SHF (SHFS) 14 Aug 242024 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Safe Harbor Financial Second Quarter 2024 Earnings Conference Call. [Operator Instructions]

And I would now like to turn the conference over to Mr. KCSA. of Carlson Phil

begin. may You

Safe everyone, and Conference as Quarter Earnings presentation. to the Harbor the company duration of welcome for SHF to the as refer Call will business which Second or Holdings, the Financial throughout XXXX we Hello, Harbor Inc. Safe doing

Act could Before in Securities predicted cause an harbor those by differ results forward-looking outlook XXXX. materially that are future statements, to of matters. statements on comments from we statements. Actual subject like Litigation events of provision on results These differ include made as to respect opportunities expectations such operational or actual statements everyone timing I other of or be remind not to would safe and is forward-looking of discussed that and regarding today's to which projected and Private the call from performance. considered the this Reform start, the indication may certain statements and financial with should forward-looking implied to uncertainties certain call company's the results materially reported timing results These market the forward-looking subject include its statements risks company's such and the

available factors are heading at the the company's www.sec.gov Securities Additional on appears filings under information which Risk and regarding website with the or and these the Factors ir.shfinancial.org. at SEC, in Exchange our Commission,

non-GAAP reconciliation SEC can earnings present which of obligation the included speak filed as will website. during of and as to Harbor of U.S. All statements. XX-Q non-GAAP expressed any are call the amounts today's website revise company's undertakes in Safe well currency. you as and or the our press today today's in these in this on Relations on call, GAAP Investor GAAP dollar or is only financial to release, find measures statements forward-looking will update the date, A The company no measures. both Also

Seefried, call Chief I Jim Dennedy, Sundie the Financial Safe please be will Officer to Executive go and over Sundie, Chief today Presenting turn Harbor. of Sundie. now Officer; will ahead.

everyone, Phil, Thank welcome, XXXX and earnings you, our to call. second-quarter

of we Harbor's position leading improve income portfolio for continuing Safe During cannabis-related to as loan continue as XXXX, to our diversify quality businesses, second provider services capacity enhance streams, the quarter well financial as product our and a offering. solidify

efficiently For revenue and gross services platform change allowed in the our shaped has In regulatory mix financial positive to improved quarter The that operate the model demonstrate past response higher in the we years, an we XX interest for and we net results business our with have landscape. achieved income. generated income cannabis X to us to quarter, profit. particular,

the for operating [ quarter We also approximately million. XX% period second note, last ] XXX% loan year. to the compared same important expenses up Also interest by almost income to was XXXX year-over-year reduced to $X.X approximately

cannabis industry the addresses from businesses, firm cannabis and dives highlights. cannabis lines supporting and small financial Jim into some of underserved X the traditional often want midsized credit we financials, the our segment capital of I growing deeper to exemplifies clients. issued, the $XXX,XXX recap long-standing Before move additional announced In for by originating Colorado requirements institutions. commitment strategic June, This demand successfully to recent a

but this provider not as services financial position revenue normalized rates believe offers only lending expansion streams diversify real of program our estate the also cannabis We could required that industry. our Our strengthen [ collateral. noncreditor our ] without in platform a

broader to growth, that while believe this in the we're relationships our will By solidifying program Harbor's cannabis filling we the line this supporting driving market, Safe and anticipate client positively market leadership. enhancing gap ecosystem. We bottom contribute

The fundamentals, over capacity. this Class exiting credit interest, A principal successful in announced loan, the million recovered exit we loan, and which process. in Denver. accrued strong defaulted the plus strength $X.X full we and In originated by into underwriting secured $XXX,XXX line real lending a in exited XXXX of Harbor's will facilitated demonstrating Safe be that reinvested we July, was the by property's In estate had successfully industrial

was the company's lending validates nonperforming its This the balanced only history loan approach. and Harbor's Safe in recovery full

overall addition, quality outcome loan lending In the improves and our our increases portfolio capacity.

to I the address reclassification Department the a regarding believe the growth cannabis possibility proposal to July of submitted the of reclassify would XX to the from Act. we also Schedule like Controlled Substances Ahead deadline, cannabis industry. of X to be significant the which for catalyst we would comments X Schedule Justice

were comments significant calling XX% rescheduled comments progress descheduling of alter cannabis changing the AML would of the submitted page of cannabis from for X proposed complete requirements. those It cannabis Over to X XX% with while in legalize for would or represent a and favor Schedule Schedule of compliance and BSA almost XX,XXX schedule industry. cannabis,

balance sheet would prospect could and change cannabis business this reclassification help burdens for services more We strengthening statements. field rescheduling potentially level new alleviate The The XXXE, would expansion create businesses. opportunities. cannabis likely income clients' market under tax of favorable environment, our enabling anticipate playing of Section a and the

our balances. believe expenses constraints debt Internal service XXXE, returns, these potentially to them Schedule on would the our be produce their stronger businesses, of with Revenue lending the for to X substances increasing increase writing Code we deposit returns qualify prohibits from options, Without ability off businesses more federal financial coverage, and that Provision viewing able business tax improve

to to Harbor. the up financial the Safe rolled benefits favor The of strength industry's

