Auction Technology Group plc

Welcome to ATG's half-year results. We're very happy to be able to speak to you today about these results, and we feel really good about them. Becky, if you can go to slide five. So just kind of setting it up a little bit, I think before diving into this slide, One of the things we feel best about as we come to these results is just as we exited December, there were three big questions out there we felt about ATG that all the investors were posing us. And one was on the art and antique side, how procyclical would you be? Would you be able to grow off the really incredible growth that you saw during COVID? Or would you see a reversal in your volume or people moving back offline once they were able to go attend auction houses? The second big question was around the industrial commercial group and people saying, okay, well, are you going to see the volume that will compensate for the fact that asset price inflation may be a little bit less? And then the third point that people were looking at was would the ATG pay, which was being launched onto proxy bid, receive a good response and would there be good adoption or not? And I think one of the things that we're most happy about as we come to these results is the fact that we think we've addressed all three of those questions while strengthening the business and increasing the competitive moat around what we do. So We'll cover that in a little bit more detail between Tom and me coming up. But for now, just on this slide, this is for the people who are less familiar, maybe for the first time on this call. What does ATG do? Well, we are unlocking the value of the curated secondary goods market and accelerating the growth of the circular economy. And the key thing, the key way that we do that is we connect bidders from around the world to auction houses around the world. We work with several thousand, about 4000 auction houses connecting to bidders in 160 countries around the world. Those auction houses are listing 10 to 12 billion per year that we help facilitate the sale of over 20 million items per year. And we connect them to bidders who are generating now with our acquisition of estate sales dot net over 270 million web sessions per year. Those for those auction houses. The key reason bidders come to us is because we offer the best selection of specialized and unique inventory. They come to us for the convenience because they can bid on dozens of auctions at any given time. And they come to us because of trust, because everything that we sell on our site is listed by an expert auctioneer and in a curated format. And auctioneers come to us because of the technology that we provide for the cost savings and operational efficiencies. But more than anything, they come for the bidders because those bidders help generate higher asset sale prices for the consignors. So that's kind of the essence of what we do.

Go to the next slide.

So these are one of those happy slides where it shows everything up and to the right. But the key reason that we wanted to do this was because the big questions about ATG way back were, could we grow during COVID? People wondered. Then when we grew, people said, could you grow on top of that exceptional growth? And then they were saying, well, now that COVID's over, could you grow again? And I think what we like to show is that whether you look at an organic basis or through the acquisitions we've made, it means that we are in fact growing and you can see that that GMV is going up. In terms of the revenue growth, you can see that, again, it's not just translating into volume of what's being sold, but that we're actually growing revenues as well. And we're growing organically. But again, with our seventh acquisition, which is a core part of our story, that's accelerating that growth even further. And then finally, we were able to do that despite this uncertain economic macroeconomic backdrop while improving our financial profile.

Next slide.

So I mentioned before a little bit about the three big questions that we felt that were out there about us, but this slide gives a few more of the highlights. So again, we're able to grow GMV by 5% to 1.9 billion. And that compares to last year at a total of 3.3 billion. As expected, we saw acceleration in our GMV and as a result, revenue in the back half of the first half of the year, so in the second quarter, and that has continued into these early months of the second half. Our take rate, as you see, was flat. And that was because we were able to see the higher listing fees offset the growth of INC. And for people unfamiliar, INC has a slightly lower take rate than the art and antiques division. But with the listing fee increases that we passed through successfully, that kept that impact on the overall take rate minimal. We also saw very strong growth in marketing and demand for payments. So if you look at, again, we referenced Etsy quite a few times. Etsy has 3.8% of its revenue, or it monetizes its GMV at a rate of 3.8% through the digital marketing it sells to people who sell on their site. And today, ATG is at 0.6%. We saw a really good increase in the demand there. We also saw progress of live auctioneers with our other value added service, which is payments. So it's now at 83% adoption. And then the comment that we made in the press release this morning, and then which I referred to at the beginning, is that we're very pleased with the fact that we have 21% of the proxy bid auctioneers now having signed up to our payments product. So the fifth point here is around integrated bidding. So one of the things that we've been investing in beyond value-added services and the take rate is just improving the ability for auctioneers to cross-list on different marketplace. We've made significant progress there as well. And then lastly, we were able to do this while making, as I said, our seventh acquisition. And this business is performing ahead of expectations. And I'll talk a little bit more about that later.

The next slide. Over to Tom.

