Exchange: NASDAQ | Sector: Real Estate | Industry: REIT Diversified
Q2 2024
Published: Feb 14, 2025
Earnings Highlights
Revenue of $7.97M up 122.9% year-over-year
EPS of $-0.39 decreased by 160% from previous year
Gross margin of 68.5%
Net income of -4.93M
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MacKenzie Realty Capital Inc (MKZR) QQ2 2024 Earnings Analysis: Revenue Momentum Amid Persistent Earnings Stress and Leveraged Balance Sheet
Executive Summary
MacKenzie Realty Capital’s QQ2 2024 results show a pronounced revenue expansion alongside deteriorating bottom-line profitability. Revenue rose to $7.97 million in the quarter, up 122.9% year-over-year and 61.0% quarter-over-quarter, supported by a robust gross margin of 68.5%. Yet the company reported a substantial operating loss of $4.55 million and a net loss of $4.93 million, driven largely by a large non-operating expense line of $9.24 million, which overshadowed core operating performance. EBITDA was negative at $0.31 million and the EBITDA margin stood at -3.94%, signaling that the current revenue trajectory is not yet translating into positive cash generation or earnings power.
From a balance sheet and liquidity perspective, MKZR entered the period with solid liquidity: cash and cash equivalents of $12.17 million and short-term investments of $16.54 million, plus a favorable current ratio of 4.19x. However, operating cash flow was negative at $1.10 million and free cash flow was also negative, underscoring ongoing cash-generation challenges. Leverage remains a material consideration: long-term debt of $96.41 million, total debt of $96.41 million, and a net debt position of about $84.24 million, with a debt-to-capitalization ratio of roughly 65.5% and an interest coverage of -2.31x. The company’s dividend yield is attractive at about 4.5%, but the payout is not supported by current earnings, given a negative net income and a negative payout dynamic implied by the reported ratios.
With no specific forward guidance available in the dataset, investors should focus on stabilization of operating performance, normalization of non-operating costs, and improvement in cash flow and coverage metrics to assess sustainable value. The absence of disclosed management targets makes the near-term path uncertain, placing emphasis on cost discipline, NOI trajectory, asset management actions, and refinancing options as key drivers of the investment thesis.
Profitability and margins
- Operating income: -$4,554,932; Operating margin -57.12%.
- EBITDA: -$314,097; EBITDA margin -3.94%.
- Net income: -$4,929,221; Net margin -61.81%; EPS -$0.39.
- EBITDARatio: -0.039.
Costs and expenses
- Cost of revenue: $2,570,195; Gross profit aligns with margin above.
- General and administrative expenses: $775,562.
- Other expenses: $9,239,491 (dominant driver of operating loss).
Cash flow and liquidity
- Net cash provided by operating activities: -$1,102,787.
- Free cash flow: -$1,102,787.
- Net cash used in investing activities: -$2,851,756; net cash used in financing activities: -$3,392,783.
- Net change in cash: -$1,643,814; cash at end of period: $13,038,061.
Balance sheet and leverage
- Total assets: $204.82M; total liabilities: $102.25M; stockholders’ equity: $90.47M.
- Long-term debt: $96.41M; total debt: $96.41M; net debt: $84.24M.
- Current ratio: 4.19; quick ratio: 4.19; cash ratio: 0.84.
- Payout/dividend metrics: dividend yield 4.53%; payout ratio effectively negative due to loss situation (-39.1%).
- Price/val metrics: price-to-book 0.62; price-to-sales 5.33; price-to-earnings negative; enterprise-value multiple negative.
Overall takeaway
- The quarter demonstrates top-line momentum but persistent losses and negative cash flow undermine earnings power and financial flexibility. The high level of other expenses is a critical overhang that warrants closer disclosure and scrutiny in future filings. Investors should monitor cost normalization, NOI performance, debt-service capacity, and potential strategic actions to deleverage and restore cash flow generation.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
7.97M
122.91%
61.03%
Gross Profit
5.46M
325.95%
145.27%
Operating Income
-4.55M
-93.15%
38.79%
Net Income
-4.93M
-196.96%
36.89%
EPS
-0.39
-160.00%
36.07%
Key Financial Ratios
currentRatio
4.19
grossProfitMargin
68.5%
operatingProfitMargin
-57.1%
netProfitMargin
-61.8%
returnOnAssets
-2.09%
returnOnEquity
-7.21%
debtEquityRatio
1.9
operatingCashFlowPerShare
$0.14
freeCashFlowPerShare
$0.14
dividendPayoutRatio
-39.1%
priceToBookRatio
0.62
priceEarningsRatio
-2.16
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript data was provided for QQ2 2024 MKZR results in the dataset. Consequently, there are no management quotes or theme-based highlights available to integrate. If a transcript becomes available, we would structure highlights by themes (strategy, operations, market conditions) and pair each quote with its context and significance.
