| [November 06, 2017] |
 |
Heritage Global Inc. Reports 2017 Third 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 third quarter ended
September 30, 2017 as summarized below.
|
|
|
|
|
Quarter Ended
|
|
Nine Months Ended
|
|
($ in thousands, except per share amounts)
|
|
September 30,
|
|
September 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
Services revenue(1)
|
|
$
|
4,231
|
|
|
$
|
3,824
|
|
|
$
|
12,637
|
|
|
$
|
11,718
|
|
|
Asset sales(2)
|
|
|
506
|
|
|
|
4,758
|
|
|
|
1,915
|
|
|
|
6,245
|
|
|
Total revenue
|
|
|
4,737
|
|
|
|
8,582
|
|
|
|
14,552
|
|
|
|
17,963
|
|
|
Gross profit
|
|
|
3,933
|
|
|
|
2,457
|
|
|
|
10,720
|
|
|
|
8,733
|
|
|
Operating income (loss)
|
|
|
316
|
|
|
|
(402
|
)
|
|
|
736
|
|
|
|
(444
|
)
|
|
Net income (loss)
|
|
|
83
|
|
|
|
(371
|
)
|
|
|
138
|
|
|
|
313
|
|
|
Net income (loss) per share - basic and diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
(Non-GAAP Financial Measures) (3)
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
$
|
148
|
|
|
$
|
(283
|
)
|
|
$
|
433
|
|
|
$
|
696
|
|
|
Adjusted EBITDA
|
|
$
|
448
|
|
|
$
|
(312
|
)
|
|
$
|
1,155
|
|
|
$
|
(133
|
)
|
|
(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.
|
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(3)
|
|
Definitions and disclosures regarding non-GAAP financial
information including reconciliations are included on pages 3 and
6 of the press release.
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|
Third Quarter 2017 Summary of Financial Results:
-
Total revenues were $4.7 million in the third quarter of 2017 compared
to $8.6 million during the prior year third quarter. The decrease in
total revenues was due to a $4.3 million decline in asset sales
revenue related almost entirely to the Company's sale of its real
estate inventory during the prior year period.
-
Excluding $4.1 million of asset sales revenue related to the sale of
the Company's real estate inventory, total revenues of $4.7 million in
the third quarter of 2017 increased 4% compared to $4.5 million during
the prior year third quarter, while the cost of total revenues
decreased by 62% to $0.8 million.
-
Gross profit, or total revenues net of costs of revenues, increased
60% to $3.9 million in the third quarter of 2017 from $2.5 million in
the third quarter level of 2016, due principally to the timing and
magnitude of certain asset liquidation transactions.
-
During the third quarter, Heritage Global completed a number of
successful global online sales, including projects for Amgen, Pfizer,
Arena Pharmaceuticals, Channel Technologies Group, V-T Industries, and
Mallinckrodt.
-
Selling, general and administrative expenses increased 27% to $3.5
million in the third quarter of 2017 from $2.8 million in the third
quarter of 2016. The increase in selling, general and administrative
expenses was largely attributable to compensation related items from
higher headcount and variable compensation arrangements related to
financial results.
-
The continued improvement in Heritage Global's operations is the
result of its stronger performance across most of its business lines,
coupled with continued cost management discipline. As a result,
Heritage Global reported operating income of $0.3 million in the third
quarter of 2017, compared to an operating loss of $0.4 million in the
third quarter of 2016.
-
Heritage Global recorded a $0.2 million non-operating loss in the
third quarter of 2017 related to the non-cash fair value adjustment of
its contingent consideration from the acquisition of National Loan
Exchange Inc. (NLEX), compared to a small non-operating gain in the
third quarter of 2016.
-
The Company recorded net income of approximately $0.1 million in the
third quarter of 2017, or $0.00 per share, compared to a net loss of
$0.4 million in the third quarter of 2016, or $0.01 per share.
