Q4 2020 Ritchie Bros. Auctioneers Inc Earnings Call
Hello, and good morning, and thank you for joining us on today's call to discuss our fourth quarter 2020 results. Joining me today are Anne <unk>, Our Chief Executive Officer, and Sharon Driscoll, our Chief Financial Officer, along with other members of the management team, who will be available for the Q&A portion of the call.
The following discussion will include forward looking statements comments that are not a statement of fact, including projections of future earnings revenue gross transaction value and other items are considered forward looking and involve risks and uncertainties.
The risks and uncertainties that could cause our actual.
Financial and operating results to differ significantly from our forward looking statements are detailed in our SEC and Canadian Securities filings and are available on our Investor Relations website at Investor Day at Ritchie Bros. Dot com.
We encourage you to review our earnings release and form 10-K, which are available on our website as well.
Edgar and SEDAR.
On this call we will discuss certain non-GAAP financial measures for the identification of non-GAAP financial measures. The most directly comparable GAAP financial measures and a reconciliation between the two see our earnings release and form 10-K presence.
Presentation slides accompany our commentary.
Larry today. These slides can be viewed through the live or recorded webcast or downloaded from our website. All figures discussed today are in U S dollars unless otherwise indicated I will now turn the call over to Ann centers.
Thank you Samir and good morning to everyone joining our call today.
It has been close to a year since the pandemic started and we hope you and your loved ones are safe and healthy ex COVID-19 continues to impact all parts of our daily lives.
Ritchie brothers delivered solid full year results with an 8% growth in service revenue and 24%.
Growth in adjusted operating income and 5% GTD growth despite operating in a COVID-19 environment, which is inherently plagued with uncertainty.
I think these numbers underscore the leverage in our model on sharing will walk you through the financials shortly.
Our.
Priority use for health and safety of our employees and customers and to that end. We continue to stay vigilant on all our Covid protocols that you have heard me discuss for the past year.
To keep our employees and customers safe, we made the difficult decision to move our flagship Orlando auction to 100% virtual.
Tap over the past year, we have proven that our omni channel model to deliver great results.
Like many of our customers I sorely Miss going to Orlando This year, because it brings together an amazing community.
We do not want to lose that aspect of our business and post Covid. We are planning to have live customer appreciation.
And bigger and better preview days when it is safe to do so.
The way I think about the world is normally through two main pass on things.
Things that are in our control and things that are not we fiercely drive all elements in our control. So that we are able to handle outside factors.
On the downturn and benefiting from the upturn.
The current environment remains unprecedented and in the fourth quarter of Consignor started to take a wait and see approach as they digested the news around the prolonged vaccine rollout.
Felt the impacts of a turbulent U S election.
Managing various new Covid restrictions.
On top of this we know the used equipment market is tight right now with very low new and used inventory levels.
This is a challenge we continue to face in the first quarter.
And while we can't control the broader environment, we are obsessed with drive.
Driving execution for the benefit of our customers for our employees and for all of you.
Looking back at 2020, I am proud of the technology driven innovation, our teams implemented to help customers leverage our omni channel platform.
In the fourth quarter.
Our data science and digital marketing teams continue to innovate and leverage the wealth of data we are collecting by being 100% of our line.
Our customers are very happy as these efforts are driving demand and resulting pricing well ahead of expectations across the board.
The early read on Orlando.
Suggest the demand and pricing strength has continued and you will be able to see the detail in our Ritchie brothers market trends report in early March.
Additionally, our data science team continues to focus on auction science to understand how we can improve price realization using the various technologies.
<unk> tools and channels, we have at our disposal such as marketplaces.
Much like last quarter, we continue to not ramp equipment.
Keep tight controls on costs.
And whose timed auction lots technology for select events.
These actions and many.
Others produce the strong operating leverage you are seeing in our financials.
Also in the quarter, we have realigned our senior leaders to drive growth and execution on a global scale.
I am very pleased to announce that Gary Taylor is becoming our global Chief revenue Officer.
After doing a phenomenal job as the head of North American sales.
Her global role complements Jim Kessler, as our global Chief operating Officer, and Jeff Jeter as global head of strategic accounts.
I would also like to formally welcome routes services for the Ritchie Brothers family.
After share on disk.
Versus our financials I will talk about how we are executing against our strategic pillars.
