HGBL Heritage Global Inc

Heritage Global Inc. (NASDAQ: HGBL) (“Heritage Global,” “HG” or “the Company”), an asset services company specializing in financial and industrial asset transactions, today reported financial results for the third quarter and nine months ended September 30, 2024.

Third Quarter and First Nine Months 2024 Summary of Financial Results (unaudited):

 

($ in thousands, except per share amounts)

Three Months Ended

September 30,

Nine Months Ended

September 30,

 

2024

 

 

2023

 

2024

 

 

2023

Operating income

$

1,479

 

$

2,769

$

7,581

 

$

9,764

Net income

$

1,089

 

$

1,977

$

5,385

 

$

7,585

Net income per share – diluted

$

0.03

 

$

0.05

$

0.14

 

$

0.20

 

 

 

 

 

 

 

(Non-GAAP Financial Measures) (1)

 

 

 

 

 

 

EBITDA

$

1,631

 

$

2,901

$

8,021

 

$

10,137

Adjusted EBITDA

$

1,914

 

$

3,076

$

8,822

 

$

10,719

(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.

Third Quarter 2024 Review:

• The Company recorded operating income of $1.5 million for the third quarter of 2024, as compared to operating income of $2.8 million in the third quarter of 2023.
• EBITDA totaled $1.6 million in the third quarter of 2024 versus EBITDA of $2.9 million in the third quarter of 2023, and Adjusted EBITDA was $1.9 million compared to $3.1 million in the prior-year quarter.
• Net income totaled $1.1 million or $0.03 of diluted earnings per share for the third quarter of 2024, compared to net income of $2.0 million or $0.05 of diluted earnings per share in the prior-year quarter.
• The Company strengthened its balance sheet by increasing stockholders’ equity to $66.1 million as of September 30, 2024, compared to $61.1 million as of December 31, 2023, and increased net working capital to $16.2 million at September 30, 2024, compared to $11.6 million at December 31, 2023.
• On September 13, 2024 the Company's Board of Directors approved an amendment to the repurchase program which increased the authorized aggregate amount of common shares the Company may repurchase to an aggregate of $6.0 million in common shares. The Company repurchased 601,449 shares in the open market during the three and nine months ended September 30, 2024. As of September 30, 2024, the Company had approximately $4.1 million in remaining aggregate dollar value of shares that may be purchased under the repurchase program.

Heritage Global Chief Executive Officer Ross Dove commented, “Our third quarter results reflected lower than expected revenue in our industrial segment primarily due to the absence of the larger auctions we typically see. Despite the quarter’s result, our business development efforts were strong as we were selected to manage two prominent bankruptcy cases and added several notable Fortune 100 corporate clients, including one of the top five largest companies by market cap. Additionally, we have been engaged to run an auction project for a preeminent aerospace company slated to take place in 2025. These types of engagements illustrate the strong brand recognition and the excellent reputation our Company has within the industry.”

“The performance in the financial assets side of the business was consistent with our expectations. Consumer spending remains near all-time highs and with this dynamic alongside elevated delinquency rates, we expect the amount of charge-offs available for sale to remain robust. At NLEX, we continue to capture the opportunities presented by the current market landscape to drive growth and continued profitability.

“As we move through the balance of 2024, we are focused on executing on our strategic priorities and delivering continued profitability. We remain confident in Heritage Global’s long-term value proposition and look forward to the opportunities ahead. On the M&A front, I am encouraged by the ongoing increase in potential opportunities and receptivity to our initial inquiries. Our team is well positioned for significant progress as consolidation activity appears to be escalating in the markets we serve.”

Heritage Global Chief Financial Officer Brian Cobb commented, “As previously announced, Heritage Global Capital's largest borrower was placed into a default and non-accrual status in the second quarter of 2024. With our visibility today, the Company does not currently intend to make any significant structural changes to its lending business. While the market for debt buyers is attractive, we will conservatively manage the portfolio to gain a higher concentration of performing loans and to limit the consolidated Company’s potential exposure to lending risk. Concurrently, we plan to utilize our strong cash position, continued profitability, and potential financing capabilities to invest more heavily in our industrial asset division and brokerage segment strategic initiatives, while repurchasing shares opportunistically.”

Third Quarter Conference Call

Management will host a webcast and conference call on Thursday, November 7, 2024, at 5:00 p.m. ET to discuss financial results for the third quarter of 2024. Analysts and investors may participate via conference call, using the following dial-in information:

• 1-800-717-1738 (Domestic)
• 1-646-307-1865 (International)
• Conference ID: 59480

To access the webcast, individuals can use this link. The conference call will also be available in the Investor Relations section of the Company’s website. To listen to a live broadcast, go to the site or click on the webcast link at least 10 minutes prior to the scheduled start time in order to register.

Replay

A replay of the call will be available approximately three hours after the call ends through November 21, 2024. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 1159480. A webcast replay can also be accessed on the Investor Relations section of the Company’s website.

About Heritage Global Inc. (“HG”)

Heritage Global Inc. (NASDAQ: HGBL) values and monetizes industrial & financial assets by providing acquisition, disposition, valuation, and lending services for surplus and distressed assets. This aids in facilitating the circular economy by diverting useful industrial assets from landfills and operating an ethical supply chain by overseeing post-sale account activity of financial assets. Specialties consist of acting as an adviser, in addition to acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, real estate, and charged-off account receivable portfolios through its two business units: Industrial Assets and Financial Assets.

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. 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).

