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Welcome to Portfolio Perspective: Managing Risk & Seizing Opportunity, a podcast focused on the asset-based lending industry. Join Andrew Pace, Chief Client Experience Officer at Asset Compliant Solutions, as he interviews experts, shares insights, and explores strategies for managing risk, optimizing portfolio performance, and seizing opportunities in an ever-evolving financial landscape. From regulatory changes to technological advances, each episode provides actionable takeaways and deep dives into industry trends. Whether you’re a lender, servicer, or recovery expert, this podcast offers valuable perspectives to enhance your approach and improve outcomes.
We'll win deals based on our service. That's kind of the philosophy here. I don't we offer a premium service and I don't need to I don't need to get into a rate battle with Bank of America. Right? They can take me off the off the board anytime they choose.
John:Right. I'd rather I'd rather be consistent and service the heck out of my customers and have them come back.
Andrew:Welcome back to ACS Portfolio Perspective. I'm your host, Andrew Pace, Chief Client Experience Officer at ACS. And today I'm joined by John Gujon, President of Unifi Equipment Finance. John brings extensive leadership experience in the equipment finance industry, including senior roles at Heller Financial, GE Capital, and Bank of America Global Leasing before joining Unifi Equipment Finance about one and a half years ago. Under John's leadership, Unifi has achieved remarkable growth, reaching 145,000,000 run rate in volume and growing their portfolio to $320,000,000 last year, with ambitious plans for another 165,000,000 in volume and $350,000,000 portfolio this year.
Andrew:Unifi was recently recognized as one of the Monitor's top 100 leasing companies this year. Perhaps most impressively, Unifi maintains exceptional credit performance with delinquency at just 0.28% and annualized charge offs at 0.12%, significantly outperforming industry averages. Based in Ann Arbor, Michigan, and owned by the Bank of Ann Arbor, Unifi has built a reputation for exceptional service that drives strong referral business and sustainable growth. John, welcome to the show. Great to have you here.
John:Thanks, Andrew. It's great to be with you. Always great to see you. It feels like a conference, right?
Andrew:Right. It seems like we just saw each other seems like yesterday, but we last saw each other in Vegas back in February. How time flies. I mean, can you believe it? It's already September, NFL college football, NFL season.
John:Well, as you can see, I'm wearing a vest. So Yep. And the weather too.
Andrew:Like, hoodies are back. Right?
John:Actually, today's today's my least favorite day of the year. We had to close our pool today, and it's always sad seeing the backyard with the pool closed.
Andrew:Yeah, I have a few more weeks before I do that, but I'm not looking forward to cleaning up the millions and millions of leaves that are going to be falling in my house in the next couple of weeks. So before we dive into numbers, let's start with the foundation. Culture and leadership choices often make or break a growth story. So let's begin with how you set the tone at Unifi. What were the first two, three moves you made that unlocked Unifi's recent growth and performance gains?
John:Yeah, that's a great question, Andrew. You know, I would tell you that when I came on board here, I was blessed to find a very, very talented team of professionals ready to roll. In fact, I had worked with Daniel Patti back at US Express Leasing years ago when we started that platform in Parsippany, New Jersey. I had made a commitment to the bank and to the chairman of the bank that I wouldn't really make any changes or tweak anything until I took a good hard look at the process and understood what Unifi did and what our what our go to business model was at that time. After spending sixty, ninety days kind of observing and talking to people, it was pretty apparent to me that this place was a machine, particularly in the operations side.
John:I would tell the team, I'm going to break the machine. My goal is to break the machine. I knew that they had throughput capacity, and I was really curious as to how much it could withstand. The to market strategy the prior go to market strategy was to build the portfolio through tranche acquisition, more of an indirect model. And I'd hoped to move into a more direct model and own the deals that we're putting on the books.
John:Hence the idea of breaking the machine. The response was great. I think there was a little bit of culture shock when I first came on board. One of my core tenets, one of my core beliefs, particularly from a leadership perspective, is the belief in resident expertise. So for instance, my director of credit and portfolio, Tony McHugh, you know, one of the best credit guys I've ever worked with.
John:I don't need to have the highest credit initial when I've got that kind of talent on the team.
Andrew:Mhmm.
