Q4 2023 RB Global Inc Earnings Call

Based on mute to prevent any background noise.

After the Speakers' remarks, there will be a question and answer session.

I would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please press Star then the number two thank you.

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

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.

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.

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 and expectations regarding the integration of IAA, including the anticipated cost synergies are considered forward looking and involve risks and uncertainties.

The risks and uncertainties that could cause actual results to differ significantly.

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 Investor Relations website, and Edgar and theater <unk>.

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 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.

We are unable to prevent 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.

At this time I would like to turn the call over to Jim.

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.

All of our sectors contributed to solid GDP growth.

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

Our continued focus on operational excellence and driving incremental efficiencies across the organization resulted in strong adjusted EBITDA growth.

Investing in our teammates through our best in class people experience remains core to our strategy.

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

The recognition underscores our ongoing progress in integrating our teams and solidifying <unk> global as a highly attractive workplace.

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

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.

<unk> equipment owners to act on fleets that were aged during the pandemic.

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.

Every market share percentage point recapture translates to more satisfied customers solidifying our commitment to excellence and remain in the partner of choice.

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.

Customer savings and operational efficiencies go hand.

In hand for Us that's why we prioritize optimizing total formats after transaction closing.

Picking up the vehicles quickly and efficiently stop storage cost.

Rental car cost and other accelerate cost for our customers and significantly impacts net returns.

I'm proud of the team I'm pleased to say that our process improvement combined with strategically deploying an internal tool called tow assets have dramatically improved our performance compared to prior levels.

Our our pickup compliance and internal measure of our total 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.

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

Our efforts yielded measureable results again in the quarter with.

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

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.

Combined with strategically deploying in internal to overhaul tow assets have dramatically improved our performance compared to prior levels.

This gives buyers unparalleled and industry, leading insights for trim level data on vehicles in our marketplace, while unlocking additional value for our sellers.

For a pickup compliance and internal measure of our total performance was approximately 98% in the fourth quarter.

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

Substantial improvement year over year more importantly, we have consistently been in the high 90% of compliance for several months.

This system gives our sellers incredible real time transparency into the variables impacting the markets microstructure of our auctions.

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

<unk> them to optimize their price realization further and unlock incremental value.

Our efforts yielded measureable results again in the quarter with.

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

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

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.

In 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 to every turn.

This gives buyers unparalleled and industry, leading insights for trim level data on vehicles in our marketplace, while unlocking additional value for our sellers.

So momentum from our efforts to integrate IEA is fueling a broader focus on efficiencies and operational excellence across the entire organization.

We're also getting phenomenal feedback on our recently launched sales decision center.

We realized $17 million in actual cost synergies in the quarter and have action that totaled $70 million in annual run rate cost synergies since the close of the transactions.

This system gives our sellers incredible real time transparency into the variables impacting the markets microstructure of our auctions.

<unk> them to optimize their price realization further and unlock incremental value.

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

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

Our responsibilities to manage overall cost 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.

In 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 to every turn.

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.

So momentum from our efforts to integrate IEA is fueling a broader focus on efficiencies and operational excellence across the entire organization.

And our discussions with our valued partners.

We realized $17 million in actual cost synergies in the quarter and have action a total of $70 million in annual run rate cost synergies since the close of the transactions.

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

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

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

Leon us to accommodate our operational requirements easily as we indicated last quarter, we will continue to purchase property strategically and opportunistically in Regis acceptable to cats, but where the market opportunity to make strong financial sense for us to make these investments.

Our responsibility is to manage overall cost not just cost synergies and more importantly deliver overall results were.

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.

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

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.

Before passing the call to Eric I'd like to introduce them formally.

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

<unk>, we wanted someone who could enhance operational excellence by collaborating closely with the sales and operational teams.

And our discussions with our valued partners.

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

<unk>.

People oriented leader, who seamlessly aligned with our one team one culture.

Maintain a surplus of lane capacity across our asset classes.

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

Allowing us to accommodate our operational requirements easily as we indicated last quarter, we will continue to purchase property strategically and opportunistically and reagents acceptable to cats, but where the market opportunity to make strong financial sense for us to make these investments.