Importantly, Safe financial continued underscores Kansas the this development relevance Harbor's in services sector.

the to expertise industry status position evolving first-mover uniquely Our and on us capitalize landscape. regulatory deep

service cannabis company's believe business for would businesses. we remain a unique that growth the has would our believe industry, the in cannabis crucial methodical the enabled increase we approach platform building scaling. high-risk for other and partner and our the banking considerably, platform need creative national of and With We

competitive this focus on combination talent. of processes advantage anticipate all a The intellectual training, We supported platform's talent capital policies, we growth. are human monitoring and by property as established plus continued and will provide well expert

Harbor services ahead, our and the lead will to Looking Safe with in cannabis commend market. position further continue lending unique financial

capable a traditional one of financial CRB handful of compliant just access We to of tools with lending. service providers are and deposit providing

committed our industry changes. regulation and remain will opportunities to regulatory organic We service to suite, these the well-positioned drive unique growth. With supporting through capitalize new as on we evolves, change lending offerings to the cannabis believe are and we product continue deposit

to continuing legalized are seek to on increasing to base deposit focus seen or our expand we institutions attention and and financial our growing on institutions to with unwilling difficulty unable financial As have opportunities. due execute. complexity a model Certainly, business client exiting remains traditional our business replicate the its lending markets attracting newly either

to roll country, over With our we legal serve June additional our ability Jim? to as Jim the pursuit are results every months to to discuss market the large XXXX. we believe hand for across quarter well-positioned well offerings, like future call service XX, our continued out financial for growth. ended to MSOs now the in X I'd as and

Sundie, everyone. and afternoon, good Thank you,

of of of income. The approximately total higher the the the in and months decrease and down second lower XX, offset holders of balances, and approximately income by year volume revenue end lower were at And $X.X revenue of loan income, was the second from lower deposit revenue interest X interest quarter and the the active in million, total Notwithstanding period. prior higher prior by substantially down was accounts XX% accounts quarter activity period. of balances million account X.X% million, comparable by number onboarding $X.X XX% period. year June prior driven comparable fewer versus year versus XXXX, deposit was of XXXX total quarter active comparable the account revenue XXXX aggregate the for was per in Our account The activity $X revenue in $X.X our the the approximately total period. year million ending prior the of lower XXXX, from total

more Additionally, in the loan XXX% up XXXX, XX, was period. by June prior period ending versus interest the year income than

the of income down operating company the the of Operating that quarter $X.X versus charges in quarter million. were Recall intangible goodwill significant million incurred and of Moving of approximately assets quarter in second XXXX the expenses statement. XXXX. second to long-lived XXXX in $XX.X impairment the second expenses

for After and of lower lower versus for XXXX X in $X the quarter loss quarter of expenses. Consequently, in operating the in quarter million XXXX And ending year $XX XXXX the operating of compensation prior second professional net in company expenses removing net loss of second expenses XXXX, million. were June million of versus a repeat $XX.X the was the period. a the expense $X.X consulting $XXX,XXX prior XX, XXXX quarter were period. second net these one-time million services-related year same stock The the noncash second the income months compared of to lower of reported primarily expenses, and income to attributable net

infrequent and for adjusted interest, When expense to we adjustments exclude amortization and unusual believes performance. depreciation net further adjusting and/or management operating compute to evaluate EBITDA, costs, measure which is a income our in and taxes noncash,

XX, of X-K for XX, $XXX,XXX the EBITDA A June report today. the approximately filed and with for earlier $XXX,XXX of months $X.X versus ending million million approximately of half year company the reported period. comparable for X XXXX, income is provided ending reconciliation press to XXXX. release And current $X.X adjusted in the prior EBITDA the June adjusted first net XXXX, Adjusted the EBITDA in versus SEC quarter the was

sheet. balance the to Moving

of year cited a previously compared million company $X.X million prior improvement the $X.X versus second reported of cash used at of by operating to This XXXX. in operating cash provided was expenses period. XXXX versus December $XXX,XXX comparable and year As cash quarter Cash due million period. activities and in approximately was XXXX, by of $X.X mainly June XX, to equivalents through lower the XXXX prior operating the XX, activities

a capital reported December of $XXX,XXX to XX, our XXXX. of net The net versus deficit on liquidity. capital XXXX, a approximately working Turning XX, working $XXX,XXX company June on

adjusted With $X.XX now expect balance full-year of the questions. we in the to Looking to $XX to EBITDA of XXXX, that, of will to million revenue million I call $XX the the full-year the to turn XXXX the range ahead for for open $X.XX range report million. call operator and million in to back

questions Instructions]. conference turn actually for over with closing back I Seefried remarks. [Operator to time, at additional no to any the this And would or like Sundie

Financial. to today's your on joining and us like support thank would for I all you. you Harbor call Thank for Safe for

innovative our time. we exciting We grow the financial the line. as will to services are continue grateful our I this during close operator platform to now to ask investors

concludes and you thank And we participation. for ladies and your gentlemen, this call, today's

disconnect. now may You