Greetings, and welcome to Heritage Global Inc.'s second quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A 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, Ross Dove, Chief Executive Officer. Thank you. You may begin. 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 date of this call. For more details and factors that could affect these expectations, please see our filings with the Securities and Exchange Commission. I'd like to turn the call over to Heritage Global's Chief Executive Officer, Mr. Ross Dove. Go ahead, Ross. Thank you, John. Good afternoon, everyone. Thank you all for joining. Welcome to our 2023 second quarter earnings conference call. Today, we'll start the call with Brian Cobb, our CFO. Brian, go ahead. You're up. Thanks, Ross. We are pleased to reach the halfway point of 2023 with a record 7 million in operating income. Our solid second quarter results included operating income of 3.1 million, earnings of 0.07 per diluted share, and EBITDA of 3.2 million. Both our financial assets and industrial assets division are continuing to see tremendous opportunities in the marketplace, as the current economic situation is driving increased volume and assets coming to market. Our industrial assets division has seen a significant increase in its core asset disposition business during the first half of 2023, as compared to the same period in 2022. From time to time, we have real estate transactions in the mix, which occurred in the first half of 2022, but we think a more accurate comparison is looking at only our core auction business. In the first half of 2023, we saw a higher volume of industrial auctions, which includes an increased contribution by American Laboratory Trading, acquired in 2021. With growing synergies within the division and the industrial asset pipeline currently in place, we anticipate we'll continue to see substantial activity during the second half of 2023. In our financial assets division, we are seeing heightened activity as consumer debt reaches record levels and creates corresponding growth in the volume of non-performing loans and charged-off credit card accounts. Both NLEX and HGC are executing well in the current economic landscape, winning brokerage contracts and specialty lending opportunities. This was demonstrated by a 185% increase in divisional net operating income during the 6-month period, as compared to the same period in 2022. As interest rates continue to rise and inflationary environment drives consumers to make more purchases on credit rather than cash, we expect to see asset flows continue to increase as we move through the remainder of the year. In turning to the financial details for the second quarter. Consolidated net operating income was 3.1 million, as compared to 3.6 million in the second quarter of 2022. Net income was 2.8 million, or 0.07 per diluted share, compared to net income of 2.6 million, or 0.07 per diluted share in the second quarter of 2022. EBITDA was 3.2 million, as compared to EBITDA of 3.8 million in the second quarter of 2022. Adjusted EBITDA was 3.5 million for the second quarter of 2023, as compared to 3.9 million in the second quarter of 2022. Our balance sheet remains strong, with stockholders' equity of 54.2 million as of June 30, 2023, compared to 48.3 million as of December 31, 2022, and net working capital of 15.5 million. Our total balance related to investments in loans to buyers of charged-off and non-performing receivable portfolios was 29.9 million as of June 30, 2023, of which $15 million is classified as notes receivable and 14.9 million is classified as equity method investments. With that, I'll now turn the call back over to Ross. Thanks, Brian. That was comprehensive. Let me just take a few brief moments and try to talk a little bit about the story behind the numbers. As most of you know, our headquarters are in Del Mar, so I took the day off on opening day to go to the race track. While I was there looking at the racing forum, I started kind of thinking about Heritage and saying, "Everybody's getting the same information here today, looking at the same form, yet lots of people seem to be picking different horses." I thought about that and I thought about today, and what I could do to convey to you that Heritage is the right horse to pick. Kind of going into the story behind the numbers, the 7 million was great, but more important, and I think far more important, is how we earned the 7 million. If you look back at last year, where we had 11 million in a record year, we're crushing that this year. Much more importantly, last year we had several large deals, and we had some large real estate deals that really helped us get to 11 million. This year, the story behind the numbers is very different. This year, the story behind the numbers is we didn't have any significant real estate deal in the first half. We just had incredible, solid performance across all divisions. All divisions are growing without any phenomenal one-time deal, just hitting on all cylinders. Let me just take a moment. Let's look at HGBL quickly, kind of division by division, and maybe I can help you figure out why we're growing. In financial assets, everyone gets the same information. We now have $1 trillion in credit card