Q3 2024 RB Global Inc Earnings Call
Thank you for standing by my name is Jamie and our beer conference operator for today at this time I would like to welcome everyone to the RMB Global third quarter earnings call. All lines have been placed on mute to prevent any background.
Okay.
Speaker Change: After todays presentation, there will be an opportunity to ask a question to ask a question you May press star followed by the number one and you touched on fun.
Speaker Change: Withdraw your question. Please press star followed by the number one again I would now like to turn the conference over to Samir right that Vice President of Investor Relations and market Intelligence. Please go ahead.
Samir Wright: Hello, and good morning, Thank you for joining us today to discuss our third quarter results, Jim Kessler, Our Chief Executive Officer, and Eric <unk>, Our Chief Financial Officer are with me on the call.
Samir Wright: 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 that potential partnerships and other items and business and market trends are considered forward looking and involve risks and uncertainties.
Samir Wright: The risks and uncertainties that could cause actual results to differ significantly from such forward looking statements are detailed in our news release issued this morning as well as our most recent quarterly report and annual report on Form 10-K, which are available on the investors relations website.
Samir Wright: Edgar and SEDAR.
Samir Wright: On this call. We will also discuss certain non-GAAP financial measures, including forward looking non-GAAP financial measures.
Samir Wright: 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 posted on our website.
Samir Wright: We are unable to prevent quantitative reconciliation of forward looking non-GAAP financial measures as management cannot predict all necessary components investors are cautioned not to place undue reliance on forward looking non-GAAP financial measures.
Speaker Change: At this time I'd like to turn the call over to Jim Kessler Ken.
Jim Kessler: Thanks, Samir and good morning to everyone joining the call.
Jim Kessler: I want to begin by expressing my gratitude to our exceptional team for consistently over delivering on our commitments and delivering outstanding results to our partners and customers.
Jim Kessler: <unk> Globals third quarter highlights our commitment to disciplined execution with adjusted EBITDA declining less than 1% in the face of a 7% decline in gross transactional value.
Jim Kessler: As previously discussed <unk> was driven by challenging comps in our commercial construction and transportation sector and the impacts of previously announced customer loss in our automotive sector.
Jim Kessler: Let's first discuss the commercial construction and transportation sector as mentioned in prior quarters partners and customers continue to evaluate business conditions in the face of macro uncertainty and have adopted a wait and see approach to their equipment disposition needs.
Jim Kessler: Historically, these wait and see moments of breed. However, they do cause headwinds in our marketplace for the supply of higher ASP assets.
Jim Kessler: The current environment combined with the elevated volumes and prices as we experienced last year due to the lingering impacts from Covid has created difficult year on year comparisons that masked the underlying progress of our growth initiatives.
Jim Kessler: We believe the best view of the business trajectory is to compare to 2022 or a two year stack with construction and transportation GTD, increasing approximately 10% in this timeframe.
Jim Kessler: Typically the wait and see periods are short in nature.
Jim Kessler: When the market either accepts this slowdown.
Jim Kessler: Partners execute at leading strategy or partners gain confidence that there will be a reacceleration and start purchasing new equipment.
Jim Kessler: Which stimulates the trade in cycle and drives decisions on aged equipment in either scenario. We are the ideal partner to help our customers navigate their fleet management needs.
Jim Kessler: We continue to focus on driving sustainable growth and have expanded our north American sales organization by approximately 10% year over year on a net basis as productivity continues to ramp up. These investments. We believe we'll be in a solid position to capitalize when the broader.
Jim Kessler: <unk> environment resolves lower or higher.
Jim Kessler: We understand our partners challenges and are dedicated to supporting them through these complex times.
Jim Kessler: Now, let's move to the automotive sector.
Jim Kessler: Our teammates year round dedication to cat preparedness.
Jim Kessler: Short of rapid and seamless response to the recent hurricanes, our thoughts are with those affected by these devastating storms and as a proud member of these communities are being global remain dedicated to help and where we live and work.
Jim Kessler: We supported local charities in the most impacted areas providing relief to those most affected.
