Heritage Global Inc. Announces 2021 Third Quarter Results

Nov 10, 2021 04:05 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 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 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.

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.

-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.

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