Earnings call transcript Q1 2023

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Operator

Welcome to the Heritage Global Inc.

First Quarter 2023 Earnings Call. [Operator Instructions]

I will now turn the call over to your host, John Nesbett, IMS Investor Relations.

You may begin.

John Nesbett

afternoon, good and you, everyone. Thank

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

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

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

Ross Dove

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

Cobb, discuss who Financial turn. Brian our Brian, your Let's Chief our performance. start will call Officer, financial today's with

Brian Cobb

Thanks, Ross.

XXXX performance Our industrial both of EBITDA with net our four growth We results, operating improved including all assets per saw of operating profitability. of diluted to record segments strong profitability and $X.X operating our share financial and assets million, million. $X.XX quarter income contributing divisions, reflected $X our first from

quarter, only This we result for as seen Not a three of quarter's achieve last more quarters record estate is main so XXXX. reasons. a our performance than two without did joint ventures even significant but record real in we did sales in the

segments. this for is to our high continue to transactions, search profits and a asset in estate continue lucrative without evidence, we even each level purchases a real component, at we perform Although can include that that real of grow estate

through segment. and have the the being ability our to we second The capital deploy growth lending specialty seen recent

nonperforming charged was in buyers of receivable million of XXXX. related loans to as investments off Our XX, total March portfolios balance $XX.X to and

million total $X.X increase an XX, the have from more since ago year an million of in balance of one and than $XX December We seen increase XXXX.

our very promising. outlook is Beyond XXXX QX,

dispose sees division Industrial for facility of downsizing a increased face companies assets. and difficult challenges responsibly Assets As economy, closures in more occur, to activity businesses look our and as ways

economy division more contributed to on installment increased slowing in has consumers are and credit Financial loans cards volumes Assets The reliant to make also our purchases. as

debt consumer that drive continue loans sides sold charged-off increasing landscape capitalize the institutions, asset on economic and continued being that financial by our volume to the anticipate on consumer so of financial we both current As We to move XXXX. we tailwinds produce business flow does optimistic remain grows, we'll and will continue the through of success. as

first to to was the Consolidated share million diluted $X.X a the Turning income first $X.XX as was diluted net $XXX,XXX XXXX. and or and $X.XX income of of income share first per XXXX. compared $X.X to basic of or financial net operating the quarter Net the million record basic quarter. of compared details in $XXX,XXX per in quarter

XXXX, of million EBITDA first the million XXXX, quarter $X million first as of of of $X the $X.X EBITDA to for $X.X substantially and in million quarter first EBITDA increased grew compared adjusted up the of XXXX. in to from quarter

XXXX, with working strong $X.X million. of equity million of capital remains XX, XXXX, $XX.X of sheet XX, to Our net stockholders' as a $XX.X of December balance and March compared as million

With to that, call now over will the I back turn Ross.

Ross Dove

Brian. you, Thank

I'll that to well but so that best it, did my to leave do You you much that didn't add me anyway.

able, record to inception. that year, a we it are after post year, since really a right So was our our quarter best record coming off exciting

revenue a against running was all novo as Heritage said, our years that growth, XX was mile. by we've stride hitting that been best streams. the quarter quarter de So all five And Brian in organic our

very was in and XXX an performing tackling entire team at that win just a no was people pure of level. and There quarter. extraordinary It blocking high

a then forward? had the they mean So future? it's great can at now What by How a followed year look going and yourself, quarter. you I that to "Okay, great does say

from the it's with market access company? industrial financial, is, and answer these grow board the say believe, have after has but Can that So this I very a clients together Do to together decade question company hard, truly little record you a can the the the yourself business, levels?" at what position in where not very right just right tactics. bag? staying turnover, built-to-last want that and guys with guys operated a and tricks me performance. I now leader So And simple, coming these everyone still still working in more the gaining for is across strategy Heritage it in to in hat is a

CEO as It And Heritage everybody that to look the growth all of oldest last. to at I'm all say perform. say if years years I here, stick and has guy younger I because the is to we than as them me, built and around proud

our think, of one streams, industrial at drivers in financial, point growth I and place. existing positioned Because true that? in time, say already I to do this why revenue with is already from So every

lending a update the you've Assets, business. of growth maintaining and kind there across to loans, to on garner that growth while clients. drivers from do nonperforming Financial legacy continues both real got quarter-century-old a and our loans it's company a continue fintech sells grow alternative me credit in card In to every Let we share the loan business called quick more sides of auto because NLEX

seeing legacy and for spending the clients year-over-year maintain potential is clients, over exponential operate segments On new of increased that, in for grow the we our in. top there growth and consumer pandemic a is while. of the all quite with, we we're As now

increase, continues defaults follow. as follow, then defaults spending extent. to follow, And to charge-offs consumer naturally some As

a looking we're multiyear So pleasing right a very at last year now, great and future.

