SHF (SHFS) Q3 2024 earnings summary

Executive summary

• Net income for Q3 2024 rose 147% year-over-year to $354,000, reversing a net loss, and nine-month net income reached $3.3 million versus a $19.8 million loss last year, driven by lower operating expenses and absence of large impairment charges.

• Loan interest income increased 48% in Q3 and 143.5% for the nine months year-over-year, as the number of serviced loans doubled.

• Revenue declined to $3.5 million in Q3 2024, down 19.6% year-over-year, and to $11.6 million for the nine months, down 11.6%, mainly due to reduced deposit and onboarding income after the loss of a key banking partner.

• Operating expenses decreased 13% in Q3 and 66% for the nine months, reflecting lower compensation, rent, and G&A, and no impairment charges in 2024.

• Management notes substantial doubt about the company’s ability to continue as a going concern due to historical negative trends and net working capital deficit.

Financial highlights

• Adjusted EBITDA for Q3 was $764,000, down from $1.05 million year-over-year; nine-month Adjusted EBITDA rose to $2.8 million from $2.3 million.

• Cash and cash equivalents at September 30, 2024, were $5.9 million, up from $4.9 million at year-end 2023.

• Cash flow from operations was $3.2 million for the nine months, compared to cash used of $225,000 in the prior year.

• Diluted EPS for nine months was $0.06, compared to $(0.51) in the prior year.

• Net working capital deficit of $2.5 million at September 30, 2024, versus $135,000 at December 31, 2023; excluding a $7.3 million forward purchase liability, working capital would be positive $4.8 million.

Outlook and guidance

• Full-year 2024 revenue expected in the range of $15–$15.5 million.

• Management expects account numbers and fees to recover as the lending program expands, requiring borrowers to place deposits with partner institutions.

• Focus remains on expanding the customer base, acquiring account portfolios, and adapting offerings for cannabis-related businesses.

• Monitoring regulatory developments, including potential cannabis rescheduling and federal reform.

• Substantial doubt about the company’s ability to continue as a going concern for at least twelve months due to historical negative operating income and net working capital.