Q3 2024 SHF Holdings Inc Earnings Call
Erika Kay, Sundie Seefried, Unknown Attendee, James Dennedy
Speaker Change: Greetings and welcome to Safe Harbor Financial's 3rd Quarter 2024 Earnings Conference Call. As a reminder, this conference has been recorded. It is now my pleasure to turn the call over to you, Phil Carson from KCSA. Thank you. You may begin.
Phil Carson: Thank you. Hello, everyone, and welcome to the third quarter of nine months, 2024 earnings conference call for Safe Harbor Financial.
Phil Carson: Before we start, please note that remarks made today include forward-looking statements, including statements with respect to the company's outlook and the company's expectations regarding its market opportunities and other financial operational matters.
Phil Carson: Each forward-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.
Phil Carson: Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forelooking statements and reported results should not be considered as an indication for future performance.
Phil Carson: with the Securities and Exchange Commission, or the SEC, which are available at www.sec.gov and on our website at ir.shfinancial.org. Forward-looking statements in this call will speak only as of today's date, and the company undertakes no obligation to update or revise any of these statements.
Speaker Change: which you can find on the company's investment relations website or on the SEC website. All dollar amounts expressed today are in U.S. currency. Presenting today will be Sundie Seefried, Chief Executive Officer, and Jim Dennedy, Chief Financial Officer of Safe Harbor. I'll now turn the call over to Sundie. Sundie, please go ahead.
Sundie Seefried: Thank you, Phil, and welcome, everyone, to our third quarter and nine months of 2024 earnings call.
Sundie Seefried: Throughout the third quarter of 2024, we continued to build our credibility as a trusted financial partner for the businesses operating in and around the cannabis industry.
Sundie Seefried: Financial highlights for the third quarter 2024 include net income which increased 147% year-over-year to $354,000 compared to a net loss of $748,000 for the year ago period.
Sundie Seefried: Revenues for the third quarter of 2024, in which we experienced a decline from the second quarter in our fee, loan, and investment income, was negatively impacted by challenging market conditions for cannabis-related businesses.
Sundie Seefried: One additional factor impacting Canada's sales that is highly controversial is the emerging market of CBD and THC derivatives from hemp.
Sundie Seefried: These are not regulated at the state level, but rather under the hemp farm bill.
Sundie Seefried: Legalization at the state level is one thing, but the implementation of a legal market certainly lags legalization.
Sundie Seefried: with other internal programs that operators may choose to neutralize such use.
Ranging from Minimum Balancers [inaudible]
Unknown Attendee, James Dennedy, Participant Broadcast and Webinar.
Sundie Seefried: Subsequent to the end of third quarter, we originated a new $1.07 million secured credit facility for a Missouri-based cannabis operator. The facility is secured by a portfolio that includes four retail dispensaries and a manufacturing facility in Missouri.
Sundie Seefried: And this is the first tranche of a $5 million commitment to refinance existing senior debt. The refinancing reduces the operator's borrowing costs and will enable them to optimize their operations within the state's growing cannabis market.
Sundie Seefried: This is an example of executing on our strategy to offer cannabis operators access to capital with competitive pricing in our evolving industry. It also grows our credit portfolio, further delivering value to investors.
Sundie Seefried: Throughout our history, Safe Harbor has shown its commitment to a more inclusive and equitable cannabis industry by supporting the development and growth of minority-owned small businesses and entrepreneurs from underserved communities.
Sundie Seefried: Before handing over to Jim to review our financial results, I will speak briefly on the recent election results as well as the upcoming hearing on reclassification.
Sundie Seefried: With the election now behind us and President-elect Trump coming back to the White House in January, we hope that both sides can find middle ground and support cannabis-related businesses.
Sundie Seefried: As we have previously said, we believe rescheduling cannabis from Schedule 1 to Schedule 3 will be a positive for our industry in several ways, and we will know more soon as the DEA has scheduled a December 2nd hearing to review expert opinions on the proposed rescheduling of cannabis.
Sundie Seefried: As a first mover in our industry, Safe Harbor is well positioned to capitalize on the evolution of the regulatory environment. We view these developments as positive steps towards federal cannabis reform, and Safe Harbor is monitoring this closely.