that that, the Simultaneous to onboarded people grown. has we've

our And of revenue onboarded any business our the us more streams they're has more best in and predictability and clear winning exponential We more division to lending upon ever. clients portfolios, the growth. relying most have than they're of that literally path

we the growing fund we automatically. business up time wind that Every business,

has grows, in business a that then that's constantly, funding as year So If static after end, business improve will year, that, legs. funding even. long truly as stays the

So that business. that's side the on of

switching over platform. now really highly Lab to platform and The with proved place auction strategically of division. in is Trading Now tactically. has our industrial industrial American synergistic The right the acquisition the positioned

In fact, on a that long assets we basis, monthly they it's as they're that auction resell. can assets finding as can

with So that's packaging business growth. that a together, true

into more business recessionary needed valuation potentially is greater and Our as with times, asset and concern we a there's move more values.

has legs business right true that So now.

Global company. there The driver every of moving so rightsizing. to entire is And industrial look growth the businesses, our business marketplace The is growth a Partners, the if auction driver Heritage basically, all driver. at has obvious you is growth

process the moves moves As it to moves as to outsourcing. lean manufacturing, it rightsizing, it business

So are industrial these using more and companies auctioneers. more

consign looking into also and assets to landfill to is way auctioneer present worldwide They're to prevent to with The best from more assets a purchasing going more an going from into them landfill. base.

not building have but long-term not like come. we dedicated So next over, here company a and long I'd at really believe something this employees look and And I'm group just year, this year, I over a to and I say, a for to of staying value. holder, just can of years time to

Thank out. hearing me you all for

Operator

ahead, Lake Argento from comes question Mark go first Our Instructions] Please Street. from Mark. [Operator

Mark Argento

Hi Ross, impressive. on great Brian, congrats hi a really quarter,

Anything or, know Financial a on versus know And you guys historically, division-level profitability. you us could should would profitability there or bit I data said, Assets you a guys anything at you provide? segments. drill the granularity contribution, little down Just X contribution? wanted give a little Industrial businesses can commented have unit-level units, maybe I say, into terms I Any to level, revenue in four all high of helpful. contributed. income be But operating Assets various

Ross Dove

over supply last a pandemic last on premium, on a six the negative in literal sold year was called higher add on impact use so been just in nine chain the of it. biggest level, Financial, Industrial. Brian needed The people comeback Industrial let at to the the equipment because and But I'll So not not equipment, a has new months, at really afterwards. over and had

know, don't dramatically to Financial much Financial the a pandemic over the as receiving had That on volume as want sell. resurgence impacted of in Asset However, to as with, we we comeback. assets a I the you were say side,

to had resurgence. now and starting we're see back a to we come So

Assets, Financial but was say surprise, want to forward. it a don't was going So I it higher performer biggest the

to add that. can you if Brian,

Brian Cobb

Yes.

add on that. I'll to So

we As operating it's to of the each operating income. very segments, look you when at evenly look split

XXXX increase in Ross Now QX Assets the XXXX, division the see higher the is From correct larger volumes. of a Financial driven QX comeback. you by with of to

increase which in had ALT we to also and QX, overall acquisition. from Asset that's larger we Industrial purchase contributed the which I'll fantastic resold segment, in had a They point in a that our QX, the and refurbishment And resale quarter division. the out

each $X.X contribution quarter. million, approximately million $X.X from So this division

Mark Argento

on physical goods, And Financial the that would versus margin helpful. as the profile house, the scales? the on are and Asset of thoughts margin profile high. there margins digits assume scalability given Any super I that moving business, incremental of kind on side the paper That's just business

Ross Dove

the to assets. of business the physical people call side just platform Mark, being and on an touch platform. lower and out fly has with out physically So the to on a the buyers of margin on bid the the go used bids, both changed, everything fly Industrial on had at sides e-commerce dramatically We to auction, an go

scalability huge without everything that the there, sell over Internet that the buyer worldwide it us site. can to gives the So changed having over travel to dramatically and

was Asset physically Financial assets. look always there have at the didn't people leverage the the to On side, that

platform do scalability don't is increased it's not OpEx e-commerce more an that volume. on the have, side, much So the we a to to that as need switch an the so we volume

staff there and ready. Our is

can of this sell have across in substantially more to supply. internal supply if raise we company our don't So garner that position literally, a any we we're more the cost board, in to

company as can leveraged supply ourselves So view cost, that a highly more if really sense. makes without more we leverage adding we that

