Q4 2021 Ritchie Bros Auctioneers Inc Earnings Call
Good morning, My name is Pam and I will be your conference operator today at this time I would like to welcome everyone to the Ritchie brothers Auctioneers fourth quarter Conference call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question. Please press star followed by Xu.
I would now like to turn the conference call over to Mr. Samir Rethought, Vice President of Investor Relations and market intelligence to open the conference call. Mr. Rethought, you May begin your conference Hello, and good morning, and thank you for joining us on today's call to discuss our fourth quarter 2021 results. Joining me today are <unk>.
<unk>, our Chief Executive Officer, Sharon Driscoll, our Chief Financial Officer, as well as other members of the management team who will be available for the Q&A portion of this 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 involves risks and uncertainties the risks and uncertainties that could cause our actual operating results to differ significantly from.
Our forward looking statements are detailed in our SEC and Canadian Securities filings available on our Investor Relations website at Investor Day, Richard gross Dot com.
Encourage you to review our earnings release and Form 10-K , which are available on our website as well at <unk> 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 press.
Presentation slides accompany our commentary today. These slides can be viewed through our live or recorded webcast or downloaded from our website. All figures discussed on today's calls are U S dollars unless otherwise indicated I will now turn the call over to Ann fantasy.
Thank you Samir and good morning to everyone joining our call today.
As we all know 2021 was another unprecedented year due to the direct and indirect impacts of COVID-19 affecting our employees our customers and our trusted partners.
I would like to start the call once again by thanking our remarkable employees, who continue to manage through this environment to deliver for our customers day in and day out.
For the full year, we drove solid results, both strategically and operationally.
Spite, an unprecedented tight supply environment, we grew J T V, 2% for the year and services revenue by 5%.
With services revenue growth outpacing GTD growth consistent with our evergreen model commitments.
At the same time, we continued our transformational journey to becoming a trusted global marketplace for insights services and transaction solutions, so organic investments and key acquisitions, which accelerate our pace and achieving our ultimate vision.
As we gain confidence to our test and learn approach we continue to invest in key initiatives like satellite yards and go to market coverage models.
These investments naturally come with a cost.
And despite the topline pressures due to the tight supply environment in 'twenty 'twenty. One we grew non-GAAP adjusted operating income 3% for the full year.
Our omnichannel platform is delivering strong outcomes for our customers with bids per lot and used equipment pricing remaining very strong in the fourth quarter.
Recall, we went completely online at the start of the pandemic.
However, something we have heard our customers consistently tell us go out depends that Mac has been that they missed the social connection of our live events.
To that end, we are excited to welcome back customers next week to our flagship Orlando event.
We of course will remain diligent and vigilant with our Covid protocols and masking.
That said Orlando will be an amazing way to celebrate our customers and deepen our long standing relationships.
Turning to our M&A of the past year I am pleased to note that rouse continues to perform well.
And it's driving benefits for the broader Ritchie brothers ecosystem.
I also want to give everyone an update on euro auction.
The CMA review process is ongoing and on track and we are using this time to put detailed integration plans in place.
To allow us to begin executing on our vision immediately after close.
We are also very pleased that we decided to complete our euro auction that offering in the fourth quarter in advance of closing, but also in advance of some of the unfavorable moves we are now seeing in interest rates and spreads.
After seeing a pretty incredible kpis and our early satellite yard tests.
Specifically in attracting new customers with a much lower cost to serve model.
We continue to scale that initiative with 23 local satellite yards, having come online by the end of the fourth quarter globally.
Clearly investments such as this are made ahead of the corresponding revenue.
And our confidence cement each day that local satellite yards are a key component of our organic growth plans moving forward.
Moving to our inventory management system.
We continue to make strong progress with 89% growth sequentially compared to last quarter.
Cumulative number of organizations that have activated on the platform. The Kpis. We are focused on is the number of organizations.
So as we build out our marketplace functionality, we are able to have scaled quickly.
So that and we are migrating our entire transactional workflow into IMF.
Our go to market strategy is.
Is that if you want to transact with Ritchie brothers, you have to use IMS.
This is an excellent way to get customers into our ecosystem to begin interacting with our various services.
As we work towards a modern technology architecture needed to enable our marketplace upscale we are focusing on driving organic growth from the portfolio of services that Ritchie brothers offers to our customers today.
A great example, here is Ritchie brothers financial services.
