Q2 2026 Heritage Global Inc Earnings Call

August 13, 2026

Speaker #1: Hello and welcome, everyone, joining today's Heritage Global Inc. second quarter 2026 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session.

Operator: Hello and welcome everyone joining today's Heritage Global Inc. Q2 2026 earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session.

Speaker #1: To register to press star one on your telephone keypad. Please note this call is being recorded and we are standing by should you need any assistance.

Operator 2: To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Jenn Bilodeau. Please go ahead.

Operator: To register to ask a question at any time, please press star one on your telephone keypad. Please note this call is being recorded. We are standing by should you need any assistance. It is now my pleasure to turn the meeting over to Jenn Bilodeau. Please go ahead.

Speaker #1: It is now my pleasure to turn the meeting over to Jen Bellido. Please go ahead.

Speaker #2: 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.

Jen Bilodeau: Thank you and good afternoon, everyone. Before we begin, I would 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 would like to turn the call over to Heritage Global's Chief Executive Officer, Mr. Ross Dove. Please go ahead, Ross.

Speaker #2: 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.

Speaker #2: For more details on factors that could affect these expectations, please review 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.

Speaker #2: Please go ahead, Ross.

Speaker #3: Welcome, everyone, and thanks for joining us today. Before I turn it over to Brian, to go through the financials, I want to take a few minutes to add some color to our recent news.

Ross Dove: Welcome, everyone, and thanks for joining us today. Before I turn it over to Brian to go through the financials, I want to take a few minutes to add some color to our recent news. Closing Heritage Global Capital was at a point of no return where it became both obvious and necessary on multiple fronts. First, the distraction on management team, then coupled with the continued lag on collections that was not improving. Our board and many investors had weighed in for several months that all focus should now be on growing the business units that are both profitable and strong and core to our future. Honestly, it is a relief moving forward to just do that. It can be hard to fold, but I look at the great poker player Stu Ungar, and maybe he had the best advice of all. Fold to live to fold again.

Speaker #3: Closing Heritage Capital was at a point of no return where it became both obvious and necessary on multiple fronts. First, the destruction on management team; then, coupled with the continued lag on collections, that was not improving.

Speaker #3: Our board and many investors had weighed in for several months that all focus should now be on growing the business units that are both profitable and strong, and core to where our future is.

Speaker #3: So honestly, it's a relief, moving forward, to just do that. It can be hard to fold, but I look at the great poker players—Stu Unger—and maybe he had the best advice of all.

Speaker #3: Fold to live, to fold again. With that, everyone here is moving on, building the business units that are built to last. On the financial side, our acquisition of Boston Note that followed the DebtX acquisition is very exciting.

Ross Dove: With that, everyone here is moving on, building the business units that are built to last. On the financial side, our acquisition of Boston Note that followed the DebtX acquisition is very exciting. With DebtX along with NLEX and Boston Note, we have an asset-light brokerage now that truly serves a broad and diverse range of Financial Assets classes, both performing and non-performing, and covering institutional and private sellers with all the building blocks ready to accelerate growth. It is exciting. On the industrial side, we have expanded our sales force and already see an expanded and more diverse sector pipeline with more bankruptcy assignments and also added transportation and construction products which are additive to our well-respected and key manufacturing and processing auctions. We have built an extremely robust inventory holding at American Laboratory Trading, bringing us more buyers to the Heritage Global Inc. family as well.

Speaker #3: With dead ex, along with NLAX and Boston Note, we have an asset-light brokerage now that truly serves a broad and diverse range of financial asset classes.

Speaker #3: Both performing and non-performing, and covering institutional and private sellers, with all the building blocks ready to accelerate growth. It's exciting. On the industrial side, we have expanded our sales force and already see an expanded and more diverse sector pipeline, with more bankruptcy assignments, and we've also added transportation and construction products, which are additive to our well-respected and key manufacturing and processing auctions.

Speaker #3: We have built an extremely robust inventory holding at ALT, bringing us more buyers to the HG family as well. The charter is simple and up to us.

Ross Dove: The trigger is simple and up to us. Grow what's strong and built to last. With that, I pass it back to Brian.

Speaker #3: Grow it strong and built to last. With that, I pass it back to Brian.

