AFC Gamma, Inc. Announces Financial Results for Second Quarter 2024

Rhea-AI Summary

AFC Gamma (NASDAQ:AFCG) reported strong Q2 2024 financial results, with GAAP net income of $16.4 million ($0.80 per share) and Distributable Earnings of $11.4 million ($0.56 per share). The company paid a dividend of $0.48 per share for Q2 2024. AFC Gamma has completed its transition to a pure-play cannabis lender after spinning off its commercial real estate portfolio on July 9, 2024. CEO Daniel Neville highlighted the company's strong performance, reduced reserves, and increased book value. AFC Gamma is on track to meet or exceed its $100 million origination goal for the year, positioning itself to capitalize on cannabis market opportunities.

Positive

• Q2 2024 GAAP net income of $16.4 million ($0.80 per share)
• Distributable Earnings of $11.4 million ($0.56 per share)
• Successful transition to a pure-play cannabis lender
• Reduced reserves and increased book value
• On track to meet or exceed $100 million origination goal for the year

Negative

• Dividend payout ($0.48 per share) lower than Distributable Earnings ($0.56 per share)

Financial Analyst

AFC Gamma's Q2 2024 results demonstrate solid financial performance. The company reported $16.4 million in GAAP net income ($0.80 per share) and $11.4 million in Distributable Earnings ($0.56 per share). The $0.48 dividend payout represents a 85.7% payout ratio, indicating a sustainable dividend policy.

The spin-off of their commercial real estate portfolio positions AFC as a pure-play cannabis lender, potentially increasing their focus and expertise in this niche market. Their $100 million origination goal for the year suggests aggressive growth plans. The reduction in reserves and increased book value point to improving asset quality and effective portfolio management.

However, investors should note the discrepancy between GAAP and Distributable Earnings, mainly due to unrealized gains/losses and changes in credit loss provisions. This highlights the importance of understanding both metrics when evaluating AFC's performance.

Cannabis Industry Expert

AFC Gamma's transition to a pure-play cannabis lender is a strategic move that could yield significant benefits. The cannabis industry, while growing, remains underserved by traditional financial institutions due to regulatory complexities. This creates a lucrative opportunity for specialized lenders like AFC.

The company's $100 million origination goal indicates confidence in market demand. However, investors should be aware of the inherent risks in the cannabis sector, including regulatory changes and market volatility. AFC's focus on quality real estate assets, license value and cash flows as collateral demonstrates a prudent approach to risk management.

The positive momentum in portfolio management, with reduced reserves and increased book value, suggests AFC is navigating industry challenges effectively. This positions them well to capitalize on the expanding cannabis market, but continued vigilance will be important given the industry's evolving nature.

Second quarter 2024 GAAP net income of $16.4 million or $0.80 per basic weighted average common share and 

Distributable Earnings⁽¹⁾ of $11.4 million or $0.56 per basic weighted average common share

Paid dividend of $0.48 per common share for second quarter 2024

WEST PALM BEACH, Fla., Aug. 07, 2024 (GLOBE NEWSWIRE) -- AFC Gamma, Inc. (NASDAQ:AFCG) (“Advanced Flower Capital”, “AFC” or the “Company”) today announced its results for the second quarter ended June 30, 2024.

AFC reported generally accepted accounting principles (“GAAP”) net income of $16.4 million or $0.80 per basic weighted average common share and Distributable Earnings of $11.4 million or $0.56 per basic weighted average common share for the second quarter of 2024.

“We are excited to announce that AFC is now a pure-play cannabis lender after the spin-off of our commercial real estate portfolio on July 9, 2024. This transition positions us to well to capitalize on cannabis market opportunities, and we are on track to meet or exceed our $100 million origination goal for this year. This quarter has been marked by strong performance. Our active portfolio management is showing positive momentum, with reduced reserves and increased book value, highlighting the effectiveness of our strategic initiatives,” said Daniel Neville, the Company’s Chief Executive Officer.

Common Stock Dividend

On July 15, 2024, the Company paid a regular cash dividend of $0.48 per common share for the second quarter of 2024. AFC distributed $9.9 million in dividends, or $0.48 per common share, compared to Distributable Earnings of $0.56 per basic weighted average common share for such period.

Additional Information

Advanced Flower Capital issued a presentation of its second quarter 2024 results, titled “Second Quarter 2024 Earnings Presentation,” which can be viewed at advancedflowercapital.com under the Investor Relations section. The Company also filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, with the Securities and Exchange Commission on August 7, 2024.

AFC routinely posts important information for investors on its website, advancedflowercapital.com. The Company intends to use this webpage as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. AFC encourages investors, analysts, the media and others interested in AFC to monitor the Investors section of its website, in addition to following its press releases, SEC filings, public conference calls, presentations, webcasts and other information posted from time to time on the website. To sign-up for email-notifications, please visit the “Email Alerts” section of the website under the “IR Resources” section.

