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SHF Holdings, Inc. (SHFS)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 revenue was $4.04M, down ~12% YoY on lower deposit activity/onboarding, but essentially flat QoQ; net income improved to $0.94M vs. $(17.6)M YoY as operating expenses fell sharply and loan interest income surged over 200% YoY .
  • Lending mix shift drove “record” quarterly loan interest income of approximately $1.8M; management launched a Small Business Line of Credit program and fully recovered a $3.1M defaulted loan plus >$200K interest, bolstering lending capacity and validating underwriting discipline .
  • FY24 guidance introduced/quantified: revenue $17–18M and adjusted EBITDA $3.75–4.25M, versus prior qualitative view of “modestly higher” revenue than 2023’s $17.6M and “slightly better” adj. EBITDA than 2023’s $3.6M; this constitutes a formal range and an effective raise vs prior qualitative framing .
  • Key stock catalysts: visibility from formal FY guidance, sustained lending growth (high-margin), regulatory tailwinds (potential cannabis rescheduling), and improved portfolio quality post-default recovery .

What Went Well and What Went Wrong

  • What Went Well

    • Lending momentum: “record quarterly loan income of approximately $1.8 million” (+~203–204% YoY), improving gross margins as mix shifts to higher-margin products .
    • Cost discipline: operating expenses fell to $3.74M from $22.49M YoY (ex-2023 impairments, the comparable prior-year quarter was $5.6M), supporting a swing to $0.94M net income .
    • Underwriting validation: exited sole non-performing loan, recovering 100% of $3.1M principal plus >$200K accrued interest, increasing lending capacity and portfolio quality (“only nonperforming loan in the company’s history”) .

  • What Went Wrong

    • Top-line pressure: revenue declined to $4.04M from $4.57M YoY due to fewer accounts and lower deposit/onboarding revenue (active accounts and aggregate deposit balances down ~33% YoY) .
    • Depository fees softness: PCCU-related deposit/onboarding revenue decreased YoY (Q2 PCCU contribution $1.21M vs. $1.39M), while account hosting expenses rose (Q2 $121K vs. $61K) .
    • Revenue mix reliance: investment and deposit-driven revenues were weaker; the business leaned more on lending to offset declines, which may add sensitivity to credit cycles despite strong recent recoveries .

Financial Results

MetricQ2 2023Q1 2024Q2 2024
Revenue ($USD Millions)$4.57 $4.05 $4.04
Net Income ($USD Millions)$(17.60) $2.05 $0.94
Diluted EPS ($)$(0.40) $0.04 $0.02
Operating Expenses ($USD Millions)$22.49 $3.73 $3.74
Adjusted EBITDA ($USD Millions)$0.85 $1.09 $0.97
Adjusted EBITDA Margin (%)18.6% (=$0.85/$4.57) 26.9% (=$1.09/$4.05) 24.1% (=$0.97/$4.04)
Net Income Margin (%)(385.0%) (=$(17.60)/$4.57) 50.6% (=$2.05/$4.05) 23.3% (=$0.94/$4.04)

Notes: Management cited revenue down ~12% YoY in Q2 2024; table aligns with that description .

Revenue composition/KPIs (Q2 2024):

  • Loan interest income: approximately $1.8M (record) .
  • PCCU-related deposit/activity/onboarding revenue: $1,206,922 .
  • Account hosting expenses: $121,108 .
  • Provision (benefit) for credit losses: $(97,248) .
  • Active accounts and aggregate deposit balances ~33% lower YoY .
  • Cash and cash equivalents: $6.11M at 6/30/2024 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2024“Modestly higher” than 2023’s $17.6M (qualitative) $17.0–$18.0M Formal range provided; narrows outlook and brackets modest growth
Adjusted EBITDAFY 2024“Slightly better” than 2023’s $3.6M (qualitative) $3.75–$4.25M Quantified and effectively raised vs prior qualitative framing (midpoint > $3.6M)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023 and Q1 2024)Current Period (Q2 2024)Trend
Lending growth/mix2023: loan book to $55.6M; mix shifting to higher-margin lending . Q1’24: loan income up 250% YoY to $1.64M; lending now >40% of revenue .Record quarterly loan interest income ~ $1.8M (+~204% YoY); launched Small Business LOC program .Positive and accelerating
Deposits/accountsCentral Bank termination reduced deposit base; expected rebuilding . Q1’24: depository fees down 28% YoY .Active accounts and aggregate deposit balances ~33% lower YoY; activity per account increased .Stabilizing activity intensity, base still lower YoY
Cost discipline2023 had large impairments; Opex fell in Q4; focus on lower comp and services . Q1’24 Opex down >35% YoY .Opex $3.74M vs $22.49M YoY (ex-impairment prior-year $5.6M); improved profitability .Sustained efficiency
Credit/underwritingPortfolio growth noted in 2023; no major NPLs called out .Exited only NPL, recovered 100% principal + >$200K interest; portfolio quality improved .Strengthened
Regulatory tailwindsQ1’24: highlighted potential rescheduling and SAFER Banking as catalysts .Reiterated rescheduling as growth catalyst; submitted comments; sees benefits via 280E relief improving client credit metrics and deposits .Increasing visibility
OutlookQ1’24: qualitative guide: slightly better EBITDA, modestly higher revenue vs 2023 .Provided quantified FY24 ranges: rev $17–18M; adj. EBITDA $3.75–4.25M .Improved visibility