Speaker #4: Thank you, Ross, and welcome, everyone. During the second quarter, we made the strategic decision to substantially wind down Heritage Global Capital. In connection with this wind down, we recorded approximately $21.7 million in non-cash charges during the second quarter, related to the write-down of non-performing loans within our specialty lending business.

Brian Cobb: Thank you, Ross, and welcome, everyone. During Q2, we made the strategic decision to substantially wind down Heritage Global Capital. In connection with this wind down, we recorded approximately $21.7 million in non-cash charges during Q2 related to the write-down of non-performing loans within our specialty lending business. Despite the Q2 impact, we believe this is the right path forward in order to create a stronger platform anchored in the fundamentals of our core business that allows for growth and long-term shareholder value. We recorded a consolidated operating loss of $20.9 million in Q2 2026 compared to consolidated operating income of $2.2 million in the prior year quarter.

Speaker #4: Despite the second quarter impact, we believe this is the right path forward in order to create a stronger platform, anchored in the fundamentals of our core business that allows for growth and long-term shareholder value.

Speaker #4: We recorded a consolidated operating loss of 20.9 million in the second quarter of 2026, compared to consolidated operating income of 2.2 million in the prior year quarter.

Speaker #4: Our industrial assets division reported operating income of approximately 600,000 in the second quarter of 2026, compared to 1.3 million in the second quarter of 2025.

Brian Cobb: Our Industrial Assets division reported operating income of approximately $600,000 in Q2 2026 compared to $1.3 million in Q2 2025. In our Financial Assets division, due to the wind down of HCC, we reported an operating loss of $20.4 million in Q2 2026 compared to operating income of $2.2 million in the prior year quarter. Our Industrial Assets division continued to execute on a steady volume of auction activity, though we've continued to see a similar trend of smaller scale opportunities absent larger auctions in the marketplace. With that said, we're seeing a solid pipeline of activity and remain confident in our ability to capitalize on opportunities in the space as they arise.

Speaker #4: In our Financial Assets division, due to the wind-down of HGC, we reported an operating loss of $20.4 million in the second quarter of 2026, compared to operating income of $2.2 million in the prior year quarter.

Speaker #4: Our industrial assets division continued to execute on a steady volume of auction activity though we've continued to see a similar trend of smaller-scale opportunities absent larger auctions in the marketplace.

Speaker #4: With that said, we're seeing a solid pipeline of activity and remain confident in our ability to capitalize on opportunities in this space as they arise.

Speaker #4: Our refurbishment and resale business has been performing well, as we're seeing our improvements to the quality of inventory continuing to translate to meaningful increases in asset turnover and improved profitability.

Brian Cobb: Our refurbishment and resale business has been performing well as we're seeing our improvements to the quality of inventory continuing to translate to meaningful increases in asset turnover and improved profitability. Our Financial Assets division was impacted this quarter by non-cash charges associated with the wind down of HCC. Excluding these charges, the division reported a decent quarter as we saw continued activity in NLEX across the charge-off and non-performing loan space and began to realize gains from DebtX, a leading full-service loan sale advisor that we acquired in January 2026. Subsequent to the quarter, we completed the acquisition of substantially all of the assets of the Boston Note Company, a seller financed real estate brokerage with over 30 years of operating history in the residential space.

Speaker #4: Our financial assets division was impacted this quarter by non-cash charges associated with the wind down of HGC. Excluding these charges, the division reported a decent quarter as we saw a continued activity in NLAX across the charge-off and non-performing loan space, and began to realize gains from dead ex, a leading full-service loan sale advisor that we acquired in January of 2026.

Speaker #4: Subsequent to the quarter, we completed the acquisition of substantially all of the assets of the Boston Note company, a seller financed real estate brokerage with over 30 years of operating history in the residential space.

Speaker #4: The transaction acts as a bolt onto dead ex and expands our financial assets platform as we look to enter additional asset classes and distribution channels while expanding upon the seller note category, which we believe is ripe with opportunity.

