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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.
It's so key to have the right people in the right spots. Right? And and obviously, on that collection side or repo side or you look at your team or our team. But if you have the right people in the right spots that understand their job, you know, and and, you know, you're especially on the collection side. Yeah.
Jim:Making those calls isn't easy. It 100% always, for me, it always comes back to people, right? It's having the right people in the right places makes a world of difference for everything.
Andrew:Welcome back to ACS Portfolio Perspective. I'm your host, Andrew Pace, Chief Client Experience Officer at ACS. And today I am joined by Jim Ryan, Sales Manager, Sandhills Global. Jim oversees all of Sandhills auction products and relationships with finance customers across construction, agricultural, commercial, trucking, and aviation industries. Since joining Sand Hills in 2015, Jim has been instrumental in driving the expansion of Auction Time and EquipmentFax platforms, and currently manages partnership development between Sandhills and financial institutions nationwide.
Andrew:His unique position at the intersection of retail marketplaces, auction platforms, and bank and finance relationships give him an exceptional insight into equipment values, market dynamics, and strategies for maximizing recovery on distressed assets. Jim, welcome to the show.
Jim:Thanks, Buddy. Glad to be here. Appreciate it.
Andrew:Well, thanks for being here, Jim. You know, to set the stage, let's start with where values are today and how we got here. Then we'll dig into recovery tactics, transportation opportunities, and how technology is changing the game. From your seat, across construction, agriculture, trucking, and aviation, how have values moved since the pandemic and over the past twelve to eighteen months?
Jim:Yeah, no, it's been a wild ride, and I still think we're in the midst of it in a lot of industries. You know, if you look back, March 2022 was really the peak time, right? That's where we saw values at the highest, inventory levels at the lowest. And then we've been through it. You know, the transportation industry has been through it to where we had a record number of inventory levels to where now we're somewhat back to normal.
Jim:Our prices there, I wouldn't say we're back to where we need to be on the pricing side. Inventory levels look good on that side, better than what we had been. But every industry has been a little bit different. We're going through it, pick on the ag sector right now. We're going through that right now where there's a ton of ag inventory that's out there.
Jim:Dealers have a lot of inventory, and we still expect more to hit the market. So it's been a different dynamic how each industry has rolled through you know, their peaks and valleys with inventory and pricing different and at different times since the pandemic. But, you know, it's really been one of those deals, you know, with the pandemic that was, you know, once in a lifetime type deal of, you know, something that had happened to the industry and the market and the world essentially. And the way we bounce back and, you know, handle that has been different for each industry, but we've made it through and, you know, things are progressing in somewhat of a positive fashion.
Andrew:So, you know, you talked about inventory glut in agriculture. Where
Jim:has supply finally normalized? You know, you've seen it now a little bit on the ag side to where, you know, the manufacturing, as far as production goes, has slowed down. They've limited that a little bit just because there's a glut of inventory. But, you know, we've caught up in the transportation side. You know, our numbers now are where they were pre COVID levels, so we're in a good spot on that side.
Jim:You know, construction's a balancing act. You know, we're pretty solid on construction. You do see a lot of dealers moving a lot of inventory into rental fleets on the construction side, so there's kind of a balance there. Really, the pinpoint right now is that egg side, like you'd mentioned, where, you know, we do have a lot of inventory. There's dealers that are loaded with inventory.
Jim:Dealers don't want take trades right now. You know, they're trying to move inventory before year end, so we're not carrying that floor plan over to next year. So it's kind of the dynamic we're dealing with on the ag side. Now granted, every industry is different, but, you know, we went through it on transportation, went through it on construction, and now finally we're going through it on the ag side. And it's kind of crazy to think, but this is still all stemmed back from pandemic driven, and we're still dealing with that years later.
Jim:So, you know, hopefully we can get through next year and get that egg side corrected and be on the up and up for all the industries, but there's so many other factors that go into, you know, where pricing and inventory levels are at that are outside of just inventory itself.
Andrew:Yeah. So what would you say are some leading indicators that lenders should watch to gauge, you know, portfolio risk in, let's say, you know, the next two quarters?
Jim:Sure, sure. I mean, we'll talk about the ag side first. I mean, we started to hear here over the last month probably where, you know, some of our customers are starting to hear from a lot of farmers and end users that, Hey, I'm gonna need to move some equipment before a year and I need cash flow. I don't know if I'm gonna make my operating note. So we're starting to hear some of that out there on the ag side alone.
Jim:You know, the biggest thing overall, transportation and construction, I think is just value. And there's opportunities there on the lending side, absolutely. But having a good understanding of where that company or person or contractor or whatever is as far as in their business, how did they navigate the last five years, right? What kind of jobs have they done? What's the plan here in the future?