Sundie Seefried: To recap, we are concentrating our efforts to expand the growth of our customer base, continue to deliver best-in-class service, and develop innovative offerings.
Sundie Seefried: All of which we are confident will result in higher capacity for lending. Our near-term growth strategy remains to acquire account portfolios from banks, looking to exit the business, as well as expanding our deposit base and adapting our platform to meet demands of CRBs.
Sundie Seefried: As we continue to execute on our business strategy, we remain focused on driving our bottom line by looking at generating additional revenue streams while decreasing overall expenses.
Speaker Change: I'd now like to hand the call over to Jim to discuss our financial results for third quarter ended September 30th, 2024. Jim?
Thanks, Sundie, and good afternoon, everyone.
Jim Dennedy: And for the nine months ended September 30, 2024, revenue for deposit activity and onboarding revenue was $4.9 million, a decrease of more than 29.6% versus the comparable prior year period.
Jim Dennedy: Revenue earned from the three-month end of December 30, 2024, for investment income was $475,000.
Jim Dennedy: In the third quarter, loan interest income grew 48% versus the comparable prior year period to $1.3 million.
Jim Dennedy: And for the nine months ended September 30, 2024, loan interest income grew 143.5% versus the comparable prior year period to $4.8 million.
Jim Dennedy: Moving down the income statement for the three months ended September 30, 2024, total operating expenses were $3.3 million.
compared to $3.8 million for the comparable prior year period.
Jim Dennedy: The decrease in operating expenses was largely driven by decreases in compensation and employee benefit expense and decreases in general and administrative expenses.
for the nine months ended.
September 30, 2024. Total operating expenses were $10.89.
Jim Dennedy: Operating expenses for the nine months ended September 30, 2023, included an impairment charge of $16.9 million.
Jim Dennedy: Excluding the impairment charges, total operating expenses for the nine months ended September 30, 2023, were $15.2 million.
Unknown Attendee, James Dennedy
on excluding the impairment charges taken in 2023.
Speaker Change: And for the nine months ended September 30, 2024, the company reported net income of $3.3 million versus a net loss of $19.8 million for the nine months ended September 30, 2023.
Speaker Change: A reconciliation of net income to adjust the EBITDA is provided in the press release and AK file earlier today.
Speaker Change: Adjusted EBITDA for the quarter ended September 30, 2024, was $764,000.
versus 1.05 million in the comparable prior year period.
Speaker Change: And for the nine months ended September 30, 2024, the company reported adjusted EVDA of $2.8 million versus $2.3 million in the comparable prior year, nine months ended September 30, 2023.
Speaker Change: Cash provided by operating activities through the third quarter of 2024 was 3.2 million dollars.
Speaker Change: Our working capital deficit of $2.5 million includes $7.3 million recorded for the full purchase liability, which may be paid in common stock to the company.
Speaker Change: Excluding the liability that may be paid in common stock versus cash, the company would have a positive working capital of approximately $4.8 million.
Speaker Change: Looking ahead to the balance of 2024, we expect to report full-year revenue for 2024 in the range of $15 to $15.5 million.
Speaker Change: I'd now like to turn the call over to the operator for question and answering sessions.
Thank you.
Speaker Change: We will now begin the question and answer session. At this time, I would like to remind everyone in order to ask a question,
Speaker Change: Press the star and then the number one on your telephone keypad. If you are called upon to ask your question and are listening via a loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Now we will pause for a moment to compile the question and answer roster.
[inaudible]
Speaker Change: I know it's your question at this time. I'd like to turn the call over to Ms. Sundie Seefried, CEO, for closing remarks.
Speaker Change: Thank you all for joining us on today's call, and thank you to our investors for their continued support. We look forward to updating you on our year-end 2024 call in March. I will now ask the operator to close the line.
Speaker Change: Thank you all for joining on today's call and thank you to our investors for their continuous support. We will look forward to updating you on our year-end 2024 call in March.
Erika Kay, Sundie Seefried, Unknown Attendee, James Dennedy