Q4 2022 Ritchie Bros Auctioneers Inc Earnings Call
Good morning, My name is Michelle 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.
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After the Speakers' remarks, there will be a question and answer session.
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You.
I will now turn the call over to Mr. Samir with THAAD, Vice President of Investor Relations and market intelligence to open the call. Mr. Prasad you may begin your conference.
Thanks, and Hello, and good afternoon to everyone joining on our call today to discuss our fourth quarter and full year 2022 results joining me on the call today are <unk>.
Richie Brothers, Chief Executive Officer, and Eric Jacobs Ritchie Brothers, Chief Financial Officer. The following discussion will include forward looking statements, which can be identified by words, such as expect believe estimate anticipate plan intend opportunities and similar expressions.
Comments that are not a statement of fact, including but not limited to projections of future earnings revenue gross transaction value and other items.
And market trends and expectations regarding the proposed acquisition.
Including the anticipated timing benefit.
Cost synergies and opportunities with respect to the transaction are considered forward looking and involve risks and uncertainties.
These factors include the satisfaction of the closing conditions, including shareholder approval or the IAA transaction.
We note that during today's call, we will be discussing potential opportunities for the combined company and related information, including estimated amounts or ranges for such opportunities for illustrative purposes. This information is not intended to imply future targets expectations.
Our guidance does not incorporate potential cost achieved or specific timelines the risks and uncertainties that could cause actual results to differ significantly from such forward looking statements are detailed in our news release issued this afternoon as well as our most recent quarterly reports and annual reports on Form 10-K, which are available on our invest.
Relations website and on Edgar and SEDAR.
We also have and will make important filings with the SEC and applicable Canadian Securities regulatory authorities in connection with the proposed IAA acquisition, including registration statement on form S. Four filed with the SEC you are urged to read those materials carefully.
On this call. We will also discuss certain non-GAAP financial measures, including forward looking non-GAAP financial measures for the identification of non-GAAP financial measures.
The most directly comparable GAAP financial measures and applicable reconciliation of the two see our news release Form 10-K, and Investor presentation posted to our website we.
We are able to present quantitative reconciliation of forward looking non-GAAP financial measures that management cannot predict all necessary components of such measures.
Investors are cautioned not to place undue reliance on forward looking non-GAAP financial measures.
All figures discussed today are U S dollars unless otherwise indicated.
During the prepared remarks, we will open the call to questions now I'd like to turn the call over to Ritchie Brothers, Chief Executive Officer, and Tim density.
Thank you Samir and good afternoon to everyone joining us today.
I'm excited to be here with you to discuss Ritchie brothers, a nominal 2022 performance.
We delivered record financial results and made significant progress in continuing to build our marketplace technology and advancing our growth initiatives. Despite operating in a challenging environment.
Tight supply inflationary headwinds.
Graco competition and foreign exchange volatility.
Speaking on behalf of the entire leadership team I want to express my sincere appreciation to all of our employees, who have shown time and again their focus and dedication to delivering best in class service to our customers.
Without our employees none of this would be possible.
When I was appointed CEO in 2020, Ritchie brothers had solid core assets and very talented employees with.
It was profitable and generated a lot of cash, but the business was stagnant.
Since then we have recruited.
And through organic initiatives and partnerships and strategic acquisitions.
We have taken bold steps.
We define our operating model and we invigorate profitable growth.
As a result, we are transforming Ritchie brothers from a traditional auction business.
So a trusted global marketplace.
Insight services and transaction solutions, and we continued our journey.
Several important steps in 2020.
Richie brothers to point out our marketplace technology platform is in the process of piloting an old digital checkout experience with seltzer invoices and settlement.
This builds on our track record of innovation and further expand our ecosystem of solutions.
Make it easier for customers to do business with us.
We continue to test satellite yard locations and have learned that these can attract new customers into our ecosystem. We have implemented a new sales coverage model that has enabled GTD grow whether it's through our inside sales team working in tandem with our satellite yards the target the long tail of sellers, where 80% of the equipment sits across our bank.
Articles.
Or the accelerated investments, we are making to put more sales resources in the field to expand our customer relationships.
Martin a quick route.
Ritchie brothers financial services, and our inventory management system, all continue to grow our Standalone solutions and have record performance.
While we are excited about the performance of these solutions. So far we see even greater opportunities ahead, as our digital marketplace strategy and scale.
