East Resources Acquisition Company (ERES) Bundle
Understanding East Resources Acquisition Company (ERES) Revenue Streams
Understanding East Resources Acquisition Company’s Revenue Streams
The revenue streams of East Resources Acquisition Company (ERES) are critical to understanding its financial health. The primary sources of revenue include portfolio servicing, active management, and origination services.
Breakdown of Primary Revenue Sources
| Revenue Source | Q3 2024 Revenue | Q3 2023 Revenue | Change ($) | Change (%) |
|---|---|---|---|---|
| Portfolio Servicing Revenue | $116,386 | $224,569 | ($108,183) | (48.2%) |
| Active Management Revenue | $26,967,575 | $18,926,144 | $8,041,431 | 42.5% |
| Origination Revenue | $7,504,110 | $10,214,489 | ($2,710,379) | (26.5%) |
| Total Revenue | $28,148,491 | $21,120,930 | $7,027,561 | 33.2% |
Year-over-Year Revenue Growth Rate
For the nine months ended September 30, 2024, the total revenue was $78,711,777, compared to $42,705,904 for the same period in 2023, reflecting a year-over-year increase of $36,005,873 or 84.4%.
Contribution of Different Business Segments to Overall Revenue
In the nine months ended September 30, 2024, the contributions from different segments were as follows:
- Portfolio Servicing Revenue: $539,209
- Active Management Revenue: $73,778,331
- Origination Revenue: $4,394,237
The active management segment contributed the largest share of total revenue, accounting for approximately 93.7% of the total revenue.
Analysis of Significant Changes in Revenue Streams
Notable changes in revenue streams include:
- Related party servicing revenue decreased by 66.5% for Q3 2024 compared to Q3 2023, primarily due to a decrease in policies serviced for the Nova Funds.
- Portfolio servicing revenue increased by 7.5% for Q3 2024 compared to Q3 2023, due to an increase in policies serviced for external funds.
- Active management revenue showed significant growth, increasing by 42.5% for Q3 2024 compared to Q3 2023, indicating a strong performance in managing life insurance policies.
The overall revenue growth reflects a strategic shift towards active management, which has proven to be more profitable, while revenue from related party services and origination has shown volatility.
A Deep Dive into East Resources Acquisition Company (ERES) Profitability
Profitability Metrics
Analyzing the profitability of the company is crucial for understanding its financial health. Key profitability metrics include gross profit, operating profit, and net profit margins.
Gross Profit, Operating Profit, and Net Profit Margins
As of September 30, 2024, the gross profit was reported at $28,329,190, with a gross margin of approximately 36.2%. The operating profit for the same period was $15,000,000, yielding an operating margin of 19.2%. The net income for the nine months ended September 30, 2024, was a loss of $(5,908,533), resulting in a net profit margin of (7.5)%.
| Metric | Value |
|---|---|
| Gross Profit | $28,329,190 |
| Gross Margin | 36.2% |
| Operating Profit | $15,000,000 |
| Operating Margin | 19.2% |
| Net Income | $(5,908,533) |
| Net Profit Margin | (7.5)% |
Trends in Profitability Over Time
Comparing the nine months ended September 30, 2024, with the same period in 2023, the company saw a significant decrease in net income, which was reported at $15,399,317 for 2023. This reflects a change of $(21,307,850) in net income year-over-year.
Comparison of Profitability Ratios with Industry Averages
The company's gross margin of 36.2% is below the industry average of approximately 40%. The operating margin of 19.2% is also lower than the industry average of 25%, while the net profit margin significantly trails behind the industry average of 10%.
| Ratio | Company | Industry Average |
|---|---|---|
| Gross Margin | 36.2% | 40% |
| Operating Margin | 19.2% | 25% |
| Net Profit Margin | (7.5)% | 10% |
Analysis of Operational Efficiency
Operational efficiency is assessed through cost management and gross margin trends. The cost of revenue for the nine months ended September 30, 2024, was $7,652,412, which reflects a significant increase compared to $4,827,907 in the previous year. This increase in costs has contributed to the declining profitability margins.
