Heritage Global, Inc. (NASDAQ: HGBL) reported Q3 EPS of $0.04, in-line with the analyst estimate of $0.04. Revenue for the quarter came in at $7.57 million versus the consensus estimate of $6.31 million.

Third Quarter 2020 Highlights:

• Total revenue of $7.6 million increased 14% from $6.6 million in the prior-year quarter. The year-over-year increase reflected 16% growth in services revenue ($6.1 million versus $5.2 million in the third quarter of 2019), as well as higher asset sales ($1.5 million versus $1.4 million in the prior year).
• Gross profit totaled $5.0 million compared to $5.3 million in the prior-year quarter. The decline reflected timing and activity of asset liquidation transactions, as well as a mix shift between financial assets and industrial assets.
• Operating income of $1.6 million increased 27% from $1.3 million in the third quarter of 2019, with lower selling, general and administrative expense, mostly due to the elimination of costs related to Equity Partners, which was discontinued as of December 31, 2019 and partially offset by slightly lower gross profit and higher compensation expense driven by improved financial performance by the industrial assets division and additional headcount to underpin growth, primarily in Heritage Global Capital.
• Net income increased to $1.3 million, or $0.04 per share, for the third quarter of 2020, was in line with the prior-year quarter.
• At September 30, 2020 the Company had aggregate tax net operating loss carry forwards of approximately $82.4 million ($61.6 million of unrestricted net operating tax losses and approximately $20.8 million of restricted net operating tax losses). Substantially all of the net operating loss carry forwards expire between 2024 and 2037.
• EBITDA totaled $1.7 million versus $1.3 million in the third quarter of 2019, while Adjusted EBITDA (excluding non-cash stock-based compensation expense) was $1.8 million compared to $1.4 million in the prior-year quarter.
• Heritage Global maintains a strong balance sheet, with stockholders’ equity of $16.0 million as of September 30, 2020, compared to $11.8 million as of December 31, 2019, and net cash of $5.7 million. Importantly, the foregoing balance sheet figures exclude the $9.1 million of net proceeds from the Company’s common stock offering that closed on October 6, 2020.
• As of September 30, 2020, the firm maintained an outstanding balance of zero on its $5.0 million credit facility.

Heritage Global Chief Executive Officer Ross Dove commented, “Heritage had strong results for the third quarter of 2020, highlighted by net income totaling $1.3 million consistent with the third quarter of 2019 and 28% year-over-year growth in Adjusted EBITDA, which we achieved despite ongoing macroeconomic and political uncertainty. The results reinforced the Company’s unique and differentiated business model, with robust growth across our industrial assets business. Looking ahead, we believe rising demand for the re-commerce of used and surplus equipment bodes well for sustained near term performance and profitability of our industrial assets segment, while we expect accelerating volumes and revenue from the financial assets side of the business, driven by an expected step up in the release of nonperforming loans into the market in 2021.”

“Stepping back, Heritage Global recently completed two important milestone accomplishments that we believe will meaningfully enhance the Company’s growth prospects and drive long-term shareholder value. First, Heritage Global’s common stock was uplisted to the NASDAQ Stock Market, which enhances our visibility within the investment community, thereby increasing the liquidity of our stock and broadening our institutional shareholder base over time. Second, we completed an underwritten public offering of common stock, raising $9.1 million of net proceeds that will be used to expand the businesses of Heritage Global Capital and Heritage Global Partners.”

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