Heritage (US:HGBL)2024-11-07 21:00Loan and Credit Losses - As of September 30, 2024, the amortized cost basis of restructured loans was $51.6 million, representing 59% of the total charged-off asset portfolio loans[76] - The allowance for credit losses related to restructured loans increased to $1.1 million as of September 30, 2024, up from $1.0 million as of September 30, 2023[76] - The company has incurred no actual credit losses from the inception of the specialty lending program through September 30, 2024[77] - The company’s largest borrower restructured loans totaling $22.2 million, which accounted for 57% of its share of the loan book[76] - As of September 30, 2024, approximately 75% of the total balance of loans outstanding were in nonaccrual status due to a default by the largest borrower[84] - The company's net balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $30.8 million as of September 30, 2024[84] Financial Performance - Revenues for the three months ended September 30, 2024, were $10.4 million, a decrease of approximately 33.3% from $15.6 million in the same period in 2023[103] - Gross profit for the three months ended September 30, 2024, was $7.2 million, down approximately 26% from $9.7 million in the same period in 2023[103] - Total revenues for the nine months ended September 30, 2024, were $34.6 million, down from $45.3 million in the same period in 2023, representing a decrease of approximately 23.5%[105] - Gross profit for the nine months ended September 30, 2024, was $23.8 million, a decrease of approximately 18% from $29.0 million in the same period in 2023[105] - Net income for the three months ended September 30, 2024, was $1.1 million, a decrease of approximately 45% from $1.9 million in the same period in 2023[103] - The company reported a net income of $5,385,000 for the nine months ended September 30, 2024, down from $7,585,000 in 2023, a decrease of 29%[109] Operating Income and Expenses - Operating income for the three months ended September 30, 2024, was $1.5 million, a decline of approximately 47% from $2.8 million in the same period in 2023[102] - The Auction and Liquidation segment reported operating income of $583,000 for the three months ended September 30, 2024, down from $1.1 million in the same period in 2023[102] - The Brokerage segment generated operating income of $1.7 million for the three months ended September 30, 2024, compared to $2.1 million in the same period in 2023[102] - Selling, general and administrative expenses decreased to $5.7 million for the three months ended September 30, 2024, compared to $6.8 million in the same period in 2023, a reduction of approximately 16%[104] - Total selling, general, and administrative expense decreased by 6% to $18,390,000 for the nine months ended September 30, 2024, compared to $19,546,000 in 2023[31] Cash Flow and Working Capital - Working capital increased to $16.2 million as of September 30, 2024, compared to $11.6 million as of December 31, 2023[91] - Current assets rose to $37.0 million as of September 30, 2024, up from $26.3 million as of December 31, 2023, primarily due to a $14.3 million increase in cash[91] - Cash and cash equivalents increased to $26.6 million as of September 30, 2024, compared to $12.3 million as of December 31, 2023[93] - Cash provided by operations was $13.3 million during the nine months ended September 30, 2024, compared to $12.6 million during the same period in 2023[94] - Cash provided by investing activities was $8.9 million during the nine months ended September 30, 2024, compared to cash used of $14.5 million during the same period in 2023[95] - Cash used in financing activities was approximately $7.8 million during the nine months ended September 30, 2024, compared to cash provided of $4.9 million during the same period in 2023[96] Equity and Investments - Stockholders' equity increased to $66.1 million as of September 30, 2024, from $61.1 million as of December 31, 2023[92] - Earnings in Equity Method Investments increased to $2,600,000 for the nine months ended September 30, 2024, up from $700,000 in the same period in 2023, primarily due to a $1,300,000 share of earnings from the KNFH II LLC joint venture[31] Specialty Lending and Expenses - The Specialty Lending Segment has issued a total of $153.9 million in loans since its inception in 2019, with the company's portion being $67.5 million[84] - Specialty lending expenses rose by 66% to $1,287,000 for the nine months ended September 30, 2024, compared to $773,000 in 2023[31] EBITDA and Compensation - EBITDA for the nine months ended September 30, 2024, was $8,021,000, down from $10,137,000 in 2023, reflecting a decrease of 21%[109] - Adjusted EBITDA for the nine months ended September 30, 2024, was $8,822,000, compared to $10,719,000 in 2023, representing a decline of 17.7%[109] - Stock-based compensation increased by 38% to $801,000 for the nine months ended September 30, 2024, compared to $582,000 in 2023[31] - The company reported a significant decrease in performance-related compensation, contributing to the reduction in selling, general and administrative expenses[104] Other Expenses - Travel and entertainment expenses decreased by 27% to $458,000 for the nine months ended September 30, 2024, compared to $627,000 in 2023[31] - Depreciation and amortization expense remained stable at $440,000 for the nine months ended September 30, 2024, compared to $373,000 in 2023[31] - Provision for credit losses improved significantly, decreasing by 135% to $(219,000) for the nine months ended September 30, 2024, from $632,000 in 2023[31]