Jim Kessler: Additionally, Ritchie brothers played a critical role in agent, Duke Energy's power restoration efforts in Florida by providing space for over 4000 line workers and their equipment at our Orlando yard.
Jim Kessler: This strategic location layout for quick mobilization to restore power to central Florida. Once the Hurricanes passed we are grateful for the heroic efforts of everyone involved and help them bring in these communities is back.
Jim Kessler: I was incredibly proud to witness our team's dedication firsthand during my recent visit to Florida.
Jim Kessler: Through our trust and transparency program, we have collaborated closely with our partners working side by side and communicate in real time. During these cat events I have personally received several emails from our partners and they were very pleased with our agility and excellence in execution.
Jim Kessler: IAA has several strategic advantages and responded to cat events.
Jim Kessler: Ensuring we can over deliver our commitments.
Jim Kessler: One advantage lies in our one team all a culture that enables a flexible and adaptable response from our teammates.
Jim Kessler: For these hurricanes approximately 15% of our response team comprised of Ritchie brothers team members supporting recovery NPL car inspection efforts. Additionally, we have the strategic option to utilize our Ritchie brothers Orlando yard as additional capacity. However, thanks to our ample <unk>.
Jim Kessler: <unk> cat capacity in the region, we constantly managed operations without needing to exercise this option.
Jim Kessler: Our carrier partners are also are harnessing the power of our IAA inspection services to accelerate total loss decision, making.
Jim Kessler: At the core of this service is our exclusive IAA the Alco score a cutting edge machine vision AI that analyzes vehicle images to quantify damage.
Jim Kessler: A capability unmatched in the salvage industry.
Jim Kessler: Complementing this is IAA vehicle value and AI driven tool that enables the alcohol value estimates all hydrated by our large and growing dataset.
Jim Kessler: Our technology further assesses flood damaged vehicles, capturing critical details like what airline levels and Matt Wetness.
Jim Kessler: Our mission is to streamline the virtual adjusting process, making it faster more straightforward and more accurate.
Jim Kessler: Thanks to our investment in technology and innovation are partners have significantly reduced upstream assignments cycle times by over a week Dorian Hurricane Helane.
Jim Kessler: We continue to drive premium price performance for our partners by continuously improving our processing technology.
Jim Kessler: In the third quarter, we continued to make progress in attracting new international buyers through our marketplace, achieving a record high percentage of the local salt and national buyers in the automotive sector.
Jim Kessler: Our efforts resulted in average selling prices of salvage U S insurance vehicles increase and by 1% year over year, which continues to be an industry leader in outcome.
Jim Kessler: Our exceptional performance and commitment to trust and transparency has resonated with our partners. We believe we are again at salvage market share here in the fourth quarter.
Jim Kessler: A key element of our international automotive salvage growth strategy is to enter new markets with partners that provide immediate scale.
Jim Kessler: We're excited to announce that we have been selected by some court group, a leading insurance provider in the Australian market as Theyre sold salvage provider.
Jim Kessler: We expect to execute a multi year contract.
Start supporting our partner in the late first quarter early second quarter of 2025.
Jim Kessler: So we finalized contract terms and Suncorp group.
Jim Kessler: <unk> final approval of those terms from its board we anticipated that this partnership could provide up to 65000 units annually. Once we are fully operational we plan to accommodate this volume by strategically blendon, new greenfield locations and utilized in existing Ritchie brothers locations.
Jim Kessler: Third party yards.
Jim Kessler: We were selected for this partnership for three key reasons first.
Jim Kessler: The Ritchie brothers strong existing and expanding presence in Australia.
Jim Kessler: Along with our strong brand reputation served as the cornerstone and earning our partners confidence in our ability to over deliver on our commitments.
Jim Kessler: IAA is widely recognized as a premier global brand and salvage solutions and third Ias cutting edge industry, leading digital technology for processing vehicles combined with our unmatched suite of auxiliary services set us apart.
Speaker Change: I will now pass the call to Eric to review, our financial performance and outlook.
Speaker Change: Thank you Jim before.
