• Distributable Earnings: $0.56 per basic weighted average share of common stock.
• Dividend: $0.48 regular dividend and $0.15 special dividend paid on July 15, 2024.
• Net Interest Income: $18.4 million for the quarter ended June 30, 2024.
• GAAP Net Income: $16.4 million, or $0.80 per basic weighted average common share.
• Principal Outstanding: $335.4 million across 14 loans as of June 30, 2024.
• Weighted Average Portfolio Yield to Maturity: Approximately 19% as of June 30, 2024.
• Total Assets: $458 million, including cash and cash equivalents of $170.3 million.
• CECL Reserve: $25.2 million, approximately 9.1% of loans at carrying value.
• Total Shareholder Equity: $314.3 million.
• Book Value Per Share: $15.21 as of June 30, 2024.

• Warning! GuruFocus has detected 5 Warning Sign with AFCG.

Release Date: August 07, 2024

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

Positive Points

• AFC Gamma Inc (NASDAQ:AFCG) successfully transitioned to a pure-play cannabis lender following the spin-off of its commercial real estate portfolio.
• The company generated distributable earnings of $0.56 per share, which supports its consistent dividend payouts.
• AFC Gamma Inc (NASDAQ:AFCG) achieved notable loan exits, including an $84 million loan exit with a 19.9% internal rate of return.
• The company has a growing cannabis pipeline of $346 million, indicating strong future growth potential.
• AFC Gamma Inc (NASDAQ:AFCG) is making substantial progress towards its $100 million origination target for 2024, with $57.3 million already closed.

Negative Points

• AFC Gamma Inc (NASDAQ:AFCG) still faces challenges with underperforming credits, although progress has been made.
• The company reported $1.94 per share in unrealized losses in CECL reserves as of June 30, 2024.
• There is a supply-demand imbalance in the capital markets, which could impact future lending opportunities.
• The company has experienced an increase in unrealized losses on loans at fair value, totaling $15 million.
• AFC Gamma Inc (NASDAQ:AFCG) spun off approximately $5.56 of book value per share, which could impact future dividend payouts.

Q & A Highlights

Q: Can you provide more background on what you have accomplished since joining AFC Gamma? A: Daniel Neville, Chief Executive Officer, explained that his three priorities were managing underperforming credits, focusing on origination, and enhancing underwriting. Significant progress has been made in recycling capital into new operators with attractive credit profiles and yields. The company has also been active in the cannabis space, closing $57 million in originations and engaging with quality operators. Additionally, Neville's operational experience aids in evaluating new credits effectively.

Q: Are there any changes on the supply side of capital for cannabis companies? A: Daniel Neville noted that the refinancing landscape remains largely unchanged, with the same players participating. Regional banks are not significantly involved, and AFC Gamma's bespoke credit solutions are valued over the more standardized approaches of regional banks.

Q: Can you provide any pro forma numbers or guidance on the new dividend range post-spin-off? A: Robyn Tannenbaum, President, stated that the Board will continue to declare dividends on the normal cadence. Historically, a $0.48 dividend has been declared for the last five quarters. Post-spin-off, AFC Gamma retained about two-thirds of its assets, spinning off approximately $5.56 of book value per share.

Q: What is the current status of the cannabis pipeline and origination targets for 2024? A: Daniel Neville mentioned that the company is making substantial progress towards its $100 million origination target for 2024, having closed $57.3 million in deals year-to-date. The cannabis pipeline is growing, currently standing at $346 million, with two additional deals in documentation.

Q: How does AFC Gamma view the current industry trends and capital market conditions? A: Daniel Neville expressed optimism about industry growth, driven by legalization efforts and increasing demand for capital. The company aims to capitalize on the supply-demand imbalance for debt capital, focusing on quality credits and targeting mid to high teens IRRs.

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