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Heritage Global Inc. Announces 2019 Third Quarter Operating Results

November 8, 2019

SAN DIEGO--(BUSINESS WIRE)--Nov 8, 2019--

Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) (“Heritage Global,” “HGI” or “the Company”), a diversified financial services company providing asset-based acquisition, disposition, valuation, and lending services, today reported financial results for the third quarter ended September 30, 2019.

Heritage Global Chief Executive Officer Ross Dove stated, “Heritage Global delivered strong third quarter results highlighted by accelerating growth in revenue and earnings, as we increasingly leverage the Company’s unique and differentiated model. We maintain durable competitive advantages including expertise and relationships built up over our history, global scale, and broad diversification across businesses, products and services, markets, and revenue streams. Over the last 12 months, Heritage Global has generated $4.7 million of Adjusted EBITDA.

“Looking ahead, we remain optimistic about our growth prospects, regardless of the macroeconomic backdrop, given our key strategic initiatives to continue to broaden target markets, ramp up principal investment activities, and build out product and service capabilities. To the point, we recently launched Heritage Global Capital, a new platform providing specialty financing solutions to small- and medium-sized investors in charged-off and nonperforming asset portfolios and other asset-based classes. Over time, we expect Heritage Global Capital to meaningfully enhance the growth, sustainability, and diversification of our revenues.

“In turn, our consistent growth is driving strong and improving financial performance. We remain focused on driving operating efficiencies including recently announced plans to realign our middle market M&A advisory services business, while the continued development of our more predictable fee-based advisory businesses combined with accelerating higher-margin principal activities bodes well for the trajectory and sustainability of our earnings growth.”

Third Quarter 2019 Summary of Financial Results:

($ in thousands, except per share amounts)

Quarter Ended
September 30,
(Unaudited)

Nine Months Ended
September 30,
(Unaudited)

2019

 

2018

2019

 

2018

Revenue

 

 

 

 

 

 

Services revenue (1)

$

5,207

 

$

4,897

$

14,950

 

$

16,407

Asset sales (2)

 

1,415

 

 

231

 

5,647

 

 

1,351

Total revenue

 

6,622

 

 

5,128

 

20,597

 

 

17,758

Gross profit

 

5,261

 

 

4,229

 

13,996

 

 

15,005

Operating income

 

1,267

 

 

416

 

3,496

 

 

3,451

Net income

 

1,216

 

 

369

 

3,322

 

 

3,343

Net income per share – diluted

$

0.04

 

$

0.01

$

0.11

 

$

0.12

 

 

 

 

 

 

 

(Non-GAAP Financial Measures)(3)

 

 

 

 

 

 

EBITDA

$

1,341

 

$

495

$

3,722

 

$

3,847

Adjusted EBITDA

$

1,404

 

$

568

$

3,932

 

$

3,909

(1)

Services revenue represents revenue generated from activities in which Heritage Global acted as an agent by either brokering a transaction or providing some other fee-based service.

(2)

Asset sales represent revenue generated from activities in which Heritage Global acted in a principal capacity,

reselling previously purchased assets.

(3)

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.

Third Quarter 2019 Highlights:

Definitions and Disclosures Regarding non-GAAP Financial Information

Adjusted EBITDA reflects the standard definition of EBITDA (net income/loss plus depreciation and amortization, interest and other expense, and provision for income taxes), plus/minus stock-based compensation and fair value adjustment of contingent consideration. Management believes that the presentation of this non-GAAP financial measure, when considered together with GAAP financial measures and the reconciliation to the most directly comparable GAAP financial measure, provides a more complete understanding of the factors and trends affecting the Company than could be obtained absent these disclosures. Management believes that Adjusted EBITDA is a useful supplemental tool to evaluate the underlying operating performance of the Company on an ongoing basis and make operating and strategic decisions. The Company has disclosed this non-GAAP financial measure so that investors have the same financial data that management uses, with the intention of assisting investors to make comparisons to the Company’s historical operating results and analyze its underlying performance. The use of 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 cited in the tables at the end of this press release which reconciles GAAP reported net income to EBITDA and Adjusted EBITDA for the periods presented herein.

About Heritage Global Inc. ( www.heritageglobalinc.com )

Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) is a diversified financial services company providing asset-based acquisition, disposition, valuation, and lending services. Heritage Global focuses on identifying, valuing, acquiring and monetizing underlying tangible and intangible assets across twenty-eight global sectors. The company acts as an adviser, as well as a principal, acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, accounts receivable portfolios, real estate, intellectual property, and entire business enterprises.

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. The forward-looking statements contained in this communication are based on knowledge of the environment in which the Company currently operates and are subject to change based on various important factors, including variability in magnitude and timing of asset liquidation transactions, the impact of changes in the U.S. national and global economies, 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.