Eric: Before we start I'd like to highlight that we've updated our disaggregated revenue presentation to enhanced clarity and provide investors with a more transparent view of how management evaluates business performance.
Eric: Total <unk> declined by 7%.
Eric: Automotive and <unk> decreased by 1% driven by stable unit volume and a 1% drop in average price per vehicle sold.
Eric: Notably this 1% outpaced the broader industry is more significant downturn.
Eric: Unit volumes remained stable as growth from existing partners to offset headwinds from the previously announced customer loss.
Speaker Change: As Jim noted on a net basis. We believe we are continuing to gain market share in the salvage industry sequentially here in the fourth quarter.
Speaker Change: Overall volume in the salvage industry continues to see secular growth due to higher repair costs and lower used vehicle prices, leading to an increase in the total loss ratio.
Speaker Change: In the third quarter.
Speaker Change: <unk> intelligence solutions estimated that the total loss ratio increased nearly 180 basis points to approximately 21, 7% compared to 19, 9% in the same period last year.
Speaker Change: <unk> in the commercial construction and transportation sector decreased by 10%.
Speaker Change: Driven by a decline in the average price per lot sold partially offset by a 19% growth in lock volumes average price per lot sold declined due to both asset mix and continued deflation in asset values.
and the
As we anticipated certain headwinds this quarter, we took decisive action by launching a targeted discretionary cost reduction initiatives.
Speaker Change: This was in addition to our ongoing strategic focus on operational efficiency.
Speaker Change: Through these efforts adjusted EBITDA declined by 1% in the face of a 7% decline in GTA V.
Speaker Change: We remain dedicated to efficiency and disciplined execution. However.
Speaker Change: However, we are not sacrificing any investments in strategic areas that position us for long term growth.
Speaker Change: Can measure our progress by seeing adjusted EBITDA as a percentage of GTT increased seven 8% compared to seven 4% the prior year.
Speaker Change: Adjusted earnings per share decreased by 1% on a slightly higher adjusted tax rate.
Speaker Change: Our solid operational performance and continued debt paydown drove a 110th of the churn decline in our adjusted net debt to trailing 12 months adjusted EBITDA to approximately one seven times compared to the second quarter.
Speaker Change: Consistent with our capital allocation strategy, we plan to continue paying down term loan for the remainder of the year.
Speaker Change: Moving to the outlook, we maintain our full year <unk> guidance range from zero to 2%. However, given the various puts and takes we see with the hurricane related volumes and continued pressure on commercial construction and transportation Asp's.
Speaker Change: We think we will be at the lower end of the range.
Speaker Change: For adjusted EBITDA, we are increasing the lower end of the guidance range to 123 5 billion from $1 2 billion.
Speaker Change: Due to the solid third quarter results and continued attention to cost efficiency. Please.
Speaker Change: Please note that our guidance incorporates incremental operating expenses incurred in the fourth quarter associated with the recent hurricanes.
Speaker Change: With that.
Speaker Change: Open the call for questions.
Speaker Change: Okay.
Thank you.
Ladies and gentlemen, we will now begin the question and answer session I would like to remind everyone for one question one follow up.
Speaker Change: Should you have a question press star followed by the one on your Touchtone phone and you will hear pump that you or have you seen me should you wish to withdraw please press star followed by the number one again.
Speaker Change: We're seeing a speaker phone lift.
Speaker Change: Lift the handset before pressing.
Speaker Change: Our first question comes from the line of Thomas <unk> Khan from RBC. Please go ahead.
Speaker Change: Great Thanks, and good morning.
Could you maybe I guess, given where we are sort of in the macro.
Some of the trends that you have in each of your segments can you just maybe share some perspectives on what jurors, particularly on the commercial side, what youre seeing into 2025 any early perspective, I know you shared some thoughts on customers being a bit cautious, but what do you expect maybe over the medium term instead in terms of disposition activity.
Speaker Change: The maybe the view that some of your larger partners may have on the outlook. Thanks.
Speaker Change: Great question and I'll, just give you a very high level, and then I'm going to pass it to Samir since he is our resident expert as we think about.
Speaker Change: Everything outlook and customers, but look for us our main focus is.
