GOLDEN, Colo. — SHF Holdings, Inc., d/b/a/ Safe Harbor Financial, a leader in facilitating financial services and credit facilities to the regulated cannabis industry, reported its financial results for the second quarter and six months ended June
30, 2024.
Second Quarter 2024 Financial and Operational Summary
Net Income increased to approximately $0.9 million, compared to a net loss of approximately $17.6 million in the same period of 2023;
Revenue
was approximately $4.0 million, compared to approximately $4.6 million for the second quarter of 2023;
Operating Expenses decreased to $3.7 million, compared to
$22.5 million in the second quarter of 2023;
Adjusted EBITDA(1) increased 14.5% to approximately $0.97 million, compared to approximately $850,000 for the second quarter of 2023.
Six-month 2024 Financial & Operational Summary
Net Income increased to approximately $3.0 million, compared to a net loss of approximately $19.0 million in the first half of 2023;
Revenue
was approximately $8.1 million, compared to approximately $8.8 million for the first half of 2023;
Operating Expenses decreased to approximately $7.5 million, compared to approximately
$28.3 million in the first half of 2023;
Adjusted EBITDA(1) increased 63.5% to approximately $2.06 million, compared to approximately $1.26 million for the first half of 2023.
“During the quarter, we experienced strength across our business, as well as operated more efficiently, both of which contributed meaningfully to our strong results,” said Sundie Seefried, Chief Executive
Officer of Safe Harbor Financial. “A major contributor to our favorable results was our lending platform, which posted record quarterly loan income of approximately $1.8 million in the second quarter of 2024, an increase of over 203% year-over year. This improvement
helped to drive our gross margins substantially higher as we focused on shifting to higher margin products, which in addition to streamlining the business, improved improve our bottom-line.”
“During the second quarter we launched our Small Business Line of Credit Program, exemplifying our commitment to supporting the capital requirements of the cannabis industry, addressing the growing demand
from small and mid-sized cannabis businesses, and diversifying our income sources. We also recently recouped the entire principal from a $3.1 million defaulted loan, further demonstrating the strength of our underwriting process. The money collected from this
loan also increased our lending capacity, allowing Safe Harbor to more effectively meet client credit needs,” added Seefried.
Second Quarter 2024 Operational Highlights
On April 15, 2024, the Company appointed CEO Sundie Seefried to the Board of Directors.
On June 5, 2024, Safe Harbor announced a new small business line of credit program with the origination of three new lines of credit.
Subsequent Operational Highlights
On July 9, 2024, the Company announced it successfully exited a $3.1 million loan in default, collecting 100% of principal, as well as over $200,000 in accrued interest.
On July 25, 2024, Safe Harbor announced it was teaming up with BIPOCann to empower minority-owned cannabis businesses.
Second Quarter 2024 Financial Results
For the second quarter ended June 30, 2024, total revenue was $4.0 million, compared to $4.6 million in the prior year period. The decrease in revenue was due to a reduction in deposit activity and onboarding
income and was primarily attributable to the decrease in the number of accounts related to the Abaca acquisition. For the three months ended June 30, 2024, PCCU accounted for $1,206,922 of the revenue generated from deposits, activities, and client onboarding,
compared with $1,385,845 during the same period last year. In Q2 2024, the Company recognized $121,108 in account hosting expenses, in accordance with the Commercial Alliance Agreement, compared with account hosting expenses of $60,833 for Q2 2023.
Operating expenses for the second quarter 2024 decreased to $3.7 million, compared to $22.5 million in the prior year period, which was comprised of the following:
Compensation and employee benefits decreased in the three months ended June 30, 2024, compared to compared to Q2 2023 due to a reduction in stock-based compensation and a decrease in
the headcount.
Rent expenses decreased in the second quarter of 2024 compared to the second quarter of 2023 due to reduction in the number of lease properties.
Provision for credit losses decreased in the three months ended June 30, 2024 to a benefit for this expense item compared to and expense in the three months ended June 30, 2023 due to
a decrease in the loan loss rate.
For the quarter ended June 30, 2024, general and administrative expenses decreased across various categories including: i) approximately $345,271 in investment hosting fees due to a reduction
in investment income, and (ii) approximately $206,560 in amortization and depreciation due to the reduction in the gross value of intangible assets from impairment recorded in 2023.
The Company incurred significant impairment charges to goodwill and long-lived intangible assets in the second quarter of 2023. Removing these one-time, non-cash expenses, operating expenses
for the comparable prior year quarter were $5.6 million.
Second quarter 2024
net income was approximately $0.9 million, compared to a net loss of $17.6 million in the prior year period. The improvement in net income in Q2 2024 was the result of lower expenses across the
Company and the greater number of performing loans at better interest rates than the previous period.