Mark Argento

Yes. No, that makes sense.

to and around fairly it briefly It book us the is the... was pivoting the even additional could somewhere particular like for substantially Maybe grown in Obviously your from last I current you sounds buyers. year at capacity or point. this balance and loan you just to the think through think Just more help then, importantly, over the just nonperforming million fairly capital? QX, deploy there. $XX ability What high sequentially sheet, loan said

Ross Dove

question great for to CFO shine. Heritage's a That's

So Brian, you. on it's

Brian Cobb

Mark. Thanks, Yes.

growth equity the lending of $XX.X with correlated performance method. in is and the notes the and balance supply So really investments the consists asset That brokerage receivable million. side. currently of balance That our kind is on in

transaction we to onboarded our we volumes list and see the on our as side the greater. more the clients, deploy clients, winning and of our onboarded brokerage capital level deals, see borrowers goes to So up, ability is

this over that balance a for to potential grows, business our overall and high volume we So asset great that with transaction see the stays matter. to year, assumption that that continue grow or for our

Mark Argento

does out current the to put where additional able capacity be right capital that sit? And to now,

Ross Dove

Let to look have free me this free every reported first. have quarter. is flow. to we're quarter. at confident We're going we What cash $X very answer flow you million EBITDA in We ongoing cash have

So It's flow needed our head cash needed is for growth. not operations. not count free for

in contribute cash our can a basis growth business. our lending flow So regular on free to exponential

number that's So one.

in we're flow. to position component flow a going fund. ROI contributing a cash it, cash fund have us to be continue And free not where to you free always on debt so our as we does flow based not can't free to higher is So know, cash upon

good partners. Simultaneously, and we have debt good instruments

So ahead. that, if want to you add go Brian, to

Brian Cobb

I it. think you covered

NOI mirrors EBITDA due record our noncash our operating that on because quarterly income NOLs. the tax we our to or expense is basis So roughly our a

So another I that's consider. big piece think to

principal into X% also loans from pretax. our flows back then all back out is recycle from or the operations X% month Our come can that we're cash at remittances a And getting total that outstanding we loans.

Mark Argento

fortify talk last one you priorities could back additional building business, in through company you for the but the the and maybe for into areas could about really the you back the now you here little business strength you technology, sun's so long what talked just term? Ross, some the speak, really really can either to aggressive of the a M&A, of obviously, invest about for And think what When the duration. well, to me. shining, helpful. business more ALT while long in M&A, right advantage just with the acquisition either are do in this build investing performing take where to and That's the get business, is

Ross Dove

own deployment best talking growth the stock. our So of We're back we're best Apple and not chest a Google, an is capital profits. this a enhance I'm capital that in not capital massive deployment company With of is or of and buyback, that's free about our buy not best a to your capital to micro-cap, war size. deployment our growth is

and is that, if a always money opportunistic So put most back going on back financeable our that free quarter put we're what most to predictable back into our us to hold we industrial capital that On on annually internally cash enough looking our top side, logical revenue for every find highly by flow capital segment, using is looking our will a accretive our lending literally and think it our at deal, we're contributing capital. be and which basis future of profits. without us the to place we

financially we're sense. the capitalized balance So that there quarter-over-quarter that if there's that makes constantly making on at were Mark, future, for looking a sure

Mark Argento

on appreciate No, I really, that's quarter. strong a congrats helpful. really again, And time. the

Ross Dove

very happy in now, with Well, quarter, we we're we're thank a because right us and you quite congratulating that good Mark. place much the anticipate for

Operator

[Operator appears to no for Instructions] remarks. time, like to call at this closing And be to further I management there back turn the questions. would

Ross Dove

right. All

So to you to you. really want I thank and we're with I this existing shareholders, CEO for to you want all, of our available sticking always listening. thank management. for It us, to the is us. to matters talk Ross, all

anybody through think very there's what and business what very, being walk accomplish. And looking new considering you're if you, talk shareholder, we to plan available can a against we're understand for we to our you

people of attention a Heritage to underneath at because hard to think forward we proud we're ourselves, looking screen, we more, encouraging for look take we're and us. look at the more pretty radar people doing. to to do what we can And we're pay And looking

So a I who have listen And thank to Everyone, we're extremely you for appreciative paid day. all anybody graciously. in. enough great attention

Operator

call. today's you Thank This concludes conference for attending.

Heritage Global (HGBL) 11 May 232023 Q1 Earnings call transcript