acquisition/disposition/valuation/lending services for ... · lending services for surplus and...

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.


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.


Representative Clients


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).


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


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


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


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


Global Platform

Puerto Rico Costa Rica

Mexico Canada

Spain

England France

Ireland Germany

Italy China

South Korea Australia

HERITAGE GLOBAL PARTNERS SALES


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


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


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


Value Creation – Investment Highlights

Competitive

Advantages

Sustainable

Growth

Financial

Performance

Shareholder

Value

Global

Platform

Appendix


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


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


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


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


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


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


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


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%


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%


Source: FactSet.

Company TickerStock

Price

Mkt Cap

($M)

EV

($M)

Dividend

Yield

Peer Comparables


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

[email protected]

(858) 242-4741

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