Eric embodies all these qualities and his experience within the automotive ecosystem has allowed him to dive in and make immediate impact let me pass the call to Eric to discuss our financial results for the fourth quarter and our outlook for 2024.

Certain markets, we proactively have and will continue to acquire space to better service the needs of our customers.

Eric.

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: Before passing the call to Eric I'd like to introduce him formally when seeking our CFO new CFO, we have three critical criteria in mind.

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

Speaker Change: Firstly, we wanted someone who could enhance operational excellence by collaborating closely with the sales and operational teams.

Speaker Change: Secondly.

Eric: People oriented leader, who seamlessly aligned with our one team one culture.

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.

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 let me pass the call to Eric to discuss our financial results for the fourth quarter and our outlook for 2024.

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.

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

Eric: Eric.

Eric: 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.

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

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

Used automotive prices continued to trend lower year over year, while repair costs remain elevated creating a productive environment to consider a car or a total loss after an accident.

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.

CTV in the commercial construction and transportation sector increased by 20%.

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

Part of the decline in the average price per lot sold was due to asset mix.

Eric: 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.

As lot volume growth came from rental and transportation customers, where asset values are intrinsically at lower asps compared to traditional earthmoving assets. Additionally.

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

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

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

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

Eric: Used automotive prices continued to trend lower year over year, while repair costs remain elevated creating a productive environment to consider a car or a total loss after an accident.

Moving to service revenue.

Service revenue increased 14% with our service revenue take rate expanding approximately 20 basis points to 22%.

Eric: CTV in the commercial construction and transportation sector increased by 20%.

Service revenue increased due to growth in <unk> at a higher average service revenue take rate.

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

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

Eric: Part of the decline in the average price per lot sold was due to asset mix.

Partially offset by a lower average commission rate.

Eric: As lot volume growth came from rental and transportation customers, where asset values are intrinsically at lower asps.

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

Eric: Compared to traditional earthmoving assets.

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

Moving to inventory.

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

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

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

Eric: Moving to service revenue.

Eric: Service revenue increased 14% with our service revenue take rate expanding approximately 20 basis points to 22%.

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

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

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

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

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

Turning to earnings adjusted.

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

Eric: Moving to inventory.

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

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

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

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

Partially offset by higher share count higher net interest expense and the impact of the series a senior preferred shares.

Eric: The 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.

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

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

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

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

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

Eric: Turning to earnings adjusted.

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

Moving to the outlook, we wanted to provide our initial thoughts on 2024.

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

We expect gross transaction volume growth between 1% and 4% year over year in 2024 compared to the pro forma combined gross transaction value of 2023.

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

We expect adjusted EBITDA from $1 7 billion to 123 billion in 2024, reflecting continued growth our commitment to operational excellence program and prudent investment in growth initiatives.

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

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

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

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.

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

Eric: Moving to the outlook, we wanted to provide our initial thoughts on 2024.

With that let's open the call for questions.

Eric: We expect gross transaction volume growth between 1% and 4% year over year in 2024 compared to the pro forma combined gross transaction value of 2023.

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 one on your Touchtone phone you will hear myself, Tom perhaps acknowledging your request if.

Eric: 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 and prudent investment in growth initiatives.

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

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

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

Hey, good morning, guys and welcome Eric.

Super quarter.

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

Eric: 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.

At the midpoint it looks like Youre looking for about.

Two 5% Ptv growth.

About 5%.

On an EBITDA basis pro forma.

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

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

I know the customer loss partly explained.

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

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

Speaker Change: Should you have a question. Please press the star followed by the one on your Touchtone phone.

What market trend.

Back to the sort of legacy Nia as well.

Speaker Change: Sorry, Tom perhaps acknowledging your request if.

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.

Speaker Change: 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.

<unk> side and you look at year over years of what happens in the history of price going up and down in 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 in price and who knows where it goes operate and what percent.

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

Michael: Super quarter.

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

At the midpoint it looks like Youre looking for about two 5% Ptv growth about 5%.

Michael: On an EBITDA basis pro forma.

It does.

So those two things are the biggest reflection of.

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

The guidance that we gave.

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

Michael: I know the customer loss partly explained.

