HGBL Heritage Global Inc

- Financial Assets Division Reports 185% Growth in Operating Income for First Six Months of 2023 -

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 second quarter and six months ended June 30, 2023.

Second Quarter and First Six Months 2023 Summary of Financial Results:

($ in thousands, except per share amounts)

Three Months Ended

June 30,

Six Months Ended

June 30,

2023

 

2022

2023

 

2022

Operating income

$

3,101

 

$

3,624

$

6,995

 

$

4,499

Net income

$

2,779

 

$

2,578

$

5,608

 

$

3,223

Net income per share – diluted

$

0.07

 

$

0.07

$

0.15

 

$

0.09

 

 

 

 

 

 

 

(Non-GAAP Financial Measures) (1)

 

 

 

 

 

 

EBITDA

$

3,222

 

$

3,757

$

7,236

 

$

4,765

Adjusted EBITDA

$

3,450

 

$

3,865

$

7,643

 

$

4,979

(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, “We continued to drive operational execution across our business in the second quarter, resulting in solid net operating income of $3.1 million, characterized by particularly strong growth in our financial assets division. Both of our operating divisions are seeing tremendous opportunities in the marketplace, as the challenging economy is creating heightened volume in the financial and industrial assets coming to market.

“As has been widely reported, consumer debt has reached record levels, creating corresponding growth in the volume of non-performing loans and charged-off credit card accounts. Our second quarter and first half results from our financial assets division reflect these increased volumes and more importantly, illustrate our ability to capitalize on the economic landscape as we win brokerage contracts and specialty lending opportunities. With interest rates ticking higher and the inflationary environment driving consumers to make necessary purchases on credit rather than with cash, we expect to see continued growth in our financial assets business.

“This increased asset flow is also evident in our pipeline and calendar for upcoming industrial auctions, as businesses scale down staff and close offices and operating facilities. As we have mentioned before, our auction business will vary from quarter to quarter, but our auction pipeline presently is robust and we are confident that we will continue to see substantial activity in our industrial assets division as we move through the balance of 2023.

“We are pleased with our performance to date this year and especially proud to have achieved record net operating income of $7.0 million for the first six months of 2023. As we move through the balance of the year, we are energized about building on the momentum created in the first half and believe we are ideally positioned to compete for and win the exciting opportunities we are seeing across the markets in which we operate,” Mr. Dove concluded.

Second Quarter 2023 Highlights:

• The Company achieved operating income of $3.1 million for the second quarter of 2023, as compared to operating income of $3.6 million in the second quarter of 2022.
• Net income totaled $2.8 million, or $0.07 diluted earnings per share for the second quarter of 2023, as compared to net income of $2.6 million, or $0.07 diluted earnings per share in the prior-year quarter.
• EBITDA totaled $3.2 million in the second quarter of 2023 versus EBITDA of $3.8 million in the second quarter of 2022 and Adjusted EBITDA was $3.5 million compared to $3.9 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $54.2 million as of June 30, 2023, compared to $48.3 million as of December 31, 2022. Net working capital was $15.5 million at the end of the second quarter.
• During the quarter, Heritage announced a new and enhanced $17.0 million credit facility which includes the renewal of its existing $10.0 million line of credit as well as a new $7.0 million term loan.
• As of June 30, 2023, our total balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $29.9 million, of which $15.0 million is classified as Notes Receivable and $14.9 million is classified as Equity Method Investments.

Second Quarter Conference Call

Management will host a webcast and conference call today, Thursday, August 10, 2023, at 5:00 pm ET to discuss financial results for second quarter 2023. Analysts and investors may participate via conference call using the following dial-in information:

• 1-877-423-9813 (Domestic)
• 1-201-689-8573 (International)

In addition, individuals can use this link for telephone access to the call via their web browser. The webcast link is available here and will 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.

Replay

A replay of the call will be available on the Company’s website approximately three hours after the call ends through August 24, 2023. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 13740018. The replay can also be accessed on the Investor Relations section of the Company’s website.

About Heritage Global Inc. (“HG”)

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, 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-

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

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

(unaudited)

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2023

 

 

 

2022

 

 

 

2023

 

 

 

2022

 

Revenues:

 

 

 

 

 

 

 

 

Services revenue

 

$

9,810

 

 

$

4,595

 

 

$

20,055

 

 

$

8,763

 

Asset sales

 

 

3,288

 

 

 

6,470

 

 

 

9,655

 

 

 

11,659

 

Total revenues

 

 

13,098

 

 

 

11,065

 

 

 

29,710

 

 

 

20,422

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

1,807

 

 

 

910

 

 

 

4,147

 

 

 

1,664

 

Cost of asset sales

 

 

1,935

 

 

 

5,631

 

 

 

6,270

 

 

 

9,033

 

Selling, general and administrative

 

 

6,440

 

 

 

4,939

 

 

 

12,740

 

