George Sutton: Perfect. Thank you.
Operator: Thank you. our next question comes from the line of Gary Prestopino from Barrington Research
Gary Prestopino: Hey, good morning Bill and Jorge. Bill, a couple of questions here. I would assume that the issue with Gov deals on the vehicle side is really more a supply issue. I mean you did mention pricing a little bit, but it really stems from the fact that there’s a lack of supply out there because there was a lack of new car build last year and the fleets couldn’t re-fleet. Is that kind of a correct assumption?
Bill Angrick: That’s — Barry spot on because when you think about it, the dealers, their highest margin is taking whatever supply is available and selling at retail. The last demand to get fulfilled is the fleet buyer and in the rental market, too. So, we know that we’re sort of last in line to at least our customers, I should say, are last in line to get there. Their needs fulfilled. But there’s just a ton of money that’s been approved and allotted for more efficient bus fleets, fire, medical, police, energy utility fleets that is waiting patiently to get their needs fulfilled. And the industry is working hard, increasing chip, supply capacity to fill component needs in the automotive supply chain. And I think that, ultimately is going to bear out in the second half of 2023, 2024, and we’ll be there, and we’ll have a lot of supply that free up to come into the marketplace.
So that’s how we see it. That’s the data that we observe and track, like you all probably in different sectors, with different service providers. So €“ we know that, that is a headwind that will normalize and eventually become a tailwind.
Gary Prestopino: Yeah. All right. Is it your opinion that or the knowledge base here that these local, municipal governments, state governments, whatever, they’re not going to be as sensitive to pricing interest rates. If they have the money allocated on a budget basis, they’re going to buy the cars if the cars are available? That’s sort of a correct assumption?
Bill Angrick: Having worked with government entities for over 22 years, I can tell you the use of utility always been there.
Gary Prestopino: Okay. Great. A couple of more questions here. Maybe could you go into a little bit more detail on what’s going on in the GovDeals on the real estate side? There should be €“ given the environment, I don’t know, if you’re dealing with repossessions or whatever, there should be more real estate out there to sell, but you’re saying, the conversions are coming down. So what happens to that real estate if the conversions come down?
Bill Angrick: So when the taxing event takes place, the owner has the ability to recover the properties they pay their back to mortgage or tax payments. And so we’ve seen a lower-than-normal rate of going through to final sale as some borrowers and some entities have subsidized borrowers to get those properties off of their delinquency rules. We don’t see that as sustainable. There’s a lot of, let’s say, support and subsidization happening in 2021 and 2022 lot of relief programs, sort of kind of held up that market, probably artificially. And that’s part of a larger effort to put €“ put a lot of payments on hold. Institute loan debt was another example, where you had deferrals and so forth. I think that all comes to normalize in 2023, because those aren’t sustainable policy decisions.
I think at some point, you go back to sort of your normal cycle of meeting your obligations. And that means that instead of a 0.1% rate of assets going to €“ through the foreclosure process, they’re probably normally some more like 2%, and so what does that mean for us? It means that, items that were queued up for sale that were listed in the marketplace, instead of closing an auction, they’ve been pulled well, so I think more of those assets will go through to completion and will be sold, and that will affect positively our GMV. And it’s not like, we have €“ we’re not rooting from one side or the other, which driving the longitudinal data that says, if you have 100 properties in a county every quarter that goes to the sale process as directed by the share, when you normalize that, we’re going to sell a lot more property than what we’ve seen in the last few quarters and what we currently have visibility on for our Q2 March quarter.
The other thing I would say is I think interest rates have had some impact on whether these borrowers are willing to carry the property. Interest rate payments are much higher now. And there’s a couple of pieces in the Journal this week around the fact that consumers are feeling a little bit of a squeeze. So we think that’s probably going to influence more real estate. Thus lastly, the broader secular trend and mission of liquidity services is to drive digital adoption of online sales methods by government entities, and that includes the accountings that administer these sales, and we have been successful in winning new contracts. And in some cases, those contracts have just taken a little bit of a bureaucratic kind of slow rollout phenomena.
And to some extent, people may resist change. So these sales have occurred in an off-line way for 100 years, and you’re moving to online and certain people a local buyer might say, “No, I don’t want that competition. I’m going to call my local mayor or city council and say, “This isn’t good. And so then there’s a little bit of a lobbying process that goes on and delays rollouts. But we’ve won some top 50 metro contracts that have not bared any fruit for us in the current year because of that type of a political process. Now that’s going to go through and ultimately be operationalized, and we will have the benefit of those awards because these are competitively bid contracts and the data is on the side of the decision to go online. But that’s just part of what you deal with when you’re pioneering a market is dealing with significant change, and that sometimes makes certain incumbents resist.
