HGBL - Earnings call transcript Q2 2022

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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 being recorded. I would now like to turn the conference over to John Nesbett, Investor Relations for Heritage Global. ahead. go Please

John Nesbett

good and Thank afternoon, you, everyone.

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

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

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

Ross Dove

to Thank second earnings quarter you, XXXX call. Good John. everyone. Welcome our conference afternoon,

Chief financial discuss Financial Officer. today’s start Let’s Brian performance Brian. date. our the Go ahead, call with Cobb, to will Brian

are You up.

Brian Cobb

Thanks, Ross.

reported with quarter can and and my by we following. the performance the expected, improved operating the be of during income strong perspective, $X.X operating in profitability of $X.X XXXX million. first From half million, financial EBITDA results second summarized As our the of quarter

not the was is XXXX. primarily which of as quarter, second well the during as of significant number laboratory six first seen XX, as of XXX% First, in as business evidenced compared in the held a principal trading, in This XXXX. for Industrial Assets increase in June a in Division at months by the we auctions increase the result record a sales same period of asset industrial transactions six months have ended executed the operations number our American Heritage a active to XXXX,

fourth due industrywide. off, revenues during increase an revenue in increased started We to the rates an quarter volume charge financial Second, we in of XXXX, have asset has realized services brokerage. with to delinquency in which our spending, the materialize increase from beginning saw financial asset and second increased quarter

but opportunity increased operating remaining will into the second not we quarter in during our Huntsville million. approximately the to would year least, $X.X the specialty expect our last see suit, favorably lending half that I on of And impacted income deploy closed Following and group which the cash by transactions, XXXX. two

partnerships for we basis, stated Nesher continue as high acquisition previously, part of strategic us, purchasing that and We in generated million to $X.X operating the acquire Most $XXX,XXX On basic had diluted diluted second $XX the XXX% the in adjusted million, $X.X of second up second have of $XXX,XXX share be company operating we valuable pharmaceutical Operating growth second of compared and approximately XXXX. a XXXX., considerable real of for Missouri, will or margins as periodically the which continue grow income income net XXXX. asset and profits. Division, the EBITDA June formally million XXXX, plan to in reported for net for in the to real forwards to XXX,XXX recent $X.XX basic in share aggregate As carry quarter was estate compared in plants XXXX, XX, a or million $X.XX income quarter was in prove quarter of was to assets we quarter $XX,XXX consolidated of the a two XXXX, Industrial resale. to the we’ve Pharmaceuticals. In saw second Assets XXXX. $XXX,XXX income to quarter in quarter of the Assets to was compared of Division we strong the second of per Net income in loss of $X.X quarter of increase the our XXXX. $X.X significant per Financial compared At to the million operating estate we million a second of our from quarter amount as tax $X.X

Finally, of now June as that, and of $XX.X XX, XX, strong balance call Ross. back compared a million XXXX XXXX, remains turn equity our the to to as With $XX.X stockholders’ December I’ll million. million over with $XX networking of sheet capital of

Ross Dove

Thank you, Brian.

for But or a always is of our is team our really mean I’m really just that you this time work and really It over work are me. Global it’s hard, It So for all the fun hard Heritage has revenue is proud and our accomplished. time together in in Everything pieces to as a doesn’t planned. us very got working the is place doesn’t call is to that a There mean firing today. put all at working the all of to streams, team mean that everything say planned. the diligently right with that’s that when it long now and goals performance. it’s five worked as all going is time a right right on does cylinders. very

NLEX is loan that entities buy pandemic Capital, pandemic, post slowed two it but that companies non-performing know, which happened basically those now portfolios why back two with kind both know, the believe this you Heritage we’ve lender stream. I’ll specialty kinds I different a We have with mode. our start of where we’re Let by Assets of term. hit performance where it What’s during is we as sells NLEX, to term why brokerage which long through that a in believe kinds is I’ll division – hitting Financial different of me an a Assets and as a that stride was the Income streams, growth division. And and Industrial Income the walk do we’re income strides. have portfolios. you sustainable, you stream, is Financial near I all we and Assets asset

