Earnings call transcript Q3 2022

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Operator

Good morning. I will be your conference operator today. At this time, I would like to welcome everyone to the NewLake Capital Partners Third Quarter 2022 Earnings Conference Call. Today's call is being recorded.

I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. sir. ahead, go Please

Valter Pinto

Anthony Good Annenberg, third welcome, call. quarter Gordon Financial the today operator. Officer; Chief NewLake Meyer, of Lisa I'm to Acquisitions. Capital by Chief Board, of Chairman Partners XXXX and DuGan, President afternoon you, and everyone Executive Jarrett and Officer; the joined Coniglio, Director Thank earnings conference

the statements materially Before other Private results Safe call may conference made during we begin, today's Act the Reform I'd Litigation may uncertainties a of like deemed Securities to of within forward-looking of remind Harbor actual and meaning risks and of everyone due that statements and variety the be factors. XXXX, to differ

any of filed well as intention For on press a to events disclaims the to and update other ongoing The as company's XX-Q the risks or and revise the company with statements, Form issued filed periodically SEC. information, X-K, or future refer obligation of the a of uncertainties evening new yesterday the you forward-looking detailed with release some whether any SEC and otherwise. the reports company's or discussion result in business, as I

our measures the estate the GAAP release used to non-GAAP and real included A press compare supplemental real attributable operating measure to containing in and estate of the adjustments end from the FFO at of are industry more and performance AFFO companies. AFFO, reconciliation refer financial complete our terms to income net release. of common shareholders and information. to definitions press Please FFO for

with diluted of levels, and conditions, in rates. management's and average activity, pace risks plans such administrative leasing outstanding rental including This uncollectible is occupancy rates, and and guidance of and future current expenses, to assumptions the operating weighted rents, acquisitions shares general interest and the dispositions, and the uncertainties market the view Exchange Securities fully as future company’s assumptions reflects on Commission. more current described outlook US and The based company's filings subject

ahead. the Gordon my over that, it's please to turn pleasure Mr. to With call go DuGan. Gordon,

Gordon DuGan

Valter, everyone, you, thank you, joining for and call. our Thank

near the long-term a And and challenging happy I'm for very be on our the the New our we environment. As XXXX, shareholders. I Lake performance conclusion continue business bullish of opportunities of to through macroeconomic with

significant had strong quarterly XXXX declaring growth and another We of third quarter $X.XX dividend delivering sixth $X.XX per year-over-year or quarter announcing consecutive share our dividend -- a increase, annually.

delays of price many including capital the cannabis has of As compression lack industry availability know, in a legalization, few. a you name number and of federal headwinds, to

our NewLake a while industry favor some around these scale. ebbs flows and are as getting acting business, moat maturing natural of an Some and to of

highest discipline to they decisions to the belief industry quality the industry year, years guiding of in remains this exercise operators many the continue not require will cannabis investment nondilutive told the portfolios I to cannabis that quantity. continue steadfast for our quality, continue capital the upon have growth the we Earlier are principles built growth we one our have on today. to projected and of Our focused be as industry us These to allowed and be you come. to to successful in when of the fuel access long-term making

the results. our very results, We by third established reflected are our process the have delivered financial of underwriting proud we for as rigorous in is shareholders, strong it quarter

forces the are in to that cannabis being the deployment the build and cannabis industry cautious possible. team in strategic transactions the our that, best very capital and today, we Having play high-quality has for decisions in estate, resulting worked relationships as diligently our pipeline. make industry said across source Additionally, evaluate of to we real a investment watch various

time, its in take in infancy. conviction this into or market estimated doubt about We opportunity and converting market value. think no having a sector not long-term that $XX billion cannabis will still toward illicit the remains do months our is federally today but as attractive tremendous quarters unwavering industry the is cannabis There legal the

have like experience will nascent peaks all other growth. that industries and It valleys rapid

in For center we data with volatility transactions industry movers growth. the even value early quality appreciation significant the experienced example, industry, saw the with rapid associated as reach

Similarly, states to continue best we limited us believe and properties license the serve as our focus on only transactions. we and high-quality operators execute will well

apart and real advantage as financial us in services a shareholders. estate, gives significant deliver opinion, navigate in experience long-term cannabis, us value we these collective industry our and in our times for Our and sets competitive the volatile

now to would our Chief turn over Executive like the call Coniglio, Anthony I to Officer.

