Heritage Global Inc. Reports Profitable First Quarter 2022 Results; Positioned to Benefit From Industry Tailwinds for Both Industrial and Financial Businesses

Anticipated To Close Two Real Estate Transactions in Q2 or Q3; Expected To Contribute Over $2.5 Million In Combined Net Profit

Board Approves Share Repurchase Program

May 12, 2022 04:15 PM Eastern Daylight Time

SAN DIEGO – (BUSINESS WIRE) – Heritage Global Inc. (NASDAQ: HGBL) (“Heritage Global,” “HGI” or “the Company”), an asset services company specializing in financial and industrial asset transactions, today reported financial results for the first quarter ended March 31, 2022.

First Quarter 2022 Summary of Financial Results:

($ in thousands, except per share amounts)

Three Months Ended
March 31,

2022

2021

Operating income

$

875

$

1,046

Net income

$

645

$

1,032

Net income per share – diluted

$

0.02

$

0.03

(Non-GAAP Financial Measures) (1)

EBITDA

$

1,008

$

1,137

Adjusted EBITDA

$

1,114

$

1,480

(1)

EBITDA and Adjusted EBITDA are commonly used non-GAAP financial measures utilized by management as a supplemental tool to evaluate the underlying operating performance of the Company on an ongoing basis and should be considered together with Heritage Global’s GAAP financial measures. Definitions and disclosures regarding non-GAAP financial information including reconciliations are included at the end of the press release.

Heritage Global Chief Executive Officer Ross Dove commented, “2022 is off to a solid start, and we are pleased to have delivered continued profitability and EBITDA of $1.0 million in the first quarter. With our visibility today we are increasingly optimistic about the balance of 2022. Our business model includes diverse revenue streams and we are extremely well positioned in both our Financial Assets Division and our Industrial Assets Division to capitalize on improving market dynamics. We are seeing a clear transition from headwind conditions to tailwind conditions, and we are moving aggressively to seize the opportunities being created in this more favorable environment.

“There has been a great deal of public commentary on the significant rise in consumer spending, and with the end of Covid-related stimulus payments, we are starting to see a higher volume of charged-off consumer loans coming to market. Likewise, with the current inflationary macroeconomic conditions, more and more financial institutions are pointing to a recession as a market likelihood, which we believe will lead to a significant increase in non-performing loans as we move through the year. We are ready to facilitate the sale of that volume when it materializes.

“The opportunity pipeline for our Industrial Assets Division is robust and growing. The manufacturing and industrial sector — the primary clients for this portion of our business — are increasingly focused on promoting a sustainable circular economy when it comes to the disposal of surplus assets and equipment. We are uniquely positioned to help these clients bring their assets to auction for reuse and recycling. Additionally, our recent acquisition of ALT (American Laboratory Trading) has been fully integrated and strengthens our position in the biotech and pharma sectors, providing an outlet for the resale of refurbished lab equipment.

“We also continue to pursue strategic real estate opportunities, which has proven to be a high margin revenue stream for us. Subsequent to the close of the quarter, we announced that we are part of a partnership that has acquired two pharmaceutical plants in St. Louis, Missouri. We anticipate that the sale of these facilities will follow a template similar to our successful Huntsville partnership, which encompasses three buildings, one of which sold in a fiscal 2020 transaction that resulted in $2.3 million net profit to Heritage. It is our expectation that we will close the sale of the two remaining Huntsville real estate transactions in Q2 or Q3 of this year and that on a combined basis they will contribute over $2.5 million in net profit.”

First Quarter 2022 Highlights:

  • The Company achieved operating income of $875 thousand for the first quarter of 2022, as compared to operating income of $1.0 million in the first quarter of 2021.
  • Net income totaled $645 thousand, or $0.02 diluted earnings per share for the first quarter of 2022, as compared to net income of $1.0 million, $0.03 diluted earnings per share in the first quarter of 2021.
  • EBITDA totaled $1.0 million in the first quarter of 2022 versus EBITDA of $1.1 million in the first quarter of 2021 and Adjusted EBITDA (excluding non-cash stock-based compensation) was $1.1 million compared to $1.5 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $33.4 million as of March 31, 2022, compared to $32.6 million as of December 31, 2021, and net working capital of $8.8 million.

Looking Forward
Mr. Dove commented, “As we continue through 2022, we expect accelerating tailwinds across all five of our business units. With that in mind and given what we are currently seeing in the marketplace, we are targeting full year 2022 net operating income exceeding our best prior annual results of $6.1 million, which was achieved in 2020. We are energized to execute on all fronts and to harness the opportunities we are seeing to drive growth and continued profitability.”

Share Repurchase Program
Heritage Global Inc. today announced that its Board of Directors has authorized a share repurchase program which permits the Company to purchase up to an aggregate of $4 million in common shares over a three-year period.

Mr. Dove commented, “We believe our shares are currently undervalued and given Heritage’s unique position in the marketplace, consistent profitability, and encouraging near to long-term outlook, an opportunity exists to create value for our shareholders.”

First Quarter 2022 Conference Call
Management will host a webcast and conference call today, Thursday, May 12, 2022, at 5:00 pm ET to discuss financial results for the first quarter 2022. Analysts and investors may participate via conference call, using the following dial-in information:

  • 1-844-826-3033 (Domestic)
  • 1-412-317-5185 (International)

The conference call will also be available in the Investor Relations section of the Company’s website. To listen to a live broadcast, go to the site at least 10 minutes prior to the scheduled start time in order to register.

