Q2 2022 Heritage Global Inc Earnings Call

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Speaker 1: Good afternoon and welcome to the Heritage Global second quarter 2022 earnings conference call. All participants will be in line for the first quarter of the 2020 earnings conference call.

Good afternoon, and welcome to the Heritage Global second quarter 2022 earnings Conference call.

All participants will be in listen only mode.

Speaker 1: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

Speaker 1: After today's presentation, there will be an opportunity to ask questions.

After todays presentation, there will be an opportunity to ask questions.

Speaker 1: To ask a question, you may press Star than one on your telephone keypad. To withdraw your question, please press Star than two.

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Speaker 1: Please note this event is being recorded. I would now like to turn the conference over to John Nezvitt and Vester Relations for Heritage Global. Please go ahead.

Please note this event is being recorded.

I would now like to turn the conference over to John Nesbitt Investor Relations for Heritage Global.

Please go ahead.

Speaker 2: Thank you and good afternoon everyone. Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements based on our current expectations and projections about future events and are subject to change based on various important factors.

Thank you and good afternoon, everyone before we begin like to remind everyone that this conference call contains forward looking statements based on our current expectations and projections about future events and are subject to change based on various important factors.

Speaker 2: In light of these risks, uncertainties, and assumptions, you should not place under reliance on these forward-looking statements, which speak only of the data this relates.

In light of these risks uncertainties and assumptions you should not place undue reliance on these forward looking statements, which speak only as of date of this release for more details on factors that could affect these expectations. Please see our filings with the Securities and Exchange Commission now I would like to turn the call over to Hertz Global Chief Executive Officer, Mr. Rostov Ross.

Speaker 2: For more details and factors that could affect these expectations, please see our filings with the Securities and Exchange Commission. Now, I would like to turn the call over to Heritage Global's Chief Executive Officer, Mr. Ross Dove. Thanks for joining us.

Speaker 3: Thank you, John . Good afternoon, everyone. Welcome to our second quarter, 2022 Earnings Conference call. Let's start today's call with Brian Cobb, our Chief Financial Officer. Brian will discuss the financial performance to date. Go ahead, Brian . You're up.

Thank you John and good afternoon, everyone welcome to our second quarter 2022 earnings conference call, Let's start today's call with Brian Cobb, Our Chief Financial Officer, Brian will discuss the financial performance to date go ahead, Brian in Europe.

Speaker 4: Thanks Ross. As expected, we reported strong operating results in the second quarter with operating income of $3.6 million improved profitability and EBITDA of $3.8 million.

Thanks, Ross as expected we reported strong operating results in the second quarter with operating income of $3 6 million improved profitability and EBITDA of $3 8 million.

Speaker 4: From my perspective, our financial performance during the quarter and the first half of 2022 can be summarized by the following.

From my perspective, our financial performance during the quarter and the first half of 2022 can be summarized by the following.

Speaker 4: First, we have seen a significant increase in the number of principal transactions executed in our industrial assets division. Evidence by 279% increase in assets sales for the six months ended June 30, 2022. As compared to the same period in 2021.

First we have seen a significant increase in the number of principal transactions executed in our industrial assets division evidenced by 279% increase in asset sales for the six months ended June 32022, as compared to the same period in 2021.

Speaker 4: This is primarily the result of a record number of industrial auctions held during the second quarter, as well as operations at American Laboratory Trading, which was not active as a heritage business in the first six months of 2020.

This is primarily the result of a record number of industrial auctions held during the second quarter as well as operations at American Laboratory trading, which was not active as a heritage business in the first six months of 2020 one.

Speaker 4: Second, we have realized increased services revenue during the second quarter due to an increase in financial asset volume industry-wide.

Second we have realized increased services revenue during the second quarter due to an increase in financial asset volume industry wide.

Speaker 4: We saw an increase in spending, charge off, and delinquency rates beginning in the fourth quarter of 2021, which has started to materialize with increased revenues from our financial asset brokerage.

We saw an increase in spending charge off and delinquency rates beginning in the fourth quarter of 2021, which has started to materialize with increased revenues from our financial asset brokerage.

Speaker 4: Following suit, I would expect that our specialty lending group will see increased opportunity to deploy cash in the second half of the year and into 2023.

Following suit I would expect that our specialty lending group will see increased opportunity to deploy cash in the second half of the year and into 2023.

