HGBL - Earnings call transcript Q4 2020

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Heritage Global Inc. Fourth Quarter 2020 Earnings Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. will opportunity there ask presentation, the be to an questions. After to I Investor conference would Instructions] turn Relations. now IMS [Operator Nesbett, like the John over to Please go ahead.

John Nesbett

Thank afternoon, and everyone. you, good

everyone I'd to forward-looking begin, based current events, about our and on conference to and we Before are statements remind to place as subject call statements, that like contains projections future expectations this change based In light this and the should not uncertainties which of of assumptions, forward-looking these only risks, factors. undue these important release. on various of on date speak reliance you

factors could filings Commission. on details more see and please these our For the Exchange Securities that affect expectations, with

I'd Executive Now, Heritage the Ross to Ross. over Global's Officer, to Chief like Dove. turn call Mr. Go ahead,

Ross Dove

good and everyone. fourth call. afternoon, earnings conference our to full XXXX and quarter Welcome Thanks, year John,

XXXX Heritage growth of business landscape. large continue during We public the the As in and results of and EBITDA $X.X million enabled quite the to model, the you million. health in COVID several of significantly the substantially presented quarter demonstrate from improved income diverse our quarter. to these all of in as quarter closed XX fourth the year challenges the and know, Yet the record We strength fourth results where by economic despite our $X.X close drive ride. transactions despite the believe division, pandemic, which net was economic reflected our us challenging the with saw a momentum strength has business the resilience particular to assets industrial contributed

reduce continues capabilities. today, are equipment drive we and monetize visibility And the The as surplus growth many pandemic auction marketplace themselves see is, of as there out need continued and With the in seeing supply expect auction for liquidation expect We the volumes. of side on our to industrial that viably our reposition robust the we there continued to from assets. companies are online equipment economy. re-commercing and the increasing reality they of to business demand our to pandemic [ph] strong emerge the to experience in industrial

optimistic We our our similarly about financial prospects division. assets are in

to calendar course of into the Loan increased of Exchange, benefit we the the to marketplace. in poised NLEX expect referred release to year, The from an the non-performing the increase see or it, loans as we've activity. is Over National

we Specifically, the the growth activity, COVID-XX resulted economy current stay-at-home rapid BNPL say shopping as pay these debt our charged and in has is from has increase buy produced of online in driven restrictions sales, process NLEX now an or increased later, effective assets provide resulting this inventories sale US. and off is BNPL issuers. an between efficient positioned of in competitively the to which

portfolios. million and medium-sized we loan sale year beyond. BNPL accounts, and solutions portfolio off believe $XX charged fact, the opportunities business charged Likewise, a to of capital of non-performing for we investors Global recently closure specialty financing its to the providing ramp see coming and continues of up Heritage similar small In and off announced of in

increased expect economic both endure our to we presenting challenging the for some ahead, time, Looking business. landscape of opportunities for sides

online drive with industrial brokered of expertise liquidation assets the sales the auctions. distressed respected and Our well-established business our and economy current proven success we partner is and assets surplus and will believe demand in asset rising and through

demand. to Global from capital to off begins remains and address believe benefit we related digital the and the to emerge to and Additionally, well-positioned finally, around NLEX continued this increases pandemic, vaccinations consumer in from that take the platforms lending other non-performing stay-at-home charged even growth economy. market And is opportunity economy as the of hold non-bank proliferate the well-positioned loans at Heritage

on in demand to pass the XXXX with our like business. all. our We progress we're I'd across you I pleased industrial that, our into Scott and it to seeing made a to do financials. deeper who our And segments capitalize we dive interest With financial focused and in continuing over are the Chief will and West, both Officer, thank on Financial

Scott West

Thanks, income to Ross. million primarily auction operating completion large multiple fourth in The improvement quarter significant the $XXX,XXX of of XXXX, of operating XXXX. business. company's industrial the The fourth loss of company the of $X.X as to was achieved performance for the demonstrating compared quarter an due transactions in improved

tax tax the an quarter XXXX, included according tax remain and fourth this to streams the the forward included brokered at XX, economies of margin The toward $X.X include Valuation year million expenses fourth $XXX,XXX was benefit favorable the Equity December across focused XXXX, per of quarter fourth underlying the strength standards. include processes growth perspective, XX, income business diluted compared results principal financial and and of to rising within income December platforms. an a which XXXX for multiple commissions, reversal the per of businesses mix a believe XXXX of our XXXX. the asset for reflects as a $X share or tailwinds as from From operational that impairment Tax the units, million secured shift diluted XXXX, We The Net advisory and income of going million scale As build both mentioned, and quarter leverage in as share which managing or accounting to required of corporate increased Partners, quarter discontinued fee revenue we fees. contribution businesses increasingly ended for drive of benefit earnings higher of well Ross to lending further efficiencies. a earnings the and $X.XX $XXX,XXX, and XXXX. on of fourth related Income $X.XX systems leveraging across will sales to operational income and in level increasingly as structures, $X.X synergies sales, across options, charge allowance, for as as