And now over to Ritchie brothers CFO Sharon Driscoll.
Thank you Anne and good morning, everyone.
Despite continued uncertainty posed by the pandemic, we reported a solid.
At 5% growth in G TV, 15% growth in total revenue and 6% increase in service revenue in the fourth quarter.
Our GTD was driven by high teens growth in Canada in part due to a large just first of all a pipeline equipment and single digit growth in our internet.
Terminal business, despite the cancellation of our Narita auction event due to COVID-19 concerns in that market.
I am also pleased to say Gov planet positively contributed to G. TV growth in the quarter as inventory flow has returned to near normal levels. After some of the Covid driven.
<unk> options, we saw earlier in 2020.
Despite the solid contribution of our strategic accounts group the U S business was down slightly in the quarter compared to last year.
Driven by tightening used equipment supply as well as the team cycling over.
Given discouraged sales events in <unk>, Washington, and Anthony New Mexico.
We are continuing to see equipment tightness in our early Q1 sales events as the U S can signers appear to be taking a wait and see approach to better assess new equipment availability and used equipment.
Non rich realization from the Florida auction events.
While we are optimistic about the vaccine distribution schedules globally continue to be fluid and we remain cautious about the possibility of increased restrictions globally with new strains of the virus circulating.
<unk> price our priority is to keep our employees our customers and our communities safe. During this unprecedented health crisis, and we will diligently follow our COVID-19 protocols as we comply with local jurisdictional restrictions.
We saw a 7% reduction indirect costs.
Due to our Covid protocols, and our pivot to a 100% online bidding on sale day that Anne has previously discussed.
Beyond this we also remained disciplined and diligent on all cost lines that we can control as well.
These actions drove a strong operating leverage.
With a 16% increase in adjusted operating income and 11% increase in adjusted earnings per share.
We continue to expect cost of service growth to be less than 50% of the rate of service revenue growth until we anniversary our COVID-19 protocols initiatives.
<unk> did in the second quarter of 2020.
I also wanted to specifically discuss acquisition related costs incurred in the quarter associated with the Roche services transaction.
As part of the acquisition the company incurred $6 million of acquisition related.
<unk> of.
Of which $800000 was related to the amortization of share based continuing employment costs.
These costs are due to the 312000 company shares issued to certain previous unit holders of Rouse as part of the consideration on the.
Cost.
As these rollover shares are dependent on continuous employment.
The $27 million value of these shares will be amortized into earnings over the next three years.
Looking ahead. It is important to note that in 2021 these expected.
<unk> costs are estimated to be $10 3 million.
These costs will not be adjusted out of our future earnings as they will be reoccurring charges. However.
However will be visible on this acquisition related cost line on the face of the statements.
Before I turn.
To auction and marketplaces I would note that our other service revenue increased 2% driven by a 10% growth in Ritchie brothers financial services and one partial month of inclusion of Roche revenue offset by lower refurbishing and transportation fees in the quarter.
On auction in marketplaces service revenue grew 7% with service revenue as a percentage of total GTD coming in at a solid 13, 6% for the quarter.
We continue to think that service revenue growth is the best indicator of overall top line performance for our business model.
And most reflective of underlying business trends in the quarter.
It is important to note once again that contract mix can significantly skew total revenue growth depending on <unk> preference for how the deals are structured.
We are agnostic between service and inventory oriented.
<unk> contracts and stand ready to serve our customers in any capacity that they so choose.
That said inventory sales continued to be lumpy in the quarter, increasing 33% driven by strength in Canada, partially due to a large pipeline disbursal contract.
On just cause somewhat offset by softer U S inventory deals as the region cycled over larger inventory contracts in Q4 of 2019.
Our inventory rate increased approximately 500 basis points versus last year to 10%.
Our disciplined approach.
This risk deals, particularly on our inventory contracts combined with digital marketing driven strong price realization drove these results and we are very pleased with overall rate performance during the quarter.
Overall in the fourth quarter our SG&A.
Two average 13% year on year in part due to the Finalization of bonus calculations based on our very strong 2020 operating results. During this COVID-19 period.
Also please recall that we specifically called out the benefit in the fourth quarter of 2019.
In Q, a onetime stock based compensation recovery due to the prior CEO departure, and the forfeiture of Unvested equity grants.
When looking at our SG&A run rate growth as calculated by excluding bonus and share based compensation SG&A expense is up only 3%.
