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Chicago Atlantic BDC, Inc. (LIEN)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered stable net investment income of $7.7M ($0.34 per share), while total investment income rose to $13.1M; EPS and revenue were modest misses versus thin S&P Global consensus (1 estimate): EPS $0.34 vs $0.36 and revenue $13.08M vs $13.10M. The dividend was maintained at $0.34, and NAV/share ticked up to $13.23 .
  • Deployment accelerated: $39.1M funded across nine portfolio companies in Q2 and $17.2M subsequent to quarter-end; principal repayments were $22.3M, and loans remained at 0% non‑accruals .
  • Liquidity strengthened to $125.4M with no credit facility borrowings post quarter-end; floating-rate debt exposure remained high at ~76% with 46% at floors, and gross portfolio yield was 16.1% .
  • Management emphasized the differentiated cannabis-focused lending strategy, growing ~$780M pipeline, and expectation to keep leverage well below BDC industry averages—potential stock catalysts include continued originations momentum, dividend stability, and sector tailwinds from potential rescheduling .

What Went Well and What Went Wrong

What Went Well

  • Strong deployment and pipeline: “we executed on our pipeline and funded $39,100,000 of new investments… three were to new borrowers,” and pipeline grew to ~$780M across cannabis and non‑cannabis opportunities .
  • Credit quality and economics: “None of the loan portfolio is on non‑accrual status,” high floating-rate mix, and gross weighted‑average portfolio yield of ~16.1% underscore attractive risk‑adjusted returns .
  • Liquidity and capacity: As of Aug 14, liquidity was ~$125.4M with full $100M facility undrawn, supporting additional portfolio growth while staying under‑levered relative to BDC averages .

What Went Wrong

  • Minor misses vs consensus: EPS $0.34 vs $0.36 and revenue $13.08M vs $13.10M, reflecting slightly higher net expenses and timing of deployments; coverage is minimal (1 estimate), tempering significance *.
  • Expense pressure: Net expenses rose to $5.4M (vs $4.3M in Q1) as the prior quarter benefited from a G&A waiver; interest expense also increased with facility use during Q2 before being repaid post quarter-end .
  • CFO transition in quarter: CFO change (Rodgers resigned; Geoffroy appointed Interim CFO) adds execution risk; however, management states no disagreement and continuity in finance leadership .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Total Investment Income ($USD)$12,648,223 $11,923,002 $13,080,038
Net Investment Income ($USD)$7,990,684 $7,648,421 $7,664,607
NII per Share ($)$0.35 $0.34 $0.34
NAV per Share ($)$13.20 $13.19 $13.23
Q2 2025 Actual vs EstimatesActualConsensusSurprise
EPS ($)$0.34 $0.36*-$0.02 (miss)*
Revenue ($USD)$13,080,038 $13,100,420*-$20,382 (miss)*

Values retrieved from S&P Global.*

Segment/Portfolio Composition

MetricQ4 2024Q1 2025Q2 2025
Cannabis (% of FV)77% 79% 78%
Non‑Cannabis (% of FV)23% 21% 22%
Investments at Fair Value ($USD)$275,241,398 $289,262,741 $307,499,004
Portfolio Companies (count)28 31 33
Gross Weighted‑Average Yield (%)16.5% 16.6% 16.1%
Floating Rate Debt (% FV)80% 76% 76.3%
% Floating at Floors99% 99% 45.8%
Non‑Accruals (%)0% 0% 0%
Average Position Size ($)~$9M ~$9M ~$9M
PIK Interest (% total annual)3% 5% 4.6%

Notes: Q2 press release text references 31 companies, while the schedule and slides show 33; management materials indicate 33 at quarter-end .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per ShareQ3 2025 (quarter ending Sep 30)Q2 2025 declared $0.34 (paid Jul 11, 2025) $0.34 declared; payable Oct 10, 2025; record date Sep 29, 2025 Maintained
Leverage (qualitative)2025Under‑levered; expect leverage to increase slightly with facility use Expect to remain well below industry averages; facility undrawn as of Aug 14 Maintained conservative stance
Liquidity (status)Post Q2New $100M facility closed Feb 2025 $125.4M liquidity; no borrowings as of Aug 14 Improved