Anthony Coniglio

everyone, thank I call. want joining call today's to you, cover four Thanks, Gordon, I on our have today. and for areas

financial and our NewLake's update to the pipeline I'll quality, election Our an and results actions, then provide efforts legislative lastly, results, and uplift. on

$XX.X our financial revenue XX% We're in prior million $X the from the to year-over-year Total growth and for very delivering pleased year strong with to quarter increased third quarter compared quarter. results, million revenue year-over-year AFFO.

XXXX XX% QX year-over-year $X.X million XXXX. compared million $XX.X increased as to QX to from approximately AFFO

we million, from months of in the million $XX.X and XX% XX, reported contractual nine first a rent collected For of revenue increase XXXX, nine September the months ended XXX% XXXX. of $XX.X

and from the AFFO in same year. million $XX.X period quarters for up of three $XX.X XXXX first last million, was the XX%

share dividend $X.XX expected long-term remain target to mentioned, a our the Gordon or and again annualized ratio increased third once and quarterly XX%. our payout for quarter $X.XX between AFFO we continues XX% to As

make structure, to business headcount other we in will operating us having experience scale growth, with operating to or our operating our expenses, providing without as continue significant leverage. increases Given significant

robust pace new not investments our that mentioned slowed. has seen, as we've we this and quarter, for as was Last pipeline

evaluated, patient in state remain and very the as challenges industry, during the and operator selective remained at the we quarter, transactions level. third However, we

to in and investing industry We're significant meet rigorous only in that our requirements. all operators a best that a the in selective have position fortunate to capital available capital be to underwriting of with us the

track that said, company. have we disruptions our some investments record that of communicated lease at a XX-year and consistently our with lease term business of tenant will industry-leading any average inception our since point. encounter proud collection of having being We're With net remaining rent the of quality

that seeing across and Pennsylvania are that watching we those that tenants we've previously are not particularly been discussed integrated. and vertically closely We Massachusetts, in industry, the

on I Jarrett our more be will minimize will impact those reiterate when detail for want to team disruption, portfolio, on provide prepared the address us but to the that our tenant the with issues and time comes a portfolio. well

we the to We are to also note think minimize portfolio of that risk. in proactively management it's our active important

on of to working with hands continually and operating border broadly environment industry more the participants strategy. investments are understand We our reassess and tenants our risk profile our and the

that to to walk long-term assets. our opportunities few work us tenants our From the we'll to time, with is a time shareholders. reposition for behind-the-scenes work through identify This value Jarrett optimizes examples. will

Missouri results approved Turning On earlier in adult-use cycles. cannabis South week. rejecting Tuesday, in election Maryland, election to and similar The this industry Dakota. from previous Dakota measures Arkansas, voters less while in saw than and success North

very this cannabis for clean box, quality. are as that and states. tenants business to and a this their boost the a on ballot it's meaningful is didn't at see our We a noteworthy have saw some legalization thrilled red industry disappointing sweep credit Yes, the ballot Missouri outlook in but the it cycle long-term

the the bill. asked and impact how specifically movement banking of federal at these these is also there looking legislation results, Many clear electric results prospects the safe states among legalization. will the Overall, towards

While crowded conducive duck getting in am session calendar banking ever legislative the will worried be I the passing closer, that safe the not lame to bill.

industry well adult are safe and stigma Notwithstanding, supporting already existing the industry towards the cannabis been to use. fundamentals tone certainly building evolving consumers cannabis quickly their in as a more shift The the entrenched legalization reform. likely demand banking, momentum and is states towards delay and policies has as

this marijuana. party example meet of greatest is President shift the possession by sentiment for recent simple federal perhaps of convictions in And Biden of the

eight it projected for New short example. a that after alone $X demand this rate, another consumer run months Jersey great product. meeting adult legalizing is significant on the use, is only is state billion In

the and cannabis towards great estate. well the reaffirm So our legalization our is and in opportunity federal long-term week's election is real view investment results march underway, thesis this

