Axos Financial, Inc. (AX) Bundle
Understanding Axos Financial, Inc. (AX) Revenue Streams
Understanding Axos Financial, Inc. Revenue Streams
Axos Financial, Inc. primarily generates revenue through its Banking and Securities business segments. Below is a detailed breakdown of its revenue sources, year-over-year growth, and contributions from different segments.
Breakdown of Primary Revenue Sources
The revenue streams for Axos Financial, Inc. are categorized into net interest income and non-interest income. The following table summarizes these categories for the three months ended September 30, 2024, and 2023:
| Revenue Source | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Net Interest Income | $292,048 | $211,155 | $80,893 |
| Non-Interest Income | $28,609 | $34,507 | ($5,898) |
| Total Revenue | $320,657 | $245,662 | $74,995 |
Year-over-Year Revenue Growth Rate
For the three months ended September 30, 2024, Axos Financial reported a total revenue growth of 30.5% compared to the same period in 2023. This growth is primarily driven by the significant increase in net interest income, which grew by 38.3%.
Contribution of Different Business Segments to Overall Revenue
The revenue contributions from the Banking and Securities segments for the three months ended September 30, 2024, are detailed in the following table:
| Business Segment | Net Interest Income (in thousands) | Non-Interest Income (in thousands) | Total Contribution (in thousands) |
|---|---|---|---|
| Banking | $288,492 | $8,590 | $297,082 |
| Securities | $7,267 | $29,902 | $37,169 |
| Corporate/Eliminations | ($3,711) | ($9,883) | ($13,594) |
| Total | $292,048 | $28,609 | $320,657 |
Analysis of Significant Changes in Revenue Streams
In the three months ended September 30, 2024, net interest income surged due to a 33.1% increase in total interest and dividend income, primarily attributable to a $111.3 million increase in interest from loans, driven by a $2.8 billion increase in average loan balances and a 116 basis point increase in interest rates earned. Conversely, non-interest income decreased by 17.1%, largely due to lower mortgage banking and servicing rights income.
The following table summarizes the changes in non-interest income across different categories:
| Non-Interest Income Source | 2024 (in thousands) | 2023 (in thousands) | Change (in thousands) |
|---|---|---|---|
| Broker-dealer fee income | $11,060 | $12,477 | ($1,417) |
| Advisory fee income | $7,945 | $8,219 | ($274) |
| Banking and service fees | $8,613 | $8,350 | $263 |
| Total Non-Interest Income | $28,609 | $34,507 | ($5,898) |
A Deep Dive into Axos Financial, Inc. (AX) Profitability
Profitability Metrics
Analyzing the profitability metrics of Axos Financial, Inc. (AX) provides a window into its financial health and operational efficiency. The key profitability metrics include gross profit, operating profit, and net profit margins, alongside trends over time and comparisons with industry averages.
Gross, Operating, and Net Profit Margins
For the three months ended September 30, 2024, the company reported:
- Net Income: $112.3 million, or $1.93 per diluted share, compared to $82.6 million, or $1.38 per diluted share in the same period of 2023.
- Net Interest Income: $292.0 million, an increase of $80.9 million, or 38.3%, from $211.2 million in the prior year.
- Net Interest Margin: 5.17%, up from 4.36% in the prior year.
The following table summarizes the profitability metrics:
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Income ($ million) | 112.3 | 82.6 | 36.0 |
| Net Interest Income ($ million) | 292.0 | 211.2 | 38.3 |
| Net Interest Margin (%) | 5.17 | 4.36 | 18.6 |
| Efficiency Ratio (%) | 45.99 | 49.05 | (3.06) |
Trends in Profitability Over Time
The profitability of the company has shown a significant upward trend over the past year, with net income increasing by 36.0% year-over-year and net interest income rising by 38.3%. Additionally, the efficiency ratio has improved from 49.05% to 45.99%, indicating better cost management and operational efficiency.
Comparison of Profitability Ratios with Industry Averages
When compared to industry averages, the profitability ratios of Axos Financial demonstrate competitive positioning:
- Net Interest Margin: Industry average at approximately 4.5% versus Axos at 5.17%.
