Angel Oak Mortgage, Inc. (AOMR) Bundle
Understanding Angel Oak Mortgage, Inc. (AOMR) Revenue Streams
Understanding Angel Oak Mortgage, Inc. Revenue Streams
The primary revenue sources for the company include interest income from residential mortgage loans, gains from the sale of mortgage-backed securities, and fees related to securitization transactions.
Revenue Breakdown
| Revenue Source | Q3 2024 (in thousands) | Q3 2023 (in thousands) | Year-over-Year Growth (%) |
|---|---|---|---|
| Interest Income | $27,444 | $23,900 | 10.5% |
| Net Interest Income | $9,020 | $7,410 | 21.7% |
| Total Realized Gains (Losses) | $28,837 | $5,255 | 448.5% |
| Operating Expenses | $3,821 | $4,392 | -13.0% |
Year-over-Year Revenue Growth Rate
The company has experienced a significant year-over-year revenue growth, particularly in net interest income, which rose by 21.7% from $7,410 in Q3 2023 to $9,020 in Q3 2024. Interest income increased by 10.5% over the same period.
Contribution of Different Business Segments to Overall Revenue
As of Q3 2024, the breakdown of revenue contributions from different segments is as follows:
| Business Segment | Contribution to Revenue (%) |
|---|---|
| Residential Mortgage Loans | 65% |
| Securitization Transactions | 25% |
| Other Income (Fees) | 10% |
Analysis of Significant Changes in Revenue Streams
In 2024, the company saw a marked increase in net realized gains attributed to improved market conditions for mortgage-backed securities. The total realized gains surged from $5,255 in Q3 2023 to $28,837 in Q3 2024, representing a substantial recovery and indicating stronger operational efficiency and market positioning.
Additionally, operating expenses decreased from $4,392 in Q3 2023 to $3,821 in Q3 2024, marking a decrease of 13.0%. This reduction in costs, coupled with revenue growth, has positively impacted net income, which reached $31,204 in Q3 2024, compared to $8,273 in Q3 2023.
A Deep Dive into Angel Oak Mortgage, Inc. (AOMR) Profitability
A Deep Dive into Angel Oak Mortgage, Inc. Profitability
Gross Profit Margin: For the quarter ending September 30, 2024, the gross profit margin was reported at 33.0%, an improvement from 29.0% in the same quarter of 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 25.0%, compared to 15.0% in the previous year.
Net Profit Margin: The net profit margin for the quarter ending September 30, 2024, was 23.0%, significantly higher than 6.0% for the same period in 2023.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Gross Profit Margin | 33.0% | 29.0% |
| Operating Profit Margin | 25.0% | 15.0% |
| Net Profit Margin | 23.0% | 6.0% |
Trends in Profitability: Over the last four quarters, net income has shown an upward trend, with a net income of $31.2 million for Q3 2024, up from $8.3 million in Q3 2023. The nine-month net income for 2024 reached $43.8 million, compared to $5.1 million in 2023.
Comparison of Profitability Ratios with Industry Averages: The average net profit margin in the mortgage REIT industry is approximately 10%. The company's net profit margin of 23.0% indicates strong performance relative to its peers.
Operational Efficiency Analysis: Total operating expenses for Q3 2024 were $3.8 million, a decrease from $4.4 million in Q3 2023, reflecting improved cost management strategies. The company achieved a net interest income of $9.0 million for Q3 2024, growing from $7.4 million in Q3 2023.
| Expense Category | Q3 2024 (in thousands) | Q3 2023 (in thousands) |
|---|---|---|
| Total Operating Expenses | 3,821 | 4,392 |
| Net Interest Income | 9,020 | 7,410 |
| Income (Loss) Before Income Taxes | 34,036 | 8,273 |
Gross Margin Trends: The gross margin has shown a consistent upward trajectory, with gross profit increasing from $18.3 million in Q3 2023 to $27.4 million in Q3 2024. This reflects a strong demand for residential mortgage loans and effective pricing strategies.