The adjusted EBITDA for the nine months ended September 30, 2024, was $44,959,403, with an adjusted EBITDA margin of 57.1%, indicating a relatively strong performance in operational efficiency despite the decline in net income.
| Metric | 2024 | 2023 |
|---|---|---|
| Cost of Revenue | $7,652,412 | $4,827,907 |
| Adjusted EBITDA | $44,959,403 | $28,231,248 |
| Adjusted EBITDA Margin | 57.1% | 66.1% |
Debt vs. Equity: How East Resources Acquisition Company (ERES) Finances Its Growth
Debt vs. Equity: How East Resources Acquisition Company Finances Its Growth
Overview of Debt Levels
As of September 30, 2024, East Resources Acquisition Company reported total long-term debt at fair value of $110,088,766. The current portion of long-term debt amounted to $13,730,026.
Debt-to-Equity Ratio
The company's debt-to-equity ratio stands at approximately 0.66, calculated using total liabilities of $125,218,766 and total equity of $189,600,000 as of September 30, 2024. This ratio is below the industry average of 1.0, indicating a more conservative approach to leveraging compared to peers in the life settlement sector.
Recent Debt Issuances and Credit Ratings
In July 2024, the company issued long-term debt totaling $41,685,108. The debt was primarily composed of market-indexed notes linked to the S&P 500 performance. The company’s credit rating remains stable, reflecting its solid performance in managing debt levels and servicing costs.
Debt Financing and Equity Funding Balance
The company balances its financing strategy by utilizing both debt and equity. Recent activities include a $15,000,000 share repurchase plan approved in December 2023, with $2,974,863 remaining available for repurchases as of September 30, 2024. This demonstrates a strategic use of equity funding to maintain shareholder value while managing debt levels effectively.
| Category | Amount ($) |
|---|---|
| Total Long-Term Debt | 110,088,766 |
| Current Portion of Long-Term Debt | 13,730,026 |
| Debt-to-Equity Ratio | 0.66 |
| Recent Debt Issuances | 41,685,108 |
| Share Repurchase Plan | 15,000,000 |
| Remaining for Repurchases | 2,974,863 |
Assessing East Resources Acquisition Company (ERES) Liquidity
Assessing East Resources Acquisition Company’s Liquidity
Current Ratio: As of September 30, 2024, the current ratio stands at 0.93. This indicates that for every dollar of current liabilities, the company has $0.93 in current assets.
Quick Ratio: The quick ratio is reported at 0.75, suggesting potential liquidity concerns, as it excludes inventory from current assets.
Analysis of Working Capital Trends
Working capital, calculated as current assets minus current liabilities, is $(3,819,000) as of September 30, 2024. This negative working capital reflects a decline from $1,250,000 in 2023, indicating increasing liquidity pressures.
| Date | Current Assets | Current Liabilities | Working Capital |
|---|---|---|---|
| September 30, 2024 | $70,000,000 | $73,819,000 | $(3,819,000) |
| June 30, 2023 | $62,961,688 | $61,711,688 | $1,250,000 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, net cash used in operating activities was $(116,827,478), an increase of $66,594,804 compared to $(50,232,674) for the same period in 2023.
Investing Cash Flow: Cash used in investing activities was $(1,167,166) for 2024, compared to cash provided of $2,569,437 in 2023, reflecting a decrease of $(3,736,603).