Percent in the fourth quarter.
For the full year SG&A was up about 7% after removing adjusting items in both years.
And the 7% growth rate includes a significant increase in variable based performance compensation costs due to significantly.
Do longer operational results in 2020 as compared to our 2019 performance.
Even with the additional compensation costs, our SG&A growth is below our service revenue growth of 8% in line with previously stated evergreen targets.
I am.
Really strong we're pleased to note that our sales productivity as measured by GTD per revenue producer improved in 2020 by 9% year on year.
Overall, I am very pleased with our SG&A performance and with our ability to drive SG&A productivity improvements while at the same.
I'm, all time investing for future growth.
Our thinking around travel and entertainment costs has not changed we are a sales driven organization and when it is safe to do so we expect these expenses to come back as our talented sales force gets back on the road developing and cultivating customer relation.
Townships.
Our balance sheet and liquidity remained in a very strong position.
With the cash used to complete the road service acquisition, our leverage increased to one one times on an adjusted net debt to trailing four quarter EBITDA basis, I am pleased to note.
Relation net operating free cash flow to net income came in at 125% for the year well ahead of our 100% evergreen targets.
That said operating free cash flow for the year is lower than last year, mainly due to timing of auction payouts and inventory.
Purchases.
Finally during the course of our 2020 year end close procedures, we identified material weaknesses in the company's internal control over financial reporting as stated in our filed form 10-K.
It is important to note that we have.
<unk> seen audit opinion on our financial statements and there have been no restatements, resulting from these control matters.
Our legacy systems architecture requires significant manual control points to ensure data moving between systems is complete and accurate.
The Cliff manual control environment, coupled with work from home protocols resulted in end of year Sox control test failures, primarily due to insufficient evidence of effective review.
It is important to point out that as many of our Sox controls are manual.
Sure. The company does use additional substantive and compensating controls to ensure the financial statements are complete and accurate.
To be clear there were no adjustments significant or material that were required in the 2020 interim or annual consolidated financial.
In naval statements due to these material weaknesses.
And I want to emphasize that we are committed to maintaining a strong internal control environment and will make it a priority to implement measures designed to help ensure that control deficiencies contributing to these material weaknesses.
Financial are remediated.
Further details can be found in our form 10-K.
I would like to thank again, our employees for their continued focus on health and safety as well as their dedication to meet the needs of our customers in these times and with that let me turn.
<unk> all back to Anne.
Thank you Sharon.
As many of you know we rolled out our new strategy to become the trusted global marketplace for insight services and transaction solutions for commercial assets.
At our Investor day in December.
A foundational part of our strategy is that we are a learning organization and we are committed to communicating as we learn.
Every quarter you can expect for us this year, how we are moving the strategy forward.
Although early days I am very pleased with the progress we made against the new strategy we are driving.
The coal innovations across our ecosystem.
To help us accelerate end to end customer experience initiatives, we are moving to a new nimbler product management organization.
I'm also very proud of the technological innovations around our flagship Orlando Woburn.
Digital with virtual tour videos of over 4000 items and the introduction of a remote concierge service for our customers.
We literally have our knowledgeable staff on face time with customers walking the yard to look at equipment and answer questions, we'll kind.
We also improved our call center experience by deploying our new interactive voice response system.
Net unemployed.
We continue to take steps to deliver the very best employee experience by revamping, our performance management system and developing and piloting.
360 degree leadership capabilities.
We proudly launched various initiatives around diversity and inclusion.
One I'd like to give particular call out too is our black lives matter of strategic initiatives.
Shifting to our modern architecture I am pleased to note debt.
<unk> successfully launched our first cloud be bidding engine micro services.
While unnoticeable for customers. This is a big step and moving our infrastructure for work.
We also added a very talented new head of architecture to support and propel our efforts in this area.
Now, let's talk about our inventory management system or IMS.
We continue to improve our automated data ingestion capabilities to make it easier for customers to use our system.
We also launched a free version of our IMF and have already seen significant adoption.
Launch of Ritchie brothers asset value either arms, our customers with a day that they need to make business decisions.
The Rouse acquisition will undoubtedly accelerate our efforts with IMS and the broader market.
In terms of our accelerate growth pillar.
But we have pilots underway for new satellite sites in Australia and Europe.