Before turning this a national an comment is know to company like on uplisting make details to basis, regarding I provide an would Jarrett the exchange. We more to operator-by-operator call over to on a important continue our we topic including own who We meaningful unlock company. the as management all to our of for percentage solutions value. remain investors, of focused efforts a possible all shareholder on investigating

to given change in do caution same relief time, legal But the for an without reiterate to progress expect that uplift my status not remained an the to of of has a investors want cannabis. or period regulatory extended to I occur

detail. you. that, our our Jarrett Jarrett, Acquisitions, portfolio to hand Annenberg more over to it of With over Director to through walk I'll in

Jarrett Annenberg

Anthony. Thanks,

with has approximately million across million $XXX one As we XX a of with total inclusive that sale with of X.X a feet have provided tenants, loan, tenant representing leaseback, of a committed along covered. states today, XX square been

As XXth, XX.X% portfolio lease and of XX.X term built-in an average yield our a had lease approximately tenant remaining current improvements weighted and through years escalators. growth of unfunded September with

more majority have will approximately on Phoenix in grounded which which square we unfunded for Currently, is I $X.X Mint, in million of detail XXX,XXX foot the cultivation touch the commitments, in momentarily. for facility

from fund NewLake's let our project we which expansion million the into in revenue. the square us Missouri. have XX% overview, portfolio, Additionally, of tenants a five a look With to XX,XXX results that recent option $XX.X ground-up represents in foot top most

tenant, an adjusted largest X% Curaleaf, and the increase. announced company of QX sequentially stated of QX $XXX $XX Our EBITDA XX% year-over-year where Tuesday, million, on earnings up revenue million,

operating has Greenlight This an cash with of their based this we million tenant the expand to and million new relationship cash and Additionally, a third work $XX $XXX Curaleaf in balance Missouri, dispensary across are positive Midwest. Curaleaf Greenlight in tenant we transfer Arkansas to on the of past about quarter quarter, the as MSO generated looks excited flow to sheet.

for results tenant, The increase QX was largest will Cresco, they adjusted the second announce and had company's of EBITDA $XXX million revenue an XX% Our QX year-over-year. million, week. $XX quarter, next

the of At $XX cultivation balance be their June on leader Cresco to in where XXth, million facility. the sheet. the we market, own continues we had largest cash Illinois

to continues acquisition Columbia one Cresco will move they indicated, year. with times, another have their which of close of Additionally, Care, our forward this

third Our tenant, clinics largest revolutionary Trulieve. is

financial in facility own we usual, information specific as their cultivation can't here. We Massachusetts. So share

Boston to Metro is reminder, expect a and three As state revolutionary two area we in with XXXX. in them dispensaries the integrated adult-use open well-situated vertically stores in medical clinics, the

market compression, by Rev brands such compete effectively has price to Papi Teva. and been the experienced exciting as with while Clinics able the partnering has

Trulieve. largest fourth is tenant Our

cash The company XXth. EBITDA and reported Trulieve reported during $XXX quarter was million, $XX million QX September the of earnings yesterday, year-over-year. a up XX% generated $XXX more million than QX balance of revenue adjusted at

earnings Columbia tenants top report is They Rounding Care. five out our QX next week.

company The on had $XXX company of million of QX, sheet For adjusted of balance EBITDA million of cash $XX million. XXth. as reported June the reported revenue and $XX the

Care week, Columbia announced New a sell had assets Massachusetts and last they York. agreement in Illinois, and to definitive

the properties expect formal either any some divestitures we've portfolio, we received in our not party. While include notice to from

Our are rights that standard ensure our our lease documents will well Tenant capitalized. and Guarantor under

Columbia the stated. the of transaction end close year the to as expect We Cresco and by as both Care

