HGBL - Earnings call transcript Q2 2024

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Operator

Good day, everyone, and welcome to the Heritage Global Inc.

Second Quarter 2024 Earnings Call. [Operator Instructions] Please note, today's call will be recorded. It is now my pleasure to turn today's conference over to John Nesbett, President, IMS Investor Relations. Please go ahead.

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. go to like Heritage to turn please Mr. Executive Officer, call

Ross Dove

everyone, Good you, Well, welcome thank afternoon, and our call. to John.

all I'd of call, Before I give give the just call over of the into I the of quick thought to a go you couple Brian observations. details to

us, in really really both $X consolidated seeing a million performance where Financial solid bodes and we've QX we're a QX QX, had retention well for Industrial, ourselves is and where was operating the $X.X and accelerated across strong. looking some and QX because in into EBITDA improvement big million client for in market it over going was and was income primarily

you I thought. is with of What kind really leave Brian before just one

And time. this QX. solid, really actually have and the very very rolling on all sides second for the business, both pipeline. prospects very, very the we're QX view strong you on clients did you're solid end with with QX of a happen added a ended quarter. and bullish new flow We've at a of forward lot robust left into quarter at the a quarter. Sometimes really of without that quarter, We not That

that walk what which Brian walk I'll business with that, to improvements a need else we doing doing the to and Capital, quarter, give along we're walk in Heritage of track. of Everything what create the on this businesses, been to through to through our with is all will better Global the on it you through we're to Brian else. track, you has to part one everything there through get So go right exact some over

ahead and So Brian, it take away. go

Brian Cobb

Ross. over before into our going our I'll begin you, results. Thank by highlights moving divisional Financial

division quarter Our of Industrial execute income total XXXX, $X.X operating from Assets the million, $X.X increase an to the continued in in second divisional million year of period. prior reporting

country, to surplus in businesses Increased and downsizing business, of Our particular, pressures continued a and variety quarter. across economic resulting Auction the strong had the cause equipment. in sale closures in a of machinery office industrial

conjunction on lease sale As a the sales million to the in $X.X division Missouri. partners, with completed determined previously the for lease and involved sale lease. be disclosed, that equipment, was equipment And The a earnings in in share the pharmaceutical a in a second of Fenton, recently transaction type the quarter. of company the XX-year recorded acquired respective together of total with our plant its building

pipeline auction back expect look second XXXX, activity the place in we to year. in the strong we of have to the continued of a see As half and half

million. Our XXXX prior operating of quarter the in year Financial performed to of quarter the division Assets compared income consistently with $X.X second

brokerage Our business perform continues to well.

growth volumes and of loans We optimistic cards and this continue are steady nonperforming forward. credit business to charge-off moving see of the about

as balance amortized of and XX, loans and our of XXXX, classified on equity to method both was charged total our receivable basis sheet portfolios June cost investments. receivable notes $XX.X million, off of nonperforming As buyers

capacity collection pay which to previously results consumers As in environment economic lower debts, noted, in an where we industry-wide. less rates are their have

to the underlying the result, meeting company obligations. to these collections their the difficulties This servicing collect and largest borrower continued continues of had a company's net fees. on As remit has borrower portfolios

However, payments. required these are sufficient collections minimum currently not all satisfy to net

June June received applied in the on company nonaccrual amount the status, including loans of against will nonaccrual and balance. short placed due, payments XXXX, the interest, company's minimum borrower's remittance status. the fell after be of The this outstanding share Beginning loans on

As XX, loss loans accounting to to $X.X primarily total $XX.X company's treatment. by to basis default December interest XXXX, XXXX cost is was recovery from status and of reduce currently expected loans million nonaccrual approximately the of status June cost million. XX, compared operating the XXXX, amortized no of nonaccrual and the income due income of The as the

avenues strength date under profitable, growth its sheet, in It is the subsequent paid diversified in loan's our important with company going XXXX principal the XXXX. which to the flow of reiterate the Global with Reflecting remaining outstanding cash completely facility balance executed a credit was to maturity off business of CXBank, is multiple balance advance and quarter forward. the Heritage that and

quarter XXXX second to the turning XXXX. $X.X $X.X second compared Consolidated of Now the in income Financial the million results. quarter operating million of to in was

