AFCG - Earnings call 3 2023

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Operator

Good day, and welcome to the ASC Gamma Q3 2023 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to Gabriel Katz, Chief Legal Officer.

You may begin.

Gabe Katz

Good morning, and thank you all for joining Ipi Gamma's earnings call for the quarter ended September 30, 2023, and I'm joined this morning by Leonard Tannenbaum, our Chief Executive Officer; Brandon Hetzel, our Chief Financial Officer; and Robyn Tannenbaum, our President.

would note I is this begin, recorded. being we like that to call Before included October section in release is and with information Replay our earnings quarter posted website afcgamma.com, release the our Gamma's third and presentation. XX, on Investor AFC Relations of investor at along is press XXXX beyond. respect statements financial things, other anticipated developments and includes Today's that the among conference forward-looking call company's to, reflect in XXXX and performance projections and current views with market in predicting These results subject statements inherent uncertainties are conditions. future to and Please ASC the most cause periodic SEC materially and recent for to could statements from results refer that projections. Gamma's to filings these forward-looking certain with significant actual differ factors

income, earnings release and to in During earnings, Gamma's measure. a earnings which the this can AFC GAAP Gamma's available is presentation net website. financial most to measure be we call, comparable also found distributable refer AFC on distributable non-GAAP investor of will Reconciliations

today's and then will will financial call line commentary, Len Brandon and is summarize follows. our The Q&A. for performance the strategic XXXX will we of format quarter results, overview for and as remarks open our introductory provide third

Tannenbaum. the that, Officer, will Executive to Leonard With our I Chief over call turn now

Leonard Tannenbaum

call Thank to The and to you, our for joining discuss XX, results. everyone welcome Gabe. us September the for I ApsGamma's Good ended thank earnings quarter like morning, XXXX. would today to

we results, Gamma of I Monday. and AFC excited the coming am to very Officer to the Neville, Dan appointment are new announce this excited turning the quarterly Chief Before effective of personally Executive

Board cannabis a with X cannabis grow and including multi-state X Board and Interim Wellness positions roles, Dan Executive company to most Officer; Officer. as joins Financial us us Officer. in operator from helping will deal employees, an in his joined of various AFC and he's employees As structuring $XXX revenue. M&A Chairman and and operator the the lead leading transition was as Holdings, over he first Dan expertise Investment to us instrumental activity held of million Ascend Gamma joins uniquely role, I and integrated Executive as operations, CEO. Chief CEO from states, in in to vertically recently its where X,XXX-plus Chief Dan of the new Chief and him Dan's Chairman

noticed as M&A have to years increasingly contribute the area a that to of in-house a Therefore, industry. as management credits. provider Gamma expertise, We experience, operating portfolio the AFC my with debt of land and important combined continue leading XX position to in operating direct has to and cannabis underwriting Dan's have expertise become lending campus

We worked are very a I the he join was have number excited matters closely and with Dan have team of when as us at Ascent. him on to

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results. quarterly the to Turning

AMC weighted For common the average share of of stock. third XXXX, generated per $X.XX basic Gamma quarter of earnings distributable

declaring AMC in dividend. generated the our going share. when the June the Management is earnings we earnings declared level we sustainable year, $X.XX The $X.XX As per of distributable distributable this and XXXX, portfolio per any in Directors Board represented for and a no dividend dividend Since reminder, Gamma's significant have public, In Board each quarter. investments. a that out share assuming the exceeded that stated metric dividends quarterly $X.XX September of quarter dividend a considers without or anticipated paid primary current have the dividend that nonaccruals on additional met

of given on nonaccrual for investment investments may that the capitalize on true our we this G on Despite ample we maintained XXXX. believe Since cannabis private remainder the became in company period mid-XXXX, selective volatility time, to cash increasingly market, continue for in put new is and arise. opportunities the being a that of these to

We into opportunities acquisition are we driven as assets discount. at in are new by assets the an a excited market purchase investors coming the buying seeing, from existing both as activity operators significant about new uptick to distressed well

promising, assets attractive are focused in Georgia, name is these on such Missouri, well-capitalized operators capital Ohio, as Arizona states and few. Maryland, around we The and to formation a

license cannabis Following formed company a that we valuable operators as we the continue investment quarter, well-capitalized assets new our of during X approximately to newly private thesis consolidate of $XX to in key funded states. the million believe into limited will

believe limited investments strong states profiles. in to additional have continue license liquidity have We that we in to operators make risk-adjusted

passed a that a each AMC Ohio state. see to initiative introduce including commitment public subsidiary of the has private Gamma which our commitment yesterday, for million and facilities, are $XX our to company of in will L. positive to to large company Ohio the through X $XX adult-use, pleased exposure believe credit we million we larger operators Additionally, be to ballot

model. benefit should moving from materially believe operators to both a Ohio We recreational

been maximize benefit into are active management, borrowers to operations placed creditors. portfolio the focused on we X have As for and of the receivership optimize value

which liquidating $XX Maryland of quarter. and the borrowers million partners, of in company down operations. so principle private was and the Gamma and from the sale $XX assets received over has of paid actively Arizona during A One its AFC far has been certain syndicate million primarily to

have have as closely to valuable cash during company subsidiary closely New several completes in we challenges a last discussed As quarters, continues we continue private construction Jersey. monitor, flow which of the a G, project to it