Brian Cobb: The transaction acts as a bolt-on to DebtX and expands our Financial Assets platform as we look to enter additional asset classes and distribution channels while expanding upon the seller note category, which we believe is ripe with opportunity. We look forward to integrating Boston Note into the business and building upon their well-earned reputation in the marketplace. Additional consolidated financial results include the following. Revenue was $12.3 million in Q2 2026, compared to $14.3 million in Q2 2025. Adjusted EBITDA was $1.2 million, compared to $2.8 million in the prior year period. Net loss was $15.9 million or $0.46 per diluted share, compared to net income of $1.6 million or $0.05 per diluted share in Q2 2025.

Speaker #4: We look forward to integrating Boston Note into the business and building upon their well-earned reputation in the marketplace. Additional consolidated financial results include the following: revenue was 12.3 million in the second quarter of 2026, compared to 14.3 million in the second quarter of 2025.

Speaker #4: Adjusted EBITDA was 1.2 million, compared to 2.8 million in the prior year period. Net loss was 15.9 million, or 46 cents per diluted share, compared to net income of 1.6 million or 5 cents per diluted share in the second quarter of 2025.

Speaker #4: Our balance sheet remains a strength, with stockholders' equity of $51.9 million as of June 30, 2026, compared to $67 million at December 31, 2025, with net working capital of $9.4 million.

Brian Cobb: Our balance sheet remains a strength with stockholders' equity of $51.9 million as of 30 June 2026, compared to $67 million at 31 December 2025, with net working capital of $9.4 million. Our cash balance reflects a total of $13.2 million as of 30 June 2026, and after removing amounts due to our clients or payables to sellers on our balance sheet, our net available cash balance was $6.5 million. With that, Ross, I'll turn it back over to you.

Speaker #4: Our cash balance reflects a total of $13.2 million as of June 30, 2026, and after removing amounts due to our clients or payables to sellers on our balance sheet, our net available cash balance was $6.5 million.

Speaker #4: With that, Ross, I'll turn it back over to you.

Speaker #3: Thank you, Brian. So just as an ending, my thinking on all of this, 50 years ago, when I lost my first deal, I took the long walk from the front of our warehouse to the back of the warehouse to face my grandfather and I told my grandfather, "I feel really, really bad about the loss." He was at 5 o'clock having his normal bourbon sitting at his desk and he said to me, "Rossy boy, kid, I feel really, really good that you feel really bad." Now, flash forward 50 years to where I'm the age he was then, and I understand exactly what he meant and I know exactly what we need to do to get out of feeling really bad and start feeling really good.

Ross Dove: Thank you, Brian. Just as an ending, my thinking on all of this. 50 years ago, when I lost my first deal, I took the long walk from the front of our warehouse to the back of the warehouse to face my grandfather, and I told my grandfather, "I feel really, really bad about the loss." He was, at 5:00PM, having his normal bourbon, sitting at his desk, and he said to me, "Rossy boy, kid, I feel really, really good that you feel really bad." Now, flash forward 50 years to where I'm the age he was then, and I understand exactly what he meant. I know exactly what we need to do to get out of feeling really bad and start feeling really good. That is the plan.

Speaker #3: So that is the plan that is all the effort and that is everything we're going to do to move forward on the platforms that are strong and say goodbye to the platform that held us back.

Ross Dove: That is all the effort, and that is everything we're going to do to move forward on the platforms that are strong and say goodbye to the platform that held us back. Onward and upward, I'm proud to announce. Thank you all for everything you've done, sticking with this and staying with this. We're on our way in the right direction. Best to all, and we're around to answer any questions.

Speaker #3: So an onward and upward, I'm proud to announce thank you all for everything you've done sticking with this and staying with this, and we're on our way in the right direction.

Speaker #3: Best of all, and we're around to answer any questions.

Speaker #1: Thank you. At this time, we will open the floor for questions. If you'd like to ask a question, please press star one on your touch-tone phone now.

Operator 2: Thank you. At this time, we will open the floor for questions. If you would like to ask a question, please press star 1 on your touchtone phone now. If you would like to remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. We will take our first question from Jacob Stepan with Lake Street Capital Markets. Please go ahead. Your line is open.

Operator: Thank you. At this time, we will open the floor for questions. If you would like to ask a question, please press star 1 on your touchtone phone now. If you would like to remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. We will take our first question from Jacob Stephan with Lake Street Capital Markets. Please go ahead. Your line is open.