And are seeing strong early results.
We realigned the textbook sales organization to our new go to market structure that we talked about at Investor day.
And we have also brought a new talent dedicated to the bankruptcy and install.
With vertical.
Now turning to current trends and outlook I would like to share some considerations on our first half of 2021.
Overall, the headwinds on equipment supply that we saw on the fourth quarter will continue in the first quarter.
Our priority.
Thousands means on keeping the health and strength of.
Our employees at the forefront while focusing on execution.
The key execution priorities are growth in a constrained environment.
Being tight controls on cost.
And focusing on our true north improving our customers' experience.
We continue to see upside opportunity balanced by uncertainty and risks as well.
We seek and finals that are focused on cash flow and inventory management, which should continue to drive liquidity.
In 2020, we did not see the level of distress, we expected and think theres more to come here as bank started acting.
Where do you like things again.
We are also watching for both timing and magnitude of any government stimulus to begin driving infrastructure spend.
Also see the potential the consignor that had been on the phone.
Start to act in terms of equipment to spur sold and fleet realignment.
All that said there remains risks as the implications of Covid continues to cloud the outlook global timetables for vaccine distribution continue to be fluid.
And newer strength of Covid raise the risk of additional border restrictions.
Lastly, we continue to carefully monitor any potential.
And the sentiment.
Which could impact equipment demand and soften the current pricing environment as we progress throughout the year.
In closing I'd like to thank our team and our loyal customer base for a very successful 2020.
I am very proud of the employees of Ritchie.
Changes and their continued dedication and perseverance in the face of this pandemic.
And with that operator, please open the line for questions.
Certainly at this time for them if you would like to ask a question. Please press Star then the number one on your telephone keypad.
To withdraw your question press the pound, we will pause for just a moment you from barbecue in the roster.
Your first question from me.
Your line of blood borne from them.
Securities Your line is open.
Thanks, very much and good morning.
Interest.
In terms of the tightening used equipment supply that emerged in the fourth quarter could you sort of speak to the cadence of how that developed during the quarter.
You seem to be fairly upbeat on when we last spoke at the December analyst meeting. So just curious if that was something that emerge later in the quarter.
I sure Lynne.
And Sandoz.
So basically we first noticed it early days around the election.
I apologize on I think we spoke about that on all as well that in the U S. There was kind of an election based kind of a bit of a pause.
And cash.
Candidly when we had our call we had thought okay. One selection was behind us but of course, the what we could not have anticipated was everything and food post election.
And kind of the longer term.
Implications of that uncertainty.
<unk>.
As well as the new streams of Covid and the continued Lockdowns you know despite the vaccine are locked in so that's a little bit of kind of how we saw it unfold.
But or at the same time, let's just focus on the things that we are driving bright so these types.
Types of things election, everything the craziness that ensued new strains of Covid. These are you know out of our control. However in our control right what would your buyers want from us. The most selection they can get anywhere else and unquestionably they continue to get it.
What are sellers want that.
The highest price realizations possible and as we alluded to it as as we saw throughout last year. The way we were driving demand.
Pricing.
Very strong continues to be that way.
And as we take a look at our outlook.
We see the things that you guys are seeing right.
Oems have announced and they are coming back with production after the for shutdowns last year.
When we were all aware that banks were not acting like banks all around the world, but we believe that they will and we are of that that is part of why we built out the bankruptcy and insolvency vertical to be ready for.
For that eventuality, and whatever stimulus will come we know will be goodness as well. So that's a little bit of a context for how that played out in Q4, and what we're seeing right now and moving forward.
Okay. That's helpful color second question I wanted to ask about the legacy systems that we're.
As mentioned in the context of the.
Internal control environment.
You know in addition to some process revamping is there also a plan you know to revitalize those systems overtime.
Yeah. So good question Cherilyn, it's Sharon here you know clearly this aligns right.
With our modern architecture pillar.
The you know the legacy systems.
And it's really more of the interface environment between the various disparate systems that operate or you know different types of events.
On the.
The plan, we have is to really simplify.
How we actually complete transactions and use technology in a much better enabled way both for customer benefit as well as for our employee benefit. So that these manual controls will no.
<unk> no longer be required.
Great. That's my two thank you for the time.
Thank you.
Your next question comes from the line of Michael Do you move from Scotiabank. Your line is open.
