UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-39471 HERITAGE GLOBAL INC. 12625 High Bluff Drive, Suite 305, San Diego, CA 92130 (Address of Principal Executive Offices) (858) 847-0659 ( ...

Heritage Global Inc. (NASDAQ:HGBL) Q1 2023 Earnings Conference Call May 11, 2023 5:00 PM ET Company Participants John Nesbett - IR Ross Dove - CEO Brian Cobb - CFO Conference Call Participants Mark Argento - Lake Street Operator Welcome to the Heritage Global Inc. First Quarter 2023 Earnings Call. [Operator Instructions] I will now turn the call over to your host, John Nesbett, IMS Investor Relations. You may begin. John Nesbett Thank you, and good afternoon, everyone. Before we begin, I'd like to remind ev ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-39471 HERITAGE GLOBAL INC. (Exact name of registrant as specified in its charter) (State or Other Jurisdiction of Incorporation or Organization) WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT O ...

Financial Performance - Total revenues increased to $46.9 million in 2022, up from $25.8 million in 2021, representing an increase of approximately 82%[115] - Gross profit rose to $26.0 million in 2022, compared to $18.4 million in 2021, an increase of approximately $7.6 million or 42%[120] - Operating income for 2022 was $11.1 million, compared to $3.0 million in 2021, marking a significant increase[115] - Net income rose significantly from $3,053 thousand in 2021 to $15,493 thousand in 2022, marking an increase of 408%[127] - EBITDA increased from $3,474 thousand in 2021 to $11,656 thousand in 2022, representing a growth of 236%[127] - Adjusted EBITDA also saw a substantial rise from $4,082 thousand in 2021 to $12,196 thousand in 2022, an increase of 199%[127] Expenses - Selling, general and administrative expenses increased to $21.3 million in 2022, up from $14.8 million in 2021, reflecting a 44% increase[121] - Total selling, general and administrative expense increased by 44% from $14,811 thousand in 2021 to $21,326 thousand in 2022[123] - The total depreciation and amortization expense for both 2022 and 2021 was $0.5 million, primarily related to intangible assets[123] Cash Flow and Assets - Cash provided by operating activities was $6.5 million in 2022, a turnaround from cash used of $2.6 million in 2021, indicating a change of approximately $9.1 million[105] - Current assets increased to $23.9 million at December 31, 2022, compared to $23.3 million at December 31, 2021, primarily due to a $2.3 million increase in notes receivable[95] - Cash and cash equivalents decreased to $12.7 million at December 31, 2022, from $13.6 million at December 31, 2021[104] Liabilities and Equity - Current liabilities rose to $16.2 million at December 31, 2022, up from $14.2 million at December 31, 2021, an increase of $2.0 million[96] - The company had stockholders' equity of $48.3 million at December 31, 2022, compared to $32.6 million at December 31, 2021[101] Future Expectations - The company expects future net cash flows from operating activities to continue as the primary source of cash for ongoing operations[100] - The company expects an adjustment to retained earnings between $0.3 million and $0.4 million due to the adoption of ASU 2016-13 effective January 1, 2023[128] Acquisitions and Credits - The acquisition of American Laboratory Trading in August 2021 was for approximately $5.6 million, with fair value assessments conducted for purchase price allocation[146] - The company recorded a $0.6 million receivable related to the Employee Retention Credit as of December 31, 2022[144] Other Financial Information - The deferred revenue balance as of December 31, 2022, was $0.4 million, primarily related to customer deposits on asset sales[132] - Goodwill is tested for impairment annually on October 1, with a qualitative approach followed by a quantitative analysis if necessary[148] - The company recorded a net deferred tax asset balance of approximately $9.4 million in Q4 2022, indicating a belief that a significant portion of net operating loss carryforwards will be utilized[150] - Stock-based compensation is primarily in the form of options, with fair value calculated using the Black-Scholes model and expensed over the vesting period[151] - As of December 31, 2022, the company had not recorded an allowance for credit losses related to notes receivable outstanding[141]

Heritage Global Inc. (NASDAQ:HGBL) Q4 2022 Earnings Conference Call March 9, 2023 5:00 PM ET Company Participants John Nesbett - IR Ross Dove - CEO Brian Cobb - CFO Conference Call Participants Mark Argento - Lake Street Michael Diana - Maxim Group Operator Thank you for standing by. This is the conference operator. Welcome to the Heritage Global Inc. Fourth Quarter and Year-end 2022 Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. [Operator Ins ...