John:They were accustomed to a more centralized decision making process and funnel funneling decisions into a centralized process. My expectation was you've got the role, you're the right person, you make the decision. So my challenge was empowerment helping them get to the point of taking the next logical step. And I think that came as a bit of a surprise. So once we got through that and they understood that a lot of this is based on trust, I put my trust in my team, and I trust that they're the right people to execute, and I ask them to put their trust in me from a vision perspective.
John:You know, after that, we were a rocket ship ready to go.
Andrew:And you mentioned, you know, build through, you know, you unified, build through, tranche. Can you talk how the shift from the reliance on that wholesale paper to building, more of a direct portfolio, the rationale, how did you sequence that transition?
John:Yeah, so when you look at the income lines, the revenue lines, a good percentage of our income line is derived from non interest income. In commercial paper market or the tranche market, you prohibit yourself from executing or taking advantage of documentation fees or interim rents, etcetera. When somebody else originates the transaction, they keep the fee. Well, I wanted to grow that non interest income line. We had some excellent partnerships in place in the broker market that were still doing transactions on our paper.
John:So we had the opportunity for fee income. But on the tranche side, you don't see those opportunities. We were really fortunate that some of the relationships that had left the company over the prior years decided to come back and give us another shot. And really, the growth last year was largely organic from those relationships and the relationships that were in place growing as well as relationships coming back. Little by little, peeled back.
John:I think our tranche business represented roughly a third of the originations. We've got that down around 10% now. My goal is to continue pushing in that direction and building out our direct model and controlling the fee income that we can generate from that.
Andrew:And I love this word that you've used in the past, thoroughbred organization philosophy. Did that how did it change the organizational design accountability and your decision speed?
John:Yeah. So as I mentioned earlier, plus to have a great team, you know, I've got people on the team that have been here thirty plus years that that are holdovers from the old urban leasing days. So they know the market. They know the business. They know commercial equipment finance.
John:The Bank of Ann Arbor bought Irvin in 2013, and I don't think they really knew what they had in a commercial equipment finance business. So during those first ninety days of observation, you know, I I got this idea that that the platform itself was strong. The platform itself was a machine. And I was talking to my boss one day, and and I wanted to know what the the magic elixir was that allowed us to go from a budget of 104,000,000 to 143,000,000 in in originations. And I said there I have no magic.
John:It's, you know, it's nothing that I've done. I said, you know, the team was like a thoroughbred back in the pen. All I did was open the gate and let them run. And it Right. It was obvious that they wanted to run, and they could run.
John:And it and it's kind of that concept that led to the idea of breaking the machine. Let's see how fast this horse really is. Let's see how much we can take on. And, you know, even even going with that kind of exponential growth, it it never broke. So we set our goal a little higher this year.
John:We went from a budget of 104,000,000 to 150,000,000. And we're hoping to close the year, you know, north of 170. So yeah. And and we haven't thrown bodies at it. We've just, you know, executed against the plan.
John:And and, you know, in addition to the idea of resident expertise, there's another big element, and that's communication. So one of the things I do, Andrew, we we have we have weekly meetings. I have a a leadership team, which consists of Tony McHugh on the credit and portfolio side, Daniel Patty on the ops side, Tim Otto is our CFO. And we get together every week and talk about what the week looks like and where we are from a planned basis, what our objectives are, etcetera. And then they go out and talk to their teams.
John:Right? And then monthly, I get the whole team together, and we have a a monthly all hands meeting, and we walk through the numbers. Right? So who can tell me what SOFR means? You know, nobody knows what SOFR means, but we use we use the we use that venue as a way to educate people and share the common goal.
John:You know, I get no more joy than hearing my vendor service reps talking about what they can do to help us get to our non interest income goal for the month. Everybody has bought in. Everybody feels a sense of ownership. We're all one team. And I think that really, you know, if you had to say what the magic is, it's it's making sure that everyone knows the plan and is feels a part of it.
Andrew:Seems like that's the magic, right? Yeah. Just everyone understands the vision, they understand, you know, the direction, and everybody's pointing in that same direction. Right. So what would you say are some of the leading indicators that you watch weekly or monthly to know if your growth is healthy versus merely just growing fast?
