Good morning, and welcome to Advanced Flower Capital's Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session and instructions will be given at that time. As a reminder this call is being recorded. I would now like to turn the call 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 ended September 30, 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 October 14, 2024, press release and is posted on the Investor Relations portion of AFC's website at advancedflowercapital.com, along with our third quarter 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 2024 and beyond. These statements are subject to inherent uncertainties in predicting future results. Please refer to AFC's most recent periodic filings 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 some introductory remarks. Dan will then provide an overview of our third quarter 2024 performance 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 President and CEO -- CIO, excuse me, Robyn Tannenbaum.

Thanks, Gabriel, and good morning to all our investors and analysts that have joined us today. I'm thrilled to share that we've had a very active quarter, following the spin-off of our commercial real estate portfolio on July 9, we have operated as a pure-play cannabis mortgage REIT. Since the start of the third quarter we have originated approximately $59 million in new loans, and we've now exceeded our $100 million origination target for the year, reaching $116 million in total new originations so far. This milestone is not just a number. It represents our renewed commitment to provide the cannabis sector with timely, flexible capital, at a moment when the industry needs it. Den will dive deeper into the new deals we closed during the third quarter. We've deployed capital into promising cannabis 3.0 operators and continue to see attractive opportunities for additional investments. As of November 1, we had an active pipeline of over $400 million of potential deals. We are pleased to have the capital to support our existing borrowers, and fund future opportunities. During the quarter, we raised capital accretively and through our ATM stock offering program, which will allow us to continue supporting this rapidly evolving industry. With the Republican sweep, we expect access to capital in the cannabis sector to remain scarce. While President-elect Trump has demonstrated some support for cannabis broader cannabis legislation may not be the Republican administrations top priority. We believe that any progress will move at a measured rate. Rescheduling to Schedule III is still expected to advance, although, at a slower pace than it would under a Democratic administration. The path for the Safe Banking Act appears more challenging as the momentum needed to push it forward may not be strong enough. With the prospect of progress at the federal level slowing down, we believe that there will be favorable conditions for AFC to deploy capital into deals with strong risk-adjusted returns over the medium term. With that, I'll turn it over to Dan, who will discuss our third quarter performance and what lies ahead.

Thanks, Robyn, and good morning everyone. This quarter saw strong performance and key achievements in our origination efforts. I'll begin with an overview of our results, followed by an update on our recent deals and some commentary on the cannabis industry before concluding. For the third quarter, AFC generated distributable earnings of $0.35 per basic weighted average share of common stock. As a reminder, distributable earnings is the primary metric our Board of Directors considers when declaring AFC's quarterly dividend. The Board declared our first post-spin dividend of $0.33 per share, which was paid on October 15th, 2024 to shareholders of record, as of September 30th, 2024. Since going public, we have generated distributable earnings that met or exceeded our dividend each quarter and paid out $6.98 in dividends per share. I joined AFC, last November; one of my key priorities was to reinvigorate the origination engine. I'm proud to say, we've made significant strides in this area. During the third quarter, we closed several key deals, including an $11 million senior secured credit facility for Private Company Q, a vertically integrated operator in Georgia. We also expanded senior secured facilities to two existing borrowers, by a total of $7.3 million to support their continued growth. Additionally, subsequent to quarter end, we closed a $41 million senior secured credit facility for Story of Maryland, a leading vertically integrated operator in Maryland's adult-use cannabis market. These deals reflect our continued focus on partnering with strong operators in limited license states and further diversifying our portfolio. Cannabis industry remains capital intensive, acquiring significant investments in cultivation and distribution infrastructure. The demand for debt capital is growing, driven by refinancing activity, adult use in medical expansions and increased M&A across the cannabis segment. However, traditional lenders remain cautious, and will likely remain so,…