Speaker Change: As we talk to our partners, how do we help them deliver in whatever economic environment. We're in so our team is really focused on.
Speaker Change: The situation. We currently have this quarter next quarter.
Samir Wright: Listening to what their needs are and how do we support that and add as much value to their P&L as we can and Samir I'll pass it to you just for some outlook.
Yeah, Hey, Saba I think overall.
Samir Wright: We're not seeing anything different compared to what you hear from other companies obviously.
Samir Wright: Construction OEM sales are weaker people are still assessing the outlook.
Speaker Change: I think from our perspective again like Jim said, we're focused on servicing our customers and partners best we can regardless of what happens and remember we are investing in organic growth initiatives to drive secular growth and so Jim did mention that we grew the North America sales force by about 10%.
Speaker Change: Okay great.
Speaker Change: Maybe at a high level. If you can just maybe talk through I know, you've got a number of initiatives going on efficiencies and things like that.
Speaker Change: As you kind of look ahead to the next year is if you can just talk about where you are on the margin improvement journey, maybe milestones, we should keep an eye on her big bucket. So.
Speaker Change: Margin improvement opportunities that you think we should see come through over the next few years. Thanks.
Speaker Change: Yes, really nothing we're not going to give very specific items, but just go back to the comments, we've been making for the past quarter for us as we think about our business. We're very focused on three things how do we grow the top line, how do we expand margins and how do we do this at the most effective structure that we can and how do we optimize.
Speaker Change: The business so for us this isn't a one or two quarter thing. This is a journey that we're always going to focus on those three things and optimizing our business and getting as much flow through was just a very critical item in our in our journey and it's something that we're always going to focus on.
Thanks very much.
Speaker Change: Our next question comes from the line of Christopher <unk> from CIBC. Please go ahead.
Speaker Change: It sounds like things are obviously progressing quite well on the <unk>.
Speaker Change: Side, especially with.
Speaker Change: With your announcement on the call.
You just speak to some of the core kpis of the business and.
Speaker Change: How far away from where you'd like those to get to.
Speaker Change: Yes, so Jim so I'll jump in so.
Speaker Change: I think we're 18 months into the acquisition.
Speaker Change: I am very proud from.
Speaker Change: The Kpis standpoint of where we're at and we call. It SL as our strategic agreements with our partners, we are hitting industry, leading numbers and we have done it consistently for about 12 months now.
Speaker Change: Actually believe we're driving more value to our partners than anyone else and I believe our partners are seeing that in the share that we have games.
Speaker Change: But just to answer your first question really what we focus on is advanced storage charges.
Speaker Change: Cycle time, how quickly can you get a title growth.
Speaker Change: Returns and then ultimately that will calculated net return for our partners and they are really the four buckets and theres other underlying pieces like buyer base and how do you grow it that's normal in the marketplace, but they are really the buckets that we look at in the buckets that were driving and I believe we're at the very top end of that range and our focus right now is <unk>.
Speaker Change: <unk> over delivering on those items, which I believe we are doing it for our partners.
Speaker Change: That's great. Thank you and maybe just one follow up.
Speaker Change: You spoke to your capital allocation priorities for the remainder of the year, but as we look out to 2025.
Speaker Change: How are you thinking about capital allocation at that point or are you, maybe focusing a little bit more on some tuck in M&A or what are your thoughts there.
Speaker Change: Yes, so for.
Speaker Change: Thank you for the question for the remainder of 2024, our focus is on the term loan a paydown as we laid out a couple of quarters ago, our capital allocation framework.
Speaker Change: We will continue to focus on investing in in the business, both from technology and from our real estate footprint.
Speaker Change: We will maintain paying down on our term loan a and then we are always looking at M&A and our M&A funnel. So we'll continue to look at tuck in opportunities for the business, where it where it makes sense for us.
Speaker Change: Okay.
Speaker Change: Congrats on the quarter I'll jump back on the queue.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Our next question comes from the line of Gary Mr. Piano from Barrington. Please go ahead.
Speaker Change: Okay.
