Q2 2024 SHF Holdings Inc Earnings Call
Thanks for watching!
Operator: James Dennedy, Sundie Seefried, Erika Kay, Shf Holdings Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Safe Harbor Financial second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today.
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Safe Harbor Financial second quarter 2024 earnings conference call.
Unknown Attendee: At this time, I would like to welcome everyone to the Safe Harbor Financial second quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise.
Unknown Attendee: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during that time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 a second time.
Phil Carlson: Thank you, and I would now like to turn the conference over to Mr. Phil Carlson of KCSA. You may begin. Thank you.
Operator: Thank you. I would now like to turn the conference over to Mr. Phil Carlson of KCSA. You may begin. Thank you.
Speaker Change: Thank you and I would now like to turn the conference over to Mr. Phil Carlson of KCSA. You may begin.
Phil Carlson: Hello, everyone, and welcome to the second quarter 2024 earnings conference call for Shf Holdings, Inc., doing business as Safe Harbor Financial, which we will refer to as Safe Harbor Oil Company throughout the duration of the presentation. Before we start, I would like to remind everyone that certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities and Litigation Reform Act of 1995.
Sundie Seefried: Hello everyone and welcome to the second quarter 2024 earnings conference call for SHF Holdings Inc. doing business as Safe Harbor Financial, which will refer to a Safe Harbor or the company throughout the duration of the presentation.
Speaker Change: James Dennedy, Sundie Seefried
Phil Carlson: Thank you. Hello, everyone, and welcome to the second quarter 2024 earnings conference call for Shf Holdings, Inc., doing business as Safe Harbor Financial, which we will refer to as Safe Harbor Oil & Company throughout the duration of the presentation.
Sundie Seefried: Before we start, I would like to remind everyone that certain comments made on this call include forward-looking statements, which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These four lucky statements include statements with respect to the company's outlook and the company's expectations regarding the smart opportunities and other financial operational matters. Each four lucky statements discussed on today's call is subject to risk and uncertainty that could cause actual results that differ materially from those projected in such statements. Actual results in the timing of certain events may differ materially from the results are timing predicted or implied by such four lucky statements, and reported results should not be considered as an indication of future performance.
Phil Carlson: These four forward-looking statements include statements with respect to the company's outlook and the company's expectations regarding its market opportunities and other financial operational matters. Each foregoing statement discussed on today's call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Bachelor results in the timing of certain events may not necessarily be different from the results or timing predicted or implied by such four-lit constituents, and reported results should not be considered as an indication of future performance.
Speaker Change: Before we start, I would like to remind everyone that certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Speaker Change: These forelooking statements include statements with respect to the company's outlook and the company's expectations regarding its market opportunities and other financial operational matters.
Speaker Change: Each poor-looking statement discussed on today's call is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements.
Speaker Change: Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance.
Sundie Seefried: Additional information regarding these factors appears under the heading risk factors in the company's filings with the Securities and Exchange Commission or the SEC, which are available at www.sec.gov and on our website at ir.shfinancial.org. The four lucky statements on this call will speak only as a today date, and the company undertakes no obligation to update or revise any of these statements.
Phil Carlson: Additional information regarding these factors appears under the heading risk factors in the company's filings with the Securities and Exchange Commission, which are available at www.sec.gov and on our website at ir.shfinancial.org. The forward-looking statements on this call speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements. Also, during the call, Safe Harbor will present both GAAP and non-GAAP financial measures.
Speaker Change: Additional information regarding these factors appears under the heading risk factors in the company's filings with the Securities and Exchange Commission or the SEC which are available at www.sec.gov and on our website at ir.shfinancial.org
Speaker Change: The forward-looking statements on this call will speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements.
Sundie Seefried: Also during the call, safe harbor will present both gap in non-gap financial measures. The reconciliation of non-GAAP to GAAP measures is included in our 510Q, as well as today's earnings press release, which you can find in the company's best relations website or on the SEC website. All dollar amounts to express today are a US currency.
Speaker Change: Also, during the call, Safe Harbor will present both GAAP and non-GAAP financial measures. The reconciliation of non-GAAP to GAAP measures is included in our file 10-Q, as well as today's earnings press release, which you can find on the company's investor relations website or on the SEC website.
Phil Carlson: The reconciliation of non-GAAP to GAAP measures is included in our 510Q, as well as in today's earnings press release, which you can find on the company's investor relations website or on the SEC website. All dollar amounts expressed today are in U.S. currency.
Sundie Seefried: Today will be Sunday secret, chief executive officer and gym deputy chief financial officer of safe harbor.
Speaker Change: All dollar amounts expressed today are in U.S. currency.
Speaker Change: Presenting today will be Sundie Seefried, Chief Executive Officer and Jim Dennedy, Chief Financial Officer of Safe Harbor. I will now turn the call over to Sundie. Sundie, please go ahead.
Phil Carlson: Presenting today will be Sundie Seefried, Chief Executive Officer, and Jim Dennedy, Chief Financial Officer, of Safe Harbor. I will now turn the call over to Sundie. Sundie, please go ahead.
Sundie Seefried: And when I'll turn the call to Sunday, Sunday, please go ahead. Thank you, Phil, and welcome everyone to our second quarter 2024 earnings call. During the second quarter of 2024, we continue to solidify Safe Harbor's position as a leading financial services provider for cannabis related businesses. Continuing to diversify our income streams, improve loan capacity and portfolio quality, as well as enhance our product offering. For the past 10 years, we have shaped our financial services platform to change in response to the Canada regulatory landscape. The results we achieved in quarter two demonstrate that our business model has allowed us to operate efficiently, with an improved revenue mix and higher interest income.