Jim:There's a lot of guys that went through and a lot of companies that went through and were very successful during the pandemic, had good opportunity. Unfortunately, on the flip side of that, there's lot of that struggled and lost their business. So I think it's a matter of knowing what equipment values are right now. You know, you almost got to erase where we came from five years ago, right? We can't look at inventory values and stuff from three, four years ago because it's different now.
Jim:We need to understand where we're at today, you know, where the market's headed in the next couple years, you know, what's the current landscape of the country as far as economic wise goes, right? You know, we have to take all those into consideration when we're looking at portfolios or we're looking at deals right now moving forward because it is different than even two years ago. And what would you say?
Andrew:I mean, how wide is the gap today between the historical lending values and what the market will actually bear? And where is that gap the widest?
Jim:You know, we're seeing obviously widest right now on the ag side because there is so much inventory, right? Kinda goes to your old adage of supply and demand. It is a buyer's market right now on the ag side because there is a ton of inventory out there. You know, we're in a spot on the transportation that's a little different. Inventory levels are good.
Jim:We haven't seen the complete bounce back in pricing. We're very structured on the transportation side within the zero to five year age gap on on that type of equipment because that's the appetite of lenders right now, right, is that zero to five years. Anything outside of that five years, you know, there's not a lot of people touching that on the lending side. So, you know, that that's kind of where the stalemate comes on the transportation side is, alright, you know, do we get some lenders that wanna dive back into that five plus year old equipment with with, you know, possibly a a a good company or fleet or whatever the case may be and dip their toe back in, quote unquote cherry pick some deals and get some of those financed out there, that's going to be the determining factor, right? Because we're seeing some positive values on the zero to five year, the lease return type spec trucks and transportation side.
Jim:But it's that older group, you know, the over five years that, you know, unless you're a cash buyer, there's not a lot of movement on that side. And that's obviously going to hurt values on that side for sure.
Andrew:Right. Right. And as far as a lender, if they have to remark a book quickly, what would you say are two or three data points from Sandhills that they should pull first?
Jim:Yeah, obviously inventory levels, right? That's a huge piece. Where we're at, current inventory, you know, where we're headed in inventory levels. And I always really, I truly look at auction value. I'm a firm believer in auction value is a true sense of where the market's at.
Jim:You know, auction value is real time data. It's what an item has worked today. You know, when we look at retail numbers or wholesale numbers, which, you know, the transportation side, there hasn't really been a lot of wholesale right now because things are so slim on that side. But retail and dealers and what's out there are usually three to four months late to react to what a true current market is. You know, if I'm a dealer and I'm listing right now, I'm very hesitant to drop my prices based off the current market.
Jim:Now I may, in two or three or four months, adjust it accordingly. But that's where I always go back to, you know, you look at inventory levels and you look at auction numbers. Auction numbers are a true sense of where we're at and where we're headed or where we've came from. It gives you a good look and dynamic of, okay, this is probably the expectation of the next couple months based off inventory and auction numbers. And then obviously you fire and adjust that retail side of things or the lending side of things based off of where the current market's at.
Andrew:So you know, that gives us a clear read on the value. Let's shift to what to do when a file turns distressed and how to maximize recovery. Why does the default playbook of sending everything straight to auction leave money on the table?
Jim:Yeah, you know, that's kind of where Sandhills and really where my entry came into the the bank and finance equipment finance world was, you know, probably four to five years ago. We, you know, we we had the data to be able to put out our monthly market reports, and and those are wildly successful, and true numbers based off of everything we've collected since we started as a company. You know, we're working with 98% of the dealers that are out there. So we're able to really capture, you know, auction values, transactional data as far as retail and wholesale transactions. Then obviously what's out there on our trade sites of like truck paper, machinery trader, tractor house.
Jim:So we kind of felt that there was a point there to where, all right, assets are distressed or we have lease returned assets. You know, what are we missing here? You know, we had some banks reach out to us, you know, initially early, early on in the whole grand scheme of things and like, okay, we want to try to retail some of this ourselves. You know, we're just not getting what we want at auction. You know, it kind of got our wheels turned into the fact of, all right, you know, we have all the tools that are here.
Jim:Why don't we get in a better mode of doing this and offer assets at a retail and wholesale option before we ever have to go to auction? Why not capitalize on what's right there? You know, if you have 10 assets that you have and we're able to sell four or five of those retail or wholesale before going to auction, obviously it's a boost to your bottom line. And in a bank and finance world, why would you not want that? So that's kind of really what started the wheels turning on that.