volumes and is to income Our are And as charge-offs basically the done into quarter being of defaults risen and converting rise. is to much the on after very and been have borrowings and the macro as now economy amount volumes debt that’s month consumer tied month after more continue more basically increase quarter. that

continuing launch clients new grow. clients Our to and existing and to added is have products added more We’ve us. product more services our

in are were a as and where tied are assets public we’d Heritage that market record ago, from hoped it the companies post a of the when year not today. buying NLEX in the have point opened we a the to So and companies basically years actually Capital using actually borrowing us. growing and up wasn’t to that half that into that during the as most think fast number a in about its of onboarded time the being highs large a pandemic two or fact beat as they pandemic Global were that business us we end, companies at I strong is lend Today, sold actively people those can

both the financial that is ends we sustainable, on we’re So to growth seeing rise. spectrum we think as continuing think is of and spending the growth consumer

over into to of industrial, fully American record there’s into us that, is deals a American What’s back inventory. we’ve and made Lab than Trading American On really several we’ve predicted. acquired Let’s top where industrial. assets, could shoot launching In integrated of of had quarters put on back enormous principal division acquisition Trading our is, heights it auction to only high margins. higher our Lab we’d Trading an before Lab where even happened between synergy initially there

operations time, So had diversification of and inventory it real would because to and ongoing a that restricted to fit trade find assets, buy pretty of expediting liquidate wider into assets of they assets we at simultaneously other the some the what it assets far the basically inventory was their have on division and out could can auction today ability then because it array ROI. look put where the in

we’re now at We’re more on many looking bidding portfolios. more many portfolios,

bifurcating inventory we’re auction assets low oftentimes Our assets on books a produce give and our recovery to is lot the even revenue the assets of the more into assets the are a auction and much attractive dollar value. And rapidly more opportunities buyers. monetize at portfolios very enough those because able that and quicker to on inventory the we’re assets

refreshed our we’re is is auction we buyers for traction gaining growing. because platform ALT assets with simultaneously inventory, growing our have So finding auctions, and our because a more

hitting all it on industrial fronts we’re So there. all on

industrial third Our our and group practice. is group valuation final

believe had as of Overall, enterprise that and getting tell I’m banks this on uptick usage year in the a the in you values. going and that any and to the be that believe actual asset center is We some and that more based We’ve a more best to And a money are and the and positive, there As want stride. into most know basically that we’re a based we financial swaying values I’m guidance full both sustainable is I asset to is market are our and about assets. record what history And more QX. of than true the a QX more fantastic people of industrial their other our concerned in more fears lenders we’re more see in have given future lot seen been more we’ve breaking recession an and company. time. is moving full of and that this year. bullish We and the record just today not here year that will that value

for much me everyone very out a have you thank hearing day. great So and

Operator

Lake begin now first Argento ahead. question go comes Instructions] And Street. from session. our will of [Operator a We Mark question-and-answer Please

Mark Argento

kind on guys of strong you quarter, so Congrats Hey, Ross a well. your market, Brian. it’s fun and perform see is obviously, this to really

revenue Just work help trying could and real Huntsville, that better it estate the of wondering, you way there how understand the makes how impact does through revenue, through understand understand kind us of P&L? the I that when a the kind you things I’m better couple of – just of numbers? some to Brian, was the have

Brian Cobb

Yes.

large to I of buildings that the thing we as in whole equipment. deal first kind machinery unique Huntsville for the three think bought So understand, campus was you a and a the with really is sense

and deal real estate portion joint the the housed and that of machinery venture the equipment in was not. was However,

So there’s a of complexity little there. bit

that been We incurred also costs that have some joint venture. outside of have

of of were there’s asset a impact above also our earnings wise, in the to those P&L buildings. closure two asset large – in accounting sales. QX cost sales But due So of part the

specifically impact $X.X for deal that to net So income was million, operating

Ross Dove

in Not prior profit the quarter, revenue substantially was in million brought the quarters. recognized the for $X.X for of recognized lot the $X.X profit in a but more, million deal deal. in total

deal. with of going amount it finished in now, much complete Mark. now done end forward, finite a be So the is And much pretty but might that’s deal revenue. we’re pretty There that a trickling small the

