Good morning. I'm Kelsey Duffey, Senior Vice President of Investor Relations at Walker & Dunlop and I would like to welcome you to Walker & Dunlop's Third Quarter 2022 Earnings Conference Call and Webcast. Hosting the call today is Willy Walker, Walker & Dunlop Chairman and CEO. He is joined by Greg Florkowski, Executive Vice President and CFO. Today's webcast is being recorded and a replay will be available via webcast on our Investor Relations section of our website. At this time, all participants have been placed in a listen-only mode, and the line will be for your questions following the presentation. [Operator Instructions] This morning, we posted our earnings release and presentation to the Investor Relations section of our website. 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 diluted earnings per share during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metric. 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, maybe 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. W&D delivered exceptional service to our clients during a volatile and challenging third quarter. $17 billion of total transaction volume was very strong and is thanks to our people, brand and the use of technology in everything we do. I've been CEO of Walker & Dunlop for 15 years. I've seen a lot, the housing boom and bust, the great financial crisis, dramatic regulatory changes, new administrations, a pandemic. And I've watched this amazing company deal with adversity, adjust and continue growing. W&T shareholders should be confident in three things; number one, our scaled lending partnerships with Fannie Mae, Freddie Mac and HUD provide our clients with much needed countercyclical capital during times of market dislocation. Number two, our business model, which includes consistent servicing and asset management fees along with escrow income that expands as rates rise has consistently outperformed in down markets. And number three, our disciplined credit culture on loans we originate, as well as our own balance sheet will allow us to expand while others contract over the coming months and years. We have no greater insight than anyone else on how the markets will evolve over the coming quarters, but we are better positioned than any competitor firm in our industry to continue providing solutions to our clients, maintain our exceptional team and continue investing towards our five-year growth plan to drive the 25. $17 billion of total transaction volume in Q3 generated total revenues of $316 million, down only 9% from Q3 of last year. In this rising rate environment, every deal whether a sale or refinancing is under pricing pressure. Spreads on our agency lending remain compressed as we work closely with Fannie Mae and Freddie Mac to make deals work for our clients. Good news,…

Thank you, Willy, and good morning everyone. Our $17 billion of transaction volumes this quarter generated total revenues of $316 million, down 9% from the third quarter of last year, and diluted earnings per share of $1.40, down 37% compared to last year. As a result of the spread and pricing dynamics, Willy just described, our non-cash MSR revenues dropped 38%, despite nearly flat Fannie Mae volumes. The decrease in MSR revenues caused our operating margins and return on equity to fall below our target ranges at 17% and 11% respectively. Our value proposition includes navigating challenging markets on behalf of our clients and closing the deal that works for them. In this quarter, we were able to deliver for our clients when they needed us most. Importantly, our agency lending grows our servicing portfolio and increases our long-term stable cash revenues, which occurred yet again this quarter, as the servicing portfolio increased to $121 million. As a result, our cash revenues expanded and our adjusted EBITDA grew 4% to $75 million, and drove 5% growth in adjusted earnings per share to $1.55 this quarter. A further benefit of our servicing portfolio is at $3 billion of escrow earnings we hold. Sharp increases in short-term rates disrupted transaction volumes, but dramatically increased our escrow earnings. This quarter escrow earnings increased nearly 800% to $18 million, compared to only $2 million in the year ago quarter. Another contributor to growth in adjusted EBITDA and adjusted EPS is the acquisitions of Alliant and Zelman. On a combined basis, these businesses generated nearly $30 million of primarily cash revenues this quarter, highlighting the benefit of the investments we made in the stable subscription revenues of Zelman, and the assets under management at Alliant. In the first quarter of 2022, we introduced segment financial…