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 collectability of the charged off receivables that secure our loan portfolio, 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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Services revenue

 

$

8,063

 

 

$

9,985

 

 

$

25,527

 

 

$

30,040

 

Asset sales

 

 

2,347

 

 

 

5,566

 

 

 

9,067

 

 

 

15,221

 

Total revenues

 

 

10,410

 

 

 

15,551

 

 

 

34,594

 

 

 

45,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services revenue

 

 

1,735

 

 

 

2,423

 

 

 

4,665

 

 

 

6,570

 

Cost of asset sales

 

 

1,458

 

 

 

3,413

 

 

 

6,140

 

 

 

9,683

 

Selling, general and administrative

 

 

5,686

 

 

 

6,806

 

 

 

18,390

 

 

 

19,546

 

Depreciation and amortization

 

 

152

 

 

 

132

 

 

 

440

 

 

 

373

 

Total operating costs and expenses

 

 

9,031

 

 

 

12,774

 

 

 

29,635

 

 

 

36,172

 

Earnings of equity method investments

 

 

100

 

 

 

(8

)

 

 

2,622

 

 

 

675

 

Operating income

 

 

1,479

 

 

 

2,769

 

 

 

7,581

 

 

 

9,764

 

Interest income (expense), net

 

 

17

 

 

 

(56

)

 

 

(183

)

 

 

(225

)

Income before income tax expense

 

 

1,496

 

 

 

2,713

 

 

 

7,398

 

 

 

9,539

 

Income tax expense

 

 

407

 

 

 

736

 

 

 

2,013

 

 

 

1,954

 

Net income

 

$

1,089

 

 

$

1,977

 

 

$

5,385

 

 

$

7,585

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – basic

 

 

36,576,931

 

 

 

36,742,018

 

 

 

36,641,820

 

 

 

36,675,838

 

Weighted average common shares outstanding – diluted

 

 

37,189,029

 

 

 

37,647,321

 

 

 

37,292,200

 

 

 

37,605,363

 

Net income per share – basic

 

$

0.03

 

 

$

0.05

 

 

$

0.15

 

 

$

0.21

 

Net income per share – diluted

 

$

0.03

 

 

$

0.05

 

 

$

0.14

 

 

$

0.20

 

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

September 30,

2024

 

 

December 31,

2023

 

ASSETS

 

(unaudited)

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

26,571

 

 

$

12,279

 

Accounts receivable (net of allowance for credit losses of $130 in 2024 and $132 in 2023)

 

 

877

 

 

 

1,910

 

Current portion of notes receivable (net of allowance for credit losses of $422 in 2024 and $650 in 2023)

 

 

3,959

 

 

 

6,581

 

Inventory – equipment

 

 

4,721

 

 

 

5,074

 

Other current assets

 

 

833

 

 

 

448

 

Total current assets

 

 

36,961

 

 

 

26,292

 

Non-current portion of notes receivable, net

 

 

7,337

 

 

 

10,890

 

Equity method investments

 

 

21,447

 

 

 

21,361

 

Right-of-use assets

 

 

2,381

 

 

 

2,539

 

Property and equipment, net

 

 

1,692

 

 

 

1,705

 

Intangible assets, net

 

 

3,460

 

 

 

3,753

 

Goodwill

 

 

7,446

 

 

 

7,446

 

Deferred tax assets

 

 

7,740

 

 

 

9,115

 

Other assets

 

 

64

 

 

 

67

 

Total assets

 

$

88,528

 

 

$

83,168

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

6,268

 

 

$

7,237

 

Payables to sellers

 

 

13,125

 

 

 

4,975

 

Current portion of third party debt

 

 

525

 

 

 

1,733

 

Current portion of lease liabilities

 

 

802

 

 

 

789

 

Total current liabilities

 

 

20,720

 

 

 

14,734

 

Non-current portion of third party debt

 

 

—

 

 

 

5,495

 

Non-current portion of lease liabilities

 

 

1,681

 

 

 

1,859

 

Total liabilities

 

 

22,401

 

 

 

22,088

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 563 of Series N as of September 30, 2024 and December 31, 2023; with liquidation preference over common stockholders equivalent to $1,000 per share

 

 

6

 

 

 

6

 

Common stock, $0.01 par value, authorized 300,000,000 shares; issued 37,341,185 and 37,157,616 shares as of September 30, 2024 and December 31, 2023, respectively; and outstanding 36,343,561 and 36,761,441 shares as of September 30, 2024 and December 31, 2023, respectively

 

 

373

 

 

 

372

 

Additional paid-in capital

 

 

295,241

 

 

 

294,522

 

Accumulated deficit

 

 

(227,641

)

 

 

(233,026

)

Treasury stock at cost, 997,624 and 396,175 shares as of September 30, 2024 and December 31, 2023, respectively

 

 

(1,852

)

 

 

(794

)

Total stockholders’ equity

 

 

66,127

 

 

 

61,080

 

Total liabilities and stockholders’ equity

 

$

88,528

 

 

$

83,168

 

– 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,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Net income

 

$

1,089

 

 

$

1,977

 

 

$

5,385

 

 

$

7,585

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

152

 

 

 

132

 

 

 

440

 

 

 

373

 

Interest expense, net

 

 

(17

)

 

 

56

 

 

 

183

 

 

 

225

 

Income tax expense

 

 

407

 

 

 

736

 

 

 

2,013

 

 

 

1,954

 

EBITDA

 

 

1,631

 

 

 

2,901

 

 

 

8,021

 

 

 

10,137

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management add back:

 

 

 

 

 

 

 

 

 

 

 

 

Stock based compensation

 

 

283

 

 

 

175

 

 

801

 

 

582

 

Adjusted EBITDA

 

$

1,914

 

 

$

3,076

 

 

$

8,822

 

 

$

10,719

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20241107487059/en/

Investor Relations: John Nesbett/Jennifer Belodeau IMS Investor Relations 203/972.9200 InvestorRelations@hginc.com