As stated subsidiary of private of nonaccrual quarter, we the put on last G month June. company for a we

cash year. payments in payments and As receive interest bar August, borrower we gamma in remained we remainder the has for Jersey, To not for the of July months. capital ensure did on modified has X have adequate nonaccrual working those the the for AMC and interest New cash $X the interest due is was in cash of of due portion its the the interest million the month in $XXX,XXX million due and October, December. $X that that received of interest in and of September November was month in

that's we relates this not it any As loan, been to currently paid interest cash. in into not income accruing are

We cultivation near-term prospects remain about Jersey facility. to full excited in and of New their to continue look the forward optimization the

we As a in focused reducing on interest I payment of have discussed, component income. our previously kind recently as

first But to level quarter the for During normalized XX, a in ended now the of a as of XXXX, of decreased September was payment or XX%. kind much XXXX, quarter percentage income level that more XX%. have PIK we

about our active PIC, pleased significant to which mainly due We management. in are is decrease the

there to believe the are we calls, market market As advantage we capitalized cannabis environment. of past that take in incredible current operators are well have said new the entering

and us to We our look forward have to in introducing and investors join him are also analysts coming pleased to months. the Dan

call turn Brandon review now over to will the our I to financial results.

Brandon Hetzel

Len. you, Thank

basic $XX.X the of quarter share net share. or million net of million income of ended million generated weighted interest and basic XX, weighted income we common September earnings common GAAP $X.XX $X.X For XXXX, average and $X distributable of per had $X.XX per earnings or average

As overall previously of shareholders providing is we assessing AFC in earnings performance business. mentioned, Gamma's helpful believe distributable to the

received items prepayments in spread third period. relating the CECL. excluding principal items XX and the of such the losses, with of as or noncash or GAAP company for loss $XXX.X net private debt in income XX, $X.X expected gains REIT income million of Taxable and XXXX, we credit XXXX quarter to subsidiary and provision losses, with net for select recorded Distributable noncash unrealized expense principal net stock Subsequent earnings computed known of ended of We borrowers. A dividends represents also million. outstanding September current across other or accordance income compensation as loss to the

had As principal of November across XX, ASC borrowers. $XXX.X million XX outstanding of XXXX, gamma

XX, with X.X% was XXXX. CECL consistent carrying of reserve maturity, of and As as as which XXXX, each XX% life XX, approximately XXXX, loans our such the represents XX, X, loan The value, of September at approximately weighted for of is XXXX. loan X.X% yield June of to November over the September measured portfolio average

a balance Next, strong. which sheet, our at remains let's take look

of cash $XX.X we of total had As million cash XX, assets XXXX, and million. equivalents in of September $XXX.X

to approximately up to drawn which Additionally, cash majority our needed. on drawn of available be $XX in that the credit, X.X% X us can funds line as earning is provides million of interest of Currently, we our X.X%. had

September to shareholder as As and per common of dividends of of out we XXXX, October equity for XX, have XX% our On value ASC our earnings. $XX.XX. share per approximately of paid shareholders Gamma And was $X.XX third XXXX, was a book of $XXX.X our Year-to-date, share XX, distributable total dividend XXXX. paid the million, of quarter September record XX,

an on between distributable to the year. basis, of is and policy our reminder, earnings over a annual As XX% XXX% dividend pay

the the With back that, Operator? over I to will now start turn it operator to Q&A.

