Executive Summary / Key Takeaways

• Market Inflection Point: Walker & Dunlop is strategically positioned to capitalize on the nascent recovery and structural tailwinds in the commercial real estate (CRE) market, particularly within the multifamily sector, as a "Great Tightening" gives way to a new investment cycle.
• Robust Q2 Performance & Strategic Shift: The company delivered strong Q2 2025 results with total transaction volume up 65% year-over-year to $13.95 billion, driving GAAP EPS up 48% to $0.99. This growth is fueled by a strategic shift towards higher non-cash Mortgage Servicing Rights (MSRs) from increased agency lending, offsetting a decline in cash-driven adjusted metrics due to lower short-term interest rates.
• Technological & Niche Leadership: WD maintains a competitive edge through its proprietary technology platforms like Galaxy and Apprise, which enhance efficiency and client acquisition, alongside its dominant market share in Fannie Mae DUS (#1), HUD (#2), and a strong position with Freddie Mac.
• Resilient Business Model & Outlook: The Servicing & Asset Management (SAM) segment provides stable, recurring cash flows, underpinning a reiterated 2025 guidance of high single-digit to double-digit diluted EPS growth. This resilience supports continued strategic investments and a consistent dividend, even amidst ongoing macroeconomic volatility.
• Multifamily Tailwinds: Structural factors, including the widening affordability gap between renting and homeownership, record absorption of multifamily units, and a dramatic decline in new construction starts, are expected to create an undersupplied market in 2026-2027, driving rent growth and asset values.

Walker & Dunlop, Inc. (NYSE:WD) stands at a pivotal juncture, emerging from a period of significant market disruption into what management firmly believes is the dawn of a new commercial real estate cycle. Founded in 1937, WD has evolved from a local brokerage firm into a leading national and now increasingly international commercial real estate services, finance, and technology powerhouse. Its core business revolves around originating, selling, and servicing a comprehensive suite of multifamily and other commercial real estate financing products, complemented by property sales brokerage, valuation, investment management, and advisory services. This diversified platform, built over decades, is now strategically poised to leverage structural market tailwinds and its technological differentiators to drive growth.

The company's journey has been marked by strategic expansion, notably the "Drive to '25" growth plan launched in 2020. This initiative saw key acquisitions like Zelman Associates for research and investment banking, GeoPhy for AI and machine learning integration, and Alliant for affordable housing and tax credit syndication. While the subsequent "Great Tightening" from 2022 to 2024 presented significant headwinds, WD's resilient business model, particularly its scaled servicing and asset management segments, generated strong recurring cash flows, enabling it to maintain strategic investments and preserve its core capabilities. This historical adaptability and commitment to long-term vision are foundational to its current market positioning.

Technological Edge: Fueling Growth and Efficiency

Walker & Dunlop's strategic investments in technology are not merely incremental improvements; they are fundamental differentiators that enhance operational efficiency, client engagement, and competitive advantage. The company actively integrates machine learning and artificial intelligence (AI) across its operations, building on its first AI-related acquisition in 2019.

Proprietary platforms like Galaxy, WD's loan database, are critical for client acquisition and retention. This technology-driven approach is evidenced by 17% of year-to-date transaction volume coming from new clients and 58% of refinancing volume originating from new loans to WD. This speaks directly to the platform's ability to identify opportunities and win business from competitors.

Apprise by Walker & Dunlop, the company's technology-enabled appraisal platform, significantly improves the consistency, transparency, and speed of multifamily property appraisals. Apprise has notably increased the number of valuation reports per appraiser from 10 per month last year to 15 this year, demonstrating a 50% gain in appraiser efficiency. This operational improvement directly contributes to faster deal execution and enhanced client service.

In its Small Balance Lending (SBL) business, WD leverages data analytics and software development to manage high volumes of smaller loans. This technological integration has allowed the company to process twice as many loans per underwriter compared to a year ago, positioning it for meaningful scaling as the market recovers. The upcoming launch of WD Suite, a web-based software, aims to further engage and attract private clients, driving lead generation and deal flow in this fragmented market.