Management Commentary

  • “A major contributor to our favorable results was our lending platform, which posted record quarterly loan income of approximately $1.8 million in the second quarter of 2024, an increase of over 203% year-over year… [and] improved our bottom-line.” — CEO Sundie Seefried .
  • “Net income reported in the second quarter of 2024 was $942,000 compared to a net loss of $17.6 million in the prior year period… [with] operating expenses… approximately $3.7 million versus… $22.5 million [in Q2 2023].” — CFO James Dennedy .
  • “We had successfully exited a $3.1 million defaulted loan… we recovered the full principal plus over $200,000 in accrued interest… This was the only nonperforming loan in the company’s history and its full recovery validates Safe Harbor’s balanced lending approach.” — CEO Sundie Seefried .
  • “Looking ahead… we expect to report full-year revenue for 2024 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.” — CFO James Dennedy .

Q&A Highlights

  • Note: The published transcript largely captured prepared remarks; Q&A detail was limited in the available document. Key clarifications from management’s discussion included:
    • Drivers of YoY revenue decline were lower deposit activity and onboarding (fewer accounts, lower balances), partially offset by substantially higher loan interest income (+>204% YoY) .
    • Operating expense reductions vs. prior year are sustainable, reflecting lower stock comp, consulting, and services (prior-year Q2 included large impairments) .
    • FY24 outlook emphasizes continued lending-led growth and operating efficiency; quantified ranges target revenue $17–18M and adj. EBITDA $3.75–4.25M .

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2024 revenue and EPS was unavailable via our S&P Global feed at the time of analysis due to system limits; therefore, we cannot determine a formal beat/miss vs. consensus for the quarter [GetEstimates error].
  • Given the formal FY24 ranges introduced, we expect Street models to converge toward revenue $17–18M and adj. EBITDA $3.75–4.25M, with upward bias to EBITDA vs. earlier qualitative framing .

Key Takeaways for Investors

  • Lending-led margin mix is working: record loan interest income and sustained cost control produced positive net income despite softer deposit-driven revenues .
  • Portfolio quality and underwriting are strengths: full recovery on sole NPL increases confidence in lending scalability and risk management .
  • FY24 guidance adds visibility and supports a constructive revision path on EBITDA, with ranges implying improvement vs. 2023 .
  • Deposits/accounts remain a watch item (down ~33% YoY), but activity per account rose; renewed deposit growth would enhance operating leverage .
  • Regulatory developments (rescheduling/280E relief) could be a medium-term catalyst for stronger client financials, higher deposits, and more lending opportunities through SHFS’s first-mover platform .
  • Near-term trading setup: positive narrative on profitability and quantified guidance versus lingering concerns about deposit base; catalysts include additional loan originations, deposit portfolio wins, and regulatory milestones .
  • Execution priorities: continue expanding high-margin lending, rebuild deposit accounts (organically and via portfolio acquisitions), and maintain tight expense control .

Additional Q2-Related Press Releases and Prior-Quarter Materials

  • Q2 earnings 8-K press release, with full financials and non-GAAP reconciliation .
  • Operational items around Q2: launched Small Business LOC program (June 5); fully exited $3.1M defaulted loan with >$200K interest recovered (July 9) .
  • Q1 2024 earnings 8-K/press release and transcript (trend context) .
  • Q4 2023/Full-year 2023 results 8-K (baseline for FY comparisons) .