Q4 2023 RB Global Inc Earnings Call

Operator: Good morning. My name is Joanna, 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. All lines have been placed on mute to prevent any background noise.

Good morning, My name is Joanna 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.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone. If you would like to withdraw your question, please press star at the minute. I will now turn the call over to Mr. Samir Rathod, Vice President of Investor Relations and Market Intelligence, to open the call. Mr. Rathod.

Joanna: After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If he would like to withdraw your question. Please press Star then the number two thank you.

Joanna: I will now turn the call over to Mr. Sam <unk>, Vice President of Investor Relations and market intelligence to open the conference call. Mr. <unk> you may begin your conference.

Sameer Rathod: Hello and good morning. Thank you for joining us today to discuss our fourth quarter results. Joining me today are Jim Kessler, our Chief Executive Officer, and Eric Guerin, our Chief Financial Officer. The following discussion will include forward-looking statements, which can be identified by such words as expect, believe, estimate, anticipate, plan, intend, opportunity, and similar expressions.

Sam: Hello, and good morning, Thank you for joining us today to discuss our fourth quarter results. Joining me today are Jim Kessler, Our Chief Executive Officer, and Eric <unk>, Our Chief Financial Officer.

Sam: The following discussion will include forward looking statements, which can be identified by such words as expect believe estimate anticipate plan intend opportunity and similar expressions are common.

Sameer Rathod: Comments that are not a statement of fact, including but not limited to projections of future earnings, revenue, gross transaction value, debt, and other items, business and market trends, and expectations regarding the integration of IAA, including the anticipated cost of energy, are considered poor-looking and involve risk and uncertainty. The risk and uncertainties that could cause actual results to differ significantly from such forward-looking statements are detailed in our news release issued this morning, as well as our most recent Quarterly Report and Annual Report on Form 10-K, which are available on the Investors Relations website and Edgar and Theda. 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 the applicable reconciliation of the two, see our news release, Form 10-K, Form 10-Q, and the investor presentations posted on our website. We are unable to present quantitative reconciliation of board-looking non-GAAP financial measures as management cannot predict all the necessary components of such measures.

Sam: Comments that are not a statement of fact, including but not limited to projections of future earnings revenue gross transaction value and other items business and market trends.

Sam: Expectations regarding the integration of IAA, including the anticipated cost of energy are considered forward looking and involve risks and uncertainties the.

Sam: Risks and uncertainties that could cause actual results to differ significantly.

Sam: Such forward looking statements are detailed in our news release issued this morning as well as our most recent quarterly.

Sam: Quarterly report and annual report on Form 10-K, which are available on the Investor Relations website, and Edgar and SEDAR.

Sam: On this call. We will also discuss certain non-GAAP financial measures, including forward looking non-GAAP financial measures.

Sam: For the identification of non-GAAP financial measures the most directly comparable GAAP financial measure and the applicable reconciliation of the two Dr. News release Form 10-K Form 10-Q, and the Investor presentation posted on our website.

Sam: We are unable to provide quantitative reconciliation of forward looking non-GAAP financial measure as management cannot predict all the necessary components of such metric investors are cautioned not to place undue reliance on forward looking non-GAAP financial measures.

Jim Kessler: Investors are cautioned not to place undue reliance on board-looking non-GAAP financial measures. At this time, I would like to turn the call over to Jim. Thank you, Sameer, and good morning to everyone. We finished the year strong with fourth quarter gross transaction value growth of 13% on a pro forma combined basis. All our sectors contributed to solid GTV growth. Fueled by our team's dedication to consistently over-deliver on the commitments we make to our customers, a continued focus on operational efficiency and driving-in incremental efficiencies across the organization resulted in strong adjusted EBITDA growth. Investing in our teammates through a best-in-class people experience remains core to our strategy. Our one-team, all-in culture was recently recognized with the prestigious Great Place to Work certification. The recognition underscores our ongoing progress in integrating our teams and solidifying RB Global as a highly attractive workplace.

Sam: At this time I would like to turn the call over to J.

Sam: Jim.

Thank you Samir and good morning to everyone. We finished the year strong with fourth quarter gross transaction value growth of 13% on a pro forma combined basis.

Joe Box: Our sectors contributed to solid GDP growth.

Joe Box: Fueled by our team's dedication to consistently over deliver on the commitments, we make to our customers.

Joe Box: Our continued focus on operational excellence.

Joe Box: Driving incremental efficiencies across the organization resulted in strong adjusted EBITDA growth.

Joe Box: Investing in our teammates through a best in class people experience remains core to our strategy.

Joe Box: Our one team all in culture was recognized recently with the prestigious great place to work certification.

Joe Box: The recognition underscores our ongoing progress in integrating our teams and solidifying RB global it's a highly attractive workplace.

Jim Kessler: This translates to increased engagement and productivity with our teammates, which benefits our customers and all our stakeholders in the long run. Let me start by talking about our commercial construction and transportation sector. We continue to be the partner of choice for our customers as we guide them through their asset disposition needs. The consignment environment remains supportive as OEM production has ramped up, allowing equipment owners to act on fleets that were aged during a pandemic. That said, we are not resting on our laurels.

Joe Box: This translates to increased engagement and productivity with our teammates which benefits our customers and all our stakeholders in the long term.

Joe Box: Let me start by talking about our commercial construction and transportation sector. We continue to be the partner of choice for our customers as we guide them through their disposition needs. The consignment environment remained supportive as OEM production has ramped up.

Joe Box: Equipment owners to act or fleets that were aged during the pandemic.

Joe Box: That said, we are not resting on our laurels, we are reinforcing our winning strategy by investing in our sales force recruiting top talent and providing better sales coverage in certain markets within North America.

Jim Kessler: We are reinforcing our winning strategy by investing in our sales force, recruiting top talent, and providing better sales coverage in certain markets within North America. Every market share percentage point we capture translates into more satisfied customers, solidifying our commitment to excellence and remaining the partner of choice. Moving to the automotive sector, we continued our steady acceleration towards operational excellence by implementing Enhanced Processes to Uber Deliver against our Service Level Agreements. Customer savings and operational efficiencies go hand in hand for us. That's why we prioritize optimizing total performance after a transaction closes; picking up the vehicles quickly and efficiently stops storage costs, rental car costs, and other auxiliary costs for our customers and significantly impacts net return. I am proud of the team and pleased to say that our process improvement, combined with strategically deploying internal tow assets, has dramatically improved our performance compared to prior levels. Our pickup compliance, an internal measure of our toad performance, was approximately 98% in the fourth quarter, a substantial improvement year over year.

Joe Box: Every market share percentage point recapture translates to more satisfied customers solidifying our commitment to excellence and remaining the partner of choice.

Joe Box: Moving to the automotive sector, we continued our steady acceleration towards operational excellence by implemented enhanced processes to over deliver against our service level agreements custom.

Joe Box: Customer savings and operational efficiencies go hand.

Joe Box: In hand for Us that's why we prioritize optimizing total performance after transaction closing.

Joe Box: Take it up the vehicles quickly and efficiently stop storage cost rent.

Joe Box: Rental car cost and other axillary costs for our customers significantly impacts net returns.

Joe Box: I'm proud of the GE Im pleased to say that our process improvement combined with strategically deploying an internal call tow assets have dramatically improved our performance compared to prior levels.

Joe Box: Our our pickup compliance and internal measure of our performance was approximately 98% in the fourth quarter, a substantial improvement year over year more importantly, we have consistently been in the high 90% compliance for several months.

Jim Kessler: More importantly, we have consistently been in the high 90s of compliance for several months. We are focused on streamlining buying processes and strategically leveraging technology to maximize gross returns for our customers. Our efforts yielded measurable results again in the quarter, with automotive average selling prices climbing an industry lead of 2.5% year over year. A prime example of our technology deployment is our recent implementation of JD Power Chrome Data VIN descriptions with our IAEA Interact merchandising platform.

Joe Box: We are focused on streamlining buying processes and strategically leveraging technology to maximize gross returns for our customers.

Joe Box: Our efforts yielded measureable results again in the quarter.

Joe Box: With automotive average selling prices climbing and industry, leading to 5% year over year.

Joe Box: A prime example of our technology deployment is our recent implementation of J D power chrome data been descriptions with our IAA interact merchandising platform.

Jim Kessler: This gives buyers unparalleled and industry-leading insights for trim-level data on vehicles in our marketplace while unlocking additional value for our sellers. We're also getting phenomenal feedback on our recently launched Sales Decision Center, which gives our sellers incredible real-time transparency into the variables impacting the market's microstructure of our auction.

Joe Box: This gets buyers unparalleled and industry, leading insights for trim level data wont be <unk> in our marketplace, while unlocking additional value for our sellers.

Joe Box: We're also getting phenomenal feedback on our recently large sales decision center.

Joe Box: This system gives our sellers incredible real time transparency into the variables impacting the markets Mike growth structure of our auctions, allowing them to optimize their price realization further and unlock incremental value.

