Heritage Global Inc. Reports Significant Net Operating Growth in Second Quarter 2022; Achieves Improved Profitability
Heritage Global (NASDAQ: HGBL) reported strong financial results for Q2 2022, achieving operating income of $3.6 million compared to $73 thousand in Q2 2021. Net income rose to $2.6 million or $0.07 per share, up from $587 thousand or $0.02 per share year-over-year. The company attributed its success to robust performance in both Industrial and Financial Asset Divisions, including $2.6 million from the sale of Huntsville real estate assets. HGBL aims for full-year operating income to exceed $6.1 million, driven by favorable market conditions.
- Q2 2022 operating income increased significantly to $3.6 million from $73 thousand in Q2 2021.
- Net income surged to $2.6 million, up from $587 thousand, marking a substantial year-over-year improvement.
- Strong EBITDA of $3.8 million compared to $171 thousand in the prior-year quarter highlights enhanced profitability.
- Completion of the sale of Huntsville real estate assets contributed $2.6 million in operating income.
- Strong balance sheet with stockholders’ equity at $36 million as of June 30, 2022.
- None.
- Closes Two Real Estate Transactions in Q2
Second Quarter and First Six Months 2022 Summary of Financial Results:
($ in thousands, except per share amounts) |
Three Months Ended
|
Six Months Ended
|
||||||||
2022 |
|
2021 |
2022 |
|
2021 |
|||||
Operating income |
$ |
3,624 |
|
$ |
73 |
$ |
4,499 |
|
$ |
1,119 |
Net income |
$ |
2,578 |
|
$ |
587 |
$ |
3,223 |
|
$ |
1,619 |
Net income per share – diluted |
$ |
0.07 |
|
$ |
0.02 |
$ |
0.09 |
|
$ |
0.04 |
|
|
|
|
|
|
|
||||
(Non-GAAP Financial Measures) (1) |
|
|
|
|
|
|
||||
EBITDA |
$ |
3,757 |
|
$ |
171 |
$ |
4,765 |
|
$ |
1,308 |
Adjusted EBITDA |
$ |
3,865 |
|
$ |
239 |
$ |
4,979 |
|
$ |
1,719 |
(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. |
“We remain bullish about the opportunities we’re seeing to drive growth from our diverse revenue streams as we move through the balance of 2022. We expect to continue to achieve strong results given the underlying strength of our diversified business model and the favorable tailwinds we’re experiencing in the markets in which we operate. It’s important to note that we view the heightened volume in our financial assets division as a return to ‘business as usual’ and expect these more normalized volume levels to endure for the foreseeable future, with a steady stream of non-performing loans expected to continue to come to market in the current economic environment.
“On the industrial asset side of the business, the environmentally sound disposition of machinery and equipment is a growing priority for our manufacturing and industrial clients and we remain a go-to resource as these clients identify assets to be brought to auction for repurposing and reuse. As we previously announced, our second quarter performance was favorably impacted by the sale of the two remaining Huntsville real estate assets. Real estate has proven to be a valuable high margin revenue generator for the Company and we’ll continue to pursue partnerships and opportunities that have the potential to contribute meaningfully to our growth and profitability.”
