[August 09, 2017] |
|
Heritage Global Inc. Reports 2017 Second Quarter Operating Results
Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) ("Heritage Global," "HGI (News - Alert)"
or "the Company"), a value-driven, innovative leader in corporate and
financial asset liquidation transactions, valuations and advisory
services, today reported financial results for the second quarter ended
June 30, 2017 as summarized below.
|
|
|
|
|
($ in thousands, except per share amounts)
|
|
Quarter Ended June 30,
|
|
Six Months Ended June 30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenue
|
|
|
|
|
|
|
|
|
|
Services revenue(1)
|
|
$
|
3,945
|
|
|
$
|
3,702
|
|
|
$
|
8,406
|
|
|
$
|
7,894
|
|
Asset sales(2)
|
|
|
837
|
|
|
|
259
|
|
|
|
1,409
|
|
|
|
1,487
|
|
Total revenue
|
|
|
4,782
|
|
|
|
3,961
|
|
|
|
9,815
|
|
|
|
9,381
|
|
Gross profit
|
|
|
3,106
|
|
|
|
2,911
|
|
|
|
6,787
|
|
|
|
6,276
|
|
Operating income (loss)
|
|
|
27
|
|
|
|
(234
|
)
|
|
|
420
|
|
|
|
(42
|
)
|
Net (loss) income
|
|
|
(199
|
)
|
|
|
624
|
|
|
|
55
|
|
|
|
684
|
|
Net (loss) income per share - basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
(Non-GAAP Financial Measures) (3)
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
(75
|
)
|
|
$
|
772
|
|
|
$
|
285
|
|
|
$
|
979
|
|
Adjusted EBITDA
|
|
$
|
166
|
|
|
$
|
(132
|
)
|
|
|
707
|
|
|
$
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
assets that it had purchased.
|
(3)
|
|
Definitions and disclosures regarding non-GAAP financial
information including reconciliations are included on pages 3 and
7 of the press release.
|
|
|
|
Second Quarter 2017 Summary of Financial Results:
-
Total revenues were $4.8 million, compared to $4.0 million in the
second quarter of 2016, representing an increase of 21%. The increase
was due to the Company executing a greater number of principal
transactions in the second quarter of 2017, with asset sales revenue
increasing by 223% to $0.8 million in the second quarter of 2017 from
$0.3 million in the second quarter of 2016. Service revenue increased
7% to $3.9 million in the second quarter of 2017 from $3.7 million in
the second quarter of 2016.
-
Gross profit, or total revenues net of costs of revenues, increased 7%
to $3.1 million in the second quarter of 2017 from $2.9 million in the
second quarter level of 2016, due principally to the timing and
magnitude of certain asset liquidation transactions.
-
During the second quarter, Heritage Global completed a number of
successful global online sales, including projects for Amgen, Pfizer,
Textron Systems, Aerojet Rocketdyne, First Solar, SunEdison (News - Alert), Sun Power
and Tellabs.
-
Selling, general and administrative expenses decreased 2% to $3.0
million in the second quarter of 2017 from $3.1 million in the second
quarter of 2016.
-
The continued improvement in Heritage Global's operations is the
result of its improved performance across all of its business lines
(asset liquidation, valuation and advisory services), coupled with
continued cost management discipline. As a result, Heritage Global
reported positive operating income in the second quarter of 2017,
compared to an operating loss of $0.2 million in the second quarter of
2016.
-
Heritage Global recorded a $0.2 million non-operating loss in the
second quarter related of 2017 to the non-cash fair value adjustment
of its contingent consideration from the acquisition of National Loan
Exchange Inc. (NLEX), compared to a $0.9 million non-operating gain in
the second quarter of 2016. As a result, the Company recorded a net
loss of $0.2 million in the second quarter of 2017, or $0.01 per
share, compared to net income of $0.6 million in the second quarter of
2016, or $0.02 per share.
-
Adjusted EBITDA, a commonly used non-GAAP financial measure, was $0.2
million in the second quarter of 2017, a reversal from the loss of
$0.1 million in the second quarter of 2016. Adjusted EBITDA is used 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.
Commenting on the first half of 2017 and second quarter of 2017 results,
Heritage Global Chief Executive Officer, Ross Dove, stated, "Our
value-driven corporate and financial asset solutions platform continued
to boost results on behalf of our growing base of global clients, as
reflected by the 21% increase in total second quarter revenues.
Importantly, solid year-to-date performance across all Heritage Global
asset liquidation, valuation and advisory business divisions, coupled
with our continued cost management, resulted in significant gross margin
improvement and adjusted EBITDA growth of 295% in the first half of
2017."
"In addition, during the second quarter we continued to pursue our
strategy of further building our diversified global corporate and
financial asset solutions platform by advancing our business development
efforts. In this regard, in late May we promoted Michael Aho to the
newly created position of National Sales Manager, responsible for
overseeing all business development and sales initiatives across the
United States for Heritage Global's asset valuation, appraisal and
advisory services division. With his deep industry knowledge and
consistent track record of generating strong sales performance, we
believe Michael is the ideal person to support the growth and
development of Heritage Global's North American client base."