John:Yeah. A couple of things. We made a decision, a strategic decision, to focus on certain asset segments, the core businesses that we wish to pursue. And we based those decisions around our knowledge of the assets, our knowledge of that market, of that user base, our obligor base. And we try to stay away from areas that we aren't comfortable or knowledgeable in.
John:So by focusing on a smaller universe and casting a narrower net, it allows us to be more expert in the areas that we choose to endeavor. Right? You know me. You know my background is in asset management. There's really nothing that I haven't seen or done, but that doesn't mean that that skill set applies to this platform.
John:So instead of, again, painting with a broad brush, we try to fine line it. And by better understanding the markets that we play in, gives us a chance to anticipate extrinsic factors that may impact that. One of the examples I would give you, we do really well in the CNC space, CNC woodworking space. And I know we'll talk about tariffs and regulations later in the conversation. But specific to that market, we saw the global trade war impact that market directly.
John:Why? Because most of those machine tools are coming out of Europe, out of Germany, out of Italy. The raw product, forestry products, are coming out of Canada. Right? So you layer on tariffs, and now a piece of equipment that someone anticipated spending $400,000 on is going to cost $450,000 or 475,000 And by the way, are they going to make that capex investment this year during this uncertainty or try to get by with what they have through the remainder of the year?
John:But again, it's kind of fine lining and looking specifically in that market segment as opposed to a generalist view and taking on anything that crosses the desk.
Andrew:Gotcha. So let's talk about credit excellence and risk management. Leadership lens sets the direction, but durable growth also depends on guardrails. Let's shift from the culture you built to the discipline that sustains it. You're running roughly 0.28% delinquency, 0.12% annualized charge offs.
John:Yes. What would you
Andrew:say are the non negotiables in your credit box that make that possible?
John:Yeah, so great question. Again, getting back to the Unifi story and how it relates to Bank of Ann Arbor. So Bank Arbor of is roughly a $5,000,000,000 community bank. With not a great ton of experience in commercial equipment finance space. So the credit policies that were originally drawn and that we adhere to are more closely hewn to a community bank credit policy, which is fine, as long as it allows you to play in the markets that you're in.
John:So, you know, we're we're an AB lender, and we utilize all of the the tools that most of our competitors do, you know, whether it's DMV or PayNet or CLEAR for background checks. We have a scoring model that James Jankowski and Tony McHugh have fine tuned over the years. While it doesn't decision deals for us, it becomes a data point in our credit decisioning process. And we try to stay in our lane and within our boundaries when it comes to our credit racks, etc. Does that mean that we won't look at other transactions or make a stretch on something?
John:Absolutely not. We we we certainly will because we we try to be problem solvers as well. So what does that look like? Maybe instead of funding 100% of the OEC, we ask for 30% down, or we ask obligor to pledge additional collateral, or we use structure, the maintenance and return provisions to strengthen our position. But I've said this before, and I'll say it again: we will never sacrifice credit quality or volume.
John:Credit quality comes first. We're pretty scrupulous in our portfolio review. We rescore our portfolio on a fairly regular basis. So we see trends that are developing or softness developing because we're constantly looking back and looking at the portfolio to see if there's any degradation or deterioration. And again, it's just that adherence to credit policy that has kept us in good stead.
Andrew:You know, that's a perfect segue into the next question I had, because I think you know, those decisions, obviously, when you guys exited over the road transportation, you did it before the downturn, right? Yeah. Can you share some of those early warning signals that prompted that call, and what would you bring it back?
John:So first off, I can take no credit for that decision. That decision was made long before I joined the company. All credit goes to Tony McHugh. Again, it's just a matter of monitoring the segments that you're in. And I think Tony, I don't want to speak in his behalf, but I think Tony saw some softening in a couple of our large relationships, saw some difficulties developing, made the decision in 2018, 2019 to start to exit that market.
John:And we employ that same strategy now as we look at the different markets that we're thinking about. There's the power of big numbers, right? So if you look at the portfolio and compare performance over a period of time, bring that performance forward, it can kind of give you an indication of what to anticipate or what to expect. But again, it's no credit of my own that was entirely on Tony McHugh.
Andrew:Sounds like I gotta get Tony on one of these podcasts.
John:Absolutely. Yeah. So
Andrew:how do you pressure test the portfolio today? Like, what which stress scenarios or concentration limits are the most useful?
