Heritage Global Inc. Announces Record 2020 Fourth Quarter and Year End Results

March 08, 2021 04:11 PM Eastern Standard 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 fourth quarter and full year ended December 31, 2020.

Heritage Global Chief Executive Officer Ross Dove commented, “We closed out 2020 with record fourth quarter results, reflected in net income of $6.3 million and substantially improved adjusted EBITDA of $3.5 million. Our performance in the quarter, and for the full year, demonstrates the strength and resilience of our diverse business model, which performed well in a challenging economic environment as the pandemic continued to impact global markets.

“As we announced in January, we closed several large transactions at Heritage Global Partners during the fourth quarter, which significantly contributed to the strength of the quarter and enabled us to begin 2021 with significant momentum across our businesses. We are optimistic for our prospects as we have moved into 2021, and expect to see strong supply on the auction side of our business as the pandemic continues to drive the liquidation of industrial equipment and assets. Likewise, we anticipate increased demand for our financial asset services, as we expect to see an increase in the release of non-performing loans into the market this calendar year. Specifically, we are seeing more opportunities related to debt associated with the growing adoption of the ‘Buy Now, Pay Later’ (BNPL) purchasing option among online consumers. In fact, we recently announced the successful sale of a $25 million portfolio of BNPL charged-off accounts. We are pleased with Heritage’s progress in 2020 and are focused on continuing to capitalize on the interest and demand we are seeing across both the industrial and financial sides of our business.”

Fourth Quarter 2020 Summary of Financial Results:

($ in thousands, except per share amounts)

Quarter Ended
December 31,

Year Ended
December 31,

2020

2019

2020

2019

Operating income (loss)

3,329

(446)

6,059

3,050

Net income

6,317

577

9,658

3,899

Net income per share – diluted

$

0.17

$

0.02

$

0.30

$

0.13

(Non-GAAP Financial Measures) (1)

EBITDA

$

3,419

$

(367)

$

6,421

$

3,355

Adjusted EBITDA

$

3,514

$

279

$

6,774

$

4,211

(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.

Fourth Quarter 2020 Highlights:

  • The Company achieved operating income of $3.3 million as compared to an operating loss of $0.4 million in the fourth quarter of 2019, primarily due to the completion of multiple large transactions in the Company’s industrial auction business. The fourth quarter of 2019 included a $0.6 million impairment charge related to Equity Partners, which was discontinued as of December 31, 2019.
  • Net income increased to $6.3 million, or $0.17 diluted earnings per share, for the fourth quarter of 2020, as compared to $0.6 million or $0.02 diluted earnings per share in the fourth quarter of 2019. The financial results for 2020 include an income tax benefit of $3.0 million for the fourth quarter of 2020, and an income tax benefit of $3.6 million for the year ended December 31, 2020 which included the reversal of the income tax valuation allowance as required according to ASC 740-10-30-5(e). Excluding the income tax benefit resulting from the income tax valuation allowance, the net income for the fourth quarter of 2020 would have been $2.5 million or $0.07 diluted earnings per share, and $4.5 million or $0.14 diluted earnings per share for the year ended December 31, 2020, compared to net loss for the fourth quarter of 2019 of $1.2 million or $0.04 diluted earnings per share, and net income of $2.1 million or $0.07 diluted earnings per share for the year ended December 31, 2019.
  • EBITDA totaled $3.4 million versus EBITDA loss of $0.4 million in the fourth quarter of 2019, while Adjusted EBITDA (excluding non-cash stock-based compensation expense) was $3.5 million compared to $0.3 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $29.9 million as of December 31, 2020, compared to $11.8 million as of December 31, 2019, and cash of $23.4 million.

Fourth Quarter and Year End 2020 Conference Call

Management will host a webcast and conference call on Monday, March 8, 2021 at 5:00 pm ET to discuss financial results for the fourth quarter and full year 2020. Analysts and investors may participate via conference call, using the following dial-in information:

  • 1-855-327-6837 (Domestic)
  • 1-631-891-4304 (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 15 minutes prior to the scheduled start time in order to register.