Thank you, Dan. For the quarter ended September 30, 2024, we generated net interest income of $8.9 million and distributable earnings of $7.2 million, or $0.35 per basic weighted average common share and had a GAAP net income of $1.4 million, or $0.06 per basic weighted average common share. As previously mentioned, we believe providing distributable earnings is helpful to shareholders and 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 third quarter of 2024 with $298.7 million of principal outstanding spread across 13 loans. As of September -- November 1, 2024 our portfolio consisted of $338 million of principal outstanding across 14 loans following the completion of the spin-off of our commercial real estate portfolio. The weighted average portfolio yield to maturity which is measured for each loan over the life of such loan was approximately 18% as of September 30, 2024 and November 1, 2024. As of September 30, 2024, we had total assets of $366.6 million, including cash and cash equivalents of $122.2 million, which included $60 million drawn on our line of credit that was subsequently repaid in full on October 1, 2024. Our line of credit provides us with up to $60 million in available funds that can be drawn as needed. During the three months ended September 30, 2024, we sold approximately 1.2 million shares under our at-the-market offering program at an average price of $10.39 per share, generating net proceeds of approximately $12.2 million. This was accretive to our book value and helped bolster our capital base during the quarter. As of September 30, 2024, the CECL reserve was $25.3 million, or approximately 10.7% of our loans at carrying value, which increased $0.2 million from the June 30, 2024 reserve of $25.1 million. During the third quarter, we also had an increase in our unrealized losses on loans at fair value of $4.6 million increasing the current total unrealized loss included on the balance sheet to $19.6 million. As of September 30, 2024, total shareholder equity was $206.1 million and our book value per share was $9.42. On October 15, 2024, we paid our first post-spin dividend of $0.33 per common share for the third quarter to shareholders of record as of September 30, 2024. As a reminder, on an annual basis, our current dividend policy is to pay between 85% and 100% of distributable earnings over the year. With that, I will now turn it back over to the operator to start the Q&A.

Thank you. [Operator Instructions] And our first question comes from the line of Pablo Zuanic with Zuanic & Associates.

Thank you. Good morning. I guess, first of all, congratulations on exceeding your target of $100 million loan origination for the year. Can you talk about just in terms of modeling I don't know if you've given guidance for 2025, but is it reasonable to assume that you would have a similar target for 2025. You talked about a pipeline of $400 million that would be like 25% of that being realized? Just some color in terms of how to think about this going forward. And again, congratulations on exceeding the target. Thanks.

Thanks, Pablo. So, we talked about having greater than $75 million of liquidity from here. We want to get fully invested, but we also want to make sure that we're cautiously deploying capital into good credits and new vintage loans with solid operators. And so we've judiciously deployed over the course of the year into a number of those credits and you should expect the same in 2025. I think in terms of a target, we'll probably come back with something on the fourth quarter call. But we've got a lot of good things in the pipeline. I'm very pleased with the quality of the things in the pipeline. And given a little bit of the turmoil in the cannabis markets and the election results the election results last Tuesday we're happy to have dry powder to deploy to new borrowers out there in the space and at attractive risk-adjusted returns.

Okay. Thank you. And then just following up on that. If we think about the current earnings season right, a lot of companies missing estimates it's challenging out there. Like you said in your prepared remarks, I think, Robyn, yes, we make a rescheduling, but that may be delayed. So from your perspective are we compared to six months ago? Are we into choppier riskier waters and that maybe also impacts the way you think about your pipeline and originating loans? Or am I exaggerating the context compared to six months ago in terms of the risk of the industry? Thanks.