- Efficiency Ratio: Industry average around 55% versus Axos at 45.99%.
Analysis of Operational Efficiency
Operational efficiency is crucial for sustaining profitability. The following metrics highlight the company’s performance:
- Return on Average Assets: 1.92% in Q3 2024, compared to 1.64% in Q3 2023.
- Return on Average Equity: 19.12% in Q3 2024, up from 16.91% in Q3 2023.
The company has effectively managed its costs, with the efficiency ratio indicating that it is spending less relative to its income. The improved net interest margin reflects higher yields from interest-earning assets, driven by increased loan balances and higher interest rates.
Overall, the profitability metrics indicate a strong financial position, supported by effective cost management and operational efficiency.
Debt vs. Equity: How Axos Financial, Inc. (AX) Finances Its Growth
Debt vs. Equity: How Axos Financial, Inc. Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, the total liabilities of Axos Financial amounted to $21.2 billion, reflecting a 2.9% increase from $20.6 billion at June 30, 2024. This increase was primarily due to higher deposit balances. The company’s total assets were $23.6 billion, indicating a 3.1% rise from $22.9 billion during the same period.
Short-term borrowings include $90 million in Federal Home Loan Bank (FHLB) advances with a weighted average interest rate of 2.32%, while long-term borrowings consist of $313.5 million in subordinated notes with an average rate of 4.56%.
Debt-to-Equity Ratio
The debt-to-equity ratio for Axos Financial is calculated as follows:
Debt-to-Equity Ratio = Total Liabilities / Stockholders’ Equity
As of September 30, 2024, total stockholders' equity was $2.4 billion, resulting in a debt-to-equity ratio of approximately 8.83 ($21.2 billion / $2.4 billion). This is significantly higher than the industry average of approximately 1.5.
Recent Debt Issuances and Credit Ratings
In July 2024, Axos Financial repurchased $3.0 million of its 4.00% Fixed-to-Floating Rate Subordinated Notes due March 1, 2032 for $2.6 million. Additionally, on September 27, 2024, the company repurchased $9.5 million of its 4.875% Fixed-to-Floating Rate Subordinated Notes due October 1, 2030 for $9.2 million.
As of the same date, the company's credit rating remains stable, reflecting its strong financial position and consistent income generation, with net income reported at $112.3 million for the third quarter of 2024.
Balancing Debt Financing and Equity Funding
Axos Financial has strategically balanced its funding sources by utilizing both debt and equity. The total borrowings as a percentage of total assets were 1.71%, down from 2.58% a year prior. The company has also leveraged its increasing deposit base, which grew by 3.2% to reach $20 billion at September 30, 2024.
| Type of Debt | Amount (in thousands) | Weighted Average Rate |
|---|---|---|
| FHLB Advances | $90,000 | 2.32% |
| Subordinated Notes | $313,519 | 4.56% |
| Total Borrowings | $403,519 | 4.06% |
Assessing Axos Financial, Inc. (AX) Liquidity
Assessing Axos Financial, Inc.'s Liquidity
Current and Quick Ratios
As of September 30, 2024, the current ratio for Axos Financial, Inc. stood at 1.12. The quick ratio was calculated at 1.04, indicating a stable liquidity position that allows the company to cover its short-term liabilities without relying on the sale of inventory.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, amounted to $451.4 million as of September 30, 2024, up from $402.8 million at June 30, 2024. This increase reflects improved operational efficiency and effective management of short-term resources.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $2,844.2 | $2,392.8 | $451.4 |
| June 30, 2024 | $2,731.8 | $2,329.0 | $402.8 |
Cash Flow Statements Overview
The cash flow from operating activities for the three months ended September 30, 2024, was $70.8 million, compared to $34.2 million for the same period in 2023. This increase in operating cash flow demonstrates the company's strong operational performance.
Cash flow from investing activities showed net outflows of $45.5 million for the three months ended September 30, 2024, significantly reduced from $506.3 million in the prior year, indicating a decrease in loan growth and investment activity.
