Q4 2023 Heritage Global Inc Earnings Call

Operator: www. HeritageGlobal.com and Heritage Global

Uh huh.

[music].

John Sutton: I'm John Sutton. I'll see you next time, www.HeritageGlobal.com Ladies and gentlemen, greetings and welcome to the Heritage Global fourth quarter and year-end 2023 Earnings Conference. At this time, all participants are in a listen-only mode.

Ladies and gentlemen, greetings and welcome to the Heritage Global fourth quarter and year end 2023 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero.

John Nesbett: A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, John Nesbett, from IMS Industrial League. We've got, Thank you and good afternoon, everyone. Before we begin, I'd like to remind everyone that this conference call contains forward-looking statements based on our current expectations and projections about future events, which 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. You 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'd like to turn the call over to Heritage Global's Chief Executive Officer, Mr. Ross Dove. Ross?

On your telephone keypad as a reminder, this conference is being recorded it is now my pleasure to introduce your host John Nesbitt with IMS Investor Relations. Please go ahead.

Thank you and good afternoon, everyone before we begin I'd like to remind everyone that this conference call contains forward looking statements based on our current expectations and 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'd like to turn the call over to Hertz Global Chief Executive Officer, Mr. Rostov Ross.

Ross M. Dove: Thank you, John. Good evening, and thank you all for joining us. This is a fun one.

Thank you John.

Good evening and thank you all for joining.

This is a fun one.

Ross M. Dove: Even as a perennial optimist, this quarter exceeded my expectations, with us blowing by the $4 million goal. For Q4, with $4.6 million in operating income, it brought our annual NOI past $14 million. I will soon turn the call over to Brian for a moment to give you the details in-depth. Then I'll come back and try to add some color on how and why and where we're headed. When I was 12 and brought home a not-so-typical straight-A report card, my mother, Zelda, sat at the kitchen table.

Even as a perennial optimist this corner exceeded my expectation.

With us globally by the $4 million goal.

For Q4 with 4.6 million of operating income it's brought our annual NOI past 14 million.

I want to turn the call over to Brian in a moment to give you the details in depth. They don't come back and try to add some color on how and why and where we're headed when I was 12 and brought home and not so typical straight a report card.

Mothers Zelda down at the kitchen table you opened it up.

Ross M. Dove: She opened it up and said, Now, kid, can you just keep doing this? Well, that's my goal here at Heritage Global. Thank you all. Brian, you're up.

No Kid can you just keep doing this.

That's my goal here at Heritage Global.

Thank you all right here in Europe.

Brian J. Cobb: Thank you, Ross, and welcome again to those tuning in. We greatly appreciate your ongoing support. Also, I want to thank the entire Heritage team for an outstanding year. I'm pleased to announce that we recorded full year 2023 operating income of $14.3 million. This was another strong quarter and year for Heritage Global as we saw continued progress across the business. We're continuing to see positive trends in our industrial assets division, with heightened macroeconomic pressures driving continued progress in our auction business. In our core auction and resale segments, we saw growth year over year in the volume of transactions, with both segments increasing their ability to work in tandem to source used assets for resale and win auction contracts. The overall division's operating income was $7.8 million, including no earnings from joint ventures involving real estate, as compared to $9.2 million during 2022, which included approximately $5.1 million of operating income from joint ventures involving a real estate component. While the auction business tends to be a bit lumpier quarter to quarter, our pipeline remains strong, and we anticipate continued momentum into 2024. Our Financial Assets Division reported a strong quarter as record consumer debt led to higher volumes of charged off-credit cards and non-performing loans.

Thank you Ross.

And welcome again to those tuning and we greatly appreciate your ongoing support.

Also I want to thank the entire heritage team for an outstanding year.

I am pleased to announce that we recorded full year 2023 operating income of $14 3 million.

This was another strong quarter and year for heritage Global as we saw continued progress across the business.

We're continuing to see positive trends in our industrial assets division with heightened macroeconomic pressures driving continued progress in our option business.

In our core auction and retail segment, we saw growth year over year in the volume of transactions when ball segments, increasing their ability to work in tandem to SAR skus asset per resale and win auction contracts.

The overall division's operating income was $7 8 million, including no earnings from joint ventures involving real estate.

As compared to $9 2 million during 2022, which included approximately $5 1 million of operating income from joint ventures involving a real estate component.

While the auction business tends to be lumpier quarter to quarter, our pipeline remains strong and we anticipate continued momentum into 2024.

