Name: Great Ajax Corp. Q4 2023 Earnings Call
Start: 2024-02-27T00:00:00.000Z

Executive Summary

Q4 2023 was challenged by non-cash CECL write-downs ($13.7M on beneficial interests) and a mark-to-market loss on loans held-for-sale ($8.6M), driving GAAP net loss to $(23.2)M and basic EPS to $(0.86) .
Net interest income was $3.173M (down ~$0.1M q/q), and book value per common share fell to $9.99 from $11.07 in Q3 .
Management intends to market ~$330M UPB of loans and anticipates losses of ~$10M per $100M sold (expected to be reflected in Q1 2024), citing market uncertainty and upcoming 2024 convertible notes maturity—an important near-term catalyst .
Dividend was set at $0.10/share (payable Mar 29, 2024), following a prior reduction to $0.11/share in Q3 to prioritize book value .
The company announced entry into a strategic transaction with Rithm on Feb 26, 2024; no Q4 earnings call transcript was available, limiting qualitative detail for the quarter .

What Went Well and What Went Wrong

Interest expense decreased ~$0.4M q/q, reflecting a lower average balance of interest-bearing debt; net interest income remained resilient at $3.173M .
Expected credit losses on the mortgage loan portfolio decreased by $2.4M, partially offsetting broader CECL-driven charges .
Liquidity remained solid: ending cash and equivalents were $52.8M, with average daily cash of $55.2M; collected $30.4M cash during the quarter .
Quote: “Our interest expense… decreased $0.4 million… primarily as a result of a decrease in our average balance of interest bearing debt.”

CECL write-downs ($13.7M) on beneficial interests and an $8.6M mark-to-market loss on loans held-for-sale led to total net revenue loss of $(16.253)M and GAAP net loss to common of $(23.197)M .
Book value per common share declined to $9.99 (from $11.07 in Q3), driven by the period’s GAAP loss, share count increase, and dividends .
NPL monetization efforts included reclassification to held-for-sale and anticipated near-term losses on the proposed ~$330M loan sales, reflecting market uncertainty .

Metric	Q4 2022	Q2 2023	Q3 2023	Q4 2023
Interest income ($USD Millions)	$18.449	$18.340	$17.879	$17.657
Net interest income ($USD Millions)	$3.967	$3.301	$3.041	$3.173
Total (loss)/revenue, net ($USD Millions)	$1.375	$(2.414)	$1.053	$(16.253)
Consolidated net loss attributable to common ($USD Millions)	$(6.835)	$(12.034)	$(6.089)	$(23.197)
Basic EPS ($USD)	$(0.30)	$(0.51)	$(0.25)	$(0.86)

Segment/Portfolio Mix

Portfolio Mix	Q2 2023	Q3 2023	Q4 2023
RPLs (% UPB)	89.0%	89.2%	89.3%
NPLs (% UPB)	10.2%	10.0%	10.0%
SBC loans (% UPB)	0.8%	0.8%	0.7%

Key Performance Indicators

KPI	Q2 2023	Q3 2023	Q4 2023
Cash & Equivalents ($USD Millions)	$40.316	$63.910	$52.834
Average Daily Cash ($USD Millions)	$43.609	$53.211	$55.195
Loans with 12-for-12 payments (% of acquisition UPB)	82.1%	81.2%	80.4%
Carrying value of debt securities & beneficial interests ($USD Millions)	$353.044	$320.130	$310.330
Average asset-backed debt balance ($USD Millions)	$870.595	$834.507	$800.050

Additional Q4 2023 GAAP Line Items

Metric	Q4 2023
Net (increase)/decrease in NPV of expected credit losses ($USD Millions)	$(11.294)
Other (loss)/income ($USD Millions)	$(7.815)
Loss on joint venture refinancing (beneficial interests) ($USD Millions)	— (none in Q4)
Mark-to-market loss on mortgage loans held-for-sale ($USD Millions)	$(8.559)

