AFC Gamma (AFCG) 13 Nov 242024 Q3 Earnings call transcript

Good morning, and welcome to Advanced Flower Capital's Third Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the call over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining AFC's earnings call for the quarter ended September 30, 2020. by Neville, our and our our Financial morning Investment and Brandon this Chief Daniel Officer; Chief Officer. joined Robyn President Tannenbaum, Chief Hetzel, I'm Executive Officer;

call like in at included October advancedflowercapital.com AFC's third the XX, and our note would Investor information release our I quarter press along and posted begin, recorded. Replay with we that Before investor earnings website this is is XXXX Relations being is of presentation. to release on portion

certain that projections anticipated and the statements yield forward-looking subject includes call to actual statements and things, conference and views to refer materially current AFC's results. inherent other uncertainties and XXXX respect are forward-looking market periodic future reflect with These in results from Today's in company's portfolio factors statements beyond. these most financial to among predicting that performance developments, could and to conditions significant SEC differ cause filings Please for projections. recent with the

is distributable be found During this comparable website. available can AFC's to earnings call, earnings which the distributable income, to GAAP we financial to on measure most in will earnings, Reconciliations net measure. and a presentation investor release refer AFC's non-GAAP

Robyn provide introductory update third providing begin Dan will cannabis remarks. industry. then the on Today's will XXXX performance call an with our of an overview some quarter and

for Finally, Brandon lines before Q&A. will the conclude with open a summary results of our we financial

-- CIO, Robyn I turn to me, now and the excuse will that, CEO over With call Tannenbaum. President

with the our our analysts originated Since real have the thrilled we share mortgage a a to milestone Thanks, third pure-play This so will and on provide quarter, It timely, exceeded very in and capital a $XXX in moment X operated had Gabriel, is reaching have we million commitment flexible start number. million total $XXX sector far. to to it. origination I'm spin-off today. of during commercial July Den for new represents deployed $XX continue promising million and the needs operators additional loans the joined X.X investments. a that attractive us investors our and We've for of morning cannabis not the at target cannabis now REIT. opportunities portfolio new year, the to industry we've our capital new the we quarter, following originations cannabis have that approximately renewed good as see just estate deeper all into the when we've dive and third closed deals quarter. active into

over million As of November of $XXX X, deals. of pipeline potential we active had an

borrowers to pleased have to capital and are the our opportunities. support We existing fund future

the quarter, allow we to which stock During will through program, us and raised accretively this rapidly evolving offering supporting ATM continue industry. our capital

sweep, we to the expect to cannabis access scarce. Republican the sector capital With remain in

momentum be cannabis, support progress to at will broader Rescheduling priority. expected Republican for demonstrated III administrations is While President-elect legislation has may Trump move Schedule believe still a rate. We top the some not cannabis a enough. be that any needed measured to it advance, for may it path slower the challenging a Banking Democratic the Act under administration. more to pace not would although at than Safe strong as appears The push forward

deals the that over believe favorable to the we be slowing conditions of at returns will capital for deploy medium term. level With the prospect federal there down, into AFC strong progress with risk-adjusted

quarter third to ahead. over it turn I'll Dan, will performance lies and that, what who With discuss our

good everyone. and morning, Thanks, Robyn

deals our with on in strong our achievements of quarter and update the performance cannabis overview and before followed by on begin efforts. recent an key our industry commentary some This I'll concluding. saw results. origination an

of basic per common quarter, earnings third distributable the weighted stock. AFC generated share For $X.XX of average

was quarter dividend our XXXX, shareholders or is declaring Board exceeded AFC's paid share record out in distributable our when generated dividend September Since public, quarterly earnings each have dividend. XX, first XXXX. on paid to earnings our reminder, that the post-spin per we which October met share. a as XX, and primary of declared of going of The $X.XX dividends $X.XX considers distributable Board metric As Directors per of

I my engine. key to the area. last strides priorities significant of we've origination AFC one was joined reinvigorate in November, say proud to this made I'm

During a the million we deals, integrated credit key senior vertically third Georgia. Company facility Private closed including secured in quarter, several an $XX for operator Q,

to to support senior X a growth. expanded $X.X of also existing secured borrowers facilities their We by total continued million

quarter industry Storey Maryland's deals with remains subsequent in diversifying our adult-use focus facility These in acquiring Cannabis closed and secured capital license for we reflect portfolio. partnering a cultivation credit to significant market. our investments in $XX continued operators million states limited distribution intensive, and cannabis infrastructure. vertically a end, operator on Additionally, Maryland, integrated senior leading strong further

The use across is M&A cannabis increased medical demand for driven debt growing, capital the refinancing activity, by and expansions adult in segment.

