Heritage Global (HGBL) Q3 2026 Earnings Call Transcript

DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Ross Dove
• Chief Financial Officer - Brian J. Cobb

TAKEAWAYS

• Revenue -- $14.6 million, an increase from $11.4 million in the third quarter of 2025.
• Net Income -- $1 million or $0.03 per diluted share, compared to $600,000 or $0.02 per diluted share in the prior year quarter.
• Consolidated Operating Income -- $1 million, representing a decrease from $1.3 million year over year.
• Adjusted EBITDA -- $1.4 million, compared to $1.6 million in the third quarter of 2025.
• Financial Assets Operating Income -- $800,000, reflecting a decline from $1.6 million in the prior year period.
• Joint Venture Investment -- $2 million, used to acquire two pharmaceutical sites in Colorado during the third quarter.
• Total Cash Balance -- $15.6 million as of Sept. 30, 2026.
• Net Available Cash -- $6.4 million, representing total cash after removing amounts due to clients.
• Stockholders' Equity -- $53.1 million at quarter end, compared to $67 million at the end of 2025.
• Net Working Capital -- $8 million as of Sept. 30, 2026.
• Revolving Line of Credit -- $10 million, established with C3 Bank to provide financial flexibility through Jan. 2028.
• Credit Facility Debt -- $2 million, drawn to fund the initial cash outlay for the pharmaceutical joint venture.
• Specialty Lending Operating Loss -- $250,000, resulting from the ongoing wind-down of the HGP business.
• Planned Auction Volume -- Over 5,000 lots of pharmaceutical and biotech assets, scheduled for monetization through five auctions following the Colorado site acquisition.
• Asset-Light Transition -- Management indicated a strategic focus on three complementary asset-light sectors as the company winds down legacy specialty lending operations.
• Acquisition Performance -- Management stated that Boston Note exceeded early goals while DebtX results did not meet internal expectations.

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RISKS

• CFO Cobb stated, "Results from DebtX did not meet our expectations for the third quarter," noting a lag in monetizing commercial real estate loans in the current marketplace.
• CEO Dove described the business of HGP as "problematic and a distraction," while detailing the company's efforts to wind down the legacy segment and focus on core operations.

SUMMARY

Heritage Global Inc. (NASDAQ:HGBL) reported third quarter results characterized by revenue growth and a strategic transition toward asset-light operations. Management highlighted the wind-down of the HGP specialty lending business to focus on industrial and financial asset services. The Industrial Assets division reported a return of larger transactions and diverse auction activity across the semiconductor, transportation, and metalworking sectors. While recent acquisitions showed mixed initial results, the company maintained its outlook for the remainder of 2026 and cited a growing pipeline of opportunities for 2027.

• CEO Dove stated, "The pendulum has swung in our favor now," noting that corporate layoffs and Chapter 11 filings from the previous two years are creating a trailing supply of assets for auction.
• Management noted that the industrial assets division is evaluating strategic options for its Colorado real estate sites, including potential leasing, sale, or development starting in 2027.
• CFO Cobb stated, "The wind down of HGP is progressing as planned," and indicated that the company aims to resolve final legacy items by the end of the fourth quarter.
• CEO Dove stated, "We are looking to expand our sales force to reach a broader audience," regarding efforts to improve commercial real estate deal flow at DebtX.
• Management reported that the Boston Note acquisition, completed in late July, integrated quickly and has exceeded early performance objectives.
• The company is prioritizing organic growth and internal synergies within its core business units over immediate new mergers and acquisitions.

INDUSTRY GLOSSARY

• Asset-light: A business model that focuses on providing services and managing assets rather than owning heavy physical infrastructure or property.
• Charge-off: A debt that a company has determined is unlikely to be collected and has written off as a loss.
• Forward-flow: A contract to purchase a certain volume of assets, such as loans, over a specific period at pre-agreed terms.
• HGP: Heritage Global Partners, a subsidiary of the company involved in industrial asset auctions.
• NOI: Net Operating Income, a measure of the profitability of an investment after operating expenses but before taxes and interest.
• Nonaccrual status: A debt or loan that no longer generates its stated interest because the borrower has failed to make payments for a period of time.
• Nonperforming loan: A loan in which the borrower is in default and has not made scheduled payments for a specified period.
• NPL: Nonperforming loan.
• Specialty Lending: A segment of the company that provided credit facilities, currently in the process of being wound down.
• Trailing benefactor: A business that realizes gains from economic activities, such as liquidations or bankruptcies, that occur months or years after an initial economic shift.

