Heritage Global Inc. (NASDAQ:HGBL) Q4 2022 Earnings Call Transcript

Ross Dove: The industrial auction business, it had giant leaps already, the giant leaps, and this is from the old guy who grew up in the business is that you’re not calling bids anymore, and you’re not deploying a bunch of auctioneers, and you’re not asking all the buyers to get on planes and fly to the planets. So they took a little bit of the fun out of it if you’re talking to an old auctioneer, but it made it massively scalable. Because Ross and Kirk Dove when they were running the shop could only do one auction in one day. Nick does running a shop now they can do eight auctions in one day if he gets enough supply. So the buyers don’t have to travel now, so the buyers can bid at seven or eight auctions in one day, versus if they traveled they could only bid at one.

So industrial auctions is really like 100x scalable from the days I started in it. And so the only cost that is really variable at this point in time is the cost of the operations into the business, which is a headcount costs to physically send the people out to do the tangible work on the front end, basically writing the specs, and then the work on the back end working with the shippers and the riggers and the safety and the hazmat checking it out. So the bottom line is, it can grow exponentially by not adding a bigger sales force, if you have the marketplace, not really adding more people in finance, or more people in marketing, or more people at the sea level, but adding more people at the operations level. So we think one of the real great things about this company, is we can do two, three times the volume across the entire spectrum of services with a very limited amount of OpEx expenditure.

So we think we’ve hit the time of real operating leverage.

Mark Argento: Great, and then maybe one for Brian, just to change it up a little bit. So when Ross says two

Ross Dove: Ask him a harder one Mark, you asked me softballs, give him the tough one.

Mark Argento: So, when Ross tells us, they’re off to a flying start 2 to 3x better than Q1 last year. So 2 to 3x better on what, on revenue, on operating income, on everything? That’s not a softball. I don’t know what it is?

Brian Cobb: Well, so when Ross talks about 2 to 3x times last quarter, he’s usually referring to operating income. And so that position that he’s taken is, is absolutely a reasonable position based on what we’re looking at right now.

Mark Argento: Great. All right. Ross, you pass. Congrats. Thanks, guys. Good work.

Operator: This concludes the question — pardon me. Our next question is from Michael Diana with Maxim Group. Please go ahead.

Michael Diana: Okay, thanks. Hey, Ross. So you’re talking a lot about your financial assets, you’re mostly talking about, I think, auctioning up charge offs. What about the financing end of that? I think that’s going pretty well, too, isn’t it?