Speaker #1: If you'd like to remove yourself from the queue, you may press star 2. Again, that is star 1 to ask a question. And we'll take our first question from Jacob Seven with Lake Street Capital Markets.

Speaker #1: Please go ahead. Your line is open.

Speaker #5: Hey, guys. Appreciate you taking the questions. Maybe just first, kind of focusing on the two businesses that were recently acquired and maybe touching on how they kind of fit together.

Jacob Stepan: Hey, guys. Appreciate you taking the questions. Maybe just first, kind of focusing on the two businesses that were recently acquired and maybe touching on how they kind of fit together. I am wondering if you could talk about DebtX's performance relative to Q1, and then also just how does Boston Note fit in with that?

Jacob Stephan: Hey, guys. Appreciate you taking the questions. Maybe just first, kind of focusing on the two businesses that were recently acquired and maybe touching on how they kind of fit together. I am wondering if you could talk about DebtX's performance relative to Q1, and then also just how does Boston Note fit in with that?

Speaker #5: I'm wondering if you could talk about dead ex's performance relative to Q1, and then also just how does Boston Note fit in with that?

Speaker #3: I thought I'd kind of start with how Boston Note fits in. This is Ross talking. We originally looked at Boston Note, and we didn't see where we were the perfect partner to Boston Note until after we acquired DebtX.

Ross Dove: I thought kind of start with how Boston Note fits in. This is Ross talking. We originally looked at Boston Note, and we did not see where we were the perfect partner to Boston Note until after we acquired DebtX. Once we acquired DebtX, we really saw that there was an opportunity for Boston Note to convert from just doing seller finance to residential products to also seller finance commercial products. We knew that DebtX had an unparalleled exit platform as long as they could find the assets. We ran a trial for several months, and during the trial, we closed 8 transactions, and over USD 500,000 in revenue. It really became kind of heir apparent that they fit like a glove. We had already acquired DebtX, and we knew that putting Boston Note in tandem with them was going to really create some synergy.

Speaker #3: Once we acquired dead ex, we really saw that there was an opportunity for Boston Note to convert from just doing seller finance to residential products to also seller finance, commercial products, and we knew that dead ex had an unparalleled exit platform if as long as they could find the assets we ran a trial for several months, and during the trial, we closed 8 transactions and over a half a million dollars in revenue.

Speaker #3: And it really became kind of apparent that they fit like a glove. We’d already acquired DAX, and we knew that putting Boston Note in tandem with them was going to really create some synergy.

Speaker #3: We also knew that Boston Note turned down pretty much every kind of non-performing loan that was brought to them, and we had an avenue second to none on non-performing loans with Enlex.

Ross Dove: We also knew that Boston Note turned down pretty much every kind of non-performing loan that was brought to them. We had an avenue second to none on non-performing loans with NLEX. When we looked at it, we said, "Putting these three companies under one roof will give us a commanding position in the marketplace." We feel that on a go-forward basis, you are going to see that over the next 6 months, year, 2 years as we blend them together, unify our sales pitch, and get them all working in consortium. We are really excited about what we think we can build there.

Speaker #3: So when we looked at it, we said, "Putting these three companies under one roof will give us a commanding position in the marketplace." And we feel that on a go-forward basis, you're going to see that over the next 6 months, a year, 2 years, as we blend them together unify our sales pitch and get them all working in consortiums.

Speaker #3: So we're really excited about what we think we can build there.

Speaker #5: Got it. And then, sorry, I might have missed this in the comments, but the debt ex-acquisition relative to Q1—it seemed, I guess, your comments made it seem like things have improved.

Jacob Stepan: Got it. Sorry, I might have missed this in the comments, but the DebtX acquisition relative to Q1. It seemed, I guess your comments made it seem like things have improved off of a seasonally slow quarter, but any kind of comments there?

Jacob Stephan: Got it. Sorry, I might have missed this in the comments, but the DebtX acquisition relative to Q1. It seemed, I guess your comments made it seem like things have improved off of a seasonally slow quarter, but any kind of comments there?

Speaker #5: Off of a seasonally slow quarter, but any kind of.

Speaker #3: They're a company that over the last maybe in Brian can give you the exact details, but over at least the last half decade, almost 50 to 60 percent, sometimes even two-thirds of their revenue comes in Q4.

