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Heritage Global Inc. Announces 2021 First Quarter Results

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, 2021.

Heritage Global Chief Executive Officer Ross Dove commented, “2021 is off to a strong start with significantly improved operating income, net income and adjusted EBITDA. While the economy continues to reopen and recover, we are seeing continued momentum in our auction business, with clients in this segment seeking to liquidate industrial equipment and assets to improve their financial position as they prepare to fully re-engage their operations. As we move through 2021, we expect to see an increase in the release of non-performing loans into the market, which we expect will favorably impact demand for our financial asset services. We’re pleased to have delivered strong performance in the first quarter and with the opportunities we’re seeing in the markets in which we operate, we remain energized and optimistic about growing our leadership position and prospects through the balance of the year.”

First Quarter 2021 Summary of Financial Results:

($ in thousands, except per share amounts)

Quarter Ended

March 31,

2021

 

2020

Operating income

$

1,046

 

$

94

Net income

$

1,032

 

$

38

Net income per share – diluted

$

0.03

 

$

0.00

 

 

 

 

(Non-GAAP Financial Measures) (1)

 

 

 

EBITDA

$

1,137

 

$

184

Adjusted EBITDA

$

1,480

 

$

259

(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.

First Quarter 2021 Highlights:

  • The Company achieved operating income of $1.0 million as compared to an operating income of $0.1 million in the first quarter of 2020.
  • Net income increased to $1.0 million, or $0.03 diluted earnings per share, for the first quarter of 2021, as compared to $38,000 or $0.00 diluted earnings per share in the first quarter of 2020.
  • EBITDA totaled $1.1 million versus EBITDA of $0.2 million in the first quarter of 2020, while Adjusted EBITDA (excluding non-cash stock-based compensation and severance expense) was $1.5 million compared to $0.3 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $30.9 million as of March 31, 2021, compared to $29.9 million as of December 31, 2020, and cash of $15.9 million.

First Quarter 2021 Conference Call

Management will host a webcast and conference call on Thursday May 13, 2021 at 5:00 pm ET to discuss financial results for the first quarter 2021. Analysts and investors may participate via conference call, using the following dial-in information:

  • 1-877-300-8521 (Domestic)
  • 1-412-317-6026 (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 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 May 27, 2021. To access the replay, dial 844-512-2921 (domestic) or 412-317-6671 (international). The replay pin number is 10156281. The replay can also be accessed on the Investor Relations section of the Company's website at http://www.hginc.com/.

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. (www.heritageglobalinc.com)

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 March 31,

 

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

Services revenue

 

$

5,030

 

 

$

4,088

 

Asset sales

 

 

2,071

 

 

 

156

 

Total revenues

 

 

7,101

 

 

 

4,244

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

1,175

 

 

 

551

 

Cost of asset sales

 

 

820

 

 

 

38

 

Selling, general and administrative

 

 

3,969

 

 

 

3,472

 

Depreciation and amortization

 

 

91

 

 

 

90

 

Total operating costs and expenses

 

 

6,055

 

 

 

4,151

 

Earnings of equity method investments

 

 

 

 

 

1

 

Operating income

 

 

1,046

 

 

 

94

 

Interest and other expense, net

 

 

3

 

 

 

(27

)

Income before income tax expense

 

 

1,049

 

 

 

67

 

Income tax expense

 

 

17

 

 

 

29

 

Net income

 

$

1,032

 

 

$

38

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

34,788,016

 

 

 

28,751,689

 

Weighted average common shares outstanding – diluted

 

 

37,533,065

 

 

 

30,200,114

 

Net income per share – basic

 

$

0.03

 

 

$

0.00

 

Net income per share – diluted

 

$

0.03

 

 

$

0.00

 

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

-balance sheets follow-

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of US dollars, except share amounts)

 

 

March 31, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,852

 

 

$

23,385

 

Accounts receivable

 

 

2,297

 

 

 

1,496

 

Current portion of notes receivable, net

 

 

2,036

 

 

 

1,338

 

Inventory – equipment

 

 

91

 

 

 

235

 

Other current assets

 

 

447

 

 

 

498

 

Total current assets

 

 

20,723

 

 

 

26,952

 

Non-current portion of notes receivable, net

 

 

1,565

 

 

 

748

 

Equity method investments

 

 

2,402

 

 

 

2,402

 

Right-of-use assets

 

 

830

 

 

 

963

 

Property and equipment, net

 

 

132

 

 

 

130

 

Intangible assets, net

 

 

3,056

 

 

 

3,123

 

Goodwill

 

 

5,585

 

 

 

5,585

 

Deferred tax assets

 

 

4,450

 

 

 

4,402

 

Other assets

 

 

246

 

 

 

250

 

Total assets

 

$

38,989

 

 

$

44,555

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

7,202

 

 

$

13,609

 

Current portion of lease liabilities

 

 

301

 

 

 

380

 

Total current liabilities

 

 

7,503

 

 

 

13,989

 

Non-current portion of lease liabilities

 

 

564

 

 

 

623

 

Total liabilities

 

 

8,067

 

 

 

14,612

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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

 

 

6

 

 

 

6

 

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

and outstanding 35,647,477 shares as of March 31, 2021 and 35,281,183 as of December 31, 2020

 

 

357

 

 

 

353

 

Additional paid-in capital

 

 

293,343

 

 

 

293,400

 

Accumulated deficit

 

 

(262,784

)

 

 

(263,816

)

Total stockholders’ equity

 

 

30,922

 

 

 

29,943

 

Total liabilities and stockholders’ equity

 

$

38,989

 

 

$

44,555

 

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 March 31,

 

 

 

2021

 

 

2020

 

Net income

 

$

1,032

 

 

$

38

 

Add back:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

91

 

 

 

90

 

Interest and other expense, net

 

 

(3

)

 

 

27

 

Income tax expense (benefit)

 

 

17

 

 

 

29

 

EBITDA

 

 

1,137

 

 

 

184

 

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

143

 

 

 

75

 

West Separation Agreement

 

 

200

 

 

 

 

Adjusted EBITDA

 

$

1,480

 

 

$

259

 

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

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