Good morning, everybody. I will take you through the financials, starting with the highlights that you can see on this slide. So revenue of 67.3 million, that's up to 17% year over year on a reported basis and 5% on an organic basis. Adjusted EBITDA of 31.5 million pounds of 18% year over year. Our adjusted EBITDA margin was 47%, that's one percentage point higher than prior year. Adjusted diluted EPS of 16p, up 19% year over year. Free cash flow of 21.8 million, that's a 69% conversion. And we ended the period with 132.4 million in adjusted net debt. If we move over the page. Talk a little bit more in detail about revenue here. On the left-hand side, you can see revenue by segment. Now, as John-Paul has already mentioned, the first half of last year, so half year one of 22, was really the last period that we had that was impacted by COVID. That impact was actually concentrated in the first four months of that period, October to January 22. By the time that we got to February of The world had reopened and we saw that normalisation of activity levels across all parts of our business. So for February and March, relatively clean non-COVID comparatives. So for the first half of this year, we're going against sort of easier comps as we get through the half year. So if you look at that total revenue number, already said £67.3 million. The growth rate for the period was 5%. But as you went through the period, as the comps got easier, the rate of growth accelerated. If you looked at the exit rate, so for February and March and also April, where we were going against clean non-COVID months, the rate of growth was 9% overall. Just moving up to see total marketplace revenue of 61.6 million. So organic growth of 6% year over year with ANA growing up 4% in industrial commercial 7%. We'll talk about that in more detail on the next two slides. Auction services revenue of 4.2 million, growth of 2% year over year. Organic decline of 7%. So auction services is largely our white label business. The white label business saw exactly that, the same COVID normalisation or post-COVID normalisation as the other, as the marketplace is in fact a little bit stronger, we saw there. But as we continue to move further away from COVID, that rate of decline will improve on a month-on-month basis, quarter-on-quarter basis, the business is growing. is stable. Content, a small part of this 1.5 million revenue, 6% decline, consistent with historic movements in that business. If you look at the mix of revenue by product on the right hand side, you can see that INC commission comprises 37% of our revenue in the first half year. An ANA commission, 21% of revenue. So an aggregate commission was 58% of our total revenue. So it's still the largest stream, but you see, interestingly, the growth and importance of value-added services. So now 17% of the mix versus 15% last year. That's payments and marketing are growing within there, but marketing in particular in the first half gave a strong performance, 20% growth on an organic basis year over year. That's across all marketplaces, something that we expect to continue into the second half of the year. Payments in INC didn't materially contribute to that growth. Again, that will be a feature of the second half of the year with the launch of payments on proxy bid. And then if you move up to the next box, other marketplace revenue, other marketplace revenue largely represents the fees that we charge for hosting auctions. Prior to COVID, we used to increase those fees every year. For the last three years during COVID, we didn't do that because all the other things that were going on and the growth in GMV. But now we're post-COVID, we introduced, we sort of reintroduced increases in our fee charges. So that combined with increasing volumes of auctions being hosted has contributed to very strong growth in our fixed fee revenue of 25% year over year, which has driven that increase in share from 15% to 17% that you can see there. If we move over... Talk in a little bit more detail about INC. So you can see on the top left hand the chart of GMV. So last year was 1.3 billion. And it's worth saying that last year's number was exceptional. So that 35% growth that we saw last year was really the standout number in the numbers we reported a year ago. A lot going on in last year. You had the benefit of COVID, which we talked about, which was still in those numbers. We also had very high asset price inflation. Many of our categories were higher. Prices were going up double digit last year, but that was offset by volumes and lower volumes last year. And it was really those lower volumes that were driving the higher prices. As we've got into this year, those volumes have come back. You can see there that 14% growth in the volume of lots, which is more than offset the impact of moderating prices. So asset prices have been coming down. The reason it's been coming down is because volumes have been going up. And so that's exactly the dynamic that we talked about last time. And that's exactly what's played out in this half year. So despite the fact we had that exceptional performance last year, we've still managed to grow GMV and INC by 7% on an organic basis year over year. Take rate, broadly flat. Within there, you've got some impact from the mix of assets being sold, being offset by improving value-added sales and particularly marketing. As I've just said, there wasn't really a material contribution from payments in INC in the first half. That's something that will feed through in the second half. And also, whilst we did change the pricing structure in INC, principally in proxy bid in the first half, that happened towards the end of the half. So, again, there isn't a big contribution to that in the take rate that we're reporting there for the first half of 23. That will feed through in the second half. You take that GMV growth of 7% with a broadly flat take rate, you get overall marketplace INC revenue growing by 7% year over year. We move over to ANA. So ANA last year, GMV growth of 1%. Now, ANA was really where the impact of COVID was most transparent, where you could see it. So that 1% growth that you could see last year was really a function of decent growth in the first four months of that period, sort of October to January. But then when the world reopened, the step-back in activity that came in from February onwards gave you an overall growth rate of 1%. So you can't see on here, but the number we reported last time for second half growth in GMV, actually decline in GMV, was 11% in the second half of last year. But as we've moved further away from COVID, that rate of decline has improved. You can see in the first half of 23, overall, it was 3% decline. But again, when you look within how that's performed across the half, by the time we've got to fully lapping COVID, when you get to February, March, and also into April, GMV is now back into growth. in ANA about five percentage points growth