Heritage Global Inc. Reports Fourth Quarter and Year-End 2024 Results

Rhea-AI Summary

Heritage Global (NASDAQ: HGBL) reported its Q4 and full-year 2024 financial results. The company achieved $9.1 million in full-year net operating income and ended 2024 with $21.7 million in cash. Q4 2024 showed operating income of $1.5 million, down from $4.6 million in Q4 2023.

The company recorded a Q4 2024 net loss of ($0.2) million, or ($0.01) per diluted share, compared to net income of $4.9 million in Q4 2023. This includes a $1.3 million after-tax allowance adjustment due to decreased revenue from non-accrual loans.

Notable achievements include strengthening the balance sheet with stockholders' equity increasing to $65.2 million and completing $2.2 million in share repurchases during 2024 at an average cost of $1.74 per share. The company also secured a $4.1 million mortgage for a new corporate headquarters in San Diego.

Positive

• Strong cash position of $21.7 million at year-end
• Increased stockholders' equity to $65.2 million from $61.1 million YoY
• Net working capital improved to $18.5 million from $11.6 million YoY
• Returned capital to shareholders through $2.2 million stock repurchase

Negative

• Q4 2024 net loss of ($0.2) million vs $4.9 million profit in Q4 2023
• Operating income declined to $1.5 million from $4.6 million YoY in Q4
• $1.3 million tax allowance adjustment due to decreased revenue
• Major borrower in default status with loans in non-accrual

Insights

Financial Analyst

Heritage Global's Q4 and full-year 2024 results reflect a company experiencing transitional challenges while maintaining underlying financial strength. The $9.1 million in full-year operating income demonstrates sustained profitability, though Q4 saw a significant decline with $1.5 million operating income versus $4.6 million in Q4 2023. The $0.2 million quarterly net loss (vs $4.9 million profit year-over-year) was primarily influenced by a $1.3 million tax allowance adjustment related to NOL utilization concerns.

Balance sheet metrics remain robust with $21.7 million cash on hand, increasing stockholders' equity to $65.2 million (up from $61.1 million YoY), and improved net working capital at $18.5 million (up from $11.6 million). The company's active capital return program, having repurchased $2.2 million of shares at an average cost of $1.74 per share, indicates management's confidence and commitment to shareholder value.

The most concerning development is the non-accrual status of loans to Heritage Global Capital's largest borrower. While the borrower continues remitting collections, performance remains below contractual minimums, creating uncertainty around future revenue streams. Yet the $4.1 million mortgage for a new headquarters suggests management is investing in long-term infrastructure to support anticipated growth.

The sequential improvement in the industrial assets division and management's optimistic outlook regarding the 2025 pipeline provide counterbalance to the challenging year-over-year comparisons, suggesting potential for recovery despite the current headwinds.

Business Strategist

Heritage Global's divergent business segments present a complex strategic picture. The industrial assets division showed encouraging sequential improvement in Q4, suggesting the operational adjustments are gaining traction despite a light second half for disposition activity. This positions them well if auction activity increases as projected for 2025, particularly as they continue securing business from "blue chip partners" - a testament to their service quality and industry reputation.

The financial assets division faces more significant challenges with their largest borrower's default situation. The continued 100% remittance of net collections is positive, but the below-minimum performance suggests potential structural issues in the underlying portfolio that may take time to resolve. Management's collaborative approach with the borrower represents best practices for loan workout situations but introduces uncertainty into near-term revenue projections.

The 6.7% increase in stockholders' equity (to $65.2 million) alongside the 59.5% improvement in net working capital demonstrates prudent balance sheet management during a challenging operating environment. The share repurchase program at an average cost of $1.74 per share (currently trading at $2.10) indicates management's view that shares were undervalued.

The investment in expanded headquarters space reveals confidence in long-term growth prospects despite current headwinds. This dual-purpose decision adds a fixed asset to the balance sheet while creating capacity for operational expansion. The return to higher profitability will likely depend on both improved performance from the troubled borrower and increased industrial asset auction activity materializing as anticipated in 2025.

• Full year 2024 net operating income of $9.1 million
• Ended the year with $21.7 million in cash, reinforcing balance sheet strength and providing financial flexibility
• Repurchased approximately $2.2 million of common stock during full year 2024
• Entering 2025 with strong momentum and a robust pipeline

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 fourth quarter and year ended December 31, 2024.