Our financial assets Division reported a strong quarter as record consumer debt has led to higher volumes of charged off credit cards and nonperforming loans.

Brian J. Cobb: And as a result, operating income for the division was up 43% and 83% for the fourth quarter and full year ended December 31, 2023, respectively, when compared to the prior year period. This year's performance within the Financial Assets Division was primarily driven by our brokerage segment, with operating income of $8.9 million, an increase of $4.2 million or 90%. This segment has expanded its number of clients and is more directly correlated with the increase in the volume of charged-off and non-performing loans on the market.

And as a result operating income for the division was up 43% and 83% for the fourth quarter and full year ended December 31, 2023, respectively, when compared to the prior year period.

This year's performance within the financial assets Division was primarily driven by our brokerage segment with operating income of $8 9 million, an increase of $4 2 million or 90%.

This segment has expanded its number of clients and is more directly correlated with the increase in volume of charged off and nonperforming loans on the market.

Brian J. Cobb: Our specialty lending segment also made good progress in 2023, reaching a gross investment balance in notes receivable of $38.4 million, an increase of $16.3 million as compared to the prior year. The segment contributed operating income of approximately $1.9 million for the full year, up 54% when compared to 2022. And as a reminder, the operating income from our lending segment includes the effect of new accounting guidance, which requires companies to estimate and reserve for their current expected credit losses. The segment's provision for credit losses during the year was roughly $1.2 million, offsetting both its notes receivable and equity method investment balances.

Our specialty lending segment also has made good progress in 2023, reaching a gross investment balance of notes receivable of $38 4 million, an increase of $16 3 million as compared to the prior year.

This segment contributed operating income of approximately $1 9 million for the full year.

54% when compared to 2022.

And as a reminder, the operating income from our lending segment includes the effect of new accounting guidance, which requires companies to estimate and reserve for their current expected credit losses.

The segment's provision for credit losses during the year was roughly $1 2 million offsetting Boston's notes receivable and equity method investment balances.

Brian J. Cobb: As mentioned last call, we increased the company's non-cash credit loss reserve in the third quarter due to ongoing restructuring efforts with our largest borrower and declined collection rates industry-wide. We reached an agreement with this borrower and expect to recoup the loan, albeit over a potentially longer time period than previously expected. In the fourth quarter, we did not materially increase our credit loss reserve.

As mentioned last call, we increased the Companys noncash credit loss reserve in the third quarter due to ongoing restructuring efforts with our largest borrower and declined collection rates industry wide.

We reached an agreement with this borrower and expect to reshape the alone, albeit over a potentially a longer time period than previously expected.

In the fourth quarter, we did not materially increased our credit loss reserve.

Brian J. Cobb: And sitting here today, we generally don't see elevated risk from our other borrowers, but we continue to diligently monitor the collection rates of our borrowers and industry-wide. Turning to the financial results. Consolidated operating income was $4.6 million in the fourth quarter, compared to $3.1 million in the fourth quarter of 2022. For the quarter, we reported adjusted EBITDA of $4.9 million, compared to $3.4 million in the prior year period.

And sitting here today, we generally don't see elevated risk form or other borrowers.

We continue to diligently monitor the collection rates of our borrowers and industry wide.

Turning to the financial results.

Consolidated operating income was $4 6 million in the fourth quarter compared to $3 1 million in the fourth quarter of 2022.

For the quarter, we reported adjusted EBITDA of $4 9 million compared to $3 4 million in the prior year period.

Brian J. Cobb: Based on the past several years of taxable income and projected operating results for the next five years, we determined that it is more likely than not that we will utilize a significant portion of our net operating loss carry forwards and thus released an additional $2.2 million of our valuation allowance against our deferred tax assets, as compared to $7.1 million during the fourth quarter of 2022. As a result, during the fourth quarter of 2023, we recognized an income tax benefit of $0.4 million compared to an income tax benefit of $6.8 million a year ago. Net income was $4.9 million, or $0.13 per diluted share, compared to net income of $10 million, or $0.27 per diluted share, in the fourth quarter of 2022. The decrease year-over-year was primarily driven by a reduced release of the income tax valuation allowance, as previously stated, offset by improved operational performance.

Based on the past several years taxable income and projected operating results for the next five years.

We determined that it is more likely than not that we will utilize a significant portion of our net operating loss carryforwards industrial leased an additional $2 2 million of our valuation allowance against our deferred tax assets.

As compared to $7 1 million during the fourth quarter of 2022.