-
Adjusted EBITDA, a commonly used non-GAAP financial measure, was $0.4
million in the third quarter of 2017, a reversal from the loss of $0.3
million in the third 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 year-to-date and third quarter of 2017 results,
Heritage Global Chief Executive Officer, Ross Dove, stated, "Heritage
Global's operating momentum continued in the third quarter as we
delivered another period of strong financial performance, resulting in a
60% increase in gross profit compared to the prior year period. The
ongoing execution of our strategies to grow our value-driven corporate
and financial asset solutions platform, coupled with our continued cost
management discipline, resulted in significant gross margin improvement
and adjusted EBITDA growth to $1.2 million in the first nine months of
2017.
"HGI remains committed to our plan to strategically grow our portfolio
of global asset solutions by adding complementary capabilities that
serve a broad range of businesses, while creating added value for our
corporate clients and customers. In order to have the financial
flexibility to support our near and long-term growth initiatives, we
remain focused on actively managing our capital structure to maximize
cash flow. In this regard, during the first nine months of 2017 repaid
$0.5 million in related third party debt, while increasing our cash and
cash equivalents by 17% compared to year-end 2016.
"We are pleased with the initial success of our expansion initiatives
and the progress we have made year-to-date in improving the Company's
financial performance and profitability. With a culture rooted in
entrepreneurship and innovation, Heritage Global continues to increase
the collaboration between our business divisions focused on auction
services, investment banking, patents and trademarks, receivables and
real estate services in order to bring a comprehensive suite of
diversified global asset solutions to market. Looking ahead, we expect
the positive operating momentum to continue in the fourth quarter and
remain confident that this direction will enable us to meet our goal of
enhancing long-term 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.
|
HERITAGE GLOBAL INC.
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
(in thousands of US dollars, except share and per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services revenue
|
|
$
|
4,231
|
|
|
$
|
3,824
|
|
|
$
|
12,637
|
|
|
$
|
11,718
|
|
|
Asset sales
|
|
|
506
|
|
|
|
4,758
|
|
|
|
1,915
|
|
|
|
6,245
|
|
|
Total revenues
|
|
|
4,737
|
|
|
|
8,582
|
|
|
|
14,552
|
|
|
|
17,963
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating costs and expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services revenue
|
|
|
522
|
|
|
|
1,882
|
|
|
|
2,291
|
|
|
|
3,751
|
|
|
Cost of asset sales
|
|
|
282
|
|
|
|
4,243
|
|
|
|
1,541
|
|
|
|
5,479
|
|
|
Selling, general and administrative
|
|
|
3,539
|
|
|
|
2,783
|
|
|
|
9,751
|
|
|
|
8,937
|
|
|
Depreciation and amortization
|
|
|
78
|
|
|
|
76
|
|
|
|
233
|
|
|
|
240
|
|
|
Total operating costs and expenses
|
|
|
4,421
|
|
|
|
8,984
|
|
|
|
13,816
|
|
|
|
18,407
|
|
|
Operating income (loss)
|
|
|
316
|
|
|
|
(402
|
)
|
|
|
736
|
|
|
|
(444
|
)
|
|
Fair value adjustment of contingent consideration
|
|
|
(246
|
)
|
|
|
43
|
|
|
|
(536
|
)
|
|
|
900
|
|
|
Interest and other expense, net
|
|
|
3
|
|
|
|
(1
|
)
|
|
|
(44
|
)
|
|
|
(114
|
)
|
|
Income (loss) before income tax expense
|
|
|
73
|
|
|
|
(360
|
)
|
|
|
156
|
|
|
|
342
|
|
|
Income tax (benefit) expense
|
|
|
(10
|
)
|
|
|
11
|
|
|
|
18
|
|
|
|
29
|
|
|
Net income (loss)
|
|
$
|
83
|
|
|
$
|
(371
|
)
|
|
$
|
138
|
|
|
$
|
313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
28,480,148
|
|
|
|
28,432,648
|
|
|
|
28,464,635
|
|
|
|
28,390,221
|
|
|
Weighted average common shares outstanding - diluted
|
|
|
28,481,296
|
|
|
|
28,432,648
|
|
|
|
28,474,997
|
|
|
|
28,399,759
|
|
|
Net income (loss) per share - basic
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
|
Net income (loss) per share - diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
0.01
|
|
The notes contained in our Quarterly Report on Form 10-Q are an integral
part of these consolidated financial statements.