Jim:And again, not that we're against auction, obviously auction times our platform and there's assets that need to go straight to auction, right? There's repoed or distressed assets that just need to go, and they need to go away. But finding that 60%, 70% of your inventory or assets that do have value, do have remarketing value, You know, it's identifying those, putting them through a process to where we really can target a retail and wholesale buyer, get a transaction done. And then worst case, you know, if not, we'll go to auction with it. But we've done enough marketing in the meantime to keep enough eyeballs on that unit to where we can go into auction and have it be successful, right?
Jim:And have some typical retail buyers maybe play in the auction space a little bit. So we're seeing, if you're priced right, we're seeing stuff move as upwards of 60%, 70% before going to auction. So we're really limiting the whole old adage of pennies on the dollar, right, of being able to maximize some of that return to where, you know, if I can sell six to 10 assets before going to auction, you know, it gives me a lot more flexibility on the four that are left when I do go to auction. I'm not so hard on the numbers I need out of it. So it's really a whole life cycle approach is the way we like to look at it, and it's been wildly successful, and I think it will continue to be as we grow it.
Jim:But it just gives a different opportunity and alternative from what I think what everybody's used to.
Andrew:Yeah, like a it sounds like a great blended strategy you guys have, you know, implemented. Can you, you know, from from, you know, share a couple of examples where a retail first path or retail plus auction path delivered a 20% plus lift in recovery?
Jim:Yeah, no, absolutely. So, you know, we're dealing with a lot of lease returns, transportation lease returns right now. We've been through it for really the past two years to where we've seen upwards of a thousand units roll through us that are off lease, well maintained, you know, your typical Freightliner Cascadia 126s, or your Ken Horse or your Bolvos, items like that to where, you know, we've gotten those in in the program to where we've put them out there and really look at, you know, let's say a forty five day window. We're gonna be, and I think where the key comes in here is pricing, right? You have to know what the market is and where to be priced at.
Jim:You know, with the way things are right now, if find that sweet spot between that auction and retail number, if you put a retail number out on a piece right now, what's gonna differentiate yourself between you, that piece, the other dealer that's out there, right? Where they can go into the dealer, maybe get extended warranty or whatever the case may be. So you find that value in that sweet spot that may be under your typical dealer average retail number. And, you know, we've seen on average so far this year on a few of those packages where we have sold 70% before auction year to date with an increased value of almost 20% over what an auction value would be. And you're talking 500 plus units, that's a big increase in the bottom line.
Jim:So and it's an ability to us, you know, with our strategy, we're really able to target the end users. So we're not just shopping this wholesale and getting a bunch of dealers to buy it so they can turn around and relist it. A lot of these units are going to someone who's gonna put it on the road next week or once they get a month from now. So we're really targeting that end user base. Anytime you target the end user base, you're gonna increase your value at the end of the day.
Jim:They're looking to buy to put to work. They're not looking to buy to resell. So that's really been a success story, I guess, as a whole on that, is being able to touch that end user base and find the right buyer that's willing to pay more than auction value.
Andrew:No, that's a great thanks. Thank you for sharing that. And you know, for lenders under timeline pressures, what, you know, is the fastest way to test retail demand before committing to the lane?
Jim:Yeah, sure. I mean, and like we talked, you know, every situation's different. Know, some assets need a, you know, you have the ability and can go longer. You know, you can go a two month window on a retail wholesale program. You know, we can drop it down to as quick as, you know, we're priced competitively.
Jim:Hey, I gotta have this asset gone by the October here. Great, we can get that asset, get it in for maybe a week, be really aggressive on pricing, do some marketing around that to try to find a buyer within a week. If not, we can go to auction with it and have it sell within two weeks. So we can make a turnaround in as quick as two to three weeks, we can extend that turnaround up to three months. So we're very flexible with the process based off the needs and situation of every asset and every lender.
Andrew:Thank you. And you know, we've talked about process. Let's look at sector strategy, especially in transportation. You know, there's a lot of strategic opportunities in transportation finance. Why might now be a good time for selective lenders to re enter the transportation industry?
Jim:Sure. You know, and we touched a little bit on this earlier, but again, my opinion, my perspective, so take it for what it's worth. But you know, I think there's opportunity there. Like we talked, you look at that zero to five range. You know, there's a lot of lenders that are not willing to go outside their tightened credit box already.
Jim:Like, hey, if it's older than five years old, we want nothing to do with it. You know, there was a lot of lenders that obviously got in, me and you both know, during the COVID time, you know, wildly successful during that time. And then obviously, we turn around and there's a ton of defaults and and, you know, repos and things like that to where it ended up not being a success. There's some lenders that went through COVID that were that kept a pretty tight ship and were very successful with it. You know, I think there's a a lot of people are scared right now, right?