You've heard Sharon's talk about the investment in head count we have made over the last couple of quarters and we are now seeing that model hit its stride with revenue growing 61% in the fourth quarter and 46% for the full year.
Outstanding results what is most exciting here is that we are driving this growth even before realizing the full vision of a modern architecture enabled marketplace, giving us even more confidence of what the services revenue growth will look like at scale.
Earlier this week, we put out a press release regarding our partnership with Butler.
I am very excited about what we are going to be able to achieve together.
Thought works has helped several other large global companies do exactly what we are trying to do in terms of a modern architecture.
This partnership is about accelerating our transformation and thoughtworks, bringing their expertise to help build the foundational pieces of modern architecture with us.
After Sharon discusses our financials I will talk about our strategic pillars and outlook and then we will move to Q&A.
And now.
Over to Sharon.
Thank you Anne and let me add my welcome to everyone on the call. This morning in the fourth quarter G. T V increased 1% with no notable impacts from foreign exchange or auction ships.
We continue to see robust increases in mix adjusted prices of equipment.
Set by lower lock volumes and negative mix.
We see this level of G. T V is a strong result, given the extremely tight supply environment do.
Due to the low used equipment levels and continued supply chain challenges impacting all new equipment production. So.
So we are pleased with this performance as historically these tight supply conditions have resulted in G. T V declines on a year on year basis.
Total reported revenue declined 6% compared to last year with total service revenue increasing 6%.
Total service revenue continues to exceed total G. T D growth, giving us continued confidence in our new evergreen model.
Our other services segment drove strength in our total services revenue increasing 32% in the quarter.
I am proud to note that the growth plan that we had implemented at our BFS continues to bear fruit as you heard Ann mentioned with revenue increasing 61% in the fourth quarter.
Other services revenue also benefited from the partial quarter contribution of smart equipped and a full quarter of contribution of rose compared to last year's partial quarter contribution.
That said the lower unit volumes and mix are translating into lower ancillary service revenues.
Our non-GAAP adjusted operating income declined 7% compared to the fourth quarter in 2020, as we continue to invest in our growth initiatives and implement our transformation to a global marketplace.
As Ed noted for the full year non-GAAP adjusted income did increase 3%.
Moving to auction and marketplaces.
N M service revenue increased 1% in A&M service revenue as a percentage of total G. T. D came in at a robust 13, 6% for the quarter.
As we have noted in the past.
Inventory sales tend to be lumpy and driven by consignor preferences.
And in the fourth quarter inventory sales declined 24% driven by weakness in the U S and Canada, partially offset by strength in our international region and our government sector.
Recall that Canada benefited from a very large inventory just first of all in the fourth quarter of last year, which we are now cycling over.
Inventory returns came in at 10%, which is up about 50 basis points compared to 2020 overall.
Overall, we are very pleased with our revenue rate performance as both profit on inventory sales and service revenues improved versus prior year.
Cost of service plus SG&A was up 13% with total SG&A, increasing 18% compared to last year.
I want to unpack total SG&A here to give everyone a better sense of the moving pieces.
It is important to note that SG&A includes about $3 million in one time nonrecurring fees associated with the ongoing evaluation of M&A opportunities.
For mediation fees and other one time advisory fees as referenced in our 8-K non-GAAP disclosures.
The acquired businesses of Rouse and smart equipped added approximately $5 million of incremental SG&A costs in the fourth quarter.
Once you look at SG&A, excluding these highlighted items, our core SG&A increased by slightly less than 11%.
This increase was primarily driven by investments to fuel our key growth and strategic initiatives.
As Anne referenced we have expanded the number of our satellite yards establish a U S based inside sales team.
Continued to grow our team in Ritchie brothers financial services.
Initiated our I T transformation to a global marketplace and supported new product launches such as Ritchie list.
We also saw a pickup in the fourth quarter in travel expenses as Covid restrictions began to ease in line with how we have guided for several quarters.
We want our sales force to be out on the road cultivating new and nurturing existing relationships.
In addition, we have also made some incremental investments to strengthen our financial control environment.
To that end I am very happy to note that we have effectively remediated material weaknesses that had been identified as part of our 'twenty 'twenty year end close procedures.
A special thank you to the entire finance team I could not be more pleased.
To sum up our SG&A section. The increases you are seeing are prudent investments that unlock the future growth and we expect to begin seeing returns on these investments within 2022 .
