Heritage Global Inc. Reports Full Year 2023 Operating Income of $14.3 Million; Achieves $4.6 Million in Operating Income for Fourth Quarter 2023

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 fourth quarter and year ended December 31, 2023.

Fourth Quarter and Full Year 2023 Summary of Financial Results (unaudited):

($ in thousands, except per share amounts)	Three Months Ended December 31,					Twelve Months Ended December 31,
	2023			2022		2023			2022
Operating income	$	4,555		$	3,147	$	14,319		$	11,120
Net income	$	4,890		$	9,970	$	12,475		$	15,493
Net income per share - diluted	$	0.13		$	0.27	$	0.33		$	0.42
(Non-GAAP Financial Measures) (1)
EBITDA	$	4,696		$	3,283	$	14,833		$	11,656
Adjusted EBITDA	$	4,890		$	3,439	$	15,609		$	12,196

(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, "2023 was the best year in our history, as demonstrated by our ability to achieve full-year 2023 operating income of $14.3 million. During the year, our business continued to capitalize on the macro-economic environment, where heightened economic pressures drove increased volumes in our Financial Asset and Industrial divisions.

"It's been widely reported that consumer debt reached record levels in 2023, and with that, the volume of charged-off credit cards and non-performing loans increased. Accordingly, our Financial Asset division saw impressive momentum during the year, as we continued to successfully leverage our experience and expertise to win new brokerage contracts and specialty lending opportunities. In the third quarter we increased our credit reserve to account for increased risk with specific clients given their declining collection rates. We did not materially increase our credit reserve in the fourth quarter and will continue to maintain a conservative balance sheet to support the long-term growth opportunity of our Financial Asset division.

"In the current economic landscape, with many businesses continuing to scale down their operations, we are seeing increased office and facility closures. These activities drive volumes to the industrial side of our business as companies look to sell their surplus equipment and assets. While our auction business can see variability quarter to quarter, our pipeline remains strong and we expect continued strong auction activity as we move through 2024.

"I am pleased with our team's efforts and execution this year, exemplified by our full-year operating income of $14.3 million. As we look forward to new growth opportunities in 2024, we remain uniquely positioned to capitalize on macro-economic tailwinds as we leverage our extensive industry experience and longstanding relationships to win new opportunities and further penetrate the market," Mr. Dove concluded.

Fourth Quarter 2023 Highlights:

• The Company achieved operating income of $4.6 million for the fourth quarter of 2023, as compared to operating income of $3.1 million in the fourth quarter of 2022.
• EBITDA totaled $4.7 million in the fourth quarter of 2023 versus EBITDA of $3.3 million in the fourth quarter of 2022 and Adjusted EBITDA was $4.9 million compared to $3.4 million in the prior-year quarter.
• Based on the past several years of taxable income and projected operating results for the next five years, the Company determined that it is more likely than not that it will utilize a significant portion of its net operating loss carryforwards and thus released an additional $2.2 million of its valuation allowance against its deferred tax assets, as compared to $7.1 million during the fourth quarter of 2022. As a result, during the fourth quarter of 2023, the Company recognized an income tax benefit of $0.4 million compared to an income tax benefit of $6.8 million a year ago.
• Net income totaled $4.9 million (including a $0.4 million income tax benefit), or $0.13 of diluted earnings per share for the fourth quarter of 2023, as compared to net income of $10.0 million (including a $6.8 million income tax benefit), or $0.27 of diluted earnings per share in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders' equity of $61.1 million as of December 31, 2023, compared to $48.3 million as of December 31, 2022. Net working capital was $11.6 million at the end of the fourth quarter of 2023.
• As of December 31, 2023, the Company held a gross balance of investments in notes receivable of $38.4 million, recorded in both notes receivable and equity method investments.
• The Company repurchased 152,707 shares of its common stock in the fourth quarter of 2023 at an average price per share of $2.62. As of December 31, 2023, the Company has repurchased a total of 396,175 shares of its common stock at an average price per share of $2.01 under its 2022 Repurchase Program.

