On July 24, 2024, Great Ajax Corp (AJX, Financial) released its 8-K filing detailing the financial results for the quarter ended June 30, 2024. Great Ajax Corp is an externally managed real estate company primarily focused on acquiring, investing in, and managing a portfolio of mortgage loans, including re-performing loans (RPLs) and small balance commercial mortgage loans (SBC loans). The company also holds real-estate owned (REO) properties acquired upon foreclosure or other settlements of owned non-performing loans.
Performance and Challenges
Great Ajax Corp reported a GAAP net loss of $12.7 million for Q2 2024, translating to a net loss of $0.32 per diluted common share. This is a significant improvement from the previous quarter's net loss of $74.3 million or $2.41 per diluted common share. However, the company's performance fell short of analyst estimates, which projected an earnings per share (EPS) of -$0.16 and revenue of $4.98 million.
Despite the improvement, the company continues to face challenges, particularly in transitioning its portfolio strategy. Michael Nierenberg, Chief Executive Officer of Rithm Capital, commented,
“As we transition away from the legacy strategy, we will be repositioning the portfolio to take advantage of attractive opportunities in the commercial real estate sector. We have already begun deploying capital into higher yielding assets and expect to see earnings grow over time. We look forward to creating value for shareholders and are excited about the future of Great Ajax.”
Financial Achievements
During the quarter, Great Ajax Corp made notable strides in its financial restructuring. The company moved its repurchase financing from full daily mark-to-market financing to either full non-mark-to-market or non-daily mark-to-market with margin holidays. Additionally, the board declared a cash dividend of $0.06 per common share, payable on August 30, 2024, to stockholders of record as of August 15, 2024.
Key Financial Metrics
Below is a summary of key financial metrics from the income statement and balance sheet:
| Metric | Q2 2024 | Q1 2024 |
|---|---|---|
| GAAP Net Loss | $(12.7) million | $(74.3) million |
| Non-GAAP Earnings Available for Distribution | $(9.6) million | $(4.8) million |
| Book Value per Common Share | $5.56 | $6.87 |
| Common Dividend per Share | $0.06 | $0.10 |
Income Statement Highlights
Great Ajax Corp reported total interest income of $11.9 million for Q2 2024, down from $15.7 million in Q1 2024. The net interest income after the net change in the allowance for credit losses was $348,000, a significant drop from $1.6 million in the previous quarter. The company also reported a mark-to-market loss on mortgage loans held-for-sale of $6.5 million, compared to a loss of $47.3 million in Q1 2024.
Balance Sheet Highlights
As of June 30, 2024, Great Ajax Corp's total assets stood at $911.5 million, down from $1.34 billion as of December 31, 2023. The company's cash and cash equivalents increased to $72 million from $52.8 million at the end of 2023. However, mortgage loans held-for-investment decreased significantly to $413.9 million from $864.6 million.
Analysis
Great Ajax Corp's Q2 2024 results reflect ongoing challenges as the company transitions its portfolio strategy. While the reduction in net loss is a positive sign, the company still faces significant hurdles in achieving profitability. The strategic shift towards higher-yielding commercial real estate assets is expected to drive future earnings, but the immediate impact on financial performance remains uncertain.
Investors should closely monitor the company's progress in repositioning its portfolio and its ability to capitalize on new investment opportunities. The declared dividend, although reduced, indicates a commitment to returning value to shareholders amidst the transition.
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Explore the complete 8-K earnings release (here) from Great Ajax Corp for further details.
