Executive Summary

Q1 performance showed resilient top line with revenue of $4.05M (-3% y/y) and a swing to net income of $2.05M (vs. $(1.41)M) on materially lower operating expenses (-36%) and favorable warrant/deferred consideration marks . Adjusted EBITDA rose to $1.09M (+165% y/y), reflecting cost actions and mix shift toward lending .
Mix shift continues: loan interest income rose 251% to $1.64M as the loan book nearly tripled y/y, while depository and onboarding fees fell 28% to $1.62M amid fewer accounts/balances after the 2023 Central Bank exit .
Balance sheet/liquidity improved modestly: cash was $5.6M (vs. $4.9M at 12/31/23); working capital turned positive (~$0.32M), though management still disclosed substantial doubt about going concern given recent history and obligations .
Outlook: management expects FY24 adjusted EBITDA “slightly better” on “modestly higher” revenue vs. 2023 ($3.6M Adjusted EBITDA on $17.6M revenue); catalysts include potential rescheduling to Schedule III (positive) while SAFER Banking viewed as neutral given persistent BSA compliance needs .

What Went Well and What Went Wrong

What Went Well
- Lending scale and mix: loan interest income rose 250%+ to $1.64M as the loan book nearly tripled y/y; lending represented just over 40% of Q1 revenue. “Our loan income increased 250% y/y to $1.6 million” (CEO) .
- Cost discipline: operating expenses declined 35.8% to $3.73M; Adjusted EBITDA improved to $1.09M; management cited lower G&A, amortization/depreciation, stock comp, and insurance costs .
- Profitability inflection and cash generation: net income of $2.05M vs. $(1.41)M; operating cash flow of $1.48M vs. $(0.23)M y/y .
What Went Wrong
- Depository pressure and client attrition: depository fees fell 28% to $1.62M; active client accounts dropped to 757 from 1,040 y/y following the Central Bank relationship termination in July 2023 .
- Investment income decline: investment income fell 45% y/y to $0.77M on lower balances and fewer new accounts .
- Going concern language and Nasdaq bid deficiency notice present overhangs despite near‑term improvements .

Financial Results

Revenue and Net Income trend

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($M)	$4.30	$4.50	$4.05
Net Income ($M)	$(0.75)	$2.50	$2.05

EPS comparison (diluted)

Metric	Q1 2023	Q1 2024
Diluted EPS ($)	$(0.06)	$0.04

Operating results (Q1 y/y)

Metric	Q1 2023	Q1 2024
Operating Expenses ($M)	$5.80	$3.73
Operating Income (Loss) ($M)	$(1.62)	$0.325
Adjusted EBITDA ($M, non‑GAAP)	$0.410	$1.087

Revenue breakdown (mix shift)

Revenue Component ($)	Q1 2023	Q1 2024
Deposit, activity, onboarding income	$2,245,831	$1,620,994
Safe Harbor Program income	$51,103	$19,230
Investment income	$1,417,152	$773,819
Loan interest income	$466,293	$1,636,756
Total Revenue	$4,180,379	$4,050,799

KPIs

KPI	Q1 2023	Q1 2024	Change
Avg. monthly ending deposit balance	$222,857,256	$135,467,105	(39.2%)
Account fees	$2,120,187	$1,303,133	(38.5%)
Avg. active accounts	1,018	744	(26.9%)
Avg. account balance	$218,917	$181,998	(16.9%)
Avg. fees per account	$2,083	$1,751	(15.9%)

Balance sheet/liquidity (point‑in‑time)

Metric	12/31/2023	3/31/2024
Cash & Equivalents ($M)	$4.89	$5.63
Working Capital ($M)	$(0.135)	~$0.318
PCCU‑funded loan portfolio ($M)	$55.65	$58.17

Non‑GAAP reconciliation details are provided in the company’s release; Adjusted EBITDA excludes non‑cash items (warrants, deferred consideration), credit loss provisions/benefits, stock comp, and loan origination fee deferrals .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2024	None issued	“Modestly higher” than FY23 ($17.6M actual)	New qualitative outlook
Adjusted EBITDA	FY 2024	None issued	“Slightly better” than FY23 ($3.6M actual)	New qualitative outlook