About Heritage Global Inc. 
Heritage Global Inc. (NASDAQ: HGBL) is an asset services company specializing in financial and industrial asset transactions. The company provides a full suite of services including market making, acquisitions, dispositions, valuations and secured lending. We focus on identifying, valuing, acquiring and monetizing underlying tangible and intangible assets across more than twenty-five global sectors. The company acts as an adviser, as well as a principal, acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, accounts receivable portfolios, intellectual property, and entire business enterprises.

Definitions and Disclosures Regarding non-GAAP Financial Information
The Company defines EBITDA as net income/loss plus depreciation and amortization, interest and other expense, and provision for income taxes. Adjusted EBITDA reflects EBITDA adjusted further to eliminate the effects of stock-based compensation. Management uses EBITDA and Adjusted EBITDA in assessing the Company’s results, evaluating the Company’s performance and in reaching operating and strategic decisions. Management believes that the presentation of EBITDA and Adjusted EBITDA, when considered together with our GAAP financial statements and the reconciliation to the most directly comparable GAAP financial measure, is useful in providing investors a more complete understanding of the factors and trends affecting the underlying performance of the Company on a historical and ongoing basis. The Company’s use of EBITDA and Adjusted EBITDA is not meant to be, and should not be, considered in isolation or as a substitute for, or superior to, any GAAP financial measure. You should carefully evaluate the financial information, below, which reconciles our GAAP reported net income to EBITDA and Adjusted EBITDA for the periods presented (in thousands).

Forward-Looking Statements
This communication includes forward-looking statements based on our current expectations and projections about future events. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. While the Company believes the forward-looking statements contained in this communication are accurate, these forward-looking statements represent the Company’s beliefs only as of the date of this communication, and there are a number of factors that could cause actual events or results to differ materially from those indicated by such forward-looking statements, including variability in magnitude and timing of asset liquidation transactions, the impact of changes in the U.S. national and global economies, and interest rate and foreign exchange rate sensitivity, as well as other factors beyond the Company’s control. Unless required by law, we undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission.

-financial tables follow-

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands of US dollars, except share and per share amounts)

(unaudited)

Three Months Ended March 31,

2022

2021

Revenues:

Services revenue

$

4,168

$

5,030

Asset sales

5,189

2,071

Total revenues

9,357

7,101

Operating costs and expenses:

Cost of services revenue

754

1,175

Cost of asset sales

3,402

820

Selling, general and administrative

4,275

3,969

Depreciation and amortization

133

91

Total operating costs and expenses

8,564

6,055

Earnings of equity method investments

82

Operating income

875

1,046

Interest and other expense, net

(38)

3

Income before income tax expense

837

1,049

Income tax expense

192

17

Net income

$

645

$

1,032

Weighted average common shares outstanding – basic

36,003,709

34,788,016

Weighted average common shares outstanding – diluted

36,749,198

37,533,065

Net income per share – basic

$

0.02

$

0.03

Net income per share – diluted

$

0.02

$

0.03

The accompanying notes are an integral part of these condensed consolidated financial statements.

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share and per share amounts) (unaudited)

March 31,
2022

December 31,
2021

ASSETS

Current assets:

Cash and cash equivalents

$

15,097

$

13,622

Accounts receivable (net of allowance for doubtful accounts of $122 in 2022 and 2021)

2,882

2,732

Current portion of notes receivable, net

2,088

2,254

Inventory – equipment

2,857

3,220

Other current assets

1,224

1,456

Total current assets

24,148

23,284

Non-current portion of notes receivable, net

1,078

1,784

Equity method investments

6,544

4,683

Right-of-use assets

2,569

2,694

Property and equipment, net

1,456

1,471

Intangible assets, net

4,460

4,565

Goodwill

7,446

7,446

Deferred tax assets

4,358

4,488

Other assets

49

49

Total assets

$

52,108

$

50,464

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

3,123

$

4,793

Payables to sellers

9,774

6,451

Current portion of third party debt

1,979

2,479

Current portion of lease liabilities

505

501

Total current liabilities

15,381

14,224

Non-current portion of third party debt

1,233

1,352

Non-current portion of lease liabilities

2,127

2,249

Total liabilities

18,741

17,825

Stockholders’ equity:

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 565 shares of Series N as of March 31, 2022 and December 31, 2021

6

6

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 36,677,837 shares as of March 31, 2022 and 36,574,702 as of December 31, 2021

367

366

Additional paid-in capital

293,112

293,030

Accumulated deficit

(260,118)

(260,763)

Total stockholders’ equity

33,367

32,639

Total liabilities and stockholders’ equity

$

52,108

$

50,464

The accompanying notes are an integral part of these condensed consolidated financial statements.

– EBITDA and Adjusted EBITDA (non-GAAP measures) reconciliation follows –

HERITAGE GLOBAL INC.

Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures)

(In thousands of US dollars)

(unaudited)

Three Months Ended
March 31,

2022

2021

Net income

$

645

$

1,032

Add back:

Depreciation and amortization

133

91

Interest and other expense, net

38

(3)

Income tax expense

192

17

EBITDA

1,008

1,137

Management add back:

Stock based compensation

106

143

Separation Agreement

200

Adjusted EBITDA

$

1,114

$

1,480

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.

Contact
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203/972.9200
[email protected]