SHFS - Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Benjamin, and I will be your conference operator today. At this time, I would like to welcome everyone to Safe Harbor Financial First Quarter 2024 Earnings Call. [Operator Instructions]

I would like to turn the call over to Erika Kay. ahead. go Please

Erika Kay

afternoon, XXXX Good welcome the to Thank Conference everyone, Call Quarter Earnings Financial. for First you. and Safe Harbor

differ start, actual company's today's subject uncertainties operational expectations matters. remarks in call that its market including is to please forward-looking results projected other include could materially regarding company's such that we financial and the the statements, from respect statements and statement made and to outlook Each to risks opportunities forward-looking those cause with Before today note statements. discussed on

timing Actual results or certain and statements, not for materially differ from such performance. as by results the and predicted of timing considered events results should indication be may or reported forward-looking the an implied future

call, non-GAAP was on to both or company's GAAP statements forward-looking harbor at ir.shfinancial.org. the speak undertakes of only forward-looking the under heading Securities will December year as www.sec.gov date, XX, in company's measures website. the for Relations the appears of factors can XXXX, earnings our financial well SEC GAAP which factors this Investor ended reconciliation Risk with in annual report non-GAAP the as you XX-K press company's on find and are SEC, these company's December A measures. website regarding The Exchange limitation report information XXXX, today's present and obligation in as included and including on the update the the safe Form at or in release, these for website filings Commission the available or the During ended the statements which of Form statement., call annual XX, Factors year on in to today's no Additional company the or revise any on XX-K the included

events today to call otherwise XXXX. to now will May any and contain Chief over statements of hand today All dollar I'll undertakes content ahead. time-sensitive expressed go the than call. of Officer; Seefried, this Holdings, the this Financial please Sundie amounts Safe circumstances Dennedy, of be SHF update U.S. obligation other Sundie, Presenting Officer revise Harbor. or only date of accurate XX, the call or reflect Chief currency. as Sundie. to Finally, information Inc. may Executive today, are no in Jim

Sundie Seefried

premier Thank we quarter and more our you, with earnings focused diversified of enhance lines We most financial first drive XXXX income specifically we Erika, newer our compliance the expansive continue suite welcome services to and to first on XXXX products place. advancing businesses business position to streams to in as to entered the grow and In as their across quarter, of in regulatory face gain call. our motion, with CRBs provider of important to understand context obstacle access to cannabis-related financial significance is CRBs businesses. the our a lending the services in even when country. changes the It trying continue program for of or capital

rates the with And provided remain Traditional other businesses hesitant do participate, interest terms if loans carry often complex to engage credit loans cannabis they industry's to less to unions financing due banks and structure. high sectors. in favorable compared to and

extension states our our platform cannabis XXXX, compliant facilitating in a proven for and clients over Given over in business. in infrastructure across deposits lending into $XX through serving the incorporating success finance XXX XX billion our our was since natural inception

capable a access one traditional service and handful providing of providers tools of compliant to is lending. Harbor just of financial Safe CRVs deposit

year. was growth in evolved understand important in we program revenue success To past first it have high-margin our of to is this Our channel provide further first results has the quarter lending in since achieved demonstrate to business composition position. this on enhance XXXX, our how developing the introduced competitive over our it the perspective

financial requirements with from monitor growth address deposits capacity. funds, which working clients' and ensure lend lend. against to capital, our we increased deposit strong success To institutions base our lending with in Increased for our result closely deposits. compliance higher accrued to to partners onboard, we a CRB Given worked financial with have

believe Safe Given unique lending will new deposit strong Harbor's organic opportunities drive lending capabilities, we growth. help

the approximately we in of end of over truly XX% up creating ramping nearly this at percentage The began and the acceptance our income value support QX loan our demonstrate income When XXXX, loan our income business the our capability nominal more diversified tripled year-over-year goal a in clearly book program of stream. was results quarter. of lending of interest just of QX represented revenue XXXX, a And at unique loan market XX%. and

