Good day and welcome to the Q1 2025 Walker & Dunlop, Inc. Earnings Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Kelsey Duffey. Please go ahead.

Thank you, Cynthia. Good morning, everyone. Thank you for joining Walker & Dunlop first quarter 2025 earnings call. I have with me this morning our Chairman and CEO, Willy Walker; and our CFO, Greg Florkowski. This call is being webcast live on our website, and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call. Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics. Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC. I’ll now turn the call over to Willy.

Thank you, Kelsey, and good morning, everyone. We started the year with very little carryover business from 2024 after the momentum of rate cuts last September turned into rising long-term interest rates and a wait-and-see attitude across the industry with regard to rates, the economy and the Trump administration. And while rates came down throughout Q1 from 4.79% on January 13 to 4.23% on March 31, volatility due to policy announcements and market reaction kept many clients in wait-and-see mode. Yet within that context, our team delivered healthy Q1 total transaction volume of $7 billion, up 10% from last year, which drove total revenue growth of 4%. Q1 is typically our slowest quarter of the year. And with the political and economic backdrop of the quarter, we were pleased with our top line growth. Our GAAP EPS was only $0.08 on the quarter, down significantly due to personnel costs to add new talent and remove underperforming ones; fees associated with the debt offering that now provides us with wonderful financial flexibility to continue investing and growing our business, and additions to our loan loss reserve that, while costly. are normal expenses associated with our lending business. In 2020, we laid out an ambitious 5-year growth plan called the Drive to ‘25. We quickly acquired or invested in the human capital and business lines to achieve our goals and then the great tightening began, pushing up interest rates and bringing down transaction volumes dramatically. We cut costs yet maintained every business line we invested in to achieve the Drive to ‘25, knowing that when the market returned, the full suite of services would benefit W&D’s customers. We saw transaction volumes improve in 2024 and into the first quarter of this year, and there is a growing sense that the pent-up demand…

Thank you, Willy, and good morning, everyone. Despite significant volatility in the broader capital markets throughout the first quarter, W&D’s transaction activity increased across most products, with the largest gains in our Fannie Mae and property sales executions, reflecting the strong fundamentals underlying the multifamily industry that Willy just described. As shown on Slide 10, growth in transaction activity drove revenue growth of 4% during the first quarter. However, due to specific increases in expenses and additions to our loan loss reserves, diluted earnings per share declined to $0.08. Adjusted EBITDA declined to $65 million and adjusted core earnings per share declined to $0.85. During the first quarter, we incurred $10 million of expenses associated with 3 discrete decisions or events. First, we refinanced our corporate debt in March. In the process, we extinguished a portion of our outstanding term loan and wrote off a portion of the deferred issuance costs totaling $4 million. The advantages of recapitalizing our balance sheet at historically low spreads far outweighed the impact of the accelerated costs and set us up with a balance sheet to continue investing in our business. Second, we recognized a provision for loan losses of $4 million this quarter compared to $500,000 a year ago. The majority of that provision relates to a single loan. And while our loan portfolio continues to perform extremely well, defaults happen. Finally, we made the decision to separate several low-performing salespeople during the quarter that will cost us around $5 million during the first half of the year, with a little over $2 million expensed in the first quarter. The first quarter is typically our slowest of the year. And while the credit expense is clearly unwelcome, it is a part of our core business. And the one-time charges for the debt offering…

Thank you, Greg. At the beginning of the year, we spoke about the tremendous amount of commercial real estate debt that needs to be refinanced and capital that needs to be deployed this year, and those underlying fundamentals remain intact. As Greg just outlined, our team is focused on specific business goals across the platform that will allow us to continue meeting our clients’ expanding needs and deliver strong financial results in 2025 and beyond. We intend to grow market share with our largest lending partners, Fannie Mae, Freddie Mac and HUD in 2025, and we began the year by holding market share with the GSEs on a combined basis, after a strong quarter with Fannie and an okay quarter with Freddie. FHFA Director, Bill Pulte, appears to be focused on growing the GSEs and aggregating capital for a potential privatization. While it is too soon to tell how or if the GSEs get spun out of conservatorship, what is clear today is that the teams at Fannie and Freddie are reenergized and focused on hitting their $146 billion multifamily caps in 2025. Similarly, the new HUD Secretary, Scott Turner, has already made positive changes at HUD to streamline the origination process and refocus HUD on providing additional, much-needed affordable housing in the United States. As the second largest HUD multifamily lender in the country with a scaled affordable housing platform, we are extremely well positioned to benefit from any changes to the HUD products that make it more efficient and competitive. As the housing market continues to heal and transaction volumes grow, our loan originations and properties sold per banker broker will also expand. As you can see on this slide, we ended 2024 with an average production per banker broker of $172 million, up by $35 million from…

[Operator Instructions] We will take our first question from Jade Rahmani with KBW.