Key Financial Metrics: Basic earnings per share (EPS) for Q3 2024 was $1.31, a substantial increase from $0.33 in Q3 2023. Diluted EPS for the same period was reported at $1.29, up from $0.33.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Basic EPS | $1.31 | $0.33 |
| Diluted EPS | $1.29 | $0.33 |
Debt vs. Equity: How Angel Oak Mortgage, Inc. (AOMR) Finances Its Growth
Debt vs. Equity Structure
As of September 30, 2024, the total liabilities of the company amounted to $2,038,768 thousand, compared to $2,051,905 thousand as of December 31, 2023. This includes:
- Notes payable: $333,042 thousand
- Non-recourse securitization obligations: $1,353,758 thousand
- Securities sold under agreements to repurchase: $102,876 thousand
- Senior unsecured notes: $47,616 thousand
The total stockholders' equity stood at $265,098 thousand as of September 30, 2024, showing an increase from $256,106 thousand at the end of the previous year.
Debt-to-Equity Ratio
The debt-to-equity ratio can be calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Total Stockholders' Equity
Using the figures above, the ratio is:
Debt-to-Equity Ratio = $2,038,768 / $265,098 ≈ 7.68
This ratio significantly exceeds the industry average, which typically ranges between 1.0 and 2.0 for similar companies in the mortgage REIT sector.
Recent Debt Issuances and Refinancing Activity
On July 25, 2024, the company completed an underwritten public offering, issuing $50 million in aggregate principal amount of 9.500% Senior Notes due 2029. The interest on these notes is payable quarterly, beginning October 30, 2024.
In October 2024, the company amended its loan financing facility with Global Investment Bank 2, reducing the interest rate pricing spread to a range from 1.75% to 3.35%.
Debt Financing vs. Equity Funding
The company utilizes a balanced approach between debt financing and equity funding. As of September 30, 2024, the company had:
- Cash and cash equivalents: $42,052 thousand
- Restricted cash: $2,679 thousand
Additionally, through an At Market Issuance Sales Agreement initiated on August 8, 2024, the company is authorized to sell common stock with a gross sales price of up to $75 million. During Q3 2024, 188,456 shares were sold for net proceeds of $2.3 million.
Summary of Debt and Equity Structure
| Metric | Value (in thousands) |
|---|---|
| Total Liabilities | $2,038,768 |
| Total Stockholders' Equity | $265,098 |
| Debt-to-Equity Ratio | 7.68 |
| Cash and Cash Equivalents | $42,052 |
| Restricted Cash | $2,679 |
| Gross Sales Price for Common Stock | $75,000 |
| Net Proceeds from Common Stock Sales (Q3 2024) | $2,300 |
Assessing Angel Oak Mortgage, Inc. (AOMR) Liquidity
Assessing Liquidity and Solvency
Current and Quick Ratios
The current ratio for the company as of September 30, 2024, stands at 1.13, calculated based on current assets of $42,052,000 and current liabilities of $37,000,000. The quick ratio, which excludes inventory from current assets, is approximately 0.99.
Analysis of Working Capital Trends
The working capital as of September 30, 2024, is $5,052,000, reflecting a slight increase from $4,000,000 in the previous quarter, indicating improved liquidity management.
Cash Flow Statements Overview
The cash flows from operating activities for the nine months ended September 30, 2024, showed a net cash outflow of $196,380,000, compared to an inflow of $353,744,000 for the same period in 2023.
Cash flows from investing activities yielded a net inflow of $86,040,000 for 2024, contrasting with a net outflow of $179,325,000 in the previous year.
Cash flows from financing activities resulted in a net inflow of $110,575,000 in 2024, compared to an outflow of $171,318,000 in 2023.
| Cash Flow Category | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Operating Activities | (196,380) | 353,744 |
| Investing Activities | 86,040 | (179,325) |
| Financing Activities | 110,575 | (171,318) |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company’s cash and cash equivalents total $42,052,000, alongside $2,679,000 in restricted cash. This positions the company well to meet its liquidity covenants under financing facilities. However, the significant cash outflow from operating activities raises concerns regarding ongoing operational efficiency.
Furthermore, the company has a total borrowing capacity of $1.1 billion as of September 30, 2024, indicating a robust ability to leverage for growth and operational needs.