I would like to note that we expect our SG&A in the first quarter of 2022 X share based payment one time nonrecurring charges and exclusive of any impact of euro auction to be approximately $125 million to $130 million.
Our cash flow remains very robust with trailing 12 month operating free cash flow of $276 million, which is 128% of our non-GAAP adjusted net income.
At the end of the quarter, our adjusted net debt increased as we drew on our revolving credit facility in connection with the acquisition of smart equipped.
I also want to note that the euro auction bonds are now held in escrow.
We are paying interest on them before the deal closes and the December 21st December 31st period resulted in an incremental $1 3 million and interest expense in the fourth quarter.
That said I am sure you are all aware of how the spreads are moving and we are very happy with going to market. When we did and completing the offering last year.
For modeling purposes, we expect our run rate interest expense to be approximately $24 million per quarter, starting the first quarter of 2022 and with that I conclude my financial discussion and hand, it back now over to Anne.
Thank you Sharon.
And while we continue to focus on driving growth and an unprecedented tight supply environment.
We have also made tremendous progress in our transformation to a global trusted marketplace for insights services and transaction solutions.
This slide highlights several accomplishments, we have made against our strategic pillars in the past year.
We dramatically improved the customer experience with the launch of new digital products like Richie list and fundamentally improved the functionality of our digital experience.
We also acquired smart equipped to enable us to facilitate parts and service transactions on behalf of our dealer and OEM partners.
We also work hard to ensure our employees have the best experience.
And I'm happy to say our engagement efforts are resulting in lower turnover compared to others.
Of particular note our efforts in the area of diversity equity and inclusion.
Which have resulted in three new employee resource groups, forming which will probably support as an organization.
You just heard about our modern architecture partner, but we are taking steps beyond that such as moving iron planet to the cloud to enable.
Enable more stable and scalable experience for our customers.
We integrated route this past year and are seeing fantastic growth in our IMS business as more and more organizations are activated.
We announced the acquisition of Euro auctions and continue to scale, our local satellite yard and sales coverage model strategy.
What should be clear to everyone is that we are sprinting towards our strategic vision of becoming the trusted global marketplace for insights services and transaction solutions for commercial assets.
And making the prudent investments needed to get there and I've locked Tam for our shareholders.
Now turning to current trends and outlook, there's no change in our view here as you know the environment remains very tight for equipment supply due to low inventory levels and continued headwinds to OEM production due to supply chain issues.
We see this as a point in time event and consider it outside of our control.
No. The equipment is there it is aging and this pent up supply will need disposition services as the supply chain starts to fall.
That said, we are not sitting idly by we are focused on growing in a constrained environment by far.
Focusing on what we can control in terms of investing in growth initiatives.
And executing on our transformation to marketplace and structurally improving the business.
River on our strategy of becoming the global trusted marketplace for insight services and transaction solution.
With that operator, please open the line for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by one on your Touchtone phone, you'll hear a three ton prompt acknowledging your request and your questions will be pulled in the order. They are received should you wish to decline from the polling process. Please press star followed by two.
And if you're using a speaker phone. Please lift your handset before pressing any keys one moment for your first question.
Your first question comes from Cherilyn Radbourne with TD Securities. Please go ahead.
Thanks, very much and good morning.
I was hoping you could comment on organic service revenue growth in the fourth quarter and just whether you think that's a reasonable run rate to think about the base business in 2022.
Hi, Cherilyn a plan thanks for joining US yeah. We are we are super proud right. So we came in with service revenue growth of.
5% for the year or 6% for the quarter or and Oh, we expect that to continue and as we discussed in our evergreen model the gap between <unk> growth and service revenue growth to widen over time as we grow service revenue.
<unk> to the underlying G T D.
And just.
Just as a context right you guys have heard me now I can't believe it but for two years talk about how we look at the world as inside and out in our control and out of our control right global pandemic, our supply chain, but no one's ever seen out of our control.
Even though we know it is a point in time the equipment continues to age and the Oems will certainly catch up it's.
It's not a question of if it's a question of when.
So for us.
Being able to drive the strategic initiatives, which are in our control both in organic growth and M&A to kind of achieve that vision. So when the supply chain opens up we can disproportionately benefit.
And we're already seeing signs of that exactly as you noted shared them with the 5% for the year and 6% in the quarter of the services revenue growth. So super proud and yes, we expect it to continue.