Speaker 4: And last but not least, we closed on the two remaining Huntsville transactions, which favorably impacted our operating income during the quarter by approximately 2.6 million.

And last but not least we closed on the two remaining Huntsville transactions, which favorably impacted our operating income during the quarter by approximately $2.6 million.

Speaker 4: As we stated previously, strategic real estate partnerships have generated high margins for us, and we plan to continue periodically purchasing real estate as part of the assets we acquire for resale.

As we stated previously strategic real estate partnerships have generated high margins for us and we plan to continue periodically purchasing real estate as part of the assets.

Acquire for resale.

Speaker 4: Most recent of which was the acquisition of two pharmaceutical plants in Missouri, formerly of Nesher Pharmaceuticals.

Most recent of which was the acquisition of two pharmaceutical plant in Missouri, formerly of <unk> Pharmaceuticals.

Speaker 4: On a consolidated basis, operating income for the quarter was $3.6 million compared to $73,000 in the second quarter of 2021.

On a consolidated basis operating income for the quarter was $3 6 million compared to 73000 in the second quarter of 2021.

Speaker 4: Operating income in the industrial assets division was 3.3 million in the second quarter of 2022, a significant increase as compared to 433,000 in the second quarter of 2021.

Operating income in the industrial assets Division was $3 3 million in the second quarter of 2022, a significant increase as compared to 433000 in the second quarter of 2021.

Speaker 4: In our financial assets division, we saw growth of 156% to 1.2 million in operating income compared to 462,000 in the second quarter of 2021.

In our financial assets Division, we saw growth of 156% to $1 2 million in operating income compared to 462000 in the second quarter of 2021.

Speaker 4: Net income was $2.6 million, or $0.07 per basic and diluted share, compared to net income of $587,000, or $0.02 per basic and diluted share, in the second quarter of 2021.

Yeah.

Net income was $2 6 million or seven cents per basic and diluted share compared to net income of 587000 or two cents per basic and diluted share in the second quarter of 2021.

Speaker 4: We reported strong adjusted EVITA of $3.9 million for the second quarter of 2022, up from $239,000 in the second quarter of 2021.

We reported strong adjusted EBITDA of $3 9 million for the second quarter 2022 up from 239000 in the second quarter of 2021.

Speaker 4: At June 30, 2022, we had aggregate tax net operating loss carry forings of approximately 78 million. A considerable amount that will prove to be a valuable asset to the company is we continue to grow our prop.

At June 32022, we had aggregate tax net operating loss carry forwards of approximately $78 million a considerable amount that will prove to be a valuable asset to the company as we continue to grow our profits.

Speaker 4: Finally, our balance sheet remains strong with stockholders' equity of $36 million as of June 30, 2022, compared to $32.6 million as of December 31, 2021, and a net working capital of $10.5 million. With that, let's move on to the next segment.

Finally, our balance sheet remains strong with stockholders equity of 36 million as of June 32022, compared to $32 6 million as of December 31, 2021, and a net working capital of $10 5 million.

With that I'll now turn the call back over to Ross.

Speaker 5: Thank you, Brian . So, this is a really fun call.

Thank you Brian .

So this is a really fun call for me I am really proud of our team and our performance. There is a time when you just got to really say everything is working as planned. It doesn't mean, it's always going to work as planned it doesn't mean.

Speaker 3: I'm really proud of our team and our performance.

Speaker 3: There is a time when you just got to really say everything is working as planned. It doesn't mean it's always going to work as planned. It doesn't mean that the hard work is over with or that all of our goals are accomplished. But it does mean right now that Heritage Global is firing on all cylinders. Everything is working in all five revenues.

The hard work is over with or is it all of our goals are accomplished but it does mean right now.

Heritage Global is firing on all cylinders everything is working in all five revenue streams and it's a team that has worked very hard very diligently for a long time to put all the pieces together at the right time and the right place.

Speaker 3: And it's a team that has worked very hard, very diligently for a long time to put all the pieces together at the right time in the right place. And that's us today. Let me walk you through why I believe that, why I believe that we've hit the stride where this kind of performance is sustainable both near term and long term. I'll do it division by division.

And that's US today, let me walk you through why I believe that's why I believe that we've hit the stride, where this kind of performance is sustainable both near term and long term I'll do it division by Division. We as you know we have two different income streams. They fight.