John:Great question. So again, community bank, right? You have concentration issues on an obligor basis, concentration issues on asset collateral types. And because we're selective in the markets that we play in, you can see growth bubbles. We're not spreading risk across the wide spectrum.
John:It's more of a narrow slice. It is. It's the testing of credit scoring. It's scoring the portfolio, going back and selecting groups within our portfolio to take a deep dive on, which we do on a monthly basis, the team here goes above and beyond looking at the portfolio for indicative measures.
Andrew:And with that being said, where would you see the greatest risk of adverse selection in the current market, and how are you guarding against that?
John:Great question. You know, obviously, over the road, trucking has taken a beating, and I think it's starting to matriculate beyond that to last mile, which is an area that we have invested in in the past. So then you start to look at, instead of the last mile delivery as a whole, are there geographic centers that stand out? One in particular is the Chicago, the Greater Chicago area. Right?
John:It's all the railheads, all the marine stops. So a lot a lot of destination to destination deliveries going from a rail depot to a trucking depot. It's starting to slow down. Well, does that mean that that is going to have the same impact in the Fort Of Long Beach? That's something that we'll have to look at.
John:Again, think it all stems from how well you know your market, how well you know your customers.
Andrew:Great, thank you. So with the risk framework in place, the next question is how you compete and how you can still grow. Let's move from the guardrails to go to market playbook, referrals, service, pricing. Unifi has grown through referrals and service. What specifically drives referrals for you and how do you measure and encourage those?
John:Sure. So I would tell you an anecdote. I was talking to one of our sales guys the other day, and he was talking to CNC machine tool guy. And this person told him, you know, yeah, you're in a tough space. You know, everybody has cheap money.
John:Everybody over services. Everybody has app only. Our app only is up to seven fifty, so it's a little different than the norm. But, basically, you know, he's telling telling us he told the guy, he said that you guys are a dime a dozen. Yeah.
John:But we're not. Work with us. See what it's like. Right? You know, we can credit decision in a couple of hours.
John:We can same day fund. Again, we have app only up to $7.50. But I think the biggest differential is if you have an issue or a question, you can pick up the phone and talk to our head of credit. You can pick up the phone and talk to our credit manager. You can pick up the phone and call me.
John:You know, there are not a lot not a lot of big banks or too big to fail banks that you would expect to be able to hop on the phone with the head of credit, the head of cheap risk. We're very involved with our customers. We're very reachable, accessible. I would put us up against anyone from a service standpoint.
Andrew:You mentioned service, so exceptional service. So what does that mean operationally, your response times, SLAs, and the post funding support?
John:Yeah. A couple of things. First, I would tell you that we're not remaining stagnant. We're investing in a new front end system to help expedite the process. Our general turnaround time is two hours or less on a credit.
John:Does that mean that we turn deals in two hours? No. We can turn deals in fifteen, twenty minutes if all the necessary data is there. We can same day fund if if we can get docs out and and, you know, use eDocs to to close the deal. From a service standpoint, I I would take it a step further.
John:For us, the relationship doesn't end at the account executive level. We've got the machine, my VSRs, the vendor service reps, who develop relationships with our vendors. And the feedback I get from the vendors and from the support we provide, whether it's calling to get a doc through the system, getting a wire out, or at the end of the month, their activity statement, which shows their entire pipeline, where deals are in that pipeline, what we expect to close in the next several weeks, etc. All that goes out at the end of the month. And I get the nice emails back thanking us for the service, and I think that's part of what separates us from a lot of our competitors.
Andrew:Great. And we touched on briefly earlier about tariffs, and especially with the CNC and woodworking. How else are tariffs and trade tensions showing up in the demand in other industries that you guys are currently involved in?
John:Yeah, so I apologize, I have a little bit of a scratchy voice. So we're seeing it across the board, and whether it's, again, raw materials, price of steel, price of aluminum, the import tax on equipment coming from overseas. So our philosophy is it's a soft cost, right? We have a certain tolerance for soft costs up to a certain percentage. And if the tariff falls within that percentage, we're okay with funding it.