Operator

comes from with Elias question first Our Instructions] Michael TD Cowen. [Operator

Michael Elias

may. Great. Feel I if

to bit a to color think of perhaps particularly now how provide of time should strategy moving make we on you why it forward, relates that, as the CEO estate? could the the part First, in change was as real commercial about

Leonard Tannenbaum

with we the as on -- the management, things then. talked knock and wood, we've When on happy Okay. buried really CEO actually, about as in way portfolio each the pleased to I I'm turning are out at corner and when change. other start let's calls, turning I these guess, and Rob company. a about looked really got I'm get

says Having that. a portfolio really this having in strong and turned forgot time lending, done with pleased is how that, I'm the I absolute for expert heavy think I corner. years and much said it's lift. an really, I've direct in management Dan XX after And So

called, upon a So frequently person come. I when was also want really the we one Dan industry, who we and -- which it's was are we name, very excited and came in to of that but we this the so X he when only that and excluding founders said, available. person -- not wanted course, And good, who's

of so think sponsors, has our extremely deal And terms talking will an portfolio. many it in that category. in a And that been are and Dan reduce to expert directly additive core We our of assets he be or streamline help truly of already order sponsors talking or our debt noncore in their lot to directly to even monetize assets I -- partners. their assets is

set skill of, he's am. I while a It's that So have pleased. than we're I really far better some

good do great the great open to have portfolio And assets so with this management, And yourself. replace there do Chairman liquidity. and real in due ton to of he real . To question, to the And to as estate. for we're getting Officer. capital a role it's up second someone Chief closed undrawn replace It's ability as company back -- as Executive we to have XX% role. I'm more It's successful yet and the We still an Investment estate. our is. of not your capital. in our still

both we to cannabis X firing. So and hopeful close estate deal going cannabis we're real forward, get did and I firing, in expect,

deployed. get have on to we cylinders company So the firing all

Michael Elias

a at estate the active the Got it. notably noticed around just real If look pipeline pipeline pipeline the that or the I cannabis I And in commercial as that quite disclosures pipeline. on take decrease. building the increased follow-up. a

estate you evolution side, AXCGAM you evolved wondering, in the perceived if real about and that market some dynamics have the opportunity Just seen how talk space? the you're for of just market the that particularly and could the on commercial -- has of

Robyn Tannenbaum

is Robyn. This

pipeline the on activity been players, those acquisition why have reinvigorated by cannabis you've more cannabis I seen market. So there's in the is as we an origination as the which seen players, side, think uptick increase. X.X And effort Lynn we've our enter discussed,

side, is can think those we're situations. be do real more other on necessarily a of I going the the syndicate we but where in be to side. we expertise real commercial that opportunities to sector, not in see On where commercial Gamma leading that estate leverage a co-lender we're positioning partner AC estate transactions, how

getting So the pipeline decrease and think quarter. that . little you're that's bit, a that's seen this why where you've I balance

Michael Elias

a is Got is, long-term terms for would you financial a Analyst it. there as And give us to just be in there expectation like an expect of setting of December, helpful. color last that, could sense question for part in at what outlook? -- me and Day expectations of your Any

Leonard Tannenbaum

should bit have it happen Dan, a the board let you and to a days have has it's meeting Dan Previewing first get who Board next no over fun. introducing my think on, little were feet X surprise. therefore, we going and Otherwise, Dan And I expect the to of Come to that it I present all where in we're and with that's to his vision investors, see approach his of Analyst to our and how think differently. . exciting. you and wet, industry, Day cannabis pretty opportunities for I think the terms

Operator

from comes next John Hecht Our Jefferies. with question

John Hecht

the a there other about market for And was it -- state wondering, recent talked the a opportunity federal a perspective change Ohio. I'm or in at the or think from regulatory you guys? But up in that any is I election provides opens you anything the

Leonard Tannenbaum

is lawsuits which one. I everybody Ohio, It's states Florida Florida. or Pennsylvania forget Three that and yesterday, watching. today

over but So My now, but I from different it's It go And is to too think is challenging. of good year that the that there's opinion. don't Ohio understanding. I the is I next which against the pass through Republicans go in governor my lawsuit If it let's threats personal this think governor From the to I far not XX%. we'll doesn't -- -- don't potentially, and any this, challenging X And see against goes election not going my approximately hoping you wordings passed the look, see, have up fails, it, I tomorrow. it X I of information But some would like never the Florida guy. with he's right on but was how any standpoint, to rec, where see at wordings goes senate's it watch just there's you'll year, be. want it. state bringing where think XX%. good think the least, know. it,

leave hope my they us is just So that alone.

the Here at than passed abortion mistaken, will it cannabis with a seems of are passed it the like be the could the percentage higher I XX%. people even -- pulling. but slightly

forth the bill whatever mean, portion or a or law the I vote. in So went

Remember, long the help X industry the it your the that in lot So really positive is that's think that's including cannabis really of I our number for are credits of a last Ohio, a going operators, is Pennsylvania is buy to even to And state liquor a time passes where And problem the Pennsylvania Pennsylvania. with liquor to in you ensue takes state-controlled a anything. do this store. there.