"In closing, we are very pleased with the initial success of our
profitability and expansion initiatives and the progress we have made
year-to-date in improving the Company's operations and financial
performance. Looking ahead, we expect the positive operating momentum
will continue into the second half of the year. We remain focused on
aggressively pursuing the next phase of growth for the Company and are
confident that this direction will enable us to meet our goal of
enhancing long-term shareholder value as we move through 2017 and
beyond."
Subsequent Event
-
On and effective as of August 7, 2017, Heritage Global's Board of
Directors appointed Emmett DeMoss to serve as a Class III director.
Mr. DeMoss graduated from Princeton University, served as a U.S.
Marine Corps pilot and earned his MBA from Stanford University. He
worked in the business sector as a Corporate Finance Officer for Dean
Witter and for Hambrecht & Quist, where he managed the initial public
offerings ("IPO") of several companies. He later served as Chief
Operating Officer of Grubb & Ellis ("G&E"), a commercial real estate
brokerage and advisory firm, where he helped grow the business to $350
million in annual revenues and led the reverse IPO of the Company. Mr.
DeMoss has extensive executive leadership experience with growing
businesses and was the founder director and senior officer of Rackwise
and Real Bid, the first on-line Company to offer indicative bidding
for commercial real estate, which eventually merged with CoStar
(Nasdaq: CSGP). He also held positions as a director and senior
officer of Docutel.
-
HGI's Board believes Mr. DeMoss' unique perspective and operational
experience will be valuable in guiding HGI's executive management team.
Mr. Dove noted, "We are pleased to announce the appointment of Emmett
DeMoss to HGI's Board of Directors. Emmett is a proven executive who
brings outstanding leadership and entrepreneurial skills to our Board as
well as a record of success in efficiently scaling real-estate auction
and financial services companies to a position of market leadership. I
am confident he will make meaningful contributions as we continue to
execute our strategies aimed at continued growth and expansion."
Commenting on his Board appointment, Mr. DeMoss stated, "I am honored to
be elected to serve on the Company's Board of Directors. With a
diversified offering of global corporate and financial asset solutions,
Heritage Global is well positioned to continue delivering value to its
corporate clients, customers and partners and has strong prospects for
long-term growth. I look forward to working with Ross, the Board and
HGI's executive management team to build on their success and to advance
the Company's goals for near and long-term growth and the ongoing
enhancement of shareholder value."
Definitions and Disclosures Regarding non-GAAP Financial Information
Adjusted EBITDA reflects the standard definition of EBITDA (net income
plus depreciation and amortization, interest and other expense, and
provision for income taxes), adjusted further to eliminate the effects
of fair value adjustments of contingent consideration and stock-based
compensation. Management believes that the presentation of this non-GAAP
financial measure, when considered together with the 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 uses Adjusted EBITDA to make operating and
strategic decisions and to evaluate the Company's performance. 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. Management
believes that Adjusted EBITDA is a useful supplemental tool to evaluate
the underlying operating performance of the Company on an ongoing basis.
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 news announcement
which reconciles GAAP reported net income to Adjusted EBITDA for the
periods presented herein.
About Heritage Global Inc. (www.heritageglobalinc.com)
Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) is a value-driven,
innovative leader in corporate and financial asset liquidation
transactions, valuations and advisory services. Heritage Global focuses
on identifying, valuing, acquiring and monetizing underlying tangible
and intangible assets in twenty-eight global manufacturing and
technology sectors. Heritage Global 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. 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.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands of US dollars, except share and per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services revenue
|
|
$
|
3,945
|
|
|
$
|
3,702
|
|
|
$
|
8,406
|
|
|
$
|
7,894
|
|
Asset sales
|
|
|
837
|
|
|
|
259
|
|
|
|
1,409
|
|
|
|
1,487
|
|
Total revenues
|
|
|
4,782
|
|
|
|
3,961
|
|
|
|
9,815
|
|
|
|
9,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services revenue
|
|
|
710
|
|
|
|
866
|
|
|
|
1,769
|
|
|
|
1,869
|
|
Cost of asset sales
|
|
|
966
|
|
|
|
184
|
|
|
|
1,259
|
|
|
|
1,236
|
|
Selling, general and administrative
|
|
|
3,002
|
|
|
|
3,064
|
|
|
|
6,212
|
|
|
|
6,154
|
|
Depreciation and amortization
|
|
|
77
|
|
|
|
81
|
|
|
|
155
|
|
|
|
164
|
|
Total operating costs and expenses
|
|
|
4,755
|
|
|
|
4,195
|
|
|
|
9,395
|
|
|
|
9,423
|
|
Operating income (loss)
|
|
|
27
|
|
|
|
(234
|
)
|
|
|
420
|
|
|
|
(42
|
)
|
Fair value adjustment of contingent consideration
|
|
|
(179
|
)
|
|
|
925
|
|
|
|
(290
|
)
|
|
|
857
|
|
Interest and other expense, net
|
|
|
(32
|
)
|
|
|
(65
|
)
|
|
|
(47
|
)
|
|
|
(113
|
)
|
(Loss) income before income tax expense
|
|
|
(184
|
)
|
|
|
626
|
|
|
|
83
|
|
|
|
702
|
|
Income tax expense
|
|
|
15
|
|
|
|
2
|
|
|
|
28
|
|
|
|
18
|
|
Net (loss) income
|
|
$
|
(199
|
)
|
|
$
|
624
|
|
|
$
|
55
|
|
|
$
|
684
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
28,480,148
|
|
|
|
28,418,582
|
|
|
|
28,456,750
|
|
|
|
28,368,774
|
|
Weighted average common shares outstanding - diluted
|
|
|
28,480,148
|
|
|
|
28,431,406
|
|
|
|
28,472,910
|
|
|
|
28,381,278
|
|
Net (loss) income per share - basic
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
0.00
|
|
|
$
|
0.02
|
|
Net (loss) income per share - diluted
|
|
$
|
(0.01
|
)
|
|
$
|
0.02
|
|
|
$
|
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.
