Good day, and thank you for standing by. Welcome to AFC's Fourth Quarter and Fiscal Year 2024 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining AFC's Earnings Call for the Quarter and Fiscal Year Ended December 31, 2024. I'm joined this morning by Robyn Tannenbaum, our President and Chief Investment Officer; Daniel Neville, our Chief Executive Officer; and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our February 12, 2025 press release and is posted on the Investor Relations portion of AFC's website at advancflowercapital.com, along with our fourth quarter and fiscal year earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, anticipated market developments, portfolio yield and financial performance in 2025 and beyond. These statements are subject to inherent uncertainties in predicting future results. Please refer to AFC's most recent periodic filings, including our annual report on Form 10-K filed earlier this morning with the SEC for certain conditions and significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During this call, we will refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations to net income, the most comparable GAAP measure to distributable earnings can be found in AFC's earnings release and investor presentation available on AFC's website. Today's call will begin with Robyn, providing a high-level recap of our 2024 fiscal year. Dan will then provide an update — an overview of our portfolio and an update on the cannabis industry. Finally, Brandon will conclude with a summary of our financial results before we open the lines for Q&A. With that, I will now turn the call over to Robyn, our President and Chief Investment Officer.

Thanks, Gabe, and good morning to all our investors and analysts that have joined us today. Looking back on 2024, AFC was extremely active in our first full year with Dan Neville as our CEO. We laid out three main goals for AFC at the beginning of 2024. One, restart the origination engine and close at least $100 million of originations; two, increase portfolio diversification while enhancing underwriting; and three, reduce our exposure to underperforming credits through active portfolio management. I am pleased to announce that over the course of the year, we made progress on all three initiatives and refocused our efforts solely on cannabis with the spin-off of our commercial real estate portfolio on July 9. Starting with originations, we set a goal of $100 million of originations for fiscal year 2024 and ended the year originating $135 million of new commitments. Since the end of 2024, we have closed $15 million of new commitments and have two signed term sheets, which we expect to close over the coming months. We continue to see interesting opportunities in the cannabis space as the demand for capital far exceeds the supply. As of March 1, 2025, we had an active deal pipeline of over $380 million. Turning to our underwriting process and increasing portfolio diversification. The addition of Dan, with his operational background, has enabled us to use both a top-down and bottom-up underwriting approach on new investments. We are focused on lending to operators with a track record of executing in the cannabis industry, and we have decreased the amount of construction lending in the portfolio. Looking ahead to 2025, we look forward to continuing to diversify the portfolio in loans similar to our recent deals with accomplished operators. Based on the deals we're seeing today, we currently see a sweet spot in loan sizes between $10 million and $40 million. Lastly, we have focused our portfolio management efforts on underperforming credits in order to preserve capital. We believe that as we begin to get repaid on some of these underperforming assets and reinvest that capital into performing credits, we may unlock future earnings potential. Dan will dive deeper into the portfolio shortly, but I am pleased that through our portfolio management efforts in 2024, we received $119 million of paydowns from five underperforming credits and redeployed that capital across nine new loans to date. With that, I'll turn it over to Dan, who will discuss our fourth quarter performance, the cannabis industry, and provide an update on our portfolio.

