Breaking Down AFC Gamma, Inc. (AFCG) Financial Health: Key Insights for Investors

Are you keeping a close watch on the financial health of Advanced Flower Capital, Inc. (AFCG), especially with the evolving dynamics of the cannabis industry? For the full year 2024, AFCG reported a GAAP net income of $16.8 million, translating to $0.78 per basic weighted average common share, alongside Distributable Earnings of $34.9 million, or $1.68 per share. But how do these figures truly reflect the company's stability and future potential in a fluctuating market? Let's delve into the key insights that can help investors make informed decisions.

AFC Gamma, Inc. (AFCG) Revenue Analysis

Understanding AFC Gamma, Inc.'s revenue streams involves analyzing its primary sources of income, revenue growth, and the contribution of different business segments. As a commercial mortgage REIT, AFC Gamma primarily generates revenue through interest income from loans provided to state law-compliant cannabis operators in the U.S.

For the fiscal year ending December 30, 2024, AFC Gamma had an annual revenue of $35.76 million, reflecting a -45.91% growth. Looking at the more recent data, the revenue for the quarter ending December 31, 2024, was $2.33 million, a -38.01% decrease. The revenue (TTM) is $41.49 million with a revenue growth of -19.90%.

Here's a breakdown of AFC Gamma's revenue trends:

• 2021: $38 million
• 2022: $72 million
• 2023: $66 million
• 2024: $36 million

In 2024, AFC Gamma reported a GAAP net income of $16.8 million ($0.78 per share) and Distributable Earnings of $34.9 million ($1.68 per share) for the full year.

AFC Gamma operates in one segment, primarily focused on financing senior secured loans and other types of loans to cannabis industry operators in states where medical and/or adult-use cannabis is legal. These loans, ranging from $10 million to over $100 million, are typically secured by real estate assets, license value, and cash flows.

Significant changes in AFC Gamma's revenue streams include strategic shifts in its portfolio and focus on lending to established cannabis operators. In 2024, AFC Gamma exceeded its origination goal, closing $135 million in new commitments against a target of $100 million. The company also successfully spun off its commercial real estate portfolio to focus solely on the cannabis sector. However, the company has been dealing with legal and operational challenges with Justice Grown, a significant borrower, which has defaulted on multiple agreements.

Here's a summary of key financial figures for AFC Gamma:

For additional insights into AFC Gamma, Inc.'s financial health, you can read this article: Breaking Down AFC Gamma, Inc. (AFCG) Financial Health: Key Insights for Investors

AFC Gamma, Inc. (AFCG) Profitability Metrics

Assessing AFC Gamma, Inc.'s financial health involves a detailed look at its profitability metrics, which provide insights into its operational efficiency and ability to generate earnings. Key metrics include gross profit, operating profit, and net profit margins. By analyzing these figures and comparing them against industry benchmarks and historical trends, investors can gain a clearer understanding of the company's financial performance and sustainability.

For the fiscal year 2024, AFC Gamma, Inc. reported the following profitability metrics:

• Gross Profit: AFC Gamma's gross profit stood at $64.91 million.
• Operating Income: The operating income was reported as $48.28 million.
• Net Income: The net income available to common shareholders was $38.85 million.

Analyzing the margins further illuminates AFC Gamma's profitability:

• Gross Profit Margin: Calculated at 86.15%.
• Operating Profit Margin: The operating profit margin was 64.08%.
• Net Profit Margin: The net profit margin was 51.58%.

A comparison of these profitability ratios with industry averages can provide valuable context. It’s important to note that the financial sector, and especially specialty finance companies like AFC Gamma, may have different benchmarks than other industries. While specific industry averages for direct comparison weren't available in the search results, these high margins generally indicate strong operational efficiency and effective cost management.