Right, but what would be organic component of that 5% growth for the year and 6% in the quarter.
7% even higher.
Okay, maybe we'll have to take that offline to build it up.
Because it looked like a lot of it in Q4 at least was inorganic.
Yeah, no Samir can take it offline and can walk you through the 7% number absolutely.
And so 7% just for the year Mark in a quarter just to be clear.
That's correct I don't know, if we peel that down, but we can certainly follow up.
Okay.
And then are you able to quantify the extent to which the IMS contributed to growth at <unk> in Q4, and sort of break that down in terms of how the contribution would be and that's the growth would compare to the impact of expanding into escrow services on private treaty deals.
Yeah. So we cannot be sure when we don't look at it that way. So we because I am out cast a very a long shadow. So think about that is really the gateway right and I think as you heard in my prepared remarks, a more and more of that as the gateway to all of Ritchie brothers.
The attribution for any particular service or the underlying drink tea need just becomes kind of a math exercise.
We as we when we started the conversation about transforming to a marketplace. When you have been a clear it though you know that that IMS pillar is the gateway and what you're seeing is a few things one we're moving fast and strong in Tibet Gateway. So you can see the underlying metrics moving up.
The second thing that you are seeing is that we are moving Oh, you know more and more of everything we offer for Richie brothers, you'll have to come into the IMS to partake in and then you know we highlighted the Ritchie brothers financial services as an example.
You know not so much of IMS because again, that's the gateway, but an example of our ability growing stronger each day.
Power services separate and apart from the underlying G. T V again, it's always going to be attached to the D. C. D. So that's the kind of the the give me and as we're gonna add more and more services to attach what.
What what's fascinating for us to watch and to drive is separating that so really unlocked that services revenue growth at a significantly higher pace, but so GTD growing.
1% in the quarter, but services revenue growing six starts giving an indication for the power button.
Okay.
Im struggling because it would be nice to understand what the IMS contributed in isolation because it seems like there's a couple of other pretty big moving pieces for RBS at like one would be substantially higher used equipment prices year over year.
And the other would seem to be because it's mentioned in the MD&A the expansion into escrow services.
Correct. So we we are happy to maybe we'll take it offline I think it's less about the attribution to IMS and more about kind of the pieces as Rbis continues to I'm gonna see unbundle, our the various.
Services that are under the RBS umbrella. So it's not that they haven't been offered before but we're unbundling them dipping into some new ones. So maybe we'll take that offline to really break down the RBR story.
Okay I'll pass it onto someone else. Thank you.
Yeah.
Your next question comes from Gary <unk> with Barrington Research. Please go ahead.
Hey, good morning in insurance.
A couple of questions here.
As you look at what's going on with the supply of used equipment and all.
Obviously big shortage, but what would be some of the leading indicators that you are focusing on that would give us. Some indication that this is going to start alleviating like you know in the car market we are seeing.
Obviously year over year some increases in new car sales were also seeing increases in inventory on dealer lots. So could you help us with that a little bit.
Yeah, Gary Hello, and thank you yeah, we're watching.
Clearly, it's out of our control, but we're watching it avidly.
So I think there are some parallels team cars. There was also some you know unique to us Ah metrics. We look at so for example, new equipment sales. Obviously, we are watching that we also watch metrics around backlogs of orders and those are less kind of widely available.
But more you know as we talk to our dealer partners, we try to understand kind of their orders be versus their demand versus the supply to the Oems are able to drive.
Another interesting measure for us is the utilization rates.
Rates are in the rental segment. So you know as those are at historic highs, we have seen those plateau, we're seeing them start coming down slightly.
But these are some of the kind of early indications that we are watching you know to know when the tides turn.
And I think what the essence of your question and exactly where were at is you know they will turn its a matter of one right Oems make money by shipping product to customers.
If theres a higher level of supply demand and the supply you can can meet they will figure it out it's a matter of when and unlike other industries, where if you quote missed the sale today, you don't get to make it up tomorrow, the beauty of our industry as the equipment continues to age it's sitting out there it will need.
To turn and when it does we will be there.
Which is which is actually why we continued to invest in those underlying pieces. There are bearing fruit today I think this year and said in her prepared remarks, when we faced environments like this before we've actually moved negative in G. T V. So.
