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GA

Great Ajax Corp. (AJX)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 was dominated by non-core charges tied to asset sales and corporate actions: net loss attributable to common stockholders was $(74.3)M, or $(2.41) per share, and book value per share fell to $6.87 from $9.99 in Q4 2023 .
  • Operating loss (non-GAAP) widened to $(4.8)M, or $(0.16) per share, as net interest income compressed and CECL adjustments and a manager termination fee hit results .
  • Liquidity improved materially: cash and cash equivalents ended the quarter at $100.1M; AJX collected $80.9M cash during the quarter and repaid its $103.5M 2024 convertible notes on April 30, 2024 .
  • Dividend reduced to $0.06/share for payment on May 30, 2024 (from $0.10 in Q4), reflecting focus on capital preservation amid loan sales and CECL write-downs .
  • Wall Street consensus estimates from S&P Global were unavailable for AJX; comparisons vs. estimates cannot be made at this time (S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well

  • Liquidity strengthened: quarter-end cash and cash equivalents reached $100.1M; collections totaled $80.9M, positioning AJX to navigate asset sales and note repayment .
  • Balance-sheet de-risking underway: moved $421.6M UPB of loans to held-for-sale; redeemed debt securities and most beneficial interests in 2020-C/D at par or ~82% paydown, progressing toward portfolio simplification .
  • Proactive capital actions: completed exchange of outstanding preferreds into common (recorded $12.6M liability for shares pending shareholder approval) and repaid $103.5M convertible notes on 4/30/24 .

What Went Wrong

  • Large mark-to-market and CECL impacts: recorded $47.3M mark-to-market loss on held-for-sale loans and $4.2M increase in expected credit losses; beneficial interests also written down by $3.1M as duration extended with less certain rate cuts .
  • Net interest income compressed: NII fell to $1.6M from $3.2M in Q4 on lower average interest-earning assets and yield adjustments; NII margin dropped to roughly ~10% of interest income .
  • Book value decline and dividend cut: book value per share fell to $6.87 (from $9.99) and dividend was reduced to $0.06/share vs. $0.10 in Q4, reflecting pressure from losses and share count increase post preferred exchange .

Financial Results

MetricQ3 2023Q4 2023Q1 2024
Total (loss)/revenue, net ($USD Millions)$1.05 $(16.25) $(49.38)
Net loss attributable to common stockholders ($USD Millions)$(6.09) $(23.20) $(74.32)
Basic EPS ($USD)$(0.25) $(0.86) $(2.41)
Net interest income ($USD Millions)$3.04 $3.17 $1.63
Interest income ($USD Millions)$17.88 $17.66 $15.74
Net interest income margin (%)17.0% 18.0% 10.4%
Operating loss ($USD Millions, non-GAAP)$(2.27) $(1.83) $(4.81)
Operating loss per share (non-GAAP)$(0.09) $(0.07) $(0.16)
Book value per common share ($USD)$11.07 $9.99 $6.87

Segment/Portfolio Composition

MetricQ3 2023Q4 2023Q1 2024
No. of loans (count)5,102 5,023 4,720
Total UPB ($USD Millions)$972.77 $957.18 $882.05
RPL (% of UPB)89.2% 89.3% 91.9%
NPL (% of UPB)10.0% 10.0% 7.4%
SBC loans (%)0.8% 0.7% 0.7%
Carrying value of debt securities & beneficial interests ($USD Millions)$320.13 $310.33 $284.54
Weighted average coupon (%)4.48% 4.51% 4.54%
Weighted average remaining term (months)290 288 284
Weighted average LTV (%)54.7% 54.2% 52.2%
Loans with 12-for-12 payments (% of acquisition UPB)81.2% 80.4% 84.4%

KPIs and Liquidity

MetricQ3 2023Q4 2023Q1 2024
Cash & cash equivalents ($USD Millions)$63.91 $52.83 $100.05
Average daily cash balance ($USD Millions)$53.21 $55.20 $65.29
Collected total cash ($USD Millions)$39.5 $30.4 $80.9
Loans moved to held-for-sale (UPB, $USD Millions)—$64.3 (MTM loss $8.6M) $421.6 (MTM loss $47.3M)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ1 2024$0.10 (declared for Mar 29, 2024) $0.06 (payable May 30, 2024) Lowered
Expected loss on loan salesLate Q1/Q2 2024Indicated ~$10M loss per $100M sold Accrued $21.8M expected loss on $180.6M; recorded $47.3M MTM loss on $421.6M moved to HFS Realized/accrued consistent with prior indication
Convertible notes (2024 maturity)4/30/2024Maturity upcomingRepaid $103.5M plus accrued interest Completed (deleveraging)
Beneficial interests (2020-C/D)2024Not specifiedRedeemed debt securities at par; beneficial interests paid down ~82% Execution underway

Earnings Call Themes & Trends

Note: No Q1 2024 earnings call transcript found; themes reflect press releases and filings.

