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Heritage Global Inc. Reports First Quarter 2024 Results

Company Reports Operating Income of $2.6 Million
Subsequent to First Quarter Company Closed an Equipment Sale and Real Estate Lease Transaction with Multi-National Pharmaceutical Company

May 09, 2024 04:08 PM Eastern Daylight Time

SAN DIEGO – (BUSINESS WIRE) – Heritage Global Inc. (NASDAQ: HGBL) (“Heritage Global,” “HG” 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, 2024.

First Quarter 2024 Summary of Financial Results (unaudited):

($ in thousands, except per share amounts) Three Months Ended

March 31,

2024   2023
Operating income     $        2,558 $       3,894
Net income     $        1,799 $       2,829
Net income per share – diluted $          0.05 $         0.08
(Non-GAAP Financial Measures) (1)
EBITDA      $       2,699 $       4,014
Adjusted EBITDA      $       2,927  $       4,193

(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, “2024 is off to a solid start with continued profitability in the business. Our financial division is executing well and benefiting from heightened economic pressures driving increases in charged-off credit cards and non-performing loans. Our industrial division continues to see healthy levels of equipment and asset auction activity, but faced a tough comparison in the quarter given a large auction that took place in the first quarter of 2023. Importantly, subsequent to the close of the first quarter, our auction division, in conjunction with our partners, completed a highly accretive transaction involving the sale of equipment and a 10-year building lease on the recently acquired pharmaceutical plant in Fenton, Missouri.

“Looking forward, the pipeline is strong across our businesses and we look forward to continuing to drive long term organic growth and profitability. Additionally, M&A is a strategic focus as we move forward and we are seeing increased opportunities in the markets we serve,” Mr. Dove concluded.

First Quarter 2024 Highlights:

  • The Company achieved operating income of $2.6 million for the first quarter of 2024, as compared to operating income of $3.9 million in the first quarter of 2023.
  • EBITDA totaled $2.7 million in the first quarter of 2024 versus EBITDA of $4.0 million in the first quarter of 2023 and Adjusted EBITDA was $2.9 million compared to $4.2 million in the prior-year quarter.
  • Net income totaled $1.8 million or $0.05 of diluted earnings per share for the first quarter of 2024, as compared to net income of $2.8 million or $0.08 of diluted earnings per share in the prior-year quarter.
  • The Company strengthened its balance sheet by increasing stockholders’ equity to $63.0 million as of March 31, 2024, compared to $61.1 million as of December 31, 2023, and increased net working capital to $15.0 million at the end of the first quarter of 2024, compared to $11.6 million at the end of the fourth quarter of 2023. The Company’s available and unused balance on its credit facility remains at $10.0 million as of March 31, 2024. The strengthened balance sheet and liquidity positions the Company well to pursue its M&A strategy.
  • As of March 31, 2024, the Company held a gross balance of investments in notes receivable of $37.3 million, recorded in both notes receivable and equity method investments.

First Quarter Conference Call
Management will host a webcast and conference call on Thursday, May 9, 2024, at 5:00 p.m. ET to discuss financial results for the first quarter of 2024. Analysts and investors may participate via conference call, using the following dial-in information:

  • 1-800-830-9649 (Domestic)
  • 1-213-992-4624 (International)

To access the webcast, individuals can use this link. 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 or click on the webcast link at least 10 minutes prior to the scheduled start time in order to register.

A replay of the call will be available on the Company’s website approximately three hours after the call ends through May 23, 2024. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 11155834. The replay can also be accessed on the Investor Relations section of the Company’s website.

About Heritage Global Inc.
Heritage Global Inc. (NASDAQ: HGBL) values and monetizes industrial & financial assets by providing acquisition, disposition, valuation, and lending services for surplus and distressed assets. This aids in facilitating the circular economy by diverting useful industrial assets from landfills and operating an ethical supply chain by overseeing post-sale account activity of financial assets. Specialties consist of acting as an adviser, in addition to acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, real estate, and charged-off account receivable portfolios through its two business units: Industrial Assets and Financial Assets.

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-

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

Three Months Ended March 31,
2024 2023
Services revenue  $            8,983  $          10,245
Asset sales   3,178   6,367
Total revenues   12,161   16,612
Operating costs and expenses:
Cost of services revenue   1,480   2,340
Cost of asset sales   2,411   4,335
Selling, general and administrative   6,358   6,300
Depreciation and amortization   141   120
Total operating costs and expenses   10,390   13,095
Earnings of equity method investments   787   377
Operating income   2,558   3,894
Interest expense, net   (92)   (68)
Income before income tax expense   2,466   3,826
Income tax expense   667   997
Net income  $            1,799  $            2,829
Weighted average common shares outstanding – basic   36,592,801   36,005,150
Weighted average common shares outstanding – diluted   37,367,268   37,334,459
Net income per share – basic  $              0.05  $              0.08
Net income per share – diluted  $              0.05  $              0.08

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

March 31, 2024 December 31, 2023
ASSETS (unaudited)
Current assets:
Cash and cash equivalents  $         15,577  $         12,279
Accounts receivable, net   1,558   1,910
Current portion of notes receivable, net   6,514   6,581
Inventory – equipment   4,735   5,074
Other current assets   490   448
Total current assets   28,874   26,292
Non-current portion of notes receivable, net   10,698   10,890
Equity method investments   20,271   21,361
Right-of-use assets   2,377   2,539
Property and equipment, net   1,684   1,705
Intangible assets, net   3,655   3,753
Goodwill   7,446   7,446
Deferred tax assets   8,637   9,115
Other assets   64   67
Total assets  $         83,706  $         83,168
Current liabilities:
Accounts payable and accrued liabilities  $           4,564  $           7,237
Payables to sellers   6,816   4,975
Current portion of third party debt   1,765   1,733
Current portion of lease liabilities   779   789
Total current liabilities   13,924   14,734
Non-current portion of third party debt   5,040   5,495
Non-current portion of lease liabilities   1,710   1,859
Total liabilities   20,674   22,088
Stockholders’ equity:
Preferred stock   6   6
Common stock   373   372
Additional paid-in capital   294,674   294,522
Accumulated deficit   (231,227)   (233,026)
Treasury stock   (794)   (794)
Total stockholders’ equity   63,032   61,080
Total liabilities and stockholders’ equity  $         83,706  $         83,168

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

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

 (In thousands of US dollars) (unaudited)

Three Months Ended March 31,
2024 2023
Net income  $        1,799  $         2,829
Add back:
Depreciation and amortization   141   120
Interest expense, net   92   68
Income tax expense   667   997
EBITDA   2,699   4,014
Management add back:
Stock based compensation   228   179
Adjusted EBITDA  $        2,927  $         4,193

John Nesbett/Jennifer Belodeau
IMS Investor Relations