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 second quarter and six months ended June 30, 2021.
Heritage Global Chief Executive Officer Ross Dove commented, “This was a challenging quarter, characterized by limited asset flow volumes across both our financial and industrial businesses. The auction industry overall saw a slowdown in large transactions in the quarter as clients took a ‘wait and see’ approach to plant closings as they evaluate what the post-pandemic landscape will look like. Similarly, the financial asset side of our business was impacted by the combination of ongoing stimulus payments and hesitancy around the release of non-performing loans into the market. Despite these factors, our experienced team effectively managed through these headwinds to gain market share and achieve continued profitability in the quarter.
“Looking forward, with our visibility today, we are optimistic about asset flow through the balance of 2021, as after a long delay in financial assets coming to market, consumer borrowing is rising significantly and stimulus payments are tapering off, likely leading to the increase of non-performing loans. Our pipeline is robust, and we have also onboarded a strong borrower base for Heritage Global Capital. Furthermore, we expect increased industrial asset flow in the second half of 2021 as large, multi-national corporations look for sustainable lifecycle management as they retire and dispose of obsolete equipment.”
Mr. Dove concluded, “We believe we are well-positioned to capitalize as the changing U.S. economy promotes a rising flow of assets in the marketplace. We remain confident in our ability to advance our leadership position and drive growth through the remainder of 2021.”
Second Quarter 2021 Summary of Financial Results:
($ in thousands, except per share amounts) |
Quarter Ended June 30, |
Six Months Ended June 30, |
||||||||||||
2021 |
|
2020 |
2021 |
|
2020 |
|||||||||
Operating income |
$ |
73 |
|
|
$ |
1,024 |
|
$ |
1,119 |
|
|
$ |
1,118 |
|
Net income |
$ |
587 |
|
|
$ |
2,039 |
|
$ |
1,619 |
|
|
$ |
2,077 |
|
Net income per share – diluted |
$ |
0.02 |
|
|
$ |
0.07 |
|
$ |
0.04 |
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
||||||||
(Non-GAAP Financial Measures) (1) |
|
|
|
|
|
|
||||||||
EBITDA |
$ |
171 |
|
|
$ |
1,114 |
|
$ |
1,308 |
|
|
$ |
1,298 |
|
Adjusted EBITDA |
$ |
239 |
|
|
$ |
1,200 |
|
$ |
1,719 |
|
|
$ |
1,459 |
|
(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. |
Second Quarter 2021 Highlights:
- The Company achieved operating income of $0.1 million for the second quarter of 2021, as compared to operating income of $1.0 million in the second quarter of 2020.
- Net income of $0.6 million, or $0.02 diluted earnings per share for the second quarter of 2021, as compared to net income of $2.0 million, $0.07 diluted earnings per share in the second quarter of 2020.
- EBITDA totaled $0.2 million in the second quarter of 2021 versus EBITDA of $1.1 million in the second quarter of 2020 and Adjusted EBITDA (excluding non-cash stock-based compensation) was $0.2 million compared to $1.2 million in the prior-year quarter.
- Heritage Global maintains a strong balance sheet, with stockholders’ equity of $31.0 million as of June 30, 2021, compared to $29.9 million as of December 31, 2020, and net working capital of $12.6 million.
Second Quarter 2021 Conference Call
Management will host a webcast and conference call on Thursday, August 12, 2021 at 5:00 pm ET to discuss financial results for second quarter 2021. Analysts and investors may participate via conference call, using the following dial-in information:
- 1- 800-954-0645 (Domestic)
- 1-312-429-0433 (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 August 26, 2021. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 21996563. 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 separation costs. 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.
HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of US dollars, except share and per share amounts)
(unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services revenue |
|
$ |
4,168 |
|
|
$ |
5,565 |
|
|
$ |
9,198 |
|
|
$ |
9,653 |
|
Asset sales |
|
|
1,008 |
|
|
|
552 |
|
|
|
3,079 |
|
|
|
708 |
|
Total revenues |
|
|
5,176 |
|
|
|
6,117 |
|
|
|
12,277 |
|
|
|
10,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services revenue |
|
|
960 |
|
|
|
1,188 |
|
|
|
2,135 |
|
|
|
1,739 |
|
Cost of asset sales |
|
|
375 |
|
|
|
330 |
|
|
|
1,195 |
|
|
|
368 |
|
Selling, general and administrative |
|
|
3,671 |
|
|
|
3,666 |
|
|
|
7,640 |
|
|
|
7,138 |
|
Depreciation and amortization |
|
|
98 |
|
|
|
90 |
|
|
|
189 |
|
|
|
180 |
|
Total operating costs and expenses |
|
|
5,104 |
|
|
|
5,274 |
|
|
|
11,159 |
|
|
|
9,425 |
|
Earnings of equity method investments |
|
|
1 |
|
|
|
181 |
|
|
|
1 |
|
|
|
182 |
|
Operating income |
|
|
73 |
|
|
|
1,024 |
|
|
|
1,119 |
|
|
|
1,118 |
|
Interest and other expense, net |
|
|
9 |
|
|
|
(8 |
) |
|
|
12 |
|
|
|
(35 |
) |
Income before income tax benefit |
|
|
82 |
|
|
|
1,016 |
|
|
|
1,131 |
|
|
|
1,083 |
|
Income tax benefit |
|
|
(505 |
) |
|
|
(1,023 |
) |
|
|
(488 |
) |
|
|
(994 |
) |
Net income |
|
$ |
587 |
|
|
$ |
2,039 |
|
|
$ |
1,619 |
|
|
$ |
2,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – basic |
|
|
35,250,964 |
|
|
|
28,751,689 |
|
|
|
35,020,768 |
|
|
|
28,760,893 |
|
Weighted average common shares outstanding – diluted |
|
|
36,972,415 |
|
|
|
30,961,261 |
|
|
|
36,611,234 |
|
|
|
30,630,713 |
|
Net income per share – basic |
|
$ |
0.02 |
|
|
$ |
0.07 |
|
|
$ |
0.05 |
|
|
$ |
0.07 |
|
Net income per share – diluted |
|
$ |
0.02 |
|
|
$ |
0.07 |
|
|
$ |
0.04 |
|
|
$ |
0.07 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share amounts)
|
|
June 30, 2021 |
|
|
December 31, 2020 |
|
||
|
|
(unaudited) |
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
17,525 |
|
|
$ |
23,385 |
|
Accounts receivable |
|
|
2,514 |
|
|
|
1,496 |
|
Current portion of notes receivable, net |
|
|
1,086 |
|
|
|
1,338 |
|
Inventory – equipment |
|
|
161 |
|
|
|
235 |
|
Other current assets |
|
|
676 |
|
|
|
498 |
|
Total current assets |
|
|
21,962 |
|
|
|
26,952 |
|
Non-current portion of notes receivable, net |
|
|
1,225 |
|
|
|
748 |
|
Equity method investments |
|
|
2,893 |
|
|
|
2,402 |
|
Right-of-use assets |
|
|
2,940 |
|
|
|
963 |
|
Property and equipment, net |
|
|
108 |
|
|
|
130 |
|
Intangible assets, net |
|
|
2,989 |
|
|
|
3,123 |
|
Goodwill |
|
|
5,585 |
|
|
|
5,585 |
|
Deferred tax assets |
|
|
4,933 |
|
|
|
4,402 |
|
Other assets |
|
|
161 |
|
|
|
250 |
|
Total assets |
|
$ |
42,796 |
|
|
$ |
44,555 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
8,834 |
|
|
$ |
13,609 |
|
Current portion of lease liabilities |
|
|
494 |
|
|
|
380 |
|
Total current liabilities |
|
|
9,328 |
|
|
|
13,989 |
|
Non-current portion of lease liabilities |
|
|
2,485 |
|
|
|
623 |
|
Total liabilities |
|
|
11,813 |
|
|
|
14,612 |
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 568 shares of Series N as of June 30, 2021 and December 31, 2020 |
|
|
6 |
|
|
|
6 |
|
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 36,284,382 shares as of June 30, 2021 and 35,281,183 as of December 31, 2020 |
|
|
363 |
|
|
|
353 |
|
Additional paid-in capital |
|
|
292,811 |
|
|
|
293,400 |
|
Accumulated deficit |
|
|
(262,197 |
) |
|
|
(263,816 |
) |
Total stockholders’ equity |
|
|
30,983 |
|
|
|
29,943 |
|
Total liabilities and stockholders’ equity |
|
$ |
42,796 |
|
|
$ |
44,555 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
HERITAGE GLOBAL INC.
Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures)
(In thousands of US dollars)
(unaudited)
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
|
|
2021 |
|
|
2020 |
|
|
2021 |
|
|
2020 |
|
||||
Net income |
|
$ |
587 |
|
|
$ |
2,039 |
|
|
$ |
1,619 |
|
|
$ |
2,077 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
98 |
|
|
|
90 |
|
|
|
189 |
|
|
|
180 |
|
Interest and other expense, net |
|
|
(9 |
) |
|
|
8 |
|
|
|
(12 |
) |
|
|
35 |
|
Income tax benefit |
|
|
(505 |
) |
|
|
(1,023 |
) |
|
|
(488 |
) |
|
|
(994 |
) |
EBITDA |
|
|
171 |
|
|
|
1,114 |
|
|
|
1,308 |
|
|
|
1,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation |
|
|
68 |
|
|
|
86 |
|
|
|
211 |
|
|
|
161 |
|
Separation Agreement |
|
|
— |
|
|
|
— |
|
|
|
200 |
|
|
|
— |
|
Adjusted EBITDA |
|
$ |
239 |
|
|
$ |
1,200 |
|
|
$ |
1,719 |
|
|
$ |
1,459 |
|
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/20210812005852/en/
Contacts
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203/972-9200
jnesbett@imsinvestorrelations.com