Jim Kessler: Allowing them to optimize their price realization further and unlock incremental value. As we continue to discuss our Operational Excellence Program with our partners, we will launch a program that will provide our aggregated SLO performance to all of our insurance partners next week, creating an industry-leading level of transparency. The road ahead is paved with continuous improvement, and we're committed to exceeding customer expectations and our commitment at every turn. The momentum from our efforts to integrate IEA is fueling a broader focus on efficiencies and operational excellence across the entire organization. We have realized $17 million in actual cost synergies in the quarter and have achieved a total of $70 million in annual run rate cost synergies since the close of the transaction. We are confident with all the plans in place to achieve our cost synergy target on the timetable we previously communicated.

Joe Box: As we continue to discuss our operational excellence program with our partners. We will launch a program that will provide our aggregated at solid performance to all of our insurance partners next week.

Joe Box: In an industry leading level of transparency.

Joe Box: The road ahead is paved with continuous improvement and we're committed to exceeding customer expectations and our commitment to every turn.

Joe Box: The momentum from our efforts to integrate IAA his view on the broader focus on efficiencies and operational excellence across the entire organization.

Joe Box: We realized $17 million in actual cost synergies in the quarter.

Joe Box: The action that totaled $70 million in annual run rate cost synergies since the close of the transactions.

Joe Box: We are confident with all the plans in place to achieve our cost synergy target on the timetable we previously communicated.

Jim Kessler: Our responsibility is to manage overall costs, not just cost synergies, and more importantly, deliver overall results. We are keenly focused on top-line growth and margin expansion opportunities across the entire organization, and therefore, we will no longer be reporting progress on cost synergies quarterly by continually exploring ways to efficiently manage the cost of our business through operational excellence. We will enable strong flow through, which will drive shareholder value. We are in discussions with our value partners. Land ownership is not necessary for meeting or exceeding our service level agreements or winning additional market share.

Joe Box: Our responsibilities to manage overall cost not just cost synergies.

Joe Box: More importantly, deliver overall results we are keenly focused on top line growth and margin expansion opportunities across the entire organization and therefore, we will no longer be reporting progress on cost synergies quarterly by.

Joe Box: By continually explore ways to efficiently manage the cost of our business through operational excellence, we will enable strong flow through which will drive shareholder value.

Joe Box: And our discussions with our valued partners.

Joe Box: Land ownership is not necessary for meeting or exceeding our service level agreements or win additional market share.

Jim Kessler: We maintain a surplus of lane capacity across our asset class, allowing us to accommodate our operational requirements easily. As we indicated last quarter, we will continue to purchase property strategically and opportunistically in regions acceptable to cats, where the market opportunity makes strong financial sense for us to make these investments. In certain markets, we proactively have, and will continue to acquire, space to better serve the needs of our customers. Before passing the call to Eric, I'd like to introduce him formally. When seeking our new CFO, we have three critical criteria in mind.

Joe Box: We maintain a surplus of lane capacity across our asset classes.

Joe Box: Leon that still accommodate our operational requirements easily as we indicated last quarter, we will continue to purchase property strategically and Opportunistically enbridge, it's acceptable to cats, but where the market opportunity to make strong financial sense for us to make these investments.

Joe Box: In certain markets, we proactively had and will continue to acquire space to better service the needs of our customers.

Speaker Change: Before passing the call to Eric I'd like to introduce him formally.

Eric: When seeking our CFO new CFO, we have three critical criteria in mind.

Eric Guerin: Firstly, we wanted someone who could enhance operational excellence by collaborating closely with the sales and operations teams. Secondly, a people-oriented leader who seamlessly aligned with our one-team, all-in culture. Lastly, someone with a deep understanding of a customer-centric company. Eric embodies all these qualities, and his experience within the automotive ecosystem has allowed him to dive in and make an immediate impact. Let me pass the call to Eric to discuss our financial results for the fourth quarter and our outlook for 2024. Thank you, Jim. I'm thrilled to be here and wanted to add my welcome to everyone joining the call. I want to thank the entire team at RB for making me feel so welcome and right at home.

Speaker Change: Lee, we wanted someone who could enhance operational excellence.

Eric: Collaborating closely with the sales and operational teams.

Eric: <unk> a pique.

Eric: <unk> oriented leader, who seamlessly aligned with our one team all a culture.

Eric: Lastly, someone with a deep understanding of our customer centric company.

Eric: Eric embodies all these qualities and his experience within the automotive ecosystem has allowed him to dive in and make immediate impact.

Eric: Let me pass the call to Eric to discuss our financial results for the fourth quarter and our outlook for 2020 for Eric.

Eric: Eric.

Eric: Thank you Jim I'm thrilled to be here I wanted to add my welcome to everyone. Joining the call I want to thank the entire team at RV for making me feel so welcome and right at home.

Eric Guerin: Before we jump into the details, please note that year-over-year comparisons for GTV and revenue refer to a comparison to the pro forma combined results of Ritchie Brothers and IAA for the prior year. Total GTV increased 13%, auctioneers Inc. auctioneers Inc. Automotive GTV increased by 10%, benefiting from higher unit volumes and a higher average selling price. The existing customer portfolio drove the growth in unit volume, as the salvage industry continues to benefit from a rebound in the total loss ratio. In the fourth quarter, PCC estimated that the loss ratio increased to approximately 20.4 percent, compared to 20% in the same period last year.

Eric: Before we jump into the details. Please note that year over year comparisons for GTP and revenue referred to a comparison to the pro forma combined results of Ritchie brothers at IAA for the prior year period.

Eric: Total <unk> increased 13% with strength across all sectors automotive GTD increased by 10% benefiting from higher unit volumes and a higher average selling price.

The existing customer portfolio drove the growth in unit volumes as the salvage industry continues to benefit from a rebound in the total loss ratio and.

Eric: In the fourth quarter DCC estimated that the loss ratio increased to approximately 24% compared to 20% in the same period last year.

Eric Guerin: Recall that the total loss ratio is the number of vehicles being salvaged as a percentage of total access; used automotive prices continue to trend lower year over year while repair costs remain elevated, creating a productive environment to consider a car a total loss after an accident. DTV in the commercial construction and transportation sector increased by 20%, driven by increases in lot volumes partially offset by declines in average price per lot sold. Part of the decline in average price per lot sold was due to asset mix, as lot volume growth came from rental and transportation customers, where asset values are intrinsically at lower ASPs compared to traditional earth-moving assets.

Eric: Recall that the total loss ratio as the number of vehicles being salvage as a percentage of our total accidents.

Eric: Used automotive prices continued to trend lower year over year, while repair costs remain elevated.

Eric: A productive environment to consider a car or a total loss after an accident.

Eric: <unk> in the commercial construction and transportation sector increased by 20%.

Eric: By increases in lot volumes, partially offset by declines in average price per lot sold.

Eric: Part of the decline in the average price per lot sold was due to asset mix as lot volume growth came from rental and transportation customers, where asset values are intrinsically at lower asps.

Eric: Just addressable earthmoving assets.

Eric Guerin: Additionally, we continue to observe declines in price year-over-year. Additionally, I also want to note that the yellow corporation dispersal had a negligible impact on our GTV in the fourth quarter. Moving to service revenue, service revenue increased 14%, with our service revenue take rate expanding approximately 20 basis points to 20.2%.

Eric: Additionally, we continue to observe declines in price year over year on an apples to apples basis.

Eric: I also want to note that the yellow Corporation dispersal had a negligible impact on our <unk> in the fourth quarter.

Eric: Moving to service revenue.

Eric: Service revenue increased 14% with.

Eric: With our service revenue take rate expanding approximately 20 basis points to 22%.

Eric Guerin: Service revenue increased due to growth in GTV and a higher average service revenue take. The increase in the average take rate was driven by a higher average buyer and growth in our marketplace service, although partially offset by a lower average commission. The lower average commission rate was primarily driven by a higher mix of automotive-related GTV and a higher mix of construction and transportation assets from strategic accounts. Moving to inventory, Inventory revenue declined 10% with lower revenue contributions from the automotive and commercial and construction and transportation sectors. The inventory rate for the quarter contracted 620 basis points year over year to approximately 5%.

Eric: Service revenue increased due to growth in <unk> and a higher average service revenue take rate the.

Eric: The increase in the average take rate was driven by a higher average buyer fee rate and growth in our marketplace services revenue.

Eric: Partially offset by a lower average commission rate.

Eric: The lower average commission rate was primarily driven by a higher mix of automotive related GTP at a higher mix of construction and transportation assets from strategic accounts.

Eric: Moving to inventory.

Eric: Inventory revenue declined 10% with lower revenue contributions from the automotive and commercial and construction and transportation sectors.

Eric: Inventory rate for the quarter contracted 620 basis points year over year to approximately 5%.

Eric Guerin: The decline in the inventory rate year-over-year can be attributed to prices declining faster than anticipated between the purchase date and the date of sale of inventory in our commercial and construction and transportation sectors and an increase in the cost of vehicles sold in our automotive. As previously noted, we expect the environment for at-risk deals to remain competitive in our commercial construction and transportation. Turning to earnings. Adjusted EBITDA increased 14% compared to the combined adjusted EBITDA of IAA and Ritchie Brothers for the year-ago period.

Eric: Decline in the inventory rate year over year can be attributed to prices declining faster than anticipated between the purchase date and the data sale of inventory in our commercial and construction and transportation sector.

Eric: And an increase in the cost of vehicles sold in the automotive sector.

