Heritage (US:HGBL)2021-11-13 16:38Financial Data and Key Metrics Changes - The company achieved operating income of $533,000 for Q3 2021, down from $1.6 million in Q3 2020, primarily due to low asset flow volumes [5] - Net income was $474,000 or $0.01 per diluted share for Q3 2021, compared to $1.3 million or $0.04 per diluted share in Q3 2020 [6] - EBITDA for Q3 2021 was $638,000, down from $1.7 million in Q3 2020, with adjusted EBITDA at $740,000 for the quarter [7] Business Line Data and Key Metrics Changes - The company noted strong progress in developing customer relationships despite low asset supply, with expectations for improved performance in revenue streams due to increased asset supply [4] - The financial segment has not grown in the last 18 months due to low consumer spending, but there are signs of recovery with increased consumer activity anticipated [15] - The industrial auction division and valuation division have held solid during the pandemic, with expectations for Q4 to potentially be one of the largest quarters ever for industrial asset auctions [16] Market Data and Key Metrics Changes - The company reported a strong balance sheet with stockholders' equity of $32 million as of September 30, 2021, up from $30 million at the end of 2020 [10] - Aggregate tax net operating loss carryforwards were approximately $78 million, with most expiring between 2024 and 2037 [9] Company Strategy and Development Direction - The company is focused on growth across its five revenue streams, with a bullish outlook for the next two years [14] - The acquisition of American Lab Trading (ALT) is seen as a strategic move to enhance capabilities in the biopharma sector, aligning with increasing focus on ESG practices [17][32] - The company aims to repurpose and reposition assets in the biopharma sector, leveraging ALT's expertise to drive premium prices through warranties on refurbished assets [19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in future growth, citing a dynamic business environment and the potential for increased asset supply [11] - The CEO highlighted the correlation between rising consumer spending and increased charge-offs, suggesting a positive outlook for the financial segment in the coming year [24] - The company anticipates a surge in asset dispositions from plant closings earlier in the year, contributing to increased market activity [25] Other Important Information - Cash used in investing activities during the nine-month period was $7.3 million, primarily for the acquisition of ALT and related real estate purchases [10] Q&A Session Summary Question: What is the status of financial assets on the balance sheet? - Management explained that different types of financial institutions have varying regulations on charge-offs, but rising consumer spending is expected to correlate with increased charge-offs in the future [24] Question: What is driving the demand in the industrial side of the business? - The CEO noted that plant closings earlier in the year are now leading to asset dispositions as companies rationalize their decisions [25] Question: How is the integration of ALT being handled? - The company is leaving ALT as a stand-alone business while integrating its services, with ongoing collaboration on auctions of surplus assets [27]