Great Ajax Corp. (NYSE:AJX) Q2 2022 Earnings Conference Call August 4, 2022 5:00 PM ET
Company Participants
Larry Mendelsohn – Chief Executive Officer
Conference Call Participants
Eric Hagen – BTIG
Kevin Barker – Piper Sandler
Matt Howlett – B. Riley
Operator
Good afternoon. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Great Ajax Corp. Second Quarter 2022 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions]
I would now like to turn the conference over to Larry Mendelsohn, CEO. Please go ahead.
Larry Mendelsohn
Thank you very much. Thank you, everybody, for joining us for the Great Ajax second quarter 2022 conference call. Before we get started with the presentation, I’d like to point out Page 2, the Safe Harbor disclosure for all the things we talked about.
On Page 3, a quick introduction and then business overview. Q2 2022 was a good quarter. However, there’s quite a bit of noise in the income statement numbers, which makes it a bit confusing, but we’ll walk through this on today’s call.
Loan performance and cash flow velocity continued and has also continued into the third quarter of 2022 as well. The significant cash flow velocity from our mortgage loans and mortgage loan JV structures increases income acceleration through the application of CECL, but it also rapidly pays down our loan and securities portfolio as well as the associated – and the associated asset-based financing, which can also reduce income and ROE.
At June 30, we had approximately $52 million of cash as well as a significant amount of unencumbered securities and loans. In the second quarter, we used cash on hand to repurchase $25 million face amount of our preferred shares and the associated warrants. While these repurchases create a one-time charge, it will create very significant savings going forward. We also repurchased approximately 475,000 common shares with cash on hand.
On Page 3, business overview, our managers data science guides the analysis of loan characteristics and geographic market metrics for performance and resolution probabilities and its ability to source these mortgage loans through longstanding relationships enables us to acquire loans that we believe have a material probability of prepayment and long-term continuing re-performance.
We’ve acquired loans in 362 different transactions since 2014 and six transactions in the second quarter. We own approximately 20% of the equity of our manager at a zero basis, and we do not mark-to-market our ownership interest on our balance sheet or through the income statement. As a result, our book value does not reflect the market value of our 20% interest in the manager.