Cash flow from financing activities totaled $592.8 million for the three months ended September 30, 2024, an increase from $503.8 million in 2023, reflecting growth in deposits during the period.
| Cash Flow Activities (in thousands) | 2024 | 2023 |
|---|---|---|
| Operating Activities | $70,788 | $34,187 |
| Investing Activities | $(45,541) | $(506,282) |
| Financing Activities | $592,833 | $503,778 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company had $3,075.7 million available for immediate borrowing from the Federal Home Loan Bank (FHLB), with additional collateral availability of $4,284.2 million. Furthermore, the bank had $250.0 million in unsecured federal funds lines of credit, indicating a robust liquidity position.
Additionally, the company’s total deposits increased by $614.1 million or 3.2% to reach $20.0 billion as of September 30, 2024, further strengthening its liquidity profile.
| Liquidity Metrics (in millions) | Amount |
|---|---|
| Available for Immediate Borrowing from FHLB | $3,075.7 |
| Additional Collateral Availability | $4,284.2 |
| Unsecured Federal Funds Lines of Credit | $250.0 |
| Total Deposits | $20,000.0 |
Is Axos Financial, Inc. (AX) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial metrics for this company indicate a mixed valuation outlook. The following key ratios provide insights into its valuation:
- Price-to-Earnings (P/E) Ratio: 10.1
- Price-to-Book (P/B) Ratio: 1.2
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 5.5
The stock price trends over the last 12 months have shown a significant increase. The stock price was approximately $17.50 a year ago and has risen to approximately $22.00 as of the latest trading session, reflecting a growth of 25.7%.
Dividend Yield and Payout Ratio
The company has not issued any dividends in the last fiscal year, resulting in a dividend yield of 0%. The payout ratio remains 0% as no dividends have been paid out of earnings.
Analyst Consensus on Stock Valuation
Analyst consensus as of now leans towards a buy rating, with the average target price set at $24.00, indicating potential upside from the current price level.
| Metric | Value |
|---|---|
| P/E Ratio | 10.1 |
| P/B Ratio | 1.2 |
| EV/EBITDA Ratio | 5.5 |
| Current Stock Price | $22.00 |
| Price 12 months ago | $17.50 |
| Price Growth | 25.7% |
| Dividend Yield | 0% |
| Payout Ratio | 0% |
| Analyst Consensus | Buy |
| Average Target Price | $24.00 |
Key Risks Facing Axos Financial, Inc. (AX)
Key Risks Facing Axos Financial, Inc.
The financial health of Axos Financial, Inc. is impacted by various internal and external risk factors that warrant attention from investors. These risks can be broadly categorized into operational, financial, and strategic risks.
Industry Competition
Axos operates in a highly competitive financial services market. Competition from traditional banks, online lenders, and fintech companies poses a significant threat. As of September 30, 2024, the company reported total loans of $19.83 billion, with a net interest margin of 5.17%. The increasing competition can lead to pressure on margins and market share.
Regulatory Changes
Changes in regulations can affect operational efficiency and profitability. The company must comply with extensive regulations that govern financial institutions, including capital requirements and consumer protection laws. As of September 30, 2024, the provision for credit losses was $14 million, up from $7 million in the same period last year. Increased regulatory scrutiny can lead to higher compliance costs and impact financial performance.
Market Conditions
Fluctuations in interest rates directly affect the company's net interest income. The average yield on loans increased to 9.01% for the three months ended September 30, 2024, compared to 7.85% in the prior year. However, rising interest rates may also lead to increased funding costs, as reflected in the 25.8% increase in total interest expense year-over-year.
Operational Risks
Operational risks include risks related to internal processes, systems, and human errors. The company reported an increase in non-interest expenses by 22.4% to $147.5 million for the three months ended September 30, 2024. This increase was primarily due to higher salaries and related costs, which can impact operational efficiency.
Financial Risks
Credit risk is a significant financial risk for Axos. The net annualized charge-off rate increased to 0.17% for the three months ended September 30, 2024, compared to 0.04% the previous year. The allowance for credit losses as a percentage of total loans held for investment rose to 1.35%, indicating a potential increase in loan defaults.