And speaking of records, let's talk about some of the ones who set over the past year.
$6 billion annually.
Over $700 million transacted on our marketplace platform.
Over $1 billion funded volume by Ritchie Brothers financial services.
Over 75000 active listings.
Total number of organizations activating a IMAX was up an incredible 465% year over year at the end of December .
Also adjusted earnings per share increased 24% year over year to a record $2 41.
We are so proud of the milestones we've achieved in 2020.
Let me transition from discussing the path.
<unk> seen what we expect for the future.
Clearly there are acute wounds that are emerging.
Bert.
There are still a lot of projects out there and our customers remain big.
That said customers are beginning to expect some softening in their end markets.
This is coming while they are starting to see loosening of new equipment supply in some verticals.
What we know for certain is that this is a critical time for our customers and we want to serve them and help them navigate their most complex challenges.
This is one of the many reasons we are so excited by the Ies acquisition.
US grow G T V with a Ritchie brothers customers using access I a yard capacity to form the basis of significantly scaling our satellite yards.
We identified I E as a potential combination for Richie brothers back in mid 2020.
Together with our board of directors have evaluate at a possible acquisition of I E for more than a year.
The strategic logic of this combination is clear.
Without it we believe we can accelerate both for Ritchie brothers.
<unk> margin expansion and expand our reach into an attractive adjacent vertical.
By adding our services and operating expertise.
We have the opportunity to fulfill E full potential as well.
I operate in a salvage vehicle market, which has strong secular tailwind.
I as a leading player in this attractive market and has shown counter cyclicality and resilience.
Economic cycles.
I a has an expansive yard footprint that complements Ritchie brothers was approximately 45% of available capacity.
I 210 yards that are already know Richie brothers customers will allow us to accelerate our standalone yard strategy.
The key here is that we are better together and combining the footprints will allow us to create a network of locations that will provide us with our agility to meet all our customers' needs and unlock higher levels of growth and margin expansion.
As we recently highlighted we see a potential to unlock $350 million to $900 million in EBIDTA growth.
Including our expected $100 million to $120 million or more a clearly identified and achievable cost synergies.
Investors should take comfort in knowing that the team at Ritchie brothers has extensive knowledge in the automotive industry and a proven track record of acquiring and integrating companies.
Speaking of integration.
Integration planning has already started.
We have established an integration management office or IMO comprised of dedicated experienced operators and leaders to ensure this integration plan is executed Lewis.
The I M O will be supported by a leading third party consulting firm and overseen by an internal hearing committee that will have clear charters milestones and kpis to drive accountability.
As we announced just a few weeks ago.
We amended the terms of our transaction structure with I E to further enhance the value proposition for both Ritchie brothers and I as shareholders. We are pleased with the feedback we have received from many new and existing shareholders, who recognize the compelling benefits of the acquisition.
We encourage shareholders to vote ahead of the March meeting, but help us bring this transaction to fruition and realize the value inherent in bringing our two companies together.
Let me now hand, the call to Arab Jacob to highlight some additional information about our fourth quarter financial results.
Thank you Ann and welcome everyone, who is joining our call. This afternoon.
Yeah, I am pleased with our record results.
And I would like to thank our entire team who did an extraordinary job focusing on and growing the business.
Turning to our actual results.
In the fourth quarter G TV increased 6% year over year to $1 5 billion.
This was driven by continued rebound in our lot volumes, partially offset by declining prices.
Favorable asset mix and the unfavorable impact of foreign exchange.
When you exclude the negative impact of foreign exchange GTA V increased 9% on a constant currency basis.
Breaking this down a little further.
Log volumes were up 20% year over year drew.
Driven by record fourth quarter volumes from our strategic account customers.
However, the average price per lot sold was down 12% versus the fourth quarter of 2021.
As much of the unit volume increase came from rental and transportation assets.
This drives an overall lower value asset mix for us.
And it also comes with some price compression from loosening you supply.
Yeah.
Geographically, we saw strength in G television from North America, driven by solid execution from our Canadian team.
At the same time.
Our international regions impressive growth was masked and offset by a negative foreign exchange impact from the strong U S dollar.
If you're thinking about modeling G television.
Recall that the first quarter tends to be the smallest from a seasonal perspective.
We also expect the trend of higher unit volumes.