Thank you, Greg. Walker & Dunlop's exceptional business model generates strong cash flows in up and down markets. If you look back at our performance coming out of the GFC and pandemic, after initial market overreaction W&D wildly outperformed the competition due to our access to countercyclical capital, focused business model and disciplined credit culture. If you look at slide 14 with W&D in dark blue, after getting hit harder in the market sell off than the S&P, CRE, services providers and mortgage originators, W&D recovered quickly in 2020 and moved dramatically higher than the market and the competition. This was due to our access to countercyclical capital, which not only provided needed liquidity when the market dislocated, but also in its aftermath when the competitive landscape was deserted. Remember that Walker & Dunlop surpassed JPMorgan and Wells Fargo in 2020 as the largest provider of capital to the multifamily industry. Then fast forward to 2021, when the investments we made in debt and property brokerage rebounded and you see why the W&D business model is so powerful. And unlike 2021, when the Fed funds rate was at zero, in this higher interest rate environment we will continue generating high-margin revenues on our escrow balances. When I joined Walker & Dunlop in 2003, we had a $6 billion servicing portfolio. Today that portfolio is 20 times bigger at $121 billion. And as Greg just mentioned, it generated $76 million in revenue in Q3. Add to that our asset management business, which is currently making first trust preferred equity and JV equity investments while many competitors sit on sidelines, and you see the W&D strategy of building long-term durable revenue streams come front and center. And our affordable housing platform Alliant is a market leader in the much needed and focused…

The line is now open for questions. [Operator Instructions] Our first question is coming from Jade Rahmani at KBW. Jade?

Jade, we can't hear, you are mute. Still nothing, Jade. I think you just came through, Jade. Try now.

Thank you very much. Sorry about that.

Yeah. It's okay.

On the transaction volume outlook quite impressive performance in the quarter. I was wondering, if you could give any fourth quarter update on how things are trending. You said you don't expect things to pick up. The Fannie Mae volumes in particular were extremely strong. And also broker loan volumes were much stronger than some of the performance we've seen elsewhere they were up 3% year-on-year. Just on those two line items maybe could you provide any comments?

First of all, Jade, thanks for joining us this morning. It's – look first of all, we're not giving explicit volume guidance for Q4. As you underscored Q3 volumes were stronger than any of the competition that I've read earnings releases on. And I think that, as I said previously speaks to our team, and their relationships and relevance to our clients. I would say, this on Q4 transaction volumes. There's still quite a bit of carryover from Q3 into Q4 on the investment sales side. And so we are still seeing sales happen. The real question is the -- if you will the replenishment of the pipeline and that has slowed down significantly as I said in my comments. On the capital market side, many of those bankers and brokers in that group are very focused on agency financing right now. And then as it relates to the agencies what we're generally seeing is that Freddie Mac stepped into the market very strong in October into the beginning of November, and was pricing deals to win and won a lot of business over the past several weeks. Freddie Mac will get to a point in the next couple of weeks where they can no longer process business in 2022. And I would think that that then opens a lane for Fannie Mae to step back into the market, and price deals to win. And so as you know our very scaled relationships with Fannie and Freddie are very valuable to us. And right now, they are dominating the lending market as they have in the past and as they will likely do going well into 2023.

Thank you very much. And again on the gain on sale margin that was definitely one of the big variances versus our model. And I think when we met, you were hopeful that there could have been a trough in margins in July thereabouts. Do you still believe that's the case could you give any directionality on where you expect gain on sale margins to be headed?

Yeah, Jade when we did meet here in New York back in the late summer early fall, I did express to you that, I was hopeful that we had hit the trough and that things were going to come back out. Quite honestly that inflation print that we saw and the Fed raising by another 75 basis points basically put the pricing situation right back to where it was, because if you think about it our borrowers if we quote a deal for them and let's back up a month and we would say that the indicative pricing was going to be a 5.25 coupon rate. And all of a sudden rates move up by 30 basis points on the base rate on the 10-year treasury. And now all of a sudden we're looking at pricing at 550. We've got to work to get back to that 5.25. And so we and Fannie Mae would sit there and look at our GeoPhy and our and make that type of the deal work. And so that's the type of pricing pressure we are dealing with right now. I would underscore what I said in my prepared remarks, which is just that this is all rate driven. It's not competitive landscape driven. And as a result of that, once we get any type of stabilization from the Fed, I think we will see spreads widen. And I think we will see the ability to price back to normalizing guarantee fees, which will obviously help that noncash mortgage servicing right line item as it relates to both revenues and net income.

Thank you very much.

Thank you.

Thanks, Jade.

Thank you, Jade. Our next question is from Steve Delaney at JMP. Steve?