For of income or $X.X the income per diluted $X.XX second or EBITDA $X to million diluted of quarter million million compared compared $X.X share period. the reported $X.X XXXX. in we per the Net year million quarter, adjusted $X.XX was prior share of to in net

million $XX.X million. $XX.X balance of up net and XXXX, stockholders' June December as Our from $XX.X XXXX, strong of million remains of sheet at with capital XX, working equity XX,

core As and marketplace. pipeline of the XXXX, we attractive of opportunities segments an continued results auction second operating to the with our move half in are produce through strong brokerage expected

with will they Ross. continue and back over positioning We call that, driving to arise. of to company advantage the are the while in our profitability, opportunities to take turn steadfast organic mission I And growth M&A when

Ross Dove

Thank Brian. you,

excited our to we're few our opportunities why the about both minutes both and and growth tell sides increased So take we're organic a in across me business, actually Assets you M&A Industrial Financial let seeing Assets. the very of

rising macro efforts win has to business because new execute. and of kind Financial now since doing is we're with the the economy been clients see me macro consumer all it's pipeline Assets. But XXXX. clear and of right the can and that let the our garner pretty at So start on everyone side, also that solid looking we're debt

with it. Our over We've in at if card that, revenue now billion you adding trillion, X at $XXX quarter. of rising trillion, can is balances got household quarter. imagine billion credit $XX.X debt just We're and now up $X along looking $XX this

at our to With just the at All we grow looking is has grow. volume you of that with And shows amount of the and growth of basically now first past payments volume, end sign that month, on credit now charge-offs. cards for month-to-month them is into card organically. X% the rather it. being due. we're charge-offs which grow of all credit at XX% continuing years going think the of off accounts solid cards growth tell-tale to credit We're business looking that in the than more paying on the And has

years was ago, it X X%. X, Just

continue our our Will grow. business growing? business So Yes. is to

is which to basically afterwards. If in a where grows, now does and you because more do us struggled it grows more during more say and business more our which strength is gives and then business There afterwards, opposite doing the we're that grow. NLEX, we're the flow clearly are What M&A. cash growing pandemic is of stronger okay there position that a M&A companies supply have our available no is in market won't argument in and

can something X.X that aggressively and next the that see we're there at, get looking hopefully for highly opportunities and bolt-ons done, we will within accretive. years, So be we year,

So in organic continued we're solid believe, in growth. solid we there, there and we're opportunities, M&A we believe

to on move over I'll Industrial. Now

are day, a are headcount look now, Google that right you're now. far seeing every basically you well, looking see sluggish to have experiencing doing look you And are companies you don't announcement, many at companies Industrial at simultaneously, you see If to lot right of if another reduction. manufacturing a too but

I the industrial the months sluggish the of period economy X, reduction, discover is reductions happening X announced. the basically economy to again, ago, over where sectors the surplus. is layoffs, layoffs of over of for bodes the As reduction do there are from have produce but is the manufacturing has also X, a day where future there's the well on that the the and been what manufacturing and where still growth. But AI lot notice heightened adding which and a don't assets lean X on X, surplus these focusing and frees of It's this auctions. machinery. headcount headcount surplus surplus now months said heightened you machinery. happen in That's There's growth X They manufacturing, up the is sectors execute and up instances, produce they at which also headcount frees

Supply years. to there saying the is in market X So over increase Management equipment X the of secondhand an be will Institute the X next on to that

fact actually The very business So the being of to we increased continue and several used has now inflation bullish that of had and if economy value that and prices getting prices up. Industrial inflation years equipment, our actually our let very we've softens. see the even we auctions, think will we're for the assets holding high organically

organically, very solid very, think there. we So we're

are the beginning fact a will in coming and where in medical, roll-ups of sectors great to the guys significant where talks of more the be have sectors. is cetera, for et all together these a across about industry There kind also do think the pharma the of that we that player more database basically

in. believe we'll a be should M&A of be that happen That the X, that So significant consolidation we one next auctioneers there X the will leaders see years. industrial we over of

organically stand M&A. we and grow So to ready through both

excited Global really multiple a again. work but to solid overall, through I'm some very difficulty with think collections, Capital. in prospects We've been adviser we because us. Global that thing with in position. special a is Heritage Heritage we see humming And working once to there very We're There's get issues hired