The company's commitment to AI extends to developing an automated valuation model that continuously improves with every new data input. These AI efficiencies, initially proven in the SBL process, are slated for migration to WD's larger loan businesses. This technological roadmap creates a powerful competitive moat, allowing WD to offer superior service, reduce costs, and capture market share, thereby directly contributing to its financial performance and long-term growth strategy.

Competitive Arena: Dominance in Key Niches

Walker & Dunlop operates in a highly competitive commercial real estate finance landscape, facing off against global giants like CBRE Group, Inc. (CBRE), Jones Lang LaSalle Incorporated (JLL), and Newmark Group, Inc. (NMRK). Despite the broader scale of these competitors, WD has carved out a dominant position in critical niches, particularly within the U.S. multifamily and affordable housing sectors.

WD's competitive strength is underscored by its consistent leadership in agency lending. The company has been Fannie Mae's largest DUS partner for six consecutive years. It also finished 2024 as the fourth-largest Freddie Mac Optigo lending partner and, notably, climbed from fifth to second largest HUD multifamily lender in 2024. This strong positioning with the Government-Sponsored Enterprises (GSEs) and HUD provides a stable foundation for its lending volumes and MSR generation.

Compared to its larger, more diversified rivals, WD's unique value proposition lies in its specialized expertise and deep, long-standing relationships within the U.S. housing finance market. While CBRE and JLL boast broader global footprints and integrated service offerings, WD's focused approach often translates into more tailored solutions and potentially stronger customer loyalty in its core segments. Newmark, while a strong brokerage player, does not match WD's comprehensive loan product offerings or its specialized focus on affordable housing.

Management acknowledges the "competitive environment in the multifamily debt financing market" and its impact on margins for origination fees and property sales broker fees. In response, WD is strategically expanding its capabilities and geographic reach. Recent initiatives include entering the hospitality investment sales space in Q4 2024, launching a data center financing business, and establishing a London office in early 2025. This international expansion aims to capture foreign deal flow and connect with European and Middle Eastern investors, leveraging WD's established brand and capital deployment platform to diversify beyond its U.S. core.

Financial Performance: A Resilient Rebound

The second quarter of 2025 marked a significant inflection point for Walker & Dunlop, signaling a robust rebound in transaction activity. Total transaction volume surged by 65% year-over-year to $13.95 billion, driving an 18% increase in total revenues to $319.24 million. This momentum translated into a 48% year-over-year increase in diluted earnings per share (EPS) to $0.99. For the first half of 2025, total transaction volume grew 41% to $20.99 billion, with revenues up 12% to $556.61 million and diluted EPS rising 5% to $1.07.

The Capital Markets (CM) segment was a primary driver of this growth, with revenues increasing 46% year-over-year in Q2 2025 to $172.79 million and net income soaring 200% to $33.14 million. This was largely attributable to a significant increase in debt financing volumes, particularly from Fannie Mae, and higher property sales volumes. However, the competitive environment led to declines in origination fee rates (82 bps in Q2 2025 vs. 95 bps in Q2 2024) and Agency MSR rates (103 bps vs. 117 bps).

A key aspect of WD's financial performance is the increasing contribution of non-cash Mortgage Servicing Rights (MSRs). As CEO Willy Walker highlighted, "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." While GAAP earnings benefited significantly from these MSRs, adjusted EBITDA declined 5% in Q2 2025 to $76.81 million, and adjusted core EPS fell 7%. This divergence is primarily due to a 100-basis point decrease in short-term interest rates, which pressured placement fees and other interest income within the Servicing & Asset Management (SAM) segment. Management views this as a favorable "swap" of lower escrow earnings for increased origination volumes and MSR revenues as the market recovers.

The SAM segment, while experiencing a 5% year-over-year revenue decline in Q2 2025 to $140.74 million and a 7% drop in net income to $37.54 million, continues to be a source of stable, recurring cash flows. Its servicing portfolio grew 3% year-over-year to $137.35 billion, and assets under management (AUM) increased 6% to $18.62 billion. The decline in SAM revenues was largely due to lower investment management fees from affordable housing operations, impacted by fewer asset dispositions in a challenging market.