Sundie Seefried: Thank you, Phil, and welcome everyone to our second quarter 2024 earnings call. During the second quarter of 2024, we continued to solidify St. Barbara's position as a leading financial services provider for Kansas-related businesses, continuing to diversify our income streams, improve loan capacity and portfolio quality, as well as enhance our product offering. For the past 10 years, we have shaped our financial services platform in response to the cannabis regulatory landscape. The results we achieved in quarter two demonstrate that our business model has allowed us to operate efficiently with an improved revenue mix and higher interest income. In particular, for the quarter, we generated positive net income and gross profit. We also reduced operating expenses by almost 84 percent compared to the same period last year.
Sundie Seefried: Thank you, Phil, and welcome everyone to our second quarter 2024 earnings call.
Sundie Seefried: During the second quarter of 2024, we continue to solidify safe harbor's position as a leading financial services provider.
Speaker Change: for Kansas-related businesses, continuing to diversify our income streams, improve loan capacity and portfolio quality, as well as enhance our product offering.
Speaker Change: For the past 10 years, we have shaped our financial services platform.
Speaker Change: to change in response to the Kansas regulatory landscape.
Speaker Change: The results we achieved in quarter two demonstrate that our business model has allowed us to operate efficiently with an improved revenue mix and higher interest income. In particular, for the quarter, we generated positive net income and gross profit.
Sundie Seefried: In particular, for the quarter, we generated positive net income and gross profit. We also reduced operating expenses by almost 84% compared to the same period last year. Also important to note, loan interest income for the second quarter, 2024, was up approximately 204% year over year to approximately $1.28 million.
Speaker Change: We also reduced operating expenses by almost 84% compared to the same period last year. Also important to note, loan interest income for the second quarter, 2024, was up approximately 204% year-over-year to approximately $1.8 million.
Sundie Seefried: Before Jim dies deeper into the financials, I want to recap some recent highlights. In June, we successfully announced additional lines of credit issued, originating $550,000 for three long-standing Colorado cannabis clients. This strategic move exemplifies our firm commitment to supporting the capital requirements of the cannabis industry and addresses the growing demand from small and mid-sized cannabis businesses, a segment often underserved by traditional financial institutions. Our program offers normalized non-predatory rates without requiring real estate collateral. We believe that this expansion of our lending platform could not only diversify our revenue streams, but also strengthen our position as the financial services provider in the cannabis industry.
Sundie Seefried: It's also important to note loan interest income for the second quarter, 2024, was up approximately 204 percent year over year to approximately $1.8 million. Before Jim dives deeper into the financials, I want to recap some recent highlights. In June, we successfully announced additional lines of credit issued, originating $550,000 for three long-standing Colorado cannabis clients. This strategic move exemplifies our firm commitment to supporting the capital requirements of the cannabis industry and addresses the growing demand from small and mid-sized cannabis businesses, a segment often underserved by traditional financial institutions. Our program offers normalized, non-predatory rates without requiring real estate collateral.
Speaker Change: Before Jim Dijk's deeper into the financials, I want to recap some recent highlights.
Speaker Change: In June, we successfully announced additional lines of credit issued, originating $550,000 for three long-standing Colorado cannabis clients.
Speaker Change: This strategic move exemplifies our firm commitment to supporting the capital requirements of the cannabis industry and addresses the growing demand from small and mid-sized cannabis businesses, a segment often underserved by traditional financial institutions.
Speaker Change: Our program offers normalized non-tradatory rates without requiring real estate collateral.
Sundie Seefried: We believe that this expansion of our lending platform could not only diversify our revenue streams but also strengthen our position as a financial services provider in the cannabis industry. By filling this gap in the market, we believe that we're driving growth, enhancing client relationships, and solidifying Safe Harbor's market leadership. We anticipate this program will contribute positively to our bottom line while supporting the broader cannabis ecosystem. In July, we announced that we had successfully exited a $3.1 million defaulted loan.
Speaker Change: We believe that this expansion of our lending platform could not only diversify our revenue streams, but also strengthen our position as a financial services provider in the cannabis industry.
Sundie Seefried: By filling this gap in the market, we believe that we're driving growth, enhancing client relationships, and solidifying Safe Harbor market readership. We anticipate this program will contribute positively to our bottom line while supporting the broader cannabis ecosystem.
Speaker Change: By filling this gap in the market, we believe that we're driving growth, enhancing client relationships, and solidifying Safe Harbor's market leadership. We anticipate this program will contribute positively to our bottom line while supporting the broader cannabis ecosystem.
Sundie Seefried: In July, we announced that we had successfully exited a $3.1 million salted loan, originated in 2021, and secured by Class A industrial real estate in Denver. The successful exit was facilitated by the property's strong fundamentals, demonstrating the strength of state covers underwriting process. In exiting this loan, we recovered the full principal plus over $200,000 in accrued interest, which will be reinvested into lending and credit line capacity. This was the only non-performing loan in the company's history, and its full recovery validates Safe Harbor's balanced lending approach. In addition, the outcome improves our overall loan portfolio quality and increases our lending capacity.
Speaker Change: In July, we announced that we had successfully exited a $3.1 million defaulted loan.