Speaker 3: We, as you know, we have two different income streams, a financial and as an income stream, and it means...

The actual asset income stream and an industrial asset income stream I'll start with our financial assets, where as you know we have two different entities.

Speaker 3: I'll start with our financial assets, where as you know, we have two different entities, Enlex, which is a brokerage that sells basically all kinds of non-performing loan portfolios, and Heritage Capital, which is a specialty lender to the companies that buy those kinds of asset portfolios. We're looking at the financial assets, where as you know, we have two different entities, Heritage Capital, which is a specialty lender to the companies that buy those kinds of assets.

Entities, and lax, which is a brokerage that sells basically all kinds of nonperforming loan portfolios and heritage capital, which is a specialty lender to the companies that buy those kinds of asset portfolios, what's happens with analytics as it was slowed during.

Speaker 3: What's happened with the NLEX is it was slowed during the pandemic, but we're now hitting post-pandemic strides and we're back in a growth mode.

The pandemic, but we're now hitting post pandemic strides and we're back in a growth mode.

Speaker 3: Our income is very much tied to the macro economy and the increase that's basically been month after month and now quarter after quarter.

Our income is very much tied to the macro economy and the increase that's basically been month after month and now quarter after quarter and the amount of borrowings that are being done is basically converting into more defaults and more charge offs.

Speaker 3: in the amount of borrowings that are being done is basically converting into more defaults and more charge-offs as volumes have risen and as volumes on consumer debt continue to rise.

As volumes have risen and as volumes on consumer debt continue to rise our product launch is continuing to grow we've added new clients and our existing clients have added more products and more services so that in the end.

Speaker 3: Our product launch is continuing to grow. We've added new clients and our existing clients have added more products and more services to us so that in the end, our product launch is continuing to grow.

Analytics is actually at a point in time, where I think it can actually beat its post pandemic is that tied into the fact that about a year and a half or two years ago. We opened up heritage global capital to learn that business wasn't growing as fast as we'd hoped during a pen.

Speaker 3: is actually at a point in time where I think it can actually beat its post-pandemic high.

Speaker 3: That tied into the fact that about a year and a half or two years ago, we opened up Heritage Global Capital to lend. That business wasn't growing as fast as we'd hoped during a pandemic when most of the assets were being sold to the large public companies and the people borrowing from us.

Damage when most of the assets were being sold to the large public companies and the people buying borrowing from US we're basically not that strong in the market as they are today today, we have a record number of onboarding companies and those companies are actively using.

Speaker 3: We're basically not that strong in the market as they are today. Today, we have a record number of onboarded companies, and those companies are actively using us. So we're seeing growth on both ends of the financial spectrum. And we think that growth is sustainable as we think the consumer spending is continuing to rise. Let's shoot on over to...

So we're seeing growth on both ends of the financial spectrum, and we think that growth is sustainable as we think the consumer spending is continuing to rise, let's shoot on over to industrial and industrial we've had a record back to back several quarters a principal deal.

Speaker 3: In industrial, we've had a record back-to-back several quarters of principal deals where we've made high margins. On top of that, our fully integrated acquisition of American lab trading is really launching us into higher heights than we'd initially even predicted. What's happened there is there's enormous synergy between American lab trading and our auction division.

Where we've made I'm margins on top of that our fully integrated the acquisition of American lab trading is really launching us into higher heights than we'd initially even predicted what's happened. There is there is enormous synergy between American lab trading in our auctions.

Vision, where American lab trading before only acquired assets it could put into inventory. So it was pretty restricted on what it could buy because basically it had to find assets that would fit in the inventory and trade out of their ongoing operations today.

Speaker 3: where American Lab trading before only acquired assets it could put into inventory. So it was pretty restricted on what it could buy because basically it had to find assets that would fit into inventory and trade out of their ongoing operation.

Speaker 3: today because they have the diversification of the auction division and the ability to look at a far wider array of assets.

Because they have the diversification of the auction division and the ability to look at a far wider array of assets well, we can put some assets and inventory and then simultaneously liquidate other asset real time expediting the Aro why we're now look.

Speaker 3: where we can put some assets in inventory and then simultaneously liquidate other assets real time.

Speaker 3: expediting the ROI. We're now looking at many more portfolios. We're bidding on many more portfolios. Our recovery is much quicker on a lot of the portfolios.