John:If exceeds that percentage, then the expectation is the obligor has to make up the difference in the down payment, etc. I think the bigger impact, Andrew, is less what we see the the immediate concern, and it's more of a long term concern. Because no one knows what tomorrow looks like or next week or next month. I've compared this year to last year and the uncertainty in the air last year, you know, last year money was sitting on the sideline. People were hesitant or reticent to make that capex expenditure leading up to the election.
John:In my opinion, it didn't matter who won the election. Money was bound to flow back into the system. You've got the pent up demand. You've got the safety valve release of the election. Okay, it's time to get back to business.
John:We don't have an election pending this year. This malaise that we have felt, I think, is going to have a knock on effect and a carryover into 2026. Know, the Fed's gonna make an announcement next week. It's already priced in the market that it's a quarter quarter point drop. With the with the tick up in of inflation, it's highly unlikely it'll be anything more than a quarter point drop.
John:So what does that tell you? More malaise. Right? So my concern is less for the immediate impact of tariffs and more concerned with when do we relieve this tension, when do we relieve this uncertainty, and get back to business.
Andrew:Yeah, I even heard that in some instances that they were going to be two quarter point drops, they've already baked in that second quarter point drop in, you know, which obviously we may not see for, you know, several months, you know, people are already maybe baking that into some of the new rates that they're offering. You know, competitors are pushing aggressive pricing. Where do you guys hold the line? And I apologize for my scratchy voice, because obviously, you know, I'm still regaining it from that exciting Bills game from the other night.
John:There you go. So
Andrew:where do you guys hold the line, and where are you willing to flex a little bit?
John:Sure. So first off, I'll say Ralph Wilson was a native Detroiter. So, you know, the Bills have made a home here in Detroit when they can't play because of the snow, and they're welcome back anytime. The the the Bills Mafia are a great group of people. Thank you.
Andrew:We love coming to Detroit. We love Detroit's like a second home for us Bills fans. So
John:Exactly.
Andrew:Know, if we can't if we can't win, you know, we we want Lions fans to enjoy one too.
John:There you go. And back in the old days, you know, we would've would've hitched our wagon to the Bills, but now we've got the Lions playing the way they should be, so we'll see what happens.
Andrew:It's exciting. It's exciting. It is. So so where's Unifi willing to hold the line, or where do you hold the line, and where are you willing to flex? Because we can always talk Bill's lines at any Well,
John:I'm really glad you asked this question. This is kind of a point of pride for me. We are hopefully a voice of stability in the market. We've not really changed our rates at all for seven or eight months. You see this every year as you go into the fourth quarter.
John:Companies who have struggled from an origination standpoint, plot all the stops, drop rates for volume sake because they need to hit numbers. We've been consistent with our rate cards. In the best of times, we review the rate cards on a monthly basis just to make sure we're competitive. That doesn't mean we're going to change rates. And if we do, we are surgical in the way we change rates.
John:It's by business segment, etcetera. But I'd rather be seen as the voice of stability and consistency as opposed to that variable that pops in and out of the market. Look, there's always someone out there that's willing to be the lesser fool, right, and drop rates. My partners know that I'll always be here, right? If you want to go and chase a low rate for a month or two, we'll still be here when you come back.
John:So to that extent, we've been very stable. Are making I think sulfur dropped 70 bps over the last four weeks. So we're making some modifications in our base rates going into the fourth quarter. But it's certainly not some of our competitors that you see swings on a weekly basis or a monthly basis.
Andrew:You know, we talked, you know, going into the fourth quarter, going into 2026, which niches or asset classes are you leaning into? And which may you deemphasize or which ones might you deemphasize from?
John:So I think the stable of products that we have right now, I'm pretty happy with. I think there may be some aggregate concentration issues in the vocational truck space, so we may take a look at that. But really, I think the portfolio is in really good shape. It's performing very, very well, and there's nothing indicative, at least at this point, that would cause me to want to retreat from where we're at. So the other side of that coin is, where do I think we can invest going into next year?
John:You know, we've done a really solid job in the smaller construction space, in the aerial work platforms and residential equipment, backhoe loaders, wheel loaders. I think that there's going to be there should be an opportunity next year on some of the larger construction gear. So we may try to do something there. But other than that, there's no sector that I would see us chasing at this point.
Andrew:Okay. So we've covered the inside of the business and how you win in the market. To wrap the content, let's zoom out to the broader industry landscape and the economic signals you're watching. What's your base case view for the next twelve months on demand, defaults, funding costs?