Sundie Seefried: Originated in 2021 and secured by Class A Industrial Real Estate in Denver, the successful exit was facilitated by the property's strong fundamentals, demonstrating the strength of Faith Harbor's underwriting process. In exiting this loan, we recovered the full principal plus over $200,000 in accrued interest, which will be reinvested into lending and credit line capacity. This was the only non-performing loan in the company's history, and its full recovery validates safe harbor's balanced lending approach.
Speaker Change: Originated in 2021 and secured by Class A Industrial Real Estate in Denver, the successful exit was facilitated by the property's strong fundamentals, demonstrating the strength of Safe Harbor's underwriting process.
Speaker Change: In exiting this loan, we recovered the full principle plus over $200,000 in accrued interest, which will be reinvested into lending and credit line capacity.
Speaker Change: This was the only non-performing loan in the company's history, and its full recovery validates safe harbours, balanced lending approach. In addition, the outcome improves our overall loan portfolio quality and increases our lending capacity.
Sundie Seefried: In addition, the outcome improves our overall loan portfolio quality and increases our. I would also like to address the possibility of Canada's reclassification, which we believe would be a significant growth catalyst for these companies. Ahead of the July 22nd deadline, we submitted comments to the Justice Department regarding the proposal to reclassify cannabis from Schedule I to Schedule III of the Controlled Substances Act. Over 42,000 comments were submitted, with almost 93 percent of those comments in favor of changing cannabis' schedule and 61 percent calling for a complete descheduling of cannabis, while the proposed change of rescheduling cannabis from Schedule I to Schedule III wouldn't legalize cannabis or alter BSA and AML compliance requirements.
Sundie Seefried: I would also like to address the possibility of cannabis reclassification, which we believe would be a significant growth catalyst for the industry. Ahead of the July 22nd deadline, we submitted comments to the Justice Department regarding the proposal to reclassify cannabis from Schedule One to Schedule Three of the Controlled Substances Act. Over 42,000 comments were submitted, with almost 93 percent of those comments in favor of changing cannabis schedule, and 61 percent calling for a complete de-scheduling of cannabis. While the proposal change of rescheduling cannabis from Schedule One to Schedule Three wouldn't legalize cannabis or alter BSA and AML compliance requirements, it would represent significant progress for the industry.
Speaker Change: I would also like to address the possibility of cannabis reclassification, which we believe would be a significant growth catalyst for the industry.
Speaker Change: Ahead of the July 22nd deadline, we submitted comments to the Justice Department regarding the proposal to reclassify cannabis from Schedule I to Schedule III of the Controlled Substances Act.
Speaker Change: Over 42,000 comments were submitted, with almost 93% of those comments in favor of changing cannabis's schedule, and 61% calling for a complete de-scheduling of cannabis.
Speaker Change: While the proposed change of rescheduling cannabis from Schedule 1 to Schedule 3 wouldn't legalize cannabis or alter BSA and AML compliance requirements, it would represent significant progress for the industry.
Sundie Seefried: It would represent significant progress for the industry. The reclassification would likely alleviate tax burdens under Section 280E, potentially strengthening our clients' balance sheets and income statements. We anticipate this change would create a more favorable business environment, enabling expansion of services and new market opportunities. The prospect of rescheduling cannabis could help level the playing field for cannabis businesses.
Sundie Seefried: The reclassification would likely alleviate tax burdens under section 280E, potentially strengthening our client's balance sheets and income statements. We anticipate this change would create a more favorable business environment, enabling expansion of services and new market opportunities. The prospect of rescheduling cannabis could help level the playing field for cannabis businesses. With out the constraints of two ADE, the internal revenue code provision that prohibits businesses dealing with schedule one substances from writing off business expenses on their federal tax returns, these businesses would potentially be able to produce stronger financial returns, increasing our ability to qualify them for more lending options, improve debt service coverage, and we believe increase our deposit balances.
Speaker Change: The reclassification would likely alleviate tax burdens under Section 280E, potentially
Speaker Change: Strengthening Our Client's Balance Sheet and Income Statements.
Speaker Change: We anticipate this change would create a more favorable business environment, enabling expansion of services and new market opportunities. The prospect of rescheduling cannabis could help level the playing field for cannabis businesses.
Sundie Seefried: Without the constraints of 280E, the Internal Revenue Code provision that prohibits businesses dealing with Schedule I substances from writing off business expenses on their federal tax returns, these businesses would potentially be able to produce stronger financial returns, increasing our ability to qualify them for more lending options, improve debt service coverage, and, we believe, increase our deposit balance. The benefits to the industry, financial strength, and stability roll up to the favor of State Harbor. Importantly, this development underscores Safe Harbor's continued relevance in the Kansas financial services sector.
Speaker Change: Without the constraints of 280E, the Internal Revenue Code provision that prohibits businesses
Speaker Change: dealing with Schedule 1 substances from writing off business expenses on their federal tax returns.
Speaker Change: These businesses
Speaker Change: would potentially be able to produce stronger financial returns, increasing our ability to qualify them for more lending options, improve debt service coverage, and we believe increase our deposit balances.
Sundie Seefried: The benefits to the industry, financial strength, rose up to the favor of safe harbor.
Speaker Change: The benefits to the industry, financial strength, rolls up to the favor of State Harbor.
