Heritage (HGBL)2022-05-14 07:07Financial Data and Key Metrics Changes - The company reported net operating income of $875,000 for Q1 2022, a decrease from $1 million in Q1 2021 [8] - Adjusted EBITDA for Q1 2022 was $1.1 million, down from $1.5 million in Q1 2021 [8] - Net income for Q1 2022 was $645,000 or $0.02 per diluted share, compared to $1 million or $0.03 per diluted share in Q1 2021 [8] Business Line Data and Key Metrics Changes - In the industrial assets division, net operating income was $846,000 in Q1 2022, down from $1.3 million in Q1 2021 [7] - The financial assets division saw net operating income of $731,000, a 59% increase from $461,000 in Q1 2021 [7] Market Data and Key Metrics Changes - The company anticipates closing two remaining Huntsville real estate transactions in Q2 or Q3, expected to contribute over $2.5 million in combined net profit [9] - The company has aggregate tax net operating loss carry forwards of approximately $78 million, which could be valuable as it generates positive results [10] Company Strategy and Development Direction - The company is optimistic about growth across all five revenue streams and expects Q2 to be a record quarter [13] - The focus is on capitalizing on anticipated market conditions and increasing demand for both financial and industrial assets [6][13] - A $4 million stock repurchase plan has been instituted, indicating confidence in the company's future [19] Management's Comments on Operating Environment and Future Outlook - Management noted a significant rise in consumer spending, which is expected to lead to increased defaults and charge-offs, benefiting the company's operations [14] - The company is seeing an increase in supply from sellers who are now monetizing surplus assets due to stronger ESG metrics [26][27] - Management expressed confidence that 2022 will be the most profitable year since the company's founding [41] Other Important Information - The balance sheet remains strong with stockholders' equity of $33.4 million as of March 31, 2022, compared to $32.6 million at the end of 2021 [11] - The company has renewed a $100 million partnership line with a New York hedge fund, enhancing its lending capabilities [29] Q&A Session Summary Question: Can you break down the revenue contribution from financial assets versus industrial assets? - Financial assets contributed $746,000 in net operating income, while industrial assets contributed $846,000 for the quarter [22][23] Question: Are you seeing more portfolios come to market? - Management noted a tremendous amount of growth and expects sequential growth for the next couple of years due to rising consumer spending [24] Question: How does the current economic environment affect industrial assets? - An increase in layoffs is producing surplus assets, and companies are now pressured to monetize these assets due to ESG metrics [26][27] Question: What is the company's position regarding capital deployment? - The company is comfortable deploying capital and is underwriting more deals than in the past, indicating a solid position for future opportunities [29][30] Question: Can you provide more details about the St. Louis acquisition? - The St. Louis acquisition involves two facilities with high-end processing equipment, and the company plans to monetize these assets similarly to the Huntsville transactions [36]