NewLake CEO Anthony Coniglio on Financial Result for Q1 2024

The TDR Three Key Takeaways regarding Q1 2024 Financial Result and NewLake Capital:

  1. NewLake Capital’s revenue climbs to $12.6M, marking a 10.4% increase.
  2. NewLake Capital achieves a notable rise in net income to $6.9M.
  3. NewLake enhances its financial flexibility for strategic growth.

NewLake Capital Partners, Inc. (NLCP), a REIT specializing in properties leased to state-licensed cannabis operators, reported its financial results for the first quarter of 2024, ending March 31, 2024. The company highlighted significant progress in key financial metrics, indicating a solid start to the year.

NewLake’s revenue rose to $12.6 million in Q1 2024, up from $11.4 million in the same quarter last year, a 10.4% increase. This growth was mainly driven by higher rental income across its portfolio of 32 properties. Net income attributable to common stockholders also increased significantly, reaching $6.9 million, up from $5.9 million in Q1 2023, a 16.9% year-over-year increase. This demonstrates how each dollar of revenue growth yields more than one dollar in earnings, highlighting the company’s efficiency in managing expenses. It showcases the effectiveness with which new revenue translates into net income, underscoring the business’s operational excellence.

The company’s funds from operations (FFO) rose to $10.6 million, a 10.8% increase from $9.5 million in the same quarter last year. Adjusted funds from operations (AFFO), an important metric in evaluating a REIT’s operating performance, grew by 10.6%, reaching $11.0 million compared to $9.9 million in Q1 2023.

As of March 31, 2024, NewLake maintained a strong liquidity position, with cash and cash equivalents totaling $21.5 million. The company also had $4.0 million in borrowings and an available capacity of $86.0 million on its revolving credit facility, offering substantial financial flexibility for future growth initiatives.

During the quarter, NewLake engaged in proactive capital management by making significant investments in tenant improvements and property acquisitions. Notably, the company invested approximately $7.9 million in tenant improvements across two properties. Additionally, NewLake completed the acquisition of a cultivation facility in Connecticut for about $4 million and committed an additional $12 million for tenant improvements, leasing it back to an existing tenant to ensure ongoing revenue generation.

Reflecting confidence in its financial stability and cash flow, NewLake increased its quarterly dividend to $0.41 per share, an annualized rate of $1.64 per share. This increase is supported by an AFFO payout ratio of 78.3%, signaling a balanced approach between rewarding shareholders and retaining capital for strategic growth.

President and CEO Anthony Coniglio of NewLake Capital commented on the results, stating, “Our growth in revenue and AFFO year-over-year, after adjusting for one-time items in the fourth quarter, drove our second consecutive quarterly dividend increase. We are particularly excited about the prospects of the cannabis industry, following the proposal to reschedule cannabis and increased dialogue among congressional leaders. As a result, you have seen really a lack of cultivation capacity. And as we’ve watched more and more dispensaries come online, you’re seeing greater and greater demand pull from the consumer, more dispensaries, potential for more sales.”

Looking forward, NewLake is poised to benefit from favorable developments in the cannabis regulatory environment, including potential changes in federal scheduling and legalization trends in key states such as Ohio and Florida. These changes could significantly enhance market opportunities and operational scalability. “We’re going to continue to run our business, assuming 280E doesn’t go away, assuming Florida doesn’t approve adult use and some of the other catalysts,” Coniglio added, highlighting the company’s cautious yet optimistic approach. NewLake Capital Partners aims to enhance tenant relationships, make strategic acquisitions, and maintain a strong balance sheet to manage the changing cannabis market and support ongoing shareholder value. “We have a lot more work to go,” Coniglio noted, reflecting on the continuous efforts to grow and adapt in a dynamic market. The company’s financial strength and market positioning suggest continued growth in the cannabis industry, indicating a positive outlook for future quarters. To keep up to date with all of TDR’s research and news, subscribe to our daily Baked In newsletter.

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