TopicPrevious Mentions (Q3 2023, Q4 2023)Current Period (Q1 2024)Trend
Interest rate path & durationCECL impacts, refinancing losses; amortization of unrealized losses via HTM transfer Duration extended; rate reductions “less certain” → lower projected collateral sale prices; CECL write-downs on beneficial interests Negative (duration extension pressuring recoveries)
Asset sales / portfolio strategyIdentified ~$330M UPB to market; expected losses signaled $421.6M moved to HFS; $47.3M MTM loss; trades closing in April/May; additional sales and redemptions Accelerating asset disposition
Liquidity & capitalCash $63.9M (Q3) → $52.8M (Q4) Cash $100.1M; collections $80.9M; convertible notes repaid Improving liquidity
Corporate actions (manager/strategic)Announced strategic review; Rithm strategic transaction noted; dividend trimmed Manager termination fee accrued ($15.5M); preferred exchange into common; warrants fair value recorded Restructuring progressing
DividendsCut to $0.11 (Q3) $0.10 (Q4) → $0.06 (Q1) Downward reset
Credit losses (CECL)$13.7M write-down on beneficial interests offset by lower mortgage CECL $4.2M CECL increase + $3.1M BI write-down (duration) Continuing headwind

Management Commentary

  • “We expect to redeem several of our joint ventures during 2024 and adjusted our cash flow projections to reflect lower projected sale prices of the underlying collateral… as interest rate reductions appear increasingly less certain during calendar year 2024.”
  • “Based on the revised collateral sales prices, the expected liquidation proceeds on the sale of the underlying loans would not be sufficient to redeem the beneficial interests in full.”
  • “We moved loans with UPB of $421.6 million to held-for-sale and recorded a $47.3 million mark to market loss…”
  • “Our expenses increased… primarily due to the approximately $15.5 million accrual of the termination fee paid to our manager.”
  • “We collected $80.9 million of cash… to end the quarter with $100.1 million in cash and cash equivalents.”
  • Prior quarter color: “We recorded $13.7 million write-downs on our beneficial interests… [and] a $8.6 million mark to market loss on a $64.3 million portfolio of mortgage loans… designated as held-for-sale.”

Q&A Highlights

  • No Q1 2024 earnings call transcript available; Q&A highlights and any guidance clarifications are unavailable for this quarter (no transcript found).

Estimates Context

  • S&P Global/Capital IQ consensus estimates for AJX were unavailable; we attempted to retrieve EPS, revenue, and target price consensus for Q1 2024 and the prior two quarters, but no mapping was found (S&P Global consensus unavailable).
  • Given the absence of consensus data, estimate beat/miss analysis cannot be performed for Q1 2024.

Key Takeaways for Investors

  • Liquidity inflection: cash rose to $100.1M and convertible notes were repaid post quarter, reducing near-term refinancing risk and supporting ongoing asset sales .
  • De-risking at a cost: Large mark-to-market and CECL charges reflect aggressive portfolio repositioning; expect continued earnings volatility as sales complete and beneficial interests redeem .
  • Book value reset: BVPS fell to $6.87, impacted by losses and share issuance from preferred exchanges; watch dilution and BV stabilization as disposals conclude .
  • Dividend policy aligned to preservation: Sequential reductions ($0.11 → $0.10 → $0.06) underscore management’s prioritization of capital amid macro uncertainty .
  • Operating performance pressured: NII margin compressed to ~10% and operating loss widened, highlighting earnings headwinds until asset base stabilizes .
  • Macro sensitivity: Extended loan durations and uncertain rate cuts drive lower collateral sale proceeds; CECL impacts may persist if duration remains elevated .
  • Near-term trading lens: Headlines around loan sale closings, additional redemptions, and any updates on Rithm/manager transition could be stock catalysts; positioning should consider potential for further non-core charges vs. improving liquidity execution .