SHF Holdings, Inc. Q3 FY2024 earnings call

• Continued building credibility as a trusted financial partner for cannabis businesses.
• Financial highlights: Net income increased 147% y/y to $354,000 in Q3 2024; loan interest income up, operating expenses down.
• Challenges in cannabis sector: Pricing pressures, excess supply, competition; lower deposit activity at Safe Harbor.
• Originated a new $1.07 million secured credit facility for a Missouri-based cannabis operator, first tranche of a $5 million commitment.
• Partnership with BIPOCann to support minority-owned small businesses in cannabis sector, offering membership benefits and discounted application fees.
• Outlook on election results and cannabis reclassification hearing: Hoping for middle ground on cannabis legalization, and anticipation of DEA hearing on reclassifying cannabis.

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. For the nine months ended September 30, 2024, total revenue was $11.6 million, a decrease of 11.6% from $13.1 million in the comparable prior year period. Third quarter 2024 loan interest income grew 48% year-over-year to $1.3 million. For the nine months ended September 30, 2024, loan interest income grew 143.5% year-over-year to $4.8 million. Revenue for deposit activity and onboarding in the third quarter of 2024 was $1.6 million, a decrease of 26% versus the comparable prior year period. For the nine months ended September 30, 2024, deposit activity and onboarding revenue was $4.9 million, a decrease of more than 29.6% versus the comparable prior year period. Revenue earned in the three months ended September 30, 2024, for investment income was $475,000, a decrease of approximately 60% versus the comparable prior year period. For the nine months ended September 30, 2024, investment income was $1.75 million, a decrease of 56.5% versus the comparable prior year period. Third quarter 2024 total operating expenses were $3.3 million compared to $3.8 million for the comparable prior year period, a 13% decrease. For the nine months ended September 30, 2024, total operating expenses were $10.8 million versus $32.1 million in the prior year period, a 66% decrease. 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.

• Challenging market conditions for cannabis-related businesses impacting sales.
• Lower deposit activity at Safe Harbor.
• Lack of regulation for CBD and THC derivatives under Temp Farm Bill posing higher risk for providing compliant financial services.