Hey, good morning. So first question I mean, you talked about.
On the.
Tightening of equipment supply on the U S.
Provided commentary on to Q1 on the Canadian GTA V. I mean that was up in the quarter due to what sounded like a favorable auction calendar. Just wondering if you noticed them all are tightening in Canada, where the markets are somewhat different.
Yeah, Hello, Michael.
And here, so where we much like every quarter, we kind of see a tale of three cities playing out around the globe for us so the tightening in the U S are really was.
Initiated with the election, something that is really contained to the U S.
Market and then was prolong the nature.
The momentum that we've seen in Canada are on.
Unaffected by that and Havent had nearly the impact of let's say the additional closures that Europe has experienced with COVID-19 as the trend as the new strain showed up there.
Fair and huge Lockdowns came back into the kind.
Kind of seen three very different marketplaces, playing out.
What gives us a lot of confidence as we know the vaccine they're here.
It is a matter of time the disappointment with the rollout.
It is it is eventually will come on.
I am.
Happy to see my parents, just got the first vaccine last weekend, so I'm very hopeful.
We know the Oems that were forced into the situation that resulted in a tightening of supply they have announced very healthy comeback.
And the the entire bankruptcy and insolvency space.
You know, it's a matter of timing on when that plays out, but just a bit of context.
Gotcha Okay.
And then separate question completely different but the growth from the online auction marketplaces have been.
It's been nothing short of impressive.
Especially versus the the onsite auctions sorry, your Investor Day, you talked about high single.
On a digit low teen GTA V growth.
In your opinion I mean is that gonna be predominantly driven by online marketplaces for Mel I'm, just trying to get a sense for how to think about that going forward.
Yeah, Michael So just reminding everybody for Investor day, but nobody is more excited than the than the folks on this call but investor.
Your day, we sat on our vision and we were clear about two things, it's going to take us a little bit of time to fully realize it and also we're in Covid. So this is time for us to learn so just a little bit about the contacts.
No.
Our perspective of what live and online are actually means.
<unk> has significantly changed and I'll, just even say for myself coming in.
Our bias I had coming in what's really a retail bias right more online sales means less reliance on brick and mortar ripens.
Click the thing chips from our warehouse.
No I don't have to go into a store.
What I learned and what we have realized.
During COVID-19 is that the use of our yards are very different between buyers and sellers, but we really need to bifurcate. Your question into a two part answer the.
The buyer ex U.
Even before Covid two thirds of our live auction.
Buyers were already coming on line.
Even though we pivoted to a 100% digital that was more of a strained to our technology organization to make sure. We had the bandwidth on the systems to handle the increased flow. So from a buyer perspective, we were already headed that way, we're fully there and it allows candidly R.
Artificial intelligence machine based learning and our marketing teams to go crazy with that data and drive demand, we're seeing that in the demand numbers, we're seeing that in the pricing.
On the seller side, however, and this is what's so fascinating what they want from Ritchie brothers and it's really a unique differentiator is.
When they're done with a piece of equipment. They want done with it and then they just want their money and so our yards during COVID-19 are busier than they've ever been before with sellers dropping equipment. We take possession, we inspected we appraise it we split it out by the way we charge for all of these services we marketed for them.
Is it.
In fact, we're still bullish about that model.
On our investor call in today, if you're on the fifth pillar about accelerating our growth initiatives, we're actually testing hub and spoke models with putting much more scaled down yards much closer to where sellers are to minimize.
So transportation cost for them, but allowed them to partake of the care custody and control that they want so I think youre going to be seeing kind of both worlds play out and for sharing and I we need to.
Through and we're putting kpis in place that we can share with you guys, where the transactions themselves are digital but the physical.
<unk> of yards, we anticipate will actually go up not down for the sellers.
That's great color on thank you I'll get back in queue.
Thanks, Michael.
Your next question comes from the line of murder Maria from William Blair. Your line is open.
Hi, Thanks, good morning, everybody.
You from.
First question I want to talk for the impact of timed auction lots the market for you from moving.
On there I think.
On this call with us where it's gone so.
So curious how important is it for you now and dispense essentially a weak spot because no frills competitors can play there.
Or maybe not so I'm just curious about your perspective on how important.
And how are you doing there competitively.
Hi, Larry.
On the auction lots have been very interesting for us and we continue the learning. This is a and again so the very first thing we did when Covid hit is we moved on almost entirely to Oh and fully timed auction.