Ross Dove: They're a company that over the last, maybe, Brian can give you the exact details, but over at least the last half-decade, almost 50% to 60%, sometimes even two-thirds of their revenue comes in Q4. Their revenue primarily comes from banks. While their revenue comes from banks, it's very common for the banks to wait till the end of the year for a lot of the asset flow. So we'll know a lot better by 1 January how well we're doing. But the pipeline is growing and transactions are closing, and we're also adding the Boston Note transaction. I don't want to overstate what hasn't happened yet, but we're on the right track.

Speaker #3: Their revenue primarily comes from banks, and while their revenue comes from banks, it's very common for the banks to wait until the end of the year for a lot of the asset flow.

Speaker #3: So we'll know a lot better by January 1st how well we're doing, but the pipeline is growing and transactions are closing, and we're also adding the Boston Note transaction.

Speaker #3: So, I don't want to overstate what hasn't happened yet, but we're on the right track.

Speaker #5: Okay. And then maybe just touching on the auction activity, it sounded like the larger type auctions were a little bit softer or few and far between in the first half.

Jacob Stepan: Okay. Then maybe just touching on the auction activity. It sounded like the larger type auctions were a little bit softer or few and far between in H1. I guess, what are you seeing in H2 that kind of gives you confidence in the pipeline that you referenced?

Jacob Stephan: Okay. Then maybe just touching on the auction activity. It sounded like the larger type auctions were a little bit softer or few and far between in H1. I guess, what are you seeing in H2 that kind of gives you confidence in the pipeline that you referenced?

Speaker #5: I guess, what are you seeing in the second half that kind of gives you confidence in the pipeline that you referenced?

Speaker #3: Yeah. It's almost like when we're slow for one or two quarters, we almost follow with one or two, three strong quarters afterwards. I've been doing this for five decades and it's just the nature of the business that everything kind of comes in shifts.

Ross Dove: Yeah. It's almost like when we're slow for one or two quarters, we almost follow with one or two, three strong quarters afterwards. I've been doing this for five decades, and it's just the nature of the business that everything kind of comes in shifts. You go from doing a bunch of smaller auctions to do a bunch of bigger auctions, just by the sheer nature of the macroeconomy. Our pipeline has larger auctions now than it did in Q1 or Q2, and we're signing several of those. All roads lead to a positive H2 of the year. The good news is, a lot of the things we're signing now are not just in our strongest sectors, the pharma sector, the food and beverage sector, but they're in a lot of diverse sectors where we're also good.

Speaker #3: So you go from doing a bunch of smaller auctions to do a bunch of bigger auctions. Just by the sheer nature of the macroeconomy, our pipeline has larger auctions now than it did in Q1 or Q2, and we're signing several of those.

Speaker #3: So all roads lead to a positive second half of the year, and the good news is a lot of the things we're signing now are not just in our strongest sectors.

Speaker #3: The pharma sector, the food and beverage sector, but they're in a lot of diverse sectors where we're also good. So, I think there's bright days ahead on the industrial side.

Ross Dove: I think there are bright days ahead on the Industrial Assets side.

Speaker #5: Great. I appreciate all the color. We'll turn it over.

Jacob Stepan: Great. I appreciate all the color. We will turn it over.

Jacob Stephan: Great. I appreciate all the color. We will turn it over.

Speaker #1: Thank you. We'll take our next question from George Sutton with Kirk Allen. Please go ahead. Your line is open.

Operator 2: Thank you. We will take our next question from George Sutton with Craig-Hallum. Please go ahead. Your line is open.

Operator: Thank you. We will take our next question from George Sutton with Craig-Hallum. Please go ahead. Your line is open.

Speaker #3: Hi, George.

Ross Dove: Hi, George.

[Analyst] (Craig-Hallum): Hey. Hey, Ross, Brian. You actually have Logan on for George here. Thanks for taking the question. First one, Ross, obviously, the Capital segment has been in a tough spot here for several quarters. I wonder if you could just talk about what moving away from that opens up in terms of time and management focus. I guess, how should we think about this move kind of lending itself to your desire to do more acquisitions?

