Heritage Global Inc. Announces 2021 Second Quarter Results

Aug 12, 2021 04:09 pm
SAN DIEGO -- 

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 second quarter and six months ended June 30, 2021.

Heritage Global Chief Executive Officer Ross Dove commented, “This was a challenging quarter, characterized by limited asset flow volumes across both our financial and industrial businesses. The auction industry overall saw a slowdown in large transactions in the quarter as clients took a ‘wait and see’ approach to plant closings as they evaluate what the post-pandemic landscape will look like. Similarly, the financial asset side of our business was impacted by the combination of ongoing stimulus payments and hesitancy around the release of non-performing loans into the market. Despite these factors, our experienced team effectively managed through these headwinds to gain market share and achieve continued profitability in the quarter.

“Looking forward, with our visibility today, we are optimistic about asset flow through the balance of 2021, as after a long delay in financial assets coming to market, consumer borrowing is rising significantly and stimulus payments are tapering off, likely leading to the increase of non-performing loans. Our pipeline is robust, and we have also onboarded a strong borrower base for Heritage Global Capital. Furthermore, we expect increased industrial asset flow in the second half of 2021 as large, multi-national corporations look for sustainable lifecycle management as they retire and dispose of obsolete equipment.”

Mr. Dove concluded, “We believe we are well-positioned to capitalize as the changing U.S. economy promotes a rising flow of assets in the marketplace. We remain confident in our ability to advance our leadership position and drive growth through the remainder of 2021.”

Second Quarter 2021 Summary of Financial Results:

($ in thousands, except per share amounts)

Quarter Ended

June 30,

Six Months Ended

June 30,

2021

 

2020

2021

 

2020

Operating income

$

73

 

 

$

1,024

 

$

1,119

 

 

$

1,118

 

Net income

$

587

 

 

$

2,039

 

$

1,619

 

 

$

2,077

 

Net income per share – diluted

$

0.02

 

 

$

0.07

 

$

0.04

 

 

$

0.07

 

 

 

 

 

 

 

 

(Non-GAAP Financial Measures) (1)

 

 

 

 

 

 

EBITDA

$

171

 

 

$

1,114

 

$

1,308

 

 

$

1,298

 

Adjusted EBITDA

$

239

 

 

$

1,200

 

$

1,719

 

 

$

1,459

 

(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.

Second Quarter 2021 Highlights:

  • The Company achieved operating income of $0.1 million for the second quarter of 2021, as compared to operating income of $1.0 million in the second quarter of 2020.
  • Net income of $0.6 million, or $0.02 diluted earnings per share for the second quarter of 2021, as compared to net income of $2.0 million, $0.07 diluted earnings per share in the second quarter of 2020.
  • EBITDA totaled $0.2 million in the second quarter of 2021 versus EBITDA of $1.1 million in the second quarter of 2020 and Adjusted EBITDA (excluding non-cash stock-based compensation) was $0.2 million compared to $1.2 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $31.0 million as of June 30, 2021, compared to $29.9 million as of December 31, 2020, and net working capital of $12.6 million.

Second Quarter 2021 Conference Call

Management will host a webcast and conference call on Thursday, August 12, 2021 at 5:00 pm ET to discuss financial results for second quarter 2021. Analysts and investors may participate via conference call, using the following dial-in information:

  • 1- 800-954-0645 (Domestic)
  • 1-312-429-0433 (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 August 26, 2021. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 21996563. 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 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. (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.

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services revenue

 

$

4,168

 

 

$

5,565

 

 

$

9,198

 

 

$

9,653

 

Asset sales

 

 

1,008

 

 

 

552

 

 

 

3,079

 

 

 

708

 

Total revenues

 

 

5,176

 

 

 

6,117

 

 

 

12,277

 

 

 

10,361

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

960

 

 

 

1,188

 

 

 

2,135

 

 

 

1,739

 

Cost of asset sales

 

 

375

 

 

 

330

 

 

 

1,195

 

 

 

368

 

Selling, general and administrative

 

 

3,671

 

 

 

3,666

 

 

 

7,640

 

 

 

7,138

 

Depreciation and amortization

 

 

98

 

 

 

90

 

