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The new CEO of Safe Harbor Financial is doubling down on marketing and sales efforts to increase awareness of the company and grow its customer base.
The fintech – which works with banks and credit unions serving cannabis industry businesses, as well as the businesses themselves – is looking to jump-start growth after reevaluating its strategy, said CEO Terry Mendez. He became CEO in February after predecessor Sundie Seefried retired.
“Marketing is a key aspect of what we need to do,” he said. “More people, more financial institutions and more cannabis-related businesses have to know that Safe Harbor is an option for them.”
Cannabis banking services have risen in recent years as a number of states have legalized marijuana recreationally or medically while it remains an illegal, Schedule 1 drug on a federal level. Many lenders can be reluctant to bank the industry due to risk and compliance burdens.
Golden, Colorado-based Safe Harbor, established in 2015 as the cannabis banking arm of Partner Colorado Credit Union, was spun out in 2021 and taken public in 2022 by a special-purpose acquisition company.
Part of the reason for that move was so Safe Harbor could work with more financial institutions, Mendez said. The fintech is a couple of years behind on that strategy, so “the goal here is to go implement the business plan,” he said.
Less than 10% of some 8,800 financial institutions in the U.S. service the cannabis industry, Mendez said. Safe Harbor counts about six on its platform, and Mendez hopes to grow that to 20 to 25 in three years. About 97% of the fintech’s revenue still comes through its relationship with PCCU.
“There’s a massive amount of opportunity, and I’d love to be able to expand the number of financial institutions that trust Safe Harbor to deliver compliance,” as well as provide services that create stickiness for their depositors, he said.
In the last 10 years, Safe Harbor has processed about $25 billion in deposit transactions for cannabis-related businesses in 41 states and U.S. territories through its partner banks. The company works with hundreds of cannabis industry firms, Mendez said.
After taking the CEO reins, Mendez sought to cut costs “fast.” He was initially brought in as a consultant by Seefried, who asked him to evaluate the company’s strategy and team, and assess how Safe Harbor could bolster revenue and reduce expenses. Seefried, PCCU’s former CEO and Safe Harbor’s founder, remains on the fintech’s board.
That endeavor resulted in what Mendez has referred to as a “mini modification” of the company to shave costs, cutting about nine employees and pausing or eliminating some marketing, financial and legal services until the company has a better grasp of what it needs, he said.
“When we started looking at what we were spending, we said, some of this is delivering value, some of it isn’t,” he said.
The company’s loss increased almost threefold last year, to $48.3 million, according to its latest annual filing. Safe Harbor’s 2024 revenue fell 13% from the previous year, to $15.2 million. Although the fintech reduced 2024 expenses by about 42% compared to the prior year, those costs still came in at $22.3 million, partly due to higher legal fees last year related to litigation connected to its 2022 acquisition of Abaca.
Operating losses and uncertainty surrounding cash flows have raised “substantial doubt about the Company’s ability to continue as a going concern” for at least the next year, Safe Harbor said in the annual filing.
“If the Company is not able to sustain its present level of operations, it may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail planned expansion programs,” the filing said. The company this month also flagged “material weaknesses” in its internal controls over financial reporting for 2024 and 2023.
Last month, Safe Harbor effected a reverse stock split to avoid Nasdaq delisting – its share price has dropped about 74% over the past year – and modified its debt with PCCU, to free up $6 million, which can be invested in the company. The fintech spent about $3 million paying down that note in 2024, Mendez noted.
Mendez maintained Safe Harbor is a “healthy” business, saying the company’s adjusted earnings before interest, taxes, depreciation and amortization over the last three years has been positive; it was about $2.9 million last year. The fintech has about $2 million in working capital, he noted.
“I don’t see myself going out and doing much more” in terms of restructuring, he said, as there’s “not a lot left that’s not core to our business.”
“Right now, the idea is: grow,” he said.
The fintech faces some stiff competition, including North Bay Credit Union’s subsidiary Greenbax Marketplace, which Mendez said approaches the market similarly to Safe Harbor, as well as firms Green Check and Shield Compliance.
Increasing Safe Harbor’s customer base is key, Mendez said, whether the fintech is just handling compliance for financial institutions, or providing compliance plus sales, marketing and opening cannabis-related accounts for those financial institutions.
The company, which now has just under 40 employees, recently hired a senior vice president of marketing and a vice president of business development, and the goal is to have those two closely tied, Mendez said.
“As we see the strategy working, we’ll continue to make investments,” he said.
Regulatory work is the core of Safe Harbor’s business, but growing its network of services will help drive revenue growth and its market share, Mendez indicated. The fintech sees the addition of services for cannabis industry employees as something that can separate it from competitors, and it’s also exploring offering earned wage access.
He also pointed to partnerships with Würk, a cannabis human resources software company, and FundCanna, a debt capital provider. Safe Harbor announced this month it had struck referral agreements with both.
The firm more recently added a small-business line of credit program and has originated debt and credit facilities for cannabis companies. Safe Harbor also plans to make investments in its core platform to increase the level of automation, aimed at making it more effective in cost and compliance, he said.
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