Heritage Global Inc. Reports Third Quarter 2024 Results

About this update from Heritage Global Inc.

SAN DIEGO --(BUSINESS WIRE)-- 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 [email protected] Source: Heritage Global Inc.

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