we've seen across the last three months to the end of April and that really affects the wider robustness of the ANA markets again last time a lot of questions about how would ANA hold up in a in a sort of softer economic environment and a weaker macro economic environment to date and we expect going forward there hasn't really been an impact of that and the wider end markets continue to perform well If we look at the take rate, that's grown from 7.6% to 8.3%, so the same dynamic as last year. GMB performance has been more than offset by take rate. That take rate is a function of continuing penetration of value-added services, with marketing being a particular call-out this time, and also the benefit of some of those changes in fixed fees that I've just talked about. So you multiply that GMV by the take rate improvement, you get organic revenue growth in ANA of 4%. When you look at the reported revenue growth of 18%, that also includes two months contribution from estate sales. So estate sales is going to be reported in arts and antiques, still early days, but to date performing ahead of our expectations. Moving over. You can see here the full P&L. So on the right-hand side, you see our headline reported revenue growth, revenue of 67.3 million. That's reported growth of 17% year over year with organic growth of 5%. The difference between the reported and organic, you've got that two-month contribution from estate sales I just talked about with about two percentage points. And the balance is FX. So over 80% of our revenue is now in dollars. The pound has weakened relative to the dollar compared to last year. The average rate in the first half of last year is 134. This year, the average rate of $1.2 equals a pound. So that has boosted our revenue by about 9 percentage points. That geographic split of revenue is mirrored in our cost base. So when you look at the movement in our costs, you can also see the impact of FX in that. You've got our cost of sales have increased 15% year over year, not a million miles away from the revenue growth. So our gross margin has stayed constant at 68% year over year. We've got our admin expenses, 36.7 million up 22% year over year. So you've got FX in there, you've got estate sales in there. You've also got 1.7 million of exceptional costs related to the acquisition of estate sales or the fees that we paid in relation to that largely. And then you've got a 1.4 million increase in our share-based payments charge. So our share-based payments charge, familiar with the accounting you amortize that cost over the life of the scheme our schemes were introduced at the point of ipo two years ago the average life of one of our schemes is three years so it'll take three years for that charge to normalize we're two years in now so still stepping up by the time we get to this point next year it should have plateaued it is sort of ongoing level. If you sort of remove all those effects and remove FX and try and create a sort of organic growth rate or rate of change in our cost base, our costs are up 4% year over year. Below the rate of growth and revenue, which you can see in our adjusted EBITDA margin, penultimate line at the bottom of 47% up one percentage point on prior year. We don't really anticipate any big changes in our cost base in the second half of the year relative to the first. So that 47% we achieved in the first half is broadly consistent with where we expect the full year outturn to be. Just moving back up the P&L a little bit to net finance costs, you see 9.1 million. That includes 3.7 million of a non-cash FX movement on our intercompany balances. If you strip that out to get to the underlying cost, our rate of interest that we paid in the period is 5.4 million. This is the first period we've had with sort of new elevated interest rates. We pay our debtors in dollars. We pay interest rates based on US SOFA or US LIBOR. And that charge will come down as debt comes down, also come down as and when or if and when the interest rates are reduced. All of that translates to right at the bottom, an adjusted diluted EPS of 16p, up 19% year over year, largely in line with adjusted EBITDA. And then finally, I've mentioned FX a couple of times here. As I've said, over 80% of our revenue is in dollars. That's up from 60% of the time of the IPO. Given the dominance of dollar in our P&L, we think it's appropriate now to remove P&L. to start reporting in dollars and move to a presentation on corrective dollars. We plan to do that from FY24 onwards. So not this year, but next year in the second half this year, we'll sort of republish all our numbers on a dollar basis. But that should remove quite a lot of the noise that we currently experience in our reported numbers from FX. If we move over the page, because our adjusted net debt, so we opened the period with 131.4 million of adjusted net debt. We had adjusted free cash flow of 21.8 million in the period. That's 69% conversion from EBITDA, slightly lower than we've had before. A couple of things going on there. So in working capital, we did have a very strong march for revenue. Some of that is stuck in working capital at the period end. No change in the rate people are paying. In fact, all that money is now in the bank. But at period end, that did result in a step up in that. And also with regards to bonuses, FY22 was the first sort of new annual bonus scheme post becoming a public company. Prior to that, we had a sort of pay-as-you-go bonus scheme. In, as with any bonus scheme, it tends to pay out post year end. So in FY22 we had a year of no cash payments for bonuses. We had the accrual for that. The cash bonus was paid in the first half of FY23, which results in a working capital outflow, about £2 million, which is impacting that number. That comes back in the second half of the year and there will be no bonus payment. And then finally, CapEx of 4.1 million, higher than prior year, but that reflects the previously talked about investment that we're making in the single tech platform, which John-Paul will talk about in a bit. Interest and tax costs, 9.3 million. Acquisition of ESN, 24.9 million. Cash outflow, and then you get this FX, another 11.4 million. That's mainly FX. As I said, we have dollar debt. Across this period, the pound has actually strengthened, which has given you an accounting gain in the books. This is a very good example of the sort of FX movement that won't occur once we move to reporting in dollars. That's left us at the end of the period with £132.4 million. of net debt about the same as we open the period that's leverage ratio of 2.3 slightly inflated by the timing of the acquisition of estate sales so the net debt number includes the cost or paying for uh estate sales but we've only got two months worth of ebitda from that if you created a pro forma leverage number it's 2.1 and by the time we get to the end of the year that should be safely below two and with that i will hand back to john paul