Additionally, monitor a performance tenants' we our to on basis. continue closely property-level

metric plus use EBITDA as I by the As main calculated or last is we noted four-wall, rents. rent quarter, divided EBITDA coverage

QX, our approximately times. more dispensary facilities coverage across our a operational cultivation approximately was XX been was For average and our times, coverage EBITDAR for XX in that five the have average quarter than XX locations EBITDAR operating

make estimates that level in companies report some a use all true for so financials comparison. we to property note Please our tracking differently, do

is While well And as REIT price has with before, see as underwrite have coverage’s industries, price compression time. four-wall other transactions the our with mentioned compression we we reduced averages reductions we have net in inflation, slight triple not are did coverage above expectation over macroeconomic performing of This coupled in significantly all surprising. margins. properties and

past Massachusetts wholesale are indoor the to of quarter, we provide cost Pennsylvania wanted level we and quality having already see per excess to markets, of come and some Wholesale difficulties the Massachusetts, are a hovered due stabilization on for high-level we we at $X,XXX touched Last the In seeing the starting capacity in update. price months, the have to the in still few pound the range of production. prices products additional for online. most in

see to more products affect sell continues pound. to the at the continue cannot during level who with to and per operators we compression prices own stores dropping pick their $X,XXX Pennsylvania, wholesale price margin QX, below up additional negatively through This In independent the retail.

are we adapt to to the operators this expect next few We over pricing decelerate declines seeing environment, months. the and

was transaction optimize stakeholders deal manage PharmaCann As closed our we dispensaries, portfolio. and we is executed project context, one portfolio one Anthony partners, tenants QX with in of Franklin, for consistent in give XXXX, with actively One noted, example we dialogue a build-to-suit Massachusetts. of of a tenant which our and with last our are Ohio. industry PharmaCann To to three in a in week

As due the Last on find to it an ago, a Wapakoneta, our better profile to a clear generate with for PharmaCann only quickly substitution and for process, land a the Lake dispensary competitors closed agreeing property. declined up to quality value permit two tenant and both area. had weeks year, more EBITDAR that back significant miles, risk us is dispensary revenue that outcome we in of the in it Ohio, within as the In sold operational XX the became coverage. QX PharmaCann finalize PharmaCann we New locations to this opening better

with dispensaries was worked and us that now limited substitute work North very to the Oklahoma Illinois to with Another apparent we difficult quality into to Oklahoma our dispensaries better States example was XXXX from in hard limited of when license to Dakota. license states. and two Curaleaf in underperforming going what a is reposition two capital It from market market the deteriorate, we is

is are Anthony I have Phoenix, concrete, under we significant specifically cultivation visited Mint few representing site weeks been in delay resource a due TI delays, Arizona. indoor to progress. a processing availability And while total and there one in in they million Phoenix, The foreign which $X our the with ground-up ago. facility of making construction, non-operational have square Currently, project and foot remaining, only XXX,XXX

to more of also Mint expect the process with materials majority early in already order advance, significant The is We in the on site, on building so we worked the delays. don't and

pipeline. to Moving

the the capital evaluate see And to flow. rising in to looking continue for a I cost the to effective risen we capital even has be range echo inflation and significant And – of interest of opportunities. diligent continue We as very operators. that With Gordon operators. cost few rates, multi-state is recent want to we XX% Anthony for deal at XX% top debt transactions the and

go-to the that four over the we relationships have The us built made industry. capital for in years source growth past have a

over to our be $XX capital ourselves of opportunities partners. are we proven have front to we grow As portfolio. about have million us excited available, reliable the We currently in and of

results through our Meyer more CFO, in to With hand that, to I'll over Lisa walk our financial Lisa? detail.