A replay of the call will also be available on the Company’s website approximately two hours after the live call through March 22, 2021. To access the replay, dial 844-512-2921 (domestic) or 412-317-6671 (international). The replay pin number is 10013440. The replay can also be accessed on the Investor Relations section of the Company’s website.

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 and any goodwill impairments. 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).

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.

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.

CONSOLIDATED STATEMENTS OF INCOME

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

Three Months Ended
December 31,

Year Ended
December 31,

2020

2019

2020

2019

(unaudited)

Revenues:

Services revenue

$

6,168

$

5,150

$

21,806

$

20,100

Asset sales

2,163

421

4,377

6,068

Total revenues

8,331

5,571

26,183

26,168

Operating costs and expenses:

Cost of services revenue

2,976

725

6,320

3,374

Cost of asset sales

1,431

413

2,789

4,365

Selling, general and administrative

3,933

4,323

14,449

15,874

Impairment of goodwill

573

573

Depreciation and amortization

90

79

362

305

Total operating costs and expenses

8,430

6,113

23,920

24,491

Earnings of equity method investments

3,428

96

3,796

1,373

Operating income

3,329

(446)

6,059

3,050

Interest and other expense, net

(7)

(7)

(45)

(64)

Income before income tax expense (benefit)

3,322

(453)

6,014

2,986

Income tax expense (benefit)

(2,995)

(1,030)

(3,644)

(913)

Net income

$

6,317

$

577

$

9,658

$

3,899

Weighted average common shares outstanding – basic

34,318,122

28,689,060

30,200,053

28,662,297

Weighted average common shares outstanding – diluted

37,071,983

30,129,432

32,708,235

29,271,375

Net income per share – basic

$

0.18

$

0.02

$

0.32

$

0.14

Net income per share – diluted

$

0.17

$

0.02

$

0.30

$

0.13

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

-balance sheets follow-

HERITAGE GLOBAL INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share amounts)

December 31,

2020

2019

ASSETS

Current assets:

Cash and cash equivalents

$

23,385

$

2,728

Accounts receivable

1,496

1,859

Current portion of notes receivable, net

1,338

1,295

Inventory – equipment

235

104

Other current assets

498

784

Total current assets

26,952

6,770

Non-current portion of notes receivable, net

748

1,366

Equity method investments

2,402

2,516

Right-of-use asset

963

1,483

Property and equipment, net

130

221

Intangible assets, net

3,123

3,392

Goodwill

5,585

5,585

Deferred tax assets

4,402

372

Other assets

250

212

Total assets

$

44,555

$

21,917

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

13,609

$

8,113

Current portion of third party debt

438

Lease liabilities

380

577

Total current liabilities

13,989

9,128

Non-current portion of lease liabilities

623

942

Total liabilities

14,612

10,070

Commitments and contingencies (Note 12)

Stockholders’ equity:

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and

outstanding 568 Series N shares at December 31, 2020 and December 31, 2019

6

6

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and

outstanding 35,281,183 shares at December 31, 2020 and 29,339,101 shares

at December 31, 2019

353

293

Additional paid-in capital

293,400

285,099

Accumulated deficit

(263,816)

(273,474)

Accumulated other comprehensive loss

(77)

Total stockholders’ equity

29,943

11,847

Total liabilities and stockholders’ equity

$

44,555

$

21,917

The accompanying notes are an integral part of these 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
December 31,

Year Ended
December 31,

2020

2019

2020

2019

Net income

$

6,317

$

577

$

9,658

$

3,899

Add back:

Depreciation and amortization

90

79

362

305

Interest and other expense, net

7

7

45

64

Income tax expense (benefit)

(2,995)

(1,030)

(3,644)

(913)

EBITDA

3,419

(367)

6,421

3,355

Management add back:

Stock based compensation

95

73

353

283

Impairment of goodwill

573

573

Adjusted EBITDA

$

3,514

$

279

$

6,774

$

4,211

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

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