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

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

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

It sounds like there is a bunch of efficiencies or targeting as well, Jim So maybe expand on.

Speaker Change: Hey, Michael. Thank you. So much look I think you got a big part of it right versus the customer loss and then also as we look out in the industrial side and you look at year over years of what happens in the history of price going up and down in units going up or down in the back.

Some of the major drivers for SG&A in 2024, and how we should think about SG&A more broadly.

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.

Speaker Change: 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.

Think about all the portfolios in all 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.

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

Michael: 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.

Long would get an 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 would day as a management team we're going to look at how do we drive the most efficiency out of it.

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

Speaker Change: So it sounds like there is a bunch of efficiencies or targeting as well, Jim So maybe expand on some.

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

The business and investing in things that make sense for the long term that keep us viable.

Speaker Change: 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.

And.

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 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.

Speaker Change: Think about all the portfolios in all 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 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 every.

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 for it and look I think all good companies have this in mind, what they try to drive and we're just I'm very committed to it.

Speaker Change: One is 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 the business and investing in things that make sense for the long term that keep us viable.

Those are my two thank you.

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

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

Look the server performance metrics, you described being in the high <unk> now or quite impressive.

Speaker Change: And.

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 Youre seeing and what we're trying to drive, but we're never going to stop.

How do you feel about parlay those into some additional market share gains through 2024 on the OE side.

I know in the deck, you've described that as part of your priority, but like some additional color on that if he might how are you.

Speaker Change: 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.

Feel like that's being reflected in the customer reception and ultimately winning new business.

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 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.

Yes, Steve the winning 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.

Speaker Change: And if they don't those are my two thank you.

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

I'm 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.

Steve Hansen: Yes, good morning, guys. Thanks for the time.

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

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

Steve Hansen: How do you feel about parlay those into some additional market share gains through 2024 on the high side.

That theyre seeing a difference in their appreciating the difference, but again I'm very realistic as we talk about the U shape.

Steve Hansen: I know in the deck, you've described that as part of your priority, but like some additional color on that if he might how do you feel like that's being reflected in the customer reception and ultimately winning new business.

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.

Steve Hansen: Steve the winning 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.

And when you do that.

The type of industry that we're in.

The automotive side when you're in this and there is two main players.

That space when you create.

Buyable competitor.

Then when 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'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 third customer.

Steve Hansen: 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.

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

Steve Hansen: That theyre seeing are different and they are 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.

Experience driving cost savings out of their business operationally.

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

Steve Hansen: And when you do that.

Steve Hansen: Type of industry that we're in.

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

Steve Hansen: For the automotive side. When you are in this and there is two main players in that space when you create a viable competitor.

No Thats fair I appreciate that and just a follow up maybe on one of your earlier comments with moderate growth.

And you did particularly in the auto sector is there anything specific that youre seeing.

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

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.

Steve Hansen: 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.

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.

Yes, as we look at some here, yes, so Steve the moderating growth in automotive reflects what we discussed last quarter with the customer loss.

Steve Hansen: 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.

If you think about the fourth quarter, we still had a full impact for this customer.

We will probably got a half a quarter impact.

So we're really confident about it.

In the first quarter and then the second quarter Youll get the full run rate.

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

Without the customer loss.

Speaker Change: No that's fair I appreciate that and just a follow up maybe on one of your earlier comments with moderate growth in <unk>.

What that reflects.

Okay, Let's see my comment was more on the industrial side just to make sure we're clear.

Speaker Change: Particularly in the auto sector is there anything specific that you're seeing.

Understood I appreciate definitely getting 5%.

Speaker Change: In the current framework that like in the current timeframe current quarter Thats starting to suggest that is already evident or is that something where you expected the back half.

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

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

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.

Samir: Yes, as we look at them here, yes, so Steve the moderating growth in 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 for this customer.

Peter 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.

Yes, no happy to do so so for us we're not taking granted of our <unk>.

Samir: We'll probably got a half a quarter impact.

Samir: In the first quarter and then the second quarter Youll get the full run rate.

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 where actually enter in markets, where the competitor that you mentioned are in.

Samir: Without without the customer loss, so that's what that reflects.

Samir: Steve My comment was more on the industrial side just to make sure we're clear.