Sundie Seefried: Importantly, this development underscores Safe Harbor's continued relevance in the Kansas financial services sector. Our first mover status and deep industry expertise positioned us uniquely to capitalize on the evolving regulatory landscape. With the growth of the Kansas industry, we believe that the need for our unique service platform would increase considerably, and we would remain a crucial partner for cannabis and other high-risk banking businesses. We believe our creative and methodical approach in building the company's platform has enabled national business scaling. The platform's policies, training, monitoring, and processes are all well-established and supported by expert talent. We anticipate this combination of intellectual property plus human capital talent will provide a competitive advantage as we focus on continued growth.
Speaker Change: Importantly, this development underscores Safe Harbor's continued relevance in the Kansas financial services sector.
Sundie Seefried: Our first-mover status and deep industry expertise position us uniquely to capitalize on the evolving regulatory landscape. With the growth of the cannabis industry, we believe that the need for our unique service platform would increase considerably, and we would remain a crucial partner for cannabis and other high-risk banking businesses. We believe our creative and methodical approach to building the company's platform has enabled national business scaling. Platforms, policies, training, monitoring, and processes are all well-established and supported by expert talent.
Speaker Change: Our first-mover status and deep industry expertise position us uniquely to capitalize on the evolving regulatory landscape.
Speaker Change: With the growth of the cannabis industry, we believe that the need for our unique service platform would increase considerably and we would remain a crucial partner for cannabis and other high-risk banking businesses.
Speaker Change: We believe our creative and methodical approach in building the company's platform has enabled national business scaling.
Speaker Change: The platform's policies, training, monitoring, and processes are all well-established and supported by expert talent. We anticipate this combination of intellectual property plus human capital talent will provide a competitive advantage as we focus on continued growth.
Sundie Seefried: We anticipate this combination of intellectual property plus human capital talent will provide a competitive advantage as we focus on continued growth. Looking ahead, safe harbor will continue to be with landing and further comment on our unique position in the Canvas Financial Services Mark. We are just one of a handful of financial service providers capable of providing CRBs with access to compliant deposit tools and traditional lending. We remain committed to supporting the cannabis industry through regulatory change, and as the regulatory environment evolves, we are well positioned to capitalize on these changes with our unique service offerings and product suite. We believe new running opportunities will continue to drive organic deposit growth.
Sundie Seefried: Looking ahead, safe harbor will continue to be with lending and further cement our unique position in the Kansas financial services market. We are just one of a handful of financial service providers capable of providing CRBs with access to compliant deposit tools and traditional lending. We remain committed to supporting the Kansas industry through regulatory change, and as the regulation evolves, we are well-positioned to capitalize on these changes. With our unique service offerings and product suite, we believe new lending opportunities will continue to drive organic deposit growth. As we have seen, traditional financial institutions are either unable or unwilling to replicate our business model due to its complexity and difficulty to execute.
Speaker Change: Looking ahead, Safe Harbor will continue to lead with lending and further cement our unique position in the Canada's financial services market.
Speaker Change: We are just one of a handful of financial service providers.
Speaker Change: capable of providing CRBs with access to compliant deposit tools and traditional lending.
Speaker Change: We remain committed to supporting the cannabis industry through regulatory change, and as the regulation evolves, we are well-positioned to capitalize on these changes.
Speaker Change: With our unique service offerings and product suite, we believe new lending opportunities will continue to drive organic deposit growth.
Sundie Seefried: As we have seen, traditional financial institutions are either unable or unwilling to replicate our business model due to its complexity and difficulty to execute. Certainly, our attention remains on growing the business with a focus on increasing our client deposit base, attracting newly legalized markets, continuing to seek out exiting financial institutions, and expanding lending opportunities. With our ability to serve large MSOs in every legal market across the country, as well as our continued pursuit to roll out additional service offerings, we believe we are well positioned for future growth. I'd now like to hand the call over to Jim to discuss our financial results for the quarter and six months ended June 30th, 2024. Jim.
Speaker Change: As we have seen, traditional financial institutions are either unable or unwilling to replicate our business model due to its complexity and difficulty to execute.
Sundie Seefried: Certainly, our attention remains on growing the business with a focus on increasing our client deposit base, attracting newly legalized markets, continuing to seek exiting financial institutions, and expand lending opportunities. With our ability to serve large MSOs in every legal market across the country, as well as our continued pursuit to roll out additional service offerings, we believe we are well-positioned for future growth.
Speaker Change: Certainly, our attention remains on growing the business with a focus on increasing our client deposit base, attracting newly legalized markets, continuing to seek exiting financial institutions, and expand lending opportunities.
Speaker Change: With our ability to serve large MSOs in every legal market across the country, as well as our continued pursuit to roll out additional service offerings, we believe we are well positioned for future growth.
Jim: I'd now like to hand the call over to Jim to discuss our financial results from the quarter and six months ended June 30th, 2024. Jim?
Speaker Change: Now I'd like to hand the call over to James to discuss our financial results from the quarter and six months ended June 30, 2024.
Jim: Thank you, Sunday.
Jim Dennedy: Thank you, Sundie, and good afternoon, everyone. Our second quarter 2024 total revenue was $4 million, down approximately 12% from total revenue of $4.6 million in the comparable prior year period, and for the six months ending June 30, 2024, total revenue was $8.1 million, down approximately 7.6% from total revenue of $8.8 million in the comparable prior year period. The decrease in total revenue was driven by lower interest income and lower deposit activity and onboarding income, offset by substantially higher loan interest.