 

 

189

 

 

 

180

 

Total operating costs and expenses

 

 

5,104

 

 

 

5,274

 

 

 

11,159

 

 

 

9,425

 

Earnings of equity method investments

 

 

1

 

 

 

181

 

 

 

1

 

 

 

182

 

Operating income

 

 

73

 

 

 

1,024

 

 

 

1,119

 

 

 

1,118

 

Interest and other expense, net

 

 

9

 

 

 

(8

)

 

 

12

 

 

 

(35

)

Income before income tax benefit

 

 

82

 

 

 

1,016

 

 

 

1,131

 

 

 

1,083

 

Income tax benefit

 

 

(505

)

 

 

(1,023

)

 

 

(488

)

 

 

(994

)

Net income

 

$

587

 

 

$

2,039

 

 

$

1,619

 

 

$

2,077

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

35,250,964

 

 

 

28,751,689

 

 

 

35,020,768

 

 

 

28,760,893

 

Weighted average common shares outstanding – diluted

 

 

36,972,415

 

 

 

30,961,261

 

 

 

36,611,234

 

 

 

30,630,713

 

Net income per share – basic

 

$

0.02

 

 

$

0.07

 

 

$

0.05

 

 

$

0.07

 

Net income per share – diluted

 

$

0.02

 

 

$

0.07

 

 

$

0.04

 

 

$

0.07

 

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

HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share amounts)

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

17,525

 

 

$

23,385

 

Accounts receivable

 

 

2,514

 

 

 

1,496

 

Current portion of notes receivable, net

 

 

1,086

 

 

 

1,338

 

Inventory – equipment

 

 

161

 

 

 

235

 

Other current assets

 

 

676

 

 

 

498

 

Total current assets

 

 

21,962

 

 

 

26,952

 

Non-current portion of notes receivable, net

 

 

1,225

 

 

 

748

 

Equity method investments

 

 

2,893

 

 

 

2,402

 

Right-of-use assets

 

 

2,940

 

 

 

963

 

Property and equipment, net

 

 

108

 

 

 

130

 

Intangible assets, net

 

 

2,989

 

 

 

3,123

 

Goodwill

 

 

5,585

 

 

 

5,585

 

Deferred tax assets

 

 

4,933

 

 

 

4,402

 

Other assets

 

 

161

 

 

 

250

 

Total assets

 

$

42,796

 

 

$

44,555

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

8,834

 

 

$

13,609

 

Current portion of lease liabilities

 

 

494

 

 

 

380

 

Total current liabilities

 

 

9,328

 

 

 

13,989

 

Non-current portion of lease liabilities

 

 

2,485

 

 

 

623

 

Total liabilities

 

 

11,813

 

 

 

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 June 30, 2021 and December 31, 2020

 

 

6

 

 

 

6

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 36,284,382 shares as of June 30, 2021 and 35,281,183 as of December 31, 2020

 

 

363

 

 

 

353

 

Additional paid-in capital

 

 

292,811

 

 

 

293,400

 

Accumulated deficit

 

 

(262,197

)

 

 

(263,816

)

Total stockholders’ equity

 

 

30,983

 

 

 

29,943

 

Total liabilities and stockholders’ equity

 

$

42,796

 

 

$

44,555

 

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

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income

 

$

587

 

 

$

2,039

 

 

$

1,619

 

 

$

2,077

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

98

 

 

 

90

 

 

 

189

 

 

 

180

 

Interest and other expense, net

 

 

(9

)

 

 

8

 

 

 

(12

)

 

 

35

 

Income tax benefit

 

 

(505

)

 

 

(1,023

)

 

 

(488

)

 

 

(994

)

EBITDA

 

 

171

 

 

 

1,114

 

 

 

1,308

 

 

 

1,298

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

68

 

 

 

86

 

 

 

211

 

 

 

161

 

Separation Agreement

 

 

—

 

 

 

—

 

 

 

200

 

 

 

—

 

Adjusted EBITDA

 

$

239

 

 

$

1,200

 

 

$

1,719

 

 

$

1,459

 

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

John Nesbett/Jennifer Belodeau
IMS Investor Relations
203/972-9200
[email protected]