Steve Hansen: Understood and I appreciate I definitely think that preterm.

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

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.

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

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

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.

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

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

Yes look we're doing both at the same time I think the change in dynamic of people wanting to be self completely self service and it's not immediate but we have both.

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 where actually enter in markets, where the competitor that you mentioned are in.

Programs going on where we have inside sales and that work on a long tail, but the one thing that we know for sure.

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.

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: 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.

And that Trust awards don't, especially when you think about an unreserved auction.

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 and self service capabilities and we have an inside sales team to help so we have.

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.

Speaker Change: I think the change in dynamic of people wanting to be self completely self service and it's not immediate but we have both.

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.

Speaker Change: [noise] programs going on where we have inside sales and.

Speaker Change: And that work on a long tail, but the one thing that we know for sure.

Okay. Thanks, Jim.

You got it.

Yeah.

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 and.

Thank you. The next question comes from Jeremy Pester P&L at Barrington Research. Please go ahead.

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

Good morning, Gary Jim.

Speaker Change: And that Trust awards don't, especially when you think about an unreserved auction.

Jim I wanted to ask you.

There was a.

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 realize look the world is going to evolve and transform and we're making sure with our marketplace that we're building and self service capabilities and we have an inside sales team to help so we have.

A lot of low hanging fruit.

And in particular.

Issue with.

Centralized versus decentralized decision, making.

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

Yes so.

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.

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

Speaker Change: Okay. Thanks, Jim.

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 feeling ownership of the process and this is my SLA to manage.

Speaker Change: You got it.

Speaker Change: Yeah.

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

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

Jeremy Pester: Good morning, Gary Jim.

Jeremy Pester: Jim I wanted to ask you.

And we have 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: There was a.

Jeremy Pester: A lot of low hanging fruit.

Jeremy Pester: And in particular.

Jeremy Pester: Issue with.

Centralized versus decentralized decision, making.

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

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 always evaluate what's the best support mechanism for the branch and how to be as efficient as possible.

Speaker Change: Yeah. So.

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

So okay. So as you talk to or your people talk too.

Speaker Change: 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.

Insurance companies can signers of vehicles.

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

Yeah.

Implement.

To improve service levels.

Yeah. So it's such a diverse when you say our insurance partners right when you take.

Speaker Change: <unk> implemented a new bonus program for the branch manager start in January one that bonuses than off of your ownership of the Sla's. So when I feel really confident is the culture of the branch manager owns it.

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

And the different like farm bureaus, they all have a different it's such a diverse.

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

<unk> background of what's important but look the way we look at our business for all of our partners.

Speaker Change: 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.

Is how do we stop all the advanced charges as quickly as possible and 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 in images and data and getting a title as quickly as possible how do we make that so they stopped depreciation as we're going through it and then.

Speaker Change: So okay. So as you talk to or your people talk too.

Speaker Change: Insurance companies can signers of vehicles.

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

Ultimately what is the right 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.

Speaker Change: Implement.

Speaker Change: 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.

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

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

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 we're we're very flexible where we're able to integrate.

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

Speaker Change: <unk> background of what's important but look the way we look at our business for all of our partners.

Speaker Change: Is how do we stop all the advanced charges as quickly as possible and 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 in images and data and getting a title as quickly as possible how do we make that so they stopped depreciation as we're going through it and then.

Right with various partners have data API is going back and forth.

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: 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.

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

Thank you.

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.

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 rates. 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.

Can you talk a little bit about what that look and what that feel is.

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

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.

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

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.

Ways rate as youre going through it but look I came from collision and inside of the collision world. There is a very transparent model update it because you have so many more competitors in that space, where you get okay. Your ear. This and this is where you are hitting your <unk> initiatives your peer a b C and D.

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

John Healy: I think.

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.

John Healy: Can you talk a little bit about what that look and what that feel is.

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

And where they're at right. So you typically had a very transparent way to measure how you're performing and that came from the insurance carriers with the model we're in for salvage.

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.

Speaker Change: What's your general thought process of how that will come online or are these typically couple of states a pilot a last three months before you can prove yourself just would love 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 at that and there could be any of that.

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

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 there 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 week is to share how we're performing in the top performance categories every.