Thanks all us. at your hearing for interest We're time to out. you questions any us you So Thank very thank with again. any all much. open and sticking for appreciate

Operator

from take with Lake our [Operator We'll Instructions] Street. first Mark question Argento

Mark Argento

working happens the in at few here. us or level like to quick the are seeing next and something any the improvement guys the in sell sounds got in impairment we you're What off? should just steps The Ross, status be situation? you there? just in forward? looking through ones for terms book What loan Brian walk a what terms the Do look It high with? of book. part Maybe of you've going of a change

Ross Dove

it first, take I'll Brian. So

work to very than efforts We announcement of hard to no recover adviser and collection announcement working recover this at an of to further change is, selling to trying at right the money. what any taking now time, than very, hired this efforts of announced. we've time any XXX% the anticipate of no -- enhance kind There with. a we've book, don't So other

as if get much, all the So of as not we hope back to can. money we

time. We're monthly in while collections We million a ago. that on changing $X.X a at getting point charge not took We're this basis.

do continue try and continue payment, very with been We get will this the short Brian they've let the best going little we you collections, the monitoring can. a have bit steady, albeit add don't to be working coming make that. them if future if and any them I'll in we time, change. to in to of Brian, we to they're to But minimum like. one. but at we're There announcements

Brian Cobb

Yes.

collect the working these a So manager really help can with group changed is the collections the in one way improve the on can borrower way of And how figure servicer the collections. specific main the structure of methods. or out to really senior in or legal those thing is our to trying that that we've lenders in been loans be finance

think be some so that might we there. improvement And there

of data in us principal side, see on lot the term. taking net we or and this think a all short at interest, the allow the all balance. collect the we're status positive allocate nonaccrual collections the to that collections will way I now of is Until conservative or that to I a could principal that accounting the look right position to changes But remain

Mark Argento

out Got additional lending, have it. with point? general... additional Or customers any the Then stopped other this putting you any what's capital at

Ross Dove

accretive financial particular have at deals, we aggressively. only are XXX% or fund. and are there. that time. Mark And aggressively, very, have should a I of funding looking to cetera, cash but the we customer very careful would say, we a looking flow no still position. that a best, right very customers very we There straightened not -- lot of albeit would at some paying, fund performing more et prudent, maybe the in now, to but have customer decision back we're flow, customers. We're that of what free less plans we're free point We're until and we're being a lot that make funded are this that cash strong obviously fund and M&A, best in we about very we as is out highly at holding then and and this But being We're we're

came loan, it. us if capitalized do So we're to somebody with great well a to

Mark Argento

Great.

pivoting had Industrial talked you of on a Just the Asset the just flows. a Asset to, Financial Financial the little is what flows I the But are through robust. mentioned Maybe Asset businesses bit flow... Industrial historically, it's both us Asset about walk over we've newer forward little side, forward on bit concept. and forward know

Ross Dove

existing forward largest an client, Our flow is is which Pfizer.

worldwide with freed auctions best lot a been doing more our them than they year restructuring, us every has up recalibrating now, So year. which having because We're month. do of assets with they've last planning, and

large are good, now, very right the crowds. So we're and the very good auctions getting assets are very

other that We've more on end. clients some added regional

of some past we've repeat done clients. that becoming for the auctions clients now And are

getting repeat business. more we're So

So know, where business, making receiving call presentations one-offs, which is the expensive in. as get, most the versus to brand-new all the it's not you're you

So the we're repeat on getting QX, Industrial business at side, a strong very we're looking QX more there. ongoing with and business

right been there as added we've and you sector, Assets estate both some companies more that growing And a nonperforming now, Financial side, have nonperforming the fintech have also, companies, companies is know. On which banks. new real

on Financial Brokerage forward think half on So QX a some we've first beat the that segment. clients the looking will the and QX too. And flow of we're at really added -- the solid year side side, at we