Management does not provide formal revenue/EPS guidance; BDCs distribute substantially all income under RIC rules (reminder in Q1 call) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Regulatory/legal (rescheduling)Positive long‑term outlook; underwrite status quo; avoid relying on timing “Rescheduling would dramatically increase after‑tax cash flow… we underwrite regulatory status quo” Consistent, cautious optimism
Tariffs/macroMonitoring impacts; limited direct exposure; pickup in opportunities after stabilization Sector uncertainty noted; LIEN niche “fundamentally insulated”; monitoring tariffs, limited direct impact Resilient, pipeline improving
Originations/pipeline~$590M pipeline; $20.8M funded in Q1 ~$780M pipeline; $39.1M funded in Q2; $17.2M subsequent fundings Accelerating
Leverage/liquidityFacility closed; under‑levered; expect slight increase with draws $125.4M liquidity, no borrowings; committed to remain below BDC averages Conservative
Dividend policyDeclared $0.34; distribute nearly all income by year end Declared $0.34 for Q3; intent to grow dividend component as platform scales Stable with growth intent

Management Commentary

  • CEO: “We remain the only BDC focused on and able to lend to cannabis companies… funded $39,100,000 of new investments… Our weighted average yield on debt investments as of June 30 was 16.1%” .
  • CEO on rescheduling: “Rescheduling would dramatically increase the cash flow after taxes for our borrowers… We have always underwritten the regulatory status quo” .
  • CFO: “As of August 14, we have approximately $125,400,000 of liquidity… $100,000,000 of borrowing capacity and $25,400,000 of cash… Net investment income was $7,700,000 or $0.34 per share” .
  • President: “Record quarter… funded approximately $39,100,000 in new debt investments in the second quarter… 100% senior secured and 88% floating rate” .

Q&A Highlights

  • Macro/BDC sector and tariffs: Management views LIEN’s niche as insulated from tariff/trade uncertainties; portfolio largely floating rate with high floors; cannabis borrowers have limited tariff exposure .
  • Regulation under new administration: Too early to speculate on changes; maintaining underwriting based on current framework .
  • Pipeline evolution: JV with Chicago Atlantic broadened non‑cannabis opportunities; new cannabis opportunities via restructurings and ESOP transactions .
  • Rescheduling and borrower behavior: No pause observed; operators more optimistic and seeking capital earlier to fund M&A and capex .
  • Leverage and dividend: Expect leverage well below industry averages; BDCs distribute nearly all income—no explicit dividend guidance .

Estimates Context

  • Q2 2025 had very limited coverage (one estimate). Actual EPS of $0.34 was below consensus of $0.36, and actual revenue of $13.08M was slightly below the $13.10M estimate—both modest misses likely driven by expense dynamics and timing of deployments. Coverage thinness reduces the signal value of the miss; still, estimates may adjust to reflect stable NII and accelerating originations pipeline .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Deployment momentum and pipeline expansion are the core near‑term catalysts; continued 0% non‑accruals and a 16.1% gross portfolio yield support dividend sustainability even as leverage remains conservative .
  • Liquidity sits at $125.4M with the $100M facility undrawn post quarter-end, positioning LIEN to fund originations and opportunistic transactions (M&A carve‑outs, ESOPs) without stretching leverage—a positive for risk‑adjusted returns .
  • The modest consensus miss (thin coverage) does not change the trajectory: stable NII per share at $0.34, NAV/share up to $13.23, and declared $0.34 dividend for Q3 support a steady income profile .
  • Regulatory tailwinds (potential rescheduling) could expand borrowers’ after‑tax cash flow and deal activity; LIEN will underwrite to status quo, limiting downside if timing slips while capturing upside from improved credit metrics .
  • Sector differentiation—100% senior secured loans, high floating-rate mix, tight covenants—remains a structural advantage vs. broader BDC peers and should command a premium as deployments scale .
  • Watch items: expense trajectory (post Q1 waiver), CFO transition execution, and maintaining dividend growth intent as portfolio scales .
  • Trading implications: Near term, stable dividend and accelerating originations could support the stock; medium term, rescheduling momentum and portfolio growth with conservative leverage are the key drivers of total return .