As a result during the fourth quarter of 2023, we recognized an income tax benefit of <unk> 4 million compared to an income tax benefit of $6 8 million a year ago.

Net income was $4 9 million or <unk> 13 per diluted share compared to net income of 10 million or <unk> 27 per diluted share in the fourth quarter of 2022.

The decrease year over year was primarily driven by reduced release of the income tax valuation allowance as previously stated offset by improved operational performance.

Brian J. Cobb: Our balance sheet remains strong with stockholders equity of $61.1 million as of December 31, 2023, up from $48.3 million at December 31, 2022, and net working capital currently sits at $11.6 million. I conclude by reiterating what a strong quarter and year this was for Heritage Global, with our business showing continued growth, with some help from macroeconomic tailwinds. And now I'll pass it off to Mr. Ross Dove.

Our balance sheet remains strong with stockholders equity of $61 1 million as of December 31, 2023 up from $48 3 million at December 31, 2022, and net working capital currently sits at $11 6 million.

I'll conclude by reiterating what a strong quarter and year. This was for heritage global with our business showing continued growth with some help from macroeconomic tailwind.

And now I'll pass it off to Mr off debt.

Ross M. Dove: Well, thank you, Brian. Let me just try to take a moment to talk about how we grew in 2023 and kind of get you to really see exactly what's happening. So I'll start with financial. At the end of the day, what happened in financial was the addressable market grew. So our execution has always been where it should be, but it's almost like they were miracle workers, that team at Enlex during a pandemic when there was no supply, to not just stay profitable and consistently profitable but to have zero layoffs. And at the same time, they had zero layoffs to continue building out the technology and to take advantage of the marketplace and increase the headcount with high-performing individuals.

Well. Thank you, Brian let me just try to take a moment to tackle how we grew in 'twenty to 'twenty, three and kind of get you to really see exactly what's happening. So I'll start with financial in the end of the day what happened in financial is the addressable.

The market grew.

Execution has always been what it should be but it's almost like they were miracle workers that team at in legs. During a pandemic when there was no supply.

Not just stay profitable and consistently profitable.

Zero layoffs and at the same time, they had zero layoffs to continue building out the technology and to take advantage of the marketplace and increased head count with high performing individuals.

Ross M. Dove: That was done because the CEO of Enlac, Dave Ludwig, knew better than anybody after 25 years in the industry that the market was going to come back. And it has come back. It's come roaring back.

It was done because the CEO of analytics data Ludwig new bedroom and antibody after 25 years in the industry.

Market was going to come back.

Well the market has come back its come Roaring back we have the highest ever consumer debt.

Ross M. Dove: We have the highest ever consumer debt, so our addressable market is dramatically increased, and we feel really good that over the next two years, as there's a runoff of selling off these assets, NLEG is going to perform at a very high rate. I'll kind of switch now over to the industrial side. On the industrial side, it's all about gas, growth, assets, and sales, and we believe they can grow. Why do we believe they can grow?

The addressable market is dramatically increased.

We feel really good that over the next two years I was there some run off of selling off these assets and less important in the very high rate.

<unk> Suisse.

Over to the industrial side on the industrial side, it's all about gas gross asset sales and we believe they can grow why do we believe they can grow because at the end of the day the ultimate way to grow is the same way it's based upon the <unk>.

Operator: Because at the end of the day, the ultimate way they grow is the same way. It's based on the addressable market, and we're seeing more plant closures, we're seeing more consolidations, and we're seeing more layoffs than we did one or two years ago. We believe that this is in our favor and that we have two different parts of our business that can grow at once. So, I'm very comfortable that we're in a good spot, and I thank you all for listening. And we're open to questions at any time. Thank you. We'll now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question area. You may press star 2 if you'd like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Dress the bull market and we're seeing more plant closures, we're seeing more consolidations and we're seeing more layoffs.

Did one or two years ago, we believe that.

That's in our favor.

Two different parts of our business.

Can grow at once.

So I'm very comfortable that we're in a good spot and I. Thank you all for listening.

Open the questions at any time.

Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It.

It would be necessary to pick up your handset before pressing the star one.

Operator: One moment, please, while we poll for questions. Thank you. Our first question is from Mark Argento with Lake Street Capital Markets.

One moment, please while we poll for questions.

Thank you our first question is from Mark.

Argento Lake Street capital markets. Please proceed with your question.

Mark Nicholas Argento: Please proceed with your questions. Hey Ross, hey Brian, congrats on a decent end to the year and a strong year overall. I'm just looking at 2024. You know, I know you guys are competing.

