acquisition/disposition/valuation/lending services for ... · lending services for surplus and...
TRANSCRIPT
Investor PresentationDecember 2019
Acquisition/disposition/valuation/lending services for
surplus and distressed assets
2 Heritage Global Inc. | www.hginc.com
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 presentation.
For more details on factors that could affect these expectations, please see our filings with the Securities and
Exchange Commission.
3 Heritage Global Inc. | www.hginc.com
Company Overview
Heritage Global Inc. is a diversified financial services company providing acquisition, disposition, valuation, and
lending services for surplus and distressed assets.
$5 Billion
Asset Sales
$10 Billion
Assets Valued
500+
Businesses Sold
10
Offices Serving
Clients Globally
M&A
SPECIAL
SITUATIONS/
DISTRESSED
Charged-Off
Portfolios
Auction
Services
ASSET
ADVISORYValuations
Intellectual
Property
ADVISORY/
MONETIZATIONDistressed
Real Estate
Note: figures based on original costs/face values and include predecessor firms of current management team.
4 Heritage Global Inc. | www.hginc.com
Representative Clients
5 Heritage Global Inc. | www.hginc.com
Value Creation – Investment Highlights
Competitive
Advantages
Sustainable
Growth
Financial
Performance
Shareholder
Value
Global
Platform
• OTCQB: HGBL
• CSE: HGP
Tickers
• $0.90
Price
• $26 Million
Market Cap
MARKET DATA1 LTM FINANCIAL TRENDS2
• $26.5 Million
Revenue
• $4.7 Million
Adjusted EBITDA
• $3.7 Million
Net Income
• $0.12
EPS
1 As of 11/25/19. 2 Through 3Q19 (9/30/19).
6 Heritage Global Inc. | www.hginc.com
Capital Assets Financial Services Proprietary Trading
Domain
Expertise
* Deal sourcing
* Relationships
* Execution capabilities
* Track records
Platforms
* Diversification
* Integrated services
offering/turnkey solution
provider
* Global scale/infrastructure
* Significant player across
underserved markets
Durability
Countercyclical
* Auction volumes/supply
* Distressed M&A
* NPAs
Pro-cyclical
* Corporate auction market
* Principal deals
* Healthy M&A
Competitive Advantages
7 Heritage Global Inc. | www.hginc.com
Leadership Team
Ross Dove began his career over
thirty years ago, joining his father and
grandfather at a small proud family
auction house in San Francisco.
During his tenure, he pioneered
countless advances and industry firsts,
as the firm he joined eventually
climbed to become the world’s largest
and most respected industrial and
commercial asset services company.
His success has been widely
chronicled in major publications,
including Fortune, Forbes, the Wall
Street Journal, Business Week, and
the Economist, among many others.
Ross Dove
Chief Executive Officer
Kirk Dove is co-founder of Heritage
Global Partners and previously served
as HGP’s Managing Partner. Kirk Dove
brings over 30 years of experience to
his role. Kirk and his brother Ross have
managed more than 4,000 industrial
auctions in 30 countries throughout
their respective careers. Kirk has been
instrumental in further expanding and
diversifying HGP’s suite of asset
liquidation, valuation and advisory
services as well as forging exclusive
alliances and strategic partnerships
with other auctioneering firms.
Kirk Dove
Chief Operating Officer
Scott West has over 25 years of multi-
national executive financial accounting
and business management experience
serving various public and private
equity funded companies, including
Fortune 500 companies. Scott is
responsible for all of the Company’s
financial, administrative and treasury
functions including financial/SEC
reporting, bank relationships,
conducting internal and industry
analysis to support the Company’s
goals for growth, investor relations,
human resources, risk management
and M&A activity.
Scott West
Chief Financial Officer
Jim Sklar has over two decades of
relevant legal experience serving
leading worldwide asset advisory and
auction services firms. Jim is
responsible for all of the Company’s
legal matters including negotiating
global transactional and business
alliance documents, managing
relationships and contracts with
worldwide clients and business
partners, and providing legal
representation for all company
divisions and platforms.
James Sklar
General Counsel
8 Heritage Global Inc. | www.hginc.com
Positioned to Grow in All Cycles
Macro
Headwinds
HGBL
Tailwinds
Wider spreads on principal asset/loan
activities
Distressed M&A volumes follow lending
cycles
Higher nonperforming assets/net
charge-offs
Building surplus inventories and
bankruptcies
Lower asset prices/volumes
Pressure on Net Interest Margins
Declining Net Interest Income
9 Heritage Global Inc. | www.hginc.com
Sustainable Growth
Vision: Become the dominant solution and most respected and trusted firm to corporations,
trustees and lenders needing to monetize challenged assets across all classes and geographies.
