Heritage Global Inc. Announces 2021 Third Quarter Results

November 10, 2021 04:05 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 third quarter and nine months ended September 30, 2021.

Heritage Global Chief Executive Officer Ross Dove commented, “Asset flow remained relatively low in the quarter on both sides of our business, resulting in performance that is below 2020 levels. That said, we reported encouraging sequential improvement in our Industrial Assets Division and remain well positioned with the Financial Assets Division for the expected increase in non-performing loans entering the market in 2022. Industrial Asset Division operating income increased to $0.7 million from $0.4 million in Q2 of this year. We are increasingly optimistic about volume improving as we move into 2022, as companies get more comfortable with the current pandemic landscape and optimizing their liquidation of surplus assets with a growing ESG mindset. Operating income in the Financial Assets Division remained relatively flat from Q2 due to the ongoing decline in non-performing loans currently available in the market. That said, (1) the extended delay in charged off financial assets coming to market, (2) the recent increase in consumer borrowing and (3) the wind down of stimulus payments, together should lead to a meaningful recovery in the volume of non-performing loans coming to market in 2022 and beyond.”

Mr. Dove continued, “Our acquisition of ALT during the quarter was an important strategic step for us, further strengthening our Industrial Asset Division. The addition of ALT enhances our service offering in the biotech and pharma sectors, which has been our most important vertical on the industrial side of the business over the past decade. The integration of ALT is going well and adds real strength to our increasing client base seeking ESG-oriented solutions for their surplus assets. In summary, this “bolt-on acquisition” has positioned us to be the clear leader in the bio and pharma asset disposition sector.”

Mr. Dove concluded, “Our Heritage Global Capital pipeline is robust, and our approved group of borrowers is strong. HGI achieved yet another profitable quarter and continues to improve our market position, which will benefit from rising asset flows, driving improved performance and profitability.”

Third Quarter 2021 Summary of Financial Results:

($ in thousands, except per share amounts)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Operating income

$

533

$

1,612

$

1,652

$

2,730

Net income

$

474

$

1,264

$

2,093

$

3,341

Net income per share – diluted

$

0.01

$

0.04

$

0.06

$

0.11

(Non-GAAP Financial Measures) (1)

EBITDA

$

638

$

1,704

$

1,946

$

3,002

Adjusted EBITDA

$

740

$

1,801

$

2,459

$

3,260

(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.

Third Quarter 2021 Highlights:

  • The Company achieved operating income of $0.5 million for the third quarter of 2021, as compared to operating income of $1.6 million in the third quarter of 2020.
  • Net income of $0.5 million, or $0.01 diluted earnings per share for the third quarter of 2021, as compared to net income of $1.3 million, $0.04 diluted earnings per share in the third quarter of 2020.
  • EBITDA totaled $0.6 million in the third quarter of 2021 versus EBITDA of $1.7 million in the third quarter of 2020 and Adjusted EBITDA (excluding non-cash stock-based compensation) was $0.7 million compared to $1.8 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $31.6 million as of September 30, 2021, compared to $29.9 million as of December 31, 2020, and net working capital of $9.9 million.
    The Company acquired the assets of American Laboratory Trading (“ALT”), one of the largest suppliers of premium refurbished lab equipment in North America and a key provider of surplus asset services for the life sciences.

Third Quarter 2021 Conference Call
Management will host a webcast and conference call on Wednesday, November 10, 2021, at 5:00 pm ET to discuss financial results for third 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. To listen to a live broadcast, go to the site at least 10 minutes prior to the scheduled start time in order to register.

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).

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.

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
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Revenues:

Services revenue

$

4,822

$

6,060

$

14,020

$

15,713

Asset sales

1,169

1,506

4,248

2,214

Total revenues

5,991

7,566

18,268

17,927

Operating costs and expenses:

Cost of services revenue

1,100

1,605

3,235

3,344

Cost of asset sales

675

990

1,870

1,358

Selling, general and administrative

3,494

3,378

11,134

10,516

Depreciation and amortization

105

92

294

272

Total operating costs and expenses

5,374

6,065

16,533

15,490

Earnings of equity method investments

(84)

111

(83)

293

Operating income

533

1,612

1,652

2,730

Interest and other expense, net

(6)

(3)

6

(38)

Income before income tax expense (benefit)

527

1,609

1,658

2,692

Income tax expense (benefit)

53

345

(435)

(649)

Net income

$

474

$

1,264

$

2,093

$

3,341

Weighted average common shares outstanding – basic

35,805,227

28,751,689

35,285,128

28,817,344

Weighted average common shares outstanding – diluted

37,090,294

31,890,115

36,567,713

31,288,151

Net income per share – basic

$

0.01

$

0.04

$

0.06

$

0.12

Net income per share – diluted

$

0.01

$

0.04

$

0.06

$

0.11

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

-balance sheets follow-

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

September 30,
2021

December 31,
2020

ASSETS

Current assets:

Cash and cash equivalents

$

13,234

$

23,385

Accounts receivable

3,388

1,496

Current portion of notes receivable, net

1,142

1,338

Inventory – equipment

1,383

235

Other current assets

675

498

Total current assets

19,822

26,952

Non-current portion of notes receivable, net

1,413

748

Equity method investments

3,327

2,402

Right-of-use assets

2,818

963

Property and equipment, net

1,477

130

Intangible assets, net

4,265

3,123

Goodwill

7,262

5,585

Deferred tax assets

4,807

4,402

Other assets

161

250

Total assets

$

45,352

$

44,555

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

8,902

$

13,609

Current portion of third party debt

531

Current portion of lease liabilities

498

380

Total current liabilities

9,931

13,989

Non-current portion of third party debt

1,469

Non-current portion of lease liabilities

2,368

623

Total liabilities

13,768

14,612

Stockholders’ equity:

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 565 shares of Series N as of September 30, 2021 and 568 as of December 31, 2020

6

6

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

and outstanding 36,574,702 shares as of September 30, 2021 and 35,281,183 as of December 31, 2020

366

353

Additional paid-in capital

292,935

293,400

Accumulated deficit

(261,723)

(263,816)

Total stockholders’ equity

31,584

29,943

Total liabilities and stockholders’ equity

$

45,352

$

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
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

Net income

$

474

$

1,264

$

2,093

$

3,341

Add back:

Depreciation and amortization

105

92

294

272

Interest and other expense, net

6

3

(6)

38

Income tax expense (benefit)

53

345

(435)

(649)

EBITDA

638

1,704

1,946

3,002

Management add back:

Stock based compensation

102

97

313

258

Separation Agreement

200

Adjusted EBITDA

$

740

$

1,801

$

2,459

$

3,260

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]