Fourth Quarter and Year-End 2024 Summary of Financial Results (unaudited):

($ in thousands, except per share amounts)	Three Months Ended December 31,						Year Ended December 31,
	2024				2023		2024			2023
Operating income	$	1,485			$	4,555	$	9,066		$	14,319
Net income (loss)	$	(203	)		$	4,890	$	5,182		$	12,475
Net income (loss) per share – diluted	$	(0.01	)		$	0.13	$	0.14		$	0.33
(Non-GAAP Financial Measures) (1)
EBITDA	$	1,636			$	4,696	$	9,657		$	14,833
Adjusted EBITDA	$	2,087			$	4,890	$	10,910		$	15,609

(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.

Fourth Quarter 2024 Review:

• The Company recorded operating income of $1.5 million for the fourth quarter of 2024, compared to operating income of $4.6 million in the fourth quarter of 2023.
• EBITDA totaled $1.6 million in the fourth quarter of 2024 versus EBITDA of $4.7 million in the fourth quarter of 2023, and Adjusted EBITDA was $2.1 million compared to $4.9 million in the prior-year quarter.
• Net loss, which includes a $1.3 million after tax allowance adjustment described below, was ($0.2) million or ($0.01) diluted loss per share for the fourth quarter of 2024, compared to net income of $4.9 million or $0.13 diluted earnings per share in the prior-year quarter.
• The Company has a significant amount of net operating loss carryforwards which begin to expire in 2025 if unused. As of December 31, 2024, the Company determined that it will likely utilize a lower portion of its net operating loss carryforwards than previously estimated, primarily due to decreased revenue related to the Company’s extended loans placed in non-accrual status. As a result, the Company has increased its valuation allowance against its deferred tax assets by approximately $1.3 million as of December 31, 2024, which is reported as a $1.3 million increase in income tax expense for the fourth quarter.
• The Company strengthened its balance sheet by increasing stockholders’ equity to $65.2 million as of December 31, 2024, compared to $61.1 million as of December 31, 2023, and increased net working capital to $18.5 million at December 31, 2024, compared to $11.6 million at December 31, 2023.
• On September 13, 2024, the Company's Board of Directors approved an amendment to the previously authorized repurchase program which increased the aggregate value of common shares the Company may repurchase to $6.0 million worth of common shares. The Company repurchased 1,266,408 shares in the open market during the year ended December 31, 2024, for a total of $2.2 million, or an average cost of $1.74 per share. As of December 31, 2024, the Company had approximately $3.0 million in remaining aggregate dollar value of shares that may be purchased under the repurchase program.

Heritage Global Chief Executive Officer Ross Dove commented, “We delivered solid results in 2024, strengthened our balance sheet, and returned capital to shareholders via our share repurchase program. While we had a tough comparison to a particularly strong 2023, Heritage delivered full year net operating income of more than $9 million and we enter 2025 with a strong and growing pipeline of opportunities. As expected, we saw improved sequential performance in our industrial assets division in the fourth quarter. While second half 2024 was light on disposition activity, we anticipate increased auction activity in 2025. We continue to compete for and win auction business from blue chip partners, reflecting our strong track record of success for the sale of industrial assets. At our financial assets division, we remain focused on selectively capitalizing on the continuing high levels of consumer spending that are driving increased charge offs. As we begin to move through 2025, we are optimistic about the strength of our pipeline and the market opportunities we are seeing across our businesses. We remain intent on expanding and leveraging our capabilities to drive growth and continued profitability.

“Subsequent to the quarter, we secured a $4.1 million mortgage for the purchase of a new corporate headquarters building which will provide us expanded office and warehouse space to support the Company’s long-term growth while also giving us a real estate asset in what we believe is an attractive business district of San Diego,” Mr. Dove concluded.

Brian Cobb, Chief Financial Officer, stated, “In the second quarter of 2024 Heritage Global Capital's largest borrower was placed into default and the loans extended to this borrower were placed into non-accrual status. Throughout the balance of 2024, this borrower continued to remit 100% of net collections generated from the underlying portfolio assets to both HGC and senior lenders. While net collections continue to be lower than the contractual monthly minimums, the borrower is actively working in tandem with its lenders to improve collection rates and we believe that these ongoing efforts will both improve the long-term cash flows to the lenders and strengthen the financial position of this borrower.”

