Heritage Global Inc. Delivers Continued Sequential Growth and Its Strongest Operating Income of the Year in Q4 2021

March 17, 2022 04:10 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 fourth quarter and year ended December 31, 2021.

Heritage Global Chief Executive Officer Ross Dove commented, “We drove continued momentum in fourth quarter 2021, with sequential improvement across key financial metrics as compared to third quarter 2021. Fourth quarter operating income grew more than 160% to $1.4 million as compared to $0.5 million in the third quarter of 2021 and net income more than doubled to $1.0 million as compared to $0.5 million in third quarter 2021. It is important to note that while operating income was lower than the previous year, the fourth quarter of 2020 included $2.3 million in net profit related to our first completed real estate transaction from our Huntsville partnership holdings.

“As we’ve previously discussed, we are well positioned in both our Financial Assets Division and in our Industrial Assets Division. On the Financial Assets side of our business, during the past 18 months there have been delays in charge-offs coming to market, as consumers used stimulus money to pay down loans. However, consumer borrowing is on the rise as people resume historical shopping and travel behaviors. During fiscal 2022, we anticipate a significant uptick in the volume of non-performing loans coming to market, and we’re positioned to benefit from that volume.

“In our Industrial Assets Division, we’re encouraged by the opportunities we’re seeing as our client base focuses not just on profitably disposing of surplus equipment and assets, but the environmentally sound disposal of these assets. As our manufacturing and industrial clients focus on sustainability, we expect to see more equipment go to auction rather than to the landfill – which is good for our business and good for the planet,” stated Mr. Dove.

Mr. Dove concluded, “At Heritage Global Capital, we continue to work with an active and growing group of borrowers, and our pipeline is strong. We’re pleased to have closed 2021 with another profitable quarter, and as the lending and spending landscape continues to improve, we expect to see continued momentum as we move through 2022.”

Fourth Quarter & Year End 2021 Summary of Financial Results:

($ in thousands, except per share amounts)

Three Months Ended
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Operating income

$

1,362

$

3,329

$

3,014

$

6,059

Net income

$

960

$

6,317

$

3,053

$

9,658

Net income per share – diluted

$

0.03

$

0.17

$

0.08

$

0.30

(Non-GAAP Financial Measures) (1)

EBITDA

$

1,528

$

3,419

$

3,474

$

6,421

Adjusted EBITDA

$

1,623

$

3,514

$

4,082

$

6,774

(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 2021 Highlights:

  • The Company achieved operating income of $1.4 million for the fourth quarter of 2021, as compared to operating income of $3.3 million in the fourth quarter of 2020, which included $2.3 million in net profit related to the real estate transaction noted above.
  • Net income of $1.0 million, or $0.03 diluted earnings per share for the fourth quarter of 2021, as compared to net income of $6.3 million, $0.17 diluted earnings per share in the fourth quarter of 2020, which included an income tax benefit of $3.0 million.
  • EBITDA totaled $1.5 million in the fourth quarter of 2021 versus EBITDA of $3.4 million in the fourth quarter of 2020 and Adjusted EBITDA (excluding non-cash stock-based compensation) was $1.6 million compared to $3.5 million in the prior-year quarter. EBITDA and Adjusted EBITDA in the fourth quarter of 2020, included $2.3 million in net profit related to the real estate transaction noted above.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $32.6 million as of December 31, 2021, compared to $29.9 million as of December 31, 2020, and net working capital of $9.1 million.

Fourth Quarter 2021 Conference Call
Management will host a webcast and conference call today, Thursday, March 17, 2022, at 5:00 pm ET to discuss financial results for fourth quarter 2021. 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 at http://www.hginc.com/. 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. Heritage Global focuses on identifying, valuing, acquiring and monetizing underlying tangible and intangible assets across twenty-eight 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 and separation costs. 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
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Revenues:

Services revenue

$

5,934

$

6,168

$

19,954

$

21,806

Asset sales

1,590

2,163

5,838

4,377

Total revenues

7,524

8,331

25,792

26,183

Operating costs and expenses:

Cost of services revenue

1,264

2,976

4,499

6,320

Cost of asset sales

1,059

1,431

2,929

2,789

Selling, general and administrative

3,677

3,933

14,811

14,449

Depreciation and amortization

166

90

460

362

Total operating costs and expenses

6,166

8,430

22,699

23,920

Earnings of equity method investments

4

3,428

(79)

3,796

Operating income

1,362

3,329

3,014

6,059

Interest and other expense, net

(28)

(7)

(22)

(45)

Income before income tax expense (benefit)

1,334

3,322

2,992

6,014

Income tax expense (benefit)

374

(2,995)

(61)

(3,644)

Net income

$

960

$

6,317

$

3,053

$

9,658

Weighted average common shares outstanding – basic

35,974,702

34,318,122

35,458,938

30,200,053

Weighted average common shares outstanding – diluted

37,140,930

37,071,983

36,901,390

32,708,235

Net income per share – basic

$

0.03

$

0.18

$

0.09

$

0.32

Net income per share – diluted

$

0.03

$

0.17

$

0.08

$

0.30

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

-balance sheets follow-

HERITAGE GLOBAL INC.

CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share amounts)

December 31,

2021

2020

ASSETS

Current assets:

Cash and cash equivalents

$

13,622

$

23,385

Accounts receivable

2,732

1,496

Current portion of notes receivable, net

2,254

1,338

Inventory – equipment

3,220

235

Other current assets

1,456

498

Total current assets

23,284

26,952

Non-current portion of notes receivable, net

1,784

748

Equity method investments

4,683

2,402

Right-of-use asset

2,694

963

Property, plant and equipment, net

1,471

130

Intangible assets, net

4,565

3,123

Goodwill

7,446

5,585

Deferred tax assets

4,488

4,402

Other assets

49

250

Total assets

$

50,464

$

44,555

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

11,244

$

13,609

Current portion of third party debt

2,479

Current portion of lease liabilities

501

380

Total current liabilities

14,224

13,989

Non-current portion of third party debt

1,352

Non-current portion of lease liabilities

2,249

623

Total liabilities

17,825

14,612

Commitments and contingencies (Note 13)

Stockholders’ equity:

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and
outstanding 565 Series N shares at December 31, 2021 and 568 shares at
December 31, 2020

6

6

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and
outstanding 36,574,702 shares at December 31, 2021 and 35,281,183
shares at December 31, 2020

366

353

Additional paid-in capital

293,030

293,400

Accumulated deficit

(260,763)

(263,816)

Accumulated other comprehensive loss

Total stockholders’ equity

32,639

29,943

Total liabilities and stockholders’ equity

$

50,464

$

44,555

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
December 31,

Year Ended
December 31,

2021

2020

2021

2020

Net income

$

960

$

6,317

$

3,053

$

9,658

Add back:

Depreciation and amortization

166

90

460

362

Interest and other expense, net

28

7

22

45

Income tax expense (benefit)

374

(2,995)

(61)

(3,644)

EBITDA

1,528

3,419

3,474

6,421

Management add back:

Stock based compensation

95

95

408

353

Separation Agreement

200

Adjusted EBITDA

$

1,623

$

3,514

$

4,082

$

6,774

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]