Logan Lillehaug: Hey. Hey, Ross, Brian. You actually have Logan on for George here. Thanks for taking the question. First one, Ross, obviously, the Capital segment has been in a tough spot here for several quarters. I wonder if you could just talk about what moving away from that opens up in terms of time and management focus. I guess, how should we think about this move kind of lending itself to your desire to do more acquisitions?

Speaker #6: Hey, hey Ross, Brian. You actually have Logan on for George here. Thanks for taking the question. So, first one, Ross, obviously the Capital segment has been in a tough spot here for several quarters.

Speaker #6: I wonder if you could just talk about what moving away from that opens up in terms of time and management focus. And I guess how should we think about this move kind of lending itself to your desire to do more acquisitions?

Speaker #3: Yeah, it became a real burden because, at the end of the day, it was taking a lot of management time without us necessarily doing anything really, truly effective to improve it.

Ross Dove: Yeah. It became a real burden because in the end of the day, it was taking a lot of management time without us necessarily doing anything really, truly effective to improve it. In the end of the day, nobody can ever be sure with thousands of accounts what you are going to collect back. But if you are in a junior position, there is always risk. So it just got to the point where we said, "Look, this is not the best place for us going forward to either operate or to put more capital. There is way better places to put our capital. It is time to basically end trying to fix something that is difficult to fix and try to focus all the energy on building what does not need fixing but is ripe for growing." So it became kind of obvious. Lots of investors kept saying it is the right move.

Speaker #3: And in the end of the day, I mean, nobody can ever be sure without thousands of accounts what you're going to collect back. But if you're in a junior position, there's always risk.

Speaker #3: So it's just gotten to the point where we said, "Look, this is not the best place for us going forward to either operate or to put more capital. There are way better places to put our capital."

Ross Dove: There is way better places to put our capital. It is time to basically end trying to fix something that is difficult to fix and try to focus all the energy on building what does not need fixing but is ripe for growing." So it became kind of obvious. Lots of investors kept saying it is the right move.

Speaker #3: It's time to basically end trying to fix something that is difficult to fix and instead focus all the energy on building what doesn't need fixing but is ripe for growing.

Speaker #3: So it became kind of obvious lots of investors kept saying, "It's the right move." Lots of board members kept saying, "It was the right move." And at some point in time, everyone in management kind of all stood up together and said, "All right, if we're ever going to do it, let's do it now." So the best thing I can tell you is it does feel good to have it over with.

Ross Dove: Lots of board members kept saying it was the right move. At some point in time, everyone in management kind of all stood up together and said, "All right, if we are ever going to do it, let us do it now." The best thing I can tell you is it does feel good to have it over with.

Speaker #6: Got it. And you mentioned doing some more hiring on the industrial side. I mean, in the past, you've talked about maybe trying to add more business on that side that's outside the building.

[Analyst] (Craig-Hallum): Got it. You mentioned doing some more hiring on the Industrial side. In the past, you have talked about maybe trying to add more business on that side that is outside the building. I am curious if any of that hiring is focused there, or maybe just in general, help us understand kind of where you see opportunity to win new business there.

Logan Lillehaug: Got it. You mentioned doing some more hiring on the Industrial side. In the past, you have talked about maybe trying to add more business on that side that is outside the building. I am curious if any of that hiring is focused there, or maybe just in general, help us understand kind of where you see opportunity to win new business there.

Speaker #6: I'm curious if any of that hiring is focused there, or maybe just in general, help us understand where you see opportunities to win new business in that area.

Ross Dove: We've been winning in more diverse auctions, not just outside the building, but in other sectors. There are lots of new sectors that are basically getting busy now. The EV sector is getting busy, the cannabis sector is getting busy. Lots of the food and beverage sectors are getting busy. There are lots of kind of inside the building manufacturing getting busy, coupled with a lot of outside the building construction and transportation. When you see this kind of broad group of asset classes getting busy, we're just building up because we think the amount of auctions and the size of auctions are going to grow over the next year or 2 years, and we want to make sure that we have the right sector and geographic coverage.

Speaker #3: We've been winning in more diverse auctions, not just outside the building, but in other sectors. There are lots of new sectors that are basically getting busy now.

Speaker #3: The EV sector is getting busy. The cannabis sector is getting busy. Lots of the food and beverage sectors are getting busy. So there's lots of kind of inside the building manufacturing getting busy.

