SHF Holdings, Inc. Q3 FY2024 earnings call

• Throughout the third quarter of 2024, Safe Harbor continued to build credibility as a trusted financial partner for cannabis industry businesses.
• Best-in-class financial services platform remains industry standard as cannabis-related businesses seek regulatory compliance.
• Financial highlights: net income increased 147% y/y in Q3 2024 to $354,000; loan interest income up 48% Q3 and 143.5% 9 months y/y; operating expenses down 13% Q3 and 66% 9 months y/y.
• Challenges: cannabis sector headwinds, lower deposit activity, pricing pressures, excess supply, competition.
• In July, announced partnership with BIPOCann to support minority-owned small businesses and entrepreneurs in cannabis sector.
• Originated a new $1.07 million secured credit facility for a Missouri-based cannabis operator, first tranche of a $5 million commitment.
• Outlook on election results and upcoming DEA reclassification hearing, with hope for middle ground and potential industry opportunities.
• Focus on expanding customer base, delivering best-in-class service, developing innovative offerings, acquiring account portfolios, expanding deposit base, and competitive pricing.

For the three months ended September 30, 2024, Safe Harbor reported revenue of $3.5 million, down 19.6% from $4.3 million in the comparable prior year period. Revenue for deposit activity and onboarding was $1.6 million, a decrease of 26% versus the comparable prior year period. Investment income for the three months ended December 30, 2024, was $475,000, a decrease of approximately 60% versus the comparable prior year period. Loan interest income in the third quarter of 2024 grew 48% versus the comparable prior year period to $1.3 million. For the nine months ended September 30, 2024, Safe Harbor reported total revenue of $11.6 million, a decrease of 11.6% from $13.1 million for the comparable prior year period. Deposit activity and onboarding revenue was $4.9 million, a decrease of more than 29.6% versus the comparable prior year period. Investment income was $1.75 million, a decrease of 56.5% versus the comparable prior year period. Loan interest income grew 143.5% versus the comparable prior year period to $4.8 million. Total operating expenses for the three months ended September 30, 2024, were $3.3 million compared to $3.8 million for the comparable prior year period. For the nine months ended September 30, 2024, total operating expenses were $10.8 million versus $32.1 million in the prior year period (excluding a $16.9 million impairment charge in 2023). Net income in the third quarter of 2024 was $354,000 compared to a net loss of $748,000 in the comparable prior year period. 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.

• Management expects full year 2024 revenue to be in the range of $15 million to $15.5 million.

• Lack of regulation in the emerging market of CBD and THC derivatives from HEP poses higher risk for providing compliant financial services.
• Market conditions for cannabis-related businesses, including pricing pressures, excess supply, and increased competition as new states legalize.
• Impact of regulatory changes and political developments on the cannabis industry.