Heritage Global Inc. Announces 2020 First Quarter Operating Results

Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) (“Heritage Global,” “HGI” or “the Company”), a diversified financial services company providing asset-based acquisition, disposition, valuation, and lending services, today reported financial results for the first quarter ended March 31, 2020.

Heritage Global Chief Executive Officer Ross Dove stated, “The first quarter was characterized by unprecedented uncertainty and volatility related to the COVID-19 pandemic. First and foremost, the health and safety of our employees, partners, and clients remain our top priority, and we have implemented support measures including working remotely.”

“Turning to our financial results for the quarter, we reported breakeven net income, as both buyers and sellers adjusted to the shifting macroeconomic backdrop. More importantly, we remain well positioned as we have entered into a more challenging economic environment. Our asset liquidation business is highly concentrated in distressed and surplus assets, and we expect that there will be an increased supply of such assets as we move forward. Indeed, leading indicators continue to point to capital asset auction participation, surplus inventories, and nonperforming loan transactions, boding well for our related advisory (NLEX) and financing (Heritage Global Capital) businesses.”

“Heritage Global Capital (HGC), our specialty financing platform providing solutions to small- and medium-sized investors in charged-off and nonperforming asset portfolios and other asset-based classes, recently closed on an $80 million senior secured credit facility with a major New York City-based investment advisor. The agreement establishes a two-year facility to strategically fund loans to purchase charged-off consumer debt portfolios and supplements a previously formed $6 million revolving credit facility with an alternative asset manager focused on asset-based lending transactions. Looking ahead, HGC will serve as an ideal platform to offer funding solutions in a growing but underserved market, and further diversifies and enhances the firm’s earnings power across cycles. To date, HGC has funded $7.5 million in the aggregate, across ten transactions.”

“Finally, we maintain a strong and liquid balance sheet, a favorable debt profile, and an untapped $5.0 million credit facility. Furthermore, we remain focused on controlling capital expenditures and expenses.”

First Quarter 2020 Summary of Financial Results:

First Quarter 2020 Highlights:

• Total revenue of $4.2 million compared to $6.6 million in the prior-year quarter. The year-over-year decline was a function of lower asset sales ($0.2 million versus $2.1 million in the first quarter of 2019), which varies depending on the volume, size and timing of the transactions, and services revenue ($4.1 million versus $4.4 million in the prior year), which decreased as a result of the disposition of Equity Partners, effective January 1, 2020.
• Gross profit totaled $3.7 million versus $4.7 million in the prior-year quarter. Year-over-year comparisons were mostly a function of the volume, size and timing of asset liquidation transactions during the respective quarters.
• Operating income was $0.1 million versus $0.7 million in the first quarter of 2019, with the decline in gross profit partially offset by lower selling, general and administrative expenses as a result of the disposition of Equity Partners.
• Net income was essentially breakeven at $38 thousand, or $0.00 per share, for the first quarter of 2020 compared to $0.6 million, or $0.02 per share, in the prior-year quarter.
• EBITDA totaled $0.2 million versus $0.7 million in the first quarter of 2019, while Adjusted EBITDA (excluding non-cash stock-based compensation expense) was $0.3 million compared to $0.8 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $12.0 million as of March 31, 2020, as compared to $11.8 million at December 31, 2019, and net cash of $2.8 million versus $2.3 million at the end of 2019.

Definitions and Disclosures Regarding non-GAAP Financial Information

Adjusted EBITDA reflects the standard definition of EBITDA (net income/loss plus depreciation and amortization, interest and other expense, and provision for income taxes), plus/minus stock-based compensation. Management believes that the presentation of this non-GAAP financial measure, when considered together with 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 believes that Adjusted EBITDA is a useful supplemental tool to evaluate the underlying operating performance of the Company on an ongoing basis and make operating and strategic decisions. 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. 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 press release which reconciles GAAP reported net income to EBITDA and Adjusted EBITDA for the periods presented herein.

About Heritage Global Inc. (www.heritageglobalinc.com)

Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) is a diversified financial services company providing asset-based acquisition, disposition, valuation, and lending services. Heritage Global focuses on identifying, valuing, acquiring and monetizing underlying tangible and intangible assets across twenty-eight global sectors. The company 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, real estate, 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-

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.

-balance sheets follow-

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 –

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these consolidated financial statements.

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