King at many more portfolios, we are bidding on many more portfolios. Our recovery is much quicker on a lot of the portfolios because were bifurcated the assets into inventory assets and auction assets and the auction assets.

Speaker 3: because we're bifurcating the assets into inventory assets and auction assets, and the auction assets often times produce enough revenue.

Oftentimes produce enough revenue that the inventory assets are on the books at a very low dollar value and we're able to monetize those more rapidly and get even more attractive opportunity to use to our buyers. So because we have a growing refreshed inventory.

Speaker 3: that the inventory assets are on the books at a very low dollar value and were able to monetize.

Speaker 3: those more rapidly and give even more attractive opportunities to our buyers. So because we have a growing, refreshed inventory, we're gaining more traction with our buyers. And because ALT is finding assets for our auction.

We're gaining more traction with our buyers and because a L. T is finding assets for our auctions, our auction platform and simultaneously growing so we're hitting it on all fronts on industrial there are third industrial group and final group is our valuation practices as there.

Speaker 3: our auction platform is simultaneously growing.

Speaker 3: So we're hitting it on all fronts on industrial there. Our third industrial group and final group is our valuation practice.

Speaker 3: as there is some fears that we're moving into a recession, that most of the money center banks and a lot of the asset-based lenders are getting more and more concerned about asset-based values and not just enterprise values. And we've seen an uptick in our usage as more people want to know what the actual market value is of their asset.

There is some fears that we're moving into a recession that most of the money center banks and a lot of the asset based lenders are getting more and more concerned about asset based values and not just enterprise values and we've seen an uptick in our usage as more people want to know what the actual.

The market value is of their assets overall, both financial and industrial are in full swing in full stride. We had a record Q2, we believe that that is sustainable and we're going to see a fantastic Q3.

Speaker 3: Overall, both financial and industrial are in full swing and full stride. We had a record Q2.

Speaker 3: We believe that that is sustainable and that we're going to see a fantastic Q3 and a record-breaking year this year.

<unk> and a record breaking year. This year, we basically given guidance that we believe this will be the best year in the history of the company and I'm here today to tell you that I am more and more positive that that is true and more and more bullish on our future than I have been in any other.

Speaker 3: We've basically given guidance that we believe this will be the best year in the history of the company. And I'm here today to tell you that I'm more and more positive that that is true and more and more bullish on our future than I have been in any other time. So thank you very much for hearing me out and everyone have a great day.

Ty so thank you very much for hearing me out and everyone have a great day.

Speaker 1: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.

We will now begin the question and answer session.

To ask a question you May press Star then one on your telephone keypad.

Speaker 1: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press the Q&A button.

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Speaker 1: At this time, we will pause momentarily to assemble our...

At this time, we will pause momentarily to assemble our roster.

Okay.

Speaker 1: And our first question comes from Mark Argento of Lake Street. Please go ahead.

And our first question comes from Mark Argento of Lake Street. Please go ahead.

Speaker 6: Hey Ross and Brian , congrats on a really strong quarter. Obviously this is your kind of market so it's fun to see you guys perform well.

Hey, Ross or Brian Congrats on a really strong quarter. Obviously this was your kind of market. So it's fun to see you guys perform wall.

Speaker 6: Just a couple of things. I was wondering, Brian , could you help us better understand when you have some of the Huntsville revenue, the real estate revenue, how does that work through the P&L and just try to better understand the impact there and understand how that makes its way through the numbers? Yeah, sure.

Just a couple of things I was wondering Brian could you help us better understand what Jim.

Some of the you know the Huntsville.

And our revenue the real estate revenue, how does that work through the P&L I'm, just trying to better understand the impact there.

I understand how that kind of mix the way through the numbers.

Yeah. So.

Speaker 4: The first thing to really understand, I think for you is the Huntsville deal as a whole was kind of unique in the sense that we bought a large campus, three buildings with machinery and equipment. However, the real estate portion...

The first thing to really understand I think for you is the Huntsville deal as a whole was was kind of unique in the sense that we bought a large campus.

Three buildings with machinery and equipment. However, the real estate portion of that deal was housed in the joint venture.

