Advanced Flower Capital Inc (AFCG) Q1 2025 Earnings Call Highlights: Navigating Challenges and ...

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Thu, May 15, 2025, 1:14 AM 4 min read

Distributable Earnings (Q4 2024): $0.29 per basic weighted average share of common stock.
Dividend (Q1 2025): $0.23 per share, payable on April 15, 2025.
Net Interest Income (Q4 2024): $7.6 million.
Net Interest Income (FY 2024): $45.7 million.
Distributable Earnings (FY 2024): $34.9 million or $1.68 per basic weighted average share.
GAAP Net Loss (Q4 2024): $1 million or $0.05 per basic weighted average share.
GAAP Net Income (FY 2024): $16.8 million or $0.78 per basic weighted average share.
Principal Outstanding (End of Q4 2024): $356.8 million across 16 loans.
Principal Outstanding (As of March 1, 2025): $368.8 million across 17 loans.
Weighted Average Portfolio Yield to Maturity: Approximately 18% as of December 31, 2024, and March 1, 2025.
Total Assets (End of Q4 2024): $402.1 million.
Cash and Cash Equivalents (End of Q4 2024): $103.6 million.
CECL Reserve (End of Q4 2024): $30.6 million or approximately 10.4% of loans at carrying value.
Total Unrealized Loss (End of Q4 2024): $19.7 million for loans held at fair value.
Total Shareholder Equity (End of Q4 2024): $201.4 million.
Book Value Per Share (End of Q4 2024): $9.02.

Warning! GuruFocus has detected 3 Warning Sign with AFCG.

Release Date: May 14, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Advanced Flower Capital Inc (NASDAQ:AFCG) received $119 million of paydowns from five underperforming credits in 2024, which were redeployed across nine new loans.
The company generated distributable earnings of $0.29 per basic weighted average share for the fourth quarter of 2024.
AFCG closed a $15 million senior secured credit facility with Story of Ohio, reflecting a focus on supporting strong operators in limited license states.
The active pipeline remains strong with over $380 million in deals as of March 1, 2025, indicating robust future opportunities.
AFCG's weighted average portfolio yield to maturity was approximately 18% as of December 31, 2024, and March 1, 2025, showcasing attractive returns.

Negative Points

Earnings were impacted by the underperformance of some legacy loans, indicating ongoing challenges with certain assets.
The Board declared a reduced first quarter dividend of $0.23 per share, down from previous levels, reflecting caution due to underperforming assets.
AFCG is dealing with legal issues related to Justice Grown, including accusations and defaults under the forbearance agreement.
The company had a GAAP net loss of $1 million for the fourth quarter of 2024, highlighting financial pressures.
AFCG had $2.24 per share in unrealized losses and CECL reserves as of December 31, 2024, indicating potential risks in the portfolio.

Q & A Highlights

Q: Can you provide an update on the situation with Justice Grown and the potential next steps? A: Daniel Neville, CEO: We are not negotiating in public, but we have set our dividend at a sustainable level based on current performing assets. Future steps will depend on paydowns and redeployment of capital into productive assets.

Q: What is the current mix of opportunities in your pipeline, and how much of it might come to fruition this year? A: Daniel Neville, CEO: We see opportunities in new medical markets like Kentucky, refinancing opportunities, and M&A. The pipeline is robust, and we expect to deploy capital into good credits this year, depending on capital returns and liquidity.

Q: What is the outlook for new funding in 2025, and how much has been drawn in the first quarter? A: Daniel Neville, CEO: We have slightly leveraged with the Story of Ohio loan. We will likely set a target next quarter, depending on capital returns. Last year, we deployed $125 million, and we see even better opportunities now.

Q: Can you remind us of your liquidity position and available credit lines? A: Brandon Hetzel, CFO: We have two revolving lines of credit allowing up to $100 million. As of March 1, we had approximately $89 million available under these facilities.

Q: Regarding the dividend, was the previous $0.33 dividend extraordinary, and is the reduction to $0.23 related to Justice Grown? A: Daniel Neville, CEO: The $0.33 was not extraordinary. Recent developments with Justice Grown and other paydowns led us to set the dividend based on the performing book, excluding underperforming legacy loans.

Q: Are you offering more competitive rates to improve the quality of your portfolio? A: Daniel Neville, CEO: It depends on the credit. Some loans with great collateral and security may have lower rates, while others, like development assets, may have higher rates. Each loan is uniquely structured.

Q: How would you describe the demand for assets in New Jersey and Pennsylvania? A: Daniel Neville, CEO: We are not commenting on market attractiveness, but you can make your own observations about these markets.

Q: Do you agree that companies not paying 280E taxes are in better financial shape despite accruing tax liabilities? A: Daniel Neville, CEO: Not paying taxes is a choice, and it can present issues, especially in equity transfer scenarios. We hope for 280E reform, but it's not a high priority for the current administration.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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