Advanced Flower Capital's Q1 2025: Unpacking Contradictions in Dividends, Deal Selectivity, and Borrower Risks

Dividend policy and distributable earnings expectations, pipeline and deal selectivity, pipeline and origination strategy, issues with significant borrowers, and dividend policy and payout expectations are the key contradictions discussed in Advanced Flower Capital Inc.'s latest 2025Q1 earnings call.



Capital Market Conditions:
- Advanced Flower Capital (AFC) noted that many capital markets participants remain on the sidelines due to unclear federal reform, causing a supply and demand imbalance in the cannabis industry.
- This imbalance is driven by operators seeking additional equity or debt capital to support their businesses, while the capital supply remains scarce.

Pipeline and Origination Activity:
- AFC's active pipeline has $287 million of deals, with one signed term sheet in documentation as of May 1, 2025.
- Origination activity is likely to be muted in times of cannabis and broader market volatility, as the company focuses on protecting shareholder capital under current market conditions.

Portfolio and Credit Management:
- AFC's portfolio consists of $372.5 million in principal outstanding across 18 loans, with a weighted average portfolio yield to maturity of approximately 18%.
- The company is actively managing underperforming loans, such as supporting the liquidation process for private company A and engaging in legal proceedings with Justice Grown.

Financial Performance:
- AFC generated net interest income of $6.6 million and distributable earnings of $0.21 per basic weighted average common share for Q1 2025.
- The decrease in interest income compared to Q4 2024 was attributed to lower income from subsidiary of private company G and the absence of TRS dividends in Q1.