Heritage Global (HGBL) Q4 2025 Earnings Transcript

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DATE

Thursday, March 12, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Ross M. Dove
• Chief Financial Officer — Brian J. Cobb

TAKEAWAYS

• Revenue -- $11,900,000, an increase from $10,800,000 in 2024, with growth reported across divisions.
• Consolidated Operating Income -- $800,000, down from $1,500,000, with $400,000 in M&A due diligence expenses included.
• Adjusted EBITDA -- $1,100,000, a decrease from $2,100,000 in the prior year.
• Net Income -- $300,000, or $0.01 per diluted share, compared to a loss of $200,000, or $0.01 per diluted share.
• Industrial Assets Operating Income -- $1,100,000, increased from $800,000, supported by higher auction and liquidation activity.
• Financial Assets Operating Income -- $900,000, down from $1,900,000, reflecting lower revenues in the NLEX segment due to fluctuating charge-off volumes.
• ALT Operating Income -- $538,000, rising from $276,000, attributed to performance in asset transactions.
• Balance Sheet -- Stockholders’ equity at $7,000,000 (down from $65,200,000), net working capital at $18,100,000, cash balance at $20,500,000, and net available cash of $13,200,000 after client payables.
• Net Operating Loss Carryforwards -- $18,900,000 expired, with $15,500,000 remaining; valuation allowance against deferred tax assets was removed.
• New Facility -- HCP’s San Diego site launched, consolidating warehouse and headquarters, designed to expand auction activity and enable personnel growth.
• Dedx Acquisition -- Substantially all assets of The Debt Exchange acquired and integrated, with $800,000 operating income from Dedx in 2025 (not included in consolidated results); expected accretion to both operating and net income in 2026.
• Share Repurchase Authorization -- No shares were repurchased during the year, but up to $7,500,000 in repurchases is authorized for the next three years.
• M&A Pipeline -- Management emphasized "aggressively looking at many, many opportunities" and continued M&A as a front-burner priority.
• Business Personnel Additions -- Staff additions underway across divisions to support expanding pipelines and transaction conversion.
• Specialty Lending -- Segment was "right around that breakeven point or slightly under" due to modest self-funded activity and limited new borrower funding.

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RISKS

• Stockholders’ equity declined to $7,000,000 from $65,200,000, due in part to expiring net operating loss carryforwards totaling $18,900,000.
• Financial Assets division faced lower revenue from recurring NLEX clients, linked to charge-off volume fluctuations.
• Specialty lending performance was negatively impacted by a "lack of funding," leading to near-breakeven results compared to historical positive contributions.
• "many were smaller in scale as companies continued to delay larger decisions amid ongoing economic uncertainty," according to Brian J. Cobb, suggesting continued market hesitancy for significant transactions.

SUMMARY

Heritage Global Inc. (NASDAQ:HGBL) reported growth in total revenue and higher operating income in the Industrial Assets and ALT segments, while profitability metrics declined at the consolidated level due to M&A expenses and lower contributions from Financial Assets. Management completed and integrated the Dedx (The Debt Exchange) acquisition, expecting it to be accretive to operating and net income in 2026, and launched a new, purpose-built headquarters in San Diego to support operational scale and growth. The company disclosed that NLEX revenues were weaker, citing persistent charge-off volume volatility, while specialty lending remained underwhelming given restrained lending activity. Share repurchases are authorized but had not resumed by year end, and new hiring initiatives are in place alongside a prioritized M&A pipeline for 2026.

• Management stated, "Our own internal growth drivers are completely in place now, and all the divisions we see expanding," reinforcing strategic confidence entering 2026.
• The CEO indicated larger transaction activity is accelerating, referencing a signed oil and gas deal and stronger Q1 auction activity in the Industrial segment.
• Dedx showed $800,000 in operating income independently for 2025 and is expected to contribute meaningfully to consolidated results moving forward, with anticipated quarter-to-quarter variability.