Here's a look at the income statement data for AFC Gamma, Inc. in 2024:

Operational efficiency, reflected in cost management and gross margin trends, is crucial for sustaining profitability. AFC Gamma's high gross margin of 86.15% suggests effective management of the costs directly related to generating revenue. Monitoring these trends over time is essential for assessing the company's ability to maintain its profitability in the face of changing market conditions.

Explore more about AFC Gamma, Inc. (AFCG): Exploring AFC Gamma, Inc. (AFCG) Investor Profile: Who’s Buying and Why?

AFC Gamma, Inc. (AFCG) Debt vs. Equity Structure

AFC Gamma, Inc. (AFCG) employs a mix of debt and equity to fund its operations and growth. Understanding the specifics of their debt levels, ratios, and financing activities provides critical insights into the company's financial strategy and risk profile. For additional context, explore Exploring AFC Gamma, Inc. (AFCG) Investor Profile: Who’s Buying and Why?.

As of the fiscal year 2024, AFC Gamma's debt structure includes both short-term and long-term obligations. While specific figures fluctuate, it's important to note that the company actively manages its debt portfolio to optimize its capital structure. Here’s a general overview:

• Long-Term Debt: This constitutes a significant portion of AFC Gamma’s capital, often used to fund larger investments and strategic initiatives.
• Short-Term Debt: Utilized for managing immediate financial needs and short-term investments.

Analyzing the debt-to-equity ratio provides a clearer picture of AFC Gamma's financial leverage. This ratio indicates the proportion of debt and equity the company uses to finance its assets. A lower ratio generally suggests a more financially stable company. For AFC Gamma, this ratio should be compared against industry averages to determine if the company is over or under-leveraged relative to its peers.

AFC Gamma has been actively involved in debt issuances and refinancing activities. Recent activities include:

• Issuing new debt to raise capital for investments.
• Refinancing existing debt to take advantage of lower interest rates or extend maturity dates.

Credit ratings also play a crucial role in evaluating AFC Gamma's financial health. These ratings, provided by agencies like Standard & Poor's, reflect the agency's assessment of AFC Gamma's ability to meet its financial obligations. A strong credit rating typically translates to lower borrowing costs and greater investor confidence.

AFC Gamma strategically balances debt and equity financing to maintain financial flexibility and support growth. While debt can provide leverage and potentially higher returns, it also increases financial risk. Equity financing, on the other hand, reduces financial risk but can dilute existing shareholders' ownership. The company's approach involves:

• Carefully assessing market conditions to determine the optimal mix of debt and equity.
• Maintaining a target capital structure that aligns with its long-term strategic goals.
• Adjusting its financing strategy based on investment opportunities and economic factors.

Here's a general illustrative table, focusing on key debt and equity metrics (note that the values are examples and should be replaced with actual 2024 fiscal year data):

AFC Gamma, Inc. (AFCG) Liquidity and Solvency

Liquidity and solvency are vital indicators of a company's financial health, revealing its ability to meet short-term obligations and long-term debts. For investors in AFC Gamma, Inc. (AFCG), understanding these metrics provides crucial insights into the company's stability and operational efficiency. Here's an analysis of AFCG's liquidity position:

Assessing AFC Gamma, Inc.'s Liquidity:

Several key ratios and financial statements offer a clear picture of AFCG's liquidity:

• Current and Quick Ratios: These ratios measure a company's ability to cover its short-term liabilities with its short-term assets. For the fiscal year 2024, AFCG's current ratio was reported as 4.20 and the quick ratio was also 4.20. These figures indicate a strong liquidity position. A current ratio above 1 suggests that a company has enough liquid assets to cover its short-term liabilities.
• Cash Ratio: The cash ratio, which assesses a company's ability to pay off its current liabilities with only cash and cash equivalents, stood at 1.17 for AFCG in 2024. This indicates that AFCG has a solid capacity to meet its immediate obligations using its most liquid assets.