Speaker Change: Ways right as Youre going through it but 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 is and this is your peer a b C and D.

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 specifically for them, but we are going to share our industry data with them. So they have.

Speaker Change: And where they're at right. So you typically had a very transparent way to measure how you're performing and that came from the insurance carriers with the model we're in for salvage.

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

Confidence of what we're doing what we're going after and how we're performing and thats the level of transparency that I want to have 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 am happy to share it with them to show our commitment to driving operational excellence in that space.

Speaker Change: 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.

<unk>.

Great No that's helpful and then.

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

Speaker Change: <unk> week is to share how we're performing in the top performance categories every quarter with them. So they don't have to guess any more 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.

Any kind of thoughts in terms of how Orlando is looking performing for you guys in <unk>.

Any sort of early indications of what might be on hold for the industry. This year just by 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 to.

Speaker Change: 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 want to have and then our competitors will decide whatever they want to do but im confident on my side that we can drive these numbers consistently where we're at and I am happy.

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

Speaker Change: To share it with them to show our commitment to driving operational excellence in that space.

Great. Thank you.

Speaker Change: Great No that's helpful and then.

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

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

Speaker Change: Any kind of thoughts in terms of how Orlando is looking performing for you guys in <unk>.

Thanks.

First question.

Everybody. The Capex I think the 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.

Speaker Change: Any sort of early indications of what might be on hold for the industry. This year just spend the time on the ground there yes.

Speaker Change: 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 to.

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

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.

2024 at this time.

Speaker Change: Great. Thank you.

Okay. Thank you and then.

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

Speaker Change: Thanks.

Safe to say.

Speaker Change: First question good morning, everybody. The Capex I think the 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.

Correct me, if I'm wrong, assuming kind of flattish here in 'twenty four and your GTA V. Excluding the prior loss and to follow up on that are there any levers besides the escalating execution actually to share shifts I think.

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

This is a possibility, but I know buyer fees or more likely not to change obviously and that's 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.

Hello.

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

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 and then we know what the type of industry. We're in.

Eric: 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 you noted some market share gains.

In.

Speaker Change: Safe to say.

Having two viable players that people can choose from.

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

Our hope is there is 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.

Speaker Change: This is a possibility, but I know buyer fees or more likely not to change obviously and that's 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.

I appreciate that and obviously 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.

Okay.

Speaker Change: Hello.

Speaker Change: Again.

Okay.

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 with the type of industry. We're in.

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.

Through Q4.

Is built in.

Okay Fair enough. Thank you good luck.

Speaker Change: <unk>.

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

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

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.

Hi, good morning, gentlemen.

Hey, how are you.

I just wanted to circle back if it's possible what kind of on the legacy equipment side.

Speaker Change: Okay.

Speaker Change: I can appreciate that and obviously 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.

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.

Attaching additional services, whether it's like painting 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.

Speaker Change: Yeah.

Speaker Change: Okay, Yes.

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

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

Dynamics from your perspective, yes, we've I think your point is correct.

In our mind 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.

Speaker Change: Through Q4.

Speaker Change: Is built in.

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

Definitely.

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.

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

Maxim: Hi, good morning, gentlemen.

<unk> rate or financial services look different in different economic environments transportation looks different. So we constantly look at how do we drive more services no matter what environment, but some of them do.

Maxim: Hey, how are you.

Maxim: I just wanted to circle back if it's possible what kind of on the legacy equipment side.

Maxim: I mean as pricing starts to normalize I mean, what we've seen.

Maxim: In the past is not there is a high probability of attach.

Act a little bit differently.

Certain environments and refurbishment in pain, and we think could look differently in the back half, but again, it's a small part of our complete business.

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

And then as we think about as you're trying to high grade Iaa's capability.

Dynamics from your perspective, Yes, I think your point is correct.

I mean, if you can paint us a little bit you apart from the journey.

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

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

Isn't driven right now by adopting some of the technology tools that you have in the legacy parts of the business processes sort of improvements do.

Speaker Change: Definitely.

Speaker Change: 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.

Do you mind, maybe just talking about those two dynamics and when it will stop right now.

Yes look.