Speaker 4: of that deal was housed in the joint venture and the machinery and equipment was not. So there's a little bit of complexity there. We also have some costs that have been incurred outside of that joint venture. So accounting-wise, you know, a large part of our earnings in Q2 were due to the closure of those two buildings.

Machinery and equipment was not so theres a little bit of complexity. There. We also have some costs that have been incurred outside of that joint venture So accounting wise.

A large part of our earnings in Q2 were due to the closure of those those two buildings.

Speaker 4: But that there's also a can-out impact above in acid sales, cost of acid sales.

But there is also a P&L impact above and in asset sales cost of asset sales.

Speaker 4: So net impact for that deal specifically to operating income was two point.

No net impact for for that deal specifically to operating income was $2 6 million.

Speaker 3: Not 2.6 million in total profit for the deal, 2.6 million recognized in profit for the quarter. The deal brought in substantially more, but a lot of the revenue was recognized in prior quarters. So it is now a complete, finite, finished deal, and that's pretty much the end of the revenue. There might be a small amount trickling in going forward, but we're pretty much done with that deal now, Mark.

Not quite 7 billion in total profit for the deal 2.6 million recognized in profit for the quarter. The deal brought in substantially more but a lot of the revenue was recognized in prior quarters. So it is now a complete fine I finish deal and that's pretty much the ended of revenue.

There might be a small amount trickling in going forward, but we're pretty much done with that deal now mark.

Speaker 6: Got it. That's helpful. And then you had mentioned.

Got it that's helpful and then.

I think you had mentioned.

Speaker 6: Ross in your previous or in your prepared remarks, maybe it was Brian , that you guys just took down another some additional real estate. Is that a similar type of...

Ross and your previous or in your prepared remarks, very little surprised that you guys just.

It just took down another.

Additional real estate is that a similar type of.

Speaker 6: transaction in terms of the setup and how that might flow through as well as yeah, I mean It's very similar in the reason we bought it the theory behind the acquisition The financial structure is a little different

Transaction in terms of the startup and how that might flow through as well yeah. I mean, it is those buildings its very similar and the reason we bought it the theory behind the acquisition the financial structure is a little different.

Speaker 3: But ultimately, we believe it will produce the same kind of profit.

But ultimately we believe that will produce the same kind of profits and we're very excited about it we've already sold a substantial amount of the capital assets to tangible machinery and equipment and we're now working through the process of selling the buildings. It was also done in a partnership with some industry peers.

Speaker 3: and we're very excited about it. We've already sold a substantial amount of the capital assets to tangible machinery and equipment and we're now working through the process of selling the buildings. It was also done in a partnership with some industry peers.

Speaker 3: And we think a lot of the revenue will be recognized.

And we think a lot of the revenue will be recognized over the next three to nine months.

Speaker 3: over the next three to nine months. And just also to add, this is a deal that's more straight.

And just also to add this is a deal that's more straightforward than the Huntsville deal that we just talked about and so a lot of the earnings are 100% of the earnings flow through the equity method line.

Speaker 4: the Huntsville deal that we just talked about. And so a lot of the earnings, 100% of the earnings should flow through the equity method.

Speaker 6: Yeah, it's helpful. And then just touching a little bit on the the nlex business, the financial assets business, that's a business that we had been he had been talking about and looking for a tailwind looks like we have that tailwind.

The top four well not just touching a little bit.

The analytics business the financial assets.

But there was also a weird, but you had been talking about and I'm looking for a tail on it looks like we have that tailwind.

Speaker 6: Can you talk a little bit or at least try to help quantify maybe the pipeline or the activity you're seeing in terms of either number of portfolios or...

Could you talk a little bit or at least try to help quantify maybe the pipeline or the activity you're seeing in terms of what you do there are a number of portfolios or.

Speaker 6: and new customers that are on board. Just give us something to better understand how that's shaping up.

Do you add cross border.

You're on board or just give us something to better understand kind of how that's shaping up.

Speaker 5: I sure will. When I was talking for the last five or six months about being bullish on the future of that business.

Sure well, what when I was talking for the last five or six months about being bullish on the future of that business is because we really do see the early warning signs here because we basically are the back end, where the bottom half of the last mile of the supply chain. So first use.

Speaker 5: It's because we really do see the early warning signs here, because we basically are the back end. We're the bottom half of the last mile of the supply chain.

Speaker 5: So first you start seeing a rise in consumer spending.