Jim: Good afternoon, everyone. Our second quarter, 2024 total revenue, was $4 million, down approximately 12 percent from total revenue of $4.6 million in the comparable prior year period. and for the six months ending June 30, 2024, total revenue was $8.1 million, down approximately 7.6% from total revenue of $8.8 million in the comparable prior year period. The decrease in total revenue was driven by a lower interest income and lower deposit activity and onboarding income, offset by substantially higher low interest income. The number of active accounts and the aggregate deposit balances of the active account holders at the end of the second quarter of 2024 were lower by approximately 30-3% versus the prior year period.
James: Thank you, Sundie, and good afternoon, everyone.
James: Our second quarter 2024 total revenue was $4 million.
James: down approximately 12% from total revenue of $4.6 million in the comparable prior year period.
James: And for the six months ending June 30, 2024, total revenue was $8.1 million, down approximately 7.6% from total revenue of $8.8 million in the comparable prior year period.
James: The decrease in total revenue was driven by lower interest income and lower deposit, activity and onboarding income.
Jim Dennedy: The number of active accounts and the aggregate deposit balances of the active account holders at the end of the second quarter of 2024 were lower by approximately 33% versus the prior year period. However, notwithstanding the fewer accounts and lower balances, the volume of account activity per account was higher in our second quarter of 2024 versus a comparable prior year period. Additionally, loan interest income was up by more than 204% in the period ending June 30, 2024 compared to the prior year period.
Speaker Change: Offset by substantially higher, low and interesting come.
Speaker Change: The number of active accounts and the aggregate deposit balances of the active account holders at the end of the second quarter of 2024 were lower by approximately 33% versus the prior year period.
Jim: Notwithstanding the fewer accounts and lower balances, the volume of account activity per account was higher in our second quarter of 2024 versus the comparable prior year period. Additionally, low interest income was up by more than 204% in the period ending June 30, 2024 versus the prior year period. Moving down the income statement, operating expenses in the second quarter of 2024 were approximately $3.7 million versus operating expenses in the second quarter of 2023, but $22.5 million. We call this a company incurred significant impairment charges to goodwill and long-lived and tangible assets in the second quarter of 2023.
Speaker Change: Notwithstanding a fewer accounts and lower balances, the volume of account activity per account was higher in our second quarter of 2024 versus a comparable prior year period.
Speaker Change: Additionally, loan interest income was up by more than 204 percent in the period ending June 30, 2024 versus the prior year period.
Jim Dennedy: Moving down the income statement, operating expenses in the second quarter of 2024 were approximately $3.7 million, versus operating expenses in the second quarter of 2023 of $22.5 million. Recall that the company incurred significant impairment charges on goodwill and long-lived intangible assets in the second quarter of 2023. After removing these one-time non-cash expenses, operating expenses for the second quarter of 2023 were $5.6 million. The lower operating expenses in the second quarter of 2024 versus the second quarter of 2023 were primarily attributable to lower stock compensation expense and lower consulting and professional services-related expenses.
Speaker Change: Moving down the income statement, operating expenses in the second quarter of 2024 were approximately
Speaker Change: versus operating expenses in the second quarter of 2023 of $22.5 million.
Speaker Change: Recall that the company incurred significant impairment charges to goodwill and long-lived intangible assets in the second quarter of 2023.
Jim: After removing these one-time, non-cash expenses, operating expenses for the second quarter of 2023 were $5.6 million. The lower operating expenses in the second quarter of 2024 versus the second quarter of 2023 were primarily attributable for lower stock compensation expense and lower consulting and professional services-related expenses. Consequently, net income reported in the second quarter of 2024 was $942,000 compared to a net loss of $17.6 million in the prior year period. And for the six months ending June 30, 2024, the company reported net income of $3 million versus a net loss of $19 million in the same prior year period.
Speaker Change: After removing these one-time, non-cass expenses, operating expenses for the second quarter of 2023, for $5.6 million.
Speaker Change: The lower operating expenses in the second quarter of 2024 versus the second quarter of 2023 were primarily attributable to lower stock compensation expense and lower consulting and professional services related expenses.
Jim Dennedy: Consequently, net income reported in the second quarter of 2024 was $942,000 compared to a net loss of $17.6 million in the prior year period. And for the six months ending June 30, 2024, the company reported net income of $3 million versus a net loss of $19 million in the same prior year period. When adjusting that income for interest, taxes, and depreciation and amortization expense and further adjustments to exclude non-cash, unusual, and or infrequent costs, we compute an adjusted EBITDA, which management believes is a measure to evaluate our operating performance.
Speaker Change: Consequently, net income reported in the second quarter of 2024 was $942,000 compared to a net loss of $17.6 million in the prior year period.
Speaker Change: and for the six months ending June 30, 2024, the company reported net income of $3 million. First is a net loss of $19 million in the same priority of period.
Jim: When adjusting net income for interest, taxes, and depreciation, and amortization expense, and further adjustments to exclude non-cash, unusual and or infrequent costs, we compute an adjusted EBITDA, which management believes is a measure to evaluate our operating performance. A reconciliation of net income to adjusted EBITDA provided in the press release in current report AK filed with the SEC earlier today. Adjusted EBITDA for the quarter ending June 30, 2024 was approximately $974,000 versus $850,000 in the comparable prior year period. And for the six months ending June 30, 2024, the company reported adjusted EBITDA of approximately $2.1 million versus $1.3 million for the first half of 2023.