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
(In thousands of US dollars, except share and per share amounts)
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
|
December 31, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,600
|
|
|
$
|
2,530
|
|
Accounts receivable, net
|
|
|
1,144
|
|
|
|
1,247
|
|
Inventory - equipment
|
|
|
264
|
|
|
|
263
|
|
Other current assets
|
|
|
366
|
|
|
|
393
|
|
Total current assets
|
|
|
4,374
|
|
|
|
4,433
|
|
Property and equipment, net
|
|
|
124
|
|
|
|
156
|
|
Identifiable intangible assets, net
|
|
|
3,999
|
|
|
|
4,122
|
|
Goodwill
|
|
|
6,158
|
|
|
|
6,158
|
|
Other assets
|
|
|
309
|
|
|
|
275
|
|
Total assets
|
|
$
|
14,964
|
|
|
$
|
15,144
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
6,941
|
|
|
$
|
6,746
|
|
Current portion of related party debt
|
|
|
496
|
|
|
|
664
|
|
Current portion of contingent consideration
|
|
|
465
|
|
|
|
961
|
|
Other current liabilities
|
|
|
145
|
|
|
|
199
|
|
Total current liabilities
|
|
|
8,047
|
|
|
|
8,570
|
|
Non-current portion of related party debt
|
|
|
120
|
|
|
|
348
|
|
Non-current portion of contingent consideration
|
|
|
2,158
|
|
|
|
1,772
|
|
Deferred tax liabilities
|
|
|
960
|
|
|
|
960
|
|
Total liabilities
|
|
|
11,285
|
|
|
|
11,650
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Preferred stock, $10.00 par value, authorized 10,000,000 shares;
issued and
outstanding 569 Class N shares at June 30, 2017 and December 31,
2016
|
|
|
6
|
|
|
|
6
|
|
Common stock, $0.01 par value, authorized 300,000,000 shares; issued
and outstanding 28,480,148 shares at June 30, 2017 and
28,470,148 shares at December 31, 2016
|
|
|
285
|
|
|
|
285
|
|
Additional paid-in capital
|
|
|
284,282
|
|
|
|
284,149
|
|
Accumulated deficit
|
|
|
(280,820
|
)
|
|
|
(280,875
|
)
|
Accumulated other comprehensive loss
|
|
|
(74
|
)
|
|
|
(71
|
)
|
Total stockholders' equity
|
|
|
3,679
|
|
|
|
3,494
|
|
Total liabilities and stockholders' equity
|
|
$
|
14,964
|
|
|
$
|
15,144
|
|
|
|
|
|
|
|
|
|
|
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 June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net Income
|
|
$
|
(199
|
)
|
|
$
|
624
|
|
|
$
|
55
|
|
|
$
|
684
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
77
|
|
|
|
81
|
|
|
|
155
|
|
|
|
164
|
|
Interest and other expense, net
|
|
|
32
|
|
|
|
65
|
|
|
|
47
|
|
|
|
113
|
|
Income tax expense
|
|
|
15
|
|
|
|
2
|
|
|
|
28
|
|
|
|
18
|
|
EBITDA
|
|
|
(75
|
)
|
|
|
772
|
|
|
|
285
|
|
|
|
979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment of contingent consideration
|
|
|
179
|
|
|
|
(925
|
)
|
|
|
290
|
|
|
|
(857
|
)
|
Stock based compensation
|
|
|
62
|
|
|
|
21
|
|
|
|
132
|
|
|
|
57
|
|
Adjusted EBITDA
|
|
$
|
166
|
|
|
$
|
(132
|
)
|
|
$
|
707
|
|
|
$
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179
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The notes contained in our Quarterly Report on Form 10-Q are an
integral part of these consolidated financial statements.
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View source version on businesswire.com: http://www.businesswire.com/news/home/20170809006144/en/
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