Hey, Rob Hey, Brian Congrats on a decent.

The year on a strong year overall.

Looking at 2024.

You know I know you guys are comping.

Ross M. Dove: It was, you know, some tough comps here in the last, second half of 2023 compared to the year before. But when you sit back and look, given the back row, yeah, how are you thinking about 2024 in terms of growth? All right, so I'll take that before Brian does, so.

Comps here in the last.

Second half of 'twenty.

23, <unk> compared to the year ago period, but when you sit back and look given the back row.

Yes, how are you thinking about 2020 or in terms of growth.

Alright, well take that before Brian.

No.

Ross M. Dove: When you talk about growth, it's not that easy to talk about it and brag about it after you just came off a record year. So we went from... a record year two years ago to a record year this year, to get a record year every year. I don't even know if even Babe Ruth hit more home runs every year.

When you talk about growth, it's not that easy to talk about it and brag about it. After you just came off a record year. So we went from <unk>.

Our record year, two years ago to a record year. This year two is.

So you get a record year every year.

I don't even know if he then Babe Ruth hit more homeruns every year. So we.

Ross M. Dove: We think we're going to have a solid, high-performance year, and we think we're going to have a good, profitable year, Mark, and whether it's going to be a record year or not is not predictable when you look at the first quarter's forecast alone. So it really depends on whether or not we get a couple windfalls. We're going to have, and I can promise the marketplace, we're going to have a good year. Is that fair enough?

We think we're going to have a solid high performing year and we think we're gonna have a good profitable year, Mark are and whether it's not whether it's going to be a record year or not.

It is not predictable when you look at the first quarter's forecast alone. So it really depends on whether or not we get a couple of windfalls were going to have and.

And I can promise the marketplace, we're going to have a good year is that fair enough.

Ross M. Dove: Yeah, well, I'm just digging in a little bit. I mean, you touched on that the addressable markets look like they're expanding. You kind of grow along with that expansion, trying to figure out how we should think about kind of modeling the out year here, just trying to better understand, you know, trying to get the macro, the broader macro picture and kind of how that translates. You know, do you guys anticipate growing? It doesn't sound like you don't anticipate growing meaningfully, but yet you could, you know, so I was just hoping to maybe try to pin you down a Look, you're the guy who went to college and became an analyst, not me. I'm an auctioneer. What do I think?

Yes.

Digging in a little bit.

Touched on addressable markets with greater expanding.

You can kind of grow along with that.

That expansion.

Just trying to figure out how we should think about kind of model.

Yes.

Just trying to better understand trying to get them back.

The broader macro picture and then kind of how that translates.

Do you guys anticipate growing it doesn't sound like you don't anticipate growing meaningfully, but yes, you could figure it out. So I was just hoping to maybe try to pin you down a little bit more on <unk>.

What how we should be thinking about it.

Well you are the Guy who went to college and became an analysts not me I'm, an auctioneer what do I think.

Ross M. Dove: I think that at the end of the day, the addressable market is bigger than last year, so we should make more money than last year. But at the end of the day, what I don't know is if there's going to be a big win or not, where we buy some large campus and make a couple million dollars, which is a big swing.

<unk> that in the end of the day the addressable market is bigger than last year. So therefore, we should make more money than last year.

But at the end of the day, what I don't know is that there's going to be a big win or not whether we buy.

One large campus didn't make a couple of million dollars, which is a big swing. Those are one time transactional deals what ive tried to tell all of our investors is please don't be an investor that looks at us as a quarter over quarter sequential.

Ross M. Dove: Those are one-time transactional deals. What I've tried to tell all of our investors is, please don't be an investor that looks at us as a quarter over quarter sequential growth company. We're going to be profitable every quarter, but we're going to have spikes in some quarters. Fair enough.

We're a growth company, we were gonna be profitable every quarter, but we're gonna have spikes in some quarters.

Fair enough.

Brian J. Cobb: Just one follow-up. Brian, in terms of the health of the loan book, I know last quarter you took the reserve, or increased the reserve. It doesn't look like you did anything to the reserve in Q4. Does that loan continue to kind of perform as I'm assuming it continues to perform? Any updates there in terms of your confidence level that you have everything accounted for at this point? Yeah, so we had the restructuring, as you all know, in early November and early December. About 25 loan agreements previously were restructured, consolidated, and that allowed the minimum monthly payments to go down significantly for our largest borrower.

One follow up.

Maybe for Bryan in terms of the.