Here's a table summarizing AFC Gamma, Inc.'s liquidity ratios over the past few years:

Analysis of Working Capital Trends:

Working capital, the difference between a company's current assets and current liabilities, is a fundamental measure of its short-term financial health. AFCG's net current asset value for 2024 was reported as $171.55 million. The trend in working capital can reveal whether the company is efficiently managing its short-term resources.

Cash Flow Statements Overview:

An overview of cash flow statements is essential for understanding the movement of cash both into and out of a company. The cash flow statement is divided into three main sections:

• Operating Activities: This section shows the cash generated from the company's core business operations.
• Investing Activities: This reflects cash used for investments in assets, such as property, plant, and equipment.
• Financing Activities: This involves cash flow related to debt, equity, and dividends.

For the 2024 fiscal year, AFCG's free cash flow decreased, and operating cash flow was $-0.03. Examining these trends helps investors understand how well AFCG is generating cash from its operations and managing its investments and financing.

Potential Liquidity Concerns or Strengths:

Based on available data, AFC Gamma, Inc. demonstrates a strong liquidity position. The current and quick ratios above 1, along with a healthy cash ratio, suggest that the company is well-equipped to handle its short-term obligations. Additionally, AFCG maintains strong liquidity with a current ratio of 5.09, indicating robust financial flexibility.

Explore more about AFC Gamma, Inc. (AFCG) and its investors: Exploring AFC Gamma, Inc. (AFCG) Investor Profile: Who’s Buying and Why?

AFC Gamma, Inc. (AFCG) Valuation Analysis

Assessing whether AFC Gamma, Inc. (AFCG) is overvalued or undervalued involves examining several key financial metrics and market indicators. These include price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios, stock price trends, dividend yield and payout ratios, and analyst consensus.

Here's a breakdown of these elements:

• Price-to-Earnings (P/E) Ratio: This ratio compares the company’s stock price to its earnings per share (EPS). As of the latest information, AFC Gamma's P/E ratio needs to be compared against industry averages and historical data to determine if it's trading at a premium or discount.
• Price-to-Book (P/B) Ratio: The P/B ratio compares a company's market capitalization to its book value of equity.
• Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: This ratio compares a company's enterprise value (total market value plus debt, minus cash) to its earnings before interest, taxes, depreciation, and amortization (EBITDA).

Analyzing AFC Gamma’s valuation through these lenses provides a comprehensive view of its relative worth in the market. Evaluating these metrics in conjunction with industry benchmarks and company-specific factors is crucial for making informed investment decisions.

Stock Price Trends: Examining AFC Gamma's stock price trends over the last 12 months (or longer) provides insight into market sentiment and company performance. Recent data indicates stock performance, reflecting broader market conditions and company-specific developments.

Dividend Yield and Payout Ratios: For income-focused investors, dividend yield and payout ratios are essential. AFC Gamma's dividend yield, reflecting its annual dividend payments relative to its stock price, is a key attraction. The payout ratio, indicating the proportion of earnings paid out as dividends, reveals the sustainability of these payments.

Analyst Consensus: Monitoring analyst ratings and price targets offers additional perspective. Current analyst consensus on AFC Gamma stock valuation leans towards a mix of ratings, reflecting varied opinions on its future performance.

For example, consider a hypothetical scenario based on available data:

Keep in mind that these are hypothetical values for illustrative purposes and should be replaced with real-time data for accurate analysis.

Dive deeper into AFC Gamma's core values and strategic direction: Mission Statement, Vision, & Core Values of AFC Gamma, Inc. (AFCG).

AFC Gamma, Inc. (AFCG) Risk Factors

AFC Gamma, Inc. (AFCG) faces a variety of risks that could impact its financial health. These risks span internal operational challenges and external market dynamics, including industry competition, regulatory changes, and broader economic conditions. Investors need to be aware of these potential pitfalls.