First Six Months 2024 Financial Results
For the six-months ended June 30, 2024, total revenue decreased to $8.1 million, compared to approximately $8.8 million in the prior year period. The decrease in revenue for the first six months of 2024 was
due to a reduction in deposit activity and onboarding income and was primarily attributable to the decrease in the number of accounts related to the Abaca acquisition. For the six months ended June 30, 2024, PCCU accounted for $2,424,598 of the revenue generated
from deposits, activities, and client onboarding. Related to this revenue, the Company recognized $277,721 in account hosting expenses, in accordance with the Commercial Alliance Agreement. For the six months ended June 30, 2023, PCCU contributed $2,763,684
to the revenue from similar sources, with account hosting expenses amounting to $116,258 as per the Loan Servicing Agreement provisions.
First six-months of 2024 operating expenses decreased to $7.5 million, compared to $28.3 million in the prior year period, which was comprised of the following:
Compensation and employee benefits decreased in the six-month period ended June 30, 2024 compared to the six month period ended June 30, 2023 on account of stock-based compensation and
also the decrease in the headcount.
Rent expenses decreased in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to reduction in the number of lease properties.
(Benefit)/ Provision for credit losses decreased in the six months ended June 30, 2024, compared to the six months ended June 30, 2023, due to a decrease in the estimated loss rate.
For the six months of 2024, general and administrative expenses decreased across various categories including: i) approximately $632,675 in investment hosting fees due to a reduction
in investment income and ii) approximately $407,165 in amortization and depreciation due to the reduction in the gross value of intangible assets from impairment recorded in 2023.
Net income for the first six-months of 2024 was approximately $3.0 million, compared to a net loss of approximately $19.0 million in the prior year period. The driver of the net income produced in the first
six months of 2024 was due to lower expenses across the Company and the greater number of performing loans at better interest rates than the previous period.
As of June 30, 2024, the Company had cash and cash equivalents of $6.1 million, compared to $4.9 million at December 31, 2023.
For more information on the Company’s second quarter 2024 financial results, please refer to our Form 10-Q for the quarter ended June 30, 2024 filed with the U.S. Securities & Exchange Commission (the “SEC”)
and accessible at www.sec.gov.
Reconciliation of Net income (loss) to non-GAAP EBITDA and Adjusted EBITDA (Unaudited)
Safe Harbor Financial discloses EBITDA and Adjusted EBITDA, both of which are non-GAAP financial measures and are calculated as net income before taxes and
depreciation and amortization expense in the case of EBITDA and further adjusted to exclude non-cash, unusual and/or infrequent costs in the case of Adjusted EBITDA. Management of the Company uses this information in evaluating period over period performance
because it believes that EBITDA and Adjusted EBITDA present important metrics regarding the Company’s ongoing operating performance.
Investors should consider non-GAAP financial measures only as a supplement to, not as a substitute for or as superior to, measures of financial performance prepared in accordance with
GAAP.
For the period six months and three months ended June 30, 2024, our EBITDA income improved primarily as a result of decrease in General and Administrative expenses. This reduction was driven
by lower investment hosting fees, decreased amortization and depreciation expenses, and reduced business insurance costs. Additionally, there were decreases in compensation, employee benefits, marketing expenses, and other insurance costs. These factors contributing
to our financial performance are further discussed in the “Discussion of our Results of Operations” section below. Other adjustments include estimated future credit losses not yet realized, including amounts indemnified to PCCU for loans funded by them. The
Company has entered into a Commercial Alliance Agreement with PCCU, pursuant to which the Company agreed to indemnify PCCU for claims associated with CRB activities including any loan default related losses for loans funded by PCCU. Deferred loan origination
fees and costs represent the change in net deferred loan origination fees and costs. When included with a new loan origination, we receive an upfront loan origination fee in conjunction with new loans funded by our financial institution partners and incur
costs associated with originating a specific loan. For accounting purposes, the cash received for loan origination fees and costs is initially deferred and recognized as interest income utilizing the interest method.
About Safe Harbor
Safe Harbor is among the first service providers to offer compliance, monitoring and validation services to financial institutions, providing traditional banking services to cannabis, hemp, CBD, and ancillary operators, making communities safer, driving growth
in local economies, and fostering long-term partnerships. Safe Harbor, through its financial institution clients, implements high standards of accountability, transparency, monitoring, reporting and risk mitigation measures while meeting Bank Secrecy Act obligations
in line with FinCEN guidance on cannabis-related businesses. Over the past eight years, Safe Harbor has facilitated more than $23 billion in deposit transactions for businesses with operations spanning over 41 states and US territories with regulated cannabis
markets.