You can go to slide 16.

So as it says, we continue to execute against each of our six strategic growth drivers. And for those of you familiar with us, you'll know that the reason we always put this slide up is that it's the simplest way to see that symbiotic, mutually reinforcing nature of the growth levers that we have, because it's not that they operate independently. They're all mutually reinforcing. And if we grow TAM and conversion rate, there's a compound benefit that flows through. and that's something we benefited benefited from uh repeatedly over these years the other thing i wanted to do before going to the next slide is just to say that um while we it's easy to focus on some of the things that we talk about like looking at the numbers and of course that's all important to input into your models and everything else i also think it's really important as we look at this next section at the strategic piece to think about what atg is doing because what i'm particularly excited by as you look at some of these things that we'll share with you is that we're investing in the things that create real value for our customers it's not just about uh raising prices. That's not the only way we're making money. It's not about just rolling out a new product because we can. It's the fact that we're doing things that we know our customers really value. So, for instance, on the auctioneer side, what do they care about most? They care about getting the highest asset value possible on the assets that they're selling. And they care about increasing operational efficiency. And they basically want to ensure that they are future-proofed, meaning as the world moves online, can they have a partner that they can rely on? And I think what we are really pleased with in this last period is we've invested in some really core things that they value. So whether it be the cross-listing that I'll talk about, or you look at payments, which takes away a big pain point for them and speeds up their collection cycles, or You look at the fact that we've invested in estate sales dot net, which brings a lot more bidders that we can then cross list and offer their goods to. So lots of things that auctioneers care about. And for the bidders, similarly, what do they care about? They care about selection, convenience and trust. And I think what we've done again is continue to invest in things. Payments are proven to be a way that increases confidence in a business when it has an integrated payment solution. We've invested in our SEO to enable people to find what's on our sites easier. And then again, that cross-listing gives them an exposure to an ever wider pool of specialized and unique items. So all of these things are really key. And on top of that, the great thing is that, yes, it's great for our customers. Yes, we make more money off of it. But all of these things also make it that much harder for someone to come in and compete with us. So we've raised that competitive wall higher, deep in the competitive moat. And that's something we're really pleased with. So if you go to the next slide. What were some of the things we said? So we said that we addressed those three key questions, and one of them is this. So yes, we are a resilient business, even against the backdrop of macroeconomic uncertainty. And basically, we talked about it. Tom already referred to that. Looking at the INC side, the big question was, will we volume offset lower asset prices? And that is something that we see very much coming through. So Looking at our total hammer value, showing again that it's up 11% on a year-on-year basis, we think really addresses that. And as Tom alluded to earlier, we saw the number of auctions increase and the number of lots listed increase. So again, we feel that the business is really responding and showing that we are very resilient. If you go to the next slide. THV is important. And part of the reason that we see that volume increasing is because our customers still see value in what we're doing. So these are the auctioneers and the bidders. And so bidders are coming to us to find those assets and auctioneers come to us because we continue to bring more bidders. But as you can see, we continue to grow the number of accounts created, the number of bidder sessions, and the number of auction registrations. And I should say the bidding sessions excludes anything associated with estatesales.net. And then the chart that we showed over on the right is just to give you a sense for the number of lots where we are bringing an ever increasing number of bidders. Because it's not that we're just bringing one bidder, we're often bringing five or more than five bidders. And the reason why we just say five is because often in the auction industry, people will say each bidder represents 20% of the target asset price that an auctioneer has. If an auctioneer is bringing five bidders, they're very confident they're going to get the estimated value of that item. And so the more that we do that, the better. Clearly, we're not the only people bringing bidders. They have people in the room and sometimes a white label. But from our perspective, just us, we like to see the number of times we're bringing five or more bidders because it gives us confidence that even for the auctioneers to