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Good day, and welcome to the Second Quarter 2025 Walker & Dunlop, Incorporated Earnings Call. Today's conference is being recorded at this time. I would like to turn the conference over to Kelsey Duffey. Please go ahead.

Thank you, and good morning, everyone. Thank you for joining Walker & Dunlop's Second 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 will now turn the call over to Willy.

Thank you, Kelsey, and good morning, everyone. In our last earnings call at the beginning of May, we mentioned that our April deal volume was very strong even with the dramatic movement in rates and market volatility post Liberation Day. As our Q2 financial results show, transaction volumes remained strong throughout the quarter and are continuing into Q3. Commercial real estate and the investing and financing activities that drive it forward is showing signs of entering its next cycle. I spoke at a conference in Chicago in May. The CEO of one of Walker & Dunlop's competitor firms spoke before me and said that the next CRA cycle would begin on July 8, 2025, as soon as the new tariff deals were negotiated. I disagreed and said it was highly unlikely all the trade deals will be negotiated by July 8. And second, even if the Trump administration was wildly successful negotiating trade deals that nobody should think trade is the last macroeconomic issue President Trump is going to try to impact. And guess what, we were both right. The volatility we have seen in the market since the advent of the second Trump administration is likely to be with us for the next 3.5 years. And at the same time, the next CRE cycle appears to be underway. This cycle is underway not due to significantly lower rates, higher asset prices nor macroeconomic tranquility. It has begun because after 3 years of dramatically lower sales and financing activity, it is time to recycle capital to investors, refinance assets and deploy capital that was raised prior to the Great Tightening. As you can see on Slide 3, there is over $640 billion of equity capital in real estate funds that has been invested for over 5 years and needs to be returned to investors. As you can also see in this chart, capital raising for new funds has plummeted since 2022. That is investors waiting for capital to be recycled prior to investing in new vehicles. And on the right side, the graph shows that there is over $400 billion of dry powder that needs to be invested or will be returned to investors. This slide represents over $1 trillion of real estate-focused equity capital that either needs to be recycled or deployed, and these equity flows are what is driving transaction activity today. Beyond this significant macro driver, the multifamily sector is extremely well positioned over the next several years. We do not have enough housing in America, and the delta between the cost of renting and homeownership continues to widen, making multifamily the only option for many Americans. As this slide shows, if we go back to March of 2020, the cost of paying principal and interest on a mortgage on the median-priced home in America was $200 to $300 cheaper than renting the median-priced apartment unit. Fast forward 5 years and the median home price in America has gone from $285,000 to $410,000 and the monthly cost of principal and interest on a mortgage to own that home is now $500 to $600 more expensive than the cost to rent the median-priced apartment per month. Single-family housing is thoroughly unaffordable to someone making anything close to the median income in America today, and this reality is why the multifamily industry has seen record absorption of 227,000 units in the second quarter of 2025 and 794,000 units over the past year. Supporting that point, Q2 household growth was driven entirely by 2.7% growth in renter households, while owner households remained flat. Apartment construction has collapsed. And as apartment deliveries begin to tail off in 2025 into 2026, owners of multifamily properties will begin to increase rents. The industry is currently at 96% occupancy. So with full properties and rising rents, values will go up, increasing investment sales and financing activity. As one of the largest providers of capital and investment sales to the multifamily industry, W&D is extremely well positioned to meet our clients' capital markets needs as this investment cycle accelerates. W&D's Q2 total transaction volume of $14 billion is up 65% from Q2 2024 and over twice our volume in the first quarter of this year. This significant increase in deal flow drove 18% revenue growth and diluted earnings per share of $0.99, up 48% year-over-year. Two things of note with regard to volumes, revenue and earnings. First, transaction volumes do not directly correlate to revenue growth. For example, we did an almost $1 billion financing for one of our long-standing clients in Q2, once again showing that W&D is one of the go-to lenders for large structured GSE financings. But a $1 billion financing does not carry with it the same origination fees nor mortgage banking gains as 10 $100 million loans. Second, while revenues were up 18%, GAAP earnings were up 48%. This is due to gaining economies of scale on our platform as well as booking significant noncash mortgage servicing rights. Those noncash servicing rights, which are the present value of future servicing income, are the lifeblood of Walker & Dunlop over the next 5, 7 and 10 years. We love booking significant noncash MSRs, but we will benefit from their cash flows going forward. As we transition to higher transaction volumes and GAAP earnings, we should see adjusted EBITDA and adjusted core EPS come down as they did in Q2. Adjusted EBITDA declined 5% in the quarter, while adjusted core EPS declined 7%, largely due to the 100 basis point decrease in short-term rate which significantly pressures escrow earnings in the quarter. As the market recovers and hopefully, rates continue to come down, we will gladly swap out increased origination volumes and MSR revenues in exchange for lower escrow earnings. $14 billion of total transaction volume included growth across almost all transaction channels, including $4.9 billion of lending volume with the GSEs, our highest GSE volume in 11 quarters. As shown on Slide 6, our year-to-date GSE market share has increased to 11.4%, up from 10.3% at the end of last year. Both Fannie Mae and Freddie Mac are extremely active in the market today and with the prospect of a future privatization being considered by the Trump administration, we expect both GSEs to be focused on hitting their multifamily caps in 2025 and beyond. Property sales volume grew to $2.3 billion in Q2, up 51% year-over-year. Our team awarded a higher volume of deals in the month of June than they did in all of Q1 2025. Those transactions will be closed in the second half of the year and reflect a strong pipeline moving into the third quarter. Our brokered debt volume grew to $6.3 billion in Q2, up 64% year-over-year. This is fantastic growth and shows the increased deal volume across all commercial real estate asset classes, not just multifamily. We work with a wide range of capital providers in our debt brokerage business, and this pickup in loan originations is reflective of a huge amount of liquidity across the capital markets. We continue to focus on expanding our affordable housing platform, which includes affordable property sales, loan originations and low-income housing tax credit syndications. Our HUD lending volumes grew 55% to $288 million in Q2, and W&D Affordable Equity completed its largest ever $240 million multi-investor fund syndication at the beginning of the quarter. Our technology-enabled businesses of small balance lending and appraisals continue to grow nicely with appraisal revenues up 61% in the quarter and small balance lending revenue up 99%. Galaxy, our proprietary loan database, continues to source new clients and loans with 17% of our transaction volume year-to-date being with new clients to Walker & Dunlop and 58% of our refinancing volume being new loans to Walker & Dunlop. These numbers speak to the use of technology and expansion of our brand to win new loans and clients from the competition. And Client Navigator, our servicing and loan analytics platform using our data and machine learning now has over 5,600 active users that allows our borrowers to seamlessly analyze their loans. These are very exciting data points as we enter the next market cycle with the W&D team, brand, technology and market presence. I will now turn the call over to Greg to talk through our second quarter and year-to-date results in more detail. Greg?

