HGBL - Earnings call transcript Q3 2024

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Operator

Good afternoon, ladies and gentlemen. Welcome to the Heritage Global Inc.

Third Quarter 2024 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 7, 2024. I would now like to turn the conference over to John Nesbett, IMS Investor Relations. ahead. go Please

John Nesbett

good and Thank afternoon, you, everyone.

of 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 this as events of future and like of this about change call. contains factors. reliance only the speak current based various Before date our I'd to uncertainties forward-looking assumptions, these based statements place not forward-looking

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

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

Ross Dove

the look $X very operating Thank Thank much, blah, at it's in joining million yes, really each revenue for But the a you okay million John. at what, more today, blah, the just than I because in And that today, I at cash okay, quarter. surface profit like is company. board we're and glance, still for so okay, a the net quarter, drill look it by-the-quarter blah, flow just When just on and the stream quarter. you that's get all it at across $X.X EBITDA blah, not down you and welcome. and

a industrial company, auction. As tells going. dollar just is we we're continue any happened snapshot very very, was in time where busy, say, a quarter-over-quarter not we're What but high to where lacked

they and in transactions minimum with and feel to large larger accretive. the in However, sense take right profitable and but on able coming, the are in X the we transactions is They and comfort longer, absolutely a stay quarter pipeline of steadily horizon. being the lots baseline growing is are

at really fronts, reached the make in heightened in possible has multiple XX We've and going there to of And closing now Activity around something now. industry all transactions get months. M&A on front up the with least play. out many prospects consolidates. this within forward, I'm and industrial comfortable plenty currently has is our to burner future, next opportunities are activity the as now heated done Going and offer stage near very the there

Moving will first-time remain front. really ongoing fintech for have in most ever sellers We're will new there NLEX's market. reliable because credit month's levels leadership seeing products. continue very spending we're as in release future, vendor are financial we to growing these now growth be at consumer a multiple well cards become heightened through will prospects, the the scale charge-offs and as with and clients that monthly as comfortable a belief more years the before, that defaults of the work than to new industry will strong be it help foreseeable and in we every the us

for Thank turn to next the going supply us comfortable Brian turn ahead, over a for you to of sticking us. very Brian. all I'll that, you. X this quarter. that With it be to you up highlights Thank very, the it Go there's with years, We're really to notch. enough give

Brian Cobb

Thank developments our financial key few into going divisional you, begin moving and over I'll Ross. before results. by consolidated a

progress strength significant sheet. company during First, balance our in the has made the year building of the

quarter. during the our of term This $X.X within shares roughly pay our balances. capital loan position open cash and improvements led conservative XXX,XXX down our and available profitability regarding subsequently the funding company to Specialty has third Lending the consistent in in July approximately and segment million its the to repurchased Our of loans market enabled in fully working

June amount of of company's repurchase XXXX. on maximum million Further, through program, increasing the an aggregate to XX, the of to amendment the Board September dollar XXXX, $X approved Directors repurchases

XX, As that the of may million company XXXX, purchased be of value aggregate under approximately program. shares had the remaining September in dollar $X.X

forward significant concentration to manage performing determined in potential gain any have portfolio Lending limit we a move Additionally, structural to risk. the without and to of segment. making to the loans plan We higher changes lending our company's exposure to conservatively Specialty

have have previously for a attractive we and in nonperforming loan mentioned, for charged-off lower As prices borrowers during resulting a from more and the the highs risk portfolios market decreased pandemic, our well profile to importantly, core and of cash business. position the in financing our have positioned our for most available and Last auction brokerage invest and investment. segments potential capabilities strategically us

to the by financial division. Turning results

of the in prior XXXX quarter division $X.X operating period. year compared Assets total divisional $XXX,XXX Our of to the as third reported income in Industrial million

achieved Our of primarily the operating see. larger the due income auction absence the typically we quarter, to business auctions lower-than-expected in

However, the executed win projects and number our contracts remains to strong. of ability

for slated The is development our division an included to place which in a company in aerospace quarterly results not XXXX. this do in selection our X solid capture to project quarter, the business prominent that bankruptcy top-tier and efforts auctions take auction manage