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

Speaker Change: Profile to them right are financial services look different in different economic environments transportation looks different. So we constantly look at how do we drive more services no matter what environment, but some of them do.

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 build I think is an unbelievable flexible efficient process.

Speaker Change: Act, a little bit differently in certain environments and refurbishment and pain.

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

Speaker Change: Yes.

Speaker Change: Then as we think about as you're trying to create is capability.

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

Speaker Change: I mean, if you can paint us a little bit you apart from the journey.

Speaker Change: Isn't 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 when it goes down right now.

I think the team just needed.

Speaker Change: Yes look.

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

Understanding of 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>.

Speaker Change: On the salvage side of the business is what they build 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.

<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 that drive the results that we want.

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

So I think at the branch level was more 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: I think the team just needed.

Speaker Change: Understanding of 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 and create and clarity. So there was no and my waiting for essential thing to do this or decentralized who's responsible for it. So we spent a lot of time, making sure we're very clear of who's <unk>.

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.

A lot of that is the technology that the company has driven.

<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 that drive the results that we want.

So I think it's a combination of both.

Alright, thank you.

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

Delinked from the legacy compensation structure or what do you see no. 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.

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>.

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.

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.

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

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

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.

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

Speaker Change: Alright, Thank you and in terms of have you seen any turnover kind of look at the branch level as you have kind of delinked from 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.

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 are appreciative of the changes that we've made so far.

Okay, maybe just one last one if I may in terms of coal car any update on that cycle to great. Thanks, So much.

Speaker Change: 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.

Speaker Change: Didn't know 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.

Yes.

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 them and grow share in the same thing we did at the branch level, we created clarity bonus.

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

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 kick off 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.

Speaker Change: And 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.

Speaker Change: 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.

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: 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.

Thank you.

Speaker Change: Yes.

Speaker Change: 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 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.

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

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

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

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

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 at 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.

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.

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

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.

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

Speaker Change: Thank you.

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

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 Saba Khan from RBC capital markets. Please go ahead.

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 on will continue to get to that leverage.

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

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

Sabahat Khan: 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.

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.

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

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

Sabahat 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.

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

As we as we get to the optimal.

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'll continue to get to that leverage.

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

<unk> taken any capital we spend to get a proper return for it and 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.

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.

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

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.

That helps and then.

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

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.

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 a management team our commitment to.

Just what are going to be the biggest sources of synergies kind of through to 2025 here.

Eric: <unk> taken any capital we spend to get a proper return for it and 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.

Yes.

The funny thing is.

When we first combined companies like every company you go through all the departments and as you can imagine procurement, becoming 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.

Eric: 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: 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.

And 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. 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.

Eric: That helps and then.

Speaker Change: Maybe to put you back on the spud, Jim just along 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.

You have so many of them there is always a bottom 10 or even 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 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.

Speaker Change: Just what are going to be the biggest sources of synergies kind of through to 2025 here.

Speaker Change: 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.

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 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.

Speaker Change: And 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. 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.

Short term because we're not we're focused on how do we run our 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 organization work, we have some plans in place to get done.

Speaker Change: You have so many of them there is always a bottom 10 or even 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 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.

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.

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

Speaker Change: 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 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.

Great if I could just squeeze in one quick one theres a comment in your slide deck around the land strategy. Obviously, you Undersold has 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.

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: Short term because we're not we're focused on how do we run our business efficiently that operates in the long term.

Well I'll just say in general.

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.

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 it's leased versus owned and land I don't think our partners.

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.

Sure.

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

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

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: Great if I could just squeeze in one quick one theres a comment in your slide deck around the land strategy. Obviously, you Undersold has 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.

<unk> is 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 Thats.

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. Thanks.

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

Speaker Change: 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 it's leased versus owned and land I don't think our partners.

The most important thing.

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

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: Sure.

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

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.

Great I appreciate the color. 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.

Speaker Change: <unk> is 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.

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 RV 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 are growing each of our asset classes. So I just wanted to and thanking the team.

Speaker Change: The most important thing.

For all 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: 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.

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: Great I appreciate the color. Thank you.

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 RB Global and again. This is RMB 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.

Jim Kessler: For all of their hard work as being part of <unk> 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.