All set by continued pressure on average selling prices due to asset mix and software category pricing to continue in the first quarter.
In addition, it is important to note that during the first quarter of 2022, we were experiencing a highest average unit selling price period post COVID-19 due to low supply.
Taking all this into account as well as foreign currency, we expect CTV in the first quarter to grow low to mid single digits year over year.
And less than our fourth quarter GDP growth rate also as a general comment we expect to close I E. In the latter half of March.
Therefore, we are recommending that analysts investors model Ritchie brothers on a standalone basis for the first quarter.
Turning to revenue.
Service revenue in the fourth quarter increased 11% driven by the uplift in buyer fees.
It was implemented during the past year as well as continued growth in our marketplace services.
We also benefited from a full quarter contribution from smart equipped compared to the last year.
Excluding the impact of smart equip from both periods total service revenue increased 10% year over year.
With regards to our earnings adjusted EBITDA increased 24% a strong flow through from the top line.
Also adjusted earnings per share increased 36% to 68 cents.
And anticipated increase in lot volumes in 2023 will likely require added resources in our operations and back office to support.
As we are still navigating through somewhat manual processes.
Therefore, we may experience, a headwind to our flow through and adjusted EBITA margin during the year as we process. These volumes.
Regarding taxes in the fourth quarter, the effective tax rate, excluding the impact of adjusted items was approximately 23, 6% funded.
Slightly lower than the 23, 7% in the same quarter last year.
The tax rate was lower than we expected in the fourth quarter due to changes in the estimate of the impact of U S tax reform.
We expect the effective tax rate, excluding the impact of adjusted items in the IAA transaction to be between 24% and 27% for the first quarter.
Our GAAP tax rate could be much different from the effective tax rate due to the impact of acquisition costs.
Turning to our auctions and marketplaces segment.
A&M services revenue increased 11%.
And our take rate or A&M service revenue as a percentage of total G. T V.
And at a robust 14, 4% for the quarter.
Up approximately 70 basis points compared to the prior year period.
This increase was primarily driven by an uplift in buyer fees.
Note that our commissions revenue as a percentage of G television declined this quarter due to the higher level of GTA V source from strategic accounts.
Typically realized lower commission levels compare to our regional business.
We expect this trend of slightly lower commission take rate to continue into the first quarter as our strategic accounts group momentum continues.
Moving to A&M inventory sales.
As a reminder, inventory sales tend to be lumpy and are driven by consignor preferences.
In the fourth quarter inventory sales increased 50% year over year with strong growth contributed from all regions, particularly in the United States.
For the quarter the.
The inventory rate came in at 10, 4%, which reflects excellent performance that dynamic pricing environment by our at risk teams.
This inventory rate is at the higher end of historical ranges.
As we focus on accelerating GTD will continue structuring of our at risk deals to win where it makes sense.
Turning to expenses.
Our cost of services for selling general and administrative expenses were up 7%.
Selling general and administrative expenses exclusive of share based payments and other nonrecurring charges were up approximately 7% as well.
This was at the low end of the range given last quarter less than total service revenue growth, which helped drive our flow through.
For the first quarter, we expect selling general and administrative expenses to be between $125 million and $130 billion on a Ritchie brothers standalone basis exclusive of share based payments and other nonrecurring charges.
Turning to cash flow and liquidity, our cash flow remains very robust with trailing 12 month operating free cash flow of $556 million, which is 206% of our non-GAAP adjusted net income.
Or 145% if you exclude the Bolton property sales proceeds.
Our adjusted net debt amount was $116 million.
At the end of the fourth quarter, our net debt to trailing 12 month non-GAAP adjusted EBITDA ratio was two three times.
In connection with the IAA transaction, we currently playing out marketing and closing additional note financings.
We estimate these financings will add an incremental $11 million to $12 billion and interest expense to our first quarter, assuming a mid to late March closed from the financings.
As a result, we expect interest expense in the first quarter to be between $20 million and $21 million inclusive of the contemplated financing to fund the IAA acquisition.
Also for modeling purposes, we expect quarterly interest expense to be between $62 million and $66 million starting in the second quarter of 2023 subject to the expected closing of I E.
Based on an anticipated total debt amount of $3 $3 billion.
And our blended interest rate of between seven 3% and seven 8%.
As I've stated previously we will be focusing on Delevering quickly post closing.