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Forward Guidance
Forward guidance is not provided in the dataset. Absent explicit targets from management, the interpretation rests on qualitative industry trends and the company’s reported metrics. Investors should seek clarity on: (1) expected normalization of the $9.24 million other expenses that severely impacted EBITDA; (2) plans to improve operating cash flow and reduce reliance on external financing; (3) potential asset dispositions, NOI growth strategies, or portfolio optimization to lift cash generation and debt-service coverage; (4) any revised dividend policy or capital allocation framework. Near-term achievability hinges on improving cash flow generation (FFO/AFFO), stabilizing interest costs, and reducing non-operating charges. Monitoring indicators: NOI growth, occupancy/lease-up, refinancing progress, debt maturities, and liquidity runway.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MKZR Focus
68.47%
-57.10%
-7.21%
-2.16%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the QQ2 2024 data, MKZR presents a cautious investment proposition. The stock trades at a discount to book value (P/B ~0.62x) and offers a ~4.5% dividend yield, which provides income upside relative to many equities. However, the persistently negative earnings and cash flow, coupled with a high debt load and negative interest coverage, imply material execution risk. The lack of disclosed forward guidance further complicates the assessment. The key to a more constructive stance will be: (1) clear reduction or normalization of the $9.24M other expenses that dominated the quarter, (2) stabilization or growth in NOI and occupancy, (3) a credible plan to improve cash flow generation and deleverage, preferably via refinancing or asset-level improvements, and (4) transparent capital allocation strategy regarding dividends. Until such elements are evidenced with concrete targets and progress, MKZR should be considered a high-risk, high-uncertainty name within the Real Estate/ diversified REIT space. Monitoring catalysts include FFO/AFFO trends, cash flow conversion, debt maturity management, dividend sustainability, and any strategic actions affecting asset mix and leverage.
Key Investment Factors
Growth Potential
Revenue growth momentum is evident with Q2 2024 revenue up 122.9% YoY and 61.0% QoQ, indicating potential portfolio expansion or higher-revenue contribution. If non-operating costs decline and operating efficiency improves, EBITDA and net income could move toward breakeven. A potential upside exists if asset-level performance improves, allowing for better NOI and cash flow generation, and if leverage is managed through refinancing or asset monetization.
Profitability Risk
Key risks are material: negative EBITDA (-$0.31M) and net income (-$4.93M) driven by other expenses of $9.24M. Interest coverage is negative (-2.31x), signaling debt-service stress. Negative free cash flow and ongoing cash burn raise liquidity and dividend sustainability concerns. High leverage (debt-to-capitalization ~65.5%) and a low earnings base could amplify sensitivity to interest rate moves and real estate cycle downturns. Lack of disclosed forward targets adds execution risk.
Financial Position
Liquidity remains robust on the balance sheet with $28.72M in total cash and short-term investments and a current ratio of 4.19x. However, negative operating cash flow and negative net income offset the apparent liquidity cushion. Long-term debt stands at $96.41M against total assets of $204.82M, with a stockholders’ equity base of $90.47M. The company trades at a book multiple of ~0.62x, suggesting the market discounts book value likely due to profitability and cash-flow concerns.
SWOT Analysis
Strengths
REIT designation with diversified real estate exposure; supports favorable tax status and potential for stable income streams.
Solid liquidity indicators (current ratio ~4.19x) and substantial cash/short-term investments (~$28.7M combined) provide a buffer against near-term shocks.
Dividend yield of approximately 4.5% remains attractive in a yield-starved environment, offering income potential for investors.
Weaknesses
Material profitability challenges: negative EBITDA and net income with operating margin -57.1% and net margin -61.8%.
Significant non-operating expense (other expenses) of $9.24M in QQ2 2024; lack of clarity on drivers and sustainability of these charges.
Negative free cash flow and negative operating cash flow undermine financial flexibility and dividend sustainability.
Opportunities
Potential for NOI improvement via portfolio optimization, asset disposals, or asset mix realignment to lift cash flow.
Debt refinancing or liability management could improve interest coverage and liquidity if market conditions permit.
Market environment for REITs with improving occupancy and rental rates could translate into higher revenues and stabilized cash generation.
Threats
High leverage and negative cash flow render MKZR sensitive to interest rate rises and real estate downturns.
Dependence on non-operating charges highlights potential one-time items or non-core costs that could recur or reappear in filings.
Limited management guidance increases execution risk and reduces visibility into path to profitability.