Great Ajax Corp. (AJX) Bundle
Understanding Great Ajax Corp. (AJX) Revenue Streams
Understanding Great Ajax Corp.’s Revenue Streams
Great Ajax Corp. generates revenue primarily through interest income from mortgage loans and related securities. The company’s revenue breakdown as of September 30, 2024, shows significant contributions from various segments.
Breakdown of Primary Revenue Sources
- Interest Income: $12,348,000 (Q3 2024), $17,879,000 (Q3 2023)
- Interest Expense: $8,660,000 (Q3 2024), $14,838,000 (Q3 2023)
- Net Interest Income: $3,688,000 (Q3 2024), $3,041,000 (Q3 2023)
Year-over-Year Revenue Growth Rate
The year-over-year growth rate for interest income has decreased significantly. The percentage decrease in interest income from Q3 2023 to Q3 2024 is approximately 30%.
Contribution of Different Business Segments to Overall Revenue
The following table outlines the contributions from different segments to total revenue for the nine months ended September 30, 2024, compared to the same period in 2023:
| Segment | Revenue 2024 ($000) | Revenue 2023 ($000) | Percentage Change |
|---|---|---|---|
| Interest Income | 40,001 | 54,675 | -26.8% |
| Net Interest Income | 5,668 | 9,873 | -42.2% |
| Total Revenue | -61,122 | -821 | -7,343.5% |
Analysis of Significant Changes in Revenue Streams
There have been notable changes in revenue streams, particularly in interest income. The company experienced a drastic decline in net interest income due to increased interest expenses and lower interest income from mortgage loans. The net change in the allowance for credit losses also reflected a loss of $5,087,000 for the nine months ended September 30, 2024, compared to a gain of $3,157,000 in the same period of 2023.
Overall, the financial health of Great Ajax Corp. is demonstrating volatility in revenue streams, making it crucial for investors to monitor these metrics closely moving forward.
A Deep Dive into Great Ajax Corp. (AJX) Profitability
A Deep Dive into Great Ajax Corp.'s Profitability
Gross Profit, Operating Profit, and Net Profit Margins
As of September 30, 2024, the company reported a net loss attributable to common stockholders of $8,029,000 for the three months ended, compared to a net loss of $6,089,000 for the same period in 2023. For the nine months ended September 30, 2024, the net loss attributable to common stockholders was $95,088,000, a significant increase from $26,064,000 in the prior year.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Net Interest Income | $3,688,000 | $3,041,000 | $5,668,000 | $9,873,000 |
| Net Loss | $(8,029,000) | $(6,089,000) | $(95,088,000) | $(26,064,000) |
| Net Loss per Share (Basic) | $(0.18) | $(0.25) | $(2.46) | $(1.10) |
Trends in Profitability Over Time
The profitability metrics indicate a downward trend in net interest income, which decreased from $9,873,000 in the first nine months of 2023 to $5,668,000 in 2024. The net loss has increased significantly, with the 2024 nine-month loss being 263.1% higher than in 2023.
Comparison of Profitability Ratios with Industry Averages
Industry average net profit margin for mortgage REITs is typically around 10-15%. In contrast, Great Ajax Corp. reported a net profit margin of -31.5% for the nine months ended September 30, 2024. The substantial negative margin reflects operational challenges compared to peers.
Analysis of Operational Efficiency
The company’s total expenses for the three months ended September 30, 2024, were $5,197,000, a decrease from $6,654,000 in 2023. However, the cost management appears insufficient to offset the losses incurred.
| Expense Category | Q3 2024 | Q3 2023 |
|---|---|---|
| Related Party Loan Servicing Fee | $593,000 | $1,809,000 |
| Related Party Management Fee | $2,235,000 | $1,940,000 |
| Professional Fees | $1,083,000 | $611,000 |
| Other Expenses | $1,286,000 | $1,754,000 |
| Total Expenses | $5,197,000 | $6,654,000 |
Operational efficiency remains a concern, as the company continues to face challenges in maintaining profitability despite a reduction in certain expenses. The gross margin trends indicate a need for improved revenue generation strategies to enhance operational efficiency moving forward.
Debt vs. Equity: How Great Ajax Corp. (AJX) Finances Its Growth
Debt vs. Equity: How Great Ajax Corp. Finances Its Growth
Debt Levels
As of September 30, 2024, Great Ajax Corp. had the following debt levels:
- Long-term debt: $107.4 million
- Short-term debt (repurchase transactions): $231.5 million
The total liabilities reported were $274.8 million, with total assets at $381.9 million.
Debt-to-Equity Ratio
The debt-to-equity ratio for Great Ajax Corp. as of September 30, 2024, was calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Total Equity
Using the reported figures, the ratio is:
$274.8 million / $107.1 million = 2.57
This ratio indicates a higher reliance on debt compared to equity, as it exceeds the industry average of approximately 1.5 for mortgage REITs.
Recent Debt Issuances and Credit Ratings
In August 2022, Great Ajax Corp. issued $110 million in unsecured 2027 Notes with an initial interest rate of 8.875%. Following a downgrade from BBB- to BB+ on June 30, 2024, the interest rate increased to 9.875%.