INDUSTRY GLOSSARY

• ALT: Heritage Global's division focused on asset transactions, auctions, liquidations, and related activity.
• NLEX: Segment within Financial Assets handling charged-off loan portfolio sales and servicing for recurring clients.
• Dedx: The Debt Exchange, acquired platform specializing in commercial and residential real estate loan sale brokerage and advisory services.
• CRE: Commercial Real Estate; sector referenced as under pressure and a driver for Dedx growth opportunities.
• HCP: Heritage Capital Partners, division encompassing warehouse and operational functions after new facility relocation.

Full Conference Call Transcript

Ross M. Dove: Thank you, John, and welcome, everyone, to the call. We are glad to have you. Just a few brief comments before I turn it over to Brian to drill down on the quarter and the year. 2025 is in our rearview mirror. It was a good, profitable year with lots of transactions, but just no needle movers. Some years you want to never end. But there are years where saying goodbye feels more than ready. 2025 felt mostly like we were rode hard and put to bed wet. 2026 feels like a break-loose year is right here and right now.

When that happens, it almost always follows with a period of larger transactions, as companies and lenders do not hold back asset flows year after year; they ultimately break loose. What we are seeing now is not just new deals entering the pipeline more aggressively than before, but many, many of the carryover deals now starting to convert to transactions, which really bodes well for the start of 2026 and beyond. Our own internal growth drivers are completely in place now, and all the divisions we see expanding, and we are looking at more supply, more activity, and on that front, we are adding business personnel across the board.

We recently moved into a brand-new, shiny facility that we are very excited and proud about, and that opens up space in our warehouse capacity to increase auction activity, and it also opens up office space to where we have room to add the personnel in an integrated situation where we can really work together as a team. So that is very exciting for all of us. M&A remains a front burner, and we are aggressively looking at many, many opportunities. We are very proud and excited that we did complete the Dedx acquisition.

We are now focused there on integrating the team with really optimistic goals that we did the right thing at the right time, and the CRE markets are under a lot of pressure to release loans in the marketplace and in their sweet spot. The goal for 2026 is to define it as the year of the needle mover. We are putting all our feet on the gas, and we believe everyone that had two feet on the brakes is getting ready to move, and we are getting ready to move with them. I will now turn the call over to Brian J. Cobb for the financial results.

Brian J. Cobb: Thank you, Ross, and good afternoon, everyone. I will begin with a brief overview of our fourth quarter operating results before walking through our Industrial and Financial segment performance. Consolidated operating income was $800,000 in 2025 compared to $1,500,000 in 2024. It is worth noting that included in the 2025 fourth quarter was approximately $400,000 in expenses related to due diligence associated with our M&A efforts. Our Industrial Assets division reported operating income of approximately $1,100,000 in 2025 compared to approximately $800,000 in the prior-year quarter. Our Financial Assets division reported operating income of approximately $900,000 in 2025 compared to $1,900,000 in the prior-year quarter.

Our Industrial Assets division had a solid quarter as the division continued to capitalize on key auction and liquidation opportunities. ALT delivered a strong close to the year, reporting operating income of $538,000 in 2025 compared to $276,000 in the prior-year period. We saw a high volume of asset transactions in the quarter, although many were smaller in scale as companies continued to delay larger decisions amid ongoing economic uncertainty. Following the close of the quarter, we announced that HCP has opened its new San Diego facility, which consolidates HCP’s warehouse and operations and will serve as Heritage Global Inc.’s corporate headquarters.

The new purpose-built facility was designed to accelerate growth, increase operating efficiency, provide ability to add personnel and scale, and we are confident it is the right space and location for us to drive our next phase of growth. Our Financial Assets division maintained strong profitability in 2025, although we saw lower revenues from recurring clients in our NLEX segment, reflecting fluctuations in the charge-off volumes. With that said, consumer loan delinquencies such as credit card and auto remain at elevated levels, and we ultimately expect those delinquencies to translate to increased charge-offs moving forward.

Subsequent to the quarter, we announced our acquisition of substantially all of the assets of The Debt Exchange, a leading full-service commercial and residential real estate loan sale brokerage and advisory platform. The Dedx integration has gone very smoothly, and this addition further expands our capabilities and reach in our Financial Assets segment. We believe this acquisition will be accretive in calendar year 2026 with potential quarter-to-quarter variability. Moving forward, we remain focused on capitalizing on our pipeline of opportunities and driving continued profitability in the division. Additional consolidated financial results include the following: Revenue was $11,900,000 in 2025 compared to $10,800,000 in 2024. Adjusted EBITDA was $1,100,000 compared to $2,100,000 in the prior-year period.