finance Our leveraging to and services service create proven of and array level cannabis platform across have providing we experienced By the financial proprietary monitoring entry offerings, barriers and our safe our service to same our country. harbor for scale due oversight on which cannabis the ability product centers high fintech differentiate expanding compliant from of business one-stop businesses in a center experience our the high compliance, in competition. shop and and to required. model to

our are to growth. drive we on depository Today, our fees reliant less

investment are being We channels operating now income with fees multiple business derived from interest, synergistic and loan income. lending increasing

compared in I of in of increased the result, pleased our million quarter that quarter $XXX,XXX the of the year-over-year. income first to XXX% $X.X XXXX, a am comparable XXXX. to period XXXX first in As loan report to

XXXX call, to I decreased our of base mentioned deposit Bank revenue termination the due in services and sharing QX our agreement with Central has master our during XXXX Arkansas. July As

of as dropped March impacted our XXX which XXXX, negatively from of to XX, number of quarterly result, depository fees. March a As total X,XXX as accounts our XXXX, XX, client

million quarter quarter compared XXXX, fees these first million the $X.XX to decreased For to XX% of the XXXX. first $X.XX in of

due all to in retain decrease continue to need at anticipated institutions. remain fees to A deposits and and not competitive attract with pricing our us the clients. the We market depository this to present surprise in increase does financial and change market new

in our to products customer with believe which in with base the opportunities, continue and first such will additional the lending long industry. value-added our relationships high-margin businesses is focus our provide where cannabis results as key our attract of turn we We forefront from lending to is finance term. takeaway quarter the create believe Our primary ability the remain we at program, to services

In deposit to addition, new for we and financial in positioned available with new greater turn, array tools of are customers now a our add platform, accounts. capture

financial attempt will it additional difficult Harbor not do these banking proven as as extremely Many [indiscernible] has model businesses. more institutions balances financial Bank these support replicate of institutions our execute. Safe look more of the lead to cannabis to We with to lending and to want to needs

strategy leverage the Our near-term the banks is platform deposit growth our and CRBs from further looking to of demands to across increase meet country. to base our the acquire exit portfolios business,

along to With for market credit every serve or operators large our strategically the the growth. rollout across legal ability deposit more multistate MSOs, country, of tools with and positioned more and in are we

commercial with and CRBs For accounts of example, interest-bearing are offering. more XXXX, of recognizing launch more in deposit the our breadth our the service

These to of resulting also first line. margins. efficiency positive important total fundamentals to expense first to our remain $X.X strong, impactfully compared XXXX our in We quarter is the deliver improvement improved improvements over our to quarter continued operating $X.XX the that net reduced operating million XX% business by bottom to operating of It in XXXX. in million note

substance Harbors. discuss We and X Jim X proposed over results, [indiscernible] Schedule discuss traditional to that cannabis And inaccessible. quarter call Schedule cannabis industry's step what to recently substance. of from industry well forward has will the turn the would to the the as believe the I first getimizing rescheduling the of means like been Before to be rescheduling to significant cannabis our for for a industry, incredible I our made leading by with financing this growth catalyst access to channels Safe greater as a

near greater tax potential we returns. much business capital field a and expenses go businesses. of to term, code, stability. can Schedule rescheduling on long the for our growth cannabis of the prospect of writing constraints more for will playing Section dealing the businesses The believe substances rescheduling their from allowing federal stronger businesses cannabis off prohibits financial evening internal X In attract with these deliver financial XXXE, the and the industry, resi Without the returns way which would

into harbor. The safe fact, cannabis have a will money in businesses which for industry, more be of the huge would these accounts, bank potentially opportunities deposit cannabis their harbor. including to And rescheduling greater lending to for safe win lead

our their more to businesses, financial services to we the As to networks the Issues dramatically businesses unfortunately continue for payment demand these increase. cash-intensive. support predominantly industry exist, will open institutions leading will expect doors cannabis