CONSOLIDATED STATEMENTS OF INCOME

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

(Unaudited)

 

 

 

Three Months Ended
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Services revenue

 

$

 

5,207

 

 

$

 

4,897

 

 

$

 

14,950

 

 

$

 

16,407

 

Asset sales

 

 

1,415

 

 

 

231

 

 

 

5,647

 

 

 

1,351

 

Total revenues

 

 

6,622

 

 

 

5,128

 

 

 

20,597

 

 

 

17,758

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

435

 

 

 

710

 

 

 

2,649

 

 

 

2,001

 

Cost of asset sales

 

 

926

 

 

 

189

 

 

 

3,952

 

 

 

752

 

Selling, general and administrative

 

 

3,928

 

 

 

3,734

 

 

 

11,551

 

 

 

11,315

 

Depreciation and amortization

 

 

74

 

 

 

79

 

 

 

226

 

 

 

239

 

Total operating costs and expenses

 

 

5,363

 

 

 

4,712

 

 

 

18,378

 

 

 

14,307

 

Earnings of equity method investments

 

 

8

 

 

 

 

 

 

1,277

 

 

 

 

Operating income

 

 

1,267

 

 

 

416

 

 

 

3,496

 

 

 

3,451

 

Fair value adjustment of contingent consideration

 

 

 

 

 

 

 

 

 

 

 

157

 

Interest and other expense, net

 

 

(12

)

 

 

(47

)

 

 

(57

)

 

 

(201

)

Income before income tax expense

 

 

1,255

 

 

 

369

 

 

 

3,439

 

 

 

3,407

 

Income tax expense

 

 

39

 

 

 

 

 

 

117

 

 

 

64

 

Net income

 

$

 

1,216

 

 

$

 

369

 

 

$

 

3,322

 

 

$

 

3,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

28,653,278

 

 

 

28,653,278

 

 

 

28,653,278

 

 

 

28,557,517

 

Weighted average common shares outstanding – diluted

 

 

29,352,812

 

 

 

28,823,918

 

 

 

28,911,488

 

 

 

28,902,499

 

Net income (loss) per share – basic

 

$

 

0.04

 

 

$

 

0.01

 

 

$

 

0.12

 

 

$

 

0.12

 

Net income (loss) per share – diluted

 

$

 

0.04

 

 

$

 

0.01

 

 

$

 

0.11

 

 

$

 

0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.

-balance sheets follow-

HERITAGE GLOBAL INC.

CONSOLIDATED BALANCE SHEETS

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

 

 

 

September 30,
2019

 

 

December 31,
2018

 

ASSETS

 

 

(unaudited)

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,901

 

 

$

4,268

 

Accounts receivable

 

 

1,722

 

 

 

400

 

Inventory – equipment

 

 

230

 

 

 

2,405

 

Other current assets

 

 

1,463

 

 

 

607

 

Total current assets

 

 

7,316

 

 

 

7,680

 

Property and equipment, net

 

 

196

 

 

 

175

 

Equity method investments

 

 

4,338

 

 

 

2,767

 

Right-of-use assets

 

 

865

 

 

 

 

Identifiable intangible assets, net

 

 

3,451

 

 

 

3,627

 

Goodwill

 

 

6,158

 

 

 

6,158

 

Other assets

 

 

224

 

 

 

224

 

Total assets

 

$

22,548

 

 

$

20,631

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

9,273

 

 

$

8,101

 

Current portion of debt

 

 

432

 

 

 

1,178

 

Current portion of lease liabilities

 

 

477

 

 

 

 

Other current liabilities

 

 

79

 

 

 

892

 

Total current liabilities

 

 

10,261

 

 

 

10,171

 

Non-current portion of debt

 

 

138

 

 

 

438

 

Non-current portion of lease liabilities

 

 

433

 

 

 

 

Other non-current liabilities

 

 

 

 

 

1,838

 

Deferred tax liabilities

 

 

584

 

 

 

584

 

Total liabilities

 

 

11,416

 

 

 

13,031

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and
outstanding 569 Class N shares at September 30, 2019 and December 31,
2018

 

 

6

 

 

 

6

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and
outstanding 29,253,278 shares at September 30, 2019 and December 31,
2018

 

 

293

 

 

 

293

 

Additional paid-in capital

 

 

284,961

 

 

 

284,751

 

Accumulated deficit

 

 

(274,051

)

 

 

(277,373

)

Accumulated other comprehensive loss

 

 

(77

)

 

 

(77

)

Total stockholders’ equity

 

 

11,132

 

 

 

7,600

 

Total liabilities and stockholders’ equity

 

$

22,548

 

 

$

20,631

 

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.

– 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
September 30,

 

 

Nine Months Ended
September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

 

1,216

 

 

$

 

369

 

 

$

 

3,322

 

 

$

 

3,343

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

74

 

 

 

79

 

 

 

226

 

 

 

239

 

Interest and other expense, net

 

 

12

 

 

 

47

 

 

 

57

 

 

 

201

 

Income tax expense

 

 

39

 

 

 

 

 

 

117

 

 

 

64

 

EBITDA

 

 

1,341

 

 

 

495

 

 

 

3,722

 

 

 

3,847

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair value adjustment of contingent consideration

 

 

 

 

 

 

 

 

 

 

 

(157

)

Stock based compensation

 

 

63

 

 

 

73

 

 

 

210

 

 

 

219

 

Adjusted EBITDA

 

$

 

1,404

 

 

$

 

568

 

 

$

 

3,932

 

 

$

 

3,909

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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/20191108005332/en/

CONTACT: Scott West

Chief Financial Officer

Heritage Global Inc.

858/847-0656Investor Relations

InvestorRelations@hginc.com

858/242-4741

KEYWORD: CALIFORNIA UNITED STATES NORTH AMERICA

INDUSTRY KEYWORD: BANKING PROFESSIONAL SERVICES FINANCE

SOURCE: Heritage Global Inc.

Copyright Business Wire 2019.

PUB: 11/08/2019 09:29 AM/DISC: 11/08/2019 09:29 AM

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