Heritage Global Inc. Achieves Record Net Operating Income of $3.9 Million and $0.08 Earnings Per Share for First Quarter 2023

SAN DIEGO--(BUSINESS WIRE)-- 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, 2023.

First Quarter 2023 Summary of Financial Results:

($ in thousands, except per share amounts)	Three Months Ended March 31,
	2023			2022
Operating income	$	3,894		$	875
Net income	$	2,829		$	645
Net income per share – diluted	$	0.08		$	0.02
(Non-GAAP Financial Measures) (1)
EBITDA	$	4,014		$	1,008
Adjusted EBITDA	$	4,193		$	1,114

(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, “As expected, 2023 is off to an exceptional start, demonstrated by our achievement of a record $3.9 million in net operating income in the first quarter, which soundly surpasses our previous quarterly NOI milestone of $3.6 million, reported in the second quarter of 2022. We are benefiting from economic tailwinds in both of our divisions, and from our focus on continuing to execute to maximize the opportunities we are seeing in the marketplace.

“It is important to note that we are seeing growth across both our Financial Assets and Industrial Assets divisions, and all four of our operating segments are making significant contributions to our overall profitability. In fact, both sides of our business posted more than 200% growth in divisional operating income for the first quarter.

“As previously mentioned, the current economic landscape is proving favorable for our growth. As consumers continue to increase spending post-Covid, resulting in increased debt on credit cards and loan balances, consumer debt has been climbing, with subsequent increases in the amount of charged-off credit cards and loans materializing. Based on economic indicators, we believe that this environment will continue for some time, positioning our NLEX brokerage and HGC lending businesses to continue to win contracts and benefit from increasing volumes of non-performing loans and credit card accounts. Likewise, as businesses downsize staff and close down operating facilities, our Industrial Assets division is a partner of choice in assisting the responsible disposal or repurposing of surplus equipment and assets. Similar to the lag in loan charge offs, there tends to be a delay from the time a company announces layoffs or closures to the time their assets are decommissioned and auctioned. With our visibility today, we believe that we will see significant activity in our industrial auction division over the next eighteen months.

“As we move through 2023, we expect to build upon the momentum demonstrated in the first quarter, leading to exciting prospects for our Company. We look forward to leveraging our proven business model, longstanding customer and client relationships, and promising economic tailwinds to drive continued growth and profitability,” Mr. Dove concluded.

First Quarter 2023 Highlights:

• The Company achieved operating income of $3.9 million for the first quarter of 2023, as compared to operating income of $0.9 million in the first quarter of 2022. The significant growth in net operating income was driven by strong performance in both divisions.
• Net income totaled $2.8 million, or $0.08 diluted earnings per share for the first quarter of 2023, as compared to net income of $0.6 million, or $0.02 diluted earnings per share in the prior-year quarter.
• EBITDA totaled $4.0 million in the first quarter of 2023 versus EBITDA of $1.0 million in the first quarter of 2022 and Adjusted EBITDA was $4.2 million compared to $1.1 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $51.2 million as of March 31, 2023, compared to $48.3 million as of December 31, 2022. Net working capital was $8.6 million at the end of the first quarter.
• Additionally, our total balance related to investments in loans to buyers of charged-off and nonperforming receivable portfolios was $28.4 million as of March 31, 2023, of which $16.0 million is classified as notes receivable and $12.4 million is classified as equity method investments. As of December 31, 2022 and March 31, 2022, our total balance related to investments in loans was $21.7 million and $7.6 million, respectively.

First Quarter Conference Call

Management will host a webcast and conference call today, Thursday, May 11, 2023, at 5:00 pm ET to discuss financial results for first quarter 2023. Analysts and investors may participate via conference call using the following dial-in information:

• 1-888-999-3182 (Domestic)
• 1-848-280-6330 (International)

In addition, individuals can use this link for telephone access to the call via their web browser. 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 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 25, 2023. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671(international). The replay pin number is 0151935. The replay can also be accessed on the Investor Relations section of the Company’s website.

About Heritage Global Inc.

Heritage Global Inc. (“HG”) 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,
		2023				2022
Revenues:
Services revenue		$	10,245			$	4,168
Asset sales			6,367				5,189
Total revenues			16,612				9,357
Operating costs and expenses:
Cost of services revenue			2,340				754
Cost of asset sales			4,335				3,402
Selling, general and administrative			6,300				4,275
Depreciation and amortization			120				133
Total operating costs and expenses			13,095				8,564
Earnings of equity method investments			377				82
Operating income			3,894				875
Interest expense, net			(68	)			(38	)
Income before income tax expense			3,826				837
Income tax expense			997				192
Net income		$	2,829			$	645
Weighted average common shares outstanding – basic			36,005,150				36,003,709
Weighted average common shares outstanding – diluted			37,334,459				36,749,198
Net income per share – basic		$	0.08			$	0.02
Net income per share – diluted		$	0.08			$	0.02

HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share and per share amounts)
	March 31, 2023					December 31, 2022
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents		$	15,733			$	12,667
Accounts receivable, net			1,300				988
Current portion of notes receivable, net			8,506				4,505
Inventory – equipment			3,492				4,619
Other current assets			1,129				1,113
Total current assets			30,160				23,892
Non-current portion of notes receivable held to maturity, net			7,525				4,245
Equity method investments			13,326				13,973
Right-of-use assets			2,617				2,776
Property and equipment, net			1,638				1,571
Intangible assets, net			4,046				4,144
Goodwill			7,446				7,446
Deferred tax assets			8,717				9,449
Other assets			74				64
Total assets		$	75,549			$	67,560
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	7,990			$	8,924
Payables to sellers			8,333				3,188
Current portion of third party debt			4,531				3,411
Current portion of lease liabilities			681				703
Total current liabilities			21,535				16,226
Non-current portion of third party debt			748				871
Non-current portion of lease liabilities			2,033				2,164
Total liabilities			24,316				19,261
Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 565 shares of Series N as of March 31, 2023 and December 31, 2022; 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 37,097,960 and 36,932,177 shares as of March 31, 2023 and December 31, 2022, respectively; and outstanding 36,854,492 and 36,688,709 shares as March 31, 2023 and December 31, 2022, respectively			371				369
Additional paid-in capital			293,923				293,589
Accumulated deficit			(242,672	)			(245,270	)
Treasury stock at cost, 243,468 shares as of March 31, 2023 and December 31, 2022			(395	)			(395	)
Total stockholders’ equity			51,233				48,299
Total liabilities and stockholders’ equity		$	75,549			$	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 March 31,
		2023			2022
Net income		$	2,829		$	645
Add back:
Depreciation and amortization			120			133
Interest expense, net			68			38
Income tax expense			997			192
EBITDA			4,014			1,008
Management add back:
Stock based compensation			179			106
Adjusted EBITDA		$	4,193		$	1,114

 

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Investor Relations:

John Nesbett/Jennifer Belodeau

IMS Investor Relations

203/972.9200

InvestorRelations@hginc.com

Source: Heritage Global Inc.