• Cash Flow: $9 million for the year, $2 million in Q4.
• Industrial Assets Division Operating Income: $800,000 in Q4 2024, down from $1.6 million in Q4 2023.
• Financial Assets Division Operating Income: $1.9 million in Q4 2024.
• Brokerage Business Operating Income: $1.7 million in Q4 2024, down from $2.7 million in Q4 2023.
• Consolidated Operating Income: $1.5 million in Q4 2024, down from $4.6 million in Q4 2023.
• Adjusted EBITDA: $2.1 million in Q4 2024, down from $4.9 million in Q4 2023.
• Net Loss: $200,000 or $0.01 per diluted share in Q4 2024, compared to net income of $4.9 million or $0.13 per diluted share in Q4 2023.
• Stockholders' Equity: $65.2 million as of December 31, 2024, up from $61.1 million as of December 31, 2023.
• Net Working Capital: $18.5 million as of December 31, 2024.
• Share Repurchase: Approximately 1.3 million shares repurchased in fiscal 2024.
• Mortgage Loan Agreement: $4.1 million for new corporate headquarters.

• Warning! GuruFocus has detected 6 Warning Signs with HGBL.

Release Date: March 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Heritage Global Inc (NASDAQ:HGBL) maintained profitability across all business units throughout 2024 despite challenging conditions.
• The company reported a strong cash flow position with $9 million for the year and $2 million in Q4.
• Heritage Global Inc (NASDAQ:HGBL) has near zero debt, providing financial flexibility.
• The company is experiencing a robust and growing market for auctions, driven by high default volumes and increased demand for used equipment.
• Heritage Global Inc (NASDAQ:HGBL) has expanded its warehouse and staffing to meet anticipated demand, positioning itself for growth in 2025.

Negative Points

• The industrial assets division saw a decline in operating income, reporting $800,000 in Q4 2024 compared to $1.6 million in the prior year.
• The financial assets division's brokerage business recorded a decrease in operating income from $2.7 million in Q4 2023 to $1.7 million in Q4 2024.
• The company recorded a net loss of $200,000 in Q4 2024, partly due to a $1.3 million adjustment to the income tax valuation allowance.
• Heritage Global Inc (NASDAQ:HGBL) faced challenges with delayed projects in Q3 and Q4, impacting larger deal closures.
• The company's stock is perceived as undervalued, trading at a lower P/E ratio compared to peers, which may affect investor sentiment.

Q & A Highlights

Q: Did you increase any provisions on the loan book, and how does this relate to the tax asset side? A: We have not significantly changed the reserve against the loan book. The tax evaluation allowance changed due to lower forecasts for 2025, primarily because of the loan book's non-accrual status. - Brian Cobb, CFO

Q: What needs to happen for the financial asset business to grow, given the favorable macro backdrop? A: There's a timing issue between defaults and charge-offs. With defaults increasing, we expect more charge-offs, which is our market. We are optimistic about the next 6 to 24 months due to this expected increase in product flow. - Ross Dove, CEO

Q: Can you discuss your increased capacity to serve the industrial market? A: We acquired a new building for more space to relocate assets and expanded our team to analyze and value assets. We are preparing for a wave of plant closings and anticipate being very busy. - Ross Dove, CEO

Q: What types of assets do you anticipate building up in the NLEX business? A: We are focusing on defaults in credit cards and auto loans, as higher default rates lead to more charge-offs. We see more sellers entering the market due to pressure to alleviate non-performing loans from their balance sheets. - Ross Dove, CEO

Q: How do you plan to finance potential M&A deals? A: We prefer not to use our stock due to its low price. We would use a combination of debt and equity, with $15 million-plus cash in the bank and a $10 million credit line. - Ross Dove, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.