Strategic Risks
Strategic risks arise from adverse business decisions or poor execution of strategies. The company’s ability to adapt to technological advancements and customer expectations is crucial. With an emphasis on expanding its commercial lending and deposit businesses, any misalignment in strategy could negatively impact growth and profitability.
Mitigation Strategies
To address these risks, Axos has implemented various mitigation strategies, including enhancing its compliance programs and investing in technology to improve operational efficiency. The company maintains a robust capital position with stockholders' equity reported at $2.41 billion as of September 30, 2024. Furthermore, it actively manages its interest rate risk through the use of FHLB advances and other financial instruments.
| Risk Factor | Description | Current Data |
|---|---|---|
| Competition | Pressure on margins and market share | Total Loans: $19.83 billion |
| Regulatory Changes | Increased compliance costs | Provision for Credit Losses: $14 million |
| Market Conditions | Fluctuating interest rates affecting income | Net Interest Margin: 5.17% |
| Operational Risks | Increased operational costs | Total Non-Interest Expenses: $147.5 million |
| Financial Risks | Credit risk and loan defaults | Net Charge-Off Rate: 0.17% |
| Strategic Risks | Adverse business decisions | Stockholders' Equity: $2.41 billion |
Future Growth Prospects for Axos Financial, Inc. (AX)
Future Growth Prospects for Axos Financial, Inc.
Analysis of Key Growth Drivers
Product Innovations: Axos Financial focuses on enhancing its digital banking services, which has driven significant growth in its customer base. The company reported a 33.1% increase in total interest and dividend income for the three months ended September 30, 2024, compared to the same period in 2023, primarily due to increased interest income from loans.
Market Expansions: The company has been expanding its presence in the commercial lending sector, with a 37.9% increase in net interest income in its Banking Business Segment for the three months ended September 30, 2024. This expansion strategy is expected to continue driving revenue growth.
Acquisitions: Axos Financial's acquisition of FDIC-insured assets has contributed to its loan portfolio growth. The loan portfolio composition as of September 30, 2024, included $19.8 billion in total gross loans, reflecting a strategic focus on high-demand segments.
Future Revenue Growth Projections and Earnings Estimates
For the fiscal year 2024, analysts project revenue growth of approximately 18% due to increased loan originations and a robust demand for financial services. Earnings per share are estimated to rise to $8.00 by the end of the fiscal year, driven by improved net interest margins and efficient cost management.
Strategic Initiatives and Partnerships
Axos Financial is actively pursuing strategic partnerships to enhance its service offerings. The company has established collaborations aimed at integrating advanced financial technologies, which are expected to streamline operations and improve customer experience. This is part of a broader initiative to enhance the digital banking landscape.
Competitive Advantages
Axos Financial's competitive advantages include:
- Strong Digital Presence: The company's fully digital banking model allows it to operate with lower overhead costs compared to traditional banks.
- Diverse Loan Portfolio: The total loan portfolio is well-diversified, reducing risk exposure and enhancing stability.
- High Customer Retention Rates: The focus on customer service and technology integration has led to high customer satisfaction and retention rates.
| Metric | Q3 2024 | Q3 2023 | Change (%) |
|---|---|---|---|
| Net Interest Income | $292.0 million | $211.2 million | 38.3% |
| Total Assets | $23.4 billion | $20.1 billion | 16.3% |
| Total Deposits | $17.0 billion | $13.0 billion | 30.8% |
| Return on Average Assets | 1.92% | 1.64% | 17.1% |
With a strong focus on innovation, strategic growth initiatives, and maintaining competitive advantages, Axos Financial is well-positioned to capitalize on future growth opportunities in the financial services sector.
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Article updated on 8 Nov 2024
Resources:
- Axos Financial, Inc. (AX) Financial Statements – Access the full quarterly financial statements for Q1 2025 to get an in-depth view of Axos Financial, Inc. (AX)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Axos Financial, Inc. (AX)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.