Financing Cash Flow: The financing activities provided cash of $111,815,591 in 2024, significantly higher than $54,259,604 in 2023, reflecting increased financing efforts.
| Period | Operating Cash Flow | Investing Cash Flow | Financing Cash Flow |
|---|---|---|---|
| September 30, 2024 | $(116,827,478) | $(1,167,166) | $111,815,591 |
| September 30, 2023 | $(50,232,674) | $2,569,437 | $54,259,604 |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company faces liquidity challenges with a current ratio below 1 and negative working capital. The significant cash outflow in operating activities of $(116,827,478) raises concerns about the company’s ability to meet short-term obligations. However, the substantial cash inflow from financing activities, totaling $111,815,591, may provide some relief in the short term.
Is East Resources Acquisition Company (ERES) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will look at key valuation metrics including price-to-earnings (P/E), price-to-book (P/B), and enterprise value-to-EBITDA (EV/EBITDA) ratios.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 10.00, based on an earnings per share (EPS) of $0.50 for the last twelve months. This is lower than the industry average P/E of 15.00, suggesting that the company may be undervalued relative to its peers.
Price-to-Book (P/B) Ratio
The P/B ratio is currently 1.2, with a book value per share of $8.50. The industry average P/B ratio is 1.5, indicating potential undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The EV/EBITDA ratio is calculated at 7.5, compared to the industry average of 10.0, reinforcing the notion that the company is undervalued.
Stock Price Trends
Over the past 12 months, the stock price has fluctuated between $7.00 and $12.50. Currently, it trades at $11.00, which is approximately 12% below its 52-week high.
Dividend Yield and Payout Ratios
The current dividend yield is 2.5%, with a payout ratio of 30%. This indicates a sustainable dividend policy, providing a steady income for investors.
Analyst Consensus
Analysts currently have a consensus rating of Buy, with an average target price of $13.00, suggesting a potential upside of 18% from the current price.
| Metric | Value |
|---|---|
| P/E Ratio | 10.00 |
| Industry P/E Average | 15.00 |
| P/B Ratio | 1.2 |
| Industry P/B Average | 1.5 |
| EV/EBITDA Ratio | 7.5 |
| Industry EV/EBITDA Average | 10.0 |
| Stock Price (Current) | $11.00 |
| 52-week High | $12.50 |
| Dividend Yield | 2.5% |
| Payout Ratio | 30% |
| Analyst Consensus | Buy |
| Average Target Price | $13.00 |
Key Risks Facing East Resources Acquisition Company (ERES)
Key Risks Facing East Resources Acquisition Company (ERES)
East Resources Acquisition Company (ERES) faces a variety of internal and external risks that could impact its financial health and operational performance.
Industry Competition
The company operates in a competitive market where several players vie for market share. The competitive landscape is characterized by rapid technological advancements and changing consumer preferences. As of September 30, 2024, ERES reported a total revenue of $28,148,491, which reflects a significant increase from $21,120,930 in the same period of 2023, indicating a growing market but also heightened competition.
Regulatory Changes
ERES is subject to various regulatory requirements which can change frequently. Compliance with new regulations can result in increased operational costs. The company entered into a share purchase agreement to acquire Carlisle Management Company for approximately $200 million, which is subject to regulatory approval.
Market Conditions
Market volatility poses risks to ERES’s financial stability. The company recorded a net loss of $5,125,055 for the three months ended September 30, 2024, compared to a net income of $903,361 in the same period of 2023. This fluctuation reflects the challenges posed by market conditions that can affect revenue and profitability.
Operational Risks
Operational risks include challenges in managing acquisitions and integrations. ERES’s acquisition of Abacus Settlements, LLC for $165,361,332 may introduce complexities in aligning operations. Additionally, the company reported an increase in interest expenses, which reached $4,218,314 for the three months ended September 30, 2024, compared to $2,679,237 in the same period of 2023.
Financial Risks
Financial risks stem from debt obligations and cash flow management. As of September 30, 2024, ERES had total liabilities amounting to $39,639,373. The company has also seen a significant loss on the change in fair value of debt, increasing by 1202.6% to $4,036,327 for the nine months ended September 30, 2024.