The company maintains a strong liquidity position, with $233.71 million in cash and cash equivalents as of June 30, 2025. It also boasts robust compliance with Fannie Mae's capital requirements, reporting $1 billion in net worth against a $337.4 million requirement and $220.2 million in operational liquidity against a $67.2 million requirement. A strategic debt refinancing in Q1 2025 reduced the weighted average cost of capital and enhanced balance sheet flexibility, adding over $50 million in liquidity and securing a $50 million working capital line.

Outlook and Guidance: Poised for the Next Cycle

Walker & Dunlop's management is optimistic about the remainder of 2025 and beyond, reiterating its full-year guidance despite Q1's slower start and ongoing market volatility. The company projects diluted EPS growth in the high single digits to double digits for 2025, while adjusted EBITDA and adjusted core EPS are expected to be flat to up in the high single digits. This guidance reflects the anticipated shift in revenue mix, with non-cash MSR earnings from the Capital Markets segment outpacing the cash-driven placement fees from the SAM segment.

Underpinning this outlook is a strong conviction in the fundamental drivers of the CRE market. Management points to over $1 trillion of real estate-focused equity capital needing to be recycled or deployed, alongside nearly $1 trillion of commercial real estate debt maturing in 2025. The multifamily sector, in particular, is expected to benefit from structural tailwinds: the median home price has risen to $410,000 by Q2 2025, making monthly mortgage payments $500-$600 more expensive than median apartment rent, rendering single-family housing "thoroughly unaffordable" for many. This has driven record multifamily absorption of 227,000 units in Q2 2025 and 794,000 units over the past year, leading to 96% occupancy. With new apartment construction starts plummeting to 213,000-250,000 units in 2024 (down 58% from 2022 peaks), an undersupplied market is anticipated in 2026-2027, which should drive rent growth and asset values.

Operational targets for 2025 include achieving an average of at least $200 million in transaction volume per banker/broker (currently $189 million annualized YTD, $206 million TTM), raising $600 million in tax credit equity through WD Affordable Equity (with $270 million raised in H1), and deploying over $1 billion in capital via Walker & Dunlop Investment Partners (with $330 million deployed YTD). The company also expects its appraisal and Zelman businesses to generate $40-$50 million in revenue.

Risks and Challenges

While the outlook is positive, Walker & Dunlop acknowledges several risks. Macroeconomic volatility, particularly from the Trump administration's trade policies and their impact on global supply chains and interest rates, remains a concern. The Federal Open Market Committee (FOMC) has indicated rates may remain elevated for longer, which could continue to pressure placement fees.

Credit risk, though primarily confined to multifamily, is a constant focus. The company has faced challenges with loan repurchases from GSEs, having repurchased five loans with an original principal balance of $87 million in 2024, incurring $24 million in related expenses. As of June 30, 2025, eight loans totaling $108.5 million in unpaid principal balance were in default within its at-risk portfolio, with collateral-based reserves of $8.6 million. WD has responded by implementing new process controls, technology, and a dedicated special asset management group to mitigate future risks.

Competitive pressures on margins in the multifamily debt financing and property sales markets are expected to persist. Additionally, the potential privatization of the GSEs, while a topic of discussion, introduces regulatory uncertainty, though management believes it could be fast-tracked if tied to a 2025 tax bill.

Conclusion

Walker & Dunlop stands on the cusp of a new commercial real estate cycle, armed with a diversified platform, a robust technological advantage, and deep-seated expertise in the resilient multifamily sector. Its Q2 2025 performance demonstrates a powerful rebound in transaction volumes, translating into significant GAAP earnings growth driven by the long-term value of MSRs. While macroeconomic volatility and competitive pressures present ongoing challenges, the company's strong liquidity, disciplined credit culture, and strategic investments in innovation and market expansion position it favorably. WD's ability to consistently grow its dividend, even through turbulent markets, underscores the stability of its Servicing & Asset Management segment.

For discerning investors, Walker & Dunlop offers a compelling thesis: a market leader poised to convert structural tailwinds and its technological leadership into sustained growth and shareholder value in the evolving commercial real estate landscape.