Jim:A lot of lenders are scared, and rightfully so. Know, I was in the position to make those decisions to jump in during that time. And if it was a time to where it wasn't the most successful time for you guys as a lender, and you got burned on some stuff, I would have a hard time wrapping my head around jumping back in that space, right? But I think we're in a more stable environment, right? The inventory levels are solid.
Jim:Prices are starting to peak in some areas. And there's a lot of good qualified fleets and users companies out there that just need the opportunity, right? Have great credit, went through COVID, you know, there was no bankruptcies, no delinquencies, no issues, but hey, you know, they may not be able to afford a two year old truck. You know, maybe it is a six year old truck with really low miles. It's hard pressed for them to find a lender that's not gonna be extremely high down payment or extremely high interest rate.
Jim:So I truly feel that there's an opportunity for some lenders if they're willing and able to get back in the space. And like I said, cherry pick some deals to a certain extent to where, you know, gain some traction back on transportation side. Because really, that's really been the struggle on why prices are still affected on that five to ten year age gap of units, and we're not seeing that grow a ton, is because it's really gotta be a cash buyer, right? There's not a lot of lenders that are willing to dabble in that space and help anybody out on that side, unless you want a high interest rate or high down payment, and that's not very feasible for some users. So I think there's opportunity there.
Jim:We'll see how it shakes out into next year. But I think if we can get a little bit more play on that side of the lending side and a little bit more opportunity there, we can see an increase on some values there and see some positive activity momentum going into next year.
Andrew:Great, thank you. And you know, you mentioned some price names were peaking. Is there a specific region of the country where you're seeing some prices peak? Can you maybe
Jim:dive Yeah, into that a I little think bit it's more not so much regions of the country. I think it's more of the type of asset, you know? So there's a lot of lease return assets that, you know, especially on the trucking side that are hitting the market right now. A lot of those being brought back to lease return specs, typically under that 500,000 mile mark, your typical fleet spec truck. We're starting to see some of that.
Jim:We're starting to see some momentum in that side. We're seeing some really strong values on that wholesale side, and even when it does go to auction, we're seeing some premium values on that stuff. So again, in comparison to where we come from, obviously the past two or three years, we're definitely seeing an increase in value there, and there's some pockets that are there. But it's that segmented pocket of, you know, a lot of lease return or lower mild late model within that five year range units that we're starting to see some activity and some positive results on.
Andrew:Great, thank you. You know, we talked about COVID and the impact. What can you you know, what lessons stand out from lenders who exited post COVID and maybe, you know, are considering a return?
Jim:Yeah. Yeah. It's tough because COVID, don't know if me and you will ever see anything like that in our lifetime. Right? And I'm sure you guys were wildly busy.
Jim:I know you were wildly busy coming out of COVID as were we like it. You got to a point where numbers were just so astronomically high and unrealistic, to be very honest with you. Like, we were seeing used units selling for over over a $100 that should have been worth about 60. You know? Like, it it just it was such a wild time and dynamic to where as a lender, you know, again, that's the tough part is, you know, I'm not in the chair to make that decision.
Jim:There were some that it wasn't a wild success, right? And you get a lot of returns and you take a lot of damage and heat. But if you were able to make it through it, you know, obviously everyone was affected at some rate or another. But if you're able to make it through then and kind of regather yourself, I think if you're smart with values, right? We got a time there where we hadn't seen anything like it in how many years as far as values that, you know, I think there would be better, I don't know if it's logic or better, you know, you have better sense of what's going on now to where if they would get back in the transportation side.
Jim:You know, there's a little bit more risk obviously involved, but you have a better feel for what a true sense of value is right now, right? And having tools at your disposal to be able to truly value what a piece of equipment is truly worth and not just what the market may say like it was during COVID, right? You could name your price, and that's what they were lending. And is that truly what the truck was worth? Probably not.
Jim:It's what the market kept screaming, and so, okay, we'll follow the market. But, you know, I think you just you gotta have a true sense of where we came from, what we've been through, where the current market's at, and where it's going. Sensible lending, right? It's lending on something, and you're not taking every deal. You're not jumping in full throttle.
Jim:But having a true sense of, okay, we've got a good transcript now of two to three years of kind of where we've been, right? The trucking market's really been stable for, if you look at the past year, minus up or down a little bit, you know, a few percentage points each month. We've been pretty stable for a year. So we have a sense of where we're at, pretty good sense of probably where we're going, that, yeah, if you're smart with it and get back in and have that mindset of, I'm going to lend on what the true sense of value is, there's some opportunity, absolutely. And how would you balance the risk controls with taking advantage of, you know, attractive opportunities, and what guardrails would you say matter most?