Operator

from question Craig-Hallum. next with take Sutton our George We'll

Logan Lillehaug

increase to actually is the now assumptions walk for the I through got George on ask on today. wonder is there's I like to one think borrower. us weakness of Can need could if you maybe, the Logan This just portfolios, underlying I just like... of have coming didn't the credit kind into then you kind loss determination any underlying you guys reserve? do guys that insight the And the where through? you

Ross Dove

Yes.

we looking it, senior it basically, multiple tiered -- to and included that talking both lenders it. at and forward, their with approach talking looking convinced anything the at borrower, out past went included need actually adviser, further from independent looked do decide going anything advice. and and looking who real the getting don't collected, needed amount It work with further, we So accounts we if at the was advice collection a thorough in pretty rates a an to after of and at what's take being third-party we're

position us that we And the comfortable all that of together were led right to believe that in we now. right were

very collections We they payment, on. the forward, and also tens And coming have forward. the and in thousands still collections they're the minimum of substantial, still collect accounts going are of short going they're regular, to there's still of although yes,

position I we've So Brian with the we that feel taken. if comfortable to let anything. I'll add missed

Brian Cobb

with go of has would collections along portfolio up And analysis. defaulted on principal from the a to on perceived been think that. reliance on inherent into loan, quick the placing being you also, The cash And are consideration. taken is only all as, a flows initially perspective, thing assets. if those underlying add the up in that's that But so look to now the is go real applied heavy should all numbers reserve that we're yes, the I it risk at I'll borrower

offsetting than the more really is accounting of method the So inherent risk.

Logan Lillehaug

And this into I the it. maybe mean, half like the other certainly, next of up big one purchasers would side. back from kind just year. going charge-offs year on Got seems Okay. the and it indicate of commentary brokerage through

just that said maybe. that, I If I think on have too. double-click can you guys

guys seen positioned? the there there. to kind a few to are from Ross, volume seeing seems think, and recently buy-now, pay-later. of we've in kind talked think up about Anything standpoint be of I competitive past, you you've I reports be a

Ross Dove

The really that even edge buy-now run the were our we process, assets, Ludwig we selling work, consumer guys volume and the entry NLEX cards kinds it sell saw up very is we kind auto the loans. were were been cutting assets. and credit able of an other with companies in very some into and ready and that there, before we've pay-later of the who of to whether early Ludwig Tom beginning, kind explaining similar how or explaining early, there assets. loans, cetera, of et do to what are, or They Dave be

product. of So sellers, we basically we pay-later people the just buy-now got a in and built early, a built buy have list not of we but cadre that

that stay happening should of I stuff, cards of as business is on forefront Across now. are part is a growth mean, we leader. all overall, pay-later of the buy-now loans Real nonperforming right industry to at right So right as seem part end. the now consumer grows, product estate the loans the part are be now credit it. an board, a there's of The growing it. fintech it. amount of What's

So we business bullish feel all the over of the next multiple across sectors. kind years on

Operator

Dove I program This or does for any session. remarks. Q&A will turn the to the closing Ross additional conclude

Ross Dove

position for very a available for paying company listening. all attention. at for follow-ons much information. Thank in Thank is us. The for you any is for further you the looking strong Thank you across any board. very We're time. sticking with Anybody

have there But the it. to exactly for We're mind, going somebody to work the on where can. we want. defaulted is of Global as make didn't Heritage to default looking as capital keep do prepared going get us. we collect best We at much some We're equity. what it. We're in on money anybody, to We to of we're

a is dynamic to forward, move further next any to company very very, time of we're for years X great proud thank looking you we're X, be X, over discussion this the of think As a all your with at and that think at interest. you. open we growth a any Bye-bye. and we we any question record part Everybody, years, have And And we're kind day. any strong of.

Operator

conclude now today's Thank program. disconnect. you does This you participation, may for and your

Heritage Global (HGBL) 8 Aug 242024 Q2 Earnings call transcript