And then international.
Because we were concerned obviously there were travel restrictions and we were very concerned about potential latency effect.
And then your virtual auctions.
The learning we had there is perhaps not unexpected that because the buyer base is on non.
<unk> speaking by nature, much more comfortable with that format for Sally.
We have done testing in North America, and we continue to do testing about kind of the differences between timed auction lots auctioneers that type of environment.
But the true answer to the question is about differentiation for us.
England, our competitors and this is where we really need to take a look at the difference between buyers and sellers.
In terms of buyers they want selection.
And they want an experience that makes it very easy for them to obviously pick what they need I have a lot of confidence in the product that they've chosen.
Versus not and then obviously be able to transact on an easy way.
And in terms of selection I think hands down there's no question that the you know.
Ritchie brothers methodology, the confidence between the inspections, we do when we have possession of the equipment.
And the iron clad inspections, we do.
No question, the very best in the industry and so this really comes down to the timed auction lot is about a very small slice of what a buyer wants which is the experience during the transaction itself and you know we keep monitoring the differences between timed auction lots and auctioneers.
I'll talk about that very clearly with our with our employees as well.
But on the seller side and this is really where the advantage really comes on.
You know for our omni channel experience the yards that we have the ability for Ritchie brothers to take care of custody.
Or are some of the equipment is proving to be invaluable for sellers and so when you think about this really is a network effect right. So think about sellers more and more wanna be done with the equipment and they want an entity, where they will take control and handle it for them and just spend the money.
And so on.
Country players really do not have that capability and then what buyers want right. This is where it is this network effect is more and more selection with more and more sellers picking us. They want assurance that that equipment is as is presented and not only our inspection services, but our ability to even.
Showcase it and.
Fixed it up and stand behind the equipment and then and then it just comes down to the transaction itself, which is important but it's a very small sliver in terms of the value chain.
We're excited about timed auction lots on the <unk>.
Technology, and we're going to keep testing to make sure we're driving the best buyer experience on that asset.
As well, but the entire ecosystem that Ritchie brothers brings to bear is second to none and we've seen that moat grow during COVID-19 not shrink.
Okay. Thanks for that comprehensive answer.
One more follow up it looks like you're giving away a day inventory management system now.
Is that a way to bring customers in and then you can.
Charging for services later and as it helps bring in new accounts. It was kind of surprised to see that you're away from <unk>.
Yeah.
Larry So we actually have two products and you know as we shared on the last two calls we are still very much in learning mode.
So we have an enterprise products, which is very customizable there for very large accounts.
And now we have a business product and that's the one that we're giving away. It is in fact as you have said, 100% to drive adoption for two reasons first and foremost right now to still learn but then as you sow Ellis.
When we stated our Tibet.
But to be able to sell all of the products and services that we will be standing up on the marketplace. So I'll give you a stat in the second but the vision, we rolled out to be the trusted global marketplace for insights services and transactions is facilitated by a very.
Very strong inventory system, where our customers are relying on it to drive their decisions. So we know that that is a key building block candidly that was part of the thinking on the acquisition of routes to bring that in because that was their capabilities I'll give you guys a stat for January.
For this system the quote free IMS.
The business system, we on boarded on them to.
Two customers a day.
And we were measuring really two.
Two kpis, how many we were bringing in and how quickly we could.
And this version I am out is up 15 minutes standup from when a customer comes in to when they are.
Up and running it's a 15th at uptick again critical for us because as we have said we are becoming a marketplace that marketplace hinges on inventory. We went on a system that is very easy for our customers to onboard two and then to use and those are all of the next kpis that we're measuring which was done to you.
But at two a day has been really an impressive amount of uptake.
Okay, Thanks, and good luck.
Thank you.
Once again, if you would like to ask a question. Please press Star then the number one on your telephone keypad. Your next question comes.
Your line of Michael Feniger from Bank of America. Your line is open.
Hey, everyone. Just piggybacking off that last question is the two a day in January is there any way you can kind of give us some numbers you know how much how much how many assets.
From where you guys kind of registered.
You know in January compared to maybe the fourth quarter or the third quarter I'm. Just curious if there's any other metrics that would be helpful on that IMS in on our best solution.
Yeah, Michael So and again you know it's interesting that the and this is where we're trying to figure.