Principal Deals
Product &
Services
Development
Target Market
Extensions
Business
Development
External
Growth
Opportunities Growth
Drivers
10 Heritage Global Inc. | www.hginc.com
Global Platform
Puerto Rico Costa Rica
Mexico Canada
Spain
England France
Ireland Germany
Italy China
South Korea Australia
HERITAGE GLOBAL PARTNERS SALES
11 Heritage Global Inc. | www.hginc.com
Financial Performance
1 Profitability• Inflection point
• Building scale across platforms
• Rising operating leverage
2 Diversification• Across/within business units
• Agency vs. principal revenue streams
• More predictable and forecastable
revenues, margins, and earnings
3 Financial Flexibility• Building EBITDA
• Strong balance sheet
• Recently upsized credit facility
• Strategic M&A
12 Heritage Global Inc. | www.hginc.com
Financial Performance – Operating Efficiencies
Build Scale
• Within businesses
• Across platforms
Manage
Expenses
• Corporate level
• Business unit level
Drive
Operating
Leverage
• Maintain high
incremental
margins
• Favorable business
mix shift
Increasingly
Leverage
Synergies
• Processes &
systems
• Centralized
database
Action Plan
13 Heritage Global Inc. | www.hginc.com
Value Creation
Financial
Performance
* Healthy & achievable
growth projections
Improving EPS
Quality,
Visibility, &
Sustainability
* More balanced
agency vs. principal
revenue streams
* More predictable
events = smoother
revenue & earnings
* Forward flow
contracts
* Date-certain events
Strengthening
& Leveraging
the Balance
Sheet
* Upsized credit facility
* Business lines of
credit
* Capital management
Investor
Relations
* Investor targeting &
outreach
* Enhance messaging,
disclosures, reporting
14 Heritage Global Inc. | www.hginc.com
Value Creation – Investment Highlights
Competitive
Advantages
Sustainable
Growth
Financial
Performance
Shareholder
Value
Global
Platform
Appendix
16 Heritage Global Inc. | www.hginc.com
Heritage Global Partners
3 Growth Drivers• Shift toward higher-contribution principal deals
• Recent alliance with Napier Park to acquire
industrial equipment and real estate assets
• Building surplus equipment assuming accelerating
Pharma M&A to refill pipelines
• Increasingly leveraging Capital Asset Redeployment
Enterprise (CARE) software package
1 ServicesHeritage Global Partners is a leading, full service,
global auction and asset advisory firm.
2 Differentiating FactorsDomain expertise and infrastructure via
management’s experience, expertise, relationships,
and track records. Broadly diversified across sectors.
Aerospace & Aviation Biotech & Pharma
Machine Tools Semiconductor & Electronics
17 Heritage Global Inc. | www.hginc.com
Heritage National Loan Exchange (“NLEX”)
3 Growth Drivers• Innovative expansion into FinTech, student loans,
and peer-to-peer lending sectors
• Plans to add post-sale initiatives
• Banks set to bring more volume to market
reflecting a less onerous regulatory environment
1 ServicesNLEX is a leading loan sale advisor of charged-off and
nonperforming asset portfolios via an electronic
auction exchange platform.
2 Differentiating FactorsFor 20+ years, NLEX has sold over $150 billion face
value of performing, nonperforming and charged-off
assets for banks, the U.S. government, and other debt
holders throughout the United States and Canada. SERVICES
Portfolio
Evaluation
Buyer Due
Diligence
Data Security
Market Price
Max
Contract
Negotiation
Remit &
Post-Sale
Service
Multiple
Product
Expertise
Compliance/
Transparency
SCOPE OF SERVICES
18 Heritage Global Inc. | www.hginc.com
Heritage Global Capital
1 ServicesHeritage Global Capital provides specialty financing
solutions to small- and medium-sized investors in
charged-off and nonperforming asset portfolios and
other asset-based classes.
2 Differentiating FactorsDecades of domain expertise and the ability to
leverage established relationships from the HGC
executive team who have participated in over $400
million in fundings and have extensive Industry
relationships.
FUNDING PROCESS
3 Growth Drivers• Increasingly penetrating a underserved growing
market – smaller buyers of charged-off receivables
• Providing more economic financing options
• Providing a greater variety of funding solutions
which allows our Clients to stretch their equity,
creating growth
• Banks set to bring more volume to market
reflecting a less onerous regulatory environment
19 Heritage Global Inc. | www.hginc.com
Heritage Equity Partners
3 Growth Drivers• Distressed M&A follows lending cycles
• Increasingly penetrating healthy M&A
• Dual track sale of business/liquidation auction
• New principal lending/investments business
• Moving upstream to bigger transactions
1 ServicesHeritage Equity Partners is a leading middle market
investment banker for financially challenged going
concern businesses. Solutions include debt/equity
underwriting, joint venture relationships, or M&A.
