Heritage Global Inc. Reports Full Year 2023 Operating Income of $14.3 Million; Achieves $4.6 Million in Operating Income for Fourth Quarter 2023
- Heritage Global Inc. achieved a full year growth of 83% in operating income for 2023.
- Operating income for the year was $14.3 million, with net income reaching $12.5 million.
- EBITDA and Adjusted EBITDA showed substantial increases compared to the previous year.
- CEO Ross Dove emphasized the company's success in the Financial Asset and Industrial divisions.
- The growth was attributed to macro-economic trends driving increased volumes in these divisions.
- The company maintains a strong balance sheet with stockholders' equity of $61.1 million as of December 31, 2023.
- Heritage Global repurchased 152,707 shares of its common stock in the fourth quarter of 2023.
- The company's net working capital was $11.6 million at the end of the fourth quarter of 2023.
- None.
Insights
The reported 83% growth in operating income for Heritage Global Inc. is a significant indicator of the company's financial health and operational efficiency. This figure surpasses typical industry growth rates and suggests that the company has effectively capitalized on market opportunities, particularly in the financial asset and industrial divisions. The conservative approach to credit reserves, as mentioned in the report, reflects prudent risk management, which is reassuring for investors concerned about the sustainability of returns amidst economic pressures.
Moreover, the company's decision to release additional valuation allowance against its deferred tax assets indicates confidence in future profitability, which can be attractive to long-term investors. The share repurchase activity, with shares bought back at an average price below the current market value, could be perceived as a signal that the company believes its stock is undervalued, which might encourage investor optimism regarding future stock performance.
Heritage Global's performance in the context of macro-economic tailwinds such as increased consumer debt and non-performing loans is noteworthy. Their success in securing new brokerage contracts and specialty lending opportunities in a challenging economic environment demonstrates strong competitive positioning and adaptability. The mention of increased volumes due to businesses scaling down operations and closing offices could indicate a robust pipeline for the company's auction business, suggesting potential for sustained growth in this area.
However, it's important to watch for potential market saturation or a downturn in the industrial sector, which could impact the volume of assets coming to auction. Keeping an eye on economic indicators and industry trends will be essential for predicting the company's performance in these segments moving forward.
Heritage Global's performance reflects broader economic trends, such as the rise in consumer debt levels and the subsequent increase in charged-off credit cards and non-performing loans. The company's ability to thrive in this environment suggests a strong alignment with market demands. However, investors should consider the cyclical nature of debt markets and the possibility of regulatory changes that could impact the volume and profitability of debt-related transactions.
The company's strategy to maintain a conservative balance sheet is prudent, especially in light of potential economic headwinds. This approach may provide a buffer against market volatility and enable the company to navigate through uncertain economic conditions with greater resilience.
- Financial Assets Division Reports Full Year Growth of
Fourth Quarter and Full Year 2023 Summary of Financial Results (unaudited):
($ in thousands, except per share amounts) |
Three Months Ended
|
Twelve Months Ended
|
||||||||
2023 |
|
2022 |
2023 |
|
2022 |
|||||
Operating income |
$ |
4,555 |
|
$ |
3,147 |
$ |
14,319 |
|
$ |
11,120 |
Net income |
$ |
4,890 |
|
$ |
9,970 |
$ |
12,475 |
|
$ |
15,493 |
Net income per share – diluted |
$ |
0.13 |
|
$ |
0.27 |
$ |
0.33 |
|
$ |
0.42 |
|
|
|
|
|
|
|
||||
(Non-GAAP Financial Measures) (1) |
|
|
|
|
|
|
||||
EBITDA |
$ |
4,696 |
|
$ |
3,283 |
$ |
14,833 |
|
$ |
11,656 |
Adjusted EBITDA |
$ |
4,890 |
|
$ |
3,439 |
$ |
15,609 |
|
$ |
12,196 |
(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, “2023 was the best year in our history, as demonstrated by our ability to achieve full-year 2023 operating income of
“It’s been widely reported that consumer debt reached record levels in 2023, and with that, the volume of charged-off credit cards and non-performing loans increased. Accordingly, our Financial Asset division saw impressive momentum during the year, as we continued to successfully leverage our experience and expertise to win new brokerage contracts and specialty lending opportunities. In the third quarter we increased our credit reserve to account for increased risk with specific clients given their declining collection rates. We did not materially increase our credit reserve in the fourth quarter and will continue to maintain a conservative balance sheet to support the long-term growth opportunity of our Financial Asset division.