 

 

9,214

 

Depreciation and amortization

 

 

121

 

 

 

133

 

 

 

241

 

 

 

266

 

Total operating costs and expenses

 

 

10,303

 

 

 

11,613

 

 

 

23,398

 

 

 

20,177

 

Earnings of equity method investments

 

 

306

 

 

 

4,172

 

 

 

683

 

 

 

4,254

 

Operating income

 

 

3,101

 

 

 

3,624

 

 

 

6,995

 

 

 

4,499

 

Interest expense, net

 

 

(101

)

 

 

(37

)

 

 

(169

)

 

 

(75

)

Income before income tax expense

 

 

3,000

 

 

 

3,587

 

 

 

6,826

 

 

 

4,424

 

Income tax expense

 

 

221

 

 

 

1,009

 

 

 

1,218

 

 

 

1,201

 

Net income

 

$

2,779

 

 

$

2,578

 

 

$

5,608

 

 

$

3,223

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

36,700,830

 

 

 

36,103,198

 

 

 

36,627,200

 

 

 

36,053,729

 

Weighted average common shares outstanding – diluted

 

 

37,651,694

 

 

 

36,999,614

 

 

 

37,504,023

 

 

 

36,846,539

 

Net income per share – basic

 

$

0.08

 

 

$

0.07

 

 

$

0.15

 

 

$

0.09

 

Net income per share – diluted

 

$

0.07

 

 

$

0.07

 

 

$

0.15

 

 

$

0.09

 

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

June 30,

2023

 

December 31,

2022

ASSETS

 

(unaudited)

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

15,035

 

 

$

12,667

 

Accounts receivable, net

 

 

2,912

 

 

 

988

 

Current portion of notes receivable, net

 

 

8,569

 

 

 

4,505

 

Inventory – equipment

 

 

5,049

 

 

 

4,619

 

Other current assets

 

 

988

 

 

 

1,113

 

Total current assets

 

 

32,553

 

 

 

23,892

 

Non-current portion of notes receivable, net

 

 

6,400

 

 

 

4,245

 

Equity method investments

 

 

15,778

 

 

 

13,973

 

Right-of-use assets

 

 

2,856

 

 

 

2,776

 

Property and equipment, net

 

 

1,745

 

 

 

1,571

 

Intangible assets, net

 

 

3,949

 

 

 

4,144

 

Goodwill

 

 

7,446

 

 

 

7,446

 

Deferred tax assets

 

 

9,085

 

 

 

9,449

 

Other assets

 

 

70

 

 

 

64

 

Total assets

 

$

79,882

 

 

$

67,560

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable and accrued liabilities

 

$

6,531

 

 

$

8,924

 

Payables to sellers

 

 

8,085

 

 

 

3,188

 

Current portion of third party debt

 

 

1,681

 

 

 

3,411

 

Current portion of lease liabilities

 

 

777

 

 

 

703

 

Total current liabilities

 

 

17,074

 

 

 

16,226

 

Non-current portion of third party debt

 

 

6,382

 

 

 

871

 

Non-current portion of lease liabilities

 

 

2,181

 

 

 

2,164

 

Total liabilities

 

 

25,637

 

 

 

19,261

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 and 565 shares of Series N as of June 30, 2023 and December 31, 2022, respectively; with liquidation preference over common stockholders equivalent to $1,000 per share

 

 

6

 

 

 

6

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued 37,145,151 and 36,932,177 shares as of June 30, 2023 and December 31, 2022, respectively; and outstanding 36,901,683 and 36,688,709 shares as June 30, 2023 and December 31, 2022, respectively

 

 

371

 

 

 

369

 

Additional paid-in capital

 

 

294,156

 

 

 

293,589

 

Accumulated deficit

 

 

(239,893

)

 

 

(245,270

)

Treasury stock at cost, 243,468 shares as of June 30, 2023 and December 31, 2022

 

 

(395

)

 

 

(395

)

Total stockholders’ equity

 

 

54,245

 

 

 

48,299

 

Total liabilities and stockholders’ equity

 

$

79,882

 

 

$

67,560

 

– 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 June 30,

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

Net income

 

$

2,779

 

$

2,578

 

$

5,608

 

$

3,223

Add back:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

121

 

 

133

 

 

241

 

 

266

Interest expense, net

 

 

101

 

 

37

 

 

169

 

 

75

Income tax expense

 

 

221

 

 

1,009

 

 

1,218

 

 

1,201

EBITDA

 

 

3,222

 

 

3,757

 

 

7,236

 

 

4,765

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

228

 

 

108

 

 

407

 

 

214

Adjusted EBITDA

 

$

3,450

 

$

3,865

 

$

7,643

 

$

4,979

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230810854624/en/

Investor Relations Contact: John Nesbett/Jennifer Belodeau IMS Investor Relations 203/972.9200 InvestorRelations@hginc.com