Chicago Atlantic BDC (LIEN) Q3 2024 earnings summary

Executive summary

• Completed acquisition of a $219.6 million loan portfolio from Chicago Atlantic Loan Portfolio, LLC, rebranded as Chicago Atlantic BDC Inc. (LIEN), and became the only publicly traded BDC focused on cannabis lending, with net assets rising to $302 million and 28 portfolio companies as of October 1, 2024.

• Issued 16.6 million new shares in conjunction with the acquisition, increasing shares outstanding to 22.8 million as of October 1, 2024.

• Expanded investment strategy beyond cannabis and health and wellness sectors, effective April 22, 2024, and is leveraging origination and underwriting experience for a robust pipeline.

• Leadership changes include new CEO, President, and board members following the joint venture and portfolio acquisition.

• Management remains focused on providing capital to high-quality operators in underserved sectors, with a durable long-term strategy for risk-adjusted returns.

Financial highlights

• Gross investment income for Q3 2024 was $3.2 million, up from $2.9 million in Q3 2023; total investment income for the nine months ended September 30, 2024 was $9.02 million, up from $8.27 million year-over-year.

• Net asset value (NAV) per share was $13.28 as of September 30, 2024, down from $13.77 at December 31, 2023.

• Net investment income for the nine months ended September 30, 2024 was $1.65 million, compared to $4.84 million for the same period in 2023; Q3 2024 net investment income was $0.00 per share.

• Transaction-related expenses of $2.4 million in Q3 and $5.07 million for the nine months ended September 30, 2024, were the primary factor in the decline of reported net investment income.

• Portfolio is now five times larger and significantly more diversified post-acquisition.

Outlook and guidance

• Management expects less transaction-related expenses going forward, with the Loan Portfolio Acquisition considered a non-recurring event.

• Additional expenses expected in Q4, but not at the magnitude of Q3; management anticipates improved returns as leverage is added and capital is deployed.

• Quarterly dividend per share is expected to be higher than the prior dividend, with an update to be provided after board approval.

• Management anticipates growth from favorable cannabis sector trends and underserved lending markets.

• The company is exploring various financing options and maintains an active investment pipeline of $559 million.