to income resulting XXXX, have of diluted been of Adjusted compared compared loss EBITDA loss $X.XX in tax ended and million of diluted would per XXXX or million share quarter or quarter or quarter $X.XX Income quarter XXXX $X.X the EBITDA million million and $X.X net company fourth $X.X $X.X earnings December an in million XXXX, per the the power share, for earnings per earnings the versus share benefit, $X.X EBITDA the dollars share, income $X.XX of model. the ended of to of XXXX. the $XXX,XXX allowance, XXXX earnings the The $X.X per XX, fourth was reflecting from net of fourth XXXX. our income $X.XX earnings XX, or diluted for year Valuation of million the $XXX,XXX of diluted the of for fourth Tax for the fourth December quarter year Excluding recorded in net

a full let's XXXX results. take look Now year at

year was in $X.X XXXX operating income full compared the diluted due $XX.X to doubled of share related For previously in to mentioned, costs $X.X discontinued year XXXX. all Partners, of as $X.XX full tax $XX to The loss million, of XXXX, compared XXXX, to and which per net losses, year. million, XXXX million elimination share diluted $X.X income Adjusted between significantly compared $XX.X At EBITDA year and net Net to $X.XX for December record operating Equity of of primarily million was per million million, unrestricted the in as XXXX. SG&A $X.X $X.X decreased the expense of $XX or million almost to loss net compared in million full for $XX to XXXX December income operating a net the losses. to million million, including full operating XXXX. the tax XXXX, prior to Substantially, $X.X loss carry-forwards million in for XXXX. XXXX, approximately XXXX for year of net or XX, restricted million grew EBITDA carry-forwards tax million compared of to approximately expire $X.X operating company had year achieved company aggregate XXXX. XX, $X.X

Finally, position, growing stockholders' of with turning cash a our at million. balance and December of company net million $XX.X to XXXX, the XX, equity $XX.X sheet and financial maintained strong

net that, call approximately questions. credit company's from that on open $X million million XXXX. the $X of we'll offering our and untapped, for stock we closed facility X, October the remained With raised up proceeds Importantly, common

Operator

comes Colliers ahead. please [Operator Securities, go question from from Instructions] Mike Shlisky first The

Mike Shlisky

afternoon. Good

So the other besides cash finer of you the your but was balance the all? that million, some quarter, take at [ph] inflows of capital the $XX did any of one-time through types flow very during some And large. points were in cash maybe, there chunky of cars us raise quarter? cash Can you the equity,

Ross Dove

outstanding the been of of Coca company, larger Cola did capital So, obviously, building and that on to we in We profit raise, the multiple transaction months, capital year, been there was sale belonged wins. on a a Odwalla, that made realized capital. that in acquisition raise had of to over was in part a in returns a for that lots cash capital a a there sale which auction top the reflected, free quarter. significant of of quarter, closed We quarter. those is from of We plant, so a flow had of we've was holding had that pharmaceutical assets returned the fact, some return transportation of very the lot for that some both that capital the cash significant of

add significant two to wins. color, I'll were And to so the turn Scott it over but of those

Scott West

good Hey hear you. to Mike, from

the price. days for to And what on XX to said, day way XX to seller. funds, actually essentially from work, invoice assets -- our Ross fortunate auction the closes, auction on have our yes, we with settle business the with before we buyers business, hours that to us buyers the the So on add bid to XX an then, winning very works anywhere we're the just the wire industrial and our all we XX cash sit that

of quarter and of But fantastic of right, there the with get raise, that's much cash the we we Ross we will get was that at up had if we cash that balance. large with equity have it. EBITDA. part lot that ended December to an when with a sense? mentioned, Ross And auctions inflated do at But XX. year the is the end how times there, quarter free the So have the are so -- large make a of Does flow because we had great we transactions cash that end,

Mike Shlisky

large now some whole transaction the through called certainly, I the sure, large for Yes, of one [ph] for go buy was that you that. I was portfolio to the BNPL sector? I and dollar that move guess on want sense. -- be that sector. would but unusually later pay for wanted that and to thank perfect numbers very also time individual much makes you to

Ross Dove

No.