So the fact that we continue to push forward and continue to push forward in services. You know it was giving us a lot of confidence that the pieces. We're putting in place are the right pieces now it's just a matter of how do they unlock even greater potential when the tide turn in the broader ecosystem.
Okay, and then just a quick one on your IMS system, just as you were discussing it it looks like you kind of give us a gateway that kind of gives you a holistic view into all of what you offer at Ritchie and to do transactions et cetera, but you did mention that the goal is to get <unk>.
All organization on this so they can transact with Ritchie brothers.
Question would be does it cost in the organization to get on and and what happens to two or three years down the road. If an organization says I don't want to get on the system or is that just.
Not something you're anticipating.
Yeah, Gary So I think why don't.
As always I like to think of the range. So let's just answer the question kind of three different ways. So the first answer is.
It depends on which I am math, we're talking about so the IMS business that we launched which is really aimed at the long tail and the regional business is great and we can offer it for you because it's very minimum work in order to load our folks stand at the ready to support to do that.
It's really kind of a minimum effort for the customers and it's giving a lot of benefits are down a lot of benefit to us we have an enterprise product enterprise and that's for large corporate customers that really want to dig into all of the capabilities are.
And that is a fee for that product.
Number two and then number three we will always have an ability to kind of much like we're.
Unbundling, if you will to various services within Ritchie brothers, you can always opt into the services. So you can imagine a marketplace where.
You can opt into one service at a time, the we've always historically been able to do.
But we will always encourage you because it's free because it's easy to kind of opt into I am as and if it's one service at a time no problem. If you want to use it more holistically, though as a fee.
Even today, but so.
I think what our true north is we're gonna be you're in whatever way our customers want to do business with us IMS just makes it infinitely easier.
Okay. Thank you.
Thank you.
Ladies and gentlemen, as a reminder, if you do have any questions. Please press star one.
Next question comes from Michael Feniger with Bank of America. Please go ahead.
Michael you may be on mute.
Sorry can you hear me now.
Got you.
Yeah.
Great. So the higher SG&A to $1 25 to $1 30, that's all.
$11 million to $16 million just sequentially what is that being spent on exactly and historically Q1 is not the high point for the year on SG&A. So.
Should we be thinking that that number creeps up through the year, especially when we bring your own auctions onto the platform.
Yeah.
Yeah, Michael So let me start and then I'm Gonna and then I'm going to turn it over to Sharon So.
Think about the things that drove the increased SG&A are the things that are kind of our investments in the satellite yards. The inside sales team. So I think the historic perspective of SG&A in Q1 had more to do with kind of that cost to serve metrics that was actually down 1% in Q.
So you're exactly right I mean in Q4 and you know those are kind of the historic measures. The SG&A. We're talking about is the non cost to serve SG&A.
And those are largely comprised with the investments that we're making in the yards in the in the teams in RBS fast in the I T transformation.
So that's.
That's kind of what's in the number that we signaled.
Moving forward. So let me stop here just to kind of I wanted to put it out there that the cost to serve it was more the historic comprised.
Comprised a bigger percentage of the total and now it's a lot of the investments, we're making that you know we we.
We talk about them as in the future, but candidly many are already.
Reaping rewards this isn't future like you know.
Four year.
These kinds of things you know satellite yards are reaping rewards now inside sales team. It's just not to the same degree as they will win kind of a broader ecosystem opens up and there's a plentiful equipment on which to offer those services. So let me stop there and then turn it over to Sharon to talk a little bit about how to understand.
The 125 to 30.
Yeah, Great and then thank Michael for the question you.
You know I think certainly we've moved quite quickly on a lot of these growth strategies. So that's why we felt it was important to give some Q1 perspective.
You know clearly you end up with smart equipped in there for the entire quarter. So that would be an unusual number compared to prior Q1 to Q4 trends.
So just wanted to call that out equally I think it's important to recognize our Orlando event is back to lives and so we are seeing some increased costs that we're expecting as we put on that live event more from as Ana said, our customers have missed that Soc.
You'll interaction.
So really reflecting the fact that where again engaging with our customers on site.
Some of the learnings that we had on cost of services won't come back, but things like travel things like Fuller support to service and entertainment type costs will be in that number.
And then as Anne said the satellite yard expansion continued growth in our BFS those of the other growth initiatives that are continuing to fuel that Q1 outlook.
Okay, and then just to follow up on the Q1 outlook. Obviously I know, we're diverging from G. T V to more the service revenue growth, but you do have a tough comp.
