AFC Gamma (AFCG) 7 Aug 24 2024 Q2 Earnings call transcript

In the latest earnings call for Advanced Flower Capital (AFC), key executives, including Chief Legal Officer Gabe Katz, President Robyn Tannenbaum, Chief Executive Officer Daniel Neville, and Chief Financial Officer Brandon Hetzel, discussed the company's second quarter 2024 performance, strategic moves, and financial results. The call highlighted the company's recent spin-off and its impact on AFC's focus on the cannabis industry, as well as notable achievements in portfolio management and origination efforts.

Strategic Spin-off and Focus on Cannabis Lending

The most significant announcement from the call was AFC's successful spin-off of its commercial real estate portfolio, marking the company's full transition to being a pure-play cannabis lender. This strategic move is expected to enhance AFC's ability to capitalize on the opportunities in the cannabis market by concentrating its lending efforts on one industry. The spin-off has also enabled AFC to target specific investor bases more effectively, positioning the company for long-term growth.

Financial Performance and Portfolio Management

Daniel Neville, AFC's CEO, reported a strong financial performance for the second quarter, with distributable earnings of $0.56 per basic weighted average share of common stock. The company's dividend policy remains committed to paying between 85% and 100% of distributable earnings over the year, with $6.65 in dividends per share paid since going public. Neville's focus on reducing exposure to underperforming credits, reinvigorating origination efforts, and enhancing underwriting strategies has led to several notable exits, including the successful sale of an $84 million loan to a subsidiary of a public company and the final prepayment of a $24 million loan from a private company.

Looking Ahead: Industry Growth and Capital Markets

Robyn Tannenbaum, AFC's President, shared her optimism about the industry's growth potential, citing recent developments such as the launch of adult-use sales in Ohio and the potential for Florida and Pennsylvania to flip in the next two years. She also highlighted the increasing demand for capital in the cannabis industry, driven by these market expansions and M&A activity. Brandon Hetzel, the Chief Financial Officer, echoed this sentiment, noting the robust demand for debt capital and the supply-demand imbalance in the market. This creates a favorable environment for AFC to deliver attractive risk-adjusted returns.

Conclusion

In summary, Advanced Flower Capital's second quarter 2024 earnings call underscored the company's strategic transition, financial performance, and optimism about the cannabis industry's growth prospects. The successful spin-off of the commercial real estate portfolio and the focus on the cannabis sector are expected to enhance AFC's ability to capitalize on the opportunities in the industry. The company's strong financial performance, including notable exits and dividend payments, demonstrates its commitment to generating value for shareholders. Looking ahead, AFC is well-positioned to capitalize on the growing opportunities in the cannabis industry and expects to meet its target of $100 million in origination for 2024.