SHF (SHFS) 12 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to Safe Harbor Financial's Third Quarter 2024 Earnings Conference Call.

As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Phil Carlson from KCSA. Thank you.

You may begin.

you. Thank welcome for Quarter Safe and Earnings Months the Call Conference Harbor to everyone, X Third XXXX Hello, Financial.

company's with Before remarks we opportunities to and statements operational its made that the the respect today include other expectations start, forward-looking statements, market please regarding outlook, and note matters. company's financial including

timing discussed those call could the considered is statement forward-looking as results an to certain projected should actual results results cause such of differ to Actual risks not for forward-looking by and statements differ the Each from may subject on today's materially in statements. be reported predicted such that materially and or results events uncertainties or and from performance. implied indication timing future

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

date, Forward-looking statements company call only obligation will undertakes statements. speak in of this update revise these any and no of the to or today's as

the which website Also amount can Harbor website. expressed in both financial U.S. non-GAAP today's and in is of currency. will press dollar GAAP A during or reconciliation earnings on release, Safe the GAAP measures. non-GAAP on included Relations present find to call, company's All the Investor measures you SEC today are

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

look of a our partner platform industry. around say to continued build and ensure am in financial our fast-changing the Thank third compliance Earnings businesses standard and sector. Throughout X we you, Quarter months the remains services to in best-in-class I Third this quarter as to XXXX And to cannabis-related as industry Call. operating regulatory businesses cannabis for trusted pleased the that Phil, credibility welcome, of the our financial everyone, and XXXX,

which include for $XXX,XXX to increased XXX% period. the compared of net year-over-year quarter for income, a third net highlights Financial ago XXXX $XXX,XXX year loss to the

interest year-over-year, months XX% X and XXX.X% increased income XXXX and quarter Third loan respectively.

XXXX decline XX% year-over-year, and Meanwhile, a XXXX third we negatively market months in investment which our impacted the experienced the businesses. was challenging cannabis-related loan quarter respectively. third in second quarter and X conditions expenses quarter from and of decreased Revenue XX% fee, operating for for income by by

sales managed is were seen specific cannabis lower Harbor income controversial headwinds quarter, activity, to cash Cannabis market increased emerging THC [ included deposit ]. supply sector, slightly much to of from and excess derivatives legalize. Despite pressures, One states CBD and we highly the the the HEP Safe sales challenges, to impacting as flat factor competition that During which and to affecting resulting continue flow. of included across is decreased increase these sales. in pricing Factors additional net new

These the are under not level, [ but state Bill the Farm regulated ]. rather at Temp

the determine it we While into health new of makes to industry market financial compliant continue Safe is a providing Harbor the and higher a regulation lack if to which can market it a risk. services expand, is

is cannabis The adult-use legalized non-legalizing realized good and Minnesota market XXXX. size cannabis national Delaware, business allowing with adult-use with XX additional increased cannabis medicinal our the continues model, being adult continued at In XXXX, state legalizing grow for states The growth. and to for states Mayo of XX legalization market the use. use in level

Grand Safe industry the XX.X% that positioned Safe make entities. state Harbor According Legalization of competitive to at growth more expected to as new advantage a changes We believe to their is market CAGR the believe View financial Harbor is to focus us level We licensees to with continue from cannabis through implementation they year-over-year. early Research, XXXX is thing, lags cannabis continue $XX.X to assist size to but on billion rate the from well incoming report we certainly growth one is will legal making legalization. in needs. ramp an of market of up with market XXXX. reach a markets take XXXX expected attractive

the for of neutralize from choose that positive that this activity raise to placement One is minimum initiatives fees or programs. programs operators ATM with other may ranging to we reduce fees balances responsible to started internal such

lending decreased able revenue. are competitive we depository pricing income to We see for as continue lead with to compensate

run, In replace of $X.XX credit programs. The will originated to and end the a is the that loss facility third a new retail Missouri-based Missouri. even manufacturing cannabis secured to by the the in quarter, in we includes secured a and believe, the for we facility dispensaries long Subsequent a operator. due portfolio facility place, X increase programs income million

optimize capital And market. their cannabis growing debt. this senior an operations refinancing example our state's borrowing existing is the of to of offer $X with our commitment a to The industry. them within operators the strategy competitive pricing This cost in cannabis enable executing the first million refinance to and will tranche access on is reduces operator's to evolving

and cannabis our also delivering development our and investors. underserved industry of value by history, grows minority-owned portfolio to Throughout commitment from shown a communities. inclusive has Safe further entrepreneurs small more It and growth supporting to its businesses Harbor credit equitable the

dedicated cost. a entrepreneurs BIPOCann, suite partnership, no new full consulting Denver-based all social benefits aiding offer will announced existing cannabis $XXX to Safe to valued Under partnership and the with clients in we firm this membership of BIPOCann, at its equity a additional Harbor social sector. at July, minority equity In

a Additionally, fees discount program. BIPOCann, complementing equity discount services social existing XX% Safe for financial Harbor's will on application receive members

financial equitable aims these and resources to to Safe with create and more By services providing businesses a inclusive Harbor industry. BIPOCann and reliable access cannabis

results, well handing recent the as hearing the Jim I Before results review financial will upcoming briefly to on speak our over election to as on reclassification.

businesses. January, we White that hope sides and middle in us now can election House support coming behind to Trump the back find With and President-elect both cannabis-related the ground

will sees this potential for to stated the legalized, While it industry he states revenue be through President-elect leave streams. that job on opportunity to confident Trump decide and cannabis creation additional the whether up that should are we has he

