8-K: SHF Holdings Reports Positive Adjusted EBITDA for 2024, Loan Interest Income Surges

SHF Holdings, a financial services provider for the cannabis industry, announced its 2024 year-end and Q4 results, highlighting positive Adjusted EBITDA and significant growth in loan interest income.

Summary

• SHF Holdings (Safe Harbor Financial) reported its unaudited consolidated financial results for Q4 and the full year ended December 31, 2024.
• Revenue for Q4 2024 was approximately $3.7 million, compared to $4.5 million in Q4 2023 and $3.5 million in Q3 2024.
• Loan Interest Income increased 82% to approximately $1.8 million in Q4 2024, up from $1.0 million in Q4 2023.
• Compensation and Employee Benefits expense decreased 32% to approximately $1.4 million in Q4 2024.
• General and Administrative Expense decreased 36% to approximately $1.1 million in Q4 2024.
• Adjusted EBITDA was positive at $63,581 for Q4 2024, compared to $1.3 million in Q4 2023.
• For the full year 2024, revenue was approximately $15.2 million, compared to $17.6 million in 2023.
• Loan Interest Income increased 123% to approximately $6.6 million for the full year 2024.
• Operating Expenses decreased to approximately $22.3 million for the full year 2024, compared to $38.3 million in 2023.
• Adjusted EBITDA was approximately $2.9 million for the full year 2024, compared to $3.6 million in 2023.
• Adjusted Working Capital was approximately $2 million as of December 31, 2024.
• The company processed over $25 billion in cannabis-related funds as of January 16, 2025.
• A $1.5 million secured credit facility for a Missouri cannabis operator was originated on February 12, 2025.
• A debt obligation with Partner Colorado Credit Union was modified on March 4, 2025, unlocking $6.4 million in cash flow over the next two years.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While there are positives like loan interest income growth and expense reductions, the overall financial results show a net loss and decreased revenue, balancing the positive aspects.

Positives

• Loan interest income saw substantial growth, increasing 82% in Q4 and 123% for the full year.
• Operating expenses were significantly reduced, decreasing by 42% for the full year.
• The company successfully modified its debt obligation with Partner Colorado Credit Union, improving financial stability.
• The company has processed over $25 billion in cannabis-related funds, demonstrating its market position.
• Compensation and Employee Benefits expense of approximately $1.4 million declined 32% compared to approximately $2.1 million in 2023.
• General and Administrative Expense of approximately $1.1 million declined 36% from $1.7 million in 2023.

Negatives

• Revenue decreased for both Q4 and the full year compared to the previous year.
• Adjusted EBITDA decreased for both Q4 and the full year compared to the previous year.
• Net loss for full year 2024 was approximately $48.3 million, compared to a net loss of approximately $17.3 million in the prior year period.
• Cash and cash equivalents decreased to $2.3 million at December 31, 2024, from $4.9 million at December 31, 2023.

Risks

• The company acknowledges risks and uncertainties related to forward-looking statements, including changes in cannabis industry regulations and market volatility.
• 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.

Future Outlook

The company aims to expand its business services and execute its business strategy throughout 2025 and beyond, focusing on providing a broad array of services to address client needs.

Management Comments

• Throughout 2024, the lending arm of Safe Harbor was a driving force for the Company as our loan interest income was up 82% for the fourth quarter and 123% for the year, said Terry Mendez, Chief Executive Officer of Safe Harbor Financial.
• We continue to be an innovator in this sector as we instituted a new small business line of credit program while also originating several debt and credit facilities at market-competitive terms for numerous clients across the U.S.
• This modification greatly improves our financial stability as we are able to unlock over $6 million in cashflow over the next two years and push the term of the debt obligation out to October 2030.
• One of the major reasons I joined Safe Harbor is the tremendous opportunity I see to build upon our strong foundation, to evolve from a single compliance solution into a provider of a broad array of services focused on addressing the needs of our clients.

Industry Context

Safe Harbor Financial operates in the regulated cannabis industry, providing financial services and credit facilities. The company's performance is influenced by trends in the cannabis industry, including changes in U.S. and state laws and regulations.

Comparison to Industry Standards

• It's difficult to directly compare Safe Harbor's results to industry standards due to the unique nature of providing financial services to the cannabis industry, which faces regulatory hurdles and limited access to traditional banking.
• However, the growth in loan interest income suggests a strong demand for financing within the cannabis sector, which aligns with the overall expansion of the legal cannabis market.
• Companies like AFC Gamma and Innovative Industrial Properties also operate in the cannabis space, but focus on different aspects such as real estate and lending, making direct comparisons challenging.

Management Changes

Stakeholder Impact

• Shareholders may be concerned about the net loss and revenue decrease.
• Employees may be affected by restructuring efforts to optimize the talent portfolio.
• Customers (cannabis businesses) may benefit from the company's expanded services and credit facilities.
• The modification of the debt obligation with Partner Colorado Credit Union could impact the relationship between the two companies.

Next Steps

• The company plans to execute its business strategy throughout 2025 and beyond.
• Safe Harbor intends to enhance and expand its overall business services.

Key Dates

Keywords

Safe Harbor Financial, SHF Holdings, cannabis, financial services, loan interest income, adjusted EBITDA, earnings, revenue, credit facilities