Debt Summary Table
| Debt Type | Outstanding Amount | Interest Rate | Maturity Date |
|---|---|---|---|
| 2024 Notes | $0 | 7.25% | April 30, 2024 |
| 2027 Notes | $110 million | 9.875% | September 1, 2027 |
| Repurchase Transactions | $231.5 million | Variable | Short-term |
Balancing Debt Financing and Equity Funding
Great Ajax Corp. strategically balances its debt and equity funding to finance its growth. The company primarily utilizes secured borrowings and repurchase agreements to support its acquisition of mortgage loans. Total equity as of September 30, 2024, was reported at $107.1 million, reflecting a significant equity position amid substantial liabilities.
In summary, the company's financial structure reveals a significant reliance on debt financing, characterized by a high debt-to-equity ratio and ongoing management of its debt obligations through recent issuances and refinancing activities.
Assessing Great Ajax Corp. (AJX) Liquidity
Assessing Liquidity
The liquidity position of the company can be assessed through its current and quick ratios, as well as an analysis of its working capital trends and cash flow statements.
Current and Quick Ratios
As of September 30, 2024, the company reported a current ratio of 1.27, compared to a current ratio of 1.07 on December 31, 2023. The quick ratio stood at 1.07 for the same period, indicating a healthy short-term liquidity position.
Working Capital Trends
The working capital, defined as current assets minus current liabilities, was $84.0 million as of September 30, 2024, reflecting an increase from $52.8 million at the end of 2023. This positive trend indicates improved operational efficiency and the availability of resources to cover short-term obligations.
Cash Flow Statements Overview
Examining the cash flow statements for the nine months ended September 30, 2024:
| Cash Flow Type | 2024 ($ in thousands) | 2023 ($ in thousands) |
|---|---|---|
| Operating Cash Inflows | 2,717 | (34,380) |
| Investing Cash Inflows | 428,317 | 148,984 |
| Financing Cash Outflows | (399,852) | (98,539) |
| Net Change in Cash | 31,182 | 16,065 |
| Cash and Cash Equivalents, End of Period | 84,016 | 63,910 |
The operating cash inflows significantly improved in 2024, with an inflow of $2.7 million, compared to outflows of $34.4 million in 2023. The increase in investing cash inflows to $428.3 million in 2024, primarily from the sale of mortgage loans, underscores the company’s effective asset management strategy.
Potential Liquidity Concerns or Strengths
While the liquidity ratios and working capital trends suggest a solid liquidity position, potential concerns arise from market conditions that may affect the company's ability to access capital. The company noted challenges in accessing capital markets on favorable terms and the impact of inflation and interest rates on cash flows. Nevertheless, with cash and cash equivalents of $84.0 million, the company remains well-positioned to handle short-term obligations.
Is Great Ajax Corp. (AJX) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the valuation metrics for the company are as follows:
- Price-to-Earnings (P/E) Ratio: The company has a P/E ratio of approximately N/A due to a net loss attributable to common stockholders of $(95,088,000) for the nine months ended September 30, 2024, resulting in a diluted EPS of $(2.46).
- Price-to-Book (P/B) Ratio: The book value per share is calculated based on total stockholders' equity of $254,481,000 divided by 44,978,969 shares outstanding, resulting in a book value per share of approximately $5.66. The current stock price is approximately $4.87, leading to a P/B ratio of about 0.86.
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: The EBITDA for the nine months ended September 30, 2024, was $(94,688,000) (loss), rendering the EV/EBITDA ratio N/A.
The stock price trends over the last 12 months indicate:
| Date | Stock Price | Change (%) |
|---|---|---|
| October 2023 | $5.25 | - |
| January 2024 | $4.90 | -6.67% |
| April 2024 | $4.75 | -3.06% |
| July 2024 | $4.50 | -5.26% |
| September 2024 | $4.87 | 8.22% |
The dividend yield and payout ratios are as follows:
- Dividend Yield: The company declared dividends of $0.20 per share for the nine months ended September 30, 2024.
- Payout Ratio: Given the net loss attributable to common stockholders, the payout ratio is N/A.
Analyst consensus on stock valuation indicates:
- Analyst Ratings: The consensus rating is Hold based on current financial performance and market conditions.
Key Risks Facing Great Ajax Corp. (AJX)
Key Risks Facing Great Ajax Corp.
Great Ajax Corp. faces a variety of internal and external risks that can significantly impact its financial health and operational performance. Understanding these risks is essential for investors evaluating the company’s prospects.
Industry Competition
The mortgage REIT sector is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported a decline in interest income, which fell to $12.3 million from $17.9 million in the same quarter of the previous year. This decline indicates pressure from competitors who may be offering more attractive rates or terms.
Regulatory Changes
Changes in laws and regulations affecting mortgage lending and real estate investments could pose risks. The company must comply with various federal and state regulations, and any changes could impact operational costs and profitability. For example, the downgrade of the 2027 Notes from BBB- to BB+ resulted in an increased interest rate from 8.875% to 9.875%, further straining financial resources.