As organizations, for keep the pipeline downsizing auctions economic continues current to many our expect closures continued strong. that pressure and will facility environment we

operating Our $X.X Assets income Financial division reported of million. total divisional

business of $X.X million quarter Our income as third the operating compared XXXX. of million in recorded to brokerage $X.X

status income recovery nonaccrual Our the change and borrower recent expectations, after with roughly consistently to cost largest lending $XXX,XXX accounting. of business operating of performed loans with of our method implementation recording the

spending all-time not economy, near the slowed has highs. Despite and credit consumer consumer remains challenging outstanding

business. elevated to the we by focused we capture expect to to opportunities the levels, volume on brokerage remain drive presented growth profitability are continued and economic at landscape our continuing current As charge-off of

the $X.X Consolidated of of to XXXX. compared quarter financials. on in XXXX was operating third third income million $X.X Now quarter consolidated the to million in the

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

net at September from XXXX, of working of million million of capital $XX.X as $XX.X up million. and sheet reflects XX, $XX.X balance Our XXXX, XX, stockholders' equity December

with call the I'll over back turn to Ross. And that,

Ross Dove

time you, you those there's allocation, capital very really we're when good take very company can The board Thank to across us take comfortable at looking new And Stay hard Brian. for analyzing joining the growing deploy capital in position and call. much opportunities is thank all strong this capital. really we're to feel a with our we news that here to opportunities, for all heights. we're a at and you the us, available

Operator

question Argento comes Instructions] [Operator our Street. first Mark of Lake from For

Mark Argento

couple and quick ones Brian, Ross a here. of

can updates book just borrower? review with you any on you of lending guys size the Did of the status well large Brian, today? First, kind more deploy of kind your there? Any as the capital

Brian Cobb

Yes.

move a So approximately the balance loan Specialty little with But looking our net million at the X/XX. plan to this risk. criteria and are during decline from to strengthened very forward we September new been $XX accretive is million in over work book, the quarter. our at and are $X low have loans of cautiously underwriting We've judiciously to invest balance segment at XX. our originating Lending little loans That's related that

I the of were prices As in are this they year than lower that years. past couple the said earlier

a it's we So lower think risk.

Mark Argento

but accrual status? is change can Or provide info It there? doesn't And much us you any the sound what payments? update Yes. there, making the the borrower on lender or like

Brian Cobb

Yes.

in quarter. the are legal last borrower. significant collections that that our No We're future still from So loans working We're in changes are loans nonaccrual the with status. closely borrower by to borrower, Us working senior methods. in to borrower. largest all allowing question, and lenders collection increase the working our certain with those

Mark Argento

accounting And treatment there of aware is loan any or in of? we kind that should be reserves changes loss other any of the any

Brian Cobb

No, appropriate to our believe there's been loss change And reserve still this no we that's that, credit an reserve. quarter.

Mark Argento

Sure.

a Is got lot there, in industrial terms Or just into of there anything QX? to business, the assets smaller of it smaller back activity the Pivoting of levels but structurally bigger lot going of in kind stuff disappointment. stuff kind was a the pushed obviously, Okay. a of the activity still stuff and industry? on

Ross Dove

amount the Yes. a not That same. It's our pipeline. was actually heightened in

signed is rolling great. the So percentage in we our And strong. what looked really happened was pipeline

So it do win to nothing had our rate. with

Our down the election going what to on just got don't the and transactions macro bigger slow in bigger kind most QX. into smart the just that's economy rate sign because ultimately not on if and transactions. But that of I'm which It transactions of the I of larger did the QX excuse course, up. was we know want of even all into made why or rolled of fine. an kind win to seemed me, some was as enough use that held

of didn't of It's just getting was kind transactions. lost come just them, it big not we lot So the It's ink just on them on fruition. Mark, into at all. that a sluggish

we're said, like had up going still our -- We're we're some going to there. So bang have And we I slow they're still quarter-over-quarter, to just like quarters out win share. to quarter. going not a big

Mark Argento

Sounds then like last more bit good. the hop the been M&A, few and guys just for quarters. one I I'll sounds a back you the it should we little me, But of lending cash queue. good in talking M&A a away in M&A haven't And have more Is that and read how in future? really on trigger. from Or take... focus reprioritize the maybe and pulled of flows you're kind to going last

Ross Dove

companies X really for are auctioneers inside to getting hedge B. all think Riley, at selling kind fund. X are that part be The large around that it look the that us. industrial of now Great consolidated weren't could talking There industry manufacturing about to. American The which time Europe in have into company. been M&A now the past Group, of largest There's was recently a an sold a in

you're over in larger X the to roll-up, I we consolidation. smaller next be massive but one years. of a wouldn't have a strong have place auctioneers And of ones X think leaders going really to we're and the in combining some definitely or it's the that say,

hoarding but up get fight So good we that credit a -- ones built are we've big in to we're going you're enough enough and on asking, yes, and there, make we're we're to not our the cash cash, if team.

