SHF Holdings Inc - Ordinary Shares (SHFS) Q2 Earnings call transcript Aug 14, 2024

Safe Harbor Financial, a leading financial services provider for cannabis-related businesses, reported a solid second quarter for 2024. The company's strategic moves to diversify revenue streams, enhance loan capacity, and improve portfolio quality have resulted in a positive net income and gross profit for the quarter.

Impressive Financial Performance

With a revenue of $4 million in the second quarter of 2024, Safe Harbor Financial reported a decrease of approximately 12% from the comparable prior year period. However, the company's loan interest income saw a significant increase of over 204% year-over-year, reaching approximately $1.8 million. This growth in loan interest income demonstrates Safe Harbor's ability to capitalize on the evolving cannabis industry landscape. The company's net income for the quarter was reported at $942,000, a significant improvement from the net loss in the prior year period.

Strategic Expansion and Loan Recovery

Safe Harbor Financial's strategic expansion into non-creditor rates without required real estate collateral for small and mid-sized cannabis businesses is a testament to their commitment to supporting the capital requirements of the industry. The company's successful exit of a $3.1 million defaulted loan, secured by Class A industrial real estate in Denver, highlights the strength of Safe Harbor's underwriting process and their balanced lending approach. This achievement not only improves portfolio quality but also increases lending capacity.

Cannabis Reclassification and Future Outlook

The potential reclassification of cannabis from Schedule 1 to Schedule 3 or even descheduling it from the Controlled Substances Act is seen as a significant growth catalyst for the industry. If implemented, this change could alleviate tax burdens under Section 280E, potentially strengthening clients' balance sheets and income statements. Safe Harbor Financial, with its first-mover status and deep industry expertise, is uniquely positioned to capitalize on these changes. The company anticipates that the evolving regulatory landscape will create new lending opportunities and drive organic deposit growth.

Looking Ahead

Safe Harbor Financial remains committed to its strategic focus on lending and capitalizing on its unique position in the cannabis financial services market. With their innovative service platform, the company is well-positioned for future growth, especially as the cannabis industry continues to expand.

In conclusion, Safe Harbor Financial's second-quarter 2024 earnings call showcases the company's resilience and strategic moves in the face of challenges. With a solid financial performance, strategic expansion, and a focus on regulatory changes, Safe Harbor Financial is poised for continued growth and success in the evolving cannabis industry.