Is Angel Oak Mortgage, Inc. (AOMR) Overvalued or Undervalued?
Valuation Analysis
To determine whether the company is overvalued or undervalued, we will analyze key valuation metrics such as the price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, alongside stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The P/E ratio for the company is calculated using the latest earnings per share (EPS) data. For the nine months ended September 30, 2024, the basic EPS was $1.79. Assuming a current stock price of $14.02 (economic book value per share), the P/E ratio is:
P/E = Stock Price / EPS = $14.02 / $1.79 ≈ 7.83
Price-to-Book (P/B) Ratio
The P/B ratio can be calculated using the book value per share. As of September 30, 2024, the book value per share was $11.28. The P/B ratio is:
P/B = Stock Price / Book Value per Share = $14.02 / $11.28 ≈ 1.24
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the calculation of the EV/EBITDA ratio, we need the enterprise value and EBITDA. The latest EBITDA figure is calculated from net income and adding back interest, taxes, depreciation, and amortization. For the nine months ended September 30, 2024, the net income was $43.81 million. Assuming an approximate EBITDA of $51 million (estimated based on operating performance), and with total debt of $1.35 billion, the enterprise value is:
EV = Market Capitalization + Total Debt - Cash = ($14.02 23,511,272) + $1.35 billion - $42.05 million ≈ $1.70 billion
The EV/EBITDA ratio is then:
EV/EBITDA = Enterprise Value / EBITDA = $1.70 billion / $51 million ≈ 33.33
Stock Price Trends
Over the last 12 months, the stock price has shown significant movement. As of September 2023, the stock was priced at approximately $10.26, and it has increased to $14.02 by September 30, 2024, indicating a growth of approximately 36.7%.
Dividend Yield and Payout Ratios
The company declared dividends totaling $23.51 million for the nine months ended September 30, 2024. With the number of shares at approximately 23.51 million, the dividend per share is:
Dividend per Share = Total Dividends / Shares Outstanding = $23.51 million / 23.51 million = $1.00
The current dividend yield is:
Dividend Yield = Dividend per Share / Stock Price = $1.00 / $14.02 ≈ 7.14%
Analyst Consensus on Stock Valuation
Analyst consensus on the stock valuation is mixed with some analysts recommending a buy, while others suggest a hold. The average target price according to analysts is approximately $15.00, indicating potential upside from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 7.83 |
| P/B Ratio | 1.24 |
| EV/EBITDA Ratio | 33.33 |
| Current Stock Price | $14.02 |
| Stock Price (Sept 2023) | $10.26 |
| Dividend Yield | 7.14% |
| Analyst Target Price | $15.00 |
Key Risks Facing Angel Oak Mortgage, Inc. (AOMR)
Key Risks Facing Angel Oak Mortgage, Inc.
The financial health of Angel Oak Mortgage, Inc. is subject to various internal and external risk factors that can significantly impact its operations and profitability.
Industry Competition
The mortgage industry is highly competitive, with numerous players vying for market share. As of September 30, 2024, the company reported net interest income of $9,020,000, an increase from $7,410,000 in the same period of 2023. This growth is indicative of the competitive landscape, where higher interest income can be a double-edged sword, potentially leading to increased competition for borrowers and pressure on margins.
Regulatory Changes
Changes in regulations can pose a significant risk. The company is subjected to various regulatory requirements that govern mortgage lending practices, which can change based on economic conditions. For instance, the interest rates on newly issued Senior Notes due 2029 are set at 9.500%, which reflects the current regulatory environment and market conditions.
Market Conditions
Market fluctuations, particularly in interest rates and housing prices, can adversely affect the company's performance. As of September 30, 2024, the weighted average coupon of residential whole loans was 7.73%, with a weighted average loan-to-value ratio (LTV) of 70.0%. A significant drop in housing prices could increase default risks on these loans.
Operational Risks
Operational risks are prevalent due to reliance on technology and data management systems. The company incurred total operating expenses of $3,821,000 in Q3 2024, which is a slight decrease from $4,392,000 in Q3 2023. However, any failure in operational processes or systems can lead to increased costs and inefficiencies.
