Exchange: NASDAQ | Sector: Real Estate | Industry: REIT Diversified
Q4 2023
Published: Sep 27, 2024
Earnings Highlights
Revenue of $4.52M up 0% year-over-year
EPS of $-0.22 increased by 0% from previous year
Gross margin of 41.2%
Net income of -2.88M
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MacKenzie Realty Capital Inc (MKZR) QQ4 2023 Results â Revenue Growth Paused Amid Material Net Loss Driven by High Other Expenses
Executive Summary
MacKenzie Realty Capital Inc (MKZR) delivered a modest sequential improvement in top-line and gross profitability for Q4 2023, but the company remains firmly in the red on a bottom-line basis. Revenue totaled $4.52 million, up from $4.08 million in Q3 2023, while gross margin expanded to 41.2% from 35.8%, reflecting better product/portfolio mix or pricing dynamics within the quarter. Despite EBITDA being positive at $1.36 million, the company reported a net loss of $2.88 million for the quarter and a negative net income margin of approximately 63.8%. The negative bottom line was driven by a combination of substantial non-cash/financing charges (Depreciation & Amortization of $2.13 million and Interest expense of $1.75 million) and a large line item of other expenses ($3.89 million) that overwhelmed operating profit of $2.62 million loss before non-operating items.
Key Performance Indicators
Revenue
4.52M
QoQ: N/A | YoY:N/A
Gross Profit
1.86M
41.20% margin
QoQ: N/A | YoY:N/A
Operating Income
-2.62M
QoQ: N/A | YoY:N/A
Net Income
-2.88M
QoQ: N/A | YoY:N/A
EPS
-0.22
QoQ: N/A | YoY:N/A
Revenue Trend
Margin Analysis
Key Insights
Revenue: $4,519,600 in Q4 2023 vs. $4,079,036 in Q3 2023; QoQ growth of ~10.8%.
Gross Profit: $1,862,256; Gross Margin 41.20% in Q4 2023 vs. 35.81% in Q3 2023, signaling improved margin discipline or mix.
Operating Income: -$2,624,990 in Q4 2023 vs. -$2,677,886 in Q3 2023; slight margin improvement but still negative (-58.08% in Q4 vs. -65.65% in Q3).
EBITDA: $1,361,998 in Q4 2023 with an EBITDA margin of 30.13% (vs. Q3 EBITDA of $560,113 and 13.73% margin), indicating a stronger cash-operating proxy despite an overall net loss.
Net Income: -$2,881,530 in Q4 2023; Net margin -63.76% (vs. -78.62% in Q3 2023), showing some improvement in the bottom line relative to the prior quarter but remaining deeply negative.
Financial Highlights
Revenue and profitability trend for Q4 2023 versus Q3 2023:
- Revenue: $4,519,600 in Q4 2023 vs. $4,079,036 in Q3 2023; QoQ growth of ~10.8%.
- Gross Profit: $1,862,256; Gross Margin 41.20% in Q4 2023 vs. 35.81% in Q3 2023, signaling improved margin discipline or mix.
- Operating Income: -$2,624,990 in Q4 2023 vs. -$2,677,886 in Q3 2023; slight margin improvement but still negative (-58.08% in Q4 vs. -65.65% in Q3).
- EBITDA: $1,361,998 in Q4 2023 with an EBITDA margin of 30.13% (vs. Q3 EBITDA of $560,113 and 13.73% margin), indicating a stronger cash-operating proxy despite an overall net loss.
- Net Income: -$2,881,530 in Q4 2023; Net margin -63.76% (vs. -78.62% in Q3 2023), showing some improvement in the bottom line relative to the prior quarter but remaining deeply negative.
- Interest Expense: $1,747,751; Depreciation & Amortization: $2,127,511; total non-cash/financing costs remain a meaningful drag on profitability.
- Other Income/Expenses: Net other expenses of $111,726 positively contribute to EBITDA but do not offset the larger operating and financing costs.
- Earnings per Share (EPS): -$0.217 (diluted) on 13.287 million weighted-average shares, reflecting ongoing profitability challenges attributable to financing and non-operating charges.
Income Statement
Metric
Value
YoY Change
QoQ Change
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Transcript data not provided in the input. As a result, management commentary and quotes from the QQ4 2023 call could not be incorporated. If you can share the earnings call transcript or a link to the transcript, I will extract key themes, themes by management (strategy, operations, market conditions) and relevant quotes with proper attribution.