Good morning everyone. Thank you for taking the question. Willy a pretty remarkable I think the topline transaction volume and revenues were down, but in high single-digits on a year-over-year basis given what we've been through. I think we know the -- you have a rate-driven business with respect to your customers doing transactions and their demand for 10-year fixed rate loans. Given where we are, I assume there's some disrupted business plans with your borrowers' properties. Given your relationship with the agencies, is this an opportunity for WD to step in and expand your bridge lending business possibly to include extension loans the CLO market is essentially -- it's not closed but it might as well be. So, all the commercial mortgage REITs et cetera are not in a position to step in you have capital. Is that an area where over the next two or three quarters, you see opportunity. And as part of that specifically Freddie Mac has this Q-series program that they're trying to reactivate. Could that be part of a strategy to get -- to expand short-term lending when high rates are reducing demand for long-term lending? Thank you.

Sure Steve and a really good and insightful question. Let me talk through a couple of things that you mentioned there. The first thing is the volumes that we saw in Q3, I would underscore show the strength of the relationship with Walker & Dunlop and our relevance to our customers. And so while volumes may come down in Q4 as both Greg and I have said, our relevance to our clients has never been more significant. We are engaged with many, many clients who are dealing with exactly what you just outlined which is a business plan that isn't on pace, a business plan that has changed dramatically given rate movements. That has then driven some people to say -- to try and add some -- do a cash-out refinancing and put capital in their balance sheet. We're doing a lot of that right now. It's had some people say I want to sell my whole portfolio regardless of where cap rates are. Let's go sell it. And so we're doing a lot of BOVs on people who want to raise capital and potentially transact at this point. Your point as it relates to the CLO market and the Freddie Q series, my understanding is that Freddie is going to do about $3 billion of Q loans in Q4. To those on the call who may not know what Steve and I are talking about. If you back the clock up very significantly back to the 2007 timeframe, Freddie Mac went and would buy loans that were if you will stuck on warehouse lines and be able to go and securitize those through what became their K series and are now being called Q series. And some of you may have heard that a few of our competitor firms…

Your last comment tied in directly to my second question that in these tough markets, there are usually some casualties -- corporate casualties. We're not wishing for that but what part of your business would you most like to grow opportunistically over the next year where we're going through this kind of shakeout period and transition period?

So, I would underscore the fact that we made -- we did not make procyclical acquisitions in 2020 and 2021. I think it's really -- we talked about it at our Board meeting yesterday. It says a ton about the fact that both Alliant and Zelman are on budget for 2022. We did not go out and acquire a big investment sales business that volumes have gone from robust to nothing. We did not go out and buy a mortgage brokerage firm because volumes have gone from robust to nothing. So, I feel extremely good about our discipline from an M&A standpoint. And clearly, as you've seen us do in the past, whether it be the acquisition of CW Capital in 2012 coming out of the great financial crisis, we've been very opportunistic to go and buy origination platforms when the market has dislocated. And when other platforms don't fare as well as ours do, given the long-term consistent revenue streams and earnings that we have. And so we'll be looking. I think the other thing to keep in mind though, and I would underscore this for any investors who would be concerned about this. Buying -- at our scaled size, we've done tuck-in acquisitions on mortgage brokerage and property sales platforms and brought in people. But we haven't done a major enterprise acquisition, since that acquisition in CW in 2012. The JLL/HFF merger as many people who are listening to this call know, was an unmitigated disaster as it relates to human resource and human capital management. It turned out to be an accretive deal for JLL, because they took a lot of their products and push them through the HFF relationships. But as it relates to merging those two big companies together, it was wildly challenging to hold on to talent at both JLL and HFF. So we are very cautionary, as it relates to going and doing a large-scale human capital-intensive acquisition. And then the other thing that I would say, on that is culture matters. We have maintained and built a culture at Walker & Dunlop that I believe is truly unique and distinct. And so, if we went and did a large-scale transaction, we would put ourselves susceptible to emerging cultures that in a people business is very challenging. Does that mean we'll never do it, does that mean we'll never take a look at something which is a large-scale human capital focused deal? I wouldn't completely rule it out, but it's probably not at the top of the list today.