Eric: As previously noted we expect the environment for at risk deals to remain competitive in our commercial construction and transportation sector.

Eric: Turning to earnings adjusted.

Eric: Adjusted EBITDA increased 14% compared to the combined adjusted EBITDA of IEA and Ritchie brothers for the year ago period.

Eric Guerin: Growth in adjusted EBITDA was in line with our pro forma service revenue and GTV; adjusted earnings per share increased 21% on strong operational performance and the full quarter impact of IAA inclusion, partially offset by a higher share count, higher net interest expense, and the impact of the Series A senior preferred share. At the end of the fourth quarter, our adjusted net debt to trailing 12 months adjusted EBITDA was approximately 2.5 times. Adjusted net debt to trailing 12 months combined adjusted EBITDA was approximately $2.2 trillion, down two-tenths of a turn compared to last quarter.

Eric: And adjusted EBITDA was in line with our pro forma service revenue and <unk> growth.

Eric: Adjusted earnings per share increased 21% on strong operational performance and a full quarter impact of IAA inclusion.

Eric: Partially offset by higher share count higher net interest expense.

Eric: The impact of the series a senior preferred shares.

Eric: At the end of the fourth quarter, our adjusted net debt to trailing 12 months adjusted EBITDA was approximately two five times.

Eric: Adjusted net debt to trailing 12 months combined adjusted EBITDA was approximately two two times down two tenths of return compared to last quarter. We.

Eric Guerin: We remain focused on deleveraging to approximately two times by the end of the first quarter of 2025. Moving to the outlet, we wanted to provide our initial thoughts on 2020. We expect gross transaction value growth between 1% and 4% year-over-year in 2024 compared to the pro forma combined gross transaction value of 2021. We expect adjusted EBITDA from $1.17 billion to $1.23 billion in 2024.

Eric: We remain focused on deleveraging to approximately two times by the end of the first quarter of 2025.

Eric: Moving to the outlook.

Speaker Change: Wanted to provide our initial thoughts on 2024.

Speaker Change: We expect gross transaction value growth between one and 4% year over year in 2024 compared to the pro forma combined gross transaction value of 2023.

Speaker Change: We expect adjusted EBITDA from $1 7 billion to $1 billion to $3 billion in 2024, reflecting continued growth our commitment to operational excellence program.

Eric Guerin: We want to thank you for joining us today. We look forward to seeing you next time. Thank you. Thank you. Bye. Thank you. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.

Speaker Change: <unk> investment in growth initiatives.

Eric Guerin: We expect our full year 2024 gap and adjusted tax rate to be between 25 and 28%. Moving to CapEx. We currently expect full year capital expenditures, which include PP&E, net of proceeds on disposals, and additions to intangible assets, to be between $275 and $325 million.

Speaker Change: We expect our full year 2020 for GAAP and adjusted tax rate to be between 25 and 28%.

Speaker Change: Moving to Capex. We currently expect full year capital expenditures, which include PP&E net of proceeds from disposals and additions to intangible assets to be between 275 and $325 million.

Operator: With that, let's open the call for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number on your touchtone phone. You will hear a three-tone prompt acknowledging your request. If you are using a speakerphone, please lift the handset before pressing any. The first question comes from Michael Gimay from Scotia Bank.

Speaker Change: With that let's open the call for questions.

Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session.

Speaker Change: Do you have a question. Please press the star followed by the one on your Touchtone phone you will hear with Sweet Tom perhaps acknowledging your request.

If you are using a speaker phone please lift the handset before pressing any case.

Speaker Change: First question comes from Michael <unk> from Scotiabank. Please go ahead.

Michael Feniger: Please go ahead. Hey, good morning, guys. And welcome, Eric. Super quarter.

Michael: Hey, good morning, guys and welcome Eric.

Michael: Super quarter.

Jim Kessler: But I'd like to start with a 2024 guide, at the midpoint, it looks like you're looking for about 2.5% GTV growth, about 5% on an EBITDA basis pro forma, and that compares to EBITDA growth of close to 20% on a pro forma basis in the last three quarters. Some of the slowdown, but wondering, you know, what else is contemplated within the guide, you know, what market trends and perspectives for legacy and IA as well. Hey Michael, thank you so much.

Michael: I'd like to start with the 2020 for guidance.

Michael: At the midpoint it looks like Youre looking for about two 5% GDP growth.

Michael: 5% on an EBITDA basis pro forma.

Michael: And that compares to EBIT growth of close to 20% on a pro forma basis in the last few quarters. So.

Michael: I know the customer loss partly explained.

Michael: Some of the slowdown, but I'm wondering what else is contemplated within the guide.

Michael: What market trend perspective sort of legacy Nia as well.

Speaker Change: Hey, Michael. Thank you. So much look I think you got a big part of it right first as the customer loss and then also as we look out in the industrial side and you look at year over years.

Jim Kessler: Look, I think you got a big part of it right first: customer loss. And then also, as we look out on the industrial side, and you look at years over years of what happens in the history of price going up and down and units going up or down. In the back half of the year, we do see that price and unit dynamic changing, where units are going to drop from where they are today, and pricing, you know, who knows where it goes up, right? And what percent it goes up.

Speaker Change: Happens in the history of price going up and down in units going up or down.

Speaker Change: Back half of the year, we do see that pricing unit dynamic changing where units are going to drop from where they are today in price and who knows where it goes operate and what percent. It does.

Jim Kessler: So those two things are the biggest reflection of the guidance that we gave. Gotcha. And then maybe just turning to the cost.

Speaker Change: So those two things are the biggest reflection of.

Speaker Change: The guidance that we gave.

Speaker Change: Got you and then maybe just turning to the cost and it looks like the operating leverage is really starting to click here.

Jim Kessler: Now, it looks like the operating leverage is really starting to click here. You know, you're still working on some synergies between the two businesses. But it also sounds like there's a bunch of efficiencies you're targeting as well, Jim.

Speaker Change: I know you're still working on some synergies between the two businesses.

Speaker Change: Also it sounds like there's a bunch of efficiencies or targeting as well Jan maybe expand on.

Jim Kessler: So maybe expand on some of the major drivers for SG&A in 2024 and how we should think about SG&A more broadly. Yeah, look, I think SG&A just in general, the philosophy that we have as a management team. We're constantly looking at how we get more efficient. And no matter what process or activity that we have in our organization, we're taking a look at it.

Some of the major drivers for SG&A into 'twenty, four and how we should think about SG&A more broadly.

Jan: Yes look I think SG&A just in general the philosophy that we have as a management team. We're constantly looking at how do we get more efficient and no matter what process or activity that we have in our organization. We are taking a look at it.

Jim Kessler: Think about all the portfolios and all the businesses that we have, RAL, SmartEquip, the different services that we provide. We're constantly looking at each of our businesses and asking, how do you get more efficient? How do you get better?

Jan: Thinking about all the portfolios in all of the businesses that we have Ralph smart equipped different services that we provide we're constantly looking at each of our businesses of how do you get more efficient how do you get better but.

Jim Kessler: But, along with getting efficient, the one thing I don't want to lose sight of is that we are looking at how we can drive long-term value for everyone as we do this. So it's the combination of both of what we're looking at is look, we're always going to want to be efficient, no matter what year, what quarter, what day as a management team, we're going to look at how do we drive the most efficiency out of the business and invest in the things that make sense for the long term that keep us viable. And, you know, in everyone's mind when it comes to all the asset classes that we support. And so I think it's just the philosophy of what you're seeing and what we're trying to do. But we're never going to stop. You know, how do we become more efficient?

Jan: Along with getting efficient the one thing I don't want to lose sight of is we are looking at how do we drive long term value for everyone. As we're doing this so it's the combination of both of what we're looking at is look we're always going to want to be efficient no matter what year, what quarter what day as a management team we're going to look at how do we drive the most efficiency out of it.

Jan: The business and invest in the things that makes sense for the long term that keep us viable.

Jan: And.

Jan: In everyone's mind when it comes to all the asset classes that we support and so I think its just a philosophy of what youre seeing and what we're trying to drive, but we're never going to stop how do we become more efficient the whole. It's the culture of the management team that we have in place right now a big reason why we brought in Eric.

Jim Kessler: It's the culture of the management team that we have in place right now, and a big reason why we brought in Eric to help us continue this pace. And we want to be diligent about every dollar we spend on capital. We want to get a return on it. And look, I think all good companies have this in mind of what they try to drive, and we're just very committed to it. Might have forgotten those one or two. Thank you.

Jan: To help US continue this pace and we want to be diligent about every dollar we spend on capital we wanted to get a return for it and look I think all good companies had this in mind, what they try to drive and we're just I'm very committed to it.

Speaker Change: Lastly, John those are my two thank you.

Speaker Change: Thank you. The next question comes from Steve Hansen from Raymond James. Please go ahead.

Steve Hansen: Thank you. The next question comes from Steve Hansen from Raymond James. Please go ahead. Yeah, good morning, guys. Thanks for the time.

Yes, good morning, guys. Thanks for the time.

Jim Kessler: Look, the service performance metrics you described being in the high 90s now are quite impressive. How do you feel about parlaying those into some additional market share gains through 2024 on the IAEA side?

Steve Hansen: Look the server its performance metrics you described being in the high <unk> now or quite impressive.