However, remain traditional election and so likely lenders the cautious results. given will remain

portfolios lenders cannabis of only active cannabis positioned debt a in AFC well number opportunities of handful remaining, the is capitalize on to down, and the winding lending. With

in As favorable have debt a states and the dynamics. supply-demand the provider NASDAQ-listed built limited cannabis a with we first license diversified space, leading lender, portfolio across

provide ability the industry's growth. funding remain us to of Our flexible at enables forefront to the

capital high-teens maturity move deploy current is continuing risk-adjusted to attractive on average remain solid XX%. curve Our to mid- to clear: a in while with IRRs. a We quality of has to the portfolio into the portfolio weighted yielding continuing Strategy credits target up returns. yield focused

XX of additional and X, principal with loans greater X.XX%. XX% with the portfolio loans a X.X% comprised above. is of Simplifying As to our was of rate XX% outstanding XXXX, fixed than An sulfur floor at above floors. of or sulfur or equal November XX% of bps currently floors fixed that floating X.X% sulfur down, principal rate has or of their floor is outstanding prevailing rate

last our significant well key and sulfur on at we Reflecting proud exiting very interest Since a high for progress, year exposure fixed high accomplishments. environment. X we year, floors, our falling incredibly loans. substantial my paydowns rate or made Given are last on securing restructuring I'm positioned of

attractive to has approach returns. risk-adjusted disciplined in capital to capital Our deals new repaid, $XXX us million allowing led with vintage redeploy that into approximately

the ambitious On milestone, front, to originations goal estate achieving new marked $XXX deals us to The commercial X origination pure-play another exceeded we million the portfolio million in spin-off $XXX as real and in lender. date. cannabis of originations of across enabling set our operate a

our These raised team's dedication, without accretively grateful program, work to industry. and possible through capital wouldn't we hard Finally, capital been truly our bolstered which has our ATM and efforts. timely, the to have flexible I'm provide accomplishments their for ability

for I'm to track As on confident further create our growth we shareholders. ahead, drive and we're long-term look value

Brandon discuss our results in to over it more financial detail. turn to I'll Now

Dan. Thank you,

basic average quarter XX, For GAAP million common weighted average a earnings net generated per and income had $X.X the or $X.X XXXX, share weighted and basic ended share. distributable million September of million $X.XX common we of interest $X.X net $X.XX per or of income

distributable accordance earnings mentioned, income previously providing and represents the GAAP. with the believe we shareholders helpful is assessing of Distributable computed performance net As overall to in business. AFC's earnings

or Excluding or of noncash CECL, for subsidiary expense, losses, gains taxable any items as stock net and loss compensation noncash as provision items such net recorded income other REIT unrealized current income known credit or in the loss also period. dividends for expected losses,

across of $XXX.X of XXXX third with spread We ended quarter outstanding principal million loans. XX the

as commercial September million average completion September the $XXX which XX estate our across XX, portfolio of of such loans of was approximately loan over X, loan principal XX% of XXXX. following spin-off outstanding life As for portfolio. yield the is to November and -- of November of The X, the maturity, measured portfolio XXXX, real consisted our XXXX, of weighted each

assets was $XXX.X full $XXX.X total As we October million, million included on repaid of in drawn equivalents of our September that credit X, and on XXXX, of cash XXXX. including line subsequently $XX cash had XX, million which of

provides needed. that Our be credit us up line to in $XX available of million as can drawn with funds

we our offering our million. capital to During sold September bolster $XX.XX program X.X value average per $XX.X at net base months approximately generating helped approximately during the ended was proceeds shares million X of our book of quarter. This the under at-the-market accretive XXXX, and price an share. XX,

from reserve the our million at of was $XX.X or XX, XX.X% XXXX, million reserve million. September approximately value, June XXXX of carrying As $X.X the $XX.X loans which increased CECL of XX,

also total million. our loans million, of losses quarter, $X.X the unrealized at value to on During unrealized the in loss current included we $XX.X an sheet increase third on increasing fair had balance the

for total XXXX, XXXX. XX, October the XX, of $X.XX common September million, of and quarter record shareholders value third per our XX, equity of per of was dividend book September our to share $X.XX. was shareholder paid first post-spin As as $XXX.X XXXX, On share we

reminder, on and XXX% the year. dividend a XX% pay is our between policy current basis, over distributable earnings of to annual As an

the turn it now With to Q&A. that, back I start operator to the over will

comes & question line with first Associates. our [Operator Instructions] And Pablo Zuanic the of Zuanic from

talk target all, of congratulations first $XXX for guidance have just origination target the a of million Can know is your guess, loan I that you don't similar it but in for for modeling, reasonable about given I if you've of assume to XXXX, you terms would exceeding on year. XXXX.

million, about a like in again, be the realized? that would forward. on to talked this how terms congratulations about And You $XXX going pipeline that being of Just think of target. color XX% of some exceeding

Pablo. Thanks,

with good that about talked capital We solid operators. invested, from new we're also want than fully liquidity to vintage of $XX greater but we and having credits deploying we loans sure So make want into get million here. to cautiously

we've same judiciously should over the year deployed into those number expect a XXXX. so credits, And in the of and course the you of

the to risk-adjusted call. and little in given and to I very at to pipeline. the things with target, back in the Tuesday, the borrowers have quality cannabis the the in the of the last fourth of the quarter new with election turmoil good election in got we've dry pipeline. space a think of come probably And attractive results a powder deploy lot the something in a we'll results, I'm things happy terms out pleased of we're markets there on returns. bit But