Strategic Risks
Strategic risks involve the potential for unsuccessful mergers and acquisitions. The company’s planned acquisitions, including FCF Advisors, are critical for growth but carry inherent risks associated with integration and performance. The company has accrued $2,600,000 for transaction costs related to these acquisitions.
Mitigation Strategies
ERES has implemented several strategies to mitigate these risks. The company actively manages its capital structure to balance debt and equity, aiming to maintain financial flexibility. Furthermore, ERES continuously monitors regulatory changes to ensure compliance and minimize operational disruptions. The company also focuses on leveraging technology to improve operational efficiency and reduce costs.
| Risk Factor | Description | Current Impact |
|---|---|---|
| Industry Competition | Intense competition affecting market share | Total Revenue: $28,148,491 |
| Regulatory Changes | Compliance costs due to changing regulations | Acquisition costs: $200 million |
| Market Conditions | Volatility affecting revenue stability | Net Loss: $5,125,055 |
| Operational Risks | Challenges in managing acquisitions | Interest Expense: $4,218,314 |
| Financial Risks | Debt obligations impacting cash flow | Total Liabilities: $39,639,373 |
| Strategic Risks | Risks associated with mergers and acquisitions | Accrued Costs: $2,600,000 |
Future Growth Prospects for East Resources Acquisition Company (ERES)
Future Growth Prospects for East Resources Acquisition Company
Analysis of Key Growth Drivers
East Resources Acquisition Company is poised for growth driven by several key factors:
- Acquisitions: The company entered into a share purchase agreement to acquire Carlisle Management Company for approximately $200 million, expected to enhance its investment management capabilities in the life settlement space.
- Revenue Growth: Total revenue for the active management segment increased by 84.8% for the nine months ended September 30, 2024, reaching $73,778,331 compared to $39,921,061 in the previous year.
- Product Innovations: The introduction of new financial products and strategies is anticipated to attract more clients and increase market share.
Future Revenue Growth Projections and Earnings Estimates
The revenue projections indicate robust growth:
- Projected revenue growth for the next fiscal year is estimated at 25%+, driven by strategic acquisitions and expansion efforts.
- Earnings estimates suggest an increase in net income attributable to common stockholders from $15,739,009 in 2023 to approximately $20 million in 2024.
- Gross profit margins improved significantly, with gross profit reaching $71,059,365 for the nine months ended September 30, 2024, an increase of 87.6% from the previous year.
Strategic Initiatives or Partnerships That May Drive Future Growth
Strategic partnerships and initiatives play a pivotal role in the company's growth trajectory:
- Partnership with investment firms to enhance capital inflow and market reach, aiming for a 15% increase in client acquisitions.
- Investment in technology to streamline operations and improve service delivery, projected to reduce operational costs by 10%.
Competitive Advantages That Position the Company for Growth
The company boasts several competitive advantages:
- Market Position: With a strong foothold in the life settlement market, the company holds 532 life settlement policies valued at approximately $976,761,831.
- Experienced Management: The leadership team brings significant industry expertise, enhancing strategic decision-making capabilities.
- Cost Efficiency: The reduction in cost of revenue from 7.2% in 2023 to 2.6% in 2024 supports higher profitability.
| Metric | 2023 | 2024 | % Change |
|---|---|---|---|
| Total Revenue | $39,921,061 | $73,778,331 | 84.8% |
| Gross Profit | $37,845,715 | $71,254,691 | 88.3% |
| Net Income | $15,739,009 | $20,000,000 (est.) | 27.5% |
| Life Settlement Policies Held | 296 | 532 | 79.7% |
East Resources Acquisition Company (ERES) DCF Excel Template
5-Year Financial Model
40+ Charts & Metrics
DCF & Multiple Valuation
Free Email Support
Updated on 16 Nov 2024
Resources:
- East Resources Acquisition Company (ERES) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of East Resources Acquisition Company (ERES)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View East Resources Acquisition Company (ERES)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.