The health of the loan book I know last quarter, you took a reserve.

<unk> increased the reserve.

It looks like you did anything with a reserve in Q4 that won't continue.

To perform.

I'm, assuming the loan continues to perform.

Any updates there in terms of your confidence level.

You have everything accounted for at this point.

Yeah Yeah.

So.

We had the restructuring as you all know.

In early December late November early December.

About 25 alone agreements previously restructured consolidated.

That allowed the minimum monthly payments take out down significantly our largest borrower W feels good about what we did there.

Brian J. Cobb: So we'll feel good about what we did there. On the reserve, we went through a very thorough analysis in Q4, we worked with our borrowers, we worked with our senior lenders, the internal team, our auditors, and we feel very comfortable that the position that we took in Q4 is appropriate given the information that we have. So the ongoing work there is really to stay closely tied to our borrowers and their performance and make sure we're on top of collection rates, the performance of collections, and also remittances and payments from our borrowers and their financial position. So I think there's been a lot of work to get to a point where we're comfortable not changing the reserve from Q3 very much. Thanks guys, I'll hop back in.

On the reserve.

We went through a very thorough analysis in Q4, we work with our borrowers we worked with our senior lenders the internal team our auditors.

And we feel very comfortable that the position that we have taken in Q4 is appropriate given the information that we have.

So the ongoing work there is really to stay.

Closely tied to our borrowers and their performance and make sure we're on top of the collection.

Right.

The performance of collections and also the remittances in payments from our borrowers and our financial position. So I think theres been a lot of work to get to a point, where we're comfortable not changing that reserve from Q3 very much.

Alright, Thanks, guys I'll hop back into queue.

Operator: Our next question is from Bob Sutton. Our next question is from George Sutton with Craig Howland. Please proceed with your question. Thank you.

Our next question.

Sutton.

Our next question is from George Sutton with Craig Hallum. Please proceed with your question.

Thank you.

George Frederick Sutton: Ross, the growth at Enlex was great. I'm curious if you could break it down, if possible, into the macro dynamic versus what you mentioned to be a growing number of customers in that segment, and therefore, how sustainable is growth in that segment? So I think right now, looking at the macroeconomy, we don't need it to change right now, George.

Ross the growth that Ed Lax was great I'm, just curious if you could break it down if possible into the macro dynamic versus what you mentioned to be a growing number of customers in that are in that segment and therefore, how sustainable this growth.

And that in that segment.

So I think right now looking at the.

The macro economy, we don't need to change right now George in other words already we have this enormous amount of runoff that has to get sold over the next two years and a trillion dollars of credit card debt etcetera. So.

Ross M. Dove: In other words, already we have this enormous amount of runoff that has to get sold over the next two years in a trillion dollars of credit card debt, et cetera. I think we're going to be stable for the next two or three years, making profits every quarter. And I don't think that we need anything to make it any different than what it is.

I think we're gonna be stable for the next two or three years, making.

<unk> profits every quarter and I don't think that we need anything to make it any different than what it is the supply is at all time high.

Ross M. Dove: The supply is at an all-time high. Now, speaking of the supply being at an all-time high, that's going to create an attractive environment for buyers. That would suggest that there would be a greater need for loans in your other segment, and I'm just curious about your comfort and interest in growing your loan book given that dynamic. So yeah, I can take this one. All right, go ahead, Brian.

Now speaking of the supply being an all time high that's going to create an attractive environment for buyers.

That would suggest that there would be a greater need for our loans in your other segment and I'm just curious your comfort and interest in growing your loan book given that dynamic.

So yeah I think.

Gotcha.

Go ahead, Brian.

Brian J. Cobb: Yeah, so you're exactly right, George, about the declining collections. Roughly decreased prices, I think, from their all-time highs, maybe 30% or more. So we've been talking in tandem with our borrowers, and there's a lot of excitement in the industry that right now is the time to buy. And we see that with PRA and Encore, the public company financials, are purchasing more. And that's exactly what we're thinking about.

Yeah, So you're exactly right George.

The declining collections roughly.

Roughly decrease prices I think from Merrill time highs, maybe 30% or more.

So we've been talking.

In tandem with our borrowers and there's a lot of excitement in the industry.

Right now is the time to buy and we see that with the PRA and encore public company financials that that they're purchasing more and thats exactly.

Exactly what we're thinking about what I'm focused on now with the team is really managing the risk in the portfolio.