“In the current economic landscape, with many businesses continuing to scale down their operations, we are seeing increased office and facility closures. These activities drive volumes to the industrial side of our business as companies look to sell their surplus equipment and assets. While our auction business can see variability quarter to quarter, our pipeline remains strong and we expect continued strong auction activity as we move through 2024.
“I am pleased with our team’s efforts and execution this year, exemplified by our full-year operating income of
Fourth Quarter 2023 Highlights:
-
The Company achieved operating income of
$4.6 million $3.1 million -
EBITDA totaled
$4.7 million $3.3 million $4.9 million $3.4 million -
Based on the past several years of taxable income and projected operating results for the next five years, the Company determined that it is more likely than not that it will utilize a significant portion of its net operating loss carryforwards and thus released an additional
$2.2 million $7.1 million $0.4 million $6.8 million -
Net income totaled
$4.9 million $0.4 million $0.13 $10.0 million $6.8 million $0.27 -
Heritage Global maintains a strong balance sheet, with stockholders’ equity of
$61.1 million $48.3 million $11.6 million -
As of December 31, 2023, the Company held a gross balance of investments in notes receivable of
$38.4 million -
The Company repurchased 152,707 shares of its common stock in the fourth quarter of 2023 at an average price per share of
$2.62 $2.01
Fourth Quarter Conference Call
Management will host a webcast and conference call today, Thursday, March 14, 2024, at 5:00 pm ET to discuss financial results for the fourth quarter and year end 2023. Analysts and investors may participate via conference call using the following dial-in information:
- 1-877-423-9813 (Domestic)
- 1-201-689-8573 (International)
In addition, individuals can use this link for telephone access to the call via their web browser. The webcast link is available here and will 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 March 28, 2024. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 13744488. 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
-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, |
||||||||||||||
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||||
Revenues: |
||||||||||||||||
Services revenue |
$ |
9,440 |
|
$ |
7,307 |
|
$ |
39,480 |
|
$ |
23,419 |
|
||||
Asset sales |
|
5,844 |
|
|
6,524 |
|
|
21,065 |
|
|
23,495 |
|
||||
Total revenues |
|
15,284 |
|
|
13,831 |
|
|
60,545 |
|
|
46,914 |
|
||||
Operating costs and expenses: |
||||||||||||||||
Cost of services revenue |
|
1,437 |
|
|
939 |
|
|
8,007 |
|
|
4,654 |
|
||||
Cost of asset sales |
|
3,041 |
|
|
4,208 |
|
|
12,724 |
|
|
16,256 |
|
||||
Selling, general and administrative |
|
6,494 |
|
|
6,419 |
|
|
26,040 |
|
|
21,326 |
|
||||
Depreciation and amortization |
|
141 |
|
|
136 |
|
|
514 |
|
|
536 |
|
||||
Total operating costs and expenses |
|
11,113 |
|
|
11,702 |
|
|
47,285 |
|
|
42,772 |
|
||||
Earnings of equity method investments |
|
384 |
|
|
1,018 |
|
|
1,059 |
|
|
6,978 |
|
||||
Operating income |
|
4,555 |
|
|
3,147 |
|
|
14,319 |
|
|
11,120 |
|
||||
Interest expense, net |
|
(99 |
) |
|
(17 |
) |
|
(324 |
) |
|
(113 |
) |
||||
Income before income tax (benefit) expense |
|
4,456 |
|
|
3,130 |
|
|
13,995 |
|
|
11,007 |
|
||||
Income tax (benefit) expense |
|
(434 |
) |
|
(6,840 |
) |
|
1,520 |
|
|
(4,486 |
) |
||||
Net income |
$ |
4,890 |
|
$ |
9,970 |
|
$ |
12,475 |
|
$ |
15,493 |
|
||||
Weighted average common shares outstanding – basic |
|
36,706,017 |
|
|
36,023,087 |
|
|
36,677,098 |
|
|
36,016,619 |
|
||||
Weighted average common shares outstanding – diluted |
|
37,493,878 |