Lisa Meyer

an quarter. full for mid-June Nevada the quarter during that of of Funding revenues of that of the a million million $X.X On Total as months of Pennsylvania day $XX.X in XXXX TI through revenue the XXXX. of the totaled Strategies quarter of last or AYR Jarrett. and third million the quarter million recognized in increase to closed from $XX.X you, million, to second occurred million approximately revenue a the TI and XX% Curaleaf ended in million on Funding we from $X $XX.X acquisition Thank and We sequential September quarter three increased $XX.X $X the XXXX. XX% compared XX, basis, invested for second the

lower stock-based and compensation nonrecurring period decreased lower general administrative ended fees in from outsourced due insurance, $X elimination September function by lower the year. XXXX, months the of expenses prior professional to primarily mainly the excluding D&O Our our expenses, three compared general accounting was decrease fees. and for million. in The administrative same approximately and the to XX, legal

increased to net to to income income $X.X the same in shareholders million of $X.X common Net the shareholders period for common third attributable to attributable for million quarter compared XXXX.

million $XX.X million FFO XXXX, quarter third to prior of $X.X in the increased compared year. the For to

our prior million expense to year. compared power in the third and $X.X same to demonstrates the the earnings year-over-year as in XXXX leverage The business AFFO increased of investors to increase period deploy million for of AFFO for model XX% $XX.X for our the quarter grow base capital. we

stock. paid business share XXXX, September October The the to declared of On of record shareholders quarter of company XXXX, $X.XX XXXX. per on share, close of on September common annualized a of cash was per XX, an XX, $X.XX the dividend at dividend to dividend XX, XXXX third

in revenue exclusive to and approximately approximate $X.X up-listing be severance year the range million. be $XX and to million $X one-time $XX the of million potential company costs to costs to G&A ahead, of expects million Looking full restructuring

would to to I back now, call Anthony? the turn like And Anthony.

Anthony Coniglio

and would To the formation formal independent committee Thank I our the social and of to make environmental, conclude company's of on you, repurchase Board Lisa. the share call, this like program of million morning a of portion the comment announcing an release from the governance Directors. press $XX

continue invest business investments Prospects priced to attractively great. for our opportunities be and to in

an our the action the However, This share providing in growth of robust that our reflects confidence for years investment price quality we many can't come. discount cannabis to our pipeline the the opportunity of opportunity. portfolio, our industry attractive underscores ignore and

Board's these with of in most brings level stand-alone today's the taking us our line important at seriously topics. the around responsibility Additionally, capital committee an commitment creation Board our ESG in one committee of to markets. the shows timely This issues

companies on, of it merit is thus, that ESG matters. all subcommittee, standard reaffirming management and to to committee of a and was While of oversight, having becoming ESG focus direct Board decided enough strategy to the the Board something our highest most as responsibility that important the our commitment opposed

the the I'd over like operator for questions. call that, to turn With to any

Operator

And Instructions] comes from mispronounced first John Massocca, I'm Thalmann. our sorry Thank you. [Operator Ladenburg I question from if

John Massocca

correct. You’re

Gordon DuGan

John. Good morning,

Anthony Coniglio

John. morning, Good

John Massocca

back the as kind that repurchase What's program? volatility, might versus stock on Okay. you Maybe the Should as investments? of use for of is in price the it think backstop program. buying kind more we or buyback more return a regularly which of of of the of something outlook starting with usage compare of kind you case

Gordon DuGan

that if on relative we the significant we that can at on programmatic. want be will I that say, look too think don't decision about evaluating meaningful leave table, want to daily, a basis. weekly where discount, to at capital would value I and make we detail Yes. investors we'll get here into deploy looking much that we that when John, to value

other value need that specific on longer. have just than no We table saying objectives can't we the any

Anthony Coniglio

of John, to the I can't as a I more a other phrase would is, add. day backstop. I heard little a company shrink it greatness. you would think The bit

just already small in had we free at we as deteriorate same to continue program off And a shrinking the with that. the choice. have backstop But isn't that comfortable an the a the So volatility, very first much we're markets. to things given if time, price could that we act so REIT throw felt cash flow, because

We have thinking think basically backstop versus money business. to would the then stock. buy out as more put sort about no still of this leverage obviously, where we a of we're as and where it's always we today. not can it And we're I can grow back But trying

