Heritage (US:HGBL)2021-05-13 20:02Financial Performance - Total revenues for the three months ended March 31, 2021 were $7.1 million, representing a 67% increase compared to $4.2 million for the same period in 2020 [139]. - Net income for the three months ended March 31, 2021 was $1.032 million, a significant increase of 2,616% from $38,000 in the same period in 2020 [139]. - The company reported a gross profit of $5.1 million for the three months ended March 31, 2021, an increase of approximately 38% from $3.7 million in the same period in 2020 [143]. - EBITDA increased to $1,137,000 in Q1 2021 from $184,000 in Q1 2020, reflecting improved operational performance [151]. - Adjusted EBITDA for Q1 2021 was $1,480,000, up from $259,000 in Q1 2020, after accounting for stock-based compensation and a one-time expense related to the Separation Agreement [151]. - Net income rose significantly to $1,032,000 in Q1 2021 from $38,000 in Q1 2020, indicating strong financial performance [151]. Cash Flow and Working Capital - Cash used in operating activities was $5.8 million for the three months ended March 31, 2021, compared to $0.1 million for the same period in 2020, reflecting a $5.7 million increase [131]. - Cash and cash equivalents decreased to $15.9 million as of March 31, 2021, down from $23.4 million at December 31, 2020, a decrease of approximately $7.5 million [130]. - As of March 31, 2021, the company had working capital of $13.2 million, a slight increase from $13.0 million at December 31, 2020 [122]. - As of March 31, 2021, the company had stockholders' equity of $30.9 million, an increase from $29.9 million at December 31, 2020 [134]. Expenses and Cost Management - Selling, general and administrative expenses increased by 14% from $3,472,000 in Q1 2020 to $3,969,000 in Q1 2021, primarily due to increased compensation expenses in HGI and HGP divisions [146]. - Compensation for HGP increased by 54% to $1,613,000 in Q1 2021, while NLEX compensation decreased by 8% to $873,000 due to declined financial performance [146]. - Stock-based compensation rose by 91% to $143,000 in Q1 2021 compared to $75,000 in Q1 2020 [146]. - Travel and entertainment expenses decreased by 78% to $39,000 in Q1 2021, attributed to COVID-19 travel restrictions [146]. - The increase in selling, general and administrative expenses was partially offset by decreased travel expenses due to the pandemic [146]. Business Operations and Strategy - Heritage Global Inc. reported a minor negative impact on performance during Q1 2021 due to COVID-19, with evolving travel restrictions and delays in asset sales [95]. - The company expects increased demand for online auctions and valuation services as a result of the COVID-19 pandemic, anticipating a greater supply of distressed assets [96]. - The Financial Assets division aims to provide liquidity to issuers of consumer credit, monetizing nonperforming and charged-off loans, with a focus on expanding into FinTech and peer-to-peer lending sectors [111]. - The Industrial Assets division targets surplus and distressed industrial assets, with service fees ranging from 15% to 50% depending on the transaction [114]. - Management believes that the asset liquidation business is well-positioned to grow in all economic cycles, benefiting from increased nonperforming assets and surplus inventories [104]. - The company plans to leverage its Capital Asset Redeployment Enterprise (CARE) software to enhance auction services and valuation offerings [115]. Financial Reporting and Governance - Significant estimates in financial statements include the assessment of revenue collectability and the valuation of accounts receivable and inventory [119]. - The company has no off-balance sheet arrangements, ensuring transparency in its financial reporting [120]. - The company has not paid any dividends and does not expect to do so in the future [121]. - The company completed a public offering on October 6, 2020, raising approximately $8.7 million in net proceeds to support business expansion and working capital [123]. - The company entered into a New Credit Facility for a $10.0 million revolving line of credit on May 11, 2021, which replaced the previous Credit Facility [127]. - The company reported a depreciation and amortization expense of $0.1 million for both Q1 2021 and Q1 2020, primarily related to intangible assets [147]. - Management considers EBITDA and Adjusted EBITDA as key performance indicators for assessing the company's results and operational performance [150].