Full Conference Call Transcript

Operator: Thank you for your continued page Your meeting will begin shortly. If you need assistance at any time, please press 0. November our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance, at any time, please press 0, and a member of our team will be happy to help you. Anybody there? Thank you, and good afternoon, everyone. Before we begin, I would like to remind everyone that this conference call contains forward-looking statements based on our current expectations projections about future events and are subject to change based on various important factors.

In light of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements which speak only as of the date of this call. For more details on factors that could affect these expectations, please see our filings with the Securities and Exchange Commission. Now I would like to turn the call over to Heritage Global's Chief Executive Officer, mister Ross Dove. Ross, please go ahead.

Ross Dove: Thank you, John. Welcome, everyone, to our third quarter call. Thank you all for joining. Before Brian walks you through the numbers in detail, I want to just take a few moments to give you my thoughts on what the numbers say to me from my upfront close view. Making $1 million in NOI was positive movement forward but there is more to digest. it is also about how we made it. And what worked and what still needs work. On the real good news front, we had a great industrial quarter with diverse auction sectors and larger transactions.

It was highlighted by also winning many quality assignments for Q4 along with a major acquisition of plant and real estate in Longmont and Boulder, Colorado with our great partner team. Our pipeline now has multiple large opportunities that include other campuses and potential acquisitions which is really very refreshing. After a pause and slowdown, We are back with fences to swing at. A feeling many sold projects are now really in motion. We have got our seat belts fastened to drive it hard and fast. As I often say, we are not the leading indicator, but the trailing benefactor. And in the marketplaces, we see they are open for business across multiple sectors and we are very busy.

On the financial asset side, financial assets have lots of promise but also plenty of work to be done. We are winding down the business of HGP that was problematic and a distraction and putting all of our focus now completely on 3 complementary asset light sectors. We have very solid inlets and indicators that the business has a bright finish to the year and well beyond. Our 2 newest acquisitions have had mixed results with Boston Note exceeding early goals and DebtX not yet where it needs to be or where it can and will be and should be.

We liked our plan of integrating the offering of all 3 and expanding the service lines and believe in 2027 getting our capability and our stories out to the market along with the HTC cost eventually gone and can finally compete, we are poised to capture our full potential. Morale and confidence in our team is high for a strong close to 2026 and a great next year and beyond. We are very confident, and we feel good about our position today. Brian, take it away.

Brian J. Cobb: Thank you, and welcome, everyone. We delivered a profitable third quarter that reflects solid execution across our core business, led by a strong performance from our Industrial Assets division. Consolidated operating income was $1 million in the third quarter of 26 compared to $1.3 million in the prior year quarter. Our Industrial Assets division reported operating income of $11.5 million in the third quarter of 26 compared to approximately $900 thousand in the third quarter of 25. In our Financial Assets division, we reported operating income of approximately $800 thousand in the third quarter of 26 compared to $1.6 million in the prior year quarter.

Our Industrial Assets division had a strong quarter, highlighted by healthy auction volume and a return of larger scale transactions. The industry range of our auction activity was also more diverse than prior quarters. As we executed auctions across the transportation, metalworking and semiconductor sectors, among others, in addition to continuing our long standing biotech and pharma activity. We are encouraged by the depth and quality of our auction pipeline as we move into the fourth quarter and into 2027. During the quarter, HCP also made a $2 million in a joint venture that acquired 2 pharmaceutical sites in Colorado.

We currently have multiple planned auctions to monetize the equipment assets and are evaluating strategic options to maximize real estate potential of the sites through lease, sale, or development. In our refurbishment and resale business, ALT delivered another good quarter as we have continued to upgrade the quality of our inventory and add assets to the business. Our Financial Assets division delivered another profitable quarter as NLEX reported solid results, and we continue to see steady activity across the charge off and non performing loan space. We are also very pleased with the early performance of Boston Note, which we acquired in late July, as the team delivered strong execution during the quarter while integrating quickly with the business.

Results from DebtX did not meet our expectations for the third quarter However, we remain confident in the business. We continue to see real opportunities in the CRE marketplace, and we are strengthening our sales and marketing efforts to better drive deal flow. Meanwhile, the wind down of HGP is progressing as planned. And is allowing us to sharpen our focus on growing our core capital light business. Additional consolidated financial results include the following: revenue was $14.6 million in the third quarter of 26, compared to $11.4 million in the third quarter of 25. Adjusted EBITDA was $1.4 million compared to $1.6 million in the prior year period.

Net income was $1 million or $0.03 per diluted share compared to approximately $600 thousand or $0.02 per diluted share in the third quarter of 25. Our balance sheet continues to be a strength. Stockholders' equity was $53.1 million as of 9/30/2026, compared to $67 million at 12/31/2025, with net working capital of $8 million Our cash balance reflects a total of $15.6 million as of 9/30/2026, And after removing amounts due to our clients, our net available cash balance was $6.4 million And further, in September, we strengthened our financial flexibility by entering into a new $10 million revolving line of credit with C3 Bank that runs through January 2028, replacing our prior facility that matured this past July.