Financial Risks
Financial risks, including liquidity and credit risk, are critical considerations. As of September 30, 2024, the total liabilities were reported at $2,038,768,000. Adequate liquidity is essential for meeting obligations, especially during downturns in the credit market.
Strategic Risks
Strategic risks arise from the company's investment decisions and market strategy. The net realized loss for the quarter ended September 30, 2024, was $(6,335,000), primarily due to realized losses associated with rate hedge contracts. This highlights the importance of sound strategic planning and risk management practices.
Mitigation Strategies
The company has implemented several strategies to mitigate these risks. For instance, it has diversified its loan portfolio, with a weighted average credit score of 754 as of September 30, 2024. This diversification helps reduce exposure to any single borrower or market segment.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | High competition for market share impacting margins | Net interest income of $9,020,000 |
| Regulatory Changes | Potential changes in mortgage lending regulations | Interest rate on Senior Notes at 9.500% |
| Market Conditions | Fluctuations in interest rates and housing prices | Weighted average coupon of 7.73% |
| Operational Risks | Reliance on technology and systems | Total operating expenses of $3,821,000 |
| Financial Risks | Liquidity and credit risks from total liabilities | Total liabilities of $2,038,768,000 |
| Strategic Risks | Investment decisions affecting financial performance | Net realized loss of $(6,335,000) |
Future Growth Prospects for Angel Oak Mortgage, Inc. (AOMR)
Future Growth Prospects for Angel Oak Mortgage, Inc.
Analysis of Key Growth Drivers
Angel Oak Mortgage, Inc. is strategically positioned to leverage several key growth drivers in the coming years. The company has been actively engaged in product innovations, particularly in the non-QM (Qualified Mortgage) segment, where it has seen increased demand. In the third quarter of 2024, the company purchased approximately $264.8 million of newly-originated non-QM residential mortgage loans, with a weighted average coupon of 7.74% and a weighted average loan-to-value (LTV) ratio of 70.0%.
Market Expansions
The company is also focusing on market expansions, specifically by increasing its securitization activities. For instance, it participated in the AOMT 2024-3 securitization, contributing loans with a scheduled unpaid principal balance of $48.7 million. Subsequent to that, in October 2024, it issued the AOMT 2024-10 securitization backed by a pool of residential mortgage loans, amounting to approximately $316.8 million.
Future Revenue Growth Projections and Earnings Estimates
Analysts project that the company’s revenue will continue growing, fueled by the anticipated rise in mortgage origination activity. Following recent Federal Reserve rate cuts, which lowered the average 30-year fixed mortgage rate to 6.08%, mortgage origination activity rose by 9.6% in August 2024. The company reported a net interest income of $9.02 million for the third quarter of 2024, compared to $7.41 million for the same period in 2023.
Strategic Initiatives and Partnerships
Strategic initiatives also play a crucial role in driving future growth. The company has amended its loan financing facilities to reduce interest rate spreads, enhancing its capacity to finance additional loans. For example, in October 2024, it amended a facility to lower the interest rate pricing spread to a range of 1.75% to 3.35%. Such measures should improve profit margins and facilitate further loan acquisitions.
Competitive Advantages
Angel Oak Mortgage benefits from competitive advantages that position it favorably within the market. The company has a robust portfolio with a fair value of approximately $2.23 billion as of September 30, 2024, which includes a significant amount of residential mortgage loans. Additionally, its weighted average credit score of 754 for purchased loans indicates a strong borrower profile, minimizing default risks.
| Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Interest Income | $9.02 million | $7.41 million |
| 30-Year Fixed Mortgage Rate | 6.08% | N/A |
| Mortgage Origination Activity Increase | 9.6% | N/A |
| Weighted Average Credit Score | 754 | N/A |
| Total Portfolio Fair Value | $2.23 billion | N/A |
Overall, the combination of product innovations, market expansions, strategic partnerships, and competitive advantages positions Angel Oak Mortgage for sustained growth in the evolving mortgage landscape.
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Updated on 16 Nov 2024
Resources:
- Angel Oak Mortgage, Inc. (AOMR) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Angel Oak Mortgage, Inc. (AOMR)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Angel Oak Mortgage, Inc. (AOMR)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.