Speaker Change: Good morning, Jim Eric and Samir two questions first of all Eric It looked like there was an absolute decline in SG&A.
Speaker Change: Year over year of about $26 million.
Speaker Change: What is that a function of what you talked about where you went into a mode of.
Speaker Change: Really got a control of expenses this quarter orders there were there just some something in last year's numbers that Jack them up and made the comparisons easier.
Speaker Change: Hey, Gary how are you, yes, theres a couple of components of that as Jim and I have been articulating since I've gotten here is we are focused on operating efficiency. So that is going to continue to be a focus also in the third quarter. We did focus on some more discretionary.
Speaker Change: Pending as we knew there were some headwinds on the <unk> side as I articulated in my prepared remarks, so those are real initiatives that year.
Speaker Change: Year over year are changes there is a piece of it.
Year over year.
Speaker Change: I won't give an exact percentage, but it's not the majority of it that would be related to.
Bonus attainment right when you look year over year.
Speaker Change: But overall, it's really the initiatives that we've put in place.
Speaker Change: To focus on operating efficiencies for the business.
Speaker Change: Okay and then my second question deals with the new business with Suncorp.
Speaker Change: Australia.
Speaker Change: Yes.
Could you maybe say how did that come to you I wasn't.
Was that kind of maybe a cross sell between what youre doing on the heavy equipment side.
You were able to.
Speaker Change: Get this contract because you don't have any operations in Australia right now on the salvage side.
And wasn't put out as an RFP or was it.
Speaker Change: This is just the sole negotiation with you.
Speaker Change: Sure.
Speaker Change: Look I would just say from a suncorp standpoint.
Speaker Change: They've managed their business like.
Speaker Change: Any of the insurance carriers in the U S. So it was kind of the normal RFP process that they go through.
Speaker Change: We were known from our Ritchie brothers side of the business over in Australia, which is a big marketplace for us.
Speaker Change: The great thing about Australia, they operate their business very similar to how we operate in Canada, So IEM candidate and the tools and the technology and everything that was built so as the RFP came together it became very obvious that we had a tool.
Speaker Change: That not only suncorp, but I think all insurance partners in Australia will have an interest in.
Speaker Change: And I'm very happy that the team was able to get awarded the contract.
Speaker Change: Okay. Thank you.
Speaker Change: Comes from the line of Craig Kennison from Baird. Please go ahead.
Speaker Change: Hey, good morning, Thanks for taking my question I believe you mentioned an increase of 10% in your territory manager base I'm wondering if you can just comment.
And then sort of the productivity curves for the typical salesperson and when we might expect that to translate into.
Speaker Change: G televisions.
Yes.
Speaker Change: Yes, so Jim.
Jim Kessler: The first thing that 10% as we think about the the increase in salespeople, we're constantly going to be looking for.
Jim Kessler: Do we have holes in our model are we not in conversations with certain partners. Because we just don't have beaten the street the habit on the regional side of the business and we constantly look at that map and where should we add someone where there's equipment, we don't get into the very detail of exactly at the curve, but for US one of the best.
Jim Kessler: Investments, we can make is on the salesperson side, it's a very clear you pay X and salary you know how much GTD they can generate and when we hired the right.
Jim Kessler: Person with the right personality that happens pretty quickly.
Jim Kessler: Going to be something that we constantly invest in and also on the other side. When you don't make the right hire. It's also something that you Couldnt you can manage pretty quickly too and get the right person into that position.
Speaker Change: Thanks, Jim and then a while back I think you had invested more in inside sales and sort of changed that territory manager model because you provide an update on that.
Speaker Change: The current inside outside model.
Speaker Change: So we still have those.
Speaker Change: In our model the one thing that's apparent in the region side of the business.
Speaker Change: Very much high touch type of business there are some customers.
Speaker Change: As.
Speaker Change: Different age groups and progress in their careers that.
Speaker Change: Prefer a self service model, which we have built with our technology and having the insight sales team for support but there is still a demographic that is out there that controls a lot of the market share that still prefers a high touch and so we're constantly investing in the future but.
Speaker Change: The one thing in this industry.