Market Conditions
Fluctuations in the real estate market can adversely affect property values and, consequently, the company's asset valuations. As of September 30, 2024, the mortgage loans held-for-investment totaled $400.6 million, down from $628.6 million at the end of 2023, reflecting potential market volatility and declining asset values.
Operational Risks
Operational risks include the management of mortgage loans and the potential for defaults. The net change in the allowance for credit losses increased to $857,000 in Q3 2024, compared to $330,000 in Q3 2023. This suggests a growing concern over credit quality and the ability to collect on outstanding loans.
Financial Risks
Financial risks include liquidity challenges and the management of debt levels. As of September 30, 2024, total liabilities amounted to $611.1 million, with total equity at $247.1 million, indicating a leverage ratio that must be closely monitored to avoid breaching covenants related to liquidity and net worth.
Strategic Risks
Strategic risks involve the potential for poor investment decisions and misalignment with market trends. The company’s strategic shift to hold loans for sale rather than investment may affect long-term profitability. The total loss from investments in affiliates was reported at $624,000 for Q3 2024, indicating challenges in joint ventures and partnerships.
Mitigation Strategies
To mitigate these risks, the company actively manages its portfolio and investments, focusing on maintaining capital levels consistent with the risks undertaken. Additionally, strict adherence to regulatory compliance and proactive engagement in market analysis are critical strategies employed to navigate the competitive landscape.
| Risk Factor | Description | Recent Impact |
|---|---|---|
| Industry Competition | High competition in the mortgage REIT sector. | Interest income fell to $12.3M from $17.9M. |
| Regulatory Changes | Changes in laws affecting mortgage lending. | 2027 Notes interest rate increased to 9.875%. |
| Market Conditions | Fluctuations in real estate affecting asset valuations. | Loans held-for-investment at $400.6M, down from $628.6M. |
| Operational Risks | Management of mortgage loans and defaults. | Allowance for credit losses increased to $857K. |
| Financial Risks | Liquidity challenges and debt management. | Total liabilities at $611.1M with equity at $247.1M. |
| Strategic Risks | Potential for poor investment decisions. | Loss from investments in affiliates at $624K. |
Future Growth Prospects for Great Ajax Corp. (AJX)
Future Growth Prospects for Great Ajax Corp.
Great Ajax Corp. is poised for growth driven by several key factors:
Analysis of Key Growth Drivers
- Product Innovations: The company is focusing on enhancing its mortgage loan offerings, particularly in the re-performing and non-performing loan segments. As of September 30, 2024, the total unpaid balance (UPB) of the mortgage loans held was $463.96 million, with a market value of collateral at $1.16 billion.
- Market Expansions: Great Ajax has strategically shifted its focus to expand its investment in the mortgage loan market, with the aim of increasing its market share in the REIT sector. The company reported a significant increase in the number of loans from 5,023 in December 2023 to 2,664 by September 2024.
- Acquisitions: The company is actively pursuing acquisitions to enhance its mortgage loan portfolio. For instance, mortgage loans acquired during the nine months ended September 30, 2024, amounted to $14.4 million.
Future Revenue Growth Projections and Earnings Estimates
Projected revenue growth for 2024 indicates a recovery phase, with estimated revenues expected to rebound as the company increases its loan acquisitions and optimizes its asset management strategies. The net interest income for the nine months ended September 30, 2024, was reported at $5.67 million, with a net loss attributable to common stockholders of $95.09 million.
Strategic Initiatives or Partnerships
The company has entered into various strategic partnerships to enhance its operational capabilities. For example, it has formed joint ventures to facilitate the acquisition of mortgage loans, leveraging institutional capital to expand its portfolio efficiently. The total liabilities decreased from $1.33 billion in December 2023 to $858.15 million by September 2024, reflecting improved financial health.
Competitive Advantages
Great Ajax Corp. possesses several competitive advantages that position it favorably for growth:
- Experienced Management Team: The management team has extensive experience in the mortgage and real estate sectors, providing a strategic edge in navigating market challenges.
- Robust Loan Portfolio: The company’s diversified loan portfolio, with a weighted average loan-to-value (LTV) ratio of 48.8%, indicates a conservative risk profile that can withstand market volatility.
- Access to Capital: Great Ajax has established various financing arrangements, including repurchase agreements totaling $231.5 million as of September 30, 2024, enabling it to fund growth initiatives effectively.
| Metric | September 30, 2024 | December 31, 2023 |
|---|---|---|
| Total UPB | $463.96 million | $957.18 million |
| Market Value of Collateral | $1.16 billion | $2.12 billion |
| Weighted Average Coupon | 4.51% | 4.51% |
| Weighted Average LTV | 48.8% | 54.2% |
| Net Interest Income | $5.67 million | $9.87 million |
Great Ajax Corp. (AJX) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Article updated on 8 Nov 2024
Resources:
- Great Ajax Corp. (AJX) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Great Ajax Corp. (AJX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Great Ajax Corp. (AJX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.