Management will update guidance in subsequent quarters .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023)	Previous Quarter (Q4 2023)	Current Period (Q1 2024)	Trend
Lending expansion	Pipeline >$100M, loan interest +119% y/y; loan balance >$42M	Loan book value $55.6M YE23 (+194% y/y)	Loan income $1.64M (+251% y/y); lending just over 40% of revenue	Accelerating
Deposits/accounts	Avg balances $216.9M; accounts 986	Central Bank exit noted; impact to deposit accounts	Accounts 757 vs 1,040; deposit fees −28%	Down but stabilizing focus on lending‑led deposits
Regulatory (Schedule III)	SAFER advances seen as opening opportunities	—	Rescheduling to Schedule III viewed as significant catalyst; more capital to industry	Improving sentiment
SAFER Banking Act	Positive step, but BSA compliance remains barrier	—	Viewed as neutral; BSA obligations persist; SHFS platform advantage	Neutral structurally
Portfolio acquisitions	Pursuing portfolio buys from banks	—	Near‑term strategy to acquire portfolios; add deposits	Ongoing initiative
Cost discipline	Ex‑impairment, expense reductions underway	FY23 expenses elevated by impairments	Opex −36% y/y; Adjusted EBITDA up 165%	Material improvement

Management Commentary

“Our loan income increased 250% year-over-year to $1.6 million… loan income represented just over 40% of revenue in the quarter,” highlighting high‑margin lending as a growth vector (Sundie Seefried, CEO) .
“Depository fees decreased 28%… total number of client accounts dropped from 1,040… to 757,” following the Central Bank contract termination; focus is on lending‑led relationship building (Sundie Seefried) .
“Operating expense… decreased by more than 35% to $3.7 million… net income… nearly $2 million,” with improved cash from operations and positive working capital (James Dennedy, CFO) .
Regulatory tone: rescheduling to Schedule III is “a significant catalyst… leading to greater access to traditional financing,” while SAFER Banking is neutral given enduring BSA compliance needs (Sundie Seefried) .

Q&A Highlights

The Q&A portion of the Q1 call was not included in the retrieved transcript; no incremental clarifications beyond prepared remarks could be reviewed .

Estimates Context

Wall Street consensus (S&P Global) for SHFS Q1 2024 EPS/revenue was unavailable at the time of this analysis; as a result, we cannot quantify beats/misses vs. consensus for this quarter. Management did not provide quarterly financial guidance, but outlined a qualitative FY24 outlook .

Key Takeaways for Investors

Lending‑led repositioning is working: lending income now >40% of revenue with strong y/y growth; further portfolio acquisitions could add deposits and underwriting opportunities .
Cost resets are sticking: opex down 36% y/y; Adjusted EBITDA up 165% y/y; operating cash flow positive—monitor durability as growth resumes .
Deposits/accounts still a headwind y/y post Central Bank exit; watch for stabilization via lending‑anchored relationships and interest‑bearing account adoption .
Regulatory optionality: Schedule III rescheduling could catalyze capital inflows and loan demand; SAFER Banking likely neutral to SHFS given compliance moat .
Risk guardrails: going concern disclosure and Nasdaq bid‑price deficiency are notable overhangs; liquidity improved modestly but leverage/obligations persist (senior note, indemnity liabilities) .
2024 setup: management targets modest revenue growth and slightly better Adjusted EBITDA vs. 2023; execution on lending growth and deposit rebuild are the swing factors .

Additional references and context

Q1 2024 press release and full financials, including non‑GAAP reconciliations and statements of cash flows .
Q1 2024 10‑Q, detailed revenue mix, KPIs, loan/indemnity disclosures, and going concern statement .
Q4/FY23 press release for sequential context .
CEO appointment press release (governance/newsflow during Q1) .

SHF Holdings, Inc. (SHFS)·Q1 2024 Earnings Summary