Speaker Change: It takes a while for it to change right and so we want to make sure. We're as it transforms we have the right technology and the right infrastructure in place, but we do realize this is a high touch type of environment.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question comes from the line of Blake Clean Hodge from Bofa. Please go ahead.
Speaker Change: Hey, guys now that we're past the election, just looking back at Trump's first term there's tightness in the used equipment channel in 2017, so try to get a sense of what you guys are thinking about for a second term in terms of similarities and differences.
Jim Kessler: Yes look it's Jim.
Speaker Change: I wish I could answer that question right I'd, probably be doing a different job if I can answer that accurately of what's going to happen.
Speaker Change: But I think in some of our comments.
Speaker Change: That you can see we believe a lot of the macro trends are in our favor.
Speaker Change: What's going on when you look across.
Speaker Change: And have been.
Speaker Change: What happened in the election I think that's just another thing that ultimately.
Speaker Change: Is in our favor and for our industry. So.
Speaker Change: But we're not going to comment on any kind of speculation that we really can't control.
Speaker Change: That's fair and then second question, just any sense of Capex and 25, it seems like you guys.
Speaker Change: Sort of stabilizing and starting to win some business in IAA, So could we see a step up or.
Speaker Change: Want to get thoughts there.
Yes, so we're still going through our 2025 budgeting process, but there will be.
Speaker Change: And some investment related to the Suncorp deal that we just.
Speaker Change: <unk> today, So we'll go through the capital allocation.
Speaker Change: The process and we'll come out with guidance on our Q4 call.
Speaker Change: Great. Thanks.
Speaker Change: Only thing I would add on top of that with Eric and it's just as a reminder, in the U S. We have capacity and from the IAA side.
Speaker Change: Unfortunately, we had to announce a loss last year.
Speaker Change: So we do have capacity so to Eric's point, Australia of course going into a new market.
Speaker Change: Youll see that but when you think about U S and Canada and gain in market share.
Speaker Change: Just keeping that in the back of your mind the capacity that was loss that we want to sell back up before we have to get into new capital.
Speaker Change: Thanks.
Speaker Change: Thank you. Our next question comes from the line of Maxim <unk> from MBS. Please go ahead.
Speaker Change: Hi, good morning, gentlemen.
Hello.
Speaker Change: Yes, Hi can you hear me.
Speaker Change: Yes.
Okay perfect. Thank you Joanne.
Would you mind, maybe commenting a little bit on take rate against that natural continues to trend higher how should we thinking about this over the medium term. Thanks.
Speaker Change: Yes, so I'll start and then Eric if you if you want to chime in with anything look we have a process, where we evaluate take rate and it goes with a bunch of things inflation competition everything that goes through so we're going to make sure. We're in a very competitive position as we think about it.
Speaker Change: We have an annual process that we make an evaluation of what should we do with it and we're going to continue that we look at it on a very consistent basis to see what's happening in the market and what is competition doing and again look I just wanted to go back to our three priorities, we want to grow GTD, we want to expand margins and we want to do it as efficiently as possible.
<unk> and take rate plays a role in that.
We constantly evaluate.
Speaker Change: And.
Speaker Change: Some of it we have to look at other people of what decisions they are making and that could influence what we decided to do in the future, but we're very happy where we're at at this moment and it's something that we're constantly going to look at.
Speaker Change: Alright.
Any comments or color you can provide on.
Speaker Change: Sort of market share dynamic in North America, right now Jim benches.
Speaker Change: Look we're not going to comment specifically on market share I think you can see from our notes that we believe we're gaining share and thats, probably the comment that that we're going to make our focus.
Speaker Change: For market share and this applies to both sides of our business and when we think about Ritchie brothers in IAA, what our value is is what's the value we can drive to our partners and what they can see their P&L and we feel like as long as we're over delivering on our commitments and we're driving that value and in partnership with them that is.
Speaker Change: It would be good for us and ultimately help us.
Grow into the future, but what we're focused on is what we can control and what we can control is how do we drive value for our partners and that's what we're laser focused on at RMB global.
Speaker Change: Okay. That's perfect. That's it from me. Thank you so much.