Figure out or looking at the right Kpis to look at for this business solutions. So let's think about enterprise. There are so many assets that sit with the giant corporate sellers like literally millions and millions of assets that the business customers. When they bring 50 I'm 100 at a time right.
The athletes on the enterprise for cliffs.
So we absolutely look at that keep your eye, but that is a key P. P. I on the enterprise side side of things as well driving bigger and bigger enterprise customers by the way Similarly are the bread and butter of Rouse.
Which is these ERP based plug ins that drive you know millions.
I mean, but it's a backstop thing so for this and we're still watching that and that's still continuing to grow so that you know without a doubt for this version. This business. What we want is a ubiquitous product that anybody you know whether you have one product to sell you have hundreds of thousands.
And then he went in whichever way you want to use it. It's there for you and it's a very very flexible. So we're more right now interested in and we're going to pivot to kind of what percentage of your wallet or you're loading these types of things but.
But right now we are looking more around how long does it take you to set it up how much you.
Usage are you you know value are you getting from the tools that we're providing.
And just to give you once that theres about a million a million units on that side in our inventory.
Okay. Thanks, that's helpful and just curious on the SG&A side, you guys have flagged.
These opportunities you're going after.
There'll be a quarter or two on SG&A growth is actually above the service revenue growth in 2021, how should we think about these evergreen targets because 'twenty 'twenty, one is kind of a different year as you're positioning the company for the long term and contending with some of this this COVID-19.
The restrictions on issues.
Sure. So it's Sharon here I'll I'll take that.
Yeah, I think a couple of things that we're very focused on is how do we continue to deliver a great buyer and seller experience, but at that lowest cost to serve so we're taking.
Our time right now to really.
Look at how we're operating today and how it's affecting that customer experience on how can we approve improve it but again at a lower cost level.
Clearly the travel.
And you know a lot of the key aspects that kind of are out of.
Our control today some of those costs will come back in but I do think it's safe to say that we are looking at a continued margin expansion over the long term.
To be a much more productive.
Company with the cost lines.
Certainly when we come out of Covid, there might be a bit of lumpiness.
Penis, there as you have to add in certain costs that werent than in your base, but I think over the long term. Our goal is to again be accretive to our overall margin rate for our business.
That's fair enough and I'm, just curious are slightly on how you're seeing your competitors.
Betters react obviously 2020 was a tough year for for some of your competitors smaller players that couldn't keep up with your virtual and online offerings.
Curious, how you're seeing them respond I mean, you guys called out in the quarter a robust contribution from at risk team. Just curious also as youre seeing some of this tightness.
Is it getting a little bit more competitive on the underwriting and how you see this kind of playing out in 2021. Thank you.
Okay.
Hi, Michael and again, so for short right I mean, just basic laws of supply and demand as there's a tightness in supply there is more competition.
On an at risk deals. However, you know again as as we've heard from the Oems They.
They are you know.
Soon to catch up.
That said one of the conversations we also had an Investor day is you know this is an incredible industry I've now been part of it for a year.
One of the one of the interesting things from other places I have been and I've come from whether technology or.
Automotive there is no clear market share measures in this industry. So because you know I am.
Engineered by training wildly analytical we have internal.
We have stood up internal market share metrics, we we don't want to share them with you because we're still working on them kind of real time to make sure. These are things that we can rely on that said every indication we have from 2020.
As you know a significant market.
Market share growth in the year.
And despite the tightening in Q4 in Q4 as well because again right macro environments.
Apply demand.
Things, we don't control, but the things in our control driving the most selection driving the care custody and control for sellers driving an incredible price realization for them, which continues.
Having the omni channel the yards and then a fully online experience.
Guard lists of the backdrop environment. It is an incredible competitive advantage for us and again during COVID-19 that moat has grown and in Q4. Despite the tightness in supply we saw our share increase as well so feeling very.
Good about where we stand and then of course, as we push more and more into the marketplace.
You can expect even.
More growth in the services and obviously what that implies for the leverage of our model and the financials.
Yeah.
There are no further questions at this time I'll turn the call back over to management for closing comments.
Thank you so much for joining the call very much appreciate your interest your involvement and we stand at the ready if any more questions.
So much and please keep yourselves and your family safe.
Thank you everybody for joining today that concludes today's conference call you may now disconnect.
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