Mark Argento

through flow or Got is it. was liquidate a the some prepared your well think similar that in had previous That’s that helpful. of as additional And down your in type took remarks, that you setup of then mentioned you buildings? terms maybe how transaction estate, another might just and guys those Brian as I it Ross real in

Ross Dove

It’s of working revenue will the be we and the believe assets acquisition, now very kind bought we’re a We’ve machinery the with the buildings. is and and in through peers, we nine behind it, partnership it’ll a little theory different. three we’re done same industry And ultimately sold of think the a was reason profits recognized of produce months, similar to lot over a the tangible next structure financial and the capital excited already also very to amount equipment. process the the the about It it. substantial some we selling But of

Brian Cobb

also a just that’s more Huntsville just is we And deal straightforward talked that add, than deal the about. to this

through XXX% earnings, the of And lot earnings the so flow equity a method should line. a the of

Mark Argento

looks Yes, that’s have you business, for about you that that end. helpful. that’s and touching the just Can looking a a NLEX had tail little assets business, been we financial like bit business – the had a end, talking been on or we new tail or then and a portfolios give talk terms of shaping to customers onboarding, to of bit like the you’re up? little maybe at either kind how help seeing just you’re quantify of the activity us try something number least in that’s pipeline understand better or And

Ross Dove

do really warning months back was supply future the six about of the where business, basically bullish the five because signs that the last talking for last I the sure the on or of are When will. the chain. see it’s being we of here bottom of the because half end early we I mile

spending start there’s because defaults into more are you rise offs, ultimately a defaults, we’ve offs, the consumer onboarded offs brokerage convert in facie to more of more spending disposition falls there’s And produces after prima then defaults of which first when there’s charge lending charge follows that people ultimately offs. into activity by our then it by finally, those and more rise the flows the our purchasers, an in So then seeing eventually those evidence charge a just acquisition that charge business. more

in clients for incumbent we’re a nine QX, us pressure some about of There’s We’ve of our they So just stride. QX we as added they have world, to more through the growth or six growing hit looking very where because hit strong show environment the but our months financial for it have now because strong supply at supply. we’ve took have, the and in where new more more which flows stride a not now volumes clients, also been more transparency. ESG channels. want to supply, very And

mark-to-market where want competitive the lot there’s direct bidding a selling the of everyone they’re open reassuring getting sellers market work past now in they’re So an that and were values. to in that

people third-party competitive an there’ll think of to we So processes. use amount in in the brokers increase be

Mark Argento

it. I’ll back in I know… And one queue. It’s helpful. just right. me, jump Got one last All the and for

Ross Dove

give We’ll two give Mark, – you more you we’ll you if want. questions, two

Mark Argento

give two more? Will me

Ross Dove

Yes.

Mark Argento

that. appreciate I

Ross Dove

Special today. offer offer today. Special

We’re feeling generous.

Mark Argento

right. All

so quickly, capital more capital, that capital at of Just much much to in How in do buyers how of book? much or are at or assets, more the capacity deploying portfolios that out Where you have terms obviously opportunity portfolios. this you with these fund in there, lending? point got you how financial

Ross Dove

with our To inception. funded along funded $XX we’ve million date, date, To we partners. since

can year to the million hopeful We’re get to to double we that within that $XXX next million. a $XX

to we’ll in announcing our partners, the But advance with capital very in do I can our We place be our with soon partners, have go. the that fund deal. now hedge you tell to new we capital right have that ready

We’re much able we to what deploy pretty need.

strong cash We’re really very right flow have now. fortunate that we

is bank. sheet balance our CX with our with own and We’ve deploy renewed we’re partner our along able own So capital. growing to line capital

that capacity of we Our on line is and $XX fund zero now, on line of have hedge right at top the million funding.

for next months. XX So the we see sailing clear

a we like of our down we right enterprise, not capital, road, Sometime today. think raising would We as consideration looking but if the potentially be the fine is. that’s value at we’re now

Mark Argento

quarter. you since be Ducktails, Thanks. give then in the not take that’s to they’ll looks here one you aggressive me, the Any stock little a back with a it bought little you last it reason the like buyback, more me? might for

Ross Dove

Board our time. it buyback – we aggressive, more continue intention the for some to guess not buyback. approved is brief the I a the As approved just program, longevity, answer far is yes, When as when very they our for of period

capital as So we’re value buyback program ownership We’ll still it have still buyback. allotted real the on follow this still ongoing and it’s stock. available bullish believe at stock And there’s decisions. personal in we But to time of an the that real time make an a where entity. we very we’ll our

Mark Argento

guys. Thanks

Ross Dove

you, Thank the Mark. call. Appreciate

Operator

Please question Maxim [Operator ahead. Instructions] Group. will go of Michael And next our Diana from come

Ross Dove

Hi Michael.