Start seeing a rise in consumer spending that follows by a rise in default. So eventually because more spending just by prima fascia evidence produces more default ultimately more defaults convert to more charge offs and then after there's more charge offs.

Speaker 3: That follows by a rise in defaults eventually because more spending just by prima facie evidence produces more defaults. Ultimately, more defaults convert to more charge offs. And then after there's more charge offs.

Speaker 5: Finally, there's the disposition of those charge-offs, which falls into our brokerage activity. Ultimately, then when there's an acquisition of those charge-offs and the people that we've onboarded or the purchasers, it then flows into our lending business.

Finally, there is the disposition of those charge offs, which falls into our brokerage activity. Ultimately then when there is an acquisition of those charge offs and the people that we have onboard it or the purchasers. It did flows into our lending business. So it took about six or nine months of growth.

Speaker 5: So it took about six or nine months of growth in the volumes for us to hit stride. We've now hit stride where we're looking at a very strong Q3 and very strong Q4, not just because we've added some new clients, which we have, but because our incumbent clients now have more supply. And as they have more supply, more supply flows through our channel.

And the volumes for us to hit stride, we've now hit stride, where we're looking at a very strong Q3, and very strong Q4 that just because we've added some new clients, which we have but because our incumbent clients now have more supply and as they have more supply more.

Supply flows through our channels. There has also been a growing pressure for E. S. G. In the environment of the financial World, where they want to show more transparency. So a lot of the sellers that were selling direct in the past now and want to work in an open market.

Speaker 5: There's also been a growing pressure for ESG in the environment of the financial world where they want to show more transparency. So a lot of the sellers that were selling direct in the past.

Speaker 3: now want to work in an open market where there's competitive bidding and they're assuring everyone that they're getting mark to market values. So we think there'll be an increase in the amount of people to use third party brokers in competitive process.

Are those competitive bidding and there was showing everyone that theyre getting mark to market values. So we think there'll be an increase in the amount of people do use third party brokers and competitive processes.

Yeah.

Speaker 6: Got it. That's helpful. Just one last one for me and I'll jump back in the queue.

That's helpful and just one last one for me and I'll jump back in the queue.

Speaker 5: We'll give you two more questions, Mark, if you want. Give me two more? Alright. Yeah. I appreciate that. Special offer today. Special offer today. We're feeling generous. It's just

I know you will give you two will give you two more questions Mark if you want to more yeah.

I appreciate that perpetual offered a special offer today, we're feeling generous.

Speaker 6: Alright, just quickly, so deploying capital, obviously with the financial assets, more portfolios out there, more opportunity.

Hello, just quickly.

So deploying capital obviously with the financial outcomes more portfolios out there more opportunity took.

Speaker 6: to fund buyers of these portfolios. Where are you at now in terms of lending? How much capital or how much capacity do you have?

So Claude buyers of these portfolios.

Where are you.

In terms of lending how much capital or how much capacity you have.

Or how much.

Speaker 6: capital at this point. And that's the date we funded along with our partners to date. We funded $40 million since inception.

Capital.

At this point and that's the date, we've funded along with our partners to date, we funded $40 million since inception.

Speaker 5: We're hopeful that we can double that within the next year to get to 80 to 100 million. We have the capital in place right now to do that with our partners, with our hedge fund partners. We'll be announcing very soon our new deal. But I can tell you in advance that we have the capital.

We're hopeful that we can double that within the next year to get to $80 million to $100 million, we have the capital in place right now to do that with our partners with their hedge fund partners, we'll be announcing very soon.

Our new deal, but I can tell you in advance that we have the capital ready to go we're able to deploy pretty much what we need we're.

Speaker 5: ready to go. We're able to deploy pretty much what we need.

Speaker 5: We're very fortunate that we have really strong cash flow right now. So our own balance sheet is growing and we're able to deploy our own capital along with partner capital. We renewed our line with C3 bank, our line is at zero right now. And we have $10 million of capacity on that line on top of the hedge fund funding. So we see clear sailing for the next 12 months. They continued!

We're very fortunate that we have really strong cash flow right now so our own balance sheet is growing and we're able to deploy our own capital along with partner capital. We've renewed our line with C. Three bank. Our line is at zero right now and we have $10 million of capacity on.

That line on top of the hedge fund funding. So we see clear sailing for the next 12 months.

