8-K: Angel Oak Mortgage REIT Announces Stock Repurchase Agreement and Preliminary Q2 2024 Results

Angel Oak Mortgage REIT has entered into a stock repurchase agreement with Xylem Finance and released preliminary financial results for the second quarter of 2024.

Summary

• Angel Oak Mortgage REIT has agreed to repurchase between $5 million and $20 million of its common stock from Xylem Finance, an affiliate of Davidson Kempner Capital Management LP.
• The repurchase price will be based on the volume-weighted average price of the stock for the five trading days before the launch of a senior notes offering, less a 3.15% discount.
• The total repurchase amount depends on the amount of notes sold in the offering, ranging from $5 million if $25 million in notes are sold to $20 million if $50 million or more in notes are sold, less $50,000.
• The stock repurchase is contingent on the successful sale of at least $25 million in notes and the initial closing of the notes offering by August 15, 2024.
• Preliminary unaudited results for Q2 2024 show an estimated earnings per share range of $(0.04) to $0.01 and distributable earnings per share range of $(0.12) to $(0.07).
• The company estimates a book value per share between $9.98 and $10.49 and an economic book value per share between $12.90 and $13.41 as of June 30, 2024.
• These preliminary results are subject to change upon completion of the company's quarter-end closing procedures.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to the preliminary negative earnings and distributable earnings per share, although the stock repurchase agreement is a positive factor. The uncertainty around the final results also contributes to the lower score.

Positives

• The stock repurchase agreement could provide support for the company's share price.
• The company is actively managing its capital structure through the notes offering and share repurchase.
• The company is providing preliminary financial results, offering transparency to investors.

Negatives

• The preliminary Q2 2024 results indicate a potential loss per share.
• Distributable earnings per share are also estimated to be negative for the quarter.
• The preliminary results are subject to change and may vary from the final results.

Risks

• The stock repurchase is contingent on the successful closing of the notes offering.
• The final Q2 2024 results may differ materially from the preliminary estimates.
• The company's financial performance is subject to market conditions and other factors.

Future Outlook

The company's future performance is subject to market conditions and the successful execution of its strategies, including the notes offering and stock repurchase. The company has provided preliminary results and will release final results after the quarter-end closing procedures are complete.

Management Comments

• The company believes that the presentation of Distributable Earnings provides investors with a useful measure to facilitate comparisons of financial performance among its real estate investment trust (REIT) peers.
• Distributable Earnings is one of a number of factors considered by the Board in declaring dividends.

Industry Context

This announcement is typical for a REIT managing its capital structure and providing updates to investors. The stock repurchase and notes offering are common strategies for REITs to optimize their balance sheets and funding.

Comparison to Industry Standards

• The company's use of Distributable Earnings as a non-GAAP measure is common among REITs, but the methodology may vary, making direct comparisons challenging.
• The estimated book value and economic book value per share are key metrics for REITs, and these will be compared to peers such as AGNC Investment Corp, Annaly Capital Management, and other mortgage REITs when final results are released.
• The stock repurchase agreement is a common strategy to manage capital and potentially increase shareholder value, similar to actions taken by other REITs in the sector.

Related Party Transactions

• The stock repurchase agreement is with Xylem Finance LLC, an affiliate of Davidson Kempner Capital Management LP, which is a related party.

Stakeholder Impact

• Shareholders may be impacted by the stock repurchase and the preliminary financial results.
• Creditors may be impacted by the senior notes offering.
• Employees may be indirectly impacted by the company's financial performance.

Next Steps

• The company will complete its quarter-end closing procedures.
• The company will finalize and release its Q2 2024 financial results.
• The company will proceed with the senior notes offering.
• The company will execute the stock repurchase agreement after the notes offering closes.

Key Dates

Keywords

stock repurchase, senior notes offering, preliminary results, earnings per share, distributable earnings, book value, economic book value, Xylem Finance, Davidson Kempner, REIT