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per common share	Q4/Q1 timing	$0.11/share payable Nov 30, 2023	$0.10/share payable Mar 29, 2024	Lowered
Planned loan sales & expected losses	Early 2024	Not previously guided	Propose to market ~$330M UPB loans; expect ~$10M loss per $100M sold; loss likely recorded in Q1 2024	New
Strategic transaction	2024	Strategic alternatives under review (Piper Sandler engaged)	Entry into strategic transaction with Rithm (announced Feb 26, 2024)	Announced
Capital structure (convertible notes)	2024	Notes outstanding due 2024	Upcoming maturity cited as rationale for loan sales	Emphasis

Note: No Q4 2023 earnings call transcript was available. Themes reference Q2/Q3 calls and Q4 press release.

Topic	Previous Mentions (Q2 2023)	Previous Mentions (Q3 2023)	Current Period (Q4 2023)	Trend
Loan performance & delinquency	Re-performance elevated; CECL decrease $2.866M; slower prepayment amid higher rates	Slight uptick in delinquency; net interest income $3.0M; commentary on duration/yields	12-for-12 slipped to 80.4%; net interest income $3.173M; interest expense lower	Slight deterioration in performance metrics, stable NII
CECL & beneficial interests	$8.8M impairment from JV resecuritizations	Additional $1.3M impairment tied to July closing	$13.7M write-down on beneficial interests; $2.4M decrease on mortgage loan CECL	Elevated non-cash charges persist
Strategic alternatives / transactions	EFC merger announced (Q2), later terminated (Oct)	Review of alternatives; EFC termination and $16M payment	Strategic transaction with Rithm announced	Transition to actionable transaction
Liquidity & capital	Ending cash $40.3M; average daily cash $43.6M	Ending cash $63.9M; average daily cash $53.2M	Ending cash $52.8M; average daily cash $55.2M; highlighting convertible notes maturity	Solid liquidity; focusing on upcoming maturity
Dividend policy	$0.20/share declared Aug 3	Reduced to $0.11/share to prioritize book value	$0.10/share declared for Mar 29	Continued conservatism
Commercial real estate outlook	Not emphasized	Growing opportunities in CRE loans/bridge financing	Not elaborated in Q4 release	Opportunity remains, limited Q4 detail

“During the quarter ended December 31, 2023, we recorded $13.7 million write-downs on our beneficial interests offset by a $2.4 million decrease in expected credit losses on our mortgage loan portfolio.”
“We recorded a $8.6 million mark to market loss… on a $64.3 million portfolio of mortgage loans we designated as held-for-sale.”
“We anticipate that we will record a loss in connection with any loans we ultimately sell… For each $100.0 million of loans sold, we anticipate that we may record a $10.0 million loss.”
“We ended the quarter with a GAAP book value of $9.99 per common share, compared to… $11.07… for the quarter ended September 30, 2023.”
Strategic context: entry into a transaction with Rithm; moving forward with an annual/special stockholders’ meeting .

Q3 call: management deferred taking questions due to the strategic review; no Q&A was conducted .
Q4: No earnings call transcript found for the period; all commentary sourced from the Q4 press release .

Wall Street consensus estimates via S&P Global were unavailable for AJX in our tool due to a missing mapping (SpgiEstimatesError), so we cannot provide EPS or revenue consensus comparisons for Q4 2023. Given management’s stated plan to sell loans with expected losses in early 2024, near-term estimate adjustments likely hinge on sale execution and realized loss magnitude .

Near-term catalyst: management plans to sell ~~$330M UPB of loans with expected losses (~~$10M per $100M sold), likely impacting Q1 2024 results; monitor execution and realized loss vs. expectations .
Non-cash charges weighed on Q4: CECL write-downs ($13.7M) and held-for-sale mark-to-market ($8.6M) drove total net revenue loss and book value decline; assess persistence of CECL impacts .
Liquidity remains solid: $52.8M ending cash and $55.2M average daily cash provide flexibility into the convertible notes’ 2024 maturity; watch capital actions around the maturity