Thanks, Robyn, and good morning, everyone. I'll begin with an overview of our results, followed by some commentary on the industry and an update on our portfolio. For the fourth quarter of 2024, AFC generated distributable earnings of $0.29 per basic weighted average share of common stock. While we have made significant progress over the last year, reducing our exposure to underperforming credits, there is still work to be done, and our earnings in the fourth quarter and through the start of this year were impacted by the underperformance of some of our legacy loans. As a result, the Board of Directors has declared a first quarter dividend of $0.23 per share, which will be paid on April 15, 2025, to shareholders of record on March 31, 2025. We are focused on paying a dividend that is sustainable based on the current performing asset base and believe that the $0.23 dividend should be in line or close to our first and second quarter distributable earnings. Before turning to the existing portfolio, I would like to highlight a recent transaction that we closed. In mid-February, we committed and funded a $15 million senior secured credit facility to Story of Ohio. Story intends to use the proceeds of this loan to acquire and build out dispensaries in Ohio. Our first lien term loan is secured by all of Story's assets in Ohio, with its Georgia assets initially included as additional collateral. This transaction reflects our continued focus on supporting strong operators in attractive limited license states and further diversifying our portfolio. As Robyn described earlier, our active pipeline remains strong with over $380 million in deals as of March 1, 2025. We are focused on sourcing and backing operators with a prior track record of success and selectively providing construction financing to operators with existing operations in other states. We see a growing supply-demand imbalance for debt capital across the sector with rising demand outpacing an already limited supply. This demand is driven by refinancing activity, adult-use and medical expansions, and increased M&A in the cannabis space. Given the Republican sweep and stalled progress on federal reform, we don't see many new capital providers entering the market, providing AFC with an opportunity to continue lending to strong operators at attractive risk-adjusted returns. Turning to our current portfolio management efforts. We have continued the liquidation process for private company A, which recently completed the sale of its Georgia assets for $15 million of net proceeds. We are awaiting approval from the receivership to direct the distribution of these proceeds, which should go to pay down the loan. As the borrower monetizes additional assets and we receive paydowns from private company A, we expect to earn additional revenue redeploying that capital as private company A is on nonaccrual and any capital received currently goes to principal paydown. Turning to the subsidiary of private company G, on a positive note, since we entered the forbearance agreement in March 2024, the borrower has infused additional equity capital and put experienced operators in place of its Pennsylvania and New Jersey operations. The subsidiary of private company G, also known as Justice Grown. However, we have recently uncovered and notified the company of additional defaults under the forbearance agreement and additional defaults under its credit facility. In response, the company sued the CRO of the New Jersey operations. With respect to this loan, we are secured by the vertical assets in New Jersey, which include an owned cultivation facility and three dispensaries, two of which are owned. In Pennsylvania, we are secured by three dispensaries and an owned cultivation facility, which is currently not operational. Additionally, we have a parent guarantee and the shareholder guarantee as an added protective measure. We intend to aggressively pursue all rights and remedies we have under the credit facility and the guarantees to protect and preserve our shareholders' capital. In the complaint against the CRO, Justice Grown also accused AFC of attempting to take the keys. While we would not normally comment on baseless accusations, I feel the need to address this issue head-on, given the potential for it to cause significant harm to AFC's business. Our business is simple. We lend money out, seeking to earn an attractive risk-adjusted return, and we expect to be paid back. In the history of AFC, we have never sought to enforce a foreclosure outside of a payment event of default. When borrowers run into issues, which is not uncommon given the emerging nature of the cannabis industry, we always seek to work with them to find a solution that puts the borrower on a more stable footing, while also protecting our shareholders' capital. We entered into the credit facility with Justice Grown in April 2021 and subsequently entered into multiple amendments and two forbearance agreements, each of which they materially defaulted on. We are lenders and have no intention of taking the keys and indeed are prohibited from doing so under our legal standing. Additionally, the multiple amendments and forbearance agreements show we bent over backwards to avoid auctioning the borrowers' assets to the highest third party through a foreclosure. In short, these accusations are baseless and our only focus is being a trusted lending partner to strong operators with a history of success in the cannabis industry. While I am disappointed that Justice Grown is still not on more stable footing, we achieved a number of positive outcomes related to other loans on the portfolio management front in 2024. We saw $119 million of capital returns across five underperforming loans last year, including a $4 million exit of our loan to private company I, a $22 million paydown from private company L, a $5 million paydown from private company A, a $4 million net paydown from private company B, and an $84 million exit of our loan to the subsidiary of a public company. As a reminder, this loan to a subsidiary of the public company went into payment default in May 2024, and we received a full paydown of the loan at par, including back interest and default interest only a month later. While past performance is not indicative of future results, we are no stranger to portfolio management and will act aggressively to protect our shareholders' capital. As of December 31, 2024, we had $2.24 per share in unrealized losses and CECL reserves. During 2024, positions we exited had CECL reserves and unrealized losses of $0.31 per share associated with them. By selling or being repaid on these positions at par, the $0.31 per share of reserves and unrealized losses were added back to book value. We are laser-focused on unlocking value from underperforming loans and are excited about the new lending opportunities that we are seeing. Now, I'll turn it over to Brandon to discuss our financial results in more detail.

Thank you, Dan. For the quarter ended December 31, 2024, we generated net interest income of $7.6 million and distributable earnings of $6.3 million, or $0.29 per basic weighted average common share, and had a GAAP net loss of $1 million, or $0.05 per basic weighted average common share. For the fiscal year ended December 31, 2024, we generated net interest income of $45.7 million and distributable earnings of $34.9 million, or $1.68 per basic weighted average common share, and had a GAAP net income of $16.8 million, or $0.78 per basic weighted average common share. As previously mentioned, we believe providing distributable earnings is helpful to shareholders in assessing the overall performance of AFC's business. Distributable earnings represents the net income computed in accordance with GAAP, excluding non-cash items such as stock compensation expense, any unrealized gains or losses, provision for current expected credit losses, also known as CECL, taxable REIT subsidiary income or loss net of dividends, and other non-cash items recorded in net income or loss for the period. We ended the fourth quarter of 2024 with $356.8 million of principal outstanding spread across 16 loans. As of March 1, 2025, our portfolio consisted of $368.8 million of principal outstanding across 17 loans. The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loan, was approximately 18% as of December 31, 2024, and March 1, 2025. As of December 31, 2024, we had total assets of $402.1 million, including cash and cash equivalents of $103.6 million, which included $100 million drawn on our lines of credit, which were both subsequently repaid in full on January 2, 2025. As of December 31, 2024, the CECL reserve was $30.6 million, or approximately 10.4% of our loans at carrying value, and we had a total unrealized loss included on the balance sheet of $19.7 million for our loans held at fair value. As of December 31, 2024, our total shareholder equity was $201.4 million, and our book value per share was $9.02. With that, I will now turn it back over to the operator to start the Q&A.