Financial Data and Key Metrics Changes - The company reported operating income of $3.5 million for Q3 2022, a significant increase from $533,000 in Q3 2021 [8] - Net income was $2.3 million or $0.06 per share, compared to $474,000 or $0.01 per share in Q3 2021 [9] - EBITDA improved to $3.6 million from $638,000 in Q3 2021, with adjusted EBITDA growing to $3.8 million from $740,000 [9][10] - Stockholders' equity increased to $38.3 million as of September 30, 2022, from $32.6 million as of December 31, 2021 [10] Business Line Data and Key Metrics Changes - The Industrial Assets division reported operating income of $3.1 million in Q3 2022, up from $765,000 in Q3 2021, reflecting a substantial increase [8] - The Financial Assets division saw a 249% growth in operating income to $1.6 million compared to $449,000 in Q3 2021 [8] Market Data and Key Metrics Changes - The company experienced a more than 350% increase in asset sales in the Industrial Assets division compared to Q3 2021, with one-third of this growth attributed to the acquisition of American Laboratory Trading [6][8] - Services revenue grew significantly due to increased consumer spending and a rise in charge-off loans available in the market [7] Company Strategy and Development Direction - The company is optimistic about future growth across all five revenue streams, particularly in the Industrial and Financial Assets divisions [13][19] - The auction business has secured new five-year contracts with major clients in the pharmaceutical sector, ensuring revenue growth [14] - The company anticipates growth in the valuation market due to predictions of a recession, which typically increases demand for asset-based loans [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on the anticipated increase in nonperforming loans as COVID-driven aid ends [7] - The company is positioned to meet increased opportunities with a strong balance sheet, including a $10 million untapped credit line [7][10] - Management remains conservative in guidance due to the transactional nature of a significant part of the business, but is bullish on exceeding expectations [23] Other Important Information - The company has repurchased approximately 184,000 shares of common stock for an aggregate cost of $296,000 as of September 30, 2022 [11] Q&A Session Summary Question: Follow-up on guidance for net operating income - Management acknowledged a conservative approach to guidance due to the transactional nature of the business but expressed confidence in exceeding it [23] Question: Size of net operating losses (NOLs) - NOLs are approximately $78 million, with adjustments expected in the next quarter [24] Question: Breakdown of revenue by functional group - Management provided insights on the significant increase in asset sales, attributing one-third to acquisition and over 50% to organic growth [25] Question: Ratio of net operating income from industrials and financials - Management indicated that the contributions from both divisions can fluctuate based on market conditions, with potential for equal participation in revenue generation [30][31] Question: Deployment of the expanded $200 million line of credit - Management indicated that they have deployed $80 million to date and anticipate deploying the new line within 36 months [33] Question: Sourcing and demand for loans in the lending group - Management detailed the niche focus on servicing a limited number of clients in the charge-off loan market, emphasizing their expertise in underwriting [39][40] Question: Impact of interest rates on lending margins - Management confirmed that they negotiated a fixed rate for the new funding facility, which will not increase even if traditional rates rise, potentially improving lending margins [44][45]