Net income was approximately $300,000, or $0.01 per diluted share, compared to a loss of approximately $200,000, or $0.01 per diluted share, in 2024. Fourth quarter 2025 net income was impacted by a non-cash tax allowance adjustment of $100,000 related to expiring net operating loss carryforwards, compared to a non-cash adjustment of $1,300,000 in 2024. Our balance sheet is strong, with stockholders’ equity of $7,000,000 as of 12/31/2025, compared to $65,200,000 at 12/31/2024, with net working capital of $18,100,000. Our cash balance reflects a total of $20,500,000 as of 12/31/2025, and after removing amounts due to our clients, or payables to sellers on our balance sheet, our net available cash balance was $13,200,000.

At 12/31/2025, approximately $18,900,000 of federal net operating loss carryforwards were unused and expired. We expect to utilize our remaining net operating loss carryforwards of approximately $15,500,000 and, as such, have removed the valuation allowance against our deferred tax assets. And lastly, we did not repurchase any shares in 2025 but intend to resume share repurchases moving forward. As a reminder, the company authorized a new share repurchase program on July 31 that authorizes the repurchase of up to $7,500,000 in common stock for the next three years. Ross, I will turn it back over to you.

Ross M. Dove: Thanks. So just to add one thought. When I look at everything with a kind of CEO dashboard, one of the most important things I look at is the sentiment of our business development team, and they are all very pumped up. They are all very convinced they are going to have a great year this year, and I have talked to them individually, one by one, and we enter very, very excited, closing out the first quarter, that we are in the right place at the right time and anxious to not just perform but outperform for you. So thank you all for joining, and I am here, and Brian is here for any questions.

And we are always easy to get a hold of. Thank you again.

Operator: Thank you. If you would like to ask a question, press star-1 on your keypad. To leave the queue at any time, press star-2. Once again, press star-1 to ask a question. We will now open for questions. We will pause for just a moment to allow anyone a chance to join the queue. We will take our first question from Mark Argento of Lake Street. Please go ahead. Your line is open.

Mark Argento: Congrats on the Dedx acquisition and sounds like things are starting to progress nicely there and the overall business. But just kind of getting in the weeds on the acquisition, when you say you expect it to be accretive, is that on a net income basis, adjusted EBITDA basis—you know, hate to split hairs—but it would be helpful to at least better understand what accretive means.

Ross M. Dove: Brian, I will let you handle that one.

Brian J. Cobb: Yes. So we expect it to be accretive on an operating income basis as well as net income basis. So we have disclosed a couple numbers just on the standalone Dedx 2025 result, which, as a reminder, was not a part of our consolidated results. But they reported $800,000 in operating income in 2025, and even with adjustments that we will disclose in Q1 numbers for pro forma purposes, that number will still be accretive if they were to make that, and we expect them to do more.

Mark Argento: Got it. And I know you have mentioned some variability quarter to quarter, which is understandable. Is there any traditional seasonality to that business?

Ross M. Dove: They generally have a very strong Q4, Mark. As you know, primarily, their business is driven by lenders, by banks, more than by specialty lenders. Their primary client is banks. So there always seems to be, in the last 60 days, a desire to clean up, so to speak. So, generally, Q4 you would expect to be their big quarter, over 50% of their revenue.

Mark Argento: Got it. That is helpful. And then in terms of the broader macro, you touched on it a little bit. You are seeing default rates continue to work higher on the consumer. Obviously, you know, a lot of the headlines recently have been in and around private credit. There seems to be some disruption there. Do you have any exposure to that part of the market? Does Dedx get any exposure there? How are you thinking about private credit and maybe that opportunity?

