Heritage Global Inc. Announces 2020 First Quarter Operating Results

Nachrichtenquelle: Business Wire (engl.)
11.05.2020, 22:12  |  104   |   |   

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 first quarter ended March 31, 2020.

Heritage Global Chief Executive Officer Ross Dove stated, “The first quarter was characterized by unprecedented uncertainty and volatility related to the COVID-19 pandemic. First and foremost, the health and safety of our employees, partners, and clients remain our top priority, and we have implemented support measures including working remotely.”

“Turning to our financial results for the quarter, we reported breakeven net income, as both buyers and sellers adjusted to the shifting macroeconomic backdrop. More importantly, we remain well positioned as we have entered into a more challenging economic environment. Our asset liquidation business is highly concentrated in distressed and surplus assets, and we expect that there will be an increased supply of such assets as we move forward. Indeed, leading indicators continue to point to capital asset auction participation, surplus inventories, and nonperforming loan transactions, boding well for our related advisory (NLEX) and financing (Heritage Global Capital) businesses.”

“Heritage Global Capital (HGC), our specialty financing platform providing solutions to small- and medium-sized investors in charged-off and nonperforming asset portfolios and other asset-based classes, recently closed on an $80 million senior secured credit facility with a major New York City-based investment advisor. The agreement establishes a two-year facility to strategically fund loans to purchase charged-off consumer debt portfolios and supplements a previously formed $6 million revolving credit facility with an alternative asset manager focused on asset-based lending transactions. Looking ahead, HGC will serve as an ideal platform to offer funding solutions in a growing but underserved market, and further diversifies and enhances the firm’s earnings power across cycles. To date, HGC has funded $7.5 million in the aggregate, across ten transactions.”

“Finally, we maintain a strong and liquid balance sheet, a favorable debt profile, and an untapped $5.0 million credit facility. Furthermore, we remain focused on controlling capital expenditures and expenses.”

First Quarter 2020 Summary of Financial Results:

($ in thousands, except per share amounts)

Quarter Ended

March 31,

 

2020

 

2019

Revenue

 

 

 

Services revenue(1)

$

4,088

 

$

4,408

Asset sales(2)

 

156

 

 

2,143

Total revenue

 

4,244

 

 

6,551

Gross profit

 

3,655

 

 

4,660

Operating income

 

94

 

 

659

Net income

 

38

 

 

612

Net income per share – diluted

$

0.00

 

$

0.02

 

 

 

 

(Non-GAAP Financial Measures) (3)

 

 

 

EBITDA

$

184

 

$

735

Adjusted EBITDA

$

259

 

$

806

(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.

First Quarter 2020 Highlights:

  • Total revenue of $4.2 million compared to $6.6 million in the prior-year quarter. The year-over-year decline was a function of lower asset sales ($0.2 million versus $2.1 million in the first quarter of 2019), which varies depending on the volume, size and timing of the transactions, and services revenue ($4.1 million versus $4.4 million in the prior year), which decreased as a result of the disposition of Equity Partners, effective January 1, 2020.
  • Gross profit totaled $3.7 million versus $4.7 million in the prior-year quarter. Year-over-year comparisons were mostly a function of the volume, size and timing of asset liquidation transactions during the respective quarters.
  • Operating income was $0.1 million versus $0.7 million in the first quarter of 2019, with the decline in gross profit partially offset by lower selling, general and administrative expenses as a result of the disposition of Equity Partners.
  • Net income was essentially breakeven at $38 thousand, or $0.00 per share, for the first quarter of 2020 compared to $0.6 million, or $0.02 per share, in the prior-year quarter.
  • EBITDA totaled $0.2 million versus $0.7 million in the first quarter of 2019, while Adjusted EBITDA (excluding non-cash stock-based compensation expense) was $0.3 million compared to $0.8 million in the prior-year quarter.
  • Heritage Global maintains a strong balance sheet, with stockholders’ equity of $12.0 million as of March 31, 2020, as compared to $11.8 million at December 31, 2019, and net cash of $2.8 million versus $2.3 million at the end of 2019.