Speaker Change: When adjusting net income for interest, taxes and depreciation and amortization expense and further adjustments to exclude non-cash, unusual and or infrequent costs, we compute an adjusted EBITDA.
Jim Dennedy: A reconciliation of net income to adjusted earnings, as provided in the press release in the current report, A.K. filed with the SEC earlier today. Adjusted EBITDA for the quarter ending June 30, 2024 was approximately $974,000 versus $850,000 in the comparable prior year period. And for the six months ending June 30, 2024, the company reported adjusted EBITDA of approximately $2.1 million versus $1.3 million for the first half of 2023. Moving to the balance sheet, as of June 30, 2024, the company reports cash and cash equivalents of $6.1 million, compared to $4.9 million at December 31, 2023.
Speaker Change: which magically uses a measure to evaluate our operating performance.
Speaker Change: A reconciliation of net income to adjust the EBITAS provided in the press release and current report AK file with the SEC earlier today.
Speaker Change: Adjusted EBITDA for the quarter ending June 30, 2024 was approximately $974,000 versus $850,000 in the comparable prior year period.
Speaker Change: And for the six months ending June 30, 2024, the company reported adjusted even out of approximately $2.1 million, versus $1.3 million for the first half of 2023.
Jim: Moving to the balance sheet, as of June 30, 2024, the company reported cash and cash equivalents of $6.1 million compared to $4.9 million at December 31, 2023. Cash provided by Operating Activities through the second quarter of 2024 was $2.7 million versus cash used by Operating Activities of approximately $965,000 in the comparable prior year period. This improvement was mainly due to previously cited lower operating expenses in 2024 versus the prior year period. Turning to our liquidity, the company reported a networking capital on June 30, 2024, of approximately $302,000 versus a networking capital deficit of $135,000 on December 31, 2023.
Speaker Change: Really does a balance sheet, as of June 30, 2024, the company reported cash and cash equivalent of $6.1 million, compared to $4.9 million, at December 31, 2023.
Jim Dennedy: Cash provided by operating activities through the second quarter of 2024 was $2.7 million, versus cash used by operating activities, approximately $965,000 in a comparable prior year period. This improvement was mainly due to previously cited lower operating expenses in 2024 versus the prior year period.
Speaker Change: Cash provided by operating activities through the second quarter of 2024 was 2.7 million dollars versus cash used by operating activities approximately $965,000 in a comparable prior year period.
Speaker Change: This improvement was mainly due to previously cited lower operating expenses in 2024 versus the prior year period.
Jim Dennedy: Turning to our liquidity, the company reported a net working capital on June 30, 2024 of approximately $302,000, versus a net working capital deficit of $135,000 on December 31st, 2023. Looking ahead to the balance of 2024, we expect to report full-year revenue for 2024 in the range of $17 to $18 million and full-year adjusted EBITDA in the range of $3.75 to $4.25 million.
Speaker Change: Turning to our liquidity, the company reported in that working capital on June 30, 2024, of approximately $3,000. versus a networking capital deficit of $135,000. On December 31, 2023.
Jim: Looking ahead to the balance of 2024, we expect to report a full year revenue for 2024 in the range of $17,000 to $18 million and full year adjusted EBITDA in the range of $3.75 to $4.25 million.
Speaker Change: Looking ahead to the balance of 2024.
Speaker Change: We expect to report full-year revenue for 2024 in the range of 17 to 18 million dollars
Speaker Change: and full-year adjusted EBITDA in the range of 3.75 to 4.25 million dollars.
Unknown Attendee: With that, I will now turn the call back to the operator to open the call for questions.
Jim Dennedy: With that, I will now turn the call back to the operator to open the call for questions. Operator. Thank you, and we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the... If you would like to withdraw your questions, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: With that, I will now turn the call back to the operator to open the call for questions.
Unknown Attendee: Operator.
Unknown Attendee: Thank you.
Jim Dennedy: We ask that you please limit yourself to one question and one follow-up question, and you may rejoin the question queue if you have additional questions. Again, please press star 1 to join the queue. And with no questions at this time, I would actually like to turn the conference back over to Sundie Seefried for any additional or closing remarks. Thank you. I would like to thank you all for joining us on today's call and for your support for Safe Harbor Financial.
Unknown Attendee: And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We ask that you please limit yourself to one question and one follow-up question, and you may rejoin the question queue if you have additional questions.
Speaker Change: operator
Speaker Change: Thank you. And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue.
Speaker Change: If you would like to withdraw your question simply press star 1 a second time
Speaker Change: If you are called upon to ask your question and are listening via speaker phone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: We ask that you please limit yourself to one question and one follow-up question and you may rejoin the question key if you have additional questions.
Unknown Attendee: Again, please press star one to join the queue.
Speaker Change: Again, please press star one to join the queue.
Jim Dennedy: We are grateful to our investors as we continue to grow our innovative financial services platform during this exciting time. I will now ask the operator to close the line. And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect. Where Did It All Begin?
Sundie Seefried: And with no questions at this time, I would actually like to turn the conference back over to Cindy Seafried for any additional work closing remarks. Thank you. I would like to thank you all for joining us on today's call and for your support for Safe Harbor Financial. We are graceful to our investors as we continue to grow our innovative financial services platform during this exciting time.
Speaker Change: [inaudible]
Speaker Change: And with no questions at this time, I would actually like to turn the conference back over to Sundie Seefried for any additional work closing remarks.
