Heritage Global (NASDAQ:HGBL) Chief Executive Officer and board director Ross Dove said the company is focused on increasing asset supply across its industrial and financial asset businesses, arguing that current market conditions could support growth in both segments.
Speaking during an investor presentation, Dove described Heritage Global in simple terms as a liquidation business. “I’m Ross Dove, I’m a liquidator,” he said, adding that the company primarily sells machinery and equipment when businesses no longer need those assets or when companies are distressed and closing facilities.
Industrial Asset Supply Seen Increasing
Dove said supply is increasing on the industrial side because some companies are struggling and laying off employees, while others are changing manufacturing processes, including through the use of artificial intelligence. He said both trends can create surplus equipment.
“The simplest question of all” for investors, Dove said, is whether Heritage Global will get more supply of assets to sell. He said the company’s industrial operations include an auction company, a valuation company and ALT, which buys and sells used life science equipment.
Dove also pointed to sustainability pressures as a driver of secondary-market activity. He said companies that previously might have scrapped equipment or prevented competitors from acquiring it are now under pressure to return assets to the circular economy.
On the industrial side, Dove said the company still has gaps to address. He said Heritage Global does too much business in North America and not enough in Europe, and does more business in manufacturing assets inside buildings than in construction-related assets outside buildings. He said expanding sectors and geographies is part of the company’s plan.
Financial Asset Business Targets Consumer and Commercial Debt
Dove also discussed Heritage Global’s financial asset business, including NLEX, which he said developed from work related to the savings and loan crisis and later commercialized a database of buyers. He said the business built marketplaces for charged-off credit lines, auto loan deficiencies and other residual assets for lenders.
Dove said fintech has expanded the company’s opportunity set, particularly through buy now, pay later products and peer-to-peer loans. He also said a surge in subprime auto lending and higher consumer credit card debt could create additional future supply for the company’s debt marketplace.
“The guy that makes a market in consumer debt will win,” Dove said, adding that Heritage Global believes it is positioned to benefit from increases in consumer debt.
Dove also addressed the company’s acquisition of DebtX, which he said was intended to fill a gap in commercial real estate debt. He said $1 trillion of commercial real estate mortgages are coming due and that some loans may move from regional banks to specialty lenders or otherwise enter the market.
Growth Plan Emphasizes Hiring and M&A
Dove said Heritage Global is investing in business development staff, describing the company’s business as one that still depends heavily on direct outreach. “The more people we talk to, the more supply we get,” he said.
He said the company has been “stuck” making roughly $6 million to $8 million a year and that his goal is to get it “unstuck.” Dove said the company’s objective is to grow from approximately $6 million or $7 million in earnings to $14 million or $15 million over time.
Dove said Heritage Global intends to show investors progress by reporting results across its business lines, including HGP, NLEX and DebtX, and allowing investors to evaluate whether the plan is being executed.
Dividend, Stock Decline Discussed in Q&A
During a question-and-answer session, Dove was asked about initiating a cash dividend. He said the board has “healthy debate” over capital allocation, including dividends, stock buybacks and reserving cash for growth initiatives such as M&A and hiring.
Dove said he is not opposed to a dividend and noted that some investors have told him they cannot buy the stock unless the company pays one. He also said Heritage Global could afford a small dividend if that were the decision, while noting that no decision had been made.
Asked why the stock price had declined in recent years, Dove cited lower earnings compared with prior periods and a bad loan in the lending business that led to a loan loss reserve. “Earnings will fix everything, and earnings will cure all,” he said, adding that his job is to grow the company.
Dove said the largest addressable market may be DebtX because of the potential volume of commercial loans for sale. He also said buying machinery and equipment as a principal has historically been the company’s most profitable business, noting that smaller transactions can have an outsized effect on Heritage Global because of the company’s size.
About Heritage Global (NASDAQ:HGBL)
Heritage Global Inc operates as a global advisory and disposition firm specializing in the valuation, sale and auction of surplus and idle assets. Through its subsidiaries, Heritage Global Partners and Heritage Global Digital, the company delivers comprehensive end-to-end solutions, including asset appraisals, advisory services and multi-channel auction platforms. Its service offerings encompass industrial machinery and equipment, real estate, storage lockers and specialty assets, all designed to maximize recovery values for clients.
The company leverages both online and live in-person events to facilitate timely and transparent sales across diverse asset classes.