|
|
37,083,351 |
|
|
37,587,308 |
|
|
37,097,270 |
|
||||
Net income per share – basic |
$ |
0.13 |
|
$ |
0.28 |
|
$ |
0.34 |
|
$ |
0.43 |
|
||||
Net income per share – diluted |
$ |
0.13 |
|
$ |
0.27 |
|
$ |
0.33 |
|
$ |
0.42 |
|
||||
HERITAGE GLOBAL INC. |
||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||||
(In thousands of US dollars, except share and per share amounts) (unaudited) |
||||||||
December 31, |
||||||||
2023 |
|
2022 |
||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
12,279 |
|
$ |
12,667 |
|
||
Accounts receivable, net |
|
1,910 |
|
|
988 |
|
||
Current portion of notes receivable, net |
|
6,581 |
|
|
4,505 |
|
||
Inventory – equipment |
|
5,074 |
|
|
4,619 |
|
||
Other current assets |
|
448 |
|
|
1,113 |
|
||
Total current assets |
|
26,292 |
|
|
23,892 |
|
||
Non-current portion of notes receivable, net |
|
10,890 |
|
|
4,245 |
|
||
Equity method investments |
|
21,361 |
|
|
13,973 |
|
||
Right-of-use assets |
|
2,539 |
|
|
2,776 |
|
||
Property and equipment, net |
|
1,705 |
|
|
1,571 |
|
||
Intangible assets, net |
|
3,753 |
|
|
4,144 |
|
||
Goodwill |
|
7,446 |
|
|
7,446 |
|
||
Deferred tax assets |
|
9,115 |
|
|
9,449 |
|
||
Other assets |
|
67 |
|
|
64 |
|
||
Total assets |
$ |
83,168 |
|
$ |
67,560 |
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued liabilities |
$ |
7,237 |
|
$ |
8,924 |
|
||
Payables to sellers |
|
4,975 |
|
|
3,188 |
|
||
Current portion of third party debt |
|
1,733 |
|
|
3,411 |
|
||
Current portion of lease liabilities |
|
789 |
|
|
703 |
|
||
Total current liabilities |
|
14,734 |
|
|
16,226 |
|
||
Non-current portion of third party debt |
|
5,495 |
|
|
871 |
|
||
Non-current portion of lease liabilities |
|
1,859 |
|
|
2,164 |
|
||
Total liabilities |
|
22,088 |
|
|
19,261 |
|
||
Commitments and contingencies |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock |
|
6 |
|
|
6 |
|
||
Common stock |
|
372 |
|
|
369 |
|
||
Additional paid-in capital |
|
294,522 |
|
|
293,589 |
|
||
Accumulated deficit |
|
(233,026 |
) |
|
(245,270 |
) |
||
Treasury stock |
|
(794 |
) |
|
(395 |
) |
||
Total stockholders’ equity |
|
61,080 |
|
|
48,299 |
|
||
Total liabilities and stockholders’ equity |
$ |
83,168 |
|
$ |
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 December 31, |
|
Twelve Months Ended December 31, |
|||||||||||||
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
Net income |
$ |
4,890 |
|
$ |
9,970 |
|
$ |
12,475 |
$ |
15,493 |
|
||||
Add back: |
|||||||||||||||
Depreciation and amortization |
|
141 |
|
|
136 |
|
|
514 |
|
536 |
|
||||
Interest expense, net |
|
99 |
|
|
17 |
|
|
324 |
|
113 |
|
||||
Income tax (benefit) expense |
|
(434 |
) |
|
(6,840 |
) |
|
1,520 |
|
(4,486 |
) |
||||
EBITDA |
|
4,696 |
|
|
3,283 |
|
|
14,833 |
|
11,656 |
|
||||
Management add back: |
|||||||||||||||
Stock based compensation |
|
194 |
|
|
156 |
|
|
776 |
|
540 |
|
||||
Adjusted EBITDA |
$ |
4,890 |
|
$ |
3,439 |
|
$ |
15,609 |
$ |
12,196 |
|
||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20240314351149/en/
Investor Relations:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203/972.9200
InvestorRelations@hginc.com
Source: Heritage Global Inc.
FAQ
What was Heritage Global Inc.'s operating income for the full year 2023?
What was Heritage Global Inc.'s net income for the full year 2023?
What were Heritage Global Inc.'s EBITDA and Adjusted EBITDA for the full year 2023?
What did Heritage Global Inc. CEO Ross Dove highlight as the key drivers of growth in 2023?
What is the stockholders' equity of Heritage Global Inc. as of December 31, 2023?
How many shares of common stock did Heritage Global Inc. repurchase in the fourth quarter of 2023?
What was Heritage Global Inc.'s net working capital at the end of the fourth quarter of 2023?