John:Yeah, so every one of these questions is just so pertinent. You know, I think the cost of funds with rate concessions, with the lowering rates, that will ease up a bit, but it's the spreads, it's the margin. You know, again, talking about the SOFR rate dropping 70 bps, the prime lending grade is still sitting at 7.5. So it hasn't matriculated out to the commercial market or the consumer market. There will always be that demand for spread.
John:We borrow directly from our parent bank. So, know, is it a competitive edge? I think in certain cases. In other cases, captives have an advantage with blind discounting and 0% financing. I think the jobs market, the fact that it's tightening a bit, you know, seeing what happens with the global trade war, if that eases up, I think there's plenty of demand pent up that could develop into a robust 2026.
John:Am I optimistic about that? No. If we continue to see incremental increases in I say incremental decreases in job creation, increases in unemployment, and inflation ticking up, you know, that's a recipe for a pretty difficult 2026. So, I think there's plenty of headwinds that we're moving into. From a unified perspective, it makes us all the more cautious when it comes to our credit decisioning and at what point we're whole in transactions.
John:It makes us less likely to be creative and more likely to stick to our knitting. And I think from an industry standpoint, you'll probably see some of that as well. I don't know what the big banks will do, but again, know, fourth quarter, everybody's jumping in. Will they be back again in the first quarter? That's the question.
Andrew:Yeah. And, you know, obviously, know transportation's been choppy. What's your read on timing and what signals will confirm stabilization?
John:You know, I think the first thing we have to do is get past the tariffs and trade war, just brings some stability back to the general market. You know, you look at the PMI index, I think it was 48.7 last month, which was an uptick from July. So that's positive, but it's still below that 50 line, which is still negative territory, right? So, we want to see an improvement there. I think demand for goods sold has been fairly consistent, but I don't know what the demand for raw products has been.
John:And that's a driver for industry, and our market serves industry. So I think, in answering your question, I'd look to the PMI, I'd look for the cost of raw goods as bellwethers or indices as to the state of the industry.
Andrew:Great. No, thank you. Those are great, know, that's great insight. And how do you weigh pricing discipline versus, you know, share gains when the cycle's late and obviously uncertainty is high?
John:Yep. Again, I think there's real value in being the stable guy, right? Stability itself has value, as long as you're competitive. Going back to some of my prior roles, you know, at the GEs and Bank of America at the time, we didn't have to be the lowest player, right? As long as we were in that group of three or four or five and were competitive, will win deals based on our service.
John:And that's kind of the philosophy here. We offer a premium service, and I need to get into a rate battle with Bank of America. Right? They can take me off the board anytime they choose. Right.
John:I'd rather be consistent and service the heck out of my customers and have them come back.
Andrew:What is one contrarian take you hold about the equipment finance cycle today and what would change your mind?
John:Great question. I think the general thought that the legislative changes, tax changes, bonus depreciation, was going to light a fire for true leases and fair market value structures. I just don't think that that's something that's going to come back, at least not to the level that I knew it. And I think that the overwhelming counter to that uncertainty. Bonus depreciation is great, but if not making a capex spend, you're not going to benefit from bonus depreciation.
Andrew:Great. No, thank you. For operators listening, what is one practice they should adopt this quarter to strengthen their portfolio resilience?
John:Yeah, review your portfolio. Look, try not to be biased. Data is data. Data points are data points. Use them to your benefit.
John:Look for softness. And again, we talked earlier about the Chicago transportation market. Look for not only equipment concentration issues, but geographic pressure. That can turn a table pretty quickly. And the data's in your portfolio, just look at your portfolio.
Andrew:That's great advice, John. Lastly, who's the better quarterback, Josh Allen or Jared Goff?
John:Oh, come on, man. Jared Goff. Jared Goff. No. I know.
John:I love Josh Allen.
Andrew:I had to throw that in.
John:Josh Allen is my favorite quarterback, so I'll give you that. I
Andrew:I do love your coach, by the way.
John:Oh, yeah. Well, sounds coach. Like the D. Cavs.
Andrew:That's right. That's right. You know, before we go, do you have any questions for me?
John:No. How's business? What are you seeing? I mean, guys see all the dirt, right? You see the downside of the industry.