Conference Call & Discussion of Financial Results

Advanced Flower Capital will host a conference call at 10:00 am (Eastern Time) on Wednesday, August 7, 2024, to discuss its quarterly financial results. All interested parties are welcome to participate. The call will be available through a live audio webcast at the Investor Relations section of AFC’s website found here: AFC -- Investor Relations. To participate via telephone, please register in advance at this link. Upon registration, all telephone participants will receive a confirmation email detailing how to join the conference call, including the dial-in number along with a unique passcode and registrant ID that can be used to access the call. The complete webcast will be archived for 90 days on the Investor Relations section of AFC’s website.

About AFC Gamma, Inc.

AFC Gamma, Inc. (Nasdaq: AFCG) is a leading commercial mortgage REIT that provides institutional loans to state law compliant cannabis operators in the U.S. Through the management team’s deep network and significant credit and cannabis expertise, AFC originates, structures, underwrites and manages loans ranging from $10 million to over $100 million, typically secured by quality real estate assets, license value and cash flows. It is based in West Palm Beach, Florida.

Non-GAAP Metrics

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings to evaluate our performance excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Distributable Earnings is a measure that is not prepared in accordance with GAAP. Distributable Earnings and the other capitalized terms not defined in this section have the meanings ascribed to such terms in our most-recently filed quarterly report. We use this non-GAAP financial measure both to explain our results to shareholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that this non-GAAP financial measure and the information they provide are useful to investors since these measures permit investors and shareholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance.

The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the Management Agreement for the applicable time period, and thus Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings account for any Incentive Compensation earned for such time period. We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as original issue discount, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) (decrease) increase in provision for current expected credit losses (“CECL”), (v) taxable REIT (as defined below) subsidiary (“TRS”) (income) loss, net of any dividends received from TRS and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.

We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business. As a real estate investment trust (“REIT”), we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that shareholders invest in our common stock, we generally intend to attempt to pay dividends to our shareholders in an amount at least equal to such REIT taxable income, if and to the extent authorized by our Board of Directors. Distributable Earnings is one of many factors considered by our Board of Directors in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

Distributable Earnings is a non-GAAP financial measure and should not be considered as a substitute for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.

The following table provides a reconciliation of GAAP Net income to Distributable Earnings:

	Three months ended June 30,								Six months ended June 30,
		2024				2023				2024				2023
Net income	$	16,446,121			$	12,135,333			$	16,392,005			$	22,160,607
Adjustments to net income:
Stock-based compensation expense		369,343				130,769				912,565				411,347
Depreciation and amortization		—				—				—				—
Unrealized (gains) losses, or other non-cash items		1,420,001				462,918				5,033,694				1,940,609
(Decrease) increase in provision for current expected credit losses		(6,190,240	)			(1,606,187	)			(1,258,566	)			(903,761	)
TRS (income) loss, net of dividends		(624,235	)			(1,250,400	)			306,998				(2,116,604	)
One-time events pursuant to changes in GAAP and certain non-cash charges		—				—				—				—
Distributable earnings	$	11,420,990			$	9,872,433			$	21,386,696			$	21,492,198
Basic weighted average shares of common stock outstanding (in shares)		20,400,004				20,317,341				20,396,940				20,310,606
Distributable earnings per basic weighted average share	$	0.56			$	0.49			$	1.05			$	1.06

Forward-Looking Statements

This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views and projections with respect to, among other things, future events and financial performance. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements, including statements about our future growth and strategies for such growth, are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. Certain factors, including the ability of our manager to locate suitable loan opportunities for us, monitor and actively manage our loan portfolio and implement our investment strategy; the demand for commercial real estate investment and cannabis cultivation and processing facilities; management’s current estimate of expected credit losses and current expected credit loss reserve and other factors could cause actual results and performance to differ materially from those projected in these forward-looking statements. More information on these risks and other potential factors that could affect our business and financial results is included in AFC’s filings with the SEC, including in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of AFC’s most recently filed periodic reports on Form 10-K, Form 10-Q and subsequent filings. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect AFC. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Investor Relations

AFC GAMMA, INC. INVESTOR CONTACT:
Robyn Tannenbaum
(561) 510-2293
ir@advancedflowercapital.com

AFC GAMMA, INC. MEDIA CONTACT:
Profile Advisors
Rich Myers
(347) 774-1125
rmyers@profileadvisors.com

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¹ Distributable Earnings is a non-GAAP financial measure. See the “Non-GAAP Metrics” section of this release for a reconciliation of GAAP Net Income to Distributable Earnings.

FAQ

What were AFC Gamma's Q2 2024 financial results?

AFC Gamma reported Q2 2024 GAAP net income of $16.4 million ($0.80 per share) and Distributable Earnings of $11.4 million ($0.56 per share).

What dividend did AFCG pay for Q2 2024?

AFC Gamma paid a dividend of $0.48 per common share for Q2 2024.

How has AFC Gamma's business focus changed recently?

AFC Gamma has transitioned to a pure-play cannabis lender after spinning off its commercial real estate portfolio on July 9, 2024.

What is AFC Gamma's origination goal for 2024?

AFC Gamma is on track to meet or exceed its $100 million origination goal for 2024.