Business Overview and History
New Concept Energy, Inc. (NYSE:GBR) is a diversified real estate investment and management company that has navigated the challenges of the past few years with remarkable resilience. The company's history is more complex than initially presented. It was originally incorporated as Medical Resource Companies of America in 1982, not 1978 as previously believed. Over the years, it underwent several name changes, including Greenbriar Corporation, before finally adopting its current name, New Concept Energy, Inc., in 2007.
The company's journey has been marked by significant challenges. In the early 2000s, New Concept Energy faced substantial financial difficulties, incurring significant impairment charges related to its capital assets. These challenges led to net losses for several years. The situation was particularly dire in 2019 when the company reported a net loss of $2.4 million, which included a $2.3 million impairment charge.
The year 2020 marked a turning point for New Concept Energy. The company made a strategic decision to sell its oil and gas operations to a third party, a move that generated cash proceeds and helped strengthen its balance sheet. However, the transition was not without its challenges, as the company continued to report net losses in 2020 and 2021, partly due to the operational challenges posed by the COVID-19 pandemic.
By 2022, New Concept Energy's financial performance showed signs of improvement. The company reported a net income of $181,000 for the year, driven by growth in rental revenue and management fee income. As of the end of 2022, the company had $4.58 million in stockholders' equity and $436,000 in cash, reflecting a stronger financial position.
Today, New Concept Energy's primary business involves the management and leasing of commercial and industrial properties. The company owns approximately 190 acres of land in Parkersburg, West Virginia, which houses four structures totaling approximately 53,000 square feet. Of this, the main industrial-office building contains approximately 24,800 square feet, with 16,000 square feet currently leased at a rate of $101,000 per annum.
In addition to its real estate operations, the company also provides management, supervisory, and administrative services for its former oil and gas operations, earning a fee-based income through a consulting agreement. On January 1, 2022, New Concept Energy entered into a Consulting Management Agreement to provide these services for a fee of 10% of the gross revenue, which can be terminated by either party upon 60 days notice.
Financial Performance and Ratios
Over the past three years, New Concept Energy has demonstrated a mixed financial performance. In 2020, the company reported a net income of $1.92 million, a significant improvement from the previous year's net loss of $52,000. This turnaround can be attributed to the sale of the company's oil and gas operations, which generated a substantial one-time gain.
However, the company's financial results have been more subdued in the subsequent years. In 2021, New Concept Energy reported a net income of $70,000, followed by a net loss of $21,000 in 2022. The company's revenue has also fluctuated, declining from $212,000 in 2022 to $152,000 in 2023.
Financials
New Concept Energy's financial performance has shown both improvements and challenges in recent years. The company's strategic decision to sell its oil and gas operations in 2020 resulted in a significant one-time gain, leading to a net income of $1.92 million for that year. However, subsequent years have seen more modest results, with a net income of $70,000 in 2021 and a net loss of $21,000 in 2022.
For the most recent fiscal year (2023), New Concept Energy reported: - Revenue: $152,000 - Net Income: -$21,000 - Operating Cash Flow (OCF): $22,000 - Free Cash Flow (FCF): $11,000
In the most recent quarter (Q3 2024), the company's financial performance was as follows: - Revenue: $37,000 - Net Income: -$4,000 - Operating Cash Flow (OCF): $14,000 - Free Cash Flow (FCF): $14,000
The company reported a year-over-year revenue growth of 5.7% in Q3 2024 compared to Q3 2023. However, New Concept Energy reported a net loss of $4,000 for the third quarter of 2024, compared to net income of $7,000 in the same period of 2023. This was driven by an increase in corporate general and administrative expenses from $70,000 in Q3 2023 to $79,000 in Q3 2024.
For the three months ended September 30, 2024, the company reported total revenues of $37,000, including $26,000 in rental revenue and $11,000 in management fees. For the nine months ended September 30, 2024, total revenues were $110,000, with $76,000 from rental income and $34,000 from management fees.
The company's operating expenses consist primarily of corporate general and administrative costs, which were $79,000 for the three months ended September 30, 2024 and $235,000 for the nine months ended September 30, 2024. These expenses include the costs associated with operating the company's real estate properties and providing the management services for the former oil and gas assets.
Liquidity
Despite the challenges in its financial performance, New Concept Energy maintains a strong liquidity position. As of December 31, 2023, the company reported a current ratio of 7.48, indicating a healthy ability to meet its short-term obligations. This high current ratio suggests that the company has sufficient liquid assets to cover its immediate liabilities.
Furthermore, New Concept Energy's debt-to-equity ratio stands at 0, reflecting a conservative approach to financing. This lack of debt provides the company with financial flexibility and reduces its exposure to interest rate fluctuations. The strong liquidity position and debt-free status contribute to the company's resilience in the face of market uncertainties.
As of September 30, 2024, the company reported: - Cash and Cash Equivalents: $430,000 - Current Ratio: 7.48 - Quick Ratio: 7.48
The company's financial position remains strong, with minimal current liabilities of $61,000. New Concept Energy has extinguished all outstanding debt, further strengthening its balance sheet.
Recent Developments and Risks
In September 2024, New Concept Energy entered into a formal agreement with Pillar Income Asset Management, a related party, to provide certain management, administrative, and advisory services for an agreed-upon fee. This transition from an informal arrangement to a more structured agreement could potentially have implications for the company's operating expenses and profitability.
One of the key risks facing New Concept Energy is its reliance on a limited number of large customers for a significant portion of its revenue. The loss of any of these major tenants could have a material adverse impact on the company's financial performance.
Additionally, the real estate industry is inherently susceptible to various macroeconomic factors, such as interest rate fluctuations, changes in market demand, and the availability of financing. Any downturn in the broader real estate market could adversely affect New Concept Energy's operations and financial results.
Conclusion
Despite the challenges faced in recent years, New Concept Energy has demonstrated a remarkable ability to adapt and evolve. The company's strategic pivot towards real estate management and its focus on operational efficiency have positioned it as a resilient player in the industry.
As New Concept Energy navigates the ever-changing landscape, it will be crucial for the company to continue diversifying its revenue streams, managing its costs, and mitigating the risks associated with its reliance on a limited number of large customers. With a strong balance sheet and a seasoned management team, New Concept Energy appears well-equipped to weather future storms and capitalize on emerging opportunities in the real estate sector.
The company's focus on generating rental income and management fees from its real estate holdings and former oil and gas operations provides a stable, albeit modest, revenue stream. While recent financial performance has been mixed, with small losses reported in the most recent quarter, the company's strong liquidity position and debt-free status provide a solid foundation for future growth and stability in the competitive real estate market.