Steve Hansen: How do you feel about parlay those into some additional market share gains through 2024 on the IAA side I know in the deck, you've described that as part of your priority, but just like some additional color on that if you might and how you feel like that's being reflected in the customer reception and ultimately winning new business.

Jim Kessler: I know in the deck, you've described that as part of your priority, but I would like some additional color on that, if you might, and how you feel like that's being reflected in the customer reception and ultimately, winning the business. Yeah, Steve, winning the business is always the hard part, right? Because it's not my decision to make, it's someone else's.

Speaker Change: Steve the when and the business is always the hard part right because it's not my decision to make at someone else's what I can control is making sure when we make a commitment on any SLA or anything no matter what segment or asset class. We have because I include this one the industrial construction AG side.

Jim Kessler: What I can control is making sure that when we make a commitment on any SLA or anything, no matter what segment or asset class we have, because I include this on the industrial construction ag side, just like I do in the automotive. When we make a commitment, we're going to over deliver on that commitment. And I believe when we do that consistently, the trust that we're going to build with our customer base, and I can hear it now in our quarterly QBRs, that they're seeing the difference, and they're appreciating the difference. But again, I'm very realistic as we talk about the U-shape last quarter.

Speaker Change: And just like I do in the automotive and when we make a commitment we're going to over deliver on that commitment and I believe when we do that consistently.

Speaker Change: The trust that we're going to build with our customer base and I can hear it now in our quarterly <unk>.

Speaker Change: That theyre seeing a difference in their appreciating the difference, but again I'm very realistic as we talk about the U shape last quarter, I know I need to get some months behind us because I think the only way you build trust and confidence is by showing month over month that you can deliver and we look at it day over day week over week.

Jim Kessler: I know I need to get some months behind us because I think the only way you build trust and confidence is by showing month over month that you can deliver. And we look at it day over day, week over week. And when you do that, you know, the type of industry that we're in on the automotive side, when you're in this and there are two main players in that space, when you create a viable competitor, then what it comes down to for each of our customers is who do you trust to deliver on a consistent basis? And I feel really good about the progress we're making, and we're being very transparent with our partners about where we are, what we're working on, and how we're going to add value to them, right?

Speaker Change: And when you do that.

Speaker Change: The type of industry that we're in.

Speaker Change: For the automotive side when you're in this and there is two main players.

Speaker Change: That space when you create.

Speaker Change: A viable competitor.

Speaker Change: And then when it comes down to for each of our customers is who do you trust to deliver on a consistent basis.

Speaker Change: Feel really good about the progress, we're making and we're being very transparent with our partners about where we're at and what we're working on and how we're going to add value to them right because at the end of the day. Our biggest thing that we're focused on is their customers' experience driving cost savings out of their business operationally.

Jim Kessler: Because at the end of the day, our biggest thing that we're focused on is their customer experience, driving, you know, cost savings out of their business, operationally, how we do that day in and day out, and driving the SLAs down to the branch level, where they feel I'm totally accountable for it. So we're really confident about it. But again, I don't get the chance to make the decision when it happens that someone else does. No, I very much appreciate that. And just to follow up maybe on one of your earlier comments about the future and growth in units, particularly in the auto sector, is there anything specific that you're seeing in the current framework or in the current timeframe, current quarter that's starting to suggest that's already evident, or is that something more you expect in the back Yeah, I'm going to give this to Samir in a second. But again, I think it's more what we see in history as we look at trends and cycles of what happens. Yeah, as we look at Samir.

How we do that day in and day out and driving the SLA is down to the branch level, where they feel I'm totally accountable for it.

Speaker Change: So we're really confident about it.

Speaker Change: But again I don't get the chance to make the decision of when it happens that someone elses decision.

No that's fair I appreciate that and just a follow up maybe on one of your earlier comments with moderate growth in units, particularly in the auto sector is there anything specific that youre seeing.

Speaker Change: In the current framework that like in the current timeframe current quarter. That's starting to suggest that is already evident or is that something where you expect through the back half.

Speaker Change: Yes, I'm going to give samir this in a second but again I think it's more of what we see in the history as we look at trends and cycles of what happens.

Speaker Change: As we look at some here yes. This is Steve the moderating growth in automotive reflects what we discussed last quarter with the customer loss.

Sameer Rathod: Yeah, so Steve, the moderating growth and automotive reflects what we discussed last quarter with the customer loss. So if you think about the fourth quarter, we still had a full impact on this customer. You know, we'll probably get a half-a-quarter impact in the first quarter.

Speaker Change: So if you think about the fourth quarter, we still had a full impact for that customer.

We will probably got a half a quarter impact.

Speaker Change: In the first quarter and then the second quarter Youll get the full.

Sameer Rathod: And then, you know, the second quarter, you'll get it all running right without without for that. Steve, my comment was more on the industrial side, just to make sure we're clear and understood. No, I appreciate that.

Speaker Change: <unk> run rate.

Speaker Change: Without without the customer loss, so thats what that reflects.

Speaker Change: Okay, Steve My comment was more on the industrial side just to make sure we're clear.

Speaker Change: Understood I appreciate definitely think that percent.

Craig Kennison: Okay, thanks. Thank you. The next question comes from Craig Kennison at Baird. Please go ahead.

Craig Kennison: Thank you. The next question comes from Craig Kennison Baird. Please go ahead go ahead.

Jim Kessler: Yeah, thanks. I know there have been questions on the auto side where shares have been an issue, but I wanted to ask about the competitive dynamic. Construction Tide, you're clearly the market leader there, but your auto competitor has made an acquisition that could threaten that share over time. I'm wondering if you'd just share an update on the competitive dynamic in the construction space. Yeah, no. I'm happy to do so.

Craig Kennison: Yes, Thanks, I know there've been questions on the auto side, where share has been an issue, but I wanted to ask about the competitive dynamic on the construction side you are clearly the market.

Speaker Change: Leader there, but your auto competitor has made an acquisition that.

Speaker Change: Could threaten that share over time, I'm wondering if you'd just share an update on the competitive dynamic in the construction space.

Speaker Change: Yes, no happy to do so so for us we're not taking granite of our.

Jim Kessler: So, for us, we're not taking for granted our position on the industrial side. Like we mentioned before, we are actively invested in territory managers to make sure we're in the market, building relationships, and having conversations. We're actually entering markets where the competitor that you mentioned is already present, but we're not going to take it for granted, and we're constantly building our relationships with our customers. I'm in Orlando today and have spent the last five days with our customers building that confidence. Yeah, thanks, Jim.

Speaker Change: Position of where we are on the industrial side like we've mentioned before we are actively actively invested in territory managers to make sure. We're in the market building relationships and having conversations we're actually entering markets, where the competitor that you mentioned are in.

Speaker Change: But we're not going to take it for granted and we're constantly building our relationships with our customers I'm in Orlando today and has spent the last five days with our customers building that confidence.

Speaker Change: Yes, Thanks, Jim and maybe as a follow up on the territory manager comment I'm, just wondering if you'd share with us how that role has evolved and what your philosophy is today in terms of.

Jim Kessler: And maybe as a follow-up on the territory manager comment, I just wonder if you'd share with us how that role has evolved and what your philosophy is today in terms of, you know, your go-to-market strategy and the importance of a territory manager versus, you know, call centers and other marketing approaches. Yeah, look, we're doing both at the same time. I think the change in dynamics of people wanting to be completely self-service is not immediate, but we have both programs going on where we have inside sales that work on the long tail. But the one thing that we know for sure is that the industrial dynamics are a little bit behind, and our customers appreciate that personal relationship, especially when you're dealing with a piece of equipment that's $200,000, $300,000. They want to have that relationship and that trust in what they're doing, especially when you think about an unreserved auction. So they want that commitment, that trust that someone's going to deliver.

Speaker Change: You go to market strategy and the importance of a territory manager versus call centers and other marketing approaches.

Speaker Change: Yes look we're doing both at the same time I think.

Speaker Change: Inc.

The changing dynamic of people wanting to be self completely self service and it's not immediate but we have both.

Speaker Change: Im programs going on where we have inside sales and that work on the long tail, but the one thing that we know for sure.

Speaker Change: The industrial dynamics is a little bit behind and our customers appreciate that personal relationship, especially when you're dealing with a piece of equipment, that's $200000 $300000. They want to have that relationship.

Speaker Change: And that trust the work, they're doing especially when you think about an unreserved auction.

Speaker Change: So they want that commitment that trust that someone is going to deliver so we still see the value in territory managers, having that in person relationship as we're going through it but we still realized look the world is going to evolve and transform and we're making sure with our marketplace that we're building self service capabilities and we have an inside sales team to help so we have.

Jim Kessler: So we still see the value in territory managers having that in-person relationship as we're going through it. But we still realize, look, the world's going to evolve and transform. We're making sure with our marketplace that we're building self-service capabilities, and we have an inside sales team to help. So we have both, but in the short term, over the next three years, this in-person relationship will not dramatically go away from what it is today. Yeah, thanks, Jim. You've got it.

Speaker Change: Both go in but in the short term over the next three years. This in person relationship will not dramatically go away from what it is today.

Okay. Thanks, Jim.

Speaker Change: You got it.

