9,449

 

 

4,396

 

 

2,918

Guaranty obligation, net

 

38,300

 

 

36,492

 

 

35,311

 

 

32,292

 

 

30,938

Allowance for risk-sharing obligations

 

3,769

 

 

3,648

 

 

3,546

 

 

3,613

 

 

3,400

Warehouse notes payable

 

3,305,589

 

 

1,630,268

 

 

1,406,462

 

 

1,990,183

 

 

1,440,425

Note payable

 

163,935

 

 

164,011

 

 

164,088

 

 

164,163

 

 

164,238

Total liabilities

$

3,784,128

 

$

2,079,284

 

$

1,833,380

 

$

2,437,358

 

$

1,858,337

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred shares

$

 —

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Common stock

 

299

 

 

301

 

 

301

 

 

296

 

 

294

Additional paid-in capital

 

226,098

 

 

222,989

 

 

218,908

 

 

228,889

 

 

223,603

Retained earnings

 

484,963

 

 

458,819

 

 

424,252

 

 

381,031

 

 

344,241

Total stockholders’ equity

$

711,360

 

$

682,109

 

$

643,461

 

$

610,216

 

$

568,138

Noncontrolling interests

 

4,972

 

 

4,642

 

 

4,697

 

 

4,858

 

 

4,642

Total equity

$

716,332

 

$

686,751

 

$

648,158

 

$

615,074

 

$

572,780

Commitments and contingencies

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total liabilities and equity

$

4,500,460

 

$

2,766,035

 

$

2,481,538

 

$

3,052,432

 

$

2,431,117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 


 

 

\\walkerdunlop.com\DFS\Shares\Marketing\!2017 Letterhead\Logos and PMS Colors\WalkerDunlop_horizontal_CMYK.jpg

Walker & Dunlop, Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly Trends

 

Nine months ended

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 

(in thousands, except per share amounts)

Q3 2017

 

Q2 2017

 

Q1 2017

 

Q4 2016

 

Q3 2016

 

2017

 

2016

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gains from mortgage banking activities

$

111,304

 

$

102,176

 

$

96,432

 

$

117,779

 

$

100,630

 

$

309,912

 

$

249,406

Servicing fees

 

44,900

 

 

43,214

 

 

41,525

 

 

39,370

 

 

37,134

 

 

129,639

 

 

101,554

Net warehouse interest income

 

5,358

 

 

5,800

 

 

6,620

 

 

7,802

 

 

5,614

 

 

17,778

 

 

15,925

Escrow earnings and other interest income

 

5,804

 

 

4,514

 

 

3,292

 

 

2,943

 

 

2,630

 

 

13,610

 

 

6,225

Other

 

12,370

 

 

10,703

 

 

10,643

 

 

10,497

 

 

8,778

 

 

33,716

 

 

23,775

Total revenues

$

179,736

 

$

166,407

 

$

158,512

 

$

178,391

 

$

154,786

 

$

504,655

 

$

396,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Personnel

$

78,469

 

$

63,516

 

$

56,172

 

$

73,126

 

$

64,377

 

$

198,157

 

$

154,365

Amortization and depreciation

 

32,343

 

 

32,860

 

 

32,338

 

 

30,603

 

 

29,244

 

 

97,541

 

 

80,824

Provision (benefit) for credit losses

 

 9

 

 

(93)

 

 

(132)

 

 

(778)

 

 

283

 

 

(216)

 

 

166

Interest expense on corporate debt

 

2,555

 

 

2,443

 

 

2,403

 

 

2,432

 

 

2,485

 

 

7,401

 

 

7,419

Other operating expenses

 

11,664

 

 

11,599

 

 

11,608

 

 

11,827

 

 

9,685

 

 

34,871

 

 

29,511

Total expenses

$

125,040

 

$

110,325

 

$

102,389

 

$

117,210

 

$

106,074

 

$

337,754

 

$

272,285

Income from operations

$

54,696

 

$

56,082

 

$

56,123

 

$

61,181

 

$

48,712

 

$

166,901

 

$

124,600

Income tax expense

 

19,988

 

 

21,570

 

 

13,063

 

 

24,175

 

 

18,851

 

 

54,621

 

 

47,295

Net income before noncontrolling interests

$

34,708

 

$

34,512

 

$

43,060

 

$

37,006

 

$

29,861

 

$

112,280

 

$

77,305

Less: net income (loss) from noncontrolling interests

 

330

 

 

(55)

 

 

(161)

 

 

216

 

 

233

 

 

114

 

 

198

Walker & Dunlop net income

$

34,378

 

$

34,567

 

$

43,221

 

$

36,790

 

$

29,628

 

$

112,166

 

$

77,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

1.14

 

$

1.15