John:So what are you seeing?
Andrew:You know, we've noticed a drop off in transportation assets, although we've seen quite a bit of fleets. You know, we've handled a couple of large fleets simultaneously. Year over year placements have dropped, but we've seen obviously an increase in the number of assets due to those larger fleets being assigned out for repossession. And as you pointed out, some of the busiest areas for us in the transportation space still remain are California, Illinois, Texas. And then we are also starting to see an uptake in some of the construction recovery assignments.
Andrew:And again, a lot of the areas that we see most of those are, the biggest percentage of some of our construction assignments are in Texas, Florida, Georgia, Tennessee, California. Yeah, so transportation, and again, I think usually that it follows through. Transportation's usually the first industry to get affected, and then some of the other industries follow suit. So that's kind of what we're seeing right now. And a lot of things that we're hearing, people are hoping that things are going to start to improve in maybe early mid-twenty twenty six.
Andrew:But no, we're growing, and we're looking for ways that we be a better, you know, service, you know, strategic partner with our clients through, trying to mitigate those laws, trying to prevent more repos by getting involved further upstream through either, soft call first party collections to pre repossession collections, and even door knocks. We're doing a lot of door knocks, delivering letters, and that's really, we're, you know, preventing a lot of accounts from being flipped to repossession. And we're, you know, banks are really saving a lot of money and, you know, costs for repossession, transportation, you know, make ready fees, remarketing fees, and things like that. By having somebody deliver a letter, knock on the door, and it's made a significant impact. But yeah, we're, you know, we're getting, it's usually the fall is, you know, September, October are traditionally, you know, historically they're busier months for us.
Andrew:And then things obviously slow down, as we get closer to the holiday season. What
John:are you seeing on the remarketing side? Are inventories shrinking? I read an article today that construction inventories are down, and I imagine that the cost of used equipment has risen. Are you seeing the same thing?
Andrew:You know, because, you know, majority of our clients handle, you know, their liquidation of their assets, so we just take it and drop it off. But I've I've saw some of the same things that you have where, you know, know, equipment, you know, there's a, think, yeah, the same thing where used equipment is at a premium right now. So, you know, which is going to drive up costs, cost of new equipment versus used, or, you know, the tariffs and everything. So there's a lot of people, know, have decisions to make, obviously. So, do they wait, you know, for rates to drop, and do they stick with what they have for now, and maybe just deal with any maintenance issues that they're running into versus, you know, getting into that new piece of equipment.
Andrew:So yeah, I'm seeing some of the same things, but because we're not remarketing the assets for our clients, we're bringing them to the remarketers.
John:Yeah, but you talk to all the remarketers.
Andrew:We do. Yeah. Mean, we talk and, you know, I'll just say space is still at a premium because, you know, there's been a lot of repos over the last few years. But yeah, I mean, space is at a premium. You know, lots of yards are filling up.
Andrew:Yeah, that's, you know, one of the things that, like you, we're just constantly looking at the daily blasts that come out with that information just so that we're
John:kind of ahead of the curve. Well, unfortunately, and you and I both saw this with the COVID, post COVID market, that price increase as the tariff costs raise the cost of new equipment, demand for used equipment goes up, cost of new or used equipment goes up as well, and then it creates kind of a false plateau, and it becomes normalized. And now that freightliner Cascadia 26 that was selling for 135,000 new is selling for 190,000 new, and it becomes the accepted price. And, you know, as a as a finance company, we have to bear that in mind that there's this false inflation of value, and then layer on top of that the cost of the tariff. So you're always asking the question, am I making the right investment?
John:Is this going to come back on me? Unfortunately, the prices never go down, right? No. Or at least not at the same rate that they went up.
Andrew:No, never. Right. That's a true statement for sure. Well, will tell you, this has been a masterclass, John, in balancing ambition with discipline, build the culture, harden the credit box, compete through service, and keep perspective on the macro. Thank you so much for sharing such practical insight.
Andrew:And to our listeners, thank you for joining us on the ACS Portfolio Perspective. If today's conversation was helpful, please follow the show, share it with a colleague, and leave a quick review. We appreciate you being part of the conversation. We'll see you next time. Until then, take care and go Bills.
John:Thanks, Andrew.
Andrew:Thank you, Don.