Afc Gamma’s Earnings Call: Balancing Growth and Challenges

Afc Gamma, Inc. ((AFCG)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for Afc Gamma, Inc. showcased a mixed sentiment, balancing financial stability and growth initiatives against ongoing challenges. The company highlighted the renewal of its credit facility and a significant $14 million transaction, signaling positive growth prospects. However, issues such as legacy loans, declining interest income, and ongoing litigation tempered the overall sentiment.

New Senior Secured Credit Facility

Afc Gamma, Inc. announced the renewal of its senior secured credit facility, which includes a lead commitment from an FDIC-insured bank. This facility has the potential to expand to $100 million and is set to mature on April 29, 2028. This move underscores the company’s efforts to strengthen its financial foundation and support future growth.

Recent $14 Million Credit Facility

The company has committed to a $14 million senior secured credit facility for subsidiaries of Standard Wellness Holdings, a privately held multistate operator. This transaction reflects Afc Gamma’s strategic focus on expanding its reach and supporting reputable operators in the industry.

First Quarter Distributable Earnings

During the first quarter, Afc Gamma generated distributable earnings of $0.21 per basic weighted average share of common stock. This figure provides insight into the company’s operational performance and its ability to generate shareholder value.

Interest Income Decline

Afc Gamma reported a decline in interest income, which fell from $9.2 million in Q4 2024 to $8.5 million in Q1 2025. This decrease highlights some of the financial challenges the company faces in maintaining its revenue streams.

Exposure to Underperforming Credits

Despite efforts to reduce exposure to underperforming credits, legacy loans continue to impact Afc Gamma’s earnings. This ongoing challenge indicates the need for strategic adjustments to mitigate risks associated with these loans.

Pending Litigation with Justice Grown

Afc Gamma is currently engaged in three legal proceedings with Justice Grown entities. These cases relate to enforcing rights under the credit facility, adding a layer of complexity to the company’s operational landscape.

CECL Reserve and Unrealized Losses

The company reported a CECL reserve of $29.9 million, approximately 9.75% of loans at carrying value, alongside a total unrealized loss of $20.4 million. These figures highlight the financial provisions and potential losses Afc Gamma is managing.

Forward-Looking Guidance

Looking ahead, Afc Gamma provided guidance on several key metrics and developments. The company reported distributable earnings of $0.21 per basic weighted average share of common stock and net interest income of $6.6 million. As of March 31, 2025, the portfolio included $366.3 million of principal outstanding across 17 loans, increasing to $372.5 million across 18 loans by May 1, 2025. The weighted average portfolio yield to maturity was approximately 18%. Afc Gamma emphasized its focus on high-quality borrowers and proven operators, while also acknowledging challenges with underperforming loans and ongoing litigation.

In conclusion, Afc Gamma’s earnings call presented a balanced view of the company’s current state and future prospects. While growth initiatives and financial stability were evident, challenges such as declining interest income, legacy loans, and litigation remain. Investors and stakeholders will be keenly watching how the company navigates these complexities in the coming quarters.