debt. Think about that, $1 trillion. The huge growth in the debt is fueling more and more product into our marketplaces, and with more and more product going into our marketplaces, there is an increase in the purchasing by our onboarded buyers. They're very active now, and as they're active, they're basically coming to us more and more for the lending opportunities. We're growing both the brokers business on the financial side and the lending business, and we think that really bodes well for not just the second half of this year, but ongoing into next year and beyond. We feel very comfortable on the financial side that we're in an actual growth trajectory. Now, let's switch to the industrial side. Q2 was, yes, an average quarter in the amount of assets we sold, primarily because several assets flowed over into Q3. More importantly, though, and far more, is what I see in the pipeline. We have 26 auctions already posted for Q3, so we're off to really a record start. And several of those auctions were signed by ALT, which really bodes well that they're not just performing in their existing retail business, but they're also sourcing auctions for us. On the industrial side, we see an increase in Q3 over Q2 and growing solid into Q4. If you look at the Q3 industrial auctions, one of the things that is great is along with our traditional pharma, you're now seeing us really winning in multiple sectors across the board. We've got an aviation auction of parts for SkyWest. We've got processing from Canopy Growth, which is cannabis. We've got vertical farming from Upward Farms. We're once again back with Twitter, doing our second auction there. We're now selling a lot of Jensen machinery. We've got a project with Rawlings, the sportswear company, with Precor, the fitting company. All in all, we see significant progress, not just in the numbers, but in the story behind the numbers. We think that 7 million is repeatable, and we think over the years, we can grow it. We're grateful for all of you that have hung in there with us, and we're telling you we see good times going forward. Thank you all once again for joining us and listening. I'm open to any questions at this point. Thanks again. Thank you. Ladies and gentlemen, at this time, we will begin to conducting a question and answer session. If you'd like to ask a question, you may 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 would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Our first question comes from the line of Mark Argento with Lake Street. Please proceed with your question. Hey, Ross and Brian. A couple of quick ones here. First off, could you help us, you know, Ross, you alluded to it about, you know, looking at last year's operating income contribution from real estate. Could you just help us understand what that 11 million would look like without the real estate, so we can kind of think about a little apples to apples from last year to this year? Just wanted to also see if you could touch on the loan book. It looks like it grew a little bit in the quarter, up to 29 million and change. I was thinking maybe that would have grown a little bit more, just given how strong the finance segment has been for you guys. Could you dive into that a little bit for me? I'd appreciate it. Thanks. I'm actually gonna pass the baton to Brian, because those are financial questions I think that he's ready and willing to, to get after. Go ahead, Brian. All right. Your first question, Mark, we reported in Q2 of 2022 that the net impact of the Huntsville pharmaceutical campus closure in that quarter was 2.6 million to net operating income. When I'm looking at a total divisional net operating income for industrial of 4.2 million in last year's six-month period versus this year's six-month period of 4 million. Last year, you got to remove 2.6 million, and then we're comparing our core business year-over-year. Then to the next question about our balance. Go ahead, on our lending. Yeah. To touch on the lending side, so yes, we had significantly more growth to the overall loan book in Q1. There's two real reasons to that. In Q2, we did originate a lot of loans. We're not slowing down our originations. What happened was we established a new joint venture with a new senior lender, and we transferred some of our existing loans under that joint venture during the quarter. Not only we're still originating, but we've developed new relationships in the industry, and we think that's going to bode well for future deals, potential new borrowers coming on board, and the ability to kind of diversify our loan book. I would expect that in the next quarter or two, we'd see more growth than we saw in Q2. Do you happen to have that origination, like what you guys originated in Q2 versus what you originated in Q1, Andy? I can kind of look at the cash flow statement. I wouldn't want to give exact numbers right now, but, you know, we had 18.7 million in investments and notes receivable. Investments in equity method, investments was 4.2 million. You're looking at, you know, 20 million, 22 million, 23 million in originations, and then, and then transfers of 9 million coming out of that for the whole year. In Q1, we had about 13 million in originations. Less... I would, I would say less