In the first quarter of this plus 11, it's not just Orlando can you just remind us sharing any any shifts in the auction calendar that we should be aware of I think he might have mentioned before some one time just just so we're a little bit aware of what we're thinking for the first quarter there.
Yeah. So I'll go back to last year, and so what was driving that 11% growth was we were really measuring off at 20 base that was really challenged.
Predominantly because of international.
Lack of movement with the onset of Covid in 2020, So I think the year over year growth that 11% is more a reflection of a soft 'twenty as opposed to a strong.
2021.
Certainly the calendar shifts are always changing but its theres nothing unique to call out and you know we are still expecting them.
Being really good you know pricing performance continue.
So clearly the service revenue basically leverages off of that.
And you know again I'm.
I would look at that 11% base more as a reflection of lack of strength in 2020 as opposed to a strong 21 that we're lapping over.
Thank you.
Your next question comes from Bryan fast with Raymond James. Please go ahead.
Thanks, Good morning.
Can we just go back to the Rouse acquisition I guess now that you've had the business for over a year could you just provide some comments if it has performed within expectations and then maybe what sort of Kpis you look at twin measuring the performance.
Absolutely yeah.
What a year it's been so we the way we look at Rouse and first of all Hello. Thank you for joining us.
We look at route is and the way we look at any acquisition really has two different lenses that we look through the first is they are underlying performance and then the second is the impact on the broader Ritchie brothers ecosystem. Because every acquisition that we make has two things in common one.
We loved the underlying business, we loved the teams that are running it and we expect it to perform and then on the other side are the kind of the strategic rationale of the acquisition is always the impact of the broader Ritchie brothers ecosystem. So in terms of the first ones that continues right. So we are very.
Pleased with the router team the management team.
And the entire team of state attack continues to run it continues to have double digit growth, we're very happy with how the wireless business is going there unlocking new geographies.
You know on their own and with the help of Ritchie brothers Okay.
Is intact and going very well and the integration points are firmly in place.
And then on the broader ecosystem.
Ecosystem play.
You know that's a journey and we kind of map that out even before we made the acquisition and the first elements of that that really have been paying a dividend is a in our marketplace product. So just as a reminder for everybody on the call. We have obviously our unreserved auction.
Without Ritchie brothers and Iron Planet, and then marketplace is a reserved marketplace and they are quickly P. I, we called jewelry and let me just take a minute to explain.
Basically our sellers can list of products for wherever they work.
No one trillion dollars.
But the true value of our marketplaces not on what's listed on that product, we actually have launched the listing service for that.
But what actually transact and the Kpis there is the kill rate.
They kill rates have gone up almost twofold.
Because we have introduced the rouse pricing models. The same one that's offered to customers.
Well we are agnostic.
Really you know through the Chinese walls, but basically it's an advisory service for the LTE customers to say look you can price the thing whatever you want but let US show you you know what the bands of pricing really should be using a third party data service route.
And that as we increase the Cobra read through them.
And therefore, the growth rate, it's been a wonderful to watch.
And we have an entire staggered phasing of the various centers in place that we always need routes one of the ones that I've mentioned in the past as you know our.
Industry does not have a kelley blue book like solution. We are marching towards that is kind of in the future evolution of the routes offering so very clean highly integrated.
And you know the team.
It continues to deliver.
Okay. Thanks, I appreciate the color that's it for me.
Your next question is a follow up from Cherilyn Radbourne with TD Securities. Please go ahead.
Thank you.
Just wondering if you have a revised expectation on when the Euro auctions deal will close you know just in terms of any questions that might be coming back from the regulator on that review.
Yeah sure Lynne so and again so yeah. This is one obviously, where we're staying very very much on top of Ah Theres an open.
We're following the normal process, that's where we're at the questions that are coming forward are very straightforward, we actually had a call with the CMA earlier this week to answer the questions. They have so you know these things are back.
Back to the in our control and out of our control. They followed their process, we are well aligned within it and kind of following it lockstep. Obviously you know we're bullish about you know the euro auction acquisition period I wanted to get in front of it. That's why we did the debt offering to kind of get in front of me.
The interest rates.
But at this point, we're just kind of following through the process. The lines of communication are open and were kind of awaiting awaiting their stuff.
So we do have a revised expectation on when the deal might close.
