Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SHF Holdings Inc (SHFS, Financial) generated positive net income and gross profit for the second quarter of 2024.
- Operating expenses were reduced by almost 84% compared to the same period last year.
- Loan interest income for the second quarter of 2024 was up approximately 204% year over year to approximately $1.8 million.
- Successfully exited a $3.1 million defaulted loan, recovering the full principal plus over $200,000 in accrued interest.
- Cash and cash equivalents increased to $6.1 million as of June 30, 2024, compared to $4.9 million at December 31, 2023.
Negative Points
- Total revenue for the second quarter of 2024 was $4 million, down approximately 12% from the prior-year period.
- The number of active accounts and aggregate deposit balances were lower by approximately 33% versus the prior-year period.
- Total revenue for the six months ending June 30, 2024, was down approximately 7.6% from the comparable prior-year period.
- Lower interest income and lower deposit activity contributed to the decrease in total revenue.
- Net working capital was only $302,000 as of June 30, 2024, indicating limited liquidity.
Q & A Highlights
Q: Can you elaborate on the significant reduction in operating expenses this quarter?
A: (James Dennedy, CFO) The reduction in operating expenses, which were approximately $3.7 million this quarter compared to $22.5 million in the same period last year, was primarily due to lower stock compensation expenses and reduced consulting and professional services costs. Last year's figures included significant impairment charges to goodwill and long-lived intangible assets.
Q: What impact do you anticipate from the potential reclassification of cannabis from Schedule I to Schedule III?
A: (Sundie Seefried, CEO) The reclassification would not legalize cannabis but would alleviate tax burdens under Section 280E, potentially strengthening our clients' balance sheets and income statements. This could create a more favorable business environment, enabling expansion of services and new market opportunities, and increasing our ability to qualify clients for more lending options.
Q: Can you provide more details on the new lines of credit issued in June?
A: (Sundie Seefried, CEO) In June, we issued additional lines of credit totaling $550,000 to three long-standing Colorado cannabis clients. This move supports the capital requirements of small and midsized cannabis businesses, offering normalized non-predatory rates without requiring real estate collateral. This expansion aims to diversify our revenue streams and strengthen our market position.
Q: How did the company manage to exit the $3.1 million defaulted loan successfully?
A: (Sundie Seefried, CEO) The successful exit was facilitated by the strong fundamentals of the Class A industrial real estate in Denver that secured the loan. We recovered the full principal plus over $200,000 in accrued interest, which will be reinvested into lending and credit line capacity. This was our only non-performing loan, and its recovery validates our balanced lending approach.
Q: What are the expectations for full-year revenue and adjusted EBITDA for 2024?
A: (James Dennedy, CFO) We expect to report full-year revenue in the range of $17 million to $18 million and full-year adjusted EBITDA in the range of $3.75 million to $4.25 million.
Q: How has the company's loan interest income performed this quarter?
A: (James Dennedy, CFO) Loan interest income for the second quarter of 2024 was up approximately 204% year over year to about $1.8 million. This substantial increase contributed positively to our financial performance.
Q: What are the key factors behind the lower total revenue this quarter compared to last year?
A: (James Dennedy, CFO) The decrease in total revenue, which was $4 million this quarter compared to $4.6 million last year, was driven by lower interest income and lower deposit activity and onboarding income. However, this was offset by substantially higher loan interest income.
Q: Can you discuss the company's liquidity position as of June 30, 2024?
A: (James Dennedy, CFO) As of June 30, 2024, we reported cash and cash equivalents of $6.1 million compared to $4.9 million at the end of 2023. Cash provided by operating activities through the second quarter was $2.7 million, a significant improvement from the $965,000 used in the same period last year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