2 Differentiating FactorsHeritage Equity Partners professionals have
successfully completed more than 550 transactions
since its founding in 1988, with a focus on maximizing
value via accelerated timelines.
Completed nearly 600 transactions in 45 of the
United States and restructured
over $5 billion of debt.
Transactions have been confirmed in 70 separate
bankruptcy courts (50% of
our clients are in Ch. 11).
Clients range in size from $10mm to over $300mm in
annual revenue.
Buyers and investors have
come from around the globe.
CREDENTIALS
20 Heritage Global Inc. | www.hginc.com
Heritage Global Valuations
3 Growth Drivers• Additional bank-approved vendor lists
• Deepen penetration with existing bank relationships
• Geographic expansion
1 ServicesIndustrial and wholesale inventory/equipment
valuations to assist financial institutions in making
lending decisions
2 Differentiating FactorsDecades of valuation/liquidation experience
leveraging HGBL’s industry-leading industrial auction
group, as well as investment banking, patents and
trademarks, receivables, and real estate business units
REPRESENTATIVE CLIENTS
21 Heritage Global Inc. | www.hginc.com
Heritage Zetabid Realty & Auction Services
3 Growth Drivers• Client acquisition
• Broader/deeper relationships with existing clients
1 ServicesHybrid auction/brokerage solution to sell commercial
and residential real estate on an accelerated timeline
2 Differentiating FactorsBoutique approach allows for targeted marketing
under the banner of an auction to maximize buyer
attention, pricing, and close rates
22 Heritage Global Inc. | www.hginc.com
3 Growth Drivers• Expand relationships with National Association of
Bankruptcy Trustees
• Increase sales of non-commercialized patents in
Global 1000
Heritage Global Patents & Trademarks
1 ServicesProactively manage/streamline corporate Intellectual
Property portfolios via sealed-bid and online auctions
2 Differentiating FactorsPioneered the development of Intellectual Property
auctions in the early 2000s, with a focus on “Date-
Certain Events”
OIM Squared
Artificial Intelligence
Receivership
Sold $1,040,000 to credit bidder
Wisewear
Internet of Things/Smart Jewelry
Chapter 11
Sold $110K
Sheer Wind
Renewable Energy
Chapter 7
Sold $20K
RECENT SALES
23 Heritage Global Inc. | www.hginc.com
Valuation ComparisonsDate: 11/25/19
EV/EBITDA Price/EPS EPS % Chg
2018 2019 2020 2018 2019 2020 2018 2019 2020 19/18 20/19 2018 YTD
Auctioneers
KAR Auction Services, Inc. KAR $21.98 $2,934 $6,142 6.9x 12.0x 11.3x 19.6x 19.1x 15.2x $1.12 $1.15 $1.45 2.6% 25.8% -5.5% -53.9% 3.5%
Liquidity Services, Inc. LQDT $6.52 $219 $153 N/A N/A 51.7x N/A N/A N/A -$0.50 -$0.23 -$0.08 N/A N/A 27.2% 5.7% 0.0%
Ritchie Bros. Auctioneers RBA $42.49 $4,595 $4,971 19.3x 17.0x 15.2x 39.3x 32.8x 27.8x $1.08 $1.29 $1.53 19.9% 18.3% 9.3% 29.9% 1.9%
MEDIANS 13.1x 14.5x 15.2x 29.5x 26.0x 21.5x 11.2% 22.0% 9.3% 5.7% 1.9%
AVERAGES 13.1x 14.5x 26.1x 29.5x 26.0x 21.5x 11.2% 22.0% 10.3% -6.1% 1.8%
Heritage Global Inc. HGBL $0.90 $26 $24 5.1x 6.9x N/A N/A $0.13 N/A N/A N/A N/A 22.8% 98.0% 0.0%
Exchanges
