Heritage (US:HGBL)2020-11-09 21:00Impact of COVID-19 - Heritage Global Inc. reported a minor negative impact on performance due to COVID-19, with delays in asset sales[90] - The company expects increased demand for online auctions and valuation services as a result of ongoing social distancing measures[91] Business Performance and Financials - Total revenues for the nine months ended September 30, 2020, were $17.9 million, a decrease of $2.67 million or 13% compared to $20.6 million in 2019[133] - Revenues for the nine months ended September 30, 2020, were $17.9 million, a decrease of approximately 13.1% from $20.6 million in the same period in 2019[139] - Gross profit for the nine months ended September 30, 2020, was $13.2 million, down approximately 6% from $14.0 million in 2019[139] - Net income for the nine months ended September 30, 2020, was $3.34 million, a slight increase of $19, or 1%, from $3.32 million in 2019[133] - Net income for the nine months ended September 30, 2020, was $3.341 million, slightly up from $3.322 million in 2019[145] - Adjusted EBITDA for the nine months ended September 30, 2020, was $3.260 million, down from $3.932 million in 2019, reflecting a decrease of approximately 17%[145] Revenue Streams and Business Model - Heritage Global Inc. has a diversified business model with multiple revenue streams across brokerage, advisory, and secured lending services[103] - The Industrial Assets division charges fees ranging from 15% to 50% depending on the role in the transaction, highlighting revenue potential[111] - The company anticipates growth in auction services through higher-contribution principal deals and increased mergers and acquisitions in manufacturing[112] - The company plans to expand into the FinTech, student loans, and peer-to-peer lending sectors, indicating strategic growth initiatives[108] Cash Flow and Working Capital - As of September 30, 2020, the company had working capital of $0.9 million, an improvement from a working capital deficit of $2.3 million at December 31, 2019[119] - Current assets increased to $11.0 million at September 30, 2020, compared to $6.8 million at December 31, 2019, primarily due to cash flow from operations[119] - Cash and cash equivalents rose to $5.8 million at September 30, 2020, up from $2.7 million at December 31, 2019, an increase of approximately $3.1 million[125] - Cash provided by operating activities was $2.8 million during the nine months ended September 30, 2020, compared to $1.0 million in the same period in 2019, reflecting a $1.8 million increase[126] - The company expects to finance future operations through cash flows from asset liquidation, proceeds from the recent stock offering, and draws on the line of credit as needed[129] Expenses and Cost Management - Selling, general and administrative expenses decreased to $10.5 million in 2020 from $11.6 million in 2019, a reduction of about 9%[140] - The decrease in total selling, general and administrative expenses was largely due to the elimination of Equity Partners compensation costs after their separation from the company[140] - Travel and entertainment expenses saw a substantial decline of 60%, dropping to $234,000 in 2020 from $588,000 in 2019[141] - The depreciation and amortization expense increased to $0.3 million in 2020 from $0.2 million in 2019[142] Strategic Initiatives and Compliance - Management believes that tightening underwriting standards will create more funding opportunities for Heritage Global Capital LLC[93] - The company aims to leverage its Capital Asset Redeployment Enterprise (CARE) software for growth in auction services[112] - Management emphasizes the importance of compliance with consumer protection laws, which may incur substantial costs[113] - The company completed an offering of 5,462,500 shares of common stock in October 2020, resulting in net proceeds of approximately $9.1 million[129] Key Performance Indicators - The company emphasizes EBITDA and Adjusted EBITDA as key performance indicators for assessing operational performance[144] - The company reported a significant increase in HGC compensation, rising 994% to $339,000 in 2020 from $31,000 in 2019[141]