Our first question comes from the line of Aaron Grey with AGP.

Hi. Good morning and thank you for the questions here. First question for me. So just on Justice Grown, private company G. Obviously, you guys had done a lot of work to restore that to accrual and had worked out some forbearance agreements. So I imagine a lot of this is still new, but just how best to think about some of these next steps. It looks like you guys talked about in the prepared remarks, everything is kind of still on the table. Are you guys still looking to come to a potential new agreement? Or what are the potential next steps we should be thinking about in the timeline? Because obviously, this is one of the bigger borrowers in the portfolio today. So any incremental color there would be helpful. Thanks.

Yes. Thanks for the question, Aaron. Look, we're not going to negotiate in public here. And so, I think what we, as the management team and the Board of Directors have done is look to set our dividend at a sustainable level based on the current performing assets within the portfolio. And we add some commentary to that effect based on where we stand today. And should we receive paydowns and redeploy that capital into productive assets in the future? It's pretty simple arithmetic, and you guys can do your own math on what the income statement would look like if we redeploy that capital into productive assets.

Okay. Great. Thanks for the color there. And then just commentary in terms of the pipeline, right? How should we think about the mix of opportunities that you see most appealing? You talked about refinancing, CapEx as well as M&A in terms of potential new capital deployment for the year. So what are you seeing in terms of near-term opportunities and how much of that pipeline might be able to come to fruition for the year? Thanks.

Yes. So the — we're seeing a lot of interesting opportunities kind of across those broad swaths. Some are opportunities in new medical markets like Kentucky, which we view as an attractive and limited license state that obviously is going to require significant capital for build-out. Some of those opportunities are in recently adult-use flip states that are — and the Story of Ohio loan that we did would be a great example of that. And there's certainly more capital as additional dispensaries and capacity is built to service the Ohio market. Other opportunities are refinancing opportunities. We're seeing certainly some exits from the space, from other funds that have operated in the space historically and are not raising new funds or redeploying capital. And that is creating a need for good borrowers with good assets that could use that capital. And then on the flip side, we have seen not as much on the public side of things, but more on the private side, some significant M&A. And oftentimes, consideration for any of those M&A transactions is typically a third debt, a third cash, a third stock. And we are happy to be a provider of M&A and expansion capital to folks that are good operators looking to take advantage of some of the distress in the space and scale up their portfolios. So it's a mix of all of the above. On the redeployment side of things, I think at least for the time being, given some of the uncertainty related to the underperforming assets in the portfolio, a target for that is going to be partially dependent on how much capital we receive back over the course of the year. But I would say that we are seeing a robust pipeline of good operators with strong credits that fit our profile and we'll be able to deploy any of the capital that we received back plus the capital that we have available under our current liquidity into good credits in the space this year.

Okay, great. Thanks for the color Dan. I'll jump back into the queue.

Our next question comes from Pablo Zuanic with Zuanic & Associates.

Thank you and good morning everyone. Maybe, Dan, just to follow-up in terms of the outlook for the book for 2025, I think last year you had set a target of $100 million in new fundings. I don't know if you want to — if you're setting a new target. You talked about the $54 million in commitments so far in 2025, how much has that been drawn in the first quarter, if you can talk about that? I think you have about $35 million in maturities this year. Just trying to understand the year-end look of the book in terms of total. Thank you.

Yes, sure. So we did — with the deployment of our loan to Story of Ohio, we did get slightly into leverage at the start of this year. Obviously, we have availability under some of the various credit facilities that we have to continue to deploy capital into the space. On a target, I think that we'll look to — probably wait to give that target likely next quarter, given that some of the recent events are a little bit newer here. And so, how much we redeploy this year is: one, a function of, obviously, availability under liquidity; but two, a function of how much capital we get back and the timing of getting that capital back. I would say that last year, we set a target of $100 million. We deployed $125 million of capital. I think the opportunity set today is even better than it was six to nine months ago. And so we're seeing a good pipeline of borrowers that we're able to move up the quality curve on the credit profiles, the quality of the operators, the states that they're exposed to, while still earning — still targeting IRRs that are within our historical norms and our targets.