Gary Frank Prestopino: Thank you. The next question comes from Gary Prestopino at Burrington Research. Please go ahead.

Speaker Change: Thank you. The next question comes from Jeremy Pester piano at Barrington Research. Please go ahead.

Jim Kessler: Good morning, Jim and Eric. Glad to get reacquainted again for listening. Jim, I wanted to ask you, um... There was a lot of low hanging fruit at IAA and, in particular, the issue with centralized versus decentralized decision making.

Jeremy Pester: Good morning, Jim and Eric glad to get Reacquainted again.

Jeremy Pester: Your voice Gary Jim.

Jeremy Pester: Jim I wanted to ask you.

Speaker Change: There was a law.

Jeremy Pester: Lot of low hanging fruit.

Jeremy Pester: And in particular.

Jeremy Pester: Issue with.

Jeremy Pester: Centralized versus decentralized decision, making.

Jim Kessler: Has that issue of moving from centralized to decentralized been implemented at all of the salvage sites at this point? Yeah, so it's a tough question because, as I mentioned, we're always looking at ways to get more efficient and what works better for our customers, right? So what should be decentralized, what's centralized, and sometimes there's a mixture of both, right?

Jeremy Pester: Has that issue moving from centralized to decentralized implemented at all of the salaried sites at this point.

Yes so.

Jeremy Pester: It's a tough question because as I mentioned, we're always looking at ways to get more efficient in what works better.

Jeremy Pester: For our customers right, so what should be decentralized with centralized and sometimes there is a mixture of both right using centralized to support the decentralized and back and forth, but what I can tell you is the culture of the branch manager fee on ownership of the process and this is my SLA to manage and we.

Jim Kessler: Using central to support the decentralized and back and forth. But what I can tell you is the culture of the branch manager feeling ownership of the process, and this is my SLA to manage. And we have implemented a new bonus program for the branch manager starting January 1st that rewards them based on their ownership of the SLAs. So what I feel really confident about is the culture of the branch manager owning it, and the things that should be in the branch, we've shifted the low-hanging fruit stuff to the branch. But we're constantly going to constantly evaluate what's the best support mechanism for the branch and how to be as efficient as possible. So, okay, so as you talk to, or your people talk to, Insurance companies, the consignors of vehicles.

<unk> implemented a new bonus program for the branch managers start in January 1st that bonuses than off of your ownership of the Sla's. So what I feel really confident is the culture of the branch manager owns it.

Jeremy Pester: And the things that should be in the branch we've shifted the low hanging fruit stuff to the branch.

Jeremy Pester: But we're constantly going to always evaluate what's the best support mechanism for the branch and how to be as efficient as possible.

Jeremy Pester: So okay. So as you talk to or your people talk too.

Jeremy Pester: Insurance companies the consignor vehicles.

Jim Kessler: What is some of their wish list that they would like to see IAA implement to improve service levels? Yeah, it's so it's such a diverse when you say our insurance partners right when you take, you know, what I'll call tier one, the larger insurance carriers, then you work your way down to regional and different like farm bureaus, they all have a different background. It's such a diverse, you know, background of what's important. But look, the way we look at our business for all of our partners is, how do we stop all the advance charges as quickly as possible? And how do we keep them as low as possible for them?

What is some of their wish list that they would like to see.

Jeremy Pester: Implement.

To improve service levels.

Speaker Change: Yes, it's so it's such a diverse when you say our insurance partners right when you take.

Speaker Change: What I'll call a tier one that larger insurance carriers, then you work your way down to a regional.

Speaker Change: And the different like foreign bureaus, they all have a different it's such a diverse.

Background of what's important but look the way we look at our business for all of our partners.

Is how do we stop all the advanced charges as quickly as possible how do we keep them as low as possible for them right. So we're constantly looking at that then when we have possession of the car if it's inspection services and images and data and getting the title as quickly as possible how do we make that so they stopped depreciation as we're going through it and then.

Jim Kessler: Right. So we're constantly looking at that, then when we have possession of the car, if it's in inspection services, images, and data, and getting a title as quickly as possible, how do we make that so they stop depreciation as we're going through it? And then, ultimately, what is the right auction platform for how we drive ASPs?

Speaker Change: Ultimately what is the rate auction platform of how we drive Asp's and how do we make sure. We categorize things that are running drives first that are truly salvage.

Jim Kessler: And how do we make sure we categorize things that are running drives first that are truly salvage? You know, so we're constantly looking at how do you drive ASPs? And then ultimately, when you take those three things into account, it gets down to how do you get the best net return, right? So I think they all want the best net return, but how they go about it, and different partners and software and integrations, like everyone has a different philosophy of how they're going about it and what they believe is important. But we're very flexible; we're able to integrate with various partners and have data APIs going back and forth. But the, you know, the things we key on are net returns. And then we have three major buckets with a lot of stuff that goes under those buckets of how we manage the business for. Thank you. Thank you. The next question comes from John Healy from North Coast Research. Please go ahead.

Speaker Change: So we're constantly looking at how do you drive ASP.

Speaker Change: And then ultimately when you take those three things you get down to how do you get the best net return right. So I think they all want the best net return, but how they go about it and different partners in software integrations like everyone has a different philosophy of how they're going about it and what they believe is important but what we're very flexible where we're able to integrate.

Speaker Change: Right with various partners have data API is going back and forth but.

Speaker Change: The things we key on is net returns and then we have three major buckets with a lot of stuff that go under those buckets of how we manage the business for them.

Thank you.

Speaker Change: Okay.

Speaker Change: Thank you. The next question comes from John Healy from Northcoast Research. Please go ahead.

John Healy: Thank you. Jim, I just want to get your thoughts on what you mentioned, the prepared remarks about the transparency program on the auto side. Can you talk a little bit about what that looks like and what that feels like?

John Healy: Thank you.

John Healy: Jim I just wanted to get your thoughts just about what you mentioned in the prepared remarks about the transparency program on the auto side can you talk a little bit about what that look and what that feel is.

Jim Kessler: If you think it's something that competitively others have, how will it make a difference for you? And then, secondly, just if and when you guys get the opportunity to win some share of that, what's your general thought process of how that will come online? Are these typically a couple of states, a pilot, do they last three months before you can prove yourself?

If you think it's something that competitively others have.

John Healy: How it will make a difference for you and then secondly, just if and when you guys get the opportunity to win some share on that side of the business.

John Healy: What's your general thought process of how that will come online or are these typically couple of states are pilot did they last three months before you can prove yourself just sort of led to see kind of if you do get a chance to win how we might see it kind of unfold and contributing the business, Yes, John I think you everything that you said it did and it could be any of that.

Jim Kessler: Just would love to see kind of, you know, if you do get a chance to win, how we might see it kind of unfold in contributing to the business. Yeah, now, John, I think you, everything that you said at the end, it could be any of those ways, right, as you're going through it. But look, I came from a collision.

John Healy: Ways right as youre going through it but.

John Healy: Look I came from collision and inside of the equation World. There is a very transparent model of data because you have so many more competitors in that space, where you get okay. Your ear. This and this is where youre hitting your SLA issues. Your peer a b C and D and where they're at right. So you typically had a very.

Jim Kessler: And inside of the collision world, there's a very transparent model of data because you have so many more competitors in that space where, you know, you get, okay, you're this, and this is where you're hitting your SLAs. And this is your peer A, B, C, and D, and where they're at, right. So you typically have a very transparent way to measure how you're performing.

John Healy: Transparent way to measure how youre performing and that came from the insurance carriers with the model we're in for salvage with.

Jim Kessler: And that came from the insurance carriers. With the model we're in for salvage, you know, with it being, you know, really just two players in this space, you don't get that level of transparency. And at different partners, some do their own comparison, which is great. And other smaller accounts, they don't have the capability to do the analytics and do it themselves.

John Healy: With it being really just two players in this space you don't get that level of transparency.

John Healy: At different partners, some do their own comparison, which is great.

And other smaller accounts they don't have the capability to do the analytics and do it themselves. So they are dependent on both the bus given them an indication of what's happening. So in my world I'm getting so confident with where we're performing with the team. My plan is with our partners and we actually have our industry event next.

Jim Kessler: So they're dependent on both of us giving them an indication of what's happening. So in my world, I'm getting so confident with where we're performing with the team. My plan with our partners, and we actually have our industry event next week, is to share how we're performing in the top performance categories every quarter with them so they don't have to guess anymore what our competitors are saying or what we're doing. We're going to hand out our metrics to them and tell them how we're doing. Now we're going to do our quarterly QBRs with them or monthly reviews, and share the data that's just specific, specifically for them. But we are going to share our industry data with them so they have confidence in what we're doing, what we're going after, and how we're performing. And that's the level of transparency that I want to have.

John Healy: Week is to share how we're performing in the top performance categories every quarter with them. So they don't have to guess anymore. What our competitors are saying, what we're doing we're going to hand out our metrics to them and tell them. How we're doing now we're going to do our quarterly qbr's with them or monthly reviews and share the data that's just specific.

John Healy: Specifically for them, but we are going to share our industry data with them. So they have confidence of what we're doing what we're going after and how we're performing and thats. The level of transparency that I went ahead and then our competitors will decide whatever they want to do but I'm confident on my side that we can drive these numbers consistently where we're at and I'm happy to.