So, I think, if you look at the results thus far generally speaking revenue growth has been hard to come by. And the reason is that you have some AU flips like Ohio that was a partial quarter. You have some potentials in the future in terms of PA in Minnesota. But you also have markets that are kind of mature on that AU curve. Illinois, New Jersey on the retail side of things is another one. You know, Massachusetts and Michigan we're probably a year ahead of them in terms of the maturity. And so places where a lot of MSOs have a lot of exposure, Illinois and New Jersey are getting more competitive particularly on the retail side of things. Now a lot of these companies I think are looking for strategies to further densify those markets through partnership structures or other strategies to take the existing distribution infrastructure that they have in those states and get more out of it. I think that's a good trend. But you're kind of fighting -- you have these growth curves on the AU markets and the flips and they're largely being offset by declines in more mature markets. The results I think you have a little bit of pressure on profitability but generally speaking profitability has been pretty decent. Revenue growth hasn't been there. I think for us as a debt lender that's generally a fine place to be in. I think as an equity investor it's a little more problematic because if you're going to get growth multiples like the industry has historically argued for you got to have growth. And at least this past quarter you're not seeing that much growth. And so I think that's why you've seen a reaction in the stocks, a combination of obviously the results themselves, but also AU and Florida failing which would have been big for a few companies combined with a shift to the right and potentially slowing pace of federal reform.

Thank you. Let me just use that as a segue for Florida. I don't know if you can comment or in terms of your clients are based in Florida what type of color are you getting from them? I mean are we going to see more price competition? A lot of companies added capacity in stores. I hear A3 didn't happen. How are you thinking about your Florida exposure? And what type of comments are you getting from your operators there? Thank you.

Yes. So our Florida exposure is pretty modest 10% of the portfolio overall. And I would say generally we don't underwrite for the future here right. Projections in the cannabis industry have been we have a long history of borrowers providing us projections and a lot of them falling well short. So we really underwrite to the current stay without AU flips and that's how we underwrote our exposure in Florida just a medical market and being able to continue to take market share. I think in terms of the landscape in Florida, I would much rather be a challenger and somebody who's moving up the growth curve, who has additional white space to fill in an additional market share to gain been an incumbent with a large profit pool. Because the challengers in these type of markets where you're probably looking at two more years of stagnation are just on a much better footing than the incumbents with an existing profit pool. And so that's how we view our exposure. I think generally speaking, we're hearing operators are going to button down the hatches. It looks like it's at least another two years, run lean, be aggressive about fulfilling out of their own stores and maximizing profitability. And I think that's absolutely the right approach.

And I think that just to add to Dan's point, the operator that we back here has been very prudent with their capital and did not build out in anticipation of rec. So decided to take the wait-and-see approach, which as a lender, you really appreciate, right? Because now they're, as Dan described, rightsized to attack the market and also leading from a position of strength versus just having spent a lot of money on building out excess capacity that's not going to be used.

That's right, yeah. Thank you. One last one. So obviously, you talked about the continued demand and supply imbalance on capital -- on capital in general and probably even more so on the equity side now. So you're in a great place, totally agree with that. So when we hear about this like recently, a regional bank, I think they refinanced or got a new loan for 7.99% interest rate. Are those more like exceptions to the rule? Or are we seeing more region -- and I've asked this before, but are we seeing more regional banks come in? Or like you said before, some are just running down their portfolio. We're getting mixed signals on that front. That's the last question. Thank you.

I think more coming out or getting more cautious than are coming in. I think you may see people come in and you may get a headline rate to the strongest operators in the space, the GTI facility that they did. I think that is the exception rather than the rule. And generally speaking, people are deemphasizing activity or slowing down activity in the space. And that doesn't mean you won't see headlines here and there. That's going to happen. But I would honestly say the competitive intensity, Robin and I have talked about it, running across these regionals, we ran across them a lot more two, three years ago than we are today. And I think that comes from the fact that this is a very tricky industry to lend into, and you have to be specialized and very focused on it. And I think the tourists in the industry have come and gone and some of them have had a rough experience. And so having the dedicated focus on cannabis, having both the top-down and the bottoms-up operating experience and having five, six, seven years of history in the industry is a really valuable asset for us. And those without that type of specialization are generally taking a more cautious approach.

Got it. Thank you.

Thank you. And I'm showing no further questions. So with that we would like to thank you for participating. This does conclude today's program and you may now disconnect.