Heritage Global Inc. Announces 2021 First Quarter 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 first quarter ended March 31, 2021.

Heritage Global Chief Executive Officer Ross Dove commented, “2021 is off to a strong start with significantly improved operating income, net income and adjusted EBITDA. While the economy continues to reopen and recover, we are seeing continued momentum in our auction business, with clients in this segment seeking to liquidate industrial equipment and assets to improve their financial position as they prepare to fully re-engage their operations. As we move through 2021, we expect to see an increase in the release of non-performing loans into the market, which we expect will favorably impact demand for our financial asset services. We’re pleased to have delivered strong performance in the first quarter and with the opportunities we’re seeing in the markets in which we operate, we remain energized and optimistic about growing our leadership position and prospects through the balance of the year.”

First Quarter 2021 Summary of Financial Results:

($ in thousands, except per share amounts)	Quarter Ended March 31,
	2021			2020
Operating income	$	1,046		$	94
Net income	$	1,032		$	38
Net income per share – diluted	$	0.03		$	0.00
(Non-GAAP Financial Measures) (1)
EBITDA	$	1,137		$	184
Adjusted EBITDA	$	1,480		$	259

(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.

First Quarter 2021 Highlights:

• The Company achieved operating income of $1.0 million as compared to an operating income of $0.1 million in the first quarter of 2020.
• Net income increased to $1.0 million, or $0.03 diluted earnings per share, for the first quarter of 2021, as compared to $38,000 or $0.00 diluted earnings per share in the first quarter of 2020.
• EBITDA totaled $1.1 million versus EBITDA of $0.2 million in the first quarter of 2020, while Adjusted EBITDA (excluding non-cash stock-based compensation and severance expense) was $1.5 million compared to $0.3 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $30.9 million as of March 31, 2021, compared to $29.9 million as of December 31, 2020, and cash of $15.9 million.

First Quarter 2021 Conference Call

Management will host a webcast and conference call on Thursday May 13, 2021 at 5:00 pm ET to discuss financial results for the first quarter 2021. Analysts and investors may participate via conference call, using the following dial-in information:

• 1-877-300-8521 (Domestic)
• 1-412-317-6026 (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 May 27, 2021. To access the replay, dial 844-512-2921 (domestic) or 412-317-6671 (international). The replay pin number is 10156281. 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. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (In thousands of US dollars, except share and per share amounts) (unaudited)
		Three Months Ended March 31,
		2021				2020
Revenues:
Services revenue		$	5,030			$	4,088
Asset sales			2,071				156
Total revenues			7,101				4,244
Operating costs and expenses:
Cost of services revenue			1,175				551
Cost of asset sales			820				38
Selling, general and administrative			3,969				3,472
Depreciation and amortization			91				90
Total operating costs and expenses			6,055				4,151
Earnings of equity method investments			—				1
Operating income			1,046				94
Interest and other expense, net			3				(27	)
Income before income tax expense			1,049				67
Income tax expense			17				29
Net income		$	1,032			$	38
Weighted average common shares outstanding – basic			34,788,016				28,751,689
Weighted average common shares outstanding – diluted			37,533,065				30,200,114
Net income per share – basic		$	0.03			$	0.00
Net income per share – diluted		$	0.03			$	0.00

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. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of US dollars, except share amounts)
		March 31, 2021				December 31, 2020
		(unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	15,852			$	23,385
Accounts receivable			2,297				1,496
Current portion of notes receivable, net			2,036				1,338
Inventory – equipment			91				235
Other current assets			447				498
Total current assets			20,723				26,952
Non-current portion of notes receivable, net			1,565				748
Equity method investments			2,402				2,402
Right-of-use assets			830				963
Property and equipment, net			132				130
Intangible assets, net			3,056				3,123
Goodwill			5,585				5,585
Deferred tax assets			4,450				4,402
Other assets			246				250
Total assets		$	38,989			$	44,555
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	7,202			$	13,609
Current portion of lease liabilities			301				380
Total current liabilities			7,503				13,989
Non-current portion of lease liabilities			564				623
Total liabilities			8,067				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 March 31, 2021 and December 31, 2020			6				6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 35,647,477 shares as of March 31, 2021 and 35,281,183 as of December 31, 2020			357				353
Additional paid-in capital			293,343				293,400
Accumulated deficit			(262,784	)			(263,816	)
Total stockholders’ equity			30,922				29,943
Total liabilities and stockholders’ equity		$	38,989			$	44,555

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 March 31,
		2021				2020
Net income		$	1,032			$	38
Add back:
Depreciation and amortization			91				90
Interest and other expense, net			(3	)			27
Income tax expense (benefit)			17				29
EBITDA			1,137				184
Management add back:
Stock based compensation			143				75
West Separation Agreement			200				—
Adjusted EBITDA		$	1,480			$	259

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

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