Cboe Global Markets Inc CBOE $123.67 $13,710 $14,483 17.5x 18.7x 17.6x 24.6x 26.4x 24.8x $5.02 $4.68 $4.98 -6.7% 6.3% -21.5% 26.4% 1.1%
eBay Inc. EBAY $35.38 $28,778 $34,104 9.5x 9.3x 9.1x 15.2x 12.8x 12.2x $2.32 $2.77 $2.89 19.4% 4.4% -25.6% 26.0% 1.6%
MarketAxess Holdings Inc. MKTX $395.79 $15,010 $14,780 61.1x 51.9x 44.9x 86.6x 72.9x 64.1x $4.57 $5.43 $6.18 18.8% 13.8% 4.7% 87.3% 0.5%
Nasdaq, Inc. NDAQ $104.33 $17,101 $20,633 15.9x 15.7x 14.7x 21.6x 21.0x 19.3x $4.84 $4.98 $5.40 2.9% 8.4% 6.2% 27.9% 1.8%
Tradeweb Markets, Inc. Class A TW $45.18 $2,877 $8,537 30.1x 24.4x 21.4x 56.5x 45.1x 40.1x $0.80 $1.00 $1.13 25.3% 12.5% N/A N/A 0.7%
MEDIANS 17.5x 18.7x 17.6x 24.6x 26.4x 24.8x 18.8% 8.4% -8.4% 27.2% 1.1%
AVERAGES 26.8x 24.0x 21.5x 40.9x 35.6x 32.1x 11.9% 9.1% -9.0% 41.9% 1.1%
Heritage Global Inc. HGBL $0.90 $26 $24 5.1x 6.9x N/A N/A $0.13 N/A N/A N/A N/A 22.8% 98.0% 0.0%
Boutique Advisors
Evercore Inc Class A EVR $79.74 $3,117 $3,031 4.9x 5.6x 5.2x 8.8x 10.1x 9.6x $9.01 $7.92 $8.35 -12.1% 5.4% -20.5% 11.4% 3.0%
Greenhill & Co., Inc. GHL $17.61 $336 $607 7.2x 15.9x 8.9x 12.4x 43.2x 9.5x $1.42 $0.41 $1.86 -71.3% 355.9% 25.1% -27.8% 1.2%
Houlihan Lokey, Inc. Class A HLI $47.98 $2,004 $3,121 16.7x 15.7x 14.6x $2.87 $3.06 $3.30 6.5% 7.9% -19.0% 30.4% 2.6%
Lazard Ltd Class A LAZ $38.13 $4,005 $5,409 9.3x 9.3x 9.2x 11.8x 10.2x $4.16 $3.24 $3.73 -22.1% 15.0% -29.7% 3.3% 5.0%
Moelis & Co. Class A MC $33.56 $1,656 $1,611 4.6x 7.8x 6.2x 11.2x 14.1x 12.8x $3.00 $2.37 $2.62 -20.9% 10.5% -29.1% -2.4% 6.0%
PJT Partners, Inc. Class A PJT $43.96 $1,015 $1,602 11.9x 9.7x 23.0x 18.7x 14.4x $1.91 $2.35 $3.04 22.8% 29.7% -15.0% 13.4% 0.5%
MEDIANS 4.9x 9.3x 8.9x 11.8x 14.9x 11.5x -16.5% 12.7% -19.7% 7.4% 2.8%
AVERAGES 5.6x 10.1x 7.9x 13.6x 18.9x 11.8x -16.2% 70.7% -14.7% 4.7% 3.0%
Heritage Global Inc. HGBL $0.90 $26 $24 5.1x 6.9x N/A N/A $0.13 N/A N/A N/A N/A 22.8% 98.0% 0.0%
Source: FactSet.
Company TickerStock
Price
Mkt Cap
($M)
EV
($M)
Dividend
Yield
Peer Comparables
24 Heritage Global Inc. | www.hginc.com
Reconciliation of EBITDA and Adjusted EBITDA (Non-GAAP Measures)
($ thousands)
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 2016 2017 2018 LTM
Net Income $1,685 $369 $408 $612 $1,494 $1,216 $14 ($249) $3,751 $3,730
Add back:
Depreciation & amortization $76 $79 $80 $76 $76 $74 $316 $313 $319 $306
Interest & other expense, net $38 $47 $13 $23 $22 $12 $63 $95 $214 $70
Income tax expense $64 $0 $206 $24 $54 $39 $21 ($420) $270 $323
EBITDA $1,863 $495 $707 $735 $1,646 $1,341 $414 ($261) $4,554 $4,429
Management add back:
Stock-based compensation $85 $73 $70 $71 $76 $63 $99 $246 $289 $280
Real estate inventory write-down $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Impairment of goodwill and intangible assets $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Settlement accrual $0 $0 $0 $0 $0 $0 $0 $1,142 $0 $0
Fair value adjustment of contingent consideration ($157) $0 $0 $0 $0 $0 $92 $938 ($157) $0
Adjusted EBITDA $1,791 $568 $777 $806 $1,722 $1,404 $605 $2,065 $4,686 $4,709
Source: Company reports.
Reconciliations of Non-GAAP Measures
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