I wanted to end my comments by explaining how we expect to account for the convertible preferred equity that was recently issued to starboard.
And the impact it will have on calculating our earnings per share both reported and adjusted.
I will not go through all the numbers and calculations on the slide however.
However, U S generally accepted accounting principles require us to earnings per share using either the two class method or the if converted method whichever is more diluted and produces the lower earnings per share amount.
Currently we are expecting the two class method, which is detailed on this slide to be more dilutive.
It's important to note that the two class method will not have an impact on our adjusted EBITDA. It will only impact our earnings per share due to the specific GAAP reporting requirements.
While we do not provide adjusted EPS guidance.
<unk> dividend and the two class method could impact adjusted EPS by at least an estimated $4 <unk> per share per quarter on a full quarter basis going forward.
I will end my remarks here. Thank you all again for your time today and now back to Anne.
Thank you Eric.
Overall 2022 was a dynamic here as we supported our customers through the continued fallout from the pandemic.
Lewis geopolitical environment.
And continued economic uncertainty.
Most of the macroeconomic environment, we faced in 2023, I know that Ritchie brothers strategic vision for growth and our commitment to our customers to help them make the very best decisions will allow us to continue our transformation journey.
We finished this year with strong momentum and the team is here in Orlando kicking off our auction calendar for 2020.
Recall that this fight Orlando being our largest event of the year.
As we transform into a marketplace any one specific event, even Orlando isn't that big pay performance for the entire quarter.
I want to close by saying that we are excited by the expected close of the Ie acquisition and its expected benefit to.
So Ritchie brothers for years and decades to come.
With that.
Let's open the call for questions.
Thank you ladies and gentlemen, we will now begin the question and answer session.
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Your first question comes from Michael <unk> of Scotiabank. Please go ahead.
Hey, good evening and Eric.
First of all.
Congrats on these great results.
First question I wanted to ask on <unk>.
Another really good number.
Going forward the expectation as the economy slows is that we'll see transactions volume rise.
So for Q4, you talked about a lot volumes being up 20% is there a way.
That you can help us quantify the upside to lock volumes as supply conditions normalize.
And I guess, Eric why would you expect slower GTD growth in Q1, despite the volume trend that we're seeing.
Hi, Michael Let me start and here and then I'll turn it over to Eric. So let me just set the stage when we think about our G. P. D and obviously, we're a thank you for your kind words about the quarter.
We're exceptionally proud of the team and how they performed.
When you think about GTA V. There's actually three things to keep in mind. So I'm just going to take a step back for a second there was obviously volumes right. When you talk about them as long, there's obviously pricing, but there's also mix and so it is important for us as we consider modeling and when we talk about our business to really consider all three.
And then when we talk about makes there's even two flavors of mix there as the customer mix Eric spoke about in the remarks that preceded the Q&A, meaning.
Meaning obviously, if they're large strategic accounts.
They have very different seller fee structures than kind of a regional business and then there was the mix of the product itself.
Even they are what the product is my.
And then also the age of the product. So it's not so it's not just volume and price. It's just something that I ask everybody to caution and with that let me turn it over to Aaron to speak specifically on your question.
Thanks, Dan.
Michael a couple of things. So the strategic accounts are those are assets that we talked about transportation in particular and some rental.
Rice being lower for those assets, that's going to impact CTV you also have.
Last year.
As I mentioned price was really high.
We have some unique lots.
Had some.
Some real estate deals in Canada.
So mariculture that was that's not expected to repeat in the first quarter of 2023, and then internationally you still have some slight headwinds on foreign currency in those regions are performing a little differently than they did last year as well. So that's why we think.
The overall G television will be.
Still still relatively strong, but down a little bit from what we saw in Q4.
Thanks, that's helpful and maybe the second question you know with EIS results out Tonight as well the combined EBITDA for 2022 looks like its closer to 1 billion versus I think benign safety in the S. Four and most of the outperformance comes from the Ritchie side I E.
Also did outperform can you maybe just speak to the outperformance and maybe what we think or what we should think on a go forward basis.
Yeah, So I think the headline and Michael Yeah. Thank you. We're obviously very proud of our team and proud of the IAA team for delivering a I think the headline here is execution and commitment.
Right. So I think one thing you've seen from the Ritchie brothers team certainly in the three years that I've been here is that you.
