Heritage Global Inc. Reports 2018 Second Quarter Operating Results

August 6, 2018

SAN DIEGO--(BUSINESS WIRE)--Aug 6, 2018--Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) (“Heritage Global,” “HGI” 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 and six-months ended June 30, 2018 as summarized below.

Second Quarter 2018 Summary of Financial Results:

Total revenues were $6.8 million, compared to the year ago second quarter level of $4.8 million, representing an increase of 43%. The year-over-year growth in total revenues reflects the timing and magnitude of certain asset liquidation transactions and a higher volume of deals for the NLEX division. Services revenue increased 64% to $6.5 million in the second quarter of 2018 from $3.9 million in the second quarter of 2017, while asset sales revenue decreased 59% to $0.3 million in the second quarter of 2018 from $0.8 million in the second quarter of 2017. Gross profit, or total revenue net of costs of revenues, increased 86% to $5.8 million from the year ago second quarter level of $3.1 million, due principally to higher services revenue and improved gross margin on the asset sales, which together, resulted in a $0.7 million, or 39%, year-over-year reduction in the cost of total revenue. During the second quarter, Heritage Global completed a number of successful global online sales, including projects for Pfizer, Amgen, Stion Solar, and ET Solar. Selling, general and administrative expenses were $4.1 million, compared to $3.0 million in the second quarter of 2017. The increase was largely attributable to variable compensation arrangements resulting in higher commissions due to improved performance. Operating income grew more than sixty-fold to $1.6 million from the year ago second quarter level of $27,000. Heritage Global recorded a $0.2 million non-operating gain in the second quarter of 2018 for the fair value adjustment of its contingent consideration from the acquisition of National Loan Exchange Inc. (NLEX), compared to a $0.2 million non-operating charge in the second quarter of 2017. As a result, Heritage Global reported net income of $1.7 million, or $0.06 per share, compared to net loss of approximately $0.2 million, or $0.01 per share, in the second quarter of 2017. The continued financial improvement in Heritage Global’s operations is the result of its strong performance of its asset liquidation business line, coupled with continued operational discipline. Adjusted EBITDA, a commonly used non-GAAP financial measure, was $1.8 million in the second quarter of 2018, compared to $0.2 million in the second quarter of 2017. 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.

Heritage Global Chief Executive Officer, Ross Dove, stated, “Heritage Global’s operating momentum continued in the second quarter as we delivered another period of strong financial performance, resulting in a 86% increase in gross profit compared to the prior year period. The successful execution of our strategies to build the top-line, coupled with our continued cost management initiatives, resulted in higher gross margin and second quarter adjusted EBITDA growth of 979%.

“We continue to deliver added value for Heritage Global’s clients and customers by enhancing the overall collaboration between our business divisions, which are focused on auction services, distressed M&A, patents and trademarks, loan sale advisory and real estate services. This focus continues to be an essential component of our long-term growth strategy for our platform. Notably, the 623% increase in year-to-date operating income is perhaps the best measure of the success we are achieving through this disciplined approach.

“In closing, the significant improvement in our second quarter and year-to-date financial performance reflects our strong commitment to building Heritage Global into a leading provider of diversified and unique global asset solutions and services. As we continue aggressively pursuing the next phase of growth for the Company, we remain focused on actively managing our capital structure to maximize cash flow, while improving top and bottom-line financial performance to remain efficient and competitive. We are confident that this direction will enable us to meet our goal of enhancing long-term shareholder value as we move through the back half of 2018 and beyond.”

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 or minus fair value adjustments of contingent consideration and plus 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. ( )

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-

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