We the forward are cannabis for for the beyond industry. and XXXX potential to looking opportunities

As Schedule be previously believe on cannabis. the as cannabis has opinions a we have several to a scheduling for hearing scheduled we proposed X said, I III review more industry of our in to positive know soon we Schedule rescheduling from the and expert will ways, DEA December

also reclassification XAE, for As sheet. cannabis balance has businesses know, field under level the playing reduce well as burdens strengthen of customers would to potential tax our sectors. relative our to you which likely sheet the the as balance will other Section help Reclassification

mover We capitalize As the positive is in these of first evolution regulatory Federal Harbor this environment. well our towards steps closely. positioned cannabis the as monitoring and developments the view reform, Safe industry, is to Safe Harbor on

we our higher to confident growth we best-in-class of the efforts capacity for develop all base, and of service recap, concentrating our to will which expand continue To customer deliver result lending. are are innovative offerings,

weighted more and growth as strategy higher remains to balances. competitive on platform acquire portfolios well we base by are to pricing be demand near-term to the striving to meet Furthermore, our Our account deposit of needs with our CRDs. structure business expanding looking our from as adapting banks exit

bottom to while additional looking decreasing revenue execute business we line at by our streams remain driving strategy, As continue expenses. overall our on generating on we focused

the to to Third call our ended XXXX. to Jim? like over now I'd Jim financial hand discuss September Quarter for XX, results

Thanks, Sundie, and good everyone. afternoon,

year ended prior $X.X months revenue period. X million comparable Harbor of the Safe down XX.X% For XXXX, in September the from XX, reported $X.X million,

decrease X of the XXXX, for For Harbor months revenue September the from million XX.X% $XX.X million total ended year comparable reported prior $XX.X XX, a period. Safe of

$X.X In a year of than versus ended the the XX.X% period. months and XX, And comparable for deposit prior activity activity prior deposit the quarter and X of revenue revenue was for $X.X onboarding third million, a September year XXXX, versus revenue of million, for decrease XX% comparable XXXX, the period. more decrease was onboarding

Revenue ended September prior investment the XX, $X.XX approximately income for months prior of decrease $XXX,XXX, XX% a year comparable was decrease XXXX, the And the investment earned period. X income XXXX, XX.X% in the for a December versus was ended versus months of XX, period. year comparable million, X

period the XX, year loan And XXX.X% grew months September XXXX, versus In $X.X versus X interest million. ended the for the million. prior XX% grew the income income third to quarter, interest loan $X.X to period comparable comparable year prior

statement. income the down Moving

X the September For million $X.X XX, operating months the prior comparable total were for expenses XXXX, million ended to period. $X.X year compared

expense The largely operating in and decreases in and by was expenses. and benefit employee general in administrative decreases decrease compensation driven expenses

included For months ended the for September the XX, million expenses $XX.X operating of versus an year $XX.X Operating expenses charge were XXXX, period. the ended XXXX, September in XX million million. impairment $XX.X X months prior total X

expenses were for operating million. XX, total $XX.X ended Excluding X the charges, September impairment the XXXX, months

for $XXX,XXX approximately year $X.X period. income XXXX, impairment a September was September the to by $XXX,XXX When the prior X loss prior months million the in comparable period the the excluding compared in XXXX, of ending XXXX, in versus third for year the ended the charges XXXX Net expenses quarter business period. XX, taken reduced XX, comparable net of

income better X months net adjusted and/or and EBITDA, net And evaluate for million the for to measure versus adjustments XX, expense, compute loss adjusting of income and the our XXXX, ended XXXX. management performance. company we $X.X reported ended XX, unusual a taxes the $XX.X noncash, infrequent interest, September a and net depreciation further X for exclude is amortization and of believes which months operating to million When September costs,

September the million September company comparable X-K $XXX,XXX XX, the period. ended million the net provided A million comparable in filed X and X of is for $X.XX press income release XXXX, the EBITDA adjusted prior And reconciliation for reported ended months versus year Adjusted the September XX, in quarter to XXXX, XX, adjusted $X.X was earlier XXXX. $X.X EBITDA today. of versus ended EBITDA prior months in the year

company cash equivalents third to through Moving of September $XXX,XXX $X.X comparable in to used operating XX, XXXX cash At and activities at provided compared XXXX. Cash balance the activities compared of operating XX, was sheet. to million December by of million in XXXX, the year the prior period. $X.X quarter cash $X.X reported the million

our liquidity. $XXX,XXX working December reported of XX, net million capital deficit versus of The XXXX, at a September company a on to $X.X Turning deficit XXXX. XX,

which to may $X.X capital common working paid recorded Our ] deficit company. be in purchase million stock forward liability, includes the for million [ the of $X.X

paid Excluding million. the capital common $X.X the liability may of stock a positive have be company working cash, versus in approximately that would

expect to ahead we XXXX, report the to range million. of million balance $XX.X the for full Looking year revenue of to in $XX XXXX

like now the session. call turn the to operator for question-and-answer over I'd to

note CEO, for Seefried, turn to I this I questions Instructions] time. to the Sundie closing no would Ms. over like [Operator remarks. at call

support. continued all look you We XXXX updating Thank their for year-end on to March. operator to and call, now thank investors today's our us in line. our close the on call I joining forward you will to ask for the you

for thank joining support. on continuous and investors Thank our their you for you for call, all today's

We you end will look forward to on March. XXXX call year in updating our

You may disconnect.