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 first quarter ended March 31, 2023.
First Quarter 2023 Summary of Financial Results:
($ in thousands, except per share
amounts)
Three Months Ended
March 31,
2023
2022
Operating income
$
3,894
$
875
Net income
$
2,829
$
645
Net income per share – diluted
$
0.08
$
0.02
(Non-GAAP Financial Measures) (1)
EBITDA
$
4,014
$
1,008
Adjusted EBITDA
$
4,193
$
1,114
(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.
Heritage Global Chief Executive Officer Ross Dove commented, “As
expected, 2023 is off to an exceptional start, demonstrated by our
achievement of a record $3.9 million in net operating income in the
first quarter, which soundly surpasses our previous quarterly NOI
milestone of $3.6 million, reported in the second quarter of 2022.
We are benefiting from economic tailwinds in both of our divisions,
and from our focus on continuing to execute to maximize the
opportunities we are seeing in the marketplace.
“It is important to note that we are seeing growth across both
our Financial Assets and Industrial Assets divisions, and all four
of our operating segments are making significant contributions to
our overall profitability. In fact, both sides of our business
posted more than 200% growth in divisional operating income for the
first quarter.
“As previously mentioned, the current economic landscape is
proving favorable for our growth. As consumers continue to increase
spending post-Covid, resulting in increased debt on credit cards
and loan balances, consumer debt has been climbing, with subsequent
increases in the amount of charged-off credit cards and loans
materializing. Based on economic indicators, we believe that this
environment will continue for some time, positioning our NLEX
brokerage and HGC lending businesses to continue to win contracts
and benefit from increasing volumes of non-performing loans and
credit card accounts. Likewise, as businesses downsize staff and
close down operating facilities, our Industrial Assets division is
a partner of choice in assisting the responsible disposal or
repurposing of surplus equipment and assets. Similar to the lag in
loan charge offs, there tends to be a delay from the time a company
announces layoffs or closures to the time their assets are
decommissioned and auctioned. With our visibility today, we believe
that we will see significant activity in our industrial auction
division over the next eighteen months.
“As we move through 2023, we expect to build upon the momentum
demonstrated in the first quarter, leading to exciting prospects
for our Company. We look forward to leveraging our proven business
model, longstanding customer and client relationships, and
promising economic tailwinds to drive continued growth and
profitability,” Mr. Dove concluded.
First Quarter 2023 Highlights:
- The Company achieved operating income of $3.9 million for the
first quarter of 2023, as compared to operating income of $0.9
million in the first quarter of 2022. The significant growth in net
operating income was driven by strong performance in both
divisions.
- Net income totaled $2.8 million, or $0.08 diluted earnings per
share for the first quarter of 2023, as compared to net income of
$0.6 million, or $0.02 diluted earnings per share in the prior-year
quarter.
- EBITDA totaled $4.0 million in the first quarter of 2023 versus
EBITDA of $1.0 million in the first quarter of 2022 and Adjusted
EBITDA was $4.2 million compared to $1.1 million in the prior-year
quarter.
- Heritage Global maintains a strong balance sheet, with
stockholders’ equity of $51.2 million as of March 31, 2023,
compared to $48.3 million as of December 31, 2022. Net working
capital was $8.6 million at the end of the first quarter.
- Additionally, our total balance related to investments in loans
to buyers of charged-off and nonperforming receivable portfolios
was $28.4 million as of March 31, 2023, of which $16.0 million is
classified as notes receivable and $12.4 million is classified as
equity method investments. As of December 31, 2022 and March 31,
2022, our total balance related to investments in loans was $21.7
million and $7.6 million, respectively.
First Quarter Conference Call
Management will host a webcast and conference call today,
Thursday, May 11, 2023, at 5:00 pm ET to discuss financial results
for first quarter 2023. Analysts and investors may participate via
conference call using the following dial-in information:
- 1-888-999-3182 (Domestic)
- 1-848-280-6330 (International)
In addition, individuals can use this link for telephone access
to the call via their web browser. 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 at least 10
minutes prior to the scheduled start time in order to register.
Replay
A replay of the call will be available on the Company’s website
approximately three hours after the call ends through May 25, 2023.
To access the replay, dial 1-844-512-2921 (domestic) or
1-412-317-6671(international). The replay pin number is 0151935.
The replay can also be accessed on the Investor Relations section
of the Company’s website.
About Heritage Global Inc.
Heritage Global Inc. (“HG”) 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 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,
2023
2022
Revenues:
Services revenue
$
10,245
$
4,168
Asset sales
6,367
5,189
Total revenues
16,612
9,357
Operating costs and expenses:
Cost of services revenue
2,340
754
Cost of asset sales
4,335
3,402
Selling, general and administrative
6,300
4,275
Depreciation and amortization
120
133
Total operating costs and expenses
13,095
8,564
Earnings of equity method investments
377
82
Operating income
3,894
875
Interest expense, net
(68
)
(38
)
Income before income tax expense
3,826
837
Income tax expense
997
192
Net income
$
2,829
$
645
Weighted average common shares outstanding
– basic
36,005,150
36,003,709
Weighted average common shares outstanding
– diluted
37,334,459
36,749,198
Net income per share – basic
$
0.08
$
0.02
Net income per share – diluted
$
0.08
$
0.02
HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands of US dollars,
except share and per share amounts)
March 31, 2023
December 31, 2022
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$
15,733
$
12,667
Accounts receivable, net
1,300
988
Current portion of notes receivable,
net
8,506
4,505
Inventory – equipment
3,492
4,619
Other current assets
1,129
1,113
Total current assets
30,160
23,892
Non-current portion of notes receivable
held to maturity, net
7,525
4,245
Equity method investments
13,326
13,973
Right-of-use assets
2,617
2,776
Property and equipment, net
1,638
1,571
Intangible assets, net
4,046
4,144
Goodwill
7,446
7,446
Deferred tax assets
8,717
9,449
Other assets
74
64
Total assets
$
75,549
$
67,560
LIABILITIES AND STOCKHOLDERS’
EQUITY
Current liabilities:
Accounts payable and accrued
liabilities
$
7,990
$
8,924
Payables to sellers
8,333
3,188
Current portion of third party debt
4,531
3,411
Current portion of lease liabilities
681
703
Total current liabilities
21,535
16,226
Non-current portion of third party
debt
748
871
Non-current portion of lease
liabilities
2,033
2,164
Total liabilities
24,316
19,261
Stockholders’ equity:
Preferred stock, $10.00 par value,
authorized 10,000,000 shares; issued and outstanding 565 shares of
Series N as of March 31, 2023 and December 31, 2022; 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 37,097,960 and 36,932,177 shares as of
March 31, 2023 and December 31, 2022, respectively; and outstanding
36,854,492 and 36,688,709 shares as March 31, 2023 and December 31,
2022, respectively
371
369
Additional paid-in capital
293,923
293,589
Accumulated deficit
(242,672
)
(245,270
)
Treasury stock at cost, 243,468 shares as
of March 31, 2023 and December 31, 2022
(395
)
(395
)
Total stockholders’ equity
51,233
48,299
Total liabilities and stockholders’
equity
$
75,549
$
67,560
– 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,
2023
2022
Net income
$
2,829
$
645
Add back:
Depreciation and amortization
120
133
Interest expense, net
68
38
Income tax expense
997
192
EBITDA
4,014
1,008
Management add back:
Stock based compensation
179
106
Adjusted EBITDA
$
4,193
$
1,114
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230511005816/en/
Investor Relations: John Nesbett/Jennifer Belodeau IMS
Investor Relations 203/972.9200 InvestorRelations@hginc.com
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