Mike Shlisky

okay. not, It's

Ross Dove

and just $XX bigger. items a scratch home million of to deal. it of actually it everybody expand using time. peer-to-peer we actually long not in a to trial is, the to their starting it large, ones potentially, is was actually and around was to we're great, leaps pandemic retail what's grow very staying entry has since could and all on where come early be started doesn't and surface BNPL market. fact It the and other did was FinTech BNPL due really been really grow and buying an BNPL. the and The

a transaction actually become could was basically they're using, come firm to it small the no, preeminent if or we Mike. the what that compared dominant So,

Scott West

Yes, to tremendous raised now buy being a in just capital there's that on in said, space. just of space, Ross follow later to pay the what amount

$X they, largest of I I lender and last Sweden, matter week. billion BNPL a fact, another As was the believe, raised Klarna, believe

in So, see opportunities space. growth we tremendous this

Mike Shlisky

the a clarify, market right pent student in to now? card space or more a just other you're of up charge a seeing offs seeing that is loan, credit that like same loans, open provider, is not And that types

Ross Dove

they're an happen basis, increased and increase soothsayer The their and into takes up In in monthly years to build the almost while. be the that NPL know We're in NPLs. say the the that alternative on down going lot of but do basically always increase what's these of starting five FinTech, produces BNPL, are as with their platforms, not amount a and loans lending trying four to three portfolios. and curve a road loans a to track we companies we ALT,

in time, So extrapolating point from to market, Mike. some going how money we're is bigger see a comes out the much much going loan we're segment non-performing that at

Mike Shlisky

[indiscernible] that companies before one last me, for interest about auction you? there's that some does lot past variable your the headlines want raise at sell assets who a rising things might debt it. And business environment, is then, in to help as rate all, have of down, some a off been old cash some pay Got to one to rate

Ross Dove

all It's a are little bit covenants, loan companies, onto tied struggling, rates going and with have rising meet order obligations, you're are in that underperforming corporate the and idle and Rising something. manufacturing sometimes to telling often not that, but the different obligations. to companies is company meet interest to monetize than its necessarily assets companies that rates interest or to are their

interest asset the of on base And rising more sometimes the troubled faster rates, rise they with side on the bank the side. actually

what manufacturing have then need companies obviously. process, harder impact, does an performing what interest they they looking the up ABL are And really to in so, as good can the down side, to companies, and the the if the assets it on start up. quicker debt, can we're their look rates best at Because, service and rates rates, interest free assets truly even sometimes, healthy interest really really, go driving

more of positive impact will So we the negative think assets a flow. than it on a have impact

Mike Shlisky

makes sense. thank I'll you. Ross, over. That pass it. Scott, it Got

Operator

next Instructions] Argento comes ahead. question Lake Street Please The from [Operator Mark from go Capital.

Mark Argento

Ross, big year strong Scott, a congrats for on quarter, you.

are Looking you mix industrial focusing in at cycle other out of are be you're to that big pharma, now? looking businesses, quite the that? any still pharma sectors XXXX, is right And still as it's a M&A into a you key -- of on beneficiary bit of that in look there

Ross Dove

they're And assets. a obviously, business of the can industrial are if side. auctions got you on Pfizer, for right going aerospace are of you see that the you that on pharma big website, can sell -- auctions And at servicing now, our basically etcetera. start stuff for I'll when are with at a look the going Well, of ton We've signed engines older of are manufacturers see an large that that auctions now AMGEN. lot up very airplanes, an sell looking seeing parts Thrust, sitting looking at in also airplanes for companies, to monetize amount increase the the coming a see basically resellers. But this to to for big people lot to basically we're We've the look we're the that starting to got in we're of in side. aerospace option you inventory. But iAero we're

manufacturing So planes not for a put post-COVID, lot of people the think to these into many we're for to that a they're building them We planes. going basically while. new inventory be

it could bunch second think be in, aerospace, obviously, the this the our to say space, of And deals than us looks or from the looking going we're would a food manufacturing other processing three pharma over two to I it's where robust So whole across is at constant change fairly we're years. I sectors sector is, next but like that Mark. be hot

still is side, release still On buyers. a are says massive, pent our the assets problem forward. financial everybody demand we the the And same, of the among up seen loans, all haven't coming there's

financial the super super So, side, get side, trying the busy. busy, auction to

Mark Argento

a student of are play a of When any any assume of more writing bit forgiving or there? little of market some but off button the loans. know, thoughts financial federally-backed really that to Does loans I you side, it hot into private I terms what loans, been potentially any politically, that's comes doing? versus the in

