SHF (SHFS) - 2023 Q4 - Annual Results

Financial & Operational Highlights This section summarizes Safe Harbor Financial's key financial and operational achievements for the full year 2023 Full-Year 2023 Financial & Operational Highlights Safe Harbor Financial achieved record 2023 performance with 85.3% revenue growth to $17.6M, 194.2% loan book growth to $55.6M, and 176.9% Adjusted EBITDA increase to $3.6M Full-Year 2023 Key Financial Metrics | Metric | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $17.6 million | $9.5 million | +85.3% | | Loan Book Value | $55.6 million | $18.9 million | +194.2% | | Adjusted EBITDA | $3.6 million | $1.3 million | +176.9% | | Deposit activity and onboarding income | $8.6 million | $6.1 million | +42% | - Since its inception, the company has facilitated over $21.5 billion in deposit activity across 41 states, underscoring its significant role in providing financial services to the regulated cannabis industry[1] Management Discussion This section provides insights from management regarding the company's strategic initiatives and performance in 2023 CEO's Remarks CEO Sundie Seefried emphasized 2023 revenue diversification through new lending and deposit products, despite a Central Bank agreement termination, anticipating 2024 deposit growth - The company's strategic focus in 2023 was on broadening its financial service offerings with new lending and deposit products to create a more diversified and high-margin revenue mix[3] - A mutual agreement to terminate a partnership with Central Bank resulted in a significant loss of deposit accounts in the second half of 2023[3] - Management expresses confidence in increasing deposit activity in 2024 and beyond, citing strong interest from other national financial institutions and cannabis-related businesses[3] Detailed Financial Results This section presents a detailed breakdown of the company's financial performance for the fourth quarter and full year 2023 Fourth Quarter 2023 Financial Results Q4 2023 revenue rose 25% to $4.5M, driven by loan interest and retroactive adjustments, while operating expenses decreased 16.2% to $6.2M, leading to a $2.5M net income Fourth Quarter 2023 Key Financial Metrics | Metric | Q4 2023 | Q4 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $4.5 million | $3.6 million | +25% | | Operating Expenses | $6.2 million | $7.4 million | -16.2% | | Net Income/(Loss) | $2.5 million | ($37.0 million) | N/A | - A strategic shift in how the company applies earned interest to client deposits resulted in an additional $549,000 of revenue being recognized in Q4 2023, applied retroactively from the beginning of the year[6][8] - Operating expenses included a $2 million impairment charge for developed technology during the fourth quarter of 2023[7] Full-Year 2023 Financial Results FY 2023 revenue grew 85% to $17.6M, but operating expenses surged to $38.3M due to impairments, resulting in a $17.3M net loss, an improvement from prior year Full-Year 2023 Key Financial Metrics | Metric | FY 2023 | FY 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $17.6 million | $9.5 million | +85% | | Operating Expenses | $38.3 million | $11.7 million | +227% | | Net Loss | ($17.3 million) | ($35.1 million) | -50.7% | | Cash and cash equivalents | $4.9 million | $8.4 million | -41.7% | - The substantial increase in 2023 operating expenses was primarily driven by goodwill and other impairment charges, expenses related to restructuring the Abaca transaction, and stock-based compensation[10][11] Key Operational Events This section outlines significant operational activities and achievements during and after the fourth quarter of 2023 Fourth Quarter 2023 and Subsequent Operational Highlights Safe Harbor engaged in key Q4 2023 and subsequent operational activities, including Abaca acquisition restructuring and originating over $17.7M in secured loans for cannabis operators - Key activities included: - Restructuring deferred consideration obligations related to the 2022 Abaca acquisition - Originating a $3M secured loan for a cannabis industrial building in California - Originating a $1.17M secured loan for a new cannabis retail store in Connecticut - Originating a $9M secured loan for a cultivation facility in Colorado (Jan 2024) - Originating a $4.6M secured credit facility for a Michigan cannabis operator (Mar 2024)[13] Consolidated Financial Statements This section presents the company's consolidated balance sheets, statements of operations, and cash flows Consolidated Balance Sheets As of Dec 31, 2023, total assets decreased to $67.9M, liabilities to $33.5M, while stockholders' equity significantly increased to $34.4M due to goodwill reduction Consolidated Balance Sheets as of December 31 | Balance Sheet Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $4.9 million | $8.4 million | | Goodwill | $6.1 million | $19.3 million | | Total Assets | $67.9 million | $99.5 million | | Total Liabilities | $33.5 million | $94.3 million | | Total Stockholders' Equity | $34.4 million | $5.1 million | Consolidated Statements of Operations FY 2023 revenue grew to $17.6M, but operating expenses, including $18.9M in impairments, led to a $20.7M operating loss and a $17.3M net loss, an improvement from 2022 Consolidated Statements of Operations for the Year Ended December 31 | Income Statement Item | FY 2023 ($) | FY 2022 ($) | | :--- | :--- | :--- | | Revenue | 17,562,903 | 9,478,819 | | Total operating expenses | 38,275,222 | 11,676,659 | | Impairment of goodwill & assets | 18,907,739 | 0 | | Operating loss | (20,712,319) | (2,197,840) | | Net loss | (17,279,847) | (35,128,083) | | Diluted net loss per share | (0.41) | (1.85) | Consolidated Statements of Cash Flows FY 2023 saw a net cash outflow of $3.5M, with $0.8M used in operations and $2.2M in investing, ending the year with $4.9M cash Consolidated Statements of Cash Flows for the Year Ended December 31 | Cash Flow Item | Year ended Dec 31, 2023 ($) | Year ended Dec 31, 2022 ($) | | :--- | :--- | :--- | | Net cash (used in)/provided by operating activities | (832,144) | 1,697,380 | | Net cash used in investing activities | (2,180,448) | (2,897,429) | | Net cash (used in)/provided by financing activities | (488,834) | 4,094,339 | | Net (decrease)/increase in cash | (3,501,426) | 2,894,290 | | Cash and cash equivalents - end of period | 4,888,769 | 8,390,195 | Non-GAAP Financial Measures Reconciliation This section provides a reconciliation of non-GAAP financial measures to their most directly comparable GAAP measures Reconciliation of Net Loss to Adjusted EBITDA Net loss of $17.3M was reconciled to Adjusted EBITDA of $3.6M for 2023, a 176.9% increase, driven by higher income from deposits and Abaca acquisition activity Reconciliation of Net Loss to Adjusted EBITDA | Reconciliation Item | Year Ended Dec 31, 2023 ($) | Year Ended Dec 31, 2022 ($) | | :--- | :--- | :--- | | Net loss | (17,279,847) | (35,128,083) | | EBITDA | (16,622,375) | (43,486,497) | | Goodwill and long-lived intangible assets impairment | 18,907,739 | 0 | | Stock based compensation | 3,739,156 | 2,806,336 | | Adjusted EBITDA | 3,626,411 | 1,302,093 | - The increase in Adjusted EBITDA is attributed to a rise in deposits and activity income, significantly influenced by the growth in account numbers following the Abaca acquisition[25]