Heritage Global Inc. : Announces Record 2020 Fourth Quarter and Year End Results

Heritage Global Inc. (NASDAQ: HGBL) (“Heritage Global,” “HGI” or “the Company”), an asset services company specializing in financial and industrial asset transactions, today reported financial results for the fourth quarter and full year ended December 31, 2020.

Heritage Global Chief Executive Officer Ross Dove commented, “We closed out 2020 with record fourth quarter results, reflected in net income of $6.3 million and substantially improved adjusted EBITDA of $3.5 million. Our performance in the quarter, and for the full year, demonstrates the strength and resilience of our diverse business model, which performed well in a challenging economic environment as the pandemic continued to impact global markets.

“As we announced in January, we closed several large transactions at Heritage Global Partners during the fourth quarter, which significantly contributed to the strength of the quarter and enabled us to begin 2021 with significant momentum across our businesses. We are optimistic for our prospects as we have moved into 2021, and expect to see strong supply on the auction side of our business as the pandemic continues to drive the liquidation of industrial equipment and assets. Likewise, we anticipate increased demand for our financial asset services, as we expect to see an increase in the release of non-performing loans into the market this calendar year. Specifically, we are seeing more opportunities related to debt associated with the growing adoption of the ‘Buy Now, Pay Later’ (BNPL) purchasing option among online consumers. In fact, we recently announced the successful sale of a $25 million portfolio of BNPL charged-off accounts. We are pleased with Heritage’s progress in 2020 and are focused on continuing to capitalize on the interest and demand we are seeing across both the industrial and financial sides of our business.”

Fourth Quarter 2020 Summary of Financial Results:

($ in thousands, except per share amounts)	Quarter Ended December 31,						Year Ended December 31,
	2020			2019			2020			2019
Operating income (loss)		3,329			(446	)		6,059			3,050
Net income		6,317			577			9,658			3,899
Net income per share – diluted	$	0.17		$	0.02		$	0.30		$	0.13
(Non-GAAP Financial Measures) (1)
EBITDA	$	3,419		$	(367	)	$	6,421		$	3,355
Adjusted EBITDA	$	3,514		$	279		$	6,774		$	4,211

(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 2020 Highlights:

• The Company achieved operating income of $3.3 million as compared to an operating loss of $0.4 million in the fourth quarter of 2019, primarily due to the completion of multiple large transactions in the Company’s industrial auction business. The fourth quarter of 2019 included a $0.6 million impairment charge related to Equity Partners, which was discontinued as of December 31, 2019.
• Net income increased to $6.3 million, or $0.17 diluted earnings per share, for the fourth quarter of 2020, as compared to $0.6 million or $0.02 diluted earnings per share in the fourth quarter of 2019. The financial results for 2020 include an income tax benefit of $3.0 million for the fourth quarter of 2020, and an income tax benefit of $3.6 million for the year ended December 31, 2020 which included the reversal of the income tax valuation allowance as required according to ASC 740-10-30-5(e). Excluding the income tax benefit resulting from the income tax valuation allowance, the net income for the fourth quarter of 2020 would have been $2.5 million or $0.07 diluted earnings per share, and $4.5 million or $0.14 diluted earnings per share for the year ended December 31, 2020, compared to net loss for the fourth quarter of 2019 of $1.2 million or $0.04 diluted earnings per share, and net income of $2.1 million or $0.07 diluted earnings per share for the year ended December 31, 2019.
• EBITDA totaled $3.4 million versus EBITDA loss of $0.4 million in the fourth quarter of 2019, while Adjusted EBITDA (excluding non-cash stock-based compensation expense) was $3.5 million compared to $0.3 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $29.9 million as of December 31, 2020, compared to $11.8 million as of December 31, 2019, and cash of $23.4 million.

Fourth Quarter and Year End 2020 Conference Call

Management will host a webcast and conference call on Monday, March 8, 2021 at 5:00 pm ET to discuss financial results for the fourth quarter and full year 2020. Analysts and investors may participate via conference call, using the following dial-in information:

• 1-855-327-6837 (Domestic)
• 1-631-891-4304 (International)

The conference call will also be available in the Investor Relations section of the Company's website at http://www.hginc.com/. To listen to a live broadcast, go to the site at least 15 minutes prior to the scheduled start time in order to register.