Thank you, Willie, and good morning, everyone. The second quarter marked a significant inflection point for commercial real estate transaction activity and our financial performance as we saw meaningful stabilization in long-term interest rates and transaction volume rebounded. Our team took advantage, closing $14 billion in total transaction volume, up 65% year-over-year. This strong performance puts us back on track towards achieving our 2025 operational and financial goals. GAAP EPS expanded 48% this quarter to $0.99 per share, largely in line with transaction volume growth and specifically by a significant increase in originated MSR revenues. Those newly originated MSRs represent long-term contractual revenues that will boost our cash earnings over the next 5 to 10 years. As expected, growth in our adjusted metrics continues to lag GAAP earnings growth due to lower short-term interest rates year-over- year that is causing our placement fee earnings to decline compared to last year. Turning to our segment performance. Our Capital Markets segment built significant momentum in Q2. We closed 68% more debt financing volume and 51% more property sales volume than the prior year. As a result, segment revenues grew 46% year-over- year, as shown on Slide 8. Net income grew 200% to $33 million while adjusted EBITDA also improved 116% to $1.3 million. As expected, under our variable compensation model, personnel expense for the segment grew 26% over the prior year on the strength of our transaction volumes this quarter. Importantly, the momentum in our GSE volumes is promising, and we anticipate both Fannie Mae and Freddie Mac to remain active in the coming months, and that will continue to benefit our MSR and origination fee revenues the rest of the year. During Q2, we executed several larger deals and also saw an increase in shorter duration deals to take advantage of the shape of the yield curve. Those 2 trends are tightening our origination fee and MSR margins, and we expect both margins to remain in line with Q2 over the next couple of quarters. Our investment banking platform,