Ross M. Dove: So there is a big opportunity right now. Obviously, the Dedx acquisition was tied to the problems in the CRE market and the amount of loans coming due that are struggling to get refinanced. A lot of those loans have transferred from the banks already to private credit, but there is still going to be a desire to take out the more struggling part of the portfolios. So we see growth kind of overall right now, and not just the CRE with Dedx, but there was a lot of holdback in NLEX. We had a very profitable year, but not close to our record year. We just did not see as aggressive movement from the sellers as we anticipated.

So we think there is a pent-up amount of assets to come to market.

Mark Argento: Great. Well, I appreciate you answering questions. I will hop back in the queue.

Ross M. Dove: Thank you, Mark.

Operator: Thank you. We will take our next question from George Sutton of Craig-Hallum. Please go ahead. Your line is open.

Ross M. Dove: Hi, George.

George Sutton: Good afternoon, guys. So, Ross, I am curious, as you talk about 2026 being the year of hopefully some larger transactions, and I know you have already signed a large oil and gas deal. Can you just give us a picture of what you see relative to larger transactions and maybe a little sense on why we did not see it last year and why we would see it differently this year?

Ross M. Dove: I mean, I am not going to be the general economist and try to outsmart the marketplaces. I can only tell you from my front-row seat talking to clients. And from my front-row seat, there was a hesitation to make decisions, and just from a geopolitical—the going back and forth on the tariffs and many other macro issues—people were not sure exactly what they wanted to do.

So I do not want to say that people do not have a lot of assets they wanted to sell, but it just appeared that, yes, they would chip away at the smaller sales, the stuff that was really obviously declared surplus, but on the larger transactions where maybe you have to replace the assets and you are worried about the availability, maybe you are not sure if you are going to expand or hold back, there was just a general sentiment that not just Heritage Global Inc. saw, but I think everybody watching the economy saw many, many companies in a wait-and-see.

And in a wait-and-see, auctions are not your first move; they are a tertiary move once you have had the other plans in place. So we had a lot of people just say, call us back in a month. Call us back in two months. Call us back in three months. But the good news is we did not really lose our conversion rate; it is just that a lot of the transactions just did not happen that we thought were going to happen. So they are starting to come back now. That is why I say I feel positive. But I have never seen a year-after-year wait-and-see period where, eventually, people do not commit.

So I feel good about 2026, George.

George Sutton: Well, let me ask a little more specifically. You mentioned we are about to close out Q1. Are we starting to see the indications of these larger deals? And again, I will point to the oil and gas transaction. I think that was happening earlier in the year.

Ross M. Dove: Yes, you are starting to see the signing of them. We are going to have a decent Q1 for sure on the Industrial side. When I say decent, meaning some of them are of a larger nature. I am excited about the amount of auctions we are doing in Q1, so it looks good on the Industrial side. On the Financial side, it takes a little longer for the pickup in the curve, but all signs point to the amount of meetings they are having and that they are signing some new forward flows.

So I think you will see that pick up as the year goes on, maybe a little bit slower than you will see the pickup in Industrial. But we are busy on all fronts, and it feels like when you start a year busy, it usually stays busy all year, George. It usually does not tail off.

George Sutton: One small question for Brian on the specialty lending side. It normally is a positive every quarter, and it was modestly negative this quarter. What do you account for that delta?

Brian J. Cobb: The main reason why we are kind of right around that breakeven point or slightly under is the lack of funding. We have always been only funding smaller loans on a self-funded basis without any partners, and at a low level. So in order to maintain profitability, we have to be able to and be willing to put more dollars out to work with new borrowers in 2026.

George Sutton: Gotcha. Okay. Thanks, guys.

Ross M. Dove: Thank you, George.

Operator: Thank you. At this time, there are no further questions in the queue. I will now turn the meeting back to management for closing remarks.

Ross M. Dove: Hi, it is Ross. Thank you all once again for joining. We really appreciate it. If any of you have other questions, please feel free to contact us at any time, and we are always open to chat. Always look forward to chatting, and always look forward to talking and getting to know you. So feel free to reach out at any time. We are hoping for a dynamic year. We are putting all of our feet on the gas, like I said, and we are optimistic. So, hopefully, you are optimistic with us. And we appreciate your joining. Have a great evening.

Operator: Thank you. This brings us to the end of today’s meeting. We appreciate your time and participation. You may now disconnect.

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