Heritage Global, Inc. (NASDAQ:HGBL) Q3 2020 Earnings Conference Call November 9, 2020 5:00 PM ET Company Participants Michael Kim - Investor Relations Ross Dove - Chief Executive Officer Scott West - Chief Financial Officer Conference Call Participants Mark Argento - Lake Street Capital Markets Michael Diana - Maxim Group Mike Shlisky - Colliers Securities John Fichthorn - Dialectic Capital Operator Good afternoon, ladies and gentlemen. And welcome to the Heritage Global Inc Third Quarter 2020 Earnings Conf ...

Impact of COVID-19 - Heritage Global Inc. reported a minor negative impact on performance due to COVID-19, with delays in asset sales[90] - The company expects increased demand for online auctions and valuation services as a result of ongoing social distancing measures[91] Business Performance and Financials - Total revenues for the nine months ended September 30, 2020, were $17.9 million, a decrease of $2.67 million or 13% compared to $20.6 million in 2019[133] - Revenues for the nine months ended September 30, 2020, were $17.9 million, a decrease of approximately 13.1% from $20.6 million in the same period in 2019[139] - Gross profit for the nine months ended September 30, 2020, was $13.2 million, down approximately 6% from $14.0 million in 2019[139] - Net income for the nine months ended September 30, 2020, was $3.34 million, a slight increase of $19, or 1%, from $3.32 million in 2019[133] - Net income for the nine months ended September 30, 2020, was $3.341 million, slightly up from $3.322 million in 2019[145] - Adjusted EBITDA for the nine months ended September 30, 2020, was $3.260 million, down from $3.932 million in 2019, reflecting a decrease of approximately 17%[145] Revenue Streams and Business Model - Heritage Global Inc. has a diversified business model with multiple revenue streams across brokerage, advisory, and secured lending services[103] - The Industrial Assets division charges fees ranging from 15% to 50% depending on the role in the transaction, highlighting revenue potential[111] - The company anticipates growth in auction services through higher-contribution principal deals and increased mergers and acquisitions in manufacturing[112] - The company plans to expand into the FinTech, student loans, and peer-to-peer lending sectors, indicating strategic growth initiatives[108] Cash Flow and Working Capital - As of September 30, 2020, the company had working capital of $0.9 million, an improvement from a working capital deficit of $2.3 million at December 31, 2019[119] - Current assets increased to $11.0 million at September 30, 2020, compared to $6.8 million at December 31, 2019, primarily due to cash flow from operations[119] - Cash and cash equivalents rose to $5.8 million at September 30, 2020, up from $2.7 million at December 31, 2019, an increase of approximately $3.1 million[125] - Cash provided by operating activities was $2.8 million during the nine months ended September 30, 2020, compared to $1.0 million in the same period in 2019, reflecting a $1.8 million increase[126] - The company expects to finance future operations through cash flows from asset liquidation, proceeds from the recent stock offering, and draws on the line of credit as needed[129] Expenses and Cost Management - Selling, general and administrative expenses decreased to $10.5 million in 2020 from $11.6 million in 2019, a reduction of about 9%[140] - The decrease in total selling, general and administrative expenses was largely due to the elimination of Equity Partners compensation costs after their separation from the company[140] - Travel and entertainment expenses saw a substantial decline of 60%, dropping to $234,000 in 2020 from $588,000 in 2019[141] - The depreciation and amortization expense increased to $0.3 million in 2020 from $0.2 million in 2019[142] Strategic Initiatives and Compliance - Management believes that tightening underwriting standards will create more funding opportunities for Heritage Global Capital LLC[93] - The company aims to leverage its Capital Asset Redeployment Enterprise (CARE) software for growth in auction services[112] - Management emphasizes the importance of compliance with consumer protection laws, which may incur substantial costs[113] - The company completed an offering of 5,462,500 shares of common stock in October 2020, resulting in net proceeds of approximately $9.1 million[129] Key Performance Indicators - The company emphasizes EBITDA and Adjusted EBITDA as key performance indicators for assessing operational performance[144] - The company reported a significant increase in HGC compensation, rising 994% to $339,000 in 2020 from $31,000 in 2019[141]

IERITAGE Asset services company specializing in financial and capital asset transactions Investor Presentation August 2020 Forward-Looking Statements This communication includes forward-looking statements based on our current expectations and projections about future events. For these statements, Heritage Global Inc. (the "Company") claims the protection of the safe harbor for forwardlooking statements contained in the Private Securities Litigation Reform Act of 1995. The forward-looking statements containe ...