Financial Performance - Total revenues for the nine months ended September 30, 2022, were $33.1 million, up 81.5% from $18.3 million in the same period in 2021[143]. - Revenues for the three months ended September 30, 2022, were $12.7 million, a 111.7% increase from $6.0 million in the same period in 2021[140]. - Gross profit for the nine months ended September 30, 2022, was $17.3 million, an increase of approximately $4.2 million or 32% compared to $13.2 million in the same period in 2021[143]. - Gross profit for the three months ended September 30, 2022, was $7.6 million, reflecting an increase of approximately $3.4 million or 80% compared to $4.2 million in the same period in 2021[140]. - Net income for the nine months ended September 30, 2022, was $5.5 million, a 164% increase from $2.1 million in the same period in 2021[136]. - Net income for the three months ended September 30, 2022, was $2.3 million, compared to $474,000 in the same period in 2021[149]. - Adjusted EBITDA for the nine months ended September 30, 2022, was $8.757 million, significantly higher than $2.459 million in the same period in 2021[149]. Assets and Capital - As of September 30, 2022, the company reported working capital of $13.0 million, an increase from $9.1 million as of December 31, 2021[115]. - As of September 30, 2022, current assets increased to $26.5 million from $23.3 million as of December 31, 2021, primarily due to cash generated from operating activities[117]. - Cash and cash equivalents rose to $17.5 million as of September 30, 2022, compared to $13.6 million as of December 31, 2021, marking an increase of approximately $3.9 million[124]. - Stockholders' equity increased to $38.3 million from $32.6 million as of December 31, 2021[122]. Operational Highlights - The company has issued a total of $63.2 million in loans to investors through Heritage Global Capital LLC since its inception in 2019, with the company's portion being $21.5 million[104]. - The acquisition of American Laboratory Trading in 2021 has strengthened the company's service offerings in the biotech and pharma sectors[106]. - The company anticipates increased activity in its Financial Assets Division due to rising delinquency and charge-off rates, as well as expanding volumes of nonperforming consumer loans[93]. - The company plans to expand NLEX's services into the FinTech lenders, peer-to-peer lending, and Buy Now Pay Later sectors, indicating potential for significant growth[103]. - The company has multiple revenue streams across its brokerage, auction services, advisory services, and secured lending services, which are expected to drive growth[97]. - The company aims to leverage its competitive advantages to grow within each service line and across platforms, maintaining high incremental margins and improving earnings predictability[94]. Expenses - Selling, general and administrative expenses for the nine months ended September 30, 2022, were $14.9 million, a 34% increase from $11.1 million in the same period in 2021[144]. - Selling, general and administrative expenses for the three months ended September 30, 2022, were $5.7 million, a 63% increase from $3.5 million in the same period in 2021[141]. - The increase in selling, general and administrative expenses was primarily due to increased compensation and operational expenses related to the acquisition of ALT[144]. - Travel and entertainment expenses increased due to the lift in travel restrictions related to the COVID-19 pandemic[142]. Cash Flow - Cash provided by operating activities was $2.6 million during the nine months ended September 30, 2022, a significant improvement from cash used in operating activities of $4.1 million during the same period in 2021, reflecting a change of approximately $6.7 million[125]. - Cash used in financing activities was approximately $2.6 million during the nine months ended September 30, 2022, compared to cash provided by financing activities of $1.2 million for the same period in 2021[131]. - The company expects to fund operations and debt service obligations for at least 12 months from the date of filing through cash flows from ongoing asset liquidation operations and proceeds from the 2020 Public Offering[119]. Management and Expertise - The company has a strong management team with deep domain expertise, including its President and CEO, who has over thirty years of experience in the auction business[100].