Thank you, Greg. As the market recovers and expands into the next cycle, it is clear that the breadth of the Walker & Dunlop platform positions us very well to win business, gain market share and continue growing. As shown on Slide 14, in our first quarter earnings call, we outlined several goals across the business that will allow us to continue meeting our clients' needs and achieve the financial targets that Greg just ran through. One important driver of our success in 2025 will be our ability to achieve at least an average of $200 million of transaction volume per banker or broker. As you can see on Slide 15, we ended 2024 with an average production per banker/broker of $172 million. And with 222 bankers and brokers on the platform today, our annualized year-to-date volume puts us at $189 million per banker/broker. On a trailing 12-month basis, our production for banker/broker is at $206 million, giving us line of sight to exceed the annual target we set last year as we take advantage of a reflating market. It is important to remember that those averages are over an expanding platform with key hires over the past 8 months to expand our New York Capital Markets team, add a very significant affordable finance team, added a hospitality investment sales business, launched the data center financing business and opened a new office in London, England. I visited our new London office in June and cannot be more excited about the growth opportunity for us in the European and Middle Eastern markets. It is our expectation that as this next cycle gains momentum, we will look to add additional banking and brokerage talent in our existing and emerging business verticals. Over the past 3 years of the Great Tightening, our scaled servicing and asset management businesses generated strong recurring cash flows that allowed us to maintain adjusted EBITDA despite a dramatic decline in transaction activity. We never lost money during the quarter and our peak to trough earnings were less severe than any of our major competitors. And as our origination volumes increase during this next cycle, our servicing portfolio will begin growing much faster. Remember that between 2015 and 2020, the last expansionary cycle before the pandemic and Great Tightening, we saw our servicing portfolio double in size from $50 billion to $107 billion. As we see loan origination volumes increase, we also need to continue growing our investment management business. We set a 2025 goal to raise $600 million of tax credit equity, up from $400 million last year. And in the first half of the year, the team has raised $270 million. We are also focused on growing WDIP, our real estate investment management platform, with a goal to increase capital deployment in 2025 to over $1 billion. Through the second quarter, the team has deployed $330 million of capital, and we expect transaction activity to pick up throughout the remainder of the year. In 2020, we laid out an ambitious 5-year growth plan called the Drive to '25. We acquired

[Operator Instructions] And our first question is going to come from Jade Rahmani from KBW.

This quarter's growth rates were staggering in transaction volumes. So great job to the team. In light of that, can you share at all how the pipeline looks so far for the third quarter and put any ranges perhaps around the kind of growth rates year-on-year that might be reasonable for the second half?

As I said at the very top, the Q3 pipeline looks great. We are seeing sustained velocity, if you will, in the market. And as my comments, I hope, showed, we're seeing -- if you back up a year, Jade, you recall Q3 of 2024 when we had a surge in transaction volumes and then the yield curve inverted and long-term rates went up and transaction volumes sort of tailed off towards the end of the year. We're seeing nothing right now that would lead us to believe that the volumes we and our competitor firms saw in Q2 are going to be a quarterly phenomenon. As I tried to underscore, it clearly appears that capital needs to both be recycled back to investors as well as deployed into the market. And with rates where they sit today, clients have gone from a wait-and-see attitude to let's-get-it-done attitude. And then as it relates to any additional guidance, I think Greg walked through clearly what we're seeing as it relates to the guidance we gave at the beginning of the year, the fact that Q2 gets us back on track to achieving that guidance. And I think that's -- Greg, if you want to jump in with anything else, feel free to, but I think that's about all we should go and [indiscernible] .

Yes, you said it well. Yes. And we've also given the guidepost, Jade for what we're expecting in terms of banker/broker volume and things of that nature. So as Willy said, we're feeling good about our path to not only achieving but exceeding some of those. So that should give you some sense on a full year basis, what we're expecting.

On the Europe initiative, which I think is pretty interesting, can you comment as to what the strategy is? Is it to bring that capital into U.S. deals? Or is it to build an operation to do multifamily or perhaps other asset classes there?

So as I mentioned, Jade, I was over in London in June and extremely pleased with both the team we've put together as well as what I would call the market reception. I, back before Walker & Dunlop, opened up the European operations of a U.S. multinational sort of similar to how W&D is going about doing this. And I recall, clearly, when I would show up for meetings, people would be like, who are you and where do you come from? And we did a lot of sort of brand building as we launched those operations in Europe. I was both extremely pleased -- and to be blunt, somewhat surprised at the strength of the W&D brand meeting after meeting of we work with you in the United States, can't wait to work with you here in the U.K. and across Europe. And we have a team that's very focused on the European market. Clearly, the European market has had a, if you will, a very good run over the beginning part of 2025 as it relates to a market that people want to invest in. So we feel good about investment flows into the European market and our transaction volumes over there beginning and then growing. At the same time, the U.S. economy continues to crank along. And although the trade war and trade policies have been confusing to investors, and we have clearly seen a slowdown in foreign direct investment over the first 2 quarters of the year, we're in this for a long, long period of time. we're not thinking about a quarter, a year or even 5 years. We're in Europe to continue to expand Walker & Dunlop, expand this brand and this company around the globe. And after my previous -- almost all my work experience before joining Walker & Dunlop being in Latin America and being in Europe, after 22 years at Walker & Dunlop focusing solely on the United States to be blunt about it, it's pretty fun for me to go back to some of the markets that I was in prior to joining Walker & Dunlop.

[Operator Instructions] It appears we have no further questions in the queue at this time. I'll now turn it back over to William Walker, please -- for additional or closing remarks.

Thanks very much. I would reiterate my thanks to the team on a fantastic Q2. Thanks, everyone, for joining us this morning, and I hope everyone has a great day.