SHF Holdings, Inc. (SHFS)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 revenue declined to $3.48M amid lower deposit activity and onboarding fees tied to Abaca attrition, but SHFS delivered positive net income of $0.35M as cost controls and higher-yielding loans offset weakness .
• Management cut FY 2024 revenue guidance to $15.0–$15.5M (from $17–$18M in August), citing sector headwinds and softer fee/investment income, while maintaining expense discipline; no updated EBITDA guide was provided in Q3 .
• Lending remains the growth engine: loan interest income rose ~48% YoY to ~$1.3M in Q3 (vs. ~$0.9M in Q3’23), though it moderated sequentially from Q2’s record levels; investment income fell to $0.48M and deposit/onboarding revenues to $1.6M .
• Near-term catalysts center on regulatory developments (DEA hearing on rescheduling) and continued loan originations (e.g., $1.07M tranche post-quarter as part of a $5M facility), balanced against deposit mix pressure and a lowered revenue outlook .

What Went Well and What Went Wrong

• What Went Well

  • Loan interest income mix shift continues: “we are able to lead with competitive pricing as we continue to see lending income compensate for decreased depository revenue” .
  • Credit execution: exited a $3.1M defaulted loan with 100% principal plus >$200K interest collected, improving lending capacity and validating underwriting .
  • Cost control: operating expenses fell 13% YoY in Q3 and materially YTD, enabling positive net income despite revenue pressure .

• What Went Wrong

  • Revenue softness: total revenue fell to $3.48M vs. $4.33M last year, primarily from reduced deposit, activity and onboarding income related to Abaca account declines and lower sector activity .
  • Investment income down: investment income declined to $0.48M (≈60% YoY decline per CFO), adding to top-line pressure .
  • Guidance cut: FY revenue trimmed to $15.0–$15.5M from $17–$18M previously as management acknowledged cannabis sector headwinds (pricing pressure, excess supply, competition) and lower fee activity .

Financial Results

• Income statement snapshot (YoY and sequential context shown via multi-period table):

• Revenue mix (Q3 2024):

• KPIs and balance sheet/cash flow:

Notes: Q3 loan interest income 48% YoY increase ($0.9M → ~$1.3M) . CFO cited Q3 revenue down 19.6% YoY; deposit/onboarding down 26% YoY; investment income down ~60% YoY .

Guidance Changes

Management commentary pointed to sector headwinds and softer deposit/investment activity as drivers of the lower revenue outlook, while continuing to emphasize lending growth and cost controls .

Earnings Call Themes & Trends

Management Commentary

• Strategy and pricing: “We started to raise or reduce fees with other internal programs… We are able to lead with competitive pricing as we continue to see lending income compensate for decreased depository revenue” .
• Market backdrop: “Headwinds were seen across much of the cannabis sector… pricing pressures, excess supply and increased competition… [and] lower deposit activity” .
• Regulatory outlook: “We believe rescheduling… to Schedule III [would] reduce tax burdens under Section 280E… strengthen the balance sheet of our customers as well as our balance sheet” .
• Financial priorities: Expense discipline and portfolio quality improvements drove net income and cash flow; “we remain focused on driving our bottom line… generating additional revenue streams while decreasing overall expenses” .

Q&A Highlights

• The published transcript includes prepared remarks and the handoff to Q&A; a detailed Q&A section was not included in the available transcript, so no additional Q&A themes were available to review .

Estimates Context

• Wall Street consensus (S&P Global) for Q3 2024 revenue and EPS was unavailable via our S&P tool at this time due to data access limits (Daily Request Limit exceeded). As a result, we cannot quantify beats/misses versus consensus for Q3. Ordinarily, we would anchor to S&P Global consensus for comparisons.
• Given management’s updated FY revenue outlook of $15.0–$15.5M (from $17–$18M), Street models likely need to reset lower for Q4 and FY totals to align with the revised range .

Key Takeaways for Investors

• Revenue reset: Guidance reduction to $15.0–$15.5M signals a softer second half driven by deposit/activity and investment income pressure; watch for stabilization in deposit trends and investment yields .
• Lending-led model: Loan interest income remains the growth pillar with solid YoY gains; monitor sequential loan growth recovery after Q2’s record and Q3 moderation, plus new originations (e.g., $1.07M tranche post-quarter) .
• Cost discipline drives profitability: OpEx reductions and mix shift supported positive net income despite revenue decline; sustaining expense control is key to margins if fee/investment income remain pressured .
• Liquidity nuance: The reported working capital deficit is driven by a $7.3M forward purchase liability that may be settled in stock; excluding this, management cites positive working capital—important context for liquidity assessment .
• Regulatory optionality: Any progress on rescheduling (280E relief) could strengthen client credit profiles, deposits, and SHFS’ lending opportunity set; December hearing is a monitoring point .
• Execution watch‐list for Q4: sequential trends in deposit/onboarding revenue, investment income, and loan originations; adherence to cost discipline; any EBITDA commentary update versus the previously indicated full-year range from Q2 .
• Positioning: With a first-mover platform and demonstrated credit discipline, SHFS is positioned to benefit from industry normalization; near-term, prudence is warranted given the lowered revenue outlook and sector headwinds .

Citations:

• Q3 2024 8-K press release and financial statements .
• Q3 2024 earnings call transcript (management commentary and guidance) .
• Q2 2024 8-K press release and transcript (for trend and prior guidance) .
• Q1 2024 8-K press release (for trend) .