Company Overview - Heritage Global Inc (HGBL) values and monetizes industrial & financial assets through valuation, acquisition, disposition, and lending services[6] - The company operates through two divisions: Industrial Assets and Financial Assets[7] - HGBL facilitates the circular economy by diverting useful industrial assets from landfills and overseeing post-sale account activity of financial assets[8] Financial Performance - The company has a proven track record of profitability and an attractive margin profile[16] - As of June 30, 2022, HGBL had $16.1 million in cash and cash equivalents, $10.5 million in working capital, and $36.0 million in total shareholders' equity[18] - The Annual Return on Capital Employed (ROCE) for H1 2022 was 24%[18] - For the six months ended June 30, 2022, the company's operating income was $4.499 million and net income was $3.223 million, or $0.09 per diluted share[17] - Adjusted EBITDA for the six months ended June 30, 2022, was $4.979 million[17] - The company has $78 million in Net Operating Loss (NOL) carryforwards as of December 31, 2021[16] Growth Drivers - Post-pandemic industrial manufacturing landscape will increase surplus asset flows[13] - Rising consumer spending and accelerating defaults and charge-offs will increase available volume of financial assets to sell[13]

Heritage Global Inc. (NASDAQ:HGBL) Q2 2022 Earnings Conference Call August 10, 2022 5:00 PM ET Company Participants John Nesbett – Investor Relations Ross Dove – Chief Executive Officer Brian Cobb – Chief Financial Officer Conference Call Participants Mark Argento – Lake Street Michael Diana – Maxim Group Operator Good afternoon and welcome to the Heritage Global Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please note, this event is ...

Financial Data and Key Metrics Changes - The company reported net operating income of $875,000 for Q1 2022, a decrease from $1 million in Q1 2021 [8] - Adjusted EBITDA for Q1 2022 was $1.1 million, down from $1.5 million in Q1 2021 [8] - Net income for Q1 2022 was $645,000 or $0.02 per diluted share, compared to $1 million or $0.03 per diluted share in Q1 2021 [8] Business Line Data and Key Metrics Changes - In the industrial assets division, net operating income was $846,000 in Q1 2022, down from $1.3 million in Q1 2021 [7] - The financial assets division saw net operating income of $731,000, a 59% increase from $461,000 in Q1 2021 [7] Market Data and Key Metrics Changes - The company anticipates closing two remaining Huntsville real estate transactions in Q2 or Q3, expected to contribute over $2.5 million in combined net profit [9] - The company has aggregate tax net operating loss carry forwards of approximately $78 million, which could be valuable as it generates positive results [10] Company Strategy and Development Direction - The company is optimistic about growth across all five revenue streams and expects Q2 to be a record quarter [13] - The focus is on capitalizing on anticipated market conditions and increasing demand for both financial and industrial assets [6][13] - A $4 million stock repurchase plan has been instituted, indicating confidence in the company's future [19] Management's Comments on Operating Environment and Future Outlook - Management noted a significant rise in consumer spending, which is expected to lead to increased defaults and charge-offs, benefiting the company's operations [14] - The company is seeing an increase in supply from sellers who are now monetizing surplus assets due to stronger ESG metrics [26][27] - Management expressed confidence that 2022 will be the most profitable year since the company's founding [41] Other Important Information - The balance sheet remains strong with stockholders' equity of $33.4 million as of March 31, 2022, compared to $32.6 million at the end of 2021 [11] - The company has renewed a $100 million partnership line with a New York hedge fund, enhancing its lending capabilities [29] Q&A Session Summary Question: Can you break down the revenue contribution from financial assets versus industrial assets? - Financial assets contributed $746,000 in net operating income, while industrial assets contributed $846,000 for the quarter [22][23] Question: Are you seeing more portfolios come to market? - Management noted a tremendous amount of growth and expects sequential growth for the next couple of years due to rising consumer spending [24] Question: How does the current economic environment affect industrial assets? - An increase in layoffs is producing surplus assets, and companies are now pressured to monetize these assets due to ESG metrics [26][27] Question: What is the company's position regarding capital deployment? - The company is comfortable deploying capital and is underwriting more deals than in the past, indicating a solid position for future opportunities [29][30] Question: Can you provide more details about the St. Louis acquisition? - The St. Louis acquisition involves two facilities with high-end processing equipment, and the company plans to monetize these assets similarly to the Huntsville transactions [36]