So a just it's different altogether. state

John Hecht

helpful. That's Okay.

mean, scope investment bit opportunities, on kind it, things side, and The how given in consolidators cannabis the changed estate second I your you're looks for you commercial doing little bit? specialty question little have like call changed real changed underwriting a real that underwriting or like it focus some approval the, survivors process, is, the have a of has

Leonard Tannenbaum

we player on and right? as have Committee. which We committee, we in X this Investment I'm added our a that. we've skilled remain So I process, to people to needed, said, X we very the which -- Officer, added approval We Chief have have -- still investment and still we which receivership now

the which he -- we're Berman necessary sets to to then skilled will players So cannabis after so operators have we're at it, XXX facilities not happy be have is delays, and From to to that very, dollar, really the Committee, are and on skill or Dan $X.XX these joined more He's pennies, on built in more on general expand, this pennies on investment really area, XXX buying at Monday general in construction through cannabis standpoint, Investment happy have And which committee due added about committee. than just delays thinking these a dispensaries very the you permitting to think joins things really them. if and opportunities. new Bernie the will it have and delays. and

well-capitalized but are the sale them also trading. not are advantage that including the we cases, not escalated of learned double debt leasebacks of loads range, out And they in of new some so competitive and for and their advantage for that so good high think costs, This MSOs are in these business, the competitive you'd the see them mid- -- terms largest feel is competitive only cases, companies. many comfortable by if having have digits have growth. which now control, really advantage excited of in that in about back even real have . a debt that to very back And XX% capital, to some through you the that we're run operators and into

Operator

comes from question Street. Lake Smith next Mark Our with

Mark Smith

us give states any any give haven't watching. new some moved the just that Len, you're things are update you're today signs maybe you that some us bottomed Can of of and a lower? update quick where on on good maybe or and a yet seeing down just states you have improvement that

Leonard Tannenbaum

think I in -- bottomed. dates Washington, The bad and gotten levels license cost -- Michigan. California, terms at gotten God, per -- of really Colorado, of all pound market below all Look, of price lot have have bottomed have states thank states production. unlimited Oregon, your a

of gotten integrated have nonvertically that's killed. problem. those So And part the really real operators

is capture just is buy price if below you margin. have cost marginal dispensary a want of below that, You and your for to production your

And and of a so -- is good Arizona example that.

why that for its even we product in one You've is that's Having brands They're is well contrast very good in and that? cash. or flow, had Michigan it's very back making And high-end the cash paying though well-regarded regarded. is in like in or the seen that tough very our interest Michigan, with They're high-end Because sure. that state. brands challenges. a

our but bright the we're pockets it's about the only That's of way performing. one, even pretty so license unlimited Bright light, are happy And states. in there

cannabis cash credit There paid significantly, example, little are generates that in down almost have much for less yes. our and has loan Yes. that flow we Brandon, sweeps so operators, been Pennsylvania, our A half, quarter, every than cash half, in

that And by fully so to convince so so them paid dividend expect performing on get be fee. -- to or a year they That's we of and generating the when well if paid they're do an Should not else cash much off example, we have next because that to fee we're loan. we that exit recap a we loan, end flow. at loan, that And expect loan. the pay exit fully something for

a should we from have next benefit so that. And year

not it's state are Orlan So loans are company it's say, really operations, it loans are like and X company-specific to all their positioning. market bad on good. they're the constructed way about

Mark Smith

question me. then portfolio you where Perfect. updated want variable last thoughts be as And in versus Any at rates? for you to the look and fixed

Leonard Tannenbaum

it and portfolios, And are rates when including important think want manager it I've Oaktree. billion is a -- look, you I $X sold I rates managed rising. be variable in not to asset before always to And anymore.

rates You dropping. to rates when want be in fixed are

more I rates think not is important. today in this concept of variable being whole

-- personally fixed I floating moment. today at and think would be you to be this rather want I

think within in Federal in raising Reserve interest stop rates. the or I stopped of general rates the has either point X.X interest raising

will this year. think to reverse inverted yield rate good is time than the I floating more And have rate. I fixed a think curve next

rather from that If rate and And job doing have were fixed. I actually . floating benefited a So much I good new today, more been know I it. a it we've that's having have really exciting. done loan

Operator

no further closing to over remarks. Len like back for Tennenbaum at call turn questions are time. to this the There I'd

Leonard Tannenbaum

attending. for all you Thank

as provide slot Dan information his very new strong we our was As to into look takes forward, push the cannabis. on and about call, CEO more the vision over mentioned

. much. very thanks So

Operator

may disconnect. day. Thank the you you now conclude your a does participation. program, Everyone, and have for great This

AFC Gamma (AFCG) 8 Nov 232023 Q3 Earnings call transcript