Thank you very much. In today’s current market, I know you gave an intra-quarter update as to the pipeline and volumes. But could you give any further insight in terms of what you are seeing from investors? Are they underwriting more conservative assumptions due to the macro-outlook? Are they eager to do deals to lock in rates that have started to move lower? And also, behaviorally, what are you seeing from Fannie Mae and Freddie Mac?

Good morning Jade, nice to have you on. I would say the following. As I just mentioned, having closed 60% of our Q1 volume in the first month of Q2, we have not seen deal flow fall out due to market volatility, which quite honestly is a surprising statement to make, given the massive gyrations in the 10-year treasury, particularly at the beginning of April. Where we are seeing questions right now is on larger transactions, Jade, where if someone is looking at taking out a larger portfolio, the question is, do we want to launch it now or do we want to wait. And I would say, I was in two large investment sales pitches last week, and my comment to the owners of the assets was, well, unless you plan on waiting 4 years to do something with these assets, you might as well go into the market today because the volatility that we have seen in the first 100 days of the Trump administration is unlikely to subside. There are some people who think that the 90-day pause on tariffs, that once we are beyond that window, the market settle down and there will be sort of clarity in the markets. And I am not so sure on that statement. And as a result of it, unless someone is sitting there saying, I am just going to take a pause for the next 4 years, they are likely considering going into the market. The one other thing I would say to that degree is, as I mentioned, the 10-year moving from 4.80% at the beginning of January down to 4.17% yesterday is obviously extremely important to the commercial real estate industry. And so while tariffs clearly present a macro backdrop that is challenging for business more – on a macro or more global view as it relates to commercial real estate, what happens to the 10-year treasury is far more determinative as it relates to volumes.

Thanks very much. In terms of the GSEs, do you expect them to hit their caps this year? It sounded like, in your comments, you thought that was at least a possibility. And would you care to say anything about what you think the odds are that they hit their caps?

I don’t think I will give you odds on that, Jade, but I will give you this. We have not seen Fannie and Freddie competing in the market like they have been for the last two months in 3 years. So, as I – as you saw in Q1, our Fannie volumes were up significantly, but I did point out that was off an exceedingly slow low volume in Q1 of 2024. But what we are seeing right now is that both Fannie and Freddie are very engaged in the market. Both of them are working to win deals. And for the beginning of the year, that is a very welcome sign.

Great to hear. Thanks very much.

Thank you.

[Operator Instructions] We will take our next question from Steve Delaney with Citizens JMP Securities.

Good morning everyone. Hello Willy.

Hey Steve.

Talk about [Technical Difficulty] non-interest expenses, and you mentioned specifically severance. It sounded like that was just a production, pruning the low performers. You did – I didn’t hear you mention that you exited any business lines, is that correct?

We did not exit any business lines, and you are exactly right that it was the write-off of some signing bonuses and compensation expense to, if you will, get rid of underperformers.

Understood. The last 2 years, when we look at total operating expenses, obviously, you are building a complex, fully integrated business, so we get that. You don’t come in every day with the goal to have the lowest cost of operations, you come in to have the best bottom line, including growth for your shareholders. But the last 2 years, operating expenses, non-interest expenses have averaged right at 60% of total revenues. Can you give us a sense for 2025, if we were to – is this year going to be more expensive on that ratio of 60% or – and at what point do you see any potential for that 60% to drop to a lower figure with a five handle?

So, it should be down in – as you know, from having covered us for as long as you have, we have always focused on having that down in the sort of 48% to 50% personnel cost as a percentage of revenues. And the fact that it is up at 60% is directly related to volumes. And so, we are very focused, as I mentioned and Greg mentioned in our call, on driving producer – on average producer production from $170 million to $200 million per producer in 2025. You get to that, Steve, and you are going to see that number drop to that ratio. And so it really is a – it’s a production, it’s a volume-focused metric, if you will. And we have every confidence that the reason we have reiterated our guidance is because we see the volumes in 2025. We clearly did not expect the first 100 days of the Trump administration to present the challenges in the market volatility that we have seen. But the underlying theme is this, commercial real estate owner operators have run out of time on delaying refinancings, delaying the return of capital and delaying the deployment of new capital. And as a result of that, because that clock is ticking, they are now saying, look, I may or may not love a 4.17% 10-year, but I need to go and sell that asset to return capital, I need to buy that assets to deploy capital or I need to refinance that asset because I have gotten two 1-year extensions, and it’s now time to just go get permanent financing put on the asset. And we are very clearly seeing that drive volumes.

Thanks for the comments Willy.

Thank you, Steve.

[Operator Instructions] It does appear there are no further questions at this time. I will turn the conference back over to Mr. Walker for any additional or closing remarks.

Appreciate everyone joining us this morning. Appreciate all the hard work by the W&D team in Q1. I hope everyone has a great day and thanks again.

This concludes today’s call. Thank you for your participation. You may now disconnect.