Sundie Seefried: Thank you. I would like to thank you all for joining us on today's call and for your support for safe harbor financial. We are grateful to our investors as we continue to grow our innovative financial services platform during the exciting time. I will now ask the operator to close the line.
Unknown Attendee: I will now ask the operator to close the line.
Unknown Attendee: And ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.
Speaker Change: And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.
Abby: Ladies and gentlemen, thank you for standing by. My name is Abby and I will be your conference operator today.
Abby: At this time, I would like to welcome everyone to the Safe Harbor Financial Second Quarter 2024 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time.
Phil Carlson: Thank you, and I would now like to turn the conference over to Mr. Phil Carlson of KCSA. You may begin. Thank you.
Phil Carlson: Hello everyone and welcome to the second quarter 2024 earnings conference call for SHF Holdings Inc, doing business as safe harbor financial, which will refer to a safe harbor or the company throughout the duration of the presentation. Before we start, I would like to remind everyone that certain comments made on this call include for looking statements, which are subject to the safe harbor provisions of the private security litigation reform act of 1995.
Phil Carlson: These four lucky statements include statements with respect to the company's outlook and the company's expectations regarding the smart opportunities and other financial operational matters. Each four lucky statements discussed on today's call is subject to risk and uncertainty that could cause actual results that differ materially from those projected in such statements. Actual results in the timing of certain events may differ materially from the results are timing predicted or implied by such four lucky statements and reported results should not be considered as an indication of future performance.
Phil Carlson: Additional information regarding these factors appear appears under the heading risk factors in the company's filings with the securities in exchange commission or the SEC, which are available at www.scc.gov and on our website at ir.shfinancial.org. The four lucky statements on this call will speak only as a today date and the company undertakes no obligation to update or revise any of these statements. Also during the call, safe harbor will present both gap in non-gap financial measures.
Phil Carlson: The reconciliation of non-gap to gap measures is included in our 510Q as well as today's earnings press release, which you can find in the company's the best relations website or on the SEC website. All dollar amounts to express today are a US currency.
Sundie Seefried: Today will be Sunday secret, chief executive officer and gym deputy chief financial officer of safe harbor. And when I'll turn the call to Sunday, Sunday, please go ahead. Thank you, Phil, and welcome everyone to our second quarter, 2024 earnings call. During the second quarter of 2024, we continue to solidify safe harbor's position as a leading financial services provider for cannabis related businesses. Continuing to diversify our income streams, improve loan capacity and portfolio quality, as well as enhance our product offering.
Sundie Seefried: For the past 10 years, we have shaped our financial services platform to change in response to the Canada regulatory landscape. The results we achieved in quarter two demonstrate that our business model has allowed us to operate efficiently with an improved revenue mix and higher interest income. In particular, for the quarter, we generated positive net income and gross profit. We also reduced operating expenses by almost 84% compared to the same period last year. Also important to note, loan interest income for the second quarter, 2024, was up approximately 204% year over year to approximately $1.28 million.
Sundie Seefried: Before Jim dies deeper into the financials, I want to recap some recent highlights. In June we successfully announced additional lines of credit issued, originating $550,000 for three long-standing Colorado cannabis clients. This strategic move exemplifies our firm commitment to supporting the capital requirements of the cannabis industry and addresses the growing demand from small and mid-sized cannabis businesses, a segment often underserved by traditional financial institutions. Our program offers normalized non-predatory rates without requiring real estate collateral.
Sundie Seefried: We believe that this expansion of our lending platform could not only diversify our revenue streams, but also strengthen our position as the financial services provider in the cannabis industry. By filling this gap in the market, we believe that we're driving growth, enhancing client relationships, and solidifying safe harbor market readership. We anticipate this program will contribute positively to our bottom line while supporting the broader cannabis ecosystem.
Sundie Seefried: In July, we announced that we had successfully exited a $3.1 million to salted loan, originated in 2021, and secured by Class A industrial real estate in Denver, the successful exit was facilitated by the property strong fundamentals demonstrating the strength of state covers underwriting process. In exiting this loan, we recovered the full principal plus over $200,000 in accrued interest, which will be reinvested into lending and credit line capacity. This was the only non-performing loan in the company's history, and its full recovery validates safe harbor's balanced lending approach. In addition, the outcome improves our overall loan portfolio quality and increases our lending capacity.
Sundie Seefried: I would also like to address the possibility of cannabis reclassification, which we believe would be a significant growth catalyst for the industry, ahead of the July 22nd deadline, we submitted comments to the justice department regarding the proposal to reclassify cannabis from schedule one to schedule three of the controlled substances act. Over 42,000 comments were submitted with almost 93 percent of those comments in favor of changing cannabis schedule, and 61 percent, calling for a complete de-scheduling of cannabis.
Sundie Seefried: While the proposal change of rescheduling cannabis from schedule one to schedule three wouldn't legalize cannabis or alter BSA and AML compliance requirements, it would represent significant progress for the industry. The reclassification would likely alleviate tax burdens under section 280E, potentially strengthening our client's balance sheets and income statements. We anticipate this change would create a more favorable business environment, enabling expansion of services and new market opportunities. The prospect of rescheduling cannabis could help level the playing field for cannabis businesses.
Sundie Seefried: With out the constraints of two ADE, the internal revenue code provision that prohibits businesses dealing with schedule one, substances from writing off business expenses on their federal tax returns, these businesses would potentially be able to produce stronger financial returns, increasing our ability to qualify them for more lending options, improve debt service coverage, and we believe increase our deposit balances. The benefits to the industry, financial strength, rose up to the favor of safe harbor.
