HGBL Heritage Global Inc

 Company Reports Operating Income of $2.6 Million

Subsequent to First Quarter Company Closed an Equipment Sale and Real Estate Lease Transaction With Multi-National Pharmaceutical Company

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 first quarter ended March 31, 2024.

First Quarter 2024 Summary of Financial Results (unaudited):

 

($ in thousands, except per share amounts)

Three Months Ended

March 31,

 

2024

 

 

2023

Operating income

$

2,558

 

$

3,894

Net income

$

1,799

 

$

2,829

Net income per share – diluted

$

0.05

 

$

0.08

 

 

 

 

(Non-GAAP Financial Measures) (1)

 

 

 

EBITDA

$

2,699

 

$

4,014

Adjusted EBITDA

$

2,927

 

$

4,193

(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, “2024 is off to a solid start with continued profitability in the business. Our financial division is executing well and benefiting from heightened economic pressures driving increases in charged-off credit cards and non-performing loans. Our industrial division continues to see healthy levels of equipment and asset auction activity, but faced a tough comparison in the quarter given a large auction that took place in the first quarter of 2023. Importantly, subsequent to the close of the first quarter, our auction division, in conjunction with our partners, completed a highly accretive transaction involving the sale of equipment and a 10-year building lease on the recently acquired pharmaceutical plant in Fenton, Missouri.

“Looking forward, the pipeline is strong across our businesses and we look forward to continuing to drive long term organic growth and profitability. Additionally, M&A is a strategic focus as we move forward and we are seeing increased opportunities in the markets we serve,” Mr. Dove concluded.

First Quarter 2024 Highlights:

• The Company achieved operating income of $2.6 million for the first quarter of 2024, as compared to operating income of $3.9 million in the first quarter of 2023.
• EBITDA totaled $2.7 million in the first quarter of 2024 versus EBITDA of $4.0 million in the first quarter of 2023 and Adjusted EBITDA was $2.9 million compared to $4.2 million in the prior-year quarter.
• Net income totaled $1.8 million or $0.05 of diluted earnings per share for the first quarter of 2024, as compared to net income of $2.8 million or $0.08 of diluted earnings per share in the prior-year quarter.
• The Company strengthened its balance sheet by increasing stockholders’ equity to $63.0 million as of March 31, 2024, compared to $61.1 million as of December 31, 2023, and increased net working capital to $15.0 million at the end of the first quarter of 2024, compared to $11.6 million at the end of the fourth quarter of 2023. The Company’s available and unused balance on its credit facility remains at $10.0 million as of March 31, 2024. The strengthened balance sheet and liquidity positions the Company well to pursue its M&A strategy.
• As of March 31, 2024, the Company held a gross balance of investments in notes receivable of $37.3 million, recorded in both notes receivable and equity method investments.

First Quarter Conference Call

Management will host a webcast and conference call on Thursday, May 9, 2024, at 5:00 p.m. ET to discuss financial results for the first quarter of 2024. Analysts and investors may participate via conference call, using the following dial-in information:

• 1-800-830-9649 (Domestic)
• 1-213-992-4624 (International)

To access the webcast, individuals can use this link. 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 or click on the webcast link 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 May 23, 2024. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 11155834. 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, and 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 March 31,

 

2024

 

 

2023

 

Revenues:

Services revenue

$

8,983

 

$

10,245

 

Asset sales

 

3,178

 

 

6,367

 

Total revenues

 

12,161

 

 

16,612

 

 

Operating costs and expenses:

Cost of services revenue

 

1,480

 

 

2,340

 

Cost of asset sales

 

2,411

 

 

4,335

 

Selling, general and administrative

 

6,358

 

 

6,300

 

Depreciation and amortization

 

141

 

 

120

 

Total operating costs and expenses

 

10,390

 

 

13,095

 

Earnings of equity method investments

 

787

 

 

377

 

Operating income

 

2,558

 

 

3,894

 

Interest expense, net

 

(92

)

 

(68

)

Income before income tax expense

 

2,466

 

 

3,826

 

Income tax expense

 

667

 

 

997

 

Net income

$

1,799

 

$

2,829

 

 

Weighted average common shares outstanding – basic

 

36,592,801

 

 

36,005,150

 

Weighted average common shares outstanding – diluted

 

37,367,268

 

 

37,334,459

 

Net income per share – basic

$

0.05

 

$

0.08

 

Net income per share – diluted

$

0.05

 

$

0.08

 

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

March 31, 2024

December 31, 2023

ASSETS

(unaudited)

Current assets:

Cash and cash equivalents

$

15,577

 

$

12,279

 

Accounts receivable, net

 

1,558

 

 

1,910

 

Current portion of notes receivable, net

 

6,514

 

 

6,581

 

Inventory – equipment

 

4,735

 

 

5,074

 

Other current assets

 

490

 

 

448

 

Total current assets

 

28,874

 

 

26,292

 

Non-current portion of notes receivable, net

 

10,698

 

 

10,890

 

Equity method investments

 

20,271

 

 

21,361

 

Right-of-use assets

 

2,377

 

 

2,539

 

Property and equipment, net

 

1,684

 

 

1,705

 

Intangible assets, net

 

3,655

 

 

3,753

 

Goodwill

 

7,446

 

 

7,446

 

Deferred tax assets

 

8,637

 

 

9,115

 

Other assets

 

64

 

 

67

 

Total assets

$

83,706

 

$

83,168

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued liabilities

$

4,564

 

$

7,237

 

Payables to sellers

 

6,816

 

 

4,975

 

Current portion of third party debt

 

1,765

 

 

1,733

 

Current portion of lease liabilities

 

779

 

 

789

 

Total current liabilities

 

13,924

 

 

14,734

 

Non-current portion of third party debt

 

5,040

 

 

5,495

 

Non-current portion of lease liabilities

 

1,710

 

 

1,859

 

Total liabilities

 

20,674

 

 

22,088

 

 

Stockholders’ equity:

Preferred stock

 

6

 

 

6

 

Common stock

 

373

 

 

372

 

Additional paid-in capital

 

294,674

 

 

294,522

 

Accumulated deficit

 

(231,227

)

 

(233,026

)

Treasury stock

 

(794

)

 

(794

)

Total stockholders’ equity

 

63,032

 

 

61,080

 

Total liabilities and stockholders’ equity

$

83,706

 

$

83,168

 

– 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,

 

2024

 

2023

Net income

$

1,799

$

2,829

Add back:

Depreciation and amortization

 

141

 

120

Interest expense, net

 

92

 

68

Income tax expense

 

667

 

997

EBITDA

 

2,699

 

4,014

 

Management add back:

Stock based compensation

 

228

 

179

Adjusted EBITDA

$

2,927

$

4,193

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240509698865/en/

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