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. 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 March 31,

 

 

 

2020

 

 

2019

 

Revenues:

 

 

 

 

 

 

 

 

Services revenue

 

$

4,088

 

 

$

4,408

 

Asset sales

 

 

156

 

 

 

2,143

 

Total revenues

 

 

4,244

 

 

 

6,551

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

551

 

 

 

731

 

Cost of asset sales

 

 

38

 

 

 

1,160

 

Selling, general and administrative

 

 

3,472

 

 

 

3,925

 

Depreciation and amortization

 

 

90

 

 

 

76

 

Total operating costs and expenses

 

 

4,151

 

 

 

5,892

 

Earnings of equity method investments

 

 

1

 

 

 

 

Operating income

 

 

94

 

 

 

659

 

Interest and other expense, net

 

 

(27

)

 

 

(23

)

Income before income tax expense

 

 

67

 

 

 

636

 

Income tax expense

 

 

29

 

 

 

24

 

Net income

 

$

38

 

 

$

612

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

28,751,689

 

 

 

28,653,278

 

Weighted average common shares outstanding – diluted

 

 

30,200,114

 

 

 

28,814,149

 

Net income per share – basic

 

$

0.00

 

 

$

0.02

 

Net income per share – diluted

 

$

0.00

 

 

$

0.02

 

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)

 

 

 

 

March 31, 2020

 

 

December 31, 2019

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,093

 

 

$

2,728

 

Accounts receivable

 

 

1,699

 

 

 

1,859

 

Current portion of notes receivable, net

 

 

816

 

 

 

1,295

 

Inventory – equipment

 

 

218

 

 

 

104

 

Other current assets

 

 

1,058

 

 

 

784

 

Total current assets

 

 

6,884

 

 

 

6,770

 

Property and equipment, net

 

 

203

 

 

 

221

 

Non-current portion of notes receivable, net

 

 

950

 

 

 

1,366

 

Equity method investments

 

 

2,766

 

 

 

2,516

 

Right-of-use assets

 

 

1,353

 

 

 

1,483

 

Identifiable intangible assets, net

 

 

3,325

 

 

 

3,392

 

Goodwill

 

 

5,585

 

 

 

5,585

 

Deferred tax assets

 

 

329

 

 

 

372

 

Other assets

 

 

271

 

 

 

212

 

Total assets

 

$

21,666

 

 

$

21,917

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

7,980

 

 

$

8,110

 

Current portion of debt

 

 

340

 

 

 

403

 

Current portion of lease liabilities

 

 

580

 

 

 

577

 

Other current liabilities

 

 

3

 

 

 

3

 

Total current liabilities

 

 

8,903

 

 

 

9,093

 

Non-current portion of debt

 

 

 

 

 

35

 

Non-current portion of lease liabilities

 

 

805

 

 

 

942

 

Total liabilities

 

 

9,708

 

 

 

10,070

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and

outstanding 568 shares of Series N at March 31, 2020 and December 31, 2019

 

 

6

 

 

 

6

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued

and outstanding 29,358,906 shares at March 31, 2020 and 29,339,101 at

December 31, 2019

 

 

294

 

 

 

293

 

Additional paid-in capital

 

 

285,171

 

 

 

285,099

 

Accumulated deficit

 

 

(273,436

)

 

 

(273,474

)

Accumulated other comprehensive loss

 

 

(77

)

 

 

(77

)

Total stockholders’ equity

 

 

11,958

 

 

 

11,847

 

Total liabilities and stockholders’ equity

 

$

21,666

 

 

$

21,917

 

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 March 31,

 

 

 

2020

 

 

2019

 

Net income

 

$

38

 

 

$

612

 

Add back:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

90

 

 

 

76

 

Interest and other expense, net

 

 

27

 

 

 

23

 

Income tax expense

 

 

29

 

 

 

24

 

EBITDA

 

 

184

 

 

 

735

 

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

Stock based compensation

 

 

75

 

 

 

71

 

Adjusted EBITDA

 

$

259

 

 

$

806

 

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

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