We don't you know these things are you know obviously, our anticipation is and was a you know kind of Q1, but largely these things are out of our control. So our debt is lined up we're ready to go we're talking to the CMA.
You know open book on kind of how we're viewing it and we're kind of a waiting they're steps in their patients.
Okay.
And then one for sure and in terms of those share based payments, which are now an important add back can you give us a sense of the base expense there and the sensitivity of the mark to market portion to a change in the stock price.
Sure Cherilyn I'm really the the.
It's fairly limited exposure to the change in the stock price because really the only mark to market M D.
D S use are the director.
Retainer grants.
So you know that and certainly there was not.
Not much.
Inside of that Q4 relative to that the other kind of changing element would be more.
A measure of PSU achievements and those.
We wouldn't have been sizable in AR in Q4.
And keep it again.
Your next question comes from it's out of a hat on with RBC. Please go ahead.
Okay, great Thanks, and good morning.
One question I guess on the fees or just one we think we saw some buyer fees being taken up into 2022 on your platforms. One if you could just confirm if that's correct and maybe how broad based or the magnitude of those price increases were.
I'm, sorry buyer fee increases.
Yeah, Hello, I am here. Thank you for joining US yeah. So it is correct that we have taken some buyer fees walking into 2022, let me just state. This one when we first announced some fee increase last year, we talked about the fact that this will be a normal course.
How we go to market.
Like every other industry I know it hasn't been normal course for us historically, but much like most industries look around the competitive landscape and understand you know.
Windows.
A pricing opportunity or a pricing gap or and take appropriate measures. We have now instituted that it's part of our normal process.
To both of you the competitive landscape, which we actually do on a monthly basis, how certain hurdles are met when we actually take action, we saw an opportunity for that and good at walking into 2022, and you know it wasn't broad based because that's not how opportunities are a needle.
Globally, nor kind of across every category.
But it was prudent and we took it I don't believe.
That.
Oh, <unk> kind of gone out with a quantification I don't know Sharon if you want to say anything about the quantification of the magnitude of it.
Yeah, we.
Haven't really expressed anything on it you know again I think this is more of a regular fee increase.
And in some in some ways it.
[noise] necessary because of the inflation that we're seeing and as you know it's the same like item is now moving across the grid.
And then ratcheting down based on our fee tables. Its just a normal course kind of repositioning them, so but no we have not quantified the magnitude.
Okay great.
Yeah.
Okay that makes sense and then I guess just on the upcoming Orlando auction I guess, you commented that the supply situation isn't really much better into Q1, but just big picture. If you compare the mix of the equipment you have there.
Volume just kind of a directional feeling about it is it pretty much reflective of the environment.
Just what they're being in person has that view changed anything.
Yeah, how about we turn that one over to Jim Kessler, Our President and Chief operating officer on all things Orlando Jim.
Awesome, Thanks, Ann and I would say just from when you look at basic mix in Lat am.
<unk> environment to last year.
The great news is pricing.
We're seeing continued to be strong so really excited but when do you kind of take a look at last year.
Mixed similar.
Number of lots.
Slightly up compared to last year, and then we're expecting to see strong pricing as we go but the great thing is I think we do have excitement from our customers to be able to get together, which as this happens being able to have the sales team our customers and talking about the rest of the year.
It out I think we're going to see some real benefit of.
Having that social interaction with our customer and what really happens in the rest of the year and with those conversations.
Okay, Great and then there's just more of a logistics one I think there's a bit of a discussion earlier on the timing of the euro auctions transaction, but assuming I think see I mean, you said they might come back with a decision by March 4th from I guess your perspective, so it does come on that.
At a one week four week process for you to actually logistically close the transaction.
I mean, you've got a decision on that day, just wondering what more leg work that could be on your car after they decide.
Yeah, So I'm going to turn this over to Sharon Let me just start there's kind of two things once we get the green light.
And obviously, that's why we wanted to line up the financing so that what's that didn't end up being the long pole in the 10th and we weren't on on our heels with interest rates moving up so we're actually very happy that we made the decision we made.
There's two things we're doing during the.
During this period of time, one is obviously working with the CME to make sure that all questions are answered. The other is really sharpening our pencils for integration.
This any any transaction our lives and dies by how well the integration plans come together.
You just heard me answer with Ralph's question those have come together very well. This is obviously a bigger scale. So we have been really spending a lot of time on every nuance of integration planning.