Operator

question Diana Instructions] Group. [Operator next Michael Maxim comes Our from of

Michael Diana

acquiring that basically that? When you talking and sounds people, with you talk buying buying about So companies if acquisition? whole infrastructures are think a would exactly be making all -- an made What M&A, buying getting about you you'd you really on acquisition, big exciting. teams,

Ross Dove

look really you the to changes at can significant that in can things and make we when X X the really needle kind be there's than do that whiteboard move go of say, where acquisitions more X XX% which you in how growth-oriented, not but equals or North X So is America industrial North XX% they're in to obvious. is of are are X. all America, come geography, when one, in XX% And X global. significant auctions down areas, of our you auctions clearly that

with think may We Europe prospects government more in America. new the Just there's to reshoring significantly. election, coming back the even reshoring with of alone, grow some North changes

So, of obviously, having significant feet parts would on for the the world other growth. in street ability have

that multinational to We assets, onshore looking also clients and assets. more are clients here that not more have sell just are offshore

key. So be geography would

The biopharma we think second look certain the in There we can key would are get are equivalent us we because dominant acquisition. dominance really obviously, be if area to area sectors which in, growing ALT one, forward. at sectors with a you that are segment be that how other leaps segments, lab now

opportunities that our would organically to presence green ability there obviously, people. novo be and So still X now, Michael. hire real entities, that But the de sector expanding see go goals. would entire looking the we're acquire are geography and be heightened And to opportunities simultaneous, main at right we both,

cash to now We've firms more move lot really now. join the execute grown And the that we where make ability are past. firms can than there the to have a ready front. there in we were to larger a So on

So we time. think now is the

Operator

Chad Our Stauffer, next investor. comes private question from

Unknown Attendee

lender I how that's again? that levels that the And of a a that some changes you level guess, failure what have process case? been order large through concentration And like are kind in not the to make being of risk taken happened I addressed? sure the with sense. have And mistake made so, assumption walk can or if guess, to I X process that having is and in was,

Ross Dove

a we that It's had brokerage side very company on known the for reputable decades.

someone much that didn't So prior I concentration do the it if I success a in of, default. that X want client. knowledge of a without concentration? retrospect, But history long that client, we how you to we thought were underwriting have ask too we right would me wasn't didn't say we have about you're that any the now what matter had feel about in no that

yes, learned we've answer our would guess, we you're lesson. our have be, learned lesson? asking, the And if I

any the Going entity. more more to as broad-based forward, criteria to dependent upon client we intend be we're a cautiously and not level, really so for lend significant that judiciously we specific

I applaud So would correct. for being you

Operator

Investments. question Our next from Sam of Ridgewood comes Namiri

Sam Namiri

the wasn't to get was just little the in of And a the movement surprised the after -- thinking I one was stock. just the wanted I under more reasons towards was your election, Assets there not just Financial the as borrowers. that? thoughts division, thoughts on color on I those positive any stance CFPB, be Do side, assume, lending taking Republican in would administration provide you maybe you could I on aggressive or any have

Ross Dove

mean, consumers presidential I in that history, I is the President to pick back know not. by you the election can I if it if what you know Well, look going actually or don't change -- don't

X rather people and first wait a days. be over reacting would that guess, I the see So, than

clever to an up So a me come answer today. for with too it's question

Sam. I out think find we'll over time,

Operator

There questions Please session. the Q&A time. This to are at ahead. management. I'd over this to turn further our concludes like go no conference

Ross Dove

like Ross. has where We're incredible encourage a we a bullish asset products thank that take is hard that with we're with And all even very and on are have for joining. stuck we There'll our the at on leader. think I'd people we're joined. think to loan us to you can This that because century been where for excited the quarter think future. of really well we nonperforming sales. We wanted internally, today We to think, in the opportunities going we is positioned thank wanted and as that tell be management I side. all look shareholders you growth, a we can an I to a there team grow on see. financial I

into that really is On to and is the going basically leadership extent role industrial think come consolidate the side, to fruition. we some going industry our to

to we excited entry as right on think next come ourselves and where see of great want So board, to. get a now can we're for the we point decade we people who about

all So paying you for attention. we'd welcome anybody, and thank we

Operator

much. Thank you you today's participation. Ladies Thank so conference and your this gentlemen, concludes call. for

Heritage Global (HGBL) 7 Nov 242024 Q3 Earnings call transcript