We set objectives, we stretch our we test we learn you know and we obviously manage the things in our control very very fiercely you saw that as the months Ah in 2022, we saw it in 'twenty one.
And Ah exceptionally proud of the work we did the team has done and kind of set ourselves up for success.
I E are you know you certainly saw it in Q4.
And Ah churning themselves to a very similar bar.
Obviously, we've been working together for quite some time.
On both on this acquisition and getting to know each other's cultures and.
We're very proud of how they've done either driving the things in their control and we're confident that when we come together, we're only going to make all of that better here's Arab to add.
So relatively simply stated we had strong top line performance due to the buyer uplift fees and inventory right. So that that strong top line performance helped pull through to the bottom line as long as well as the strong cost containment that we had in the quarter. So we were able to process.
Some of those above that significant amount of volume.
With all.
On an efficient basis that said, we do expect more volumes and just want to caution that we you know that's that's with our manual processes that something that we still have to deal with.
Amazing really helpful industrial for the deal to close.
Thank you.
Thank you. The next question comes from Michael Feniger of Bank of America. Please go ahead.
Yeah. Thanks for taking my question just to follow up on that I mean, the flow through in the quarter was really impressive I recognize a lot a lot a lot.
Lot growth is coming up and there's more labor there, but you are also more virtual than you've been in the past. So I would see your cost of service that that increase would be would be lower so just trying to unpack the comments around the flow through for next year, Eric like it service revenues up 10%, we expect EBITDA.
<unk>.
10% as well or 20% just trying to get a framework on how operating leverage should work next year, given the pick up on volumes.
Yeah, Michael So let me start it there Hello.
So there's been some oh kind of news out there about this you know you're more virtual or saving cost.
I remind us that on every earnings call, we talk SG&A and why it's continuing to increase so let's be clear.
When we went fully virtual we stopped ramping but.
But we added quite a bit of technology to offset that so that the customer experience is even better where we now have full 360 videos. So if you take a look at our cost.
The SG&A to process the equipment, they actually have not come down. So I know there is just kind of you know Richie brothers, a saving of kind of money.
During Covid, where the savings came was really the travel and entertainment those kinds of things, where obviously, we encourage our salespeople to get back out there because you know we're happy to spend the SG&A dollars on salespeople and travel and entertainment as long as those real resulting.
Brazil can G. P. D. So if you just look kind of brass tacks.
The the yards have stayed the same we've actually added some from a satellite basis are the only cost that was Scott was really the cost of ramping which has been more than offset by all of the kind of buyer facing incremental value added service we put in place.
Most notable to 360, <unk> technology, which requires quite a bit of labor to kind of bring that to per weekend for every check in.
It just kind of a move from one bucket or another if you will those are the facts, but let me turn it over to Eric to talk about you know kind of flow through and the question you're asking.
Yeah. Thanks, Michael So look we don't give formal guidance.
Quarter to quarter. So some of the some of the requests that yeah. The part of your question that is a little difficult for us, but let me just talk about longer term and we do expect that we'll have more flow through and and so youll start seeing more efficiency gains, but that'll come on the marketplace technology.
Is launched in a way that we can reduce quite frankly.
Some of the back office some of the manual processes that we have also you know and you talked about this quite a bit and while we always talk to them.
Analysts and investors about the IAA acquisition and that their investments in the yard yard technology.
And you know and you take all of your investments in the marketplace technology that those go hand in hand, and will allow us to scale each of our businesses much more efficiently than we can stand alone. So that's that's a significant benefit for us that we see coming come down the pipe.
Great.
This is more of just a big picture question for you simply the core business is performing incredibly well you just grew EBITDA at 24% with all indications that growth is actually going to accelerate in 'twenty. Three so Richard outlook is bright and executing a time when the macro data uncertain, where a majority of other companies.
So I guess why not put more capital behind the playbook that is definitely working.
Or why do you feel this is the time to do.
A big integration right now thanks, everyone.
Yeah. Thank you for asking that question. So Michael it's not it's literally the case of it make both business is stronger. This is not I know early on people were saying Hey, I. You know question Mark around why is the steel happening if there any weakness in the core business of Ritchie brothers nothing can be further from the truth the answer is.
This makes Ritchie brothers better it makes it stronger let me give you just a few examples.