Fourth Quarter and Year-End Conference Call

Management will host a webcast and conference call on Thursday, March 13, 2025, at 5:00 p.m. ET to discuss financial results for fourth quarter and year-end 2024. Analysts and investors may participate via conference call, using the following dial-in information:

• 1-800-225-9448 (Domestic)
• 1-203-518-9708 (International)
• Conference ID: HGBLQ4

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 approximately three hours after the call ends through March 27, 2025. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 11158220. A webcast 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 collectability of the charged off receivables that secure our loan portfolio, 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 December 31,								Twelve Months Ended December 31,
		2024				2023				2024				2023
Revenues:
Services revenue		$	7,080			$	9,440			$	32,607			$	39,480
Asset sales			3,687				5,844				12,754				21,065
Total revenues			10,767				15,284				45,361				60,545
Operating costs and expenses:
Cost of services revenue			1,140				1,437				5,805				8,007
Cost of asset sales			2,181				3,041				8,321				12,724
Selling, general and administrative			5,876				6,494				24,266				26,040
Depreciation and amortization			151				141				591				514
Total operating costs and expenses			9,348				11,113				38,983				47,285
Earnings of equity method investments			66				384				2,688				1,059
Operating income			1,485				4,555				9,066				14,319
Interest income (expense), net			90				(99	)			(93	)			(324	)
Income before income tax expense (benefit)			1,575				4,456				8,973				13,995
Income tax expense (benefit)			1,778				(434	)			3,791				1,520
Net income (loss)		$	(203	)		$	4,890			$	5,182			$	12,475
Weighted average common shares outstanding – basic			36,227,223				36,706,017				36,539,911				36,677,098
Weighted average common shares outstanding – diluted			36,817,159				37,493,878				37,240,815				37,587,308
Net income (loss) per share – basic		$	(0.01	)		$	0.13			$	0.14			$	0.34
Net income (loss) per share – diluted		$	(0.01	)		$	0.13			$	0.14			$	0.33

HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share and per share amounts)
		December 31,
		2024				2023
ASSETS
Current assets:
Cash and cash equivalents		$	21,749			$	12,279
Accounts receivable, net			1,559				1,910
Current portion of notes receivable, net			3,416				6,581
Inventory – equipment			5,348				5,074
Other current assets			1,056				448
Total current assets			33,128				26,292
Non-current portion of notes receivable, net			6,558				10,890
Equity method investments			20,892				21,361
Right-of-use assets			2,208				2,539
Property and equipment, net			1,643				1,705
Intangible assets, net			3,362				3,753
Goodwill			7,446				7,446
Deferred tax assets			6,008				9,115
Other assets			64				67
Total assets		$	81,309			$	83,168
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	5,979			$	7,237
Payables to sellers			7,417				4,975
Current portion of third party debt			395				1,733
Current portion of lease liabilities			807				789
Total current liabilities			14,598				14,734
Non-current portion of third party debt			—				5,495
Non-current portion of lease liabilities			1,510				1,859
Total liabilities			16,108				22,088
Commitments and contingencies
Stockholders’ equity:
Preferred stock			6				6
Common stock			374				372
Additional paid-in capital			295,657				294,522
Accumulated deficit			(227,844	)			(233,026	)
Treasury stock			(2,992	)			(794	)
Total stockholders’ equity			65,201				61,080
Total liabilities and stockholders’ equity		$	81,309			$	83,168

HERITAGE GLOBAL INC.
Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures)
(In thousands of US dollars) (unaudited)
		Three Months Ended December 31,								Twelve Months Ended December 31,
		2024				2023				2024				2023
Net income (loss)		$	(203	)		$	4,890			$	5,182			$	12,475
Add back:
Depreciation and amortization			151				141				591				514
Interest (income) expense, net			(90	)			99				93				324
Income tax expense (benefit)			1,778				(434	)			3,791				1,520
EBITDA			1,636				4,696				9,657				14,833
Management add back:
Stock based compensation			451				194				1,253				776
Adjusted EBITDA		$	2,087			$	4,890			$	10,910			$	15,609

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20250313920493/en/

Investor Relations Contact:

John Nesbett/Jennifer Belodeau

IMS Investor Relations

203/972.9200

InvestorRelations@hginc.com

Source: Heritage Global Inc.

FAQ

What was Heritage Global's (HGBL) financial performance in Q4 2024?

HGBL reported Q4 2024 operating income of $1.5 million and a net loss of ($0.2) million or ($0.01) per share, compared to operating income of $4.6 million and net income of $4.9 million in Q4 2023.

How much stock did HGBL repurchase in 2024?

Heritage Global repurchased 1,266,408 shares for $2.2 million at an average cost of $1.74 per share, with $3.0 million remaining in the repurchase program.

What is Heritage Global's (HGBL) cash position as of December 2024?

HGBL ended 2024 with $21.7 million in cash, demonstrating strong balance sheet position and financial flexibility.

How did HGBL's stockholders' equity change in 2024?

Stockholders' equity increased to $65.2 million as of December 31, 2024, up from $61.1 million at the end of 2023.