Sundie Seefried: Importantly, this development underscores safe harbor's continued relevance in the Kansas Financial Services sector. Our first mover status and deep industry expertise positioned us uniquely to capitalize on the evolving regulatory landscape. With the growth of the Kansas industry, we believe that the need for our unique service platform would increase considerably, and we would remain a crucial partner for cannabis and other high risk banking businesses. We believe our creative and methodical approach in building the company's platform has enabled national business scaling.
Sundie Seefried: The platform's policies, training, monitoring, and processes are all well-established and supported by expert talent. We anticipate this combination of intellectual property plus human capital talent will provide a competitive advantage as we focus on continued growth. Looking ahead, safe harbor will continue to be with lending and further cement our unique position in the Kansas Financial Services market. We are just one of a handful of financial service providers capable of providing CRBs with access to compliant deposit tools and traditional lending.
Sundie Seefried: We remain committed to supporting the Kansas industry through regulatory change, and as the regulation evolves, we are well-positioned to capitalize on these changes. With our unique service offerings and product suite, we believe new lending opportunities will continue to drive organic deposit growth. As we have seen, traditional financial institutions are either unable or unwilling to replicate our business model due to its complexity and difficulty to execute. Certainly, our attention remains on growing the business with a focus on increasing our client deposit base, attracting newly legalized markets, continuing to seek exiting financial institutions and expand lending opportunities. With our ability to serve large MSOs in every legal market across the country, as well as our continued pursuit to roll out additional service offerings, we believe we are well-positioned for future growth.
Jim: I'd now like to hand the call over to Jim to discuss our financial results from the quarter and six months ended June 30th, 2024. Jim? Thank you, Sunday. Good afternoon, everyone. Our second quarter, 2024 Total Revenue, was $4 million, down approximately 12 percent from Total Revenue of $4.6 million in the comparable prior year period, and for the six months ending June 30, 2024, total revenue was $8.1 million, down approximately 7.6% from total revenue of $8.8 million in the comparable prior year period.
Jim: The decrease in total revenue was driven by a lower interest income and lower deposit activity and onboarding income, offset by substantially higher low interest income. The number of active accounts and the aggregate deposit balances of the active account holders at the end of the second quarter of 2024 were lower by approximately 30-3% versus the prior year period. Notwithstanding the fewer accounts and lower balances, the volume of account activity per account was higher in our second quarter of 2024 versus the comparable prior year period. Additionally, low interest income was up by more than 204% in the period ending June 30, 2024 versus the prior year period.
Jim: Moving down the income statement, operating expenses in the second quarter of 2024 were approximately $3.7 million versus operating expenses in the second quarter of 2023, but $22.5 million. We call this a company incurred significant impairment charges to Goodwill and long-lived and tangible assets in the second quarter of 2023. After removing these one time, non-cash expenses, operating expenses for the second quarter of 2023 were $5.6 million. The lower operating expenses in the second quarter of 2024 versus the second quarter of 2023 were primarily attributable for lower stock compensation expense and lower consulting and professional services related expenses.
Jim: Consequently, net income reported in the second quarter of 2024 was $942,000 compared to a net loss of $17.6 million in the prior year period. And for the six months ending June 30, 2024, the company reported net income of $3 million versus a net loss of $19 million in the same prior year period. When adjusting net income for interest, taxes, and depreciation, and amortization expense, and further adjustments to exclude non-cash, unusual and or infrequent costs, we compute an adjusted evida, which management believes is a measure to evaluate our operating performance.
Jim: A reconciliation of net income to adjusted evidas provided in the press release in current report AK filed with the SEC earlier today. Adjusted evida for the quarter ending June 30, 2024 was approximately $974,000 versus $850,000 in the comparable prior year period. And for the six months ending June 30, 2024, the company reported adjusted evida of approximately $2.1 million versus $1.3 million for the first half of 2023.
Jim: Moving to the balance sheet, as of June 30, 2024, the company reported cash and cash equivalents of $6.1 million compared to $4.9 million at December 31, 2023. Cash provided by Operating Activities through the second quarter of 2024 was $2.7 million versus cash used by Operating Activities of approximately $965,000 in the comparable prior year period. This improvement was mainly due to previously cited lower operating expenses in 2024 versus the prior year period.
Jim: Turning to our liquidity, the company reported a networking capital on June 30, 2024 of approximately $302,000 versus a networking capital deficit of $135,000 on December 31, 2023. Looking ahead to the balance of 2024, we expect to report a full year revenue for 2024 in the range of $17,000 to $18 million and full year adjusted EBITDA in the range of $3.75 to $4.25 million.
Operator: With that, I will now turn the call back to the operator to open the call for questions. Operator. Thank you.
Operator: And we'll now begin the question and answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. We ask that you please limit yourself to one question and one follow-up question and you may rejoin the question queue if you have additional questions. Again, please press star one to join the queue.
Sundie Seefried: And with no questions at this time, I would actually like to turn the conference back over to Cindy Seafried for any additional work closing remarks. Thank you.
Sundie Seefried: I would like to thank you all for joining us on today's call and for your support for safe harbor financial. We are graceful to our investors as we continue to grow our innovative financial services platform during this exciting time. I will now ask the operator to close the line.
Operator: And ladies and gentlemen, this concludes today's call and we thank you for your participation. You may now disconnect.