Jim Kessler: And then our competitors will decide whatever they want to do, but I'm confident on my side that we can drive these numbers consistently where we are. And I'm happy to share it with them to show our commitment and to drive operational excellence in that space. Great. No, that's helpful.

John Healy: Share it with them to show our commitment to driving operational excellence in that space.

John Healy: Great.

Jim Kessler: And then, you know, you mentioned you're down in Orlando right now. I don't know if you mentioned it earlier, because I hop in between calls, but any kind of thoughts in terms of how Orlando is looking and performing for you guys, and any sort of early indications of, you know, what might be in store for the industry this year, just by spending time on the ground there? Yeah, I'll just speak more to our customers. It was the biggest turnout that we've had from a customer event as we went through this, and I think we did the press release where we talked about the historical number of lots that were selling. So, I think our customers for what I got are very happy with what they're seeing down here in Orlando, and it was great to get the turnout, which just gets back to the relationship that we have and the trust that we've built with our customers. But I think everyone's going to be happy with how Orlando turned out this year.

John Healy: Helpful and then.

Speaker Change: You mentioned Youre down in Orlando right now I don't know if you mentioned it earlier I say hopping between calls but.

Speaker Change: Any kind of thoughts in terms of how Orlando is looking performing for you guys and any sort of early indications of what might be on hold for the industry. This year. Despite spending time on the ground there yes.

Yeah, I'll just speak more to our customers. It was the biggest turn out that we've had from a customer event as we're going through this and I think we did the press release, where we talked about our historical number of lots that we're selling so I think our customers are what I got are very happy with what they're seeing down here in Orlando and it was great to get.

Speaker Change: Turn out which just gets back to the relationship that we have and the trust that we built with our customers, but I think everyone is going to be happy with them, how Orlando turned out this year.

Lawrence De Maria: Great, thank you. Thank you. The next question comes from Larry DeMaria of William Blair. Please go ahead.

Speaker Change: Great. Thank you.

Speaker Change: Thank you. The next question comes from Larry de Maria from William Blair. Please go ahead.

Eric Guerin: Thanks. This first question... Good morning, everybody. The CapEx, I think it's at $275 plus. Is that a, what's the run rate? I had to think about that.

Speaker Change: Thanks.

Speaker Change: First question. Good morning, everybody. The Capex I think you said 275, plus is that what's the run rate of how to think about that over the next few years or is that a good starting point and then kind of grow from there can you just give us some color on that.

Eric Guerin: Auctioneers Inc. Auctioneers Inc., Yes, excuse me, it's Eric. On the CapEx, the 275 to 325 ranges specifically to 2024. Obviously, we'll continue to invest in our digital platforms and our PP&E as required, but I wouldn't build that into your long-term model at this point. I'm just providing guidance for 2024 at this point. Okay, thank you. Maybe to put a finer point on this, I know you've discussed this a few times already, but on the IAA share and the U-shaped comments. Auctioneers Inc. Auctioneers Inc., Price is a possibility, but I know buyer fees are more likely.

Speaker Change: Yes, excuse me, it's Eric on the Capex, the $2 75 to $3 25 ranges specifically to 2024, obviously will continue to invest in our digital platforms our PP&E.

Eric: As required but I wouldn't build that into your long term model at this point I'm, just providing guidance for.

2024 at this time.

Speaker Change: Okay. Thank you and then.

Speaker Change: Maybe to put a final point I know you've discussed a few times already but on the IAA share in the U shape comments and then in the presentation noted some market share gains.

Speaker Change: Is it safe to say.

Speaker Change: Correct me, if wrong, assuming kind of flattish here in 'twenty four and your GTD, excluding the prior loss and to follow up on that are there any levers. Besides the escalating execution that can lead to share shifts I think.

Jim Kessler: Auctioneers Inc. profits there, and any preview on the tenders, you can move the needle this way, one way or the other. Look, again; it's always a tough conversation because we don't get to make the final decision of who decides to move when they move. Right. Of course, we know when all the contracts come up and and all that fun stuff. But look, we're just laser focused on what's in our control. How do we drive those results?

Speaker Change: The possibility, but I know buyer fees or more likely not to change, obviously and thats a big bulk of the profits there and any preview on the tenders that can move the needle this way one way or the other this year.

Speaker Change: Well.

Speaker Change: Again.

Speaker Change: It's always a tough conversation because we don't get to make the final decision of who decides to move when they move right of course, we know when all the contracts come up and and all that fun stuff, but look we're just laser focused on what's in our control how do we drive those results and then we know what the type of industry. We're in.

Eric Guerin: And then we know the type of industry we're in, you know, having two viable players that people can choose from. Our hope is there's some rational market share that comes out of that, that logically makes sense for the type of environment we're in on the salvage side. Okay, well, I can appreciate that and the sensitivity around it, but is it safe to say that we're assuming a flat share for IAA, excluding the share losses, or actually, we think we're going to... Okay, yeah, we're not going to give specifics on automotive by itself, but what I would say on the guidance is that we've built in the impact of the carrier that we lost. As Samir described earlier, that'll roll off in Q2 through Q4. That is built in.

Speaker Change: <unk>.

Speaker Change: Having two viable players that people can choose from.

Speaker Change: Our hope is theres, some rational market share that comes out of that that logically makes sense for the type of environment. We're in on the salvage side.

Speaker Change: Okay.

Speaker Change: I can appreciate that and that was a sensitivity around it but it is safe to say that we're assuming a flat year for IAA, excluding the share losses or actually we think we're going to pick up some share.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: We're not going to give specifics on automotive.

Itself, but what I would say on the guidance, we built in the impact of the carrier that we lost as Samir described earlier that will roll off in Q2.

Speaker Change: Through Q4.

Speaker Change: <unk> is built in.

Maxim Sychev: Yep. Thank you. The next question comes from Maxim Sychev from National Bank Financial. Please go ahead. Hi, good morning, gentlemen. Hey, how are you?

Speaker Change: Okay Fair enough. Thank you good luck.

Speaker Change: Yeah.

Speaker Change: Thank you. The next question comes from Maxim <unk> from National Bank Financial. Please go ahead.

Maxim: Hi, good morning, gentlemen.

Maxim: Hey, how are you.

Jim Kessler: Good, good. I just want to circle back, if it's possible, kind of on the legacy equipment side. I mean, as pricing has started to normalize, I mean, what we've seen in the past was that there's a high probability of kind of, you know, attaching additional services, whether it's like painting, small repairs, and things like that. Are we starting to see this already in the field, or do you think that's more of a sort of a back half dynamic from your perspective? Yeah, I think your point's correct, and in our minds, I think it's more of a back half type of environment. We saw a little bit in Orlando as we're kind of going through it this year, but definitely, as units and prices start to change, that becomes an opportunity.

Maxim: Good.

Maxim: Want to circle back if it's possible what kind of on the legacy equipment side I mean as pricing has started to normalize I mean, what we've seen in the past is that theres a high probability of attach.

Maxim: Attaching additional services, whether it's like painting, the smaller players and things like that we're starting to see this already in the field or what do you think that's more of a sort of a back half.

Maxim: Dynamics from your perspective, yes, we I think your point is correct.

Maxim: In our mind I think it's more of a back half.

Maxim: Type of environment, we saw a little bit into Orlando as we're kind of going through it this year, but.

Maxim: Definitely.

Maxim: Units and price start to change that becomes an opportunity and look I think as the environment changes all of our services have a different <unk>.

Jim Kessler: And look, I think as the environment changes, all of our services have a different profile to them, right? Our financial services look different in different economic environments, and transportation looks different. So we constantly look at how we can drive more services, no matter what environment, but some of them do, you know, act a little bit differently in certain environments, and refurbishment and paint, we think could look differently in the back half, but again, it's a small part of our overall business. And then, as we think about, as you're trying to high-grade IA's capability, in terms of, I mean, if you can paint us a little bit your path on the journey, is it driven right now by adopting sort of the technology tools that you have in the legacy part of the business, processes, sort of improvements? You might maybe just talk about those two dynamics and where we stand right now. Yeah, look, I think it's a lot of everything, right?

Maxim: <unk> them right are financial services look different in different economic environments transportation looks different so and we constantly look at how do we drive more services no matter what environment, but some of them do.

Maxim: Act a little bit differently.

Maxim: Certain environments and refurbishment in paint.

Maxim: Could look differently in the back half, but again, it's a small part of our complete business.

Yes.

Maxim: And then as we think about as you're trying to high grade Ias capability.

Maxim: I mean, if you can paint us a little bit you pass on the journey.

Maxim: Is it driven right now by adopting some of the technology tools that you have in the legacy part of the business processes sort of improvements do.

Speaker Change: Do you mind, maybe just talking about those two dynamics and what it will stop right now.

Speaker Change: Yes look.

Speaker Change: I think it's a lot of everything right. The one thing we've been impressed with them.