Speaker #3: Coupled with a lot of outside the building construction and transportation. So when you see this kind of broad group of asset classes getting busy, we're just building up because we think the amount of auctions and the size of auctions are going to grow over the next year or two years, and we want to make sure that we have the right sector and geographic coverage.

Speaker #3: So this is not the type of business where we're looking to hire dozens of people, but we are going to add some select individuals to make sure we get as broad a coverage as we can.

Ross Dove: This is not the type of business where we're looking to hire dozens of people, but we're going to add some select people to make sure we get as broad a coverage as we can.

Speaker #6: Okay. Thanks for taking the questions.

[Analyst] (Craig-Hallum): Okay. Thanks for taking the questions.

Logan Lillehaug: Okay. Thanks for taking the questions.

Speaker #3: Thank you.

Ross Dove: Thank you.

Speaker #1: Thank you. We'll take our next question from Michael Diana with Maxim Group. Please go ahead. Your line is open.

Operator 2: Thank you. We will take our next question from Michael Diana with Maxim Group. Please go ahead. Your line is open.

Operator: Thank you. We will take our next question from Michael Diana with Maxim Group. Please go ahead. Your line is open.

Speaker #3: Hi, Michael.

Ross Dove: Hi, Michael.

Michael Diana: Thank you. Hey, Ross. You mentioned construction and transportation, which has been very successful for other people. What is your strategy or niche or whatever that you are going for there?

Speaker #7: Thank you. Hey, Ross. So, you mentioned construction and transportation, which have been very successful for other people. What is your strategy or niche, or whatever, that you're going for there?

Speaker #3: Yeah. The really, really big firms doing it, and there's obviously one monster firm. We're not out to try to take them on. There are lots of regional auctions, where in the end of the day, they're underneath the radar of somebody at that size.

Ross Dove: Yeah. The really, really big firms doing it, and there is obviously one monster firm. We are not out to try to take them on. There are lots of regional auctions, where in the end of the day, they are underneath the radar of somebody of that size. Half a million dollar auctions, 1 million, 2 million dollar auctions, and those are really kind of our sweet spot. The auctions from basically half a million to 5 to 10 million are our sweet spot. We are not looking to win the $50 million fleet auctions. But the individual owner retiring or the struggled company with some financial trouble that needs someone to come in right away with a lot of hand-holding, kind of really fits our DNA and culture.

Speaker #3: Half a million dollar auctions, million dollar, two million dollar auctions. And those are really kind of our sweet spot. The auctions from basically half a million to 5 to 10 million are our sweet spot.

Speaker #3: We're not looking to win the $50 million fleet auctions, but the individual owner retiring, or the struggling company with some financial trouble that needs someone to come in right away with a lot of hand-holding, really fits our DNA and culture.

Speaker #3: And we've won what I'll call kind of one-off transactions that aren't from the biggest institutions or the biggest rental companies, but from individual sellers who were looking to really work with somebody on a one-on-one basis.

Ross Dove: And we've won what I'll call kind of one-off transactions that aren't from the biggest institutions or the biggest rental companies, but from individual sellers who were looking to really work with somebody on a one-on-one basis. And we think there's a lot of that coming forward right now. We just want to make sure we can serve that market, Michael.

Speaker #3: And we think there's a lot of that coming forward right now, and so we just want to make sure we can serve that market, Michael.

Speaker #7: Yeah. Okay. That's what I figured. That's great. So you're in an area where you can compete well. Going to Boston node, I'm somewhat ignorant on the terminology there.

Michael Diana: Yeah. Okay. That's what I figured. That's great. So you're in an area where you can compete well. Going to Boston Note. I'm somewhat ignorant on the terminology there. Could you just explain to us what a seller note and a carryback note is?

Speaker #7: Could you just explain to us what a seller note and a carryback note is?

Speaker #3: I sure can. So when an individual sells a property, it could be a residential property, it could be a multifamily, it could be any really category of property.

Ross Dove: I sure can. So when an individual sells a property, it could be a residential property, it could be a multifamily, it could be any really category of property, it could be any kind of commercial property. An individual sells that property, and for whatever reason, the buyer won't either qualify for a bank loan or the seller of the property wanted a steady income and said, "You don't need to go to the bank. I will become your lender." He carries back the loan. So the seller carried back a first deed of trust secured by the collateral of the property he used to own. Now, one year later, two years later, three years, four year later, for whatever reason, he wishes he could monetize that loan, and he really would like to get all of his cash, not get the monthly payments anymore.

