Heritage Global (HGBL) investor relations material

Executive summary

• Q1 2026 revenue was $12.7 million, down from $13.5 million in Q1 2025, with net income of $0.7 million ($0.02 per diluted share), reflecting a year-over-year decline and profit below internal goals.

• Operating income was $1.0 million, down from $1.4 million, with core business units growing but DebtX posting a larger-than-expected loss due to post-acquisition ramp-up and seasonality.

• Gross profit increased 4% to $8.3 million, driven by higher-margin service revenue and the inclusion of DebtX results.

• Management remains focused on growth, investing in technology, people, and business development, and expects DebtX to contribute more significantly in coming quarters.

• Cash and cash equivalents declined to $11.6 million from $20.5 million at year-end 2025, mainly due to the DebtX acquisition and capital expenditures.

Financial highlights

• Services revenue was $6.9 million, asset sales revenue was $5.8 million; services revenue increased year-over-year while asset sales declined.

• Adjusted EBITDA was $1.4 million, down from $1.8 million in Q1 2025.

• Net income margin for Q1 2026 was 5.6%, down from 7.9% in Q1 2025.

• Selling, general and administrative expenses increased 17% to $7.6 million, primarily due to the DebtX acquisition.

• Earnings from equity method investments rose to $0.5 million, mainly from joint venture real estate transactions.

Outlook and guidance

• Management anticipates a record year in the subprime auto sector and expects DebtX to stabilize and contribute more in coming quarters.

• Growth plans are in place across all divisions, with a focus on execution, organic growth, and additional acquisitions.

• Gross margin target is up to 70% with strong financial asset performance.

• Capital resources are considered sufficient for ongoing operations and investment needs.

• Management expects to fund operations and debt service for at least 12 months through working capital, cash flows, and available credit.