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Forward Guidance
No formal forward guidance is included in the provided data. Consequently, an explicit management outlook or target metrics for 2024 are not available here. Given the quarterly trends, investors would typically expect management to address: (i) trajectory of occupancy and rental revenue within the diversified REIT portfolio, (ii) ongoing cost containment and the drivers behind the elevated other expenses, (iii) capital deployment strategy and debt maturities, and (iv) potential for offsetting non-cash charges. Absent visible guidance, the near-term outlook hinges on whether the company can sustain EBITDA gains while reducing the impact of depreciation, interest costs, and other expenses. Key indicators to monitor would include occupancy/lease-up tailwinds, rent escalations, capex discipline, refinancing plans, and any one-time charges that may recur.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
MKZR Focus
41.20%
N/A
N/A
N/A
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Given the mixed signal from Q4 2023, MKZR presents a high-uncertainty, high-potential opportunity. The positive EBITDA and higher gross margin in Q4 indicate that the core operating structure can generate cash flow, but a substantial burden from other expenses, depreciation, and interest leads to a meaningful net loss. The absence of disclosed balance sheet data and formal guidance complicates a robust investment thesis. For risk-tolerant investors, potential upside hinges on meaningful reduction of other expenses and/or debt-service optimization, coupled with sustainable revenue growth and occupancy improvements. The key factors to monitor include: (1) occupancy and rent collection trends, (2) any material changes to other expenses and non-operating charges, (3) debt maturities and refinancing conditions, and (4) progression toward cash-flow positive operations (as suggested by EBITDA stability). If management can demonstrate discipline on costs and improved leverage, MKZR could re-rate from a distressed profitability position toward a more stable cash-flow profile typical of diversified REITs. If these conditions do not materialize, the stock remains exposed to continued bottom-line pressure despite topline gains.
Key Investment Factors
Growth Potential
Moderate growth potential from improving gross margins and revenue QoQ in Q4 2023, with upside if occupancy or lease pricing improves and if other expenses are reduced. Potential enhanced cash flow if D&A and interest burden can be stabilized or offset by portfolio optimization or capital efficiency.
Profitability Risk
Key risks include a persistent bottom-line loss driven by high interest expense and other operating expenses, limited visibility into balance sheet strength and liquidity, reliance on non-operating charges that can swing quarterly results, and lack of publicly disclosed peers for benchmarking. The absence of formal forward guidance adds to earnings visibility risk.
Financial Position
Limited balance sheet data in the provided dataset; debt load, debt maturities, and liquidity are not disclosed here. Evaluation of financial health is constrained without balance sheet and cash flow statements. MKZR operates as a REIT, which implies requirement to distribute a substantial portion of earnings; the negative net income in Q4 2023 raises questions about dividend sustainability until profitability improves.
SWOT Analysis
Strengths
REIT designation provides taxable efficiency and potential portfolio discipline.
Q4 2023 revenue increased to $4.52M from $4.08M in Q3 2023, signaling topline momentum.
Gross margin expanded to 41.2% in Q4 2023 from 35.8% in Q3 2023, suggesting some improvement in portfolio mix or pricing power.
EBITDA positive at $1.36M in Q4 2023, indicating the core operating activities can generate cash flow before financing and non-cash charges.
Weaknesses
Net income remained negative at -$2.88M for Q4 2023 with a net margin of -63.8%.
Large other expenses ($3.89M) and ongoing interest and depreciation pressures are driving profitability deterioration.
Operating income remains negative (-$2.62M) despite revenue growth, signaling high fixed costs or unusual charges.
Incomplete balance sheet and cash flow data limit assessment of liquidity and leverage risks.
Opportunities
Cost containment and optimization of non-operating expenses could unlock additional EBITDA.
Potential portfolio optimization or acquisitions could enhance scale and stabilize cash flows if financing remains favorable.
Rent escalations or improved occupancy could lift revenue stability in future quarters.
Threats
Rising interest rates or refinancing risk could pressure debt service costs and financing flexibility.
Volatility in real estate markets and occupancy trends could impact rental income stability.
Lack of disclosed peers for benchmarking makes it harder to gauge relative valuation and performance.