Speaker #3: It could be any kind of commercial property. An individual sells that property, and for whatever reason, the buyer won't either qualify for a bank loan or the seller of the property wanted a steady income and said, "You don't need to go to the bank."

Speaker #3: I will become your lender." He carries back the loan. So the seller carried back a first deed of trust, secured by the collateral of the property he used to own.

Speaker #3: Now, one year later, two years later, three years, four years later, for whatever reason, he wishes he could monetize that loan. And he really would like to get all of his cash, not get the monthly payments anymore.

Speaker #3: So he didn't really know where to go. He or she, as an individual, it wasn't that simple to go find a bank to sell it to.

Ross Dove: He didn't really know where to go. He or she as an individual, it wasn't that simple to go find a bank to sell it to. So Boston Note, for the last 30 years, primarily on the residential side, it says, "Come to us, and we will get you all cash and get you out of that seller carryback, and you'll be done with it and have the money in the bank." We figured out with the CEO of Boston Note, what if you did this for commercial loans, which is 50x bigger business, and what if you did this for larger jumbo real estate loans and non-performing loans and really extended the offering, what would it look like? He said, "Well, it'll look like a lot more profitable, a lot larger company.

Speaker #3: So Boston Note, for the last 30 years, primarily on the residential side, it has come to us and we will get you all cash and get you out of that seller carryback, and you'll be done with it and have the money in the bank.

Speaker #3: We figured out, with the CEO of Boston Note, what if you did this for commercial loans, which is a 50x bigger business, and what if you did this for larger jumbo real estate loans and non-performing loans, and really extended the offering—what would it look like?

Speaker #3: And he said, "Would it look like a much more profitable, a much larger company? How can you execute this?" And we said, "We think because of the two companies we already own, that putting everything together, we think it can really scale."

Ross Dove: How can you execute this?" We said, we think because of the two companies we already own, that putting everything together, we think it can really scale.

Michael Diana: Okay. That sounds very logical. Do you have any idea, does anybody keep track of the magnitude of just the residential part of the market? I mean, how many of these carryback notes are out there?

Speaker #7: Okay, that sounds very logical. Do you have any idea if anybody keeps track of the magnitude of just the residential part of the market?

Speaker #7: I mean, how many of these carryback notes are out there?

Speaker #3: All I know, I don't have the exact number. When we did the original, basically analysis, we were under 2% of the market. So the market is 100 times bigger than what Boston note, which is a boutique firm was doing.

Ross Dove: All I know, I do not have the exact number. When we did the original basically analysis, we were under 2% of the market. So the market is 100 times bigger than what Boston Note, which is a boutique firm, was doing.

Michael Diana: Okay. Great. Okay. Thanks, Ross.

Speaker #7: Okay. Okay. Great. Okay. Thanks, Ross.

Speaker #3: Thank you, Michael.

Ross Dove: Thank you, Michael.

Speaker #1: Thank you. And I'm showing no additional questions at this time. I'd like to now turn the meeting back to Ross Dove for any additional or closing remarks.

Operator 2: Thank you. I am showing no additional questions at this time. I would like to now turn the meeting back to Ross Dove for any additional or closing remarks.

Operator: Thank you. I am showing no additional questions at this time. I would like to now turn the meeting back to Ross Dove for any additional or closing remarks.

Speaker #3: Thank you all for attending. We've got our work cut out for us, but we're very comfortable that we're in the right place at the right time with the right plan.

Ross Dove: Thank you all for attending. We got our work cut out for us, but we are very comfortable that we are in the right place at the right time with the right plan. So, keep an eye on us, and I think you will be very pleased as we move forward through the year. Thank you all, and anybody who has questions, you can contact us at any time, and we would love to chat with you. Thank you again. Bye-bye.

Speaker #3: So keep an eye on us, and I think you'll be very pleased as we move forward through the year. Thank you all. If anyone has questions, you can contact us at any time, and we'd love to chat with you.

Speaker #3: Thank you again. Bye-bye.

Operator 2: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.

Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.