Heritage (HGBL) - 2024 Q2 - Quarterly Report

Financial Performance - Total revenues for Q2 2024 were $12.023 million, a decrease of 8.2% from$ 13.098 million in Q2 2023[6] - Services revenue for the first half of 2024 was $17.464 million, down 13.0% from$ 20.055 million in the same period of 2023[6] - Net income for Q2 2024 was $2.497 million, compared to$ 2.779 million in Q2 2023, reflecting a decrease of 10.1%[6] - Operating income for the first half of 2024 was $6.102 million, a decrease of 12.8% from$ 6.995 million in the same period of 2023[6] - Net income decreased from $5,608 million to$ 4,296 million, representing a decline of approximately 23.4%[17] - The company reported a basic net income per share of $0.07 for Q2 2024, unchanged from Q2 2023[6] - Consolidated operating income for the six months ended June 30, 2024, was$ 6.102 million, down from $6.995 million in the same period of 2023[65] Assets and Liabilities - Total current assets increased to$ 35.935 million as of June 30, 2024, up from $26.292 million at the end of 2023, representing a growth of 36.5%[4] - Total assets reached$ 90.001 million as of June 30, 2024, compared to $83.168 million at the end of 2023, marking an increase of 8.8%[4] - The company’s total liabilities increased to$ 24.188 million as of June 30, 2024, compared to $22.088 million at the end of 2023, an increase of 9.5%[4] - The company’s total assets as of June 30, 2024, were$ 54,245,000, reflecting an increase from the previous balance of $51,233,000[15] - The company’s total liabilities decreased from$ 239,893,000 to $228,000,000, indicating a reduction of approximately 4.6%[15] Stockholders' Equity - Stockholders' equity rose to$ 65.813 million as of June 30, 2024, up from $61.080 million at the end of 2023, indicating a growth of 7.0%[5] - Total stockholders' equity increased to$ 65,813,000 as of June 30, 2024, compared to $61,080,000 as of December 31, 2023, reflecting a growth of 7.1%[5] - The accumulated deficit decreased to$ (228,730,000) as of June 30, 2024, from $(233,026,000) as of December 31, 2023[5] Cash Flow - The company generated net cash provided by operating activities of$ 7,730,000 for the six months ended June 30, 2024, compared to $6,663,000 for the same period last year, reflecting an increase of 16%[17] - The company experienced a net cash used in investing activities of$ 5,507,000 for the six months ended June 30, 2024, compared to a net cash used of $7,992,000 for the same period last year, indicating an improvement[17] - Cash and cash equivalents at the end of the period rose to$ 24,583 million from $15,035 million, an increase of about 63.5%[17] Credit Losses and Allowances - The Company held a gross balance of investments in notes receivable of$ 35.2 million as of June 30, 2024, with one borrower's note balance comprising approximately $23.1 million, or 66% of the total[27] - The Company's allowance for credit losses related to notes receivable was$ 0.5 million as of June 30, 2024, down from $0.7 million as of December 31, 2023[30] - The allowance for credit losses related to the restructured loans was$ 1.1 million as of June 30, 2024, up from $1.0 million as of September 30, 2023[24] - The Company increased its allowance for credit losses related to its largest borrower experiencing financial difficulties, resulting in an allowance of$ 1.0 million as of September 30, 2023[24] - The Company has no historical accounts receivable credit losses, maintaining a reserve for credit losses of approximately $0.1 million as of both June 30, 2024, and December 31, 2023[28] Share Repurchase and Stock Options - The company has approximately$ 3.2 million remaining under its share repurchase program, which allows for the purchase of up to $4.0 million in common shares by June 2025[19] - The company had 2,258,850 outstanding stock options with a weighted average exercise price of$ 1.72 and an aggregate intrinsic value of approximately $1.998 million[38] - The company recognized stock-based compensation expense related to common stock options of$ 0.3 million for both the six months ended June 30, 2024, and 2023, with $1.1 million of unrecognized stock-based compensation expense expected to be recognized over 2.1 years[38] Joint Ventures and Investments - The company reported net income of$ 5,107 thousand from HGC Origination I LLC and HGC Funding I LLC for the six months ended June 30, 2024[42] - The company recognized approximately $1.3 million in earnings from equity method investments related to KNFH II LLC in Q2 2024[51] - The company’s operating income from joint ventures for the six months ended June 30, 2024, was$ 5,107 thousand, compared to $2,226 thousand for the same period in 2023[42] Debt and Financing - The Company modified its 2021 Credit Facility, extending the maturity date to October 27, 2024, with an interest rate of Wall Street Journal Prime rate plus 1.00%, not less than 6.75% per annum[59] - The Company entered into a new$ 7.0 million Term Loan under the 2023 Credit Facility, repayable until April 27, 2028, with a variable interest rate based on the Wall Street Journal prime rate plus 0.250%[61] - The outstanding balance of the Term Loan as of June 30, 2024, was $5.7 million, with$ 1.3 million classified as current and $4.4 million as non-current[61] - Total third-party debt decreased from$ 7,228 million as of December 31, 2023, to $6,376 million as of June 30, 2024, a reduction of approximately 11.8%[57] Operational Segments - The company’s reportable segments include Auction and Liquidation, Refurbishment & Resale, Brokerage, and Specialty Lending, indicating a diversified operational structure[18] - The Industrial Assets Division reported total operating income of$ 2.125 million for the three months ended June 30, 2024, compared to $1.451 million for the same period in 2023[65] - The Financial Assets Division reported total operating income of$ 2.668 million for the three months ended June 30, 2024, compared to $2.723 million for the same period in 2023[65]