AFC Gamma (AFCG) Q3 Earnings call transcript Nov 13, 2024

In the latest earnings call for Advanced Flower Capital (AFC), the company showcased a robust performance in Q3 2024, highlighting significant achievements and a strategic focus on the rapidly evolving cannabis industry. The call, led by Chief Legal Officer Gabe Katz, featured updates from President and Chief Investment Officer Robyn Tannenbaum, CEO Daniel Neville, and CFO Brandon Hetzel, providing valuable insights into AFC's financial health and growth prospects.

Highlights and Key Themes

Origination Success and Industry Insights

AFC reported a strong third quarter, generating distributable earnings of $0.35 per basic weighted average share of common stock. The company, which has exceeded its $100 million origination target for the year, has now reached $116 million in total new originations. This milestone underscores AFC's commitment to providing timely, flexible capital to the cannabis sector, which is experiencing increased demand for debt capital due to refinancing activities, market expansions, and mergers and acquisitions.

CEO Daniel Neville highlighted the capital-intensive nature of the cannabis industry, with a particular focus on the need for cultivation and distribution infrastructure investments. He also emphasized that traditional lenders remain cautious, leaving AFC well-positioned to capitalize on opportunities in cannabis lending. As the first NASDAQ-listed cannabis lender, AFC has a diversified portfolio across limited license states with favorable supply-demand dynamics, enabling it to remain at the forefront of the industry's growth.

Financial Performance and Outlook

The financial results for Q3 2024 revealed net interest income of $8.9 million and distributable earnings of $7.2 million, with a GAAP net income of $1.4 million. AFC's focus on distributable earnings, which excludes non-cash items, provides a more accurate assessment of the company's overall performance. The company's financial health is further underscored by its $298.7 million of principal outstanding and a weighted average portfolio yield to maturity of 18%.

Looking ahead, AFC is confident in its ability to deploy capital into solid credits with attractive risk-adjusted returns while maintaining a disciplined approach to origination. The company has set ambitious goals for future growth, including the potential for further expansion into limited license states and the pursuit of new vintage deals.

Investor Perspective

Analyst Pablo Zuanic from Zuanic & Associates engaged in a lively Q&A session, touching on topics such as the company's loan origination targets for 2025, the current state of the cannabis industry, and AFC's exposure to markets like Florida. AFC's executives provided insightful responses, shedding light on the company's strategic focus, financial position, and confidence in its ability to navigate the challenges and opportunities in the cannabis sector.

Conclusion

Advanced Flower Capital's Q3 2024 earnings call underscores the company's strong performance and strategic focus on the cannabis industry. With a robust pipeline of potential deals, a disciplined approach to origination, and a focus on providing flexible capital to strong operators, AFC is well-positioned for continued growth and value creation for its shareholders. As the cannabis industry evolves, AFC's dedication to specialized lending and deep industry knowledge will be key drivers of its success.