Heritage Global Inc. Q1 FY2025 earnings call

• Reported a solid profitable quarter with over $1.5 million in free cash flow. - Had a slow start to the quarter but experienced strong March and April, with positive trends expected to continue. - M&A is an important component of growth strategy, with evaluation of strategic opportunities ongoing. - Balance sheet is strong with stockholders' equity, net working capital, and cash balance. - Repurchased shares in the open market during the first quarter, with remaining share repurchase program value.

Consolidated operating income was $1.4 million in the first quarter of 2025 compared to $2.6 million in the first quarter of 2024. The Industrial Assets Division reported operating income of $1 million in Q1 2025, up from $800,000 in Q1 2024. Its Auction Liquidation segment had a solid quarter, but the Appraisal business had a slow start, generating less than anticipated. The Refurbishment and Retail segment saw a $300,000 increase in operating income. The Financial Assets Division reported operating income of $1.7 million in Q1 2025, down from $2.9 million in Q1 2024. The Brokerage segment started slow but picked up, while the Specialty Lending segment had decreased income due to lack of revenue recognition. Adjusted EBITDA was $1.8 million, net income was $1.1 million. Balance sheet was strong with stockholders' equity of $65.4 million, cash balance $18.8 million, and net available cash $10.2 million. Approximately 500,000 shares were repurchased in the first quarter.

• Expect a positive trend to continue throughout 2025 and into 2026. - M&A progress is closing in on exciting targets, expected to be accretive and synergistic. - Momentum and strong balance sheet work in favor given market liquidity conditions.

• Forward-looking statements are subject to various important factors and uncertainties, as noted at the start of the call.

Q: On the financial assets business, type of assets and seasonality?

A: Ross mentioned there was a wait-and-see sentiment at the start due to geopolitical factors, but it flipped midway through February with a big push to get things done, and there's a strong pipeline into Q2.

Q: Loan book balance and progress in whittling down?

A: Brian said gross loans outstanding were just over $29 million, with cash inflows from the business, and the non-accrual lending partner situation with lower remittances but a short-term situation.

Q: Prepayment with C3, motivation and capital deployment?

A: Ross and Brian said it's about having available credit for episodic transactions, being opportunistic with cash and having the option to use available cash or credit line as needed.

Q: NLEX performance, driving factors and sustainability?

A: Brian said high performance due to volume and stable prices after pandemic highs, and expected to continue given ongoing volume and potential for upside.

Q: AI impact?

A: Ross said the team is embracing AI, which helps in finding clients, helping clients, and solving situations, expected to move the needle positively.