Brian J. Cobb: What I'm focused on now with the team is really managing the risk in the portfolio as well as redeploying our principal remittances in a way that we have higher quality collateral such that, over time, our loan book is one at a lower risk and two more sustainable for the long term. Gotcha. Okay. Offline, Ross, I'd love to hear what non-standard straight A's mean. I can't come up with it myself, but you probably have them, George.

As well as.

Re.

Redeploying our principal remittances in a way that we have higher quality collateral.

Such that over time, our loan book is.

One at a lower risk and to a more sustainable for long term.

Gotcha, Okay offline Ross I'd love to hear what non standard straight A's means I can't come up with it myself.

You probably got them George maybe.

Operator: May, As a reminder, if you'd like to ask a question, please press star one on your telephone key. Our next question is from Michael Diana with Maxim Group. Please proceed with your question. Okay, thank you. Hey, Ross.

As a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.

Our next question is from Michael Diana with Maxim Group. Please proceed with your question.

Thank you Hey, Ross.

Hi, Michael.

Michael Keelan Diana: Hi Michael, your addressable market is growing. And on the financial side, I know traditionally it's been charged off credit cards. In the past, you've also talked about FinTechs, Buy Now, Pay Later, and all that. Are those contributing substantially to the supply? Yeah, they've been really growing.

You talked about.

You're addressing.

Addressable market is growing and on the financial side I know traditionally it's been charged off credit cards in the past you've also talked about syntax buy now pay later and all that are those contributing substantially to the supply.

Yeah, they've been really growing the thing about the fintech companies.

Ross M. Dove: The thing about the FinTech company is that it's not an old-line lending company or big bank that has huge recovery departments. So as they need to sell off assets, they're way more positioned to use an outsourced partner like Enlex than to try to do it themselves. So as their lending requirements keep coming up and as their charge-offs keep growing, there's a higher probability they're going to use us than a money-centered bank who's got 100 people in recovery. It's a true growth part of our business. Okay, that's great. Let me ask you something on the industrial side, American lab trading. I know that's been a big deal. It's been very synergistic. Can you just remind us how that happened? blends in with your other traditional auction business.

<unk>.

Old line pay.

Basically old-line lending companies are big banks did have huge recovery departments. So as they need to sell off assets. There are way more position to use an outsource partner like N legs than to try to do it themselves so as their lending.

<unk> requirements keep coming up and that's their charge offs keep growing there's a higher probability theyre going to use US then a money Center bank Who's got 100 people in recoveries. So it's a true growth part of our business.

Okay. That's great all right, let me ask on the.

Industrial side.

American lab trading.

That's that's been a big.

It's been very synergistic can you just remind us how bad.

Blends in with your other.

Traditional auction business.

So they basically buying so lab equipment, but in the process of buying and selling lab equipment. They find us auctions. They find us assets that may be on their own as American lab trading.

Ross M. Dove: So they basically buy and sell lab equipment, but in the process of buying and selling lab equipment, they find us all, they find us assets that, on their own as American lab trading companies, they wouldn't have bought. For instance, if it's a whole factory, they may have wanted to cherry pick the stuff they wanted to put in the inventory, and they would have passed on the other stuff.

Wouldn't have bought for instance, if it's a whole factory. They may have wanted to cherry pick the stuff. They wanted to put it in inventory and it would've passed on the other stuff. They can now say, okay. We'll pay a premium for these very specific identifiable bull assets, we want to put it in.

Ross M. Dove: They can now say, okay, we'll pay a premium for these very specific, identifiable assets we want to put into our inventory, but we'll pay you for everything. So we've created basically a synergistic growth platform there that, I think, was an intelligent buy for us and also a very good deal for them. All right, great. Thanks, Ron. Thank you. There are no further questions at this time. I'd like to hand the floor back over to management for any closing remarks. This is Ross, the CEO, and I just want to say thank you to everybody who's listened on the call. Thank you to everybody who's invested in us, and thank you to everybody who's put trust in us. We're going to keep our foot on the pedal, and thank you for listening in. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.

Into our inventory, but we'll pay you for everything so we've created basically a synergistic growth platform there that.

I think was.

It was an intelligent by for US and also a very good deal for them Michael.

Alright, great. Thanks Ross.

Yeah.

Thank you there are no further questions at this time I'd like to hand, the floor back over to management for any closing remarks.

Well since there off the CEO and I just want to say, thank you to everybody who listened on the call. Thank you to everybody who's invested with us and thank you to everybody Who's put trust in us.

We're going to keep our foot on the pedal and thank you for listening in.

This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.