As of 9/30/2026, we had a $2 million outstanding balance on the facility drawn in connection with the initial cash outlay for our most recent HCP joint venture investment. And with that, Ross, I will turn it back over to you.

Ross Dove: Thank you, Brian. So watching my son run 100-mile races it is changed my thinking about quarters. I do not see them as finish lines anymore, but actually as red stops. A time to take a quick breather and refuel. Head back up and down the hills until you run the tape, and then get ready for the next 100-miles. it is a long race, and, we can take a few moments again in 90 days to talk about it again. If you guys wanna chat sooner, just reach out. Because we can run and talk at the same time. We are ready now for any questions. We thank you for participating.

And we look forward to continued participation and us performing at a level to get you excited. Thanks a lot, guys.

Operator: Thank you. If you would like to ask a question, press *1 on your keypad. To leave the queue at any time, press *2. Once again, that is *1 to ask the question. Once again, that is *1 if you would like to ask a question. We will take our first question from George Sutton with Craig Hallum. Please go ahead. Your line is now open.

George Sutton: Hey, guys. Afternoon. This is Logan on for George. So Ross, I wanted to start with DebtX. I mean, I hear your comments that the performance has not been kind of up to par so far this year. Just wonder if you could give us some more details and what is driving that. Is it just performance? Has something changed in the market? I guess, can you just speak to has your perspective on that business changed at all as we head into next year?

Ross Dove: I remain just as excited about the business as I was before we bought it and after we closed it. So it has not changed my encouragement But it is been slower than I expected. In a marketplace where, you know, we have got $1 trillion of commercial loans coming due. And there is been a lot of struggle with a lot of companies to refinance them. I just think there is been a bit of a lag in my anticipation of how fast we would be able to jump in and monetize those. So you know, the solution, if there is a solution, Some of it is timing, to be honest with you.

And, you know, they are forecasting a much stronger Q4 So it is a little bit of a wait and see there. But we are not operating it like a wait and wait and see company. We are looking to expand our sales force to reach a broader audience. there is more sales coming from non banks than traditionally where most of the CRE sales coming from banks selling the assets. Plenty of assets have been transferred to nonbanks who are also looking to monetize assets. So we are just gonna expand and broaden our coverage and keep pushing forward in a market that we know is solid and growing.

So we are ambitious about proving the acquisition right, and confident we are going to.

George Sutton: So it is nice to see the auction results this quarter, and it certainly sounds like you know, I know you guys have been doing work across some different verticals. It sounds like you are seeing good momentum So I just wonder if you could speak a little bit to kind of what signals you are seeing to give you confidence that, you know, quarters like this are repeatable going forward.

Ross Dove: So like I said many, many times, we are not the leading indicator We are the trailing benefactor for what is happened over the last 2 years. And what is happened over the last 2 years is we saw a lot of layoffs. We saw a lot of companies file Chapter 11s. Many of those have been converting to 7s now. As there is been a time lag. And on the layoffs, obviously, those layoffs produce assets 6 months, a year, and 1.5 years later. So the pendulum has swung in our favor now.

And we have just seen a lot of larger assets some of which we have been able to monetize in a very solid Q3 some of which we will monetize in Q4. And the pipeline has multiple large opportunities in it right now across multiple sectors. You know, there is a lot of potential trucking auctions. there is a lot of potential food and process auctions. there is a lot of medical device potential auctions.

So there is lots of broadened opportunity besides just our core business of the pharma and the bio So our core business is now expanding to a lot of different core business sectors, which bodes well for not just Q4, but it bodes very well for 2027.

George Sutton: Okay. Last 1 for me. I think you referred to NLEX as kind of performing steadily. You just walked through maybe the supply and demand side over there and just talk about kind of what is the limiting factor on growth right now?

Ross Dove: So right now, we are doing a lot of sales. The prices have slowed down a bit. From the rising tide you saw, you know, kind of during the pandemic and right post pandemic, because there is actually increased supply but there is increased supply at a little lower price. So that means we need more volume to grow which we are working on and signing up more new forward-flow clients. Why do I feel really good about it? Because what has not slowed down is the capital raise in alternative lending. So as the capital raise in alternative lending continues, over a period of time, that turns into sales for us. And, you know, we.

We have seen now that a lot of the nonperforming loans are beginning to convert to charge-offs. They were nonperforming loans 6 months ago, 9 months ago, a year ago. So you know, if you just look at it, and step back and say, you know, are we getting more and more charge offs or less charge offs? it is not decreasing and it is growing. So it is us getting new clients there are a lot of new clients out there. That are fintech clients that are just starting to see that over the last 2 or 3 years, they have created part of their asset portfolio that needs to be monetized in an NPL fashion.