John Massocca

portfolio, Okay. last you eye keeping thoughts And And right with potential regards vein, in mentioned that PA in any any of tenant the Are disruption. maybe on then property kind in-place same a quarter? any the guess, now? versus maybe there Calypso an to seeing updated on I you're

Anthony Coniglio

the and sale Yes, continue process. company continues Calypso transaction That continues rent to its collect perform expected. to we as

So no there. for you meaningful update

and have the that prospects announce performing, what for we good we look And when how it's I to turned I'd we at are? the feel QX about say, earnings buyback, think you a the portfolio, the confidence in

John Massocca

portfolio? Columbia Care-Cresco you the as merger. on maybe thoughts has credit? just of remind on do mentioned on And the you Okay. that updated us, that they And the stay can the guarantor kind Any then impact

Anthony Coniglio

have on don't Jarrett Why we that? Yes. comment

Jarrett Annenberg

Sure.

once for either more formal groups. notice have hook our group. we'll the work received leases haven't guarantor and But stay we discussions from notice term. the standard get both we So the But with formal evaluate does the on way

Anthony Coniglio

a would coverage those ago. we did years our be also properties well closed But reinforce, EBITDAR couple those I John, the transactions at when continues we to of within that originally that underwriting all

they those move they stay Cresco continually with Care Colombia So or we whether properties, mission-critical that whether to feel acquirer. an are

John Massocca

to of, in kind what's use legislation regards that And on been adult has Okay. use? or now legalized the adult Missouri, legalize then thought state option to, purchase that the with passed is process

Anthony Coniglio

are evaluate. back the tenant on We of part think hold to prudent we our and

flow overextending base that and I think be they endemic this we more Jarrett, don't to be sheet, an thoughtful their why is do characteristic that. across they about of may our little a to like believe not balance about you much their going road build what bit talk And forward? cash we overextending prudent not ahead out important where too a tenant specifically would like think Hey,

Jarrett Annenberg

market Anthony's We're took were to they in Hope results. we're the Absolutely. think on consistent happy wait to for do and over and handful that evaluating option, to We weeks. what it's market, Bloom adult-use likely the reiterate we that election on move that them dialogue Medicinal forward prudent the do. with the that of the based were expected we Yes. the time next point, but with the on want

John Massocca

on And capital And in broader maybe thought expansion? remaining acquisition of cap rate available the then, have quarter market, of as you what versus to yourselves? kind seeing deploying are to process you what's terms last the

Gordon DuGan

Sure.

still a continue alternatives and the given of we of needed. transactions rates capital see coming the in, Cap in So lack growth expand. to market lot

are way are. slowly capital coming interest I with rates operators the that to the environment, they along new think,

getting think closer. spread is So, that that, bid-ask I

there's said, up. SAFE being with coming some That optimism

that forward see before SAFE -- where in passes some if changes think moving may hear I groups rates. So the the to that wait to Lame-Duck

Anthony Coniglio

thoughtful investment, and careful, is And be I to and of going quality, about regarding said, our pace not we're want quantity. which to we've John, we're reiterate what

So an we're providing into rush our Investor in December. update out. the And Day regarding capital to not looking plans our going we'll be

Jarrett Annenberg

add would -- add I just into yes, it. John,

Session I with implications and pause see happens in because operators. for for kind think, everybody SAFE, implications its Lame-Duck us, on is has till it we what of the

think would to is So right? any decisions. happens big so, see And days, before it's and making XX everybody what going -- I I just only

John Massocca

it That's Understood. you Okay. me. for Thank much. very

Gordon DuGan

Thanks, John.

Operator

call the Coniglio back closing remarks. to like Instructions] to [Operator turn Anthony I'd for

Anthony Coniglio

with call you our day. quarter. a speaking next great to Thank and look we Have forward everybody, for you, joining

Operator

call. concludes This the

Anthony Coniglio

you. Thank

Operator

conference call. welcome. concludes today's You're This

disconnect. may participating, a for day. you and pleasant Thank have You

NewLake Capital Partners (NLCP) 10 Nov 222022 Q3 Earnings call transcript