Fourth Quarter Conference Call

Management will host a webcast and conference call today, Thursday, March 14, 2024, at 5:00 pm ET to discuss financial results for the fourth quarter and year end 2023. Analysts and investors may participate via conference call using the following dial-in information:

• 1-877-423-9813 (Domestic)
• 1-201-689-8573 (International)

In addition, individuals can use this link for telephone access to the call via their web browser. The webcast link is available here and will 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 March 28, 2024. To access the replay, dial 1-844-512-2921 (domestic) or 1-412-317-6671 (international). The replay pin number is 13744488. The 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 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 December 31,								Twelve Months Ended December 31,
		2023				2022				2023				2022
Revenues:
Services revenue		$	9,440			$	7,307			$	39,480			$	23,419
Asset sales			5,844				6,524				21,065				23,495
Total revenues			15,284				13,831				60,545				46,914
Operating costs and expenses:
Cost of services revenue			1,437				939				8,007				4,654
Cost of asset sales			3,041				4,208				12,724				16,256
Selling, general and administrative			6,494				6,419				26,040				21,326
Depreciation and amortization			141				136				514				536
Total operating costs and expenses			11,113				11,702				47,285				42,772
Earnings of equity method investments			384				1,018				1,059				6,978
Operating income			4,555				3,147				14,319				11,120
Interest expense, net			(99	)			(17	)			(324	)			(113	)
Income before income tax (benefit) expense			4,456				3,130				13,995				11,007
Income tax (benefit) expense			(434	)			(6,840	)			1,520				(4,486	)
Net income		$	4,890			$	9,970			$	12,475			$	15,493
Weighted average common shares outstanding - basic			36,706,017				36,023,087				36,677,098				36,016,619
Weighted average common shares outstanding - diluted			37,493,878				37,083,351				37,587,308				37,097,270
Net income per share - basic		$	0.13			$	0.28			$	0.34			$	0.43
Net income per share - diluted		$	0.13			$	0.27			$	0.33			$	0.42

HERITAGE GLOBAL INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of US dollars, except share and per share amounts) (unaudited)
		December 31,
		2023				2022
ASSETS
Current assets:
Cash and cash equivalents		$	12,279			$	12,667
Accounts receivable, net			1,910				988
Current portion of notes receivable, net			6,581				4,505
Inventory - equipment			5,074				4,619
Other current assets			448				1,113
Total current assets			26,292				23,892
Non-current portion of notes receivable, net			10,890				4,245
Equity method investments			21,361				13,973
Right-of-use assets			2,539				2,776
Property and equipment, net			1,705				1,571
Intangible assets, net			3,753				4,144
Goodwill			7,446				7,446
Deferred tax assets			9,115				9,449
Other assets			67				64
Total assets		$	83,168			$	67,560
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities		$	7,237			$	8,924
Payables to sellers			4,975				3,188
Current portion of third party debt			1,733				3,411
Current portion of lease liabilities			789				703
Total current liabilities			14,734				16,226
Non-current portion of third party debt			5,495				871
Non-current portion of lease liabilities			1,859				2,164
Total liabilities			22,088				19,261
Commitments and contingencies
Stockholders' equity:
Preferred stock			6				6
Common stock			372				369
Additional paid-in capital			294,522				293,589
Accumulated deficit			(233,026	)			(245,270	)
Treasury stock			(794	)			(395	)
Total stockholders' equity			61,080				48,299
Total liabilities and stockholders' equity		$	83,168			$	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 December 31,								Twelve Months Ended December 31,
		2023				2022				2023			2022
Net income		$	4,890			$	9,970			$	12,475		$	15,493
Add back:
Depreciation and amortization			141				136				514			536
Interest expense, net			99				17				324			113
Income tax (benefit) expense			(434	)			(6,840	)			1,520			(4,486	)
EBITDA			4,696				3,283				14,833			11,656
Management add back:
Stock based compensation			194				156				776			540
Adjusted EBITDA		$	4,890			$	3,439			$	15,609		$	12,196

Contacts

Investor Relations:
John Nesbett/Jennifer Belodeau
IMS Investor Relations
203/972.9200
[e-mail]