originations on a net basis. On a gross basis, it was up. Is that kinda what I heard? Yeah- You originated more in Q2 than you did in Q1, on a gross basis? Yeah. Yeah. Yeah, no, I mean, I think it, it would be helpful, and obviously, it sounds like you guys either, you know, sold off some of the loans or, you know, with, with your new partner, but, you know, just that gross originations number would be helpful just to kind of get a gauge for the trajectory, because it seems like, yeah, just given how strong that financial segment is, that Heritage Global Capital would be, you know, cranking, which it sounds like it is. You know, looking at just the, the balance there, threw, threw me off a little bit, but I appreciate the additional info. Thanks, guys. Yeah. Our next question comes from the line of George Sutton with Craig-Hallum. Please proceed with your question. Thank you, Ross. I appreciate the horse racing tie-in. That was interesting. I wanted to just address the third quarter. You know, we're tracking the auctions off the platform very closely. We see what you just indicated, which is, you have started very strong in Q3. We're also, as you know, tracking charged-off volumes very closely from a macro perspective. It, it would certainly seem like the fuel for your business is very good, and, this, this quarter has started well. Can you just expand on that, if you could? Yeah. What happened on the industrial side, George, in Q2, is what kind of always happens after a record Q1. You're scrambling after record Q1, not just to sign them, but to finish up the Q1 auctions. The problem with sequential-over-sequential growth, is sometimes it's hard to do quarter-over-quarter. What happened is we had a large amount of deals getting signed over the last 6 weeks. That's why we're telling you we're going to have a bang-up Q3, because we made a, a pretty darn good living in Q2, but more importantly, we had lots of wins that you can see on our website posted for Q3, and we had a couple Q2 deals that rolled over. That's kind of why I can talk so bullish, because I can see what we've already signed and know that there's still some time left. I'm really comfortable on the industrial side. On the financial side, George, obviously, the amount of... When I say there's a $1 trillion in credit card debt, some of those people are probably going to pay back their credit card debt. No, just a joke. There is an absolute mathematical, empirical truth to the amount of debt leads eventually to the mathematical amount of charged-offs. We can clearly see that as the debt is reaching all-time highs over the next six months, nine months, year, two years, there's an elevated amount of product for us to sell. That's why we can kind of comfortably forecast that we see growth. Is that a fair answer? That's great. As an aside, I would say the folks at the horse race probably won't be those that pay back their debt, but. I, I did want to ask one other question. Some of the checks we've seen, the, you know, the direct sellers, the, the JPMorgan types who sell direct into the market, are not achieving the same pricing in their sales that NLEX is, which would be increasingly important when we start to talk about $1 trillion of, of credit debt that could turn into charge-offs. Can you just discuss the environment that you're seeing? Are you seeing what we're hearing about? A lot of these companies that are very large, not just, the largest, banks, but a lot of companies, wound up basically with a one-trick pony. They had one buyer they were extremely comfortable with, which we understand, because a big part of buying the loans is credibility, having a trusted purchaser who is SOX compliant, who you know is going to follow all the rules. They got comfortable with one buyer, and it kind of worked in rising times. Right now, when times aren't rising on what you're getting as recovery, more and more are looking to them to want to run a process to make sure they don't just have the one right buyer, and that our kind of ethical auction process, where we bring in multiple buyers and they find the right company, is starting to resonate. That doesn't work in a growing economy where everyone's very comfortable that they have the right vendor. Right now, people are wondering, "Do I have the right vendor?" They're looking to make sure that they have the best possible vendor in place. We think we're going to get more and more people at least giving us a test against their current vendor. Okay, finally, did you walk away as a net winner or loser at the races? The way that I look at the races is, I don't bet on the favorite, and at the same time, I don't bet on the long shot. I try to find the horse that's getting better and better over time. I bet on the Heritage horse, George. Perfect. Thank you. There are no further questions in the queue. I'd like to hand the call back to Ross Dove for closing remarks. Thank you all very much. We truly appreciate you guys paying attention, you guys hanging in there with us, staying with this, and we're, we're here to try to prove that you've done the right thing, and we graciously appreciate the fact that you're still here. Thank you, and we'll keep on pushing forward. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.