Advanced Flower Capital Inc. Q4 FY2025 earnings call

Robin Tannenbaum mentioned AFC focused on reducing exposure to underperforming credits and converting to a BDC in 2025. Portfolio highlights: received $117 million in paydowns from start of 2025, 3 loans non-accrual, ongoing liquidation of Private Company A, sale progress of Private Company K's dispensaries, and Justice Grum loan status. Dan Neville discussed expanded investable universe post BDC conversion, active pipeline over $1.4 billion, and closed two loans in Q1 2026: $60 million for STAT and Moresby Group, $30 million for healthcare benefits platform.

In fiscal year 2025, AFC focused on reducing exposure to underperforming credits and converting from a REIT to a BDC. For the quarter ended Dec 31, 2025, net interest income was $5.2 million, distributable earnings were -$2.8 million or -$0.12 per basic weighted average common share, and GAAP net income was $0.9 million or $0.04 per share. For the full year, net interest income was $24.6 million, distributable earnings were $8.7 million or $0.39 per share, and GAAP net loss was $20.7 million or -$0.95 per share. As of Dec 31, 2025, total assets were $275.6 million, total shareholder equity was $175.6 million, and book value per share was $7.46.

The Board of Directors declared a first quarter dividend of $0.05 per share. AFC has an active pipeline over $1.4 billion and expects to reinvest capital from non-accrual loans into performing credits, though timeline is uncertain.

Forward-looking statements are subject to uncertainties. Actual results may differ. Risks include uncertain recovery of non-accrual loans such as progress of Private Company A's distribution, Private Company K's dispensary sales approvals, and Justice Grum loan ruling affecting potential repayment.

Q: The active pipeline increased meaningfully with $1.4 billion up from last quarter's $400 million. Could you provide color on key factors leading to this increase and how quickly it could translate to closed originations?

A: Primarily due to conversion from REIT to BDC expanding investable universe.

Q: Any split between cannabis and non-cannabis pipeline and expected yields for non-cannabis?

A: Active pipeline for lower middle market companies, not breaking out industry splits, and yields of last loans were 14% and 19%.

Q: On private company A, K, Justice Grown?

A: Private Company A has pending $6.4 million distribution, Private Company K has two dispensaries sold with third pending, Justice Grown loan matures May 2026.

Q: First quarter loan cadence and funding?

A: Pleased with start with two loans, but hard to predict sustained pace.

Q: New loans in cannabis this year?

A: Pipeline evaluated but high bar due to regulatory and capital issues.

Q: BDC industry sentiment?

A: Each BDC speaks on its own, middle market loans made are new vintage and felt good about them.