Here’s an overview of key risks:

• Industry Competition: AFCG operates in a competitive lending environment focused on the cannabis industry. Increased competition could lead to pressure on interest rates and loan terms, potentially reducing AFCG's profitability.
• Regulatory Changes: The cannabis industry is subject to evolving regulations at both the state and federal levels. Changes in these regulations could adversely affect the operations of AFCG's borrowers, impacting their ability to repay loans.
• Market Conditions: Fluctuations in the broader financial markets and economic downturns can affect the availability of capital and the demand for cannabis products, which in turn can impact AFCG's portfolio performance.

Recent earnings reports and filings may highlight specific operational, financial, or strategic risks. These could include:

• Credit Risk: The risk that borrowers may default on their loans, particularly if they face operational or financial difficulties.
• Liquidity Risk: The risk that AFCG may not be able to meet its short-term financial obligations due to insufficient liquid assets.
• Interest Rate Risk: The risk that changes in interest rates could reduce AFCG's earnings if its borrowing costs increase faster than its lending rates.

Mitigation strategies and plans that AFCG may employ to address these risks could include:

• Diversification: Spreading investments across a variety of borrowers and geographic locations to reduce the impact of any single borrower's default.
• Due Diligence: Conducting thorough assessments of potential borrowers' financial health and operational capabilities before extending loans.
• Active Monitoring: Continuously monitoring borrowers' performance and market conditions to identify potential risks early on.

Understanding these risks and mitigation strategies is crucial for investors assessing AFC Gamma, Inc.'s (AFCG) financial health and future prospects. For more detailed insights, you can refer to Breaking Down AFC Gamma, Inc. (AFCG) Financial Health: Key Insights for Investors.

AFC Gamma, Inc. (AFCG) Growth Opportunities

AFC Gamma, Inc. (AFCG) operates as a real estate investment trust (REIT) specializing in providing loans to established cannabis operators. Assessing its future growth prospects involves understanding its key growth drivers, potential revenue increases, strategic initiatives, and competitive advantages.

Key growth drivers for AFC Gamma, Inc. (AFCG) include:

• Market Expansion: As more states legalize cannabis, AFC Gamma, Inc. (AFCG) has opportunities to expand its lending operations into new markets.
• Increased Loan Demand: The growth of the cannabis industry fuels demand for capital, benefiting AFC Gamma, Inc. (AFCG) as a specialized lender.
• Strategic Acquisitions: AFC Gamma, Inc. (AFCG) could grow by acquiring or partnering with other financial institutions or cannabis-related businesses.

Future revenue growth projections and earnings estimates are contingent upon the expansion of the cannabis market and AFC Gamma, Inc. (AFCG)'s ability to deploy capital effectively. Investors should monitor:

• Revenue Growth: Look for consistent increases in interest income, indicating successful loan origination and management.
• Earnings per Share (EPS): Track EPS growth to gauge profitability and operational efficiency.
• Dividend Yield: AFC Gamma, Inc. (AFCG) is a REIT, so its dividend yield and ability to sustain payouts are important.

Strategic initiatives and partnerships that may drive future growth include:

• New Lending Products: Introducing innovative loan products tailored to specific cannabis industry needs.
• Strategic Alliances: Partnering with established cannabis companies or financial institutions to expand market reach.
• Technology Adoption: Implementing advanced technologies to streamline loan origination and management processes.

AFC Gamma, Inc. (AFCG) possesses several competitive advantages that position it for growth:

• Specialized Expertise: Deep understanding of the cannabis industry and its unique financial needs.
• Established Relationships: Strong relationships with leading cannabis operators.
• Flexible Lending Solutions: Ability to offer customized loan solutions that meet the specific requirements of borrowers.

Here's a hypothetical projection of AFC Gamma, Inc. (AFCG)'s potential revenue based on the expansion of the cannabis market:

These figures are purely illustrative and depend on various market conditions and company-specific factors.

For more insights into AFC Gamma, Inc. (AFCG)'s financial health, check out: Breaking Down AFC Gamma, Inc. (AFCG) Financial Health: Key Insights for Investors