Heritage Global (HGBL) investor relations material

Business overview and strategy

• Focuses on asset services, specializing in selling and valuing unregulated, hard-to-sell assets, with operations in both industrial and financial asset markets.

• Industrial side includes auctioning factory, research, construction, and agricultural equipment for large corporations and insolvency cases, using both commission and principal models.

• Financial asset side centers on brokering non-performing loans, primarily as a pure broker to avoid conflicts with buyers, and recently expanded into commercial real estate loans through the DebtX acquisition.

• Organic growth is driven by trends such as AI-driven automation, surplus asset cycles, and emerging sectors like buy now, pay later, with a focus on expanding business development and sector reach.

• Executive compensation is performance-based, with key leaders receiving significant commissions tied to sales, reflecting the importance of retaining top talent.

Market trends and outlook

• Anticipates a significant increase in surplus industrial assets over the next four to five years due to manufacturing modernization and AI adoption, creating more opportunities for asset sales.

• Expects a surge in non-performing consumer and commercial loans, driven by rising credit card debt and commercial real estate challenges, positioning the company for growth in these segments.

• Subprime auto loans and buy now, pay later defaults are highlighted as near-term growth areas due to recent economic shifts and consumer behavior.

• The company is bullish on future asset supply and believes its execution capabilities will allow it to capitalize on these trends.

Capital allocation and M&A

• Recent acquisition of DebtX aims to strengthen the commercial real estate loan business, with a focus on proving out this acquisition before pursuing larger deals.

• Plans for four to seven additional bolt-on acquisitions over the next three years, but no major deals expected this year.

• Buyback program is in place and expected to be used more actively, with capital allocation decisions balancing between M&A and buybacks depending on regulatory and strategic considerations.