So I think we got a strong couple of year run. Okay.

George Sutton: Thanks for taking the questions.

Ross Dove: Thank you for asking.

Operator: Thank you. We will take our next question with Mark Argento with Freedom Broker. Please go ahead. Your line is open.

Ross Dove: I do not hear. Hello? Anybody? Can you hear me? We can now.

Brian J. Cobb: Yes.

Ross Dove: Yes. Thank you for taking the question. My question will be on the capital allocation. So following the investments in DebtX and Boston Note, how are you thinking about capital allocation priorities going forward? Is the focus now more on scaling these businesses or do you continue to see opportunities for additional investments? So it is a good question. We have you know, very active board discussing capital allocation. And what is the best use of our money and what is the best use of our funds. And there is multiple choices. Right now, I would say M&A does not have the same urgency it did before our last 2 acquisitions.

Right now, we really wanna focus internally on getting everything in sync, finding all of the synergies in all of our core businesses, there is lots of opportunities that look like they are coming up. To basically put out capital and potentially larger capital on industrial acquisitions So we are really kind of more focused on building our capital building an amount of cash we have available, then we are deploying it. You know, there. there is talk obviously always about it is important to have a buyback program in place. That exists.

And there is talk about always wanting to have capital available If an M&A transaction comes up, that it is just such a good fit that we do not wanna wait But if you ask me, the primary concern right now is let's grow organically what we have as core. Alright. Understood. Thank you. And 1 more question for me about the new Your new joint venture investment. Could you please provide some additional color on that investment in pharmaceutical facilities in Colorado. How does this opportunity fit into your broader industrial asset strategy? Right. So you are not really gonna see the revenue this year. We are doing sales this year of the capital assets.

So it is a significant amount of sales this year. We are doing 5 auctions. Of over 5 thousand-plus lots of pharma assets. Biotech assets, etcetera. That will bring back a substantial amount of money But until we monetize the real estate, you know, which is multiple buildings on you know, 2 campuses, you will not see the revenue profit. So that is anticipated not to begin until 2027 and very possibly not to be completed until 2028. There will be some significant potential expenditures and decisions to make. So look at that. As something you will see from a P&L basis. Next year and the year after. Okay. Got it. Thank you. That will be it for me.

Thank you for asking.

Operator: Thank you. Once again, that is *1. if you would like to ask a question. We will take our next question from Greg Weaver with Investo Capital. Please go ahead. Your line is open.

Greg Weaver: Hi, Ross. Thanks for taking the question here. Just a quick 1 on this HGP wind down. Are there any costs running through the P and L that we see in Q3 here?

Ross Dove: I will give that to my CFO, Brian.

Brian J. Cobb: Yeah. Hi. The cost related to the wind down specifically, there is not much. So you have a immaterial amount of legal costs going through Q3 and probably into Q4. But mainly, we are looking at operating costs. So when attacking this wind down, I am really thinking about how to limit operating costs, which is mainly made up of administrative and compensation. And quickly wrap it up so those costs do not trail out multiple quarters into 2027 and beyond. So when you think about specific wind down costs, right now, they are not significant.

Greg Weaver: And the admin costs in the quarter, there is no-- is there any kind of revenue to offset that or it is just straight up cost?

Brian J. Cobb: In Q3, we had a minor amount of revenue from a servicing standpoint, but all of our assets are held in nonaccrual status at cost recovery. So not much. You will see on our segment reporting that the specialty lending segment had a $250 thousand approximate, cost. In Q3. I would expect that to be somewhat similar in Q4 and wind down starting in the New Year.

Greg Weaver: Okay, helpful. Thanks, Brian. And just any color on any recovery hope there? It sounds like you were pretty aggressive with the write down and hope that maybe something will roll back. But any thoughts there on progress or timing?

Brian J. Cobb: Well, on timing. On the timing side, I think that our goals are to work through this as quickly as possible, and the best case scenario would be in Q4. I think I will hold on any type of data on recovery right now as we are kind of right in the middle of working through the last item. So that is probably more of a report in our March call.

Greg Weaver: Okay. Appreciate the color. Thank you.

Brian J. Cobb: Thank you.

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

Ross Dove: Well, thank you all for joining. We are feeling pretty darn good about the go forward. Like I said earlier, there are things to fix, but I do not know if there is ever been a time in my career where everything was perfect and there was nothing to fix. But I like our plan. And I like our go forward plan. And I like our prospects. So we are we are feeling confident but we are not feeling overconfident because we know we have work to do but we are ready to get to work. So thank you all, and we will talk soon.

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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