Both at the business level down to individual people and so on and so forth. So and our plans are literally like two zero you know T plus one day T plus two days T plus one week that level of granularity so.
We have been very very busy during this interim period, but was that Sharon do you want to answer the question on how many days from Green light to actual closed.
Yeah, So I think probably what safe to say, if we do get clearance on that timeline that you mentioned you know we our position that we would be able to close before the end of the quarter clearly financing is in place.
You know we have we have to move the money and so there's certainly administrative responsibilities that you have to do them.
But it is possible it could close.
In that last week of March.
If that is if that is the result of a weekend.
Okay, great. Thanks, very much for the color.
Yeah.
Your next question is a follow up from Michael Feniger with Bank of America. Please go ahead.
Okay.
Yes, Hey, guys just.
On the Euro auctions.
And then there's been a lot said.
No Wonder was announced in August you know you guys gave there was some there was a multiple.
We're giving you some historical as I believe it was going to be maybe 50 million of EBITDA to think about as a contribution.
Supposed to be accretive I'm, just curious how youre seeing in Europe right now obviously things since August have gotten tighter I think in the Q4 or at least you guys flagged softer performance year over year in Europe . So I'm curious has the accretion.
Expectations changed a little bit.
Since the announcement of the deal and the supply constraints and what you might be seeing in Europe . Thank you.
Yeah, Michael It's Dan So let me take that question. So we're not seeing anything uniquely different about Europe than the rest of the globe, where we operate meaning same tightness in supply, but stronger pricing now here is the one thing to talk about when we think about the euro model Euro auctions.
Versus the Ritchie brothers of Europe model and this is.
You know just like the routes conversation we had about you know we're buying it because we love the underlying business, but we're also buying it for that second lens of what does it do for the broader Ritchie brothers ecosystem Euro auctions fundamentally has a very different go to market model, where it's less about the.
Europe as the market to do business and it's more about their sourcing model.
And then kind of transacting it around the globe wherever the pricing is fast so the weight of Ritchie brothers historically has sourced and specifically in Europe is typically for the market.
Where the sale is about to happen right. So we source in market.
That's not the way your auctions goes to market and we're fascinated by this model they source a broader and then b cell that much broader snow. So there is nothing unique there was nothing particular dampened and certainly their model opens up the globe in a way that is.
Is very different than our European business and we're excited about it.
Understood and I could have missed this so if you want to transact with Richie.
Any auction do you have to subscribe to IMS and upload your fleet can you just flesh this out for me because I understand that.
This is the gateway is the Golden Goose. It. It is a huge part of where you guys are going in the future I totally get that so.
What is this changes it that anyone that does and he's gone Ritchie nail has to upload would you get pushback from people, saying this is going a little too far I guess I'm trying to understand what the changes here with transaction with Ritchie brothers now having to subscribe to IMS. If there is a big usage at all.
Yeah, you got it so yes, and no. So I would say more internal than external at this point. So no. If you are so first of all if you are a buyer you by the way that you buy today and if you're a seller you basically have two pads you do it like you do today or through IMS.
The difference here is it's kind of a push pull right. We're explaining on those sales calls and when do you see the numbers going up as they are very successfully congratulations too.
Kari Taylor, our Chief revenue officer, and her team are kind of explaining to customers that if they are to walk in through IMS, There's a lot more benefit for them and no cost, but no you were.
Theres no stick there you do not have to you can partake of Ritchie brothers services.
And the way you always have been able to in the past.
Got it thank you.
Okay.
There are no further questions at this time. Please proceed.
Wonderful. Thank you so much.
Appreciate everybody joining us appreciate the questions and it is not lost on this team that you know the.
The environment is causing us to grow slower than we would otherwise like to grow but grow still.
And so if you take anything away from this call. It is that we are incredibly bullish on where we're headed we're putting all of the pieces in place, but we could make a decision that says wait for the environment to turn and then put the pieces in place, but candidly. These are you know we've tested and learned we know they're positive ROI.
So you know what.
If you wait that just means we're going to it's going to be that much longer.
Earn the benefits of those investments so you.
You see how bullish we are because we're continuing to put them forward, they're actually delivering results today, just not at the clip that they will deliver results.
Once the backdrop of the environment opens up but are we thank you for being on this journey with US we're very excited about it.
And have a wonderful wonderful rest of your day.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines have a great day.