Jim Kessler: The one thing we've been impressed with on the salvage side of the business is what they built, and we didn't have a lot of cats this year, but the process they built, I think, is an unbelievable, flexible, efficient process that does some amazing, you know, pickup of cars when a flood happens, and then the ASPs they get, even though we had a small season this year, what we saw in due diligence, I've been completely impressed with, and the AI investment that IEA has made in IEA vehicle score and different technologies, I'm completely impressed with, and some of their ideas bringing over to the industrial construction side. And then on the operational, at the branch level, I think the team just needed an understanding of who's accountable for what, right? Whose responsibility is it? Who's going to drive it?

Speaker Change: On the salvage side of the business is what they built and we didn't have a lot of cats this year.

Speaker Change: But the process. They build I think is an unbelievable flexible efficient process.

Speaker Change: That does some amazing pick up cars when a flood happens and then the asp's they get even though we had a small season this year.

Speaker Change: What we saw in due diligence and had been completely impressed with and the AI investment at IAA has made in IAA vehicle score in different technologies and completely impressed with and some other ideas, bringing over to the industrial construction side and then on the operational at the branch level.

Speaker Change: I think the team just needed.

Speaker Change: Understanding who's accountable for what rate, whose responsibility is it who is going to drive it and how do we do this as a complete team in creating clarity. So there was no and my waiting for essential thing to do this or decentralized who's responsible for it. So we spend a lot of time, making sure we're very clear of who's <unk>.

Jim Kessler: And how do we do this as a complete team and create clarity so there's no, am I waiting for a central thing to do this or decentralize it? Who's responsible for it? So we spent a lot of time making sure we were very clear about who was responsible for what, and then we took the analytics and said, okay, where do we have our problems? Where do we drive it?

Speaker Change: <unk> for one and then we took the analytics and said, Okay, where do we have our problems where do we drive it and like I mentioned, we made sure from a financial standpoint, Peoples' bonuses are tied to and this goes from the <unk> down to the branch that we're all tied to the same thing to drive the results that we want.

Jim Kessler: And like I mentioned, we made sure from a financial standpoint that people's bonuses are tied to, and this goes from the ELT down to the branch, that we're all tied to the same thing to drive the results that we want. So I think at the branch level, it was more clarity and making sure we brought visibility to where we had problems and then being able to train against those problems really helped. And our commitment, we're going to deliver on our SLAs, right? Yes, we're going to manage our costs as we do it, but our commitment is SLAs to drive the results for our customers and over deliver. And then, like I mentioned, everything else, there's technology things that help. And I think as you look at our ASPs and how they were up this quarter on the salvage side, a lot of that is the technology that the company is driven by. So I think it's a combination of both.

Speaker Change: So I think at the branch level was more of the clarity and making sure we bring visibility to where we have problems and then being able to train against those problems and really helped it and our commitment we're going to deliver on our SLA right. Yes, we're going to manage our cost as we do it but our commitment is sla's drive the results for <unk>.

Speaker Change: Customers over deliver and then like I mentioned everything else Theres technology things that help and I think as you look at our Asps and being up what they were this quarter on the salvage side.

Speaker Change: A lot of that is the technology that the company has driven.

Speaker Change: So I think it's a combination of both.

Jim Kessler: Right. Thank you. In terms of, have you seen any turnover, kind of at a branch level, as you have kind of delinked some of the legacy compensation structure, or what are you seeing? No, the funny thing is, I think they appreciate it now because they know what they're accountable for, and they know what to drive, and they know, okay, it's up, like, it's in my control to go after this and get it, right? I'm not missing a tool where I can't get it, where before in the past, they didn't know how to get it, right? And it was just left to, okay, maybe I'll get one bonus, maybe I won't.

Speaker Change: Alright, thank you.

Speaker Change: Have you seen any turnover kind of look at the branch level as you have.

Speaker Change: Bill linked some of the legacy compensation structure or what are you seeing now the funny thing is I think they appreciate it now because they know what they are accountable and they know what the drive in a no. Okay. It's up like it has in my control to go after this and get it right I am not missing a tool where I can't get it were before in the past they didn't know how.

Speaker Change: How to go get it right and it was just left to okay, maybe I get one bonus maybe I don't know it's completely in our control of what they are driving and I think theyre very appreciate of it and I think they are very appreciative of the clarity now of the business.

Jim Kessler: Now, it's completely in our control what they're driving, and I think they're very appreciative of it. And I think they're very appreciative of the clarity of the business now as we're going through it. So, I think the team is excited. I'm actually excited that I'm spending, in three different regions, we're getting all the branch managers together from IAA for the next two months. And this is going to be, you know, I've met some of them, but this is going to be my chance to meet every branch manager and make sure the culture of what we're trying to deliver really comes through. But I think the team on the salvage side is very excited to be part of RB Global, and they're appreciative of the changes that we've made so far. Maybe just one last one, if I may.

Speaker Change: As we're going through it so I think the team is excited I'm actually excited that I'm spending.

Speaker Change: In three different regions, we're getting all the branch managers together from IAA over the next two months and this is going to be I've met some of them, but this is going to be my chance to meet every branch manager and making sure. The culture of what we're trying to deliver really comes through.

But I think the team on the salvage side is very excited to be part of <unk> global and they are appreciative of the changes that we've made so far.

Speaker Change: Okay, maybe just one last one if I may in terms of coal car any update on that cycle to great. Thank you so much.

Jim Kessler: In terms of the whole car, any update on that side would be great. Thank you. Yeah, so it's a big part of our strategy, right? So it's part of what we want to go after, just like growing salvage share. And I'll probably just say growing all share across all of our asset classes, no matter which one we're talking about. And we believe the whole car is another opportunity for us to go after and grow share. And the same thing we did at the branch level, we created clarity bonus programs and commissions for sales teams to go after this business. So I think the team's excited, but they're just getting started. And this is really their kickoff in 2024 to go after this business. But like everything, look, it's building relationships and confidence. So it takes a little bit of time to get used to it.

Speaker Change: Yes.

Speaker Change: So a big part of our strategy right. So it's part of what we want to go after just like grow in salvage share and I'll, probably just say growing all the share across all of our asset classes no matter, which one we're talking about and we believe whole car is another opportunity for us to go after and grow share in the same thing we did at the branch level, we created clarity bonus.

Speaker Change: Programs and for sales teams and commissions of how do you go. After this business. So I think the team's excited but theyre getting started and this is really their kickoff in 2024 and to go after this business, but like everything look it's building relationships and confidence. So it takes a little bit of time to get it but we believe in the whole car business and we're going to invest.

Jim Kessler: But we believe in the whole car business, and we're going to invest in it and go after that side of the business too, and grow share, just like we do with all the asset classes that we're very proud of with the growth that we've had over the last three quarters. Thank you.

Speaker Change: And it and go after that side of the business to grow share just like we do with all the asset classes that we're very proud of with the growth that we've had over the last three quarters.

Speaker Change: Thank you.

Sabahat Khan: Ladies and gentlemen, as a reminder, should you have any questions, please press Star 1. The next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead.

Speaker Change: Thank you, ladies and gentlemen, as a reminder, should you have any questions. Please press star one.

Speaker Change: Next question comes from <unk> Khan from RBC capital markets. Please go ahead.

Jim Kessler: Great, thanks, and good morning. Just maybe a question on the leverage side and capital allocation. Leverage looks like it's trending well, and presumably the yellow fill disposition helps maybe a bit on the cash flow side. Can you maybe give a little bit of color on maybe not just CapEx but maybe just capital allocation maybe two years out and then maybe three to five years out? I think in an earlier question you said CapEx could potentially moderate. What are the other things you'd be focused on as a CapEx moderate? Would we think about return on capital, other initiatives? Maybe you could just walk us through what that looks like a few years out. Yeah, I think just to be fair, Eric's only been here for a month and a half, so I don't think it's fair.

Khan: Great. Thanks, and good morning, just maybe a question on the.

Khan: The leverage side and capital allocation leverage looks like it's trending well.

Presumably the yellow sale disposition helps maybe a bit on the cash flow side can you maybe give a little bit of color on maybe not just capex. Let me just on capital allocation, maybe two years out and then maybe three to five years out.

Khan: An earlier question you said capex could potentially moderate just what are the other things we'll be focused on is capex moderate.

Khan: Should we think about return of capital other initiatives, maybe just walk us through what that looks like peers out.

Speaker Change: Yes, I think just to be fair Ericsson only been here for a month and a half. So I don't think its fair I'll pass it to Eric in a second but I think it's fair yet to give.

Eric Guerin: I'll pass it to Eric in a second, but I don't think it's fair yet to give that much detail as Eric and I and the management team will work through in detail all your questions, but I'll pass it to Eric for a few comments. Yeah, what I would say is, excuse me, our commitment to two times net debt to adjusted EBITDA by the Q1 of 2025 is where we're focused, so we'll continue to get to that leverage level while continuing to invest in our digital platform as well as PP&E. So I feel really good about where we are against our commitment. As you noted in my prepared remarks, we're at 2.2 times net debt through Q4 and on a trajectory to hit our target by Q1 of 2025.

Speaker Change: That much detail as Eric and I and the management team worked through in detail all your questions, but I'll pass it to Eric for a few comments, yes, what I would say excuse me our commitment to the two times net debt to adjusted EBITDA by the Q1 of 2025 is where we're focused and we will continue to get to that leverage.

Eric: Level, while continuing to invest in our digital platform as well as pp and E. So I feel really good about where we are against our commitment.