Right. So again exactly what Eric just spoke through which mean our own efficiency. We've spoken at length. Our processes. Our manual we have not invested specifically in any of that yard or back office technology again painfully a couple of years ago. Those that have been in the story for a while we actually had a material counting week.
And it's because of how manual processes are IEA does 10 times the number of transactions that we do with a fraction of the workforce. So not only are you going to get where efficiency youre going to get better flow through kind of from that site.
It's been spending our money and our resources on marketplace technology. So we can attach services and drive growth rates something that I E. It's not done we're excited to be able to unleash them. So we're buying a business that is similarly counter cyclical to ours.
We can unlock a huge.
Strategic advantage for us in terms of kind of cost absorption and efficiency, we unlock a major growth lever in the form of our satellite yard. Please understand there was some confusion out there about you know if somebody has a crane or an excavator.
That's not what's coming to the satellite yards, that's not what's being driven in the satellite yard strategy. If you have a crane order an excavator you have no issue trucking it hundreds of miles to one of Ritchie.
That's great what's coming to our satellite yards is largely transportation and very very small equipment. Those are the things where the the transportation. It's just you know is precluded.
For sellers to take it to one of the core Ritchie brothers yard overnight, we get turned up the footprint in order to take that equipment as you say when we expect those very large to unlock so we're incredibly excited and then on the IAA side, we get a counter cyclical profitable business.
We can make even better and unlock their potential. So this is a and it is not an or strategy.
Thank you.
Thank you.
The next question comes from Larry de Maria of William Blair. Please go ahead.
Yeah.
Yeah.
Hi, Thank you.
I mean, everybody quick question.
Okay.
Our position.
On your <unk> comments, just give more color on that.
And watching what we're doing with piracy.
Sarah Thank you ultimately on the IMF, we have one 5%.
Is it new business can you talk about conversion rate and what that.
Thank you.
Yeah, Larry So if you could just but theres a lot of background noise. If you can just restate. Your first question I understand the second one was about I am asking for 65, but it seems to be taking the person.
Sure sorry.
Hence compensation noted in the initial comments can you just give some clarity to what you're talking about there.
And Barton.
Yeah, correct Oh. Thank you for thank you for restating. It. So the intense competition is really a function of what I stated is a function of kind of the low supply that still exists out there. So every single kind of at with deal that Ritchie brothers you know those are not.
And those are met with quite a bit of competition, which is why you heard Eric speak about the kind of depressed.
So as we kind of lean more into those those come at a lower margin, obviously been kind of that core confinement regional business. So that's what that competition refers to and again you know.
Similarly, so more inventory deals theyre competitive lower margin and then similarly more strategic account business, obviously comes at lower margins as well.
But you know the volume more than counteract that that's why we like it but that's an explanation for whats happening there.
I am as the 465%.
So the way to think about IMS as we're still in that first phase right. It is the gateway into the ecosystem for the marketplace much like the listings business that we launched it as a gateway because we want to bring customers and so today I am mass is really if a customer wants to confine with Ritchie brothers.
They are brought in through the eye on that so you're seeing the 465% growth rate really reflected in our team's ability to onboard are all of these customers into the system. So that we can then transact for them.
The next phase is really as the next phase of the marketplace technology clicks. The next phase is really to kind of pull through they are non transaction inventory into the system and that'll be the next set of Kpis that we put forward and then the phase after that is obviously the monetization of those assets. So really the way to think about the four six.
Five is the onboarding of customers that kind of critical first step into the gateway is going incredibly well.
Okay.
Okay. Thank you.
Thank you once again, ladies and gentlemen, if you do have a question. Please press star one at this time.
The next question comes from Gary Cresta panel.
From Barrington Research. Please go ahead.
Hi, Eric.
Couple of questions.
Just in the legacy business as Youre looking at 2023.
I would assume that youre not really looking at any betterment.
Supply on the <unk> side or is that.
Or are you looking for just gradual improvement as the year goes on.
Yeah, Gary Hello, So yeah, it's interesting so youre seeing the lock clicked up.
What you're seeing what you guys don't see is that the mix of flex down.
So that's why it's going to be gradual I like I like the word that you used and why you know Eric caution that Q1 in terms of our growth rate will be you know kind of below Q4.
Again, there is this there was the interrelationship between the price, which is starting to come down.
The lots, which are starting to increase but then the mix, which kind of more than offsets. The two that's why gradual is the name of the game. We're in this crossover period, where the volumes are starting to click, but it's primarily the lower end stuff.