Jim:You obviously got to look at every situation on a case by case basis now. You know, where where that company came from, you know, what type of asset they're looking at lending on, right? You know, we're we're to the point where we're gonna see a lot more lease return units hit back into the market. The market's gonna, you know, be, I wouldn't say flooded, but there's gonna be an influx of lease return stuff here as we head into the next year. So truly having a sense of the type of asset that you're dealing with.
Jim:And then you break it down even to specs, right? You know, look at mileage, you know. Typically, start getting over that 500,000 mile mark is when you start seeing issues on trucks, you know, 500 to 600,000 mile mark. So being smart with lending. Know, maybe you do have a tour.
Jim:We're willing to lend over five years, but we wanna keep that mileage under 300 or 400,000, right? So there's some mitigated risk I think you could have there going into it just based off of there's enough data coming out of post COVID and how much is transacted in the market to where you can really pinpoint on where you probably need to be as far as years, mileage, you know, maybe even make and model of asset to narrow it down and be somewhat safe in your decision on that.
Andrew:And then would you say are they mostly day cab, sleepers, combination of both?
Jim:A lot of it's sleepers. A lot of it's sleepers. You know, that day cab market right now, it's not very strong. Day cab market's a tough market right now. There's a lot of inventory on the day cab side, but there's also a lot of five year or older day cab on the market right now, and that's where you're that's where you're in almost no man's land as far as values go.
Jim:That market's really gotta get flushed, you know, whether it's cash buyers, whether it's, moving it down south or wherever the case may be. You know, a lot of farmers playing in that space just for agricultural use, but we gotta clean that market up a little bit, get rid of some of those older units. But really what you're seeing back on the lease return side, it's primarily on the sleeper side.
Andrew:Gotcha. Thank you. And if you were advising a credit committee today, what one underwriting change would suggest they make first?
Jim:You know, I think you truly, and I've talked to others about this, and we've had others reach out, but it goes back to, like I said, you've got to have a true sense of what the equipment's worth. I think there's, you know, there's times and situations to where, you know, a you can look lot of different tools that tell you what something's worth, but you really need to analyze the market. Know, any tool that you use out there, we have tools ourselves that are gonna give you a value, but if you don't have a sense of where the market is currently at and where it's going, you know, having somebody on that credit team that truly understands the market and knows where it came from, knows where it's going, and know the current market that we're in, that's a huge difference maker in being successful in lending properly, in my opinion, is, you know, we came from the spot where you saw it where, you know, it was just kind of, okay, well, everyone else is lending it, and they said it's worth this, so we're gonna go with that. We're gonna lend it that.
Jim:And that's where people got in trouble. You know, that's where companies got in trouble. So having somebody in that driver's seat or on that credit team that truly understands the market and where we're going and where we came from is a huge asset value to that credit team, in my opinion.
Andrew:Thank you. I mean, that's a great perspective on the market. So let's close with the tools that make, you know, this work scale, namely data and AI. How is Sandhills using AI to match buyers with inventory and, you know, to reduce the time to sale?
Jim:Sure, absolutely. I mean, we've been involved on the AI side quite a bit over the last few years. We integrated a lot into what we're doing in our marketplaces and our auction side, you know, even to the point of, you know, being able to identify certain buyers, right, based off search habits. You know, if if you have a user that's out on truck paper looking, we can identify those users. Okay.
Jim:They look at typically look at sleeper trucks within, you know, x year range and x mileage range. Okay, great. We understand that. We're able to put a lot of those assets in front of those buyers, and either bring them into the auction world or give them some retail assets. You know, we've started to identify, you know, okay, whether that user is a retail buyer or auction buyer.
Jim:Where does he typically like to buy at? Okay, if he's a typical retail buyer, maybe we'll start giving him some auction items that would fit his search criteria to bring him into the auction world. So it's really a unique dynamic we have of having an auction platform, but having the largest retail space on the used equipment side to be able to kind of cross those over and really identify buyers. And at the end of the day, right, it's helping all of our customers. It's helping dealers that we work with, auction companies that we work with because we're moving assets, and we're able to get those assets in front of the right buyer, and obviously limit the time that it is for sale, which is a win for everybody.
Andrew:Great. And what would you you know, what data signals most reliably predict where a unit will clear and at what price?
Jim:You know, like I said, I look at auction value right now just because that's the true sense of where the market's at. Yeah. But, you know, you gotta be realistic. We're seeing a lot of stuff move right now within that 15% to 20% over auction value number. That's kind of the sweet spot right now where you can typically get a sale a little bit quicker than normal.
Jim:So, you know, it's keeping a keeping a pulse on where the market's at. Like I touched on, there's not a ton of wholesale activity on the on the transportation side because things are so slim on that end between, you know, auction and retail. But it's truly having a sense of where the market's at and, yeah, maybe I take $58 less on this piece of equipment, but I can move it thirty days sooner. Cash flow's king in this business right now. Know, that's a huge turnaround time for a lot of companies.