A replay of the call will also be available on the Company's website approximately two hours after the live call through March 22, 2021. To access the replay, dial 844-512-2921 (domestic) or 412-317-6671 (international). The replay pin number is 10013440. The replay can also be accessed on the Investor Relations section of the Company's website at http://www.hginc.com/.

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 and any goodwill impairments. 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).

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

Heritage Global Inc. (NASDAQ: HGBL) is an asset services company specializing in financial and industrial asset transactions. The company provides a full suite of services including market making, acquisitions, dispositions, valuations and secured lending. 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, 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. 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. CONSOLIDATED STATEMENTS OF INCOME (In thousands of US dollars, except share and per share amounts)
		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
		(unaudited)
Revenues:
Services revenue		$	6,168			$	5,150			$	21,806			$	20,100
Asset sales			2,163				421				4,377				6,068
Total revenues			8,331				5,571				26,183				26,168
Operating costs and expenses:
Cost of services revenue			2,976				725				6,320				3,374
Cost of asset sales			1,431				413				2,789				4,365
Selling, general and administrative			3,933				4,323				14,449				15,874
Impairment of goodwill			-				573				-				573
Depreciation and amortization			90				79				362				305
Total operating costs and expenses			8,430				6,113				23,920				24,491
Earnings of equity method investments			3,428				96				3,796				1,373
Operating income			3,329				(446	)			6,059				3,050
Interest and other expense, net			(7	)			(7	)			(45	)			(64	)
Income before income tax expense (benefit)			3,322				(453	)			6,014				2,986
Income tax expense (benefit)			(2,995	)			(1,030	)			(3,644	)			(913	)
Net income		$	6,317			$	577			$	9,658			$	3,899
Weighted average common shares outstanding – basic			34,318,122				28,689,060				30,200,053				28,662,297
Weighted average common shares outstanding – diluted			37,071,983				30,129,432				32,708,235				29,271,375
Net income per share – basic		$	0.18			$	0.02			$	0.32			$	0.14
Net income per share – diluted		$	0.17			$	0.02			$	0.30			$	0.13

The notes contained in our Annual Report on Form 10-K 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 amounts)
		December 31,
		2020				2019
ASSETS
Current assets:
Cash and cash equivalents		$	23,385			$	2,728
Accounts receivable			1,496				1,859
Current portion of notes receivable, net			1,338				1,295
Inventory – equipment			235				104
Other current assets			498				784
Total current assets			26,952				6,770
Non-current portion of notes receivable, net			748				1,366
Equity method investments			2,402				2,516
Right-of-use asset			963				1,483
Property and equipment, net			130				221
Intangible assets, net			3,123				3,392
Goodwill			5,585				5,585
Deferred tax assets			4,402				372
Other assets			250				212
Total assets		$	44,555			$	21,917
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	13,609			$	8,113
Current portion of third party debt			—				438
Lease liabilities			380				577
Total current liabilities			13,989				9,128
Non-current portion of lease liabilities			623				942
Total liabilities			14,612				10,070
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 568 Series N shares at December 31, 2020 and December 31, 2019			6				6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 35,281,183 shares at December 31, 2020 and 29,339,101 shares at December 31, 2019			353				293
Additional paid-in capital			293,400				285,099
Accumulated deficit			(263,816	)			(273,474	)
Accumulated other comprehensive loss			—				(77	)
Total stockholders’ equity			29,943				11,847
Total liabilities and stockholders’ equity		$	44,555			$	21,917

The accompanying notes 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 December 31,								Year Ended December 31,
		2020				2019				2020				2019
Net income		$	6,317			$	577			$	9,658			$	3,899
Add back:
Depreciation and amortization			90				79				362				305
Interest and other expense, net			7				7				45				64
Income tax expense (benefit)			(2,995	)			(1,030	)			(3,644	)			(913	)
EBITDA			3,419				(367	)			6,421				3,355
Management add back:
Stock based compensation			95				73				353				283
Impairment of goodwill			-				573				-				573
Adjusted EBITDA		$	3,514			$	279			$	6,774			$	4,211

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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210308005858/en/