Okay. companies we current be And missing remarks, estimates, make I it's in right, then delayed. prepared just that. may you that a rescheduling, on but out following of season, we lot If Robyn, about the Like your said think a there. yes, think, challenging earnings up

exaggerating from riskier think I months maybe also to the the your So impacts that Or to choppier, waters industry? we ago am of perspective, originating ago? context and X compared way risk of X and in we loans? compared pipeline the into Are months about your the are terms you

if growth the Ohio, is has come been to far, revenue thus So like generally some results you reason you flips quarter. was the that hard have a partial by. And I AU speaking, at think look that

and Massachusetts also AU that side curve. Minnesota. on we're of some Illinois, a future of of have things in have mature Jersey is of another markets of the that one. the them the But you in terms terms in New potentials maturity. Michigan, retail You PA are kind on probably ahead year in

And lot so places New where competitive, a Illinois retail on things. particularly a are of of lot exposure, have the side getting MSOs of more Jersey, and

Now a structures these distribution existing lot are I those of to infrastructure strategies and for densify they in strategies to more those the companies, further out or get markets. it. that have other through states take partnership looking of think,

growth But more and kind a think mature I good of by markets declines largely the you're AU on curves and being -- in that's offset fighting these trend. they're flips you the markets. have

has of a but think, speaking, pressure profitability pretty The I results, decent. you there. hasn't Revenue growth on been generally bit little have profitability, been

in. lender, be us generally place a for that's debt as think a I to fine

problematic equity an to growth. not argued investor, the more got you're has have historically past that least because industry as growth. think seeing And this for, growth it's like get to if quarter, a little you're much multiples you I going at

you've with to Florida shift for a why the a stocks, pace companies, the of in potentially federal the and AU combined so few And failing, themselves, that's which have seen think a been obviously, right slowing results and combination would reaction reform. also of, I but big a

segue more you mean of Let I competition? stores. getting Florida, capacity How that me your of a clients comments your or in from price if are going hear there? terms know in exposure? Florida. you thinking AX what are I I color added your And Florida happen. to type are use operators based type are about comment A we you of from don't getting as in just see for companies are what lot can didn't of them? you

Yes.

them for cannabis long is Florida the portfolio overall. right. providing would the pretty XX% So industry been the generally, a borrowers exposure of us I Projections of don't our have underwrite short. history And say, and lot here, falling well of modest, projections we future we a have in

current the and continue without medical to market able AU just share. being we take to stay So Florida, really our exposure how flips underwrote market to we underwrite and a that's in

in the in who in much would gain of the a additional terms white the incumbent landscape with just to and think rather footing I challenger growth to in up you're who's where fill I curve market probably additional X share Florida, of space Because moving been existing an pool. somebody stagnation, be an an challengers the profit much large profit more with incumbents these better a of a on looking type are years pool. at markets than has

think And view are their the so at the that's of running profitability. absolutely going years down our think, least hatches. about button we're another out own approach. how looks X fulfilling operators It and stores And generally right like I be we I exposure maximizing that's to hearing speaking, it's aggressive

to has out operator, add with did capital not rec. of prudent anticipation in point, to very their just Dan's back that think been we I build here that and And

So lender, from spent which, a decided approach, rightsize they're, Dan position as that's really just of not going of out to appreciate, to a versus and Because wait-and-see you on excess be take lot capacity strength market, to the now described, a also money attack leading building used. having as the right?

One yes. last That's right, one.

So the that the supply -- general on even and capital so in probably obviously, continued equity demand you talked now. and on side capital about more imbalance

in that. agree great a So totally you're place, with

regional We're last down getting -- Are region asked running got those the when new exceptions this X.XX% a the that before, seeing more signals this and to but are more for recently said front? seeing rate. Or are their hear question. we like like mixed we Or in? refinance about like [indiscernible] interest So I've or rule? before, bank, you more regional I are That's banks on loan just we the think come portfolio. a some

more or cautious coming are out more think coming in. I getting than

more specialized rent talked and that today. these people and the that I to exception I a would you than in get it. facility may think experience. is And that going activity the tricky here are you have lend tourists competitive did. and you it rule. that's them I rate ago activity saying X, may than see be across to GTI focused industry fact the people think I I and across a them say are years very industry Robyn happen. space, operators come or strongest into. see the And the space. about in have generally X headlines gone, you a won't headline have come of think And and we I they slowing intensity, speaking, running in comes We on regionals. that the very that some a And to doesn't rather had the the lot rough have And the deemphasizing and from this there. the honestly down mean is to in But

on And X, X experience is valuable the without of having and industry history cautious X, of top-down approach. operating taking cannabis specialization and and more really so that in for generally us. those having both the are having the the dedicated a bottoms-up type asset years a focus

And no questions. further I'm showing

So conclude with now today's This would to program, that, may disconnect. does you you and we for thank like participating.