Eric: As you noted in my prepared remarks, we were at two two times net debt through Q4 and on a trajectory to hit our target by Q1 of 2005 to Jim's point.

Eric Guerin: To Jim's point, still looking at capital allocation, I think some of the things you brought up are obviously opportunities that we will look at as we get to the optimal. Yeah, and I think, just in general, I just want to reiterate, as a management team, our commitment to take in any capital we spend to get a proper return for it. And that was one of the biggest things, having Eric come in as our CFO, that commitment and working across all departments to make sure that, you know, it really gets instilled in each of us down through the organization about our commitment to the return we wanna get for any dollar that we spend. And as a leadership team with Eric here, we're gonna be spending a lot of time on this conversation to make sure we're aligned on it That helps me.

Eric: Still looking at capital allocation I think some of the things you brought up are obviously opportunities that we will look at as.

Eric: As we as we get to the optimal.

Eric: Capital structure for the business and I think just in general I, just want to reiterate as it management team our commitment.

Eric: Taken any capital we spend to get a proper return for it.

Eric: That was the one of the biggest things having Eric come in as our CFO of that commitment in working across all departments to make sure that.

It really gets instilled in each of us down through the organization of our commitment of the return we want to get for any dollar that we spend.

Eric: And as a leadership team with Eric here, we're going to be spending a lot of time on this conversation to make sure we're aligned on it.

Eric: That helps and then.

Jim Kessler: And then maybe to put you back on the spot, Jim, just so long as, I guess, the synergy side, understanding, you know, you'd want to get into the details, maybe going forward. But if you just kind of look ahead in terms of maybe an update on what are the bigger buckets that you're completely done with? And as you think about the remaining kind of integration period, maybe just what are going to be the bigger sources of synergies kind of through to kind of 2025? Yeah, look, the funny thing is, you know, when we first combined companies, like every company, you go through all the departments, and, as you can imagine, procurement becoming one, they're the easy, low-hanging fruit that happens. Unfortunately, we had a CFO transition, right? So Eric just got here.

Eric: Maybe to put you back on the spot Tim just so long I guess, the synergy side understanding you don't want to get into the details maybe going forward, but if you just kind of look ahead in terms of maybe an update on what are the bigger buckets that you are completely done with and as you think about the remaining kind of integration period, maybe just what are going to be the biggest sources of.

Eric: Synergies kind of through to 2025 here.

Eric: Yes.

Speaker Change: The funny thing is.

Speaker Change: When we first combined companies like every company you go through all the departments and as you can imagine procurement become in one there are the easy low hanging fruit that happens. Unfortunately, we had a CFO transition rates. So Eric just got here. So like every new person coming into the organization, who will look at his organization and what makes the most sense.

Jim Kessler: So like every new person coming into an organization, he'll look at his organization and what makes the most sense for the future. So, you know, but look, we're going to be laser focused on every area as a management team: are we operating as efficiently as possible? And this is just never going to stop, right?

Speaker Change: For the future so but look we're going to be laser focused on every area as a management team of our we operate in and as efficiently as possible and this is just never going to stop right.

Jim Kessler: It's just going to be a process that we're always looking at. And kind of think about your organization of people. As you think about having a sales team, you have so many of them. There's always a bottom 10, right?

Speaker Change: Just going to be a process that we're always looking at and kind of think about your organization of people as you think about having a sales team you have so many of them. There is always a bottom 10 marine in the top 10 and people in the middle and you're constantly making sure you have the right people in place. So that's always going to evolve as we're going through this so we're constantly looking.

Jim Kessler: And the top 10, and people in the middle, and you constantly make sure you have the right people in place. So that's always going to evolve as we're going through this. So we're constantly looking at all the different areas, all the portfolio companies that we have, are they living up to the return that we want? Are they expected?

Speaker Change: At all the different areas all the portfolio companies that we have are they living up to the return that we won or are they expected and based on what we're seeing we're going to make decisions I think the great thing is we had the opportunity to look at all of the organizations with the two companies coming together and putting our plans in place to get our and I hate using cost.

Jim Kessler: And based on what we're seeing, we're going to make decisions. I think the great thing is we had the opportunity to look at all the organizations with the two companies coming together and putting our plans in place to get our, and I hate using the cost synergies of this. We're just running the business efficiently because I don't want this to sound like that. We're just focused on the short term because we're not.

Speaker Change: So this we're just running the business efficiently because I don't want this to sound like that we're just focused on.

Speaker Change: And the short term because we're not we're focused on how do we run our business efficiently that operates in the long term at.

Jim Kessler: We're focused on how we run a business efficiently that operates in the long term at the same time. So we're doing both. And that's why, at this point, I think we've done all the organizational work. We have some plans in place to get things done, to live up to our commitment, which we're executing against, but we're never going to stop asking, are we as efficient as possible?

Speaker Change: At the same time, so we're doing both and that's why at this point I think we've done all the organization work, we have some plans in place to get done.

Speaker Change: To live up to our commitment, which we're executing against and but we're never going to stop of are we as efficient as possible and we're going to push each other to make sure we stay as efficient as possible as we go through this because we want to.

Jim Kessler: And we're going to push each other to make sure we stay as efficient as possible as we go through this, because we want to grow the company. We want to expand margins, and we want that to flow through to the bottom line. Great, if I could just squeeze in one quick one.

Speaker Change: Grow the company, we want to expand margins and we want that to flow through to the bottom line.

Speaker Change: Great if I could just squeeze in one quick one theres a comment in your slide deck around the land strategy. Obviously you on ourselves also got a lot of questions on just what that will eventually look like is this sort of a kind of an evolving strategy youll see how things progress or do you have sort of a.

Sabahat Khan: There's a comment in your slide deck around the land strategy. Obviously, you and yourselves also have a lot of questions on just what that'll eventually look like. Is this sort of a kind of evolving strategy?

Jim Kessler: You'll see how things progress, or do you have sort of a more definitive view on, look, this is what we want our land ownership to look like? Just any directional thoughts on how you're thinking about that today, thanks. Yeah, well, I'll just say in general, I don't think we, to be able to gain share in this business, I don't think we have to have a profile that's one way or the other, right? If it's lease versus owning land, I don't think our partners care about what financial decision we make.

Speaker Change: More definitive view on look this is what we want our land ownership to look like just any directional view on how youre thinking about that today.

Speaker Change: Well I'll just say in general.

I don't think we have to be able to gain share in this business I don't think we have to have a profile, that's one way or the other right if its lease versus own and land I don't think our partners.

Speaker Change: Yes.

Care, what financial decision, we make I think this is truly a financial decision, what's the best use of our cash.

Jim Kessler: I think this is truly a financial decision. What's the best use of our cash? And what do we do with the cash that we have, right? So, I don't think this is to get business, to hit an SLA. Do you own or do you lease land? I think for us, what's the best use of our cash? You know, land's a component of capital, and we make financial decisions based on the economic environment. If interest rates are really high, it might mean we own land today, but then we do a sale of the lease back in the future.

Speaker Change: And what do we do with the cash that we have right. So I don't think this is to get business to hit a SLA do you own or do you lease land I think for US is what's the best use of our cash.

Speaker Change: <unk> a component of the capital and we make financial decisions and dependent on the economic economic environment of interest rates are really high it might mean, we owned land today, but then we do a sale leaseback in the future, but a big part of what we want Eric and his team to support the organization through is what's the right financial decision for us as an organization that is.

Jim Kessler: But a big part of what we want Eric and his team to support the organization through is, "What's the right financial decision for us as an organization?" That's the most important thing that we have, and I feel really good about the conversations with our partners that, you know, if its owner lease isn't dictated by how we're hitting our SLAs, right? This is really a financial decision, and we're being very clear with our partners that we're making the best financial decision so we can invest back into the business. Great. I appreciate the color.

The most important thing.

Speaker Change: And that we have and I feel really good with the conversations with our partners that.

Speaker Change: If its owner lease isn't dictated in how we're hitting our SLA right and this is really a financial decision and we're being very clear with our partners that we're making the best financial decision. So we can invest back into the business.

Speaker Change: Great I appreciate the color. Thank you.

Operator: Thank you. Thank you. There are no further questions at this time. I will turn the call back over to Jim Kessler for closing comments. Again, I just wanted to thank everyone so much for taking the time and listening to our story about RB Global. And again, this is RB Global. This is not just one asset class.

Speaker Change: Okay.

Speaker Change: Thank you there are no further questions at this time I will turn the call back over to Jim Kessler for closing comments.

Jim Kessler: Again I just wanted to thank everyone. So much for taking the time and listening to our story about RMB Global and again. This is RB global this is just not one asset class and what I am impressed with the team as we're managing multiple asset classes and we're growing each of our asset classes. So I just wanted to and thanking the team.

What I am impressed with the team is that we're managing multiple asset classes, and we're growing each of our asset classes. So I just wanted to end by thanking the team for all their hard work as part of RB Global. And thank you for taking your time, and we'll talk to everyone soon. Thank you so much. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.

Jim Kessler: For all of their hard work as being part of RMB Global and thank you for taking your time and we'll talk to everyone. Soon thank you so much.

Speaker Change: Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and we ask that you. Please disconnect your lines.

Speaker Change: Okay.