Speaker Change: Our next question comes from the line of John <unk> from Morgan.
Speaker Change: For a home.
Thanks for taking my question guys. Jim I know you just answered the question about market share but.
Speaker Change: I have to try this one.
Speaker Change: Last quarter, you talked about kind of the win that you had kind of.
Speaker Change: Thank you.
Speaker Change: I think the second tier of the market this quarter Youre talking about Suncor alright are there other things that particularly in North America.
Speaker Change: Whether they are pilots or whether their test.
Speaker Change: Things along that line that gave you confidence that you can.
Speaker Change: Have more trophies on the on the case next year.
And just have that debt.
Speaker Change: I think investors do care.
Announcing debbie.
Speaker Change: There is a hope that you guys will give more color on.
Other things that youre working on or momentum that's in the marketplace.
Speaker Change: Curious if there are other kind.
Speaker Change: Pass through pilots underway.
Speaker Change: I'll give you confidence that you can gain further share into next year. Thanks.
Speaker Change: I love the different ways, everyone asked the same question. So so we definitely appreciate it.
Speaker Change: Look what gives me confidence is after 18 months and talking to all of our partners and understanding their needs.
Speaker Change: What we're driving for our partners right now and look we talked about at Asps being up 1% when you multiply 1% over the number of cars that exist in the salvage industry that is a very big number and that has a lot of zeros behind it.
Speaker Change: And as long as we're focused on those there is always going to be a pilot someone that wants to test something and do something what were trying to announce and give insight too.
Speaker Change: Because people get to make their choice right as you do a pilot you get it you don't that doesn't dictate it but what we know for future market share value if I'm driving the four key things that.
Speaker Change: Our partners one for net returns on the IAA side and also there are some similarities to the Ritchie brothers side as you think about gross returns and everything else that our partners need and helping them drive their business.
Speaker Change: We're laser focused on communicating with our partners and people that we do business with people that we don't do business with of the value that we're driving and the potential that it could equate. So they can see it in their P&L and we're not just saying numbers to say numbers, we want to be able to say this is the number youre going to see and pick whatever millions of dollar.
Speaker Change: That is in this component and Youre going to see your total loss ratio in European Al. If you are a public company EPS whenever it is youre going to see that drive through and I think it's all good business people, they're looking for partners that can do that and I believe we're showing that right now and that's what gives me confidence in the future we're going to have market share.
Speaker Change: There is always going to be opportunities to do pilots, but ultimately you have to show can you drive value for my business and I believe we're doing that right now for our existing partners.
Speaker Change: I think it creates interest in partners that were not doing business with today.
Speaker Change: I appreciate that and then just two follow up questions. Just on 74, as you kind of what that business.
Speaker Change: And action next year are there any like big upfront costs that might dilute the margin contribution of that business next year and then also on the sales force adds and 10% how long until those folks typically be unproductive.
Speaker Change: No. Good question, So I'll start and then I'll, let Eric chime in on any of the upfront costs or anything.
Speaker Change: With the Australia entry into the market, but really when I think about international just in general we have a playbook of technology tools process that we can bring to the salvage market and what we built over the last year is okay, what does that playbook and that helped us.
Speaker Change: <unk>.
Speaker Change: As youre going through the RFP process, and what I love about ending entered into Australia. We already have a footprint. We already have a support team think about market in buyer demand that kind of already exists so entering into a market where Ritchie brothers already has a support presence is a great thing now you sold to different buyers, sometimes so you have to.
Speaker Change: Drive demand and all that stuff, so I'm really happy with what I'm. Most excited about is we have the playbook. Instead. It theory. This is going to put execution against it in actual which gets me excited about other market potentials.
Speaker Change: That we had into the future then Erik if you want to answer the capital and then I can come back and talk about the sales productivity.
Erik: Yeah, no problem so on the on the.
Speaker Change: EBITDA it will not have a significant or material impact on on margin I think on the real estate side like we said in the past we will evaluate what's the right real estate footprint for for that business and some of that may be purchased some of that may be leased but we'll we'll put that through our decision tree and as.