Some time down the road, if we like the value of our enterprise, we would be potentially looking at raising capital, but right now that's not a consideration today.

Speaker 3: If we like the value of our enterprise, we would be potentially looking at raising capital. But right now, that's not a consideration today. We think

We think we're fine.

Yes.

Speaker 6: So tell they'll take the last one then since you're giving it to me You know, let's think you bought a little stock back in the corner Quarter, you know any reason you might not be a little more aggressive here With the buyback that's it for me. Thanks

To dovetail will take the.

For that since you're giving it to me.

Yeah. It looks like you bought a little stock back in the corner quarter. Any reason you might not be a little more aggressive here.

With the buyback that's it for me thanks.

Speaker 5: As far as more aggressive, I guess the answer is

As far as more aggressive I guess the answer is yes. Our intention is to continue the buyback when we when our board approved a buyback program. They approved it for some longevity not just for a very brief period of time, so it's an ongoing buyback.

Speaker 3: Yes, our intention is to continue the buyback when we when our board approved the buyback program, they approved it for some longevity, not just for a very brief period of time. So it's an ongoing buyback program where we still have available capital allotted to the buyback. We'll follow the stock and we'll.

Graham, where we still have available capital a lot of it to the buyback we will follow the stock isn't will will make real time decisions, but at this time, we still believe that there's real value in.

Speaker 3: We'll make real time decisions, but at this time we still believe that there's real value in our stock and we're still very bullish on on our personal ownership of it as an entity.

Stock and we're still very bullish on on a personal ownership of it as an entity.

Thanks, guys.

Thank you Mark.

Appreciate the call.

Speaker 1: Once again, if you would like to ask a question, please press star, then 1.

Once again, if you would like to ask a question. Please press Star then one.

Speaker 1: And our next question will come from Michael Diana of Maxim Group. Please go on. Michael. Hey Rob.

Our next question will come from Michael Diana of Maxim Group. Please go ahead Michael.

Speaker 7: So on the financial assets for the last, since you've been talking about, you've been talking about fintechs and buy now, pay later. And in the release, I noticed you talked about credit.

Ralph.

So on the financial out that's for the last since you've been talking about and you've been talking about thin texts and buy now pay later and.

In the release I noticed you talked about credit cards. So I assume all of these are sources now of your charged stop at that.

Speaker 7: So I assume all these are sources now of your charged stop pass.

Speaker 3: Yeah, credit cards and auto loans have been basically a staple for, you know, a decade before the fintech and obviously before the new BNPL. And it looked like in the pandemic, there's a growth we're seeing was in the fintech where every month they announced a new 100 or $200 million from a new entity.

Yeah credit cards auto loans have been basically a staple for you know what.

A decade before the Fintech and obviously before the new NPL and.

It looked like independently, but the growth were seeing was in the fin Tech where every month, they announced a new under $200 million from a new entity that was lending along with.

Speaker 3: that was lending along with the insurgents of the BNPL. But now it looks like there's growth across the board. We've seen a dramatic increase in the rise of credit cards and the rise of credit card product flowing to us along with auto product. And most recently, over the last, I'd say, four or five,

The insurgence of the B N P L. But now it looks like there was growth across the board we've seen a dramatic increase in the rise of credit cards and the rise of a credit card product flowing to us along with auto product and most recently over the last I'd say four.

Five months, we've seen a real steady increase and what we're doing now with real estate to where there is a growth in the nonperforming real estate loans, we've been selling to so we're not just tied to kind of the new age fintech can be N. P. L kind of our all of our old school products are grown.

Speaker 5: We've seen a real steady increase in what we're doing now with real estate.

Speaker 5: to where there's a growth in the non-performing real estate loans we've been selling too. So we're not just tied to kind of the new age fintech and BNPL, kind of all of our old school products are growing simultaneously. So we're really bullish on the next year kind of across the board with all of our products.

Simultaneously. So we're really bullish on the next year kind of across the board with all of our products.

Speaker 7: Okay, great. That's what I thought. Okay, thank you.

Okay, Great that's what I thought okay. Thank you.

Thank you Michael have a great day.

Speaker 1: The next question comes from Chad Stafford of a private investor. Please go ahead. Thank you.

The next question comes from Chad Stauffer.

Private Investor. Please go ahead.

Chad.