|
|
|
HERITAGE GLOBAL INC.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS
|
|
(In thousands of US dollars, except share and per share amounts)
|
|
(unaudited)
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,959
|
|
|
$
|
2,530
|
|
|
Accounts receivable, (net of allowance for doubtful accounts of $35;
$36 in 2016)
|
|
|
654
|
|
|
|
1,247
|
|
|
Inventory - equipment
|
|
|
142
|
|
|
|
263
|
|
|
Other current assets
|
|
|
370
|
|
|
|
393
|
|
|
Total current assets
|
|
|
4,125
|
|
|
|
4,433
|
|
|
Property and equipment, net
|
|
|
126
|
|
|
|
156
|
|
|
Identifiable intangible assets, net
|
|
|
3,938
|
|
|
|
4,122
|
|
|
Goodwill
|
|
|
6,158
|
|
|
|
6,158
|
|
|
Other assets
|
|
|
273
|
|
|
|
275
|
|
|
Total assets
|
|
$
|
14,620
|
|
|
$
|
15,144
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
6,823
|
|
|
$
|
6,746
|
|
|
Current portion of related party debt
|
|
|
541
|
|
|
|
664
|
|
|
Current portion of contingent consideration
|
|
|
1,637
|
|
|
|
961
|
|
|
Other current liabilities
|
|
|
109
|
|
|
|
199
|
|
|
Total current liabilities
|
|
|
9,110
|
|
|
|
8,570
|
|
|
Non-current portion of related party debt
|
|
|
-
|
|
|
|
348
|
|
|
Non-current portion of contingent consideration
|
|
|
735
|
|
|
|
1,772
|
|
|
Deferred tax liabilities
|
|
|
960
|
|
|
|
960
|
|
|
Total liabilities
|
|
|
10,805
|
|
|
|
11,650
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
|
Preferred stock, $10.00 par value, authorized 10,000,000 shares;
issued and outstanding 569 Class N shares at September 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 September 30, 2017 and
28,470,148 shares at December 31, 2016
|
|
|
285
|
|
|
|
285
|
|
|
Additional paid-in capital
|
|
|
284,336
|
|
|
|
284,149
|
|
|
Accumulated deficit
|
|
|
(280,737
|
)
|
|
|
(280,875
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(75
|
)
|
|
|
(71
|
)
|
|
Total stockholders' equity
|
|
|
3,815
|
|
|
|
3,494
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
14,620
|
|
|
$
|
15,144
|
|
The notes contained in our Quarterly Report on Form 10-Q are an integral
part of these consolidated financial statements.
|
|
|
HERITAGE GLOBAL INC.
|
|
Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures)
|
|
(In thousands of US dollars)
|
|
(unaudited)
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
Net Income
|
|
$
|
83
|
|
|
$
|
(371
|
)
|
|
$
|
138
|
|
|
$
|
313
|
|
|
Add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
78
|
|
|
|
76
|
|
|
|
233
|
|
|
|
240
|
|
|
Interest and other expense, net
|
|
|
(3
|
)
|
|
|
1
|
|
|
|
44
|
|
|
|
114
|
|
|
Income tax (benefit) expense
|
|
|
(10
|
)
|
|
|
11
|
|
|
|
18
|
|
|
|
29
|
|
|
EBITDA
|
|
|
148
|
|
|
|
(283
|
)
|
|
|
433
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management add back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment of contingent consideration
|
|
|
246
|
|
|
|
(43
|
)
|
|
|
536
|
|
|
|
(900
|
)
|
|
Stock based compensation
|
|
|
54
|
|
|
|
14
|
|
|
|
186
|
|
|
|
71
|
|
|
Adjusted EBITDA
|
|
$
|
448
|
|
|
$
|
(312
|
)
|
|
$
|
1,155
|
|
|
$
|
(133
|
)
|
The notes contained in our Quarterly Report on Form 10-Q are an integral
part of these consolidated financial statements.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171106006489/en/
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