Jim:So just, you know, having a sense, having a pulse of where things are at.
Andrew:Gotcha. And how has the shift from print to digital changed, you know, velocity and transparency for lenders?
Jim:Yeah. It's been a it's been a wild dynamic. We get a lot of questions of, you know, why are you guys still in print? You know, print's dead. You know, we we print we print on-site here.
Jim:We print on-site here in Lincoln, Nebraska. We send everything out here for all the trade pubs. You know, truck paper, auction time, all of them get sent out from here. Really the way we look at it, print is our digital search engine, right? You know, we've been wildly successful and this type of print is still alive.
Jim:You know, if you look at editorial print, you you can have your arguments on that side whether that's dead or not. But for what we do, we really see, you know, the less that we print, the less web activity we have. And that's a fact. We've seen that. So the more we print, the more web activity we get.
Jim:So really, our print and our magazines are really a digital search engine. You know, it's a paper copy of guys being online, and it's a generational gap, right? Like, there's we we still you know, the coffee shop down the small town I live in, there's still guys that, you know, read the paper every morning and pull the magazines out, right? You know, so part of it's a generational gap there. And who knows?
Jim:You know, we may get to a point in years to come to where, you know, what we're doing and we have to shift and fire and adjust, absolutely, it could be the case. But right now, for what we do, and just the market that we're in and kind of the type of print we're doing, it's a huge benefit to what we see online.
Andrew:That's awesome. And, you know, looking ahead, what technology will have the biggest impact on portfolio optimization over the next year or two?
Jim:You know, I think you fall back to it. I think it's going to be AI, right? I think that's probably where we're headed with it. You know, I'm not a wizard with AI any means, but I think it's the topic of everything you and I have been to the past probably year is, you know, how do we integrate AI? How do we use AI?
Jim:You know, how's it gonna impact, you know, business or processes or things like that? So I 100% think it's AI. I do think, you know, obviously, we're on top of that and integrated a lot. I think you have to be responsive to it, right? I think you get behind the eight ball if you're not.
Jim:It's almost with any industry anymore, but especially this one to where you have to stay cutting edge, you have to stay up to date, you got to stay on top of things, you got to be able to willing to adapt to different things that come about. And a lot of those things, you know, some may work, some may not, but if willing to change and get out of your comfort zone, it's really when you get left behind. So I think without a doubt, it's probably going be AI at some factor.
Andrew:Yeah. Has there been any AI tools that you guys have started to, you know, if you can share? Have you started using AI to integrate within some of the things that you guys are doing there at Sandoz?
Jim:Yeah. You know, a lot of the programs we're building on our back end, we do integrate AI, you know, whether it's on the whether it's like we talked earlier on the identifying of the buyer side and the remarketing side, you know, whether it's on the lending side where, you know, you may have somebody that doesn't qualify for this piece, but we can quickly generate another piece that's very identical and put it in front of them and get that piece lent. So I think there's a lot of pieces that are involved there, but 100% everything we're doing has to have a component of AI moving forward.
Andrew:Right. And what should lenders do now to get their data house in order so these tools deliver value quickly?
Jim:Yeah, I think it's right. It's about people, right? You got to have the right people in the right spots. I think it's an integral piece to have, you know, whether it's a credit team, whether it's an asset team, we gotta have people that are in place that understand. You know, you don't have to fully understand equipment, but you gotta understand the market, right?
Jim:You have to understand and know where, like we talk, you know, numbers and where things are coming from and where they're going. You know, having the right people in the right place is huge. I think a lot of companies that are out there that may not have that, and, you know, you're just looking at a spreadsheet, making decisions based off of what numbers say in a spreadsheet isn't always the best way to go. I think we kind of found that outcome out of COVID a little bit. So again, right people, right places, understanding what you're dealing with in the environment that you're in is huge.
Jim:Is there anything that
Andrew:you'd like to discuss or talk about that we haven't already touched on that we may overlooked or left out?
Jim:I guess question I had for you on it. Knowing and obviously, you know, we do a lot of business together, and we're done awesome for us, man. Extremely happy for what ACS has done. But what is your guys' you know, we've looked at it at a process, okay, of how soon do we, you know, we have a delinquent account or something, or how soon are we wanting to jump on it? I guess, for your perspective too, because I've seen so many lenders out there that have such a wide range or, hey, we're willing to work with them up to one hundred and twenty days, some have a hard cutoff at 30.
Jim:Like, what have you guys seen as success in as far as like, if you were to write a timeline as, Kate, here's kind of what we need to follow, what would be your timelines?