Speaker 8: Hello, hello, congratulations on a great quarter. I just had a question on some of the loan charge off from banks with Cesar requirements coming in right before COVID. I know it didn't really change anything, but now that we're seeing them have to set aside more funds, is that increasing? I think I was surprised how quickly you guys are seeing a pickup in your charge off loan auction.

Hello, and congratulations on a great quarter.

A question on some of the loan charge offs from banks with Cecil requirements coming in right before Covid.

No it didn't really change anything, but now that we're seeing them have to set aside more funds is that increasing I think I was surprised how quickly you guys are seeing a pickup in your charge off loan auctions. It seems the requirements on banks pushing them to get them to you faster and if so is that improving b like the quality and the right youre going to get for those charged off loans and just listen.

Speaker 8: Is the CSO requirements on banks pushing them to get them to you faster? And if so, is that improving the quality and the rate you're going to get for those charges off loans? And just was interested about that at the end. Yeah, yeah. Okay, good.

Yeah, Yeah, well set with some of it.

Speaker 5: Some of it is coming from banks, but I don't think it's so much.

Some of it is coming from banks, but I don't think it's so much.

Speaker 5: FDIC or credit regulatory pressure, I think a lot of it is basically kind of a social decision that during the pandemic there was a hold back on lenders not wanting to appear to be the grim reaper and put a lot of sell sell

FDIC or credit regulatory pressure I think a lot of it is basically kind of a social decision that during the pandemic. There was a hold back on lenders not wanting to appear to be the grim Reaper and put a lot of so sell side orders in when they really didn't.

Speaker 5: side orders in when they really didn't want collection agents and putting a lot of stress on people that were out of work. And now that pretty much people are going back to work.

One collection agents and putting a lot of stress on people to rattle work and now that pretty much people are going back to work pretty much depend damage isn't is really solid and issue I think a lot of these lenders just held back putting product on the street have now kind of growing them.

Speaker 5: Pretty much the pandemic isn't this really solid an issue. I think a lot of these lenders have just held back putting product on the street, have now kind of growing amounts of non performing loans. And as their loans grow, there is pressure to monetize them. That's a little greater than it was say a year ago. So we're just seeing kind of more activity across the board chat.

Mounts of nonperforming loans and as their loans grow there is pressure to monetize them, that's a little greater than it was say a year ago. So we're just seeing kind of more activity across the board yet.

Speaker 8: That sounds great. I appreciate your filling in on everything. Congratulations again. Thank you very much.

That sounds great I appreciate you filling in on everything congratulations again.

Oh, Thank you very much and thanks for following us.

Speaker 1: This concludes our question and answer session. I would like to turn the conference back over to Ross Dove for any closing remarks.

This concludes our question and answer session I would like to turn the conference back over to Ross for any closing remarks.

Speaker 5: I'd like to thank everybody for listening in. I'd like to thank...

So I'd like to thank everybody for listening in and I'd like to thank all.

Speaker 5: all of our shareholders for sticking with us through a pandemic and for having faith that we were going to come out of it stronger and better and more solid and on a real growth trajectory. As I said in the earnings call today, I'm really proud of our people and I'm really proud of our performance and our goal is to make sure that we have the best

All of our shareholders for sticking with this through a pandemic and for having faith that we were going to come out of it stronger and better and more solid and on a real growth trajectory as I said in the earnings call today, I'm really proud of our people and I'm really proud of our performance and our goal is.

Speaker 3: to keep on going, to keep on working hard, and to keep fulfilling our commitment to all of our employees, to all of our clients, and to all of you that...

To keep ongoing to keep on working hard and to keep fulfilling our commitment to all of our employees to all of our clients and to all of you that were in the right place at the right time doing the right things to continue servicing this marketplace and growing and we're very optimistic about the future.

Speaker 5: We're in the right place at the right time, doing the right things to continue servicing this marketplace and growing, and we're very optimistic about the future. And we welcome all of you as shareholders, we welcome all of you as followers, and we're very thankful for anybody who's paying attention to us. So thanks a lot and everyone have a great day.

And we welcome all of you as shareholders. We welcome all of you as followers and we're very thankful for anybody who's paying attention to us. So thanks, a lot and everyone have a great day.

Speaker 1: The conference is now concluded. Thank you for attending today's presentation, you may now disconnect.

The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.

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