Understand. And thank you for the comments Willy, we’ll miss you at our conference next week. But I know that Sheri Thompson will do a great job representing WD on our affordable house and panel. Thanks. A – Greg Florkowski: Thanks, Steve. A – Willy Walker: Thanks, Steve.

Thank you, Steve. Our next question comes from Henry Coffey of Wedbush Securities. Henry?

Yes. Good morning, everyone. Thank you for taking my question. Is it -- it sounds like -- and I don't have the answer here that on one hand your customers are slamming on the brakes. On the other hand, anybody walking around any major metro market, doesn't see anything that looks or smells like a recession. So, how much of this is just in your mind, customers overwhelmed by the rapid change in rates, confusion over the election. I hear Watson Trace [ph] may try to run again. And how much of this is, people reacting to some real changes in the underlying economics of multifamily lending, be it rent rates or ability to get buildings built or whatever the quote business disruption issues may be. I mean, is this all capital markets related or are there some real shifts going on in the multifamily business from your perspective? A – Willy Walker: So Henry, first of all, great to have you on this morning. Let me give you a couple of anecdotes that I'll just -- hopefully, will answer your question. First of all, with rates moving at the rate that they have moved, cap rates have not adjusted fully to those rate movements. And so I've heard Jade, asked the question on previous calls of some of our competitor firms, how are people buying with negative leverage. And I think there were many acquirers in the August, September time frame, who are happy to deal with the negative leverage of buying at a 4.25% cap rate and putting 5% debt on a deal. I would say, to you that in October and November there are not many people who feel comfortable going and putting negative leverage on deals right now, due to no real transparency as it relates…

And I'll just – I'll add on there too. Beyond multi, we are seeing plenty of activity on the non-multi asset classes as well and rate stabilization brings capital back into the markets and we should see our volumes rebound there as soon as you get stabilization. So there's opportunity across the landscape.

I think everybody listening to the call was there any history that you understand that W&D is going to be just fine. You plan your business, you plan your balance sheet, et cetera. What I'm really wondering about is if we put aside all the capital markets funding stuff, we just think of the whole business. If we put that aside and look at your clients, how are they bearing in terms of the operating profitability of their properties? We've seen home price appreciation go down in the residential market since June. Obviously, a lot of that's rate related. What about the fundamentals of their business, you all have a unique perspective on exactly that, not only in terms of what people want to do with their balance sheets but exactly how the properties are performing. And so push all the noises aside what does it look like?

Yes. Everyone who owns today, Henry is loving life. Everyone who owns today has an asset that was financed any time over the last 10 years is sitting back going I have rarely had the type of performance on this asset that I've gotten. So their cash flow is fantastic. Their leasing is fantastic. And while, there's lots of reporting as it relates to rent growth peeling back from the very elevated levels that it was in 2021 and the beginning of 2022, as I tried to underscore in our comments on our servicing portfolio, I had someone call me last week who said, "Oh my gosh, there's $100 million of multifamily debt that's coming up to be refi every year over the next 10 years. And with rising interest rates none of that stuff is going to be able to be done. And I looked at the CEO of this company and I said, do you know what the debt service coverage ratio is in the Walker & Dunlop $120 billion servicing portfolio today? It's 2.32 times, 2.32 times. Every one of those assets has plenty of cash flow to be refinanced in a higher rate environment. And so unless, unless you went out and did a floater in Q1 of 2022 and you didn't put a cap on it, because it was done by a CLO provider and not one of the agencies, yes you could have some pain there. But as Peter Linneman said, on the Walker webcast, probably about a month ago, when I asked him on the specific point, he said, will there be some pain? Yes. Will there be real opportunities? Few and far between. So I think the bottom line here is that we're seeing a market adjustment right now. We're seeing a…

Okay. Thank you.

Thank you.

Thank you Henry. We have no further questions at this time. So I will now turn the call back to Willy for closing remarks.

Thank you everyone for joining us today. Thank you to the W&D team for a fantastic Q3. And as Greg and I both underscored while these are challenging times, we feel exceptionally well-positioned and we have a team that's engaged with our customers every single day and doing a fantastic job of providing capital and capital solutions to our clients. Thanks everyone for joining us today. Thank you Ginna and Kelsey for all your work on this earnings call. Greg, well done and I hope everyone has a great day.