Andrew:Sure. That's a great question. You know, I would say the sweet spot, and again, speaking from my perspective, the sooner we're, you know, service provider is engaged, once the account is in default, the better chances we have of successfully resolving that case. Time is of the essence. Every day that that account's not being paid for, that asset's depreciating.
Andrew:They're not maintaining it most likely in certain cases. So the longer the lender waits, the longer they keep that account in house, you know, does make the recovery effort more difficult. So we have a lot of clients that engage us as early as thirty one days. We have clients that engage us at forty five, 60. So again, the later they engage us, the more difficult the effort becomes.
Andrew:The, you know, the equipment is not as, you know, it's not in, know, the shape of the equipment, deteriorates over time. So, by the time we do get our hands on it, it's not going to be as valuable, as it would have been had we picked it up thirty or sixty or ninety days earlier. So, I would say the sweet spot, you know, from our perspective, we've been collecting data for since I've been with the company. We've been an online system, since the early 2000s, and we've been collecting data. And, you know, we know when clients engage us, you know, it's one of the things that we like to identify early on in the relationship is how soon will you engage us?
Andrew:Because that gives us an idea how we're going to perform on their portfolio based on when they engage our services. So if a client says, Hey, I don't assign out till one hundred twenty days, we've built a portfolio predictive calculator based on a lot of data sets where, what type of customer is this? What type of industry? Is it an A credit, B credit, C credit customer? When would you hire, you know, engage us to begin recovery efforts?
Andrew:All that will impact, you know, our results. So we could identify in the beginning of any relationship when they engage us, as far as, you know, what our performance, how we're going to perform in that portfolio, just based on, you know, just a couple of little key data points, like how, when do you engage us? Is this an credit customer, B credit customer? Some of it will be geography. Is it in, you know, a lot of their customers in Chicago, you know, that has some unique challenges.
Andrew:So geography will impact some of the recovery rates and resolution rates too. But I would say to answer your question, thirty to sixty days, we can be somewhere between 8090% effective. And then if you add in, if there's telematics or GPS, that, you know, increases our, you know, resolution rates, because we can track the asset, we know where it's at, we can take the guesswork out, you know, trying to find it is half the battle. The other half is getting somebody out there quick enough to get it before it gets back out on the road. So yeah, so there's other things that can increase or decrease our resolution percentages.
Andrew:But I would say thirty to sixty days, we're pretty effective. Anything after sixty days, you're going to see a decrease performance just based on the fact that, you know, that customer's now had sixty days head start, you know, to And usually if they're
Jim:not paying, they're not caring for it, right, on the type of equipment. It's typically what we see, right? So I think, yeah, you're spot on. And that's kind of where because we're we're you know, obviously, especially in the remarketing side, get a ton of questions of. And and obviously, our first go to is always you guys as far as, you know, we get questions on, you know, who who can we use for for repossession or who do we need to go to?
Jim:And obviously, very quickly to turn them to you guys because it's it's been a good partnership between us. But, yeah, it goes the same way, though. Like, they don't get you involved earlier, you can't get the asset. If the asset doesn't get to a remarketer or get in the remarketing phase soon enough, I mean, there's timelines, and time costs money in this. And especially in the world we live in right now and the way the inventory market is, like, there's peaks times to capitalize on certain types of equipment, you miss a boat just because you didn't chase the collection process the proper way or waited too long.
Jim:Like, you know, I don't don't want say I don't feel sorry, but like if you don't have a collection process in place, you better factor that in on why you're losing X percent on every deal, right? Because, you know, and it's something we learned the hard way too, but you gotta jump on that stuff sooner because it does truly affect not only your success, but the whole process post recovery, you know, or post initiate on collection. That whole success, the rest of it is really keyed off that timeline.
Andrew:A 100%. And, you know, even before that decision to say, okay, we're because when you make that decision to assign it off for repossession, you know, that's not a decision that anybody takes lightly, right? But there's even things that, know, lenders can do even before that stage to where, just trying to make more attempts to reach out to your customers. You know, there's, you know, one or two calls a week isn't going to motivate that customer enough to pick up the phone and call you back. Sometimes, you know, we have other programs where we're getting involved even soup, you know, sooner upstream, further upstream to where we're doing, pre repossession calls for clients that, perhaps they've seen an increase in defaults in the portfolio and they don't have enough people on their teams to, you know, get through those accounts as often as they want to.
Andrew:So then they age and then they eventually land, you know, they're eventually assigning them out for repo down the road where we can step in is we can compliment their existing team and start making calls on those accounts, you know, free recovery. And then they can focus all their efforts on some of the fresher past due accounts, and then they can make more calls on those fresher accounts, preventing them from, you know, you know, aging in the portfolio. So it's, you know, us just being a compliment to their team, making some calls for them. Other things we're doing that are reducing the number of repo, and that's reduced repos by 50%, in some cases. You know, again, some other programs we've done that have really assisted clients in reducing their exposure, reducing the number of repossessions, is, you know, a door knock program where we're delivering letters, we're using, you know, professionals to deliver letters.