Second Quarter 2022 Highlights:
-
The Company achieved operating income of
for the second quarter of 2022, as compared to operating income of$3.6 million in the second quarter of 2021. The significant growth in net operating income is attributed to strong performance in both divisions, including$73 thousand of operating income from the final disposition of the Huntsville real estate assets associated with the Company’s joint venture partnership.$2.6 million -
Net income totaled
, or$2.6 million diluted earnings per share for the second quarter of 2022, as compared to net income of$0.07 ,$587 thousand diluted earnings per share in the second quarter of 2021.$0.02 -
EBITDA totaled
in the second quarter of 2022 versus EBITDA of$3.8 million in the second quarter of 2021 and Adjusted EBITDA (excluding non-cash stock-based compensation) was$171 thousand compared to$3.9 million in the prior-year quarter.$239 thousand -
Heritage Global maintains a strong balance sheet, with stockholders’ equity of as of$36.0 million June 30, 2022 , compared to as of$32.6 million December 31, 2021 , and net working capital of .$10.5 million
Looking Forward
Second Quarter 2022 Conference Call
Management will host a webcast and conference call today,
- 1-877-272-7661 (Domestic)
- 1-412-542-4162 (International)
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 two hours after the live call through
About
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-
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of US dollars, except share and per share amounts) (unaudited) |
||||||||||||||||
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Services revenue |
|
$ |
4,595 |
|
|
$ |
4,168 |
|
|
$ |
8,763 |
|
|
$ |
9,198 |
|
Asset sales |
|
|
6,470 |
|
|
|
1,008 |
|
|
|
11,659 |
|
|
|
3,079 |
|
Total revenues |
|
|
11,065 |
|
|
|
5,176 |
|
|
|
20,422 |
|
|
|
12,277 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of services revenue |
|
|
910 |
|
|
|
960 |
|
|
|
1,664 |
|
|
|
2,135 |
|
Cost of asset sales |
|
|
5,631 |
|
|
|
375 |
|
|
|
9,033 |
|
|
|
1,195 |
|
Selling, general and administrative |
|
|
4,939 |
|
|
|
3,671 |
|
|
|
9,214 |
|
|
|
7,640 |
|
Depreciation and amortization |
|
|
133 |
|
|
|
98 |
|
|
|
266 |
|
|
|
189 |
|
Total operating costs and expenses |
|
|
11,613 |
|
|
|
5,104 |
|
|
|
20,177 |
|
|
|
11,159 |
|
Earnings of equity method investments (1) |
|
|
4,172 |
|
|
|
1 |
|
|
|
4,254 |
|
|
|
1 |
|
Operating income |
|
|
3,624 |
|
|
|
73 |
|
|
|
4,499 |
|
|
|
1,119 |
|
Interest and other expense, net |
|
|
(37 |
) |
|
|
9 |
|
|
|
(75 |
) |
|
|
12 |
|
Income before income tax expense (benefit) |
|
|
3,587 |
|
|
|
82 |
|
|
|
4,424 |
|
|
|
1,131 |
|
Income tax expense (benefit) |
|
|
1,009 |
|
|
|
(505 |
) |
|
|
1,201 |
|
|
|
(488 |
) |
Net income |
|
$ |
2,578 |
|
|
$ |
587 |
|
|
$ |
3,223 |
|
|
$ |
1,619 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding – basic |
|
|
36,103,198 |
|
|
|
35,250,964 |
|
|
|
36,053,729 |
|
|
|
35,020,768 |
|
Weighted average common shares outstanding – diluted |
|
|
36,999,614 |
|
|
|
36,972,415 |
|
|
|
36,846,539 |
|
|
|
36,611,234 |
|
Net income per share – basic |
|
$ |
0.07 |
|
|
$ |
0.02 |
|
|
$ |
0.09 |
|
|
$ |
0.05 |
|
Net income per share – diluted |
|
$ |
0.07 |
|
|
$ |
0.02 |
|
|
$ |
0.09 |
|
|
$ |
0.04 |
|
(1) |
Certain costs related to the disposition of the two Huntsville real estate assets are not reflected in Earnings of equity method investments and are instead included in Cost of asset sales. Net of such costs, the sale of the two assets contributed |
CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of US dollars, except share and per share amounts) (unaudited) |
||||||||
|
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
16,076 |
|
|
$ |
13,622 |
|
Accounts receivable (net of allowance for doubtful accounts of |
|
|
1,912 |
|
|
|
2,732 |
|
Current portion of notes receivable, net |
|
|
1,941 |
|
|
|
2,254 |
|
Inventory – equipment |
|
|
3,921 |
|
|
|
3,220 |
|
Other current assets |
|
|
1,182 |
|
|
|
1,456 |
|
Total current assets |
|
|
25,032 |
|
|
|
23,284 |
|
Non-current portion of notes receivable, net |
|
|
464 |
|
|
|
1,784 |
|
Equity method investments |
|
|
8,244 |
|
|
|
4,683 |
|
Right-of-use assets |
|
|
2,443 |
|
|
|
2,694 |
|
Property and equipment, net |
|
|
1,454 |
|
|
|
1,471 |
|
Intangible assets, net |
|
|
4,355 |
|
|
|
4,565 |
|
|
|
|
7,446 |
|
|
|
7,446 |
|
Deferred tax assets |
|
|
3,992 |
|
|
|
4,488 |
|
Other assets |
|
|
49 |
|
|
|
49 |
|
Total assets |
|
$ |
53,479 |
|
|
$ |
50,464 |
|
|
|
|
|
|
|
|
||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
||
Current liabilities: |
|
|
|
|
|
|
||
Accounts payable and accrued liabilities |
|
$ |
5,761 |
|
|
$ |
4,793 |
|
Payables to sellers |
|
|
6,142 |
|
|
|
6,451 |
|
Current portion of third party debt |
|
|
1,979 |
|
|
|
2,479 |
|
Current portion of lease liabilities |
|
|
612 |
|
|
|
501 |
|
Total current liabilities |
|
|
14,494 |
|
|
|
14,224 |
|
Non-current portion of third party debt |
|
|
1,113 |
|
|
|
1,352 |
|
Non-current portion of lease liabilities |
|
|
1,899 |
|
|
|
2,249 |
|
Total liabilities |
|
|
17,506 |
|
|
|
17,825 |
|
|
|
|
|
|
|
|
||
Stockholders’ equity: |
|
|
|
|
|
|
||
Preferred stock, |
|
|
6 |
|
|
|
6 |
|
Common stock, |
|
|
367 |
|
|
|
366 |
|
Additional paid-in capital |
|
|
293,245 |
|
|
|
293,030 |
|
|
|
|
(105 |
) |
|
|
— |
|
Accumulated deficit |
|
|
(257,540 |
) |
|
|
(260,763 |
) |
Total stockholders’ equity |
|
|
35,973 |
|
|
|
32,639 |
|
Total liabilities and stockholders’ equity |
|
$ |
53,479 |
|
|
$ |
50,464 |
|
– EBITDA and Adjusted EBITDA (non-GAAP measures) reconciliation follows –
Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures) (In thousands of US dollars) (unaudited) |
||||||||||||||||
|
|
Three Months
|
|
|
Six Months Ended
|
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
Net income |
|
$ |
2,578 |
|
|
$ |
587 |
|
|
$ |
3,223 |
|
|
$ |
1,619 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
133 |
|
|
|
98 |
|
|
|
266 |
|
|
|
189 |
|
Interest and other expense, net |
|
|
37 |
|
|
|
(9 |
) |
|
|
75 |
|
|
|
(12 |
) |
Income tax expense |
|
|
1,009 |
|
|
|
(505 |
) |
|
|
1,201 |
|
|
|
(488 |
) |
EBITDA |
|
|
3,757 |
|
|
|
171 |
|
|
|
4,765 |
|
|
|
1,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Management add back: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock based compensation |
|
|
108 |
|
|
|
68 |
|
|
|
214 |
|
|
|
211 |
|
Separation Agreement |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
200 |
|
Adjusted EBITDA |
|
$ |
3,865 |
|
|
$ |
239 |
|
|
$ |
4,979 |
|
|
$ |
1,719 |
|
The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.
View source version on businesswire.com: https://www.businesswire.com/news/home/20220810005725/en/
Investor Relations:
IMS Investor Relations
203/972.9200
InvestorRelations@hginc.com
Source:
FAQ
What were Heritage Global's Q2 2022 net income results?
How much was the operating income for Heritage Global in Q2 2022?
What is the significance of the Huntsville real estate assets sale for HGBL?
What are the future expectations for Heritage Global's operating income?