Right. And just can you remind us of the liquidity? I mean, obviously, we have your balance sheet, cash flow available and then in terms of the credit lines, what's left? Just a reminder on that.

Sure. And you can see it in our investor presentation as well. So we currently have two revolving lines of credit that allow us to borrow up to $100 million. As of March 1, we had approximately $89 million available under those facilities.

All right. Understood. And then just going back to the dividend. I mean, obviously, it has to be a number that's sustainable. You issued $0.33 after the spin, so should we have thought of that as more of an extraordinary onetime dividend? Or was it that things really changed between that announcement and the $0.23 that you're doing now? Is it all Justice Grown related, I guess what I'm asking, because I suppose you already knew about Justice Grown when you announced the $0.33 last quarter. Thank you.

No. These issues are more recent. So it's — the way the forbearance agreement was structured, there were excess cash flow sweeps associated with the cash flow generation of this business. And there's been significant developments as we've entered into the new year here. So there was nothing extraordinary about the $0.33. And we're looking to set — given the uncertainty around this situation as well as some of the paydowns related to private company A, which are larger loans, we wanted to set the dividend at a level that is based on the performing book ex any of the underperforming legacy loans.

Understood. That's good color. Thank you. And look, I understand the need to exit those underperforming loans and replace them with stronger operators and better credits. And obviously, you're doing that with Story, for example, right, a very strong operator out there. But does that mean that you're being put in a position to offer maybe even more competitive rates than you have taken in the past? That maybe in this need to swap the quality of the portfolio, you're having to bid more aggressively in all-in rates than you would have had in the past?

I think it's situational based on the credit, right? We — there are some loans that we're entering that are very low leverage that amortize quickly that have a great collateral package and great security. And for a loan like that, it's going to be priced at a little lower cost of capital than a regular way cannabis loan would be priced. And there are also loans that are a little bit more development assets, I would say, in states that we really like. We have exposure to a small construction loan in Georgia. It's one of six licenses in the entirety of Georgia. And you have to structure a loan like that with appropriate protections in terms of construction reserves, interest reserves, etc., to make sure you have adequate security and protection in the structuring of the loan. And a loan like that is going to earn a little bit higher rate than your average cannabis loan. So we're not just picking one number and going out what term sheets each one of these companies, credits and structures is its own unique snowflake.

Right. And one more. I realize that being NASDAQ listed, you cannot own plant-touching assets. So that's something you have to keep in mind when there's receivers being appointed and those type of things. But how would you describe the demand for assets in New Jersey and Pennsylvania right now? On the one hand, Pennsylvania would go recreational, so there should be strong demand, but there seems to be a lot of distressed assets in that market. And in the case of New Jersey, it's supposed to be an exciting market, but a lot of competition with a lot of new stores, right? So how would you describe the environment in terms of demand for assets in those two states?

Yes. We're — unfortunately, Pablo, we're not going to be in a position to comment there. I think you all can make your own observations about those markets and the attractiveness of those markets. And I'd leave it at that.

Okay. I just want to add one more thing. Regarding certain tax benefits related to 280E, we'll see what happens in four to six years. These are not debts with a maturity date, and it could take some time. You could argue that these companies will be in a much better financial position, generating positive cash flow due to how they are handling 280E. From your perspective, do you agree that these companies are in better shape as a result of paying 280E, even though it will lead to significant tax liabilities accumulating on their balance sheets? Thank you.

Yes. There are puts and takes. We — but the old saying there are two certainties in life, death and taxes, I think, still does apply. And some of these companies, I think, are not paying taxes because they can't afford to pay those taxes. I also think that not paying taxes also potentially presents some issues for companies because in certain states, you can only — due to the regulatory regime and the regulatory overlay, you can only do equity transfers as opposed to asset sales. And so in an equity transfer scenario, the tax is attached to that individual asset and somebody eventually has to pay the tax. And so I think there are puts and takes. We don't really have a strong view one way or another. We would love for both the industry and for our borrowers to get 280E reform over the line. I think it's a crime that it's still out there and these companies are paying exorbitant rates. But unfortunately, I'm not sure that that's really a high priority item or a focus for the Republican administration.

All right. Thank you very much.

That concludes today's question-and-answer session. I'd like to turn the call back to Dan Neville for closing remarks.

Thank you so much for joining us today and for the questions.

This concludes today's conference call. Thank you for participating. You may now disconnect.