Act. that addition will cannabis In Controlled the remain fact Substance under to the

from transition the to Safer the access financial allow the and businesses Another to will Banking being operations to cannabis greater Act, catalyst is industry state which primarily for legal institutions. allow industry's gain participants traditional cash-based growth

does law, BSA. this While need requirements Act, Bank act it Secrecy to meet or not the oversight becoming the compliance moving of and eliminate is closer to the

either Therefore, neutral the to given a processed Most to is managed. harbor, funds. we the act need event new process the are banking navigate view unwilling ensure and It to market or increasingly becoming safe DSA. needed are financial the to these important institutions undertake management compliance the entering as unable safer businesses for properly continued

landscape. XX past to cannabis expand with our fintech the have platform the regulatory tailored years, Over evolving we

continue unmatched. to ensure The cannabis services proper We the pride change. our ability capability ourselves is will industry Our remains to unique deliver nationwide. to to streamline and and entrepreneurs and complex cannabis trusted financial operations consistently compliance

the results quarter I'd over to now Jim? discuss our like XXXX. the for to turn to Jim financial ended XX, March call

James Dennedy

a year activity everyone. primarily more increase and a was income. million the opened accounts of first was period year the afternoon, streams $X.X the good period, $XXX,XXX. X million in decline compared decrease to a attributable balances period. period revenue deposit versus $X.X Total current deposit income the loan interest prior to prior than revenue decrease investment of by onboarding current in offset by XXXX million XXX% was fewer prior to income period and The the quarter in lower in and Simdie, substantial being versus Thanks, result This the these in of $X.X and in in year

the consideration the and and company lower $X.X $X.X and advertising million operating in marketing expense stock-based more XXXX The The by first quarter and versus than owed quarter to loss expenses. of employee by period. Operating the first to deferred the primarily general the compensation year primarily XXXX operating fair significantly positive administrative the in the of period, $X including expense, decreased net fair to during lower of expense first value year due shareholders. income the generating income XXXX lower were compensation Apica and million million expense, expenses value first quarter company changes warrant reported liability prior the compared of million quarter benefit of of lower favorable to in in the $X.X driven prior XX% in to nearly and a net our of

net expense believes income further taxes to measure exclude for and/or XX, the which quarter in press reconciliation we net is depreciation evaluate to the X-K infrequent and and year for adjusting of When million and on performance. important the in report EBITDA noncash, today. compute interest, $X adjustments unusual our and EBITDA, is adjusted Form amortization provided ending costs, an to and period. the March management A was operating adjusted EBITDA filed income earlier XXXX, versus release $XXX,XXX prior current Adjusted

of XXXX used was Cash in million of decrease $X.X balance at XX, due flow $X.X quarter XXXX. same and improvements by operations to cash compared $XXX,XXX during reported cash by XXXX, period expenses. December of $X.X million million mainly the in a the XXXX. cash equivalents cash to At sheet. in in operating versus the March operating activities XX, the first was to The company generated Moving

Turning to liquidity. our

$XXX,XXX capital Our capital better the $XXX,XXX just at than is improvement attributable working loans in in XXXX. our at a performing and of of greater The year-end. to number quarter improved of December versus XXXX of XX, primarily and capital reported net working lower short at operating working a rates to first deficit expense

slightly generate of year XXXX, modestly to $X.X compared full EBITDA XXXX, to $XX.X year million the which of total higher full ahead on to million on our we adjusted EBITDA reported Looking of better adjusted revenue. for expect revenue

to the XXXX. and XX, filed for EBITDA the for adjusted March of year on was with XX-K Commission The income provided in Form of full net XXXX the Securities XXXX reconciliation Exchange GAAP

will now We will subsequent With the for call provide back to this open guidance and earnings year. throughout questions. the I the call call the operator to that, updates turn to

Operator

Thank there participating. today's [Operator being the Instructions] no And This in questions queue. conference concludes you for call.

disconnect. now may You

SHF (SHFS) 13 May 242024 Q1 Earnings call transcript