Afc Gamma, Inc. ((AFCG)) has held its Q4 earnings call. Read on for the main highlights of the call.
AFC Gamma, Inc. recently held its earnings call, revealing a mixed sentiment characterized by both achievements and challenges. While the company celebrated surpassing its origination targets and effectively managing underperforming assets, significant issues with Justice Grown cast a shadow over its financial results, impacting earnings and dividends.
Successful Originations Exceeding Goals
AFC Gamma set an ambitious goal of $100 million in originations for fiscal year 2024 and exceeded expectations by originating $135 million in new commitments. By the end of 2024, they further closed an additional $15 million in new commitments, showcasing their capability to surpass targets and drive growth.
Strong Active Deal Pipeline
As of March 1, 2025, AFC reported an active deal pipeline exceeding $380 million, highlighting robust demand for capital within the cannabis sector. This strong pipeline indicates potential for future growth and expansion in this burgeoning industry.
Portfolio Management Success
In 2024, AFC demonstrated effective portfolio management by receiving $119 million in paydowns from underperforming credits. This capital was redeployed across nine new loans, potentially unlocking future earnings and enhancing portfolio performance.
Positive Outcomes Related to Loan Exits
AFC successfully exited five underperforming loans in 2024, including a significant $84 million exit of a loan to a subsidiary of Public Company H. This strategic move resulted in a full paydown at par, reflecting AFC’s ability to manage and mitigate risks effectively.
Underperformance Impact on Earnings
Despite these successes, AFC’s fourth-quarter earnings and the start of 2025 were adversely affected by the underperformance of some legacy loans. This led to a reduced dividend of $0.23 per share, reflecting the financial strain from these underperforming assets.
Challenges with Justice Grown
Significant challenges arose with Justice Grown, including defaults under the forbearance agreement and credit facility. These issues have led to legal disputes, negatively impacting AFC’s financial outlook and necessitating careful management moving forward.
GAAP Net Loss for Q4 2024
AFC reported a GAAP net loss of $1 million, or $0.05 per basic weighted average common share, for the fourth quarter of 2024. This loss underscores the financial challenges faced by the company due to underperforming loans and legal issues.
Forward-Looking Guidance
Looking ahead, AFC Gamma remains committed to its strategic focus on cannabis investments, with plans to enhance portfolio diversification and improve underwriting processes. The company aims to reduce exposure to underperforming credits while actively managing its portfolio to preserve capital. With distributable earnings of $0.29 per share for the fourth quarter and a declared first-quarter dividend of $0.23 per share for 2025, AFC is poised to support strong operators within the cannabis industry despite ongoing challenges.
In conclusion, AFC Gamma’s earnings call presented a balanced narrative of achievements and hurdles. While the company has demonstrated strong origination performance and effective portfolio management, challenges with Justice Grown and legacy loans have impacted financial results. As AFC looks to the future, its focus on strategic investments and portfolio optimization will be crucial in navigating the evolving landscape of the cannabis sector.