Andrew:And you know, again, that just, you know, lets the customer know that, oh my, you know, the bank means business. They're investing time and resources and somebody's actually, you know, using a person to deliver a letter instead of it just coming through the mail or an email or a text message. So it has a different kind of message. And that again has also, helped reduce the number of repos, which reduces the losses. And, and you know, so there's a lot of different things.
Andrew:So we've over the years have evolved, we've took the team that we have here, which are, you know, we have a great team. Really it starts with who we identify and who we want to bring It's the experience, it's the professionalism, and we don't have turnover. So clients have that consistency with us. So I think we can leverage the assets that we have, which is our great team here, and just compliment the great team that our clients have. And again, you know, they can start and stop, they can increase, decrease, you know, it's based on, you know, whatever the demands are calling for at that time.
Andrew:But that's really, you know, again, I think
Jim:Yeah, it's good. It goes back to people, though. Like we taught, like I brought up earlier, like it's so key to have the right people in the right spots, right? And obviously, if you're on that collection side or your repo side or you look at your team or our team, but if you have the right people in the right spots that understand their job, you know, and you know, you're especially on the collection side, yeah, making those calls isn't easy, you know? And obviously every lender is a little different based off their volume, right, or their portfolio.
Jim:But, you know, having a collection specialist that, you know, I'm not saying sympathize, but can maybe understand the borrower at that time and and and maybe come to an accommodation to work something out, right, to where we don't have to keep going down the line. So it it 100% always, for me, it always comes back to people, right? It's having the right people in the right places makes a world of difference for everything.
Andrew:Yeah, I mean, you know, we use ZOS as an operating system here at ACS, and you know, it's the right person in the right seat, right? Do they get it, want it? Do they have the capacity? You know, we do. We, you know, we, like I said, it's a very, methodical process for us when we bring somebody in because people, you know, come here, they want to retire here.
Andrew:And, we're very sensitive and we're very protective you know, all the relationships that we've built in the almost thirty years that, you know, the company's been in business. So we, you know, could, you know, one job can ruin, you know, a big relationship. And so it's very important for us that who we decide to bring in, only from, you know, employees internally here and locally in our offices here in Buffalo, but even our external partners, our recovery agents and transporters, it's extremely important that we're properly vetting them as well to ensure to our clients that we're just not, you know, hiring somebody that doesn't have the adequate insurance. They have the proper licensing. There's a lot of states right now that, you know, over a dozen states that require, you know, any type of repossession, voluntary, involuntary, you have to use a licensed repossession agent.
Andrew:So, you know, it's educating. And again, back to your point, it's people, processes, right? But that's, you know, one of the things that we, you know, we're very sensitive and we don't want to just bring somebody in that's going to, you know, jeopardize everything that we've built over, you know, almost thirty years of being here. And our clients benefit from that. We hope.
Andrew:You know, absolutely.
Jim:I speak for Ed on our end, like obviously, business wise and the partnership, I think it's been fantastic. I think there's a ton of opportunity yet still to grow together, which is great. So no, I completely value that. I value the friendship we've kind of gained here over the last, you know, year, two years. So it's been awesome.
Jim:And I think the same on that end. There's a lot of opportunity for it to grow and work together further moving forward. So no, it's been a good fit, man. I couldn't ask for anything more. So it's been awesome.
Andrew:Yeah, no, and likewise, man. It's been great to know you more and more as we spend more time on the road. You know, traveling is not easy, as you know, in this industry. You know, it's hard to leave home. It's hard to leave your family and you have responsibilities at home.
Andrew:But you know, we take on these roles that require us to travel. You know, we do it because we love it, obviously. Absolutely. But I also, the part of me that keeps me going back to the airport and waiting in lines and boarding planes and delays is I, you know, I look forward to, you know, seeing familiar faces like yourself. And that to me is important too.
Andrew:So I, you know, that's, you know, looking
Jim:No forward making to No making a difference is a big thing. So absolutely. Couldn't agree with both
Andrew:of Absolutely. Jim, this has been terrific. Thank you for sharing clear strategies on valuation, recovery tactics, transportation opportunities, and the technology that is reshaping remarketing. Your perspective across retail marketplaces and auction platforms gives our audience a real edge. And to our listeners, thanks for joining us on the ACS Portfolio Perspective.
Andrew:If today's conversation was helpful, please follow the show, share it with colleagues, and leave a quick review. We appreciate you being part of the conversation, and we'll see you next time. Until then, take care.