Speaker Change: We evaluate that.
Speaker Change: That may have impact on our capital spend from a real estate perspective.
Speaker Change: And then from the sales productivity look I'm not going to get into specific numbers, but you can kind of think about what is an average salary.
Speaker Change: A typical TM and look at it GTD number and look at our take rate and it doesn't take a lot of equipment to be able to breakeven pretty quickly for a territory manager.
Speaker Change: But we're not going again to specifics.
Of what those numbers are but you can kind of use some basic averages and look what we have and you can see it doesn't take you a lot of months to figure out when breakeven takes place for a T M.
Speaker Change: When should you have any questions on this.
Speaker Change: Star followed by the number one.
Speaker Change: Next question comes from the line.
Speaker Change: From BMO capital markets. Please go home.
Speaker Change: Good morning, and thanks for taking my questions just a startup wondering about the modest bump to 2024 guidance as is.
Speaker Change: Function of improving margins and take rate. So we have seen or are you starting to see some higher volumes from the recent cat events here in Q4.
Speaker Change: Yes, when we look at the margin as I indicated in my prepared remarks, we knew that Q3 was going to be a little bit more of a challenge. So we took the initiative around some additional discretionary spend reduction and thats going to continue into into.
Speaker Change: Q4, and then when I looked at the Q3 performance.
Speaker Change: We did a little bit better on the EBITDA line and I wanted to make sure we capture that in our full year guidance with one quarter.
Speaker Change: Remaining so we feel we feel really good about tightening that range.
Okay.
Speaker Change: And I'll give just a little bit of color just around cat events.
Speaker Change: Cat events or one of those weird things where from a top line. It's a good thing, but dependent on how big the cat events are.
Speaker Change: From a profitability EBITDA standpoint.
Speaker Change: It really depends on your model and how do you operate in it. So this was a decent sized cat event for us.
Speaker Change: And I'm very happy of how the team handled it and how we performed.
Speaker Change: For our partners and I've received multiple E mails.
Speaker Change: Doubt it but I wouldn't think about a cat event. It helps you on the top line, but I wanted to think about it as a.
Speaker Change: A normal profitable type of event, especially not compared to the daily settlement of salvage vehicles.
Yeah.
Speaker Change: Got it thanks and then.
Speaker Change: Based on your Capex guidance for the year implies a pretty big spend here in Q4 wondering if we could see that come down a bit for the year.
Speaker Change: And then more specifically, whereas the majority of your capital going towards land purchases or more.
Speaker Change: <unk> technology and services.
Speaker Change: Sure.
Speaker Change: Yes, we don't we don't provide the specifics.
Speaker Change: Split on technology versus land and we will flex it like we talked about earlier, we put the properties through our strategic kind of decision tree and if we have to flex and spend a little bit more on property. We will do that and then the same on our technology roadmap. So it is pretty.
Speaker Change: Robust an evergreen process, we go through the through the year to answer your question on Q4, we're maintaining our current guidance and we'll see how the year progresses to make sure.
Speaker Change: Within that within that range.
Speaker Change: Got it I appreciate the responses I'll turn it back thanks, Yeah no problem. Thank you.
Speaker Change: Thank you.
That concludes our Q&A session and I'd like to turn the call over back. Thank you Pablo for final closing comments.
Speaker Change: Thank you so much first off I, just want to make sure going through the first large cat events since since I have been over on the IAA side and for the Ritchie brothers side I wanted to thank all of our 8000 teammates for all their efforts and I have been unbelievably impressed how consist.
Gently we're over delivering on our commitments to our partners, which I believe is ultimately.
Speaker Change: The thing that we need to do to be able to accomplish growing our market Anaheim expanded margins and operating efficiently. So I wanted to thank everyone for all your hard work and.
Speaker Change: Secondly, thank everyone for taking the time on the call today.
Speaker Change: I really want to make sure everyone hears how excited we are about the future potential that the whole management team and everyone here at RBC global season in front of US and just wanted to thank you one more time and everyone have a great day and hope you enjoy the weekend. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Also today, we will now disconnect.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: Yes.
And.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.