Michael Diana

Hey Ross.

FinTechs later credit and been and about the talking talking cards. about release, financial I talked on last So now you’ve buy in the since for been you you’ve noticed assets the about, pay

all now your assume I assets. of are sources off So charged these

Ross Dove

credit increase cards of to last, the auto and new And in flowing auto loans decade of along insurgents a staple across a We’ve with rise was for a growth FinTech that the real the I’d where doing increase to we’re they or a there’s we’re seen that real obviously BNPL. cards $XXX with say growth before the now estate product. recently steady in seen estate what And before it lending a basically the growth dramatic in card along announced new the there’s it Credit like But entity been we’ve the months, the seeing looked a FinTech. and the with over month us credit from rise non-performing the five in most like was real million the too. in selling now or new And loans looks board. a where been a have million the every four $XXX of we’ve BNPL. pandemic product

old new are kind products not simultaneously. So of BNPL to of school our tied growing of just we’re all and age kind the FinTech

really our with bullish So kind across products. the board year the we’re of on all next of

Michael Diana

what great. I Okay, That’s thought.

you. Thank Okay.

Ross Dove

Michael. Thank Have you, a great day.

Operator

of comes [ph] Chad from private Stauffer investor. next The ahead. Please a question go

Ross Dove

Hi, Chad.

Unidentified Analyst

pushing funds, on them banks set great more a that have of aside I it Hello, before had Congratulations from off banks, but them loans just on faster. is change I charge we’re was rate like in is think And with get surprised are improving the quality get the CECL I quarter. charges a coming some so, know pickup hello. offs in to off to – to auctions. and on seeing the increasing? that right question going I seeing guys that requirements loan how those loan didn’t really for requirements a now if charge you’re to [indiscernible] COVID. the anything, them quickly CECL Is your you you and

Ross Dove

Yes, of think pressure. is credit regulatory FDIC it’s so it or but don’t coming I much banks, from some

pretty agents I a is holdback social collection And there put work. not when much people people grim of and a think now were it that a reaper isn’t to during decision lenders in was issue. a lot sell back as didn’t really on that lot on putting kind an orders pretty they wanting much pandemic, to appear really going a be of are at side basically solid the and of of the that the to want work, pandemic stress lot

That’s them. just lot And now to kind loans it think amounts a loans. their grow, the growing than of held pressure little there on greater these have year have was is a of ago. street, monetize say non-performing as of a lenders product I back putting

more Chad. of kind the seeing activity across just we’re board So

Unidentified Analyst

again. on sounds filling I Congratulations everything. That in your great. appreciate

Ross Dove

for us. And Well, following very you much. thank thanks

Operator

session. turn would question-and-answer for our conference concludes like over to back Ross remarks. closing Dove I This the any to

Ross Dove

to to more with So shareholders solid our for to having and for for us and sticking a it and thank stronger of out I’d everybody through all like in. faith I’d like going trajectory. better we of pandemic were real come and that listening thank a on growth

a of I going to said all our on And and right people the all and and really proud call goal keep of keep at place and time, right followers, you really we’re – today, our and this attention about clients to the earnings our for of right continue And proud us. working marketplace to who’s the to very hard our in And you paying welcome future. on anybody of in you as to commitment doing very the I’m to as keep of that optimistic I’m We shareholders. the all As employees, we’re servicing to all things all we’re our of of to our welcome we is fulfilling growing. performance. thankful

thanks lot great everyone day. So and a a have

Operator

The presentation for conference Thank may today’s and is now attending now you concluded. you disconnect.

Heritage Global (HGBL) 11 Aug 222022 Q2 Earnings call transcript