And and the pricing is coming down so that's why we're optimistic but cautiously so and kind of seeing the build through the year.
So when you're talking about the bigger ticket items are not as plentiful and more like transportation items like trucks and things like that bans.
There.
Very well said and below and kind of the low end are you know kind of scissor lifts those kinds of things the transact for much smaller numbers instead of deep okay.
And then.
Could you give us an idea of.
How many satellite yards you now have worldwide and in the United States.
We have 25 worldwide.
And Ah in the United States, we have I don't want to misspeak, but I want to say about 1000 are in the U S.
Yeah. So we are largely where we were last quarter in that we closed a few this last quarter and then opened a few so net net we're right about at the same level we were at.
The plan going forwards with the acquisition of IAA is that going to.
Suffice for what you may have done as far as adding satellite yards in the U S. Pre the acquisition or is that the plan is to still continue to add satellite yards.
Gary not only will look suffice it is literally a almost a decade's worth of acceleration for that initiative.
Again, what is coming to satellite yards are things for which you know trucking them to our core Ritchie brothers yard is you know a huge deterrent because as a percentage of the final transaction price is just too much. So it is primarily transportation again, a reminder for everybody our singles our number one selling up to get use actually a Ford F 150 pickup truck.
Nobody's Gonna take their Ford F 150, 10 year old truck and truck at 300 miles that's not going to happen.
Things are coming to our satellite yard. These low end scissor lift you know that are $1000 to those of the transaction items. We literally that's why the acreage you acquired are so small right. We're talking about five acres are these satellite yards. The name of the game is as close as you can put them to the sellers.
They will go.
And the idea of the IEA are is that they already exist. They already have capacity there already stack. So literally every unit that goes to those yards is just incremental obviously revenue and then the flow through it.
It's an incredible model and as much as a decade's worth of acceleration.
Thank you.
Yes.
Thank you. The next question comes from Brian <unk> of Raymond James. Please go ahead.
Yeah. Thanks, good afternoon.
Just on other services revenue can you discuss what were some of the key drivers of that year over year growth or was it kind of broad based across those various services.
Yes, Hello, it's Eric So we're seeing growth across all the different areas you know, whether it's a <unk> fast.
Fast Ralphs smart equipped all doing well, a standalone businesses and over time the more we the goal is to tightly integrate those into the marketplace. So that they can scale, even more effectively on a standalone basis, all doing well.
And just a follow up to that has been and then being able to unleash that same technology and offering on the additional assets that come from I E.
Which is just pure margin.
And then maybe could you talk a bit about the margins realized on inventory sales I guess now that it's at the top end of the range, maybe just the sustainability of those levels.
So look.
Look we do I just want to caution that if you look at the trend over time you know we are at the high end of the range and and it's not something that some of those kind of mixed blessings from my perspective, it's great to see higher margins there, but we also want to make sure that we are competing aggressively for business and not losing deals because we're.
You know, we're trying to get that last a couple of basis points. So we think there's a huge opportunity as far as the volumes come that way you know we want to go after it.
You know that's that's part of the caution.
There is there was a lot of competition out there. So we want to make sure that we're.
That we're doing everything we can so.
It's more of a cautionary tale just to say look just don't you know if you were thinking about modeling. It may you may not want to model it that kind of level.
In the short term future because we are we're looking at that as a way to say you know look what's the yes, we do have great data to compete effectively but you know we don't think that's something that was.
I'm just gonna stay at that level for at least two.
The short term future.
Okay. That's it for me thanks.
Thank you.
There are no further questions at this time, please continue with closing remarks.
Wonderful. Thank you. So much then I'll take it from here as always I'm going to end with thinking everybody on the call for joining us, but really a heartfelt. Thank you to the incredible Ritchie brothers team.
Many of whom are currently at our Orlando auction a knee deep in all things are customer related so a huge thank you to all of you and let me just say that you know that the we're very very proud of the team and everything that that has been accomplished and we are very.
At about the upcoming I E acquisition and literally the value they can unlock for Richie brothers core and acceleration and putting us in a very very different footing for years and decades to come.
So thank you all.
Ladies and gentlemen, this does conclude the conference call for today, we thank you for your participation and ask that you. Please disconnect your lines.
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Okay.
Yes.