Ross Dove

they they a know a they assets, if And can't forgiveness. can place, don't they're at assets the and want day, can Yes, basically, discount, they don't they if the get looking in buy they're around sure at new not put are greater at looking or to they potential Because be collect. end if know economic the the buy buy want back. could still buyers in long what hold of about situation, to until it future how either they forbearances a forbearance,

-- that. you big start out a with how words But math they on there's issue, two do because it's the forbearance, something. a big before timing figure the do to and can can So can long you

no. Forgiveness,

a So the put Reaper sell create assets assets it's prematurely. really on marketplace be the us, part to more that's collections socio-political and that not been the wanting impacted and not -- during but really and sellers been it's pandemic Grim

second in dealing everyone saying, with to the that they second going why they're is is that year. What have half to I to year. this to everyone's of to the that's stimulus going one. a a have of new so start have believe, longer the And the we're packages half this And probably we're think going bunch vaccine really us brand no telling of by up

we're the analyst. not is that levels. we the back So to the and all the the normal ending all and time, of got news auctioneer, we're of will vaccines packages stimulus that -- But not of stimulate which the beginning think we're greatest healthy, just we're business

Mark Argento

You lastly, some you've the to on capital right these terms able in amount good initiative now, ramping just then more deploy out you lending of of book? the of have in of portfolios, did that terms a job. have been capital And Scott, there in of terms up

Scott West

some good we'd a have the as just XXXX. happen not there Mark. is we to we identified it did not relationship Yes, volume be buyers, well like, we there's question, very that year of that know yet. that And but capital a have raised, expect much that as in one large mid-tier really and which our about, we question, the fund deployed We plus that long with. because answer bodes XX recently a But deal, we your very debt Did happy super it's of Mark? we're will

Mark Argento

again -- and three you Yes, year is that quickly us year book? you money, that how five anticipate like then, remind turn money,

Scott West

range, two in Mark. the year it's to four Yes,

will and But on a Some the use. end. thumb rule around is years of them will be three longer on safe end the on be average, shorter to others of

Mark Argento

luck. Good Thanks. appreciate Great, it.

Operator

ahead. Michael from Please from Diana go comes question next The Group. Maxim

Michael Diana

you. Thank

assets from be surplus business you very the go then Just wave be your for somewhat the then financial it those you've what next after know as expect revenue a lending. strong on of equipment the thing. been capital it's staging growth, to like up probable setting and and saying, together, business, but the that like here two stage of sounds it lengthy sounds I the a would the

Ross Dove

business, get our and Yes, the to take equivalent lot the then analysts, and up up it very going it's that but we asset hard spikes, this to people they to of our reflect In year. amortized. as we're over you're tied there lot make on says cut half I a what upfront, there's can not ready, the and thing the times of there's of going now. be an quarter-after-quarter. towards I'm example, times tell to to if is going more many company years, problem [ph], A building, everyone business twice large end quarter starting just business, big top But pick is fees is, you to talking who and lending so going fees reporting also to spikes. we're our by big as even just are it annually, those us, back say, the first as hasn't the be happened collecting think are yet. so a valuation in the telling And financial GAAP be flow, them of make second it's the half. assets Same see to is you is big are our

without of not And half because year financial you incredibly QX on everybody the not darn We've assets. half a industrial busy ball, to assets. second to is have of been And great year the so, have But, don't we be have in as looking get outside is telling enough you going the pretty year, visibility. in want and progresses. crystal us busier in been to the in don't a busy going everyone it's tell a second

I see all Michael. So, you from tell can what today, I that's

Michael Diana

okay. Thank Yes, you. That's great.

Operator

the question the concludes This session. or

I'd back remarks. So conference closing to Dove like over the Ross to any turn for

Ross Dove

you as to you are encouraged hard thank out that For are that here And to And we for believe a as well the on and make we any their of us. can. keeping. work and there, work everybody growing us, us and wanted by perform us, an learning people in to on participation, see it worth as and belief just And closing us, we eye remarks, to to keep cadre a following take I if a to paying hope is attention we investors are can, who their future we're quick real we'll it an moment keep interest. very we're and bright there's try eye an as our eye for

So thank you very much. Bye.

Scott West

Bye, everyone. care. you. Thank Take

Operator

concludes This call. today's conference

and your may Thank disconnect pleasant a participating for lines. You day. you have

Heritage Global (HGBL) 9 Mar 212020 Q4 Earnings call transcript