rely entirely on us, we are helping them achieve that estimated value on critical lots. Go to the next slide. So the second big question that we had posed to us was, can the art and antiques division, how pro cyclical is it? And will people return to the room or will they, you know, once COVID was over, will they stay online? And I think what we think this chart shows is the gains in COVID and, and, and, On the left-hand side, you can see that there is that small drop, but that's again due to the mix that we have with greater THV coming on board, new auction houses. So there's a lot of muddle in that number on the left that makes it hard for you to really see whether we're actually growing post-COVID. So when you look at same-store sales, we actually unequivocally are growing that conversion rate again. And so we picked a division that people had many questions about, which was live auctioneers, just to show the exact dynamic for how that's happening. So as you can see, 2019, 17%, huge growth throughout COVID. Then a bit of a drop in 22 as we saw some people, again, move back offline. But the key thing that we're seeing now is, again, growth in the first half in the conversion rate on the same store sales within live auctioneers. And that's a really encouraging sign because that's a reflection of all the investment we're making. It's a reflection also of the continuation of the curve that we saw pre-COVID. Because pre-COVID, we're adding one to two percentage points of conversion per year on the different marketplaces. And what we feel this is showing is that we're now getting back to that pattern, demonstrating that we've retained the vast, vast majority of those COVID gains. And now we're back on the growth path. And Tom repeated a bit of that earlier. So if you go to the next slide, this is just a quick one. We drove our conversion rate and partly grew those numbers through the improvements that we're making. So if you recall our three investment horizons, wave one was the foundation of an aggregator marketplace, which we are. Wave two, which we're focused on is creating a true e-commerce standard level end-to-end buying experience in the auction industry. And for people less familiar with it, in the auction industry today, when you're buying online, everything is functional. It works, but it can be a lot of effort. What we're trying to do is really raise that standard to something that people are familiar with, maybe not Amazon level, but significantly above where it is today. And so whether it be SMS, where we're seeing positive early signs, or the 12% increase in email alerts, which is presenting people with more relevant items. One of the things that we began doing just several months ago, we've always, for two years now, we've been doing uh browser-based retargeting but was for people who registered for the auction what we hadn't been targeting uh previously were people who browsed but didn't register now we're retargeting people who browse but didn't register and we're seeing engagement from that as well and then finally a big part of what people look for is just can I find what I'm looking for and while we have a long way to go on that still a big part of the investment we've been making in the last few months has been an SEO around categories, subcategories, looking at the event schema and basically the way that it was worked. It was set up differently than we would have liked. In the past, we had it set up based on an auctioneer's event versus the product. And so we're moving towards much more of a product level schema instead of event level schema. All of these things, again, should drive more visits and make it easier for people to find what they're looking for. Go to the next slide. So again, growing the conversion rate. One of the big things that we benefit from is the fact that we can focus on the bidder, which is that traditional way of driving engagement with an e-commerce experience. But we can also, at ATG, focus on the seller and really drive that in a meaningful way. And the biggest way that we can do that is by getting auctioneers to adopt timed auctions where they go all in with ATG. And one of the things that we saw was that auctioneers really wanted to, well, I guess with this, first of all, with the price incentive that we gave them, this is the first part, and I'll cover a cross-listing a little bit later. But with this price incentive, the big thing that we did is we said, okay, live auctions, you can keep running live auctions, but it's going to cost you more if you want to do that. And Tom talked about the price rise we put through. But then we said, if you run timed auctions, then your fees stay the same or even get a little bit lower. And that's because we get 100% of the auction. We don't have to share it with anybody else. We make a lot more money. We can share a bit of that with the auctioneer. And then the third gold standard that you see over on the right there that we pushed was we said, and if you take our payments product, then we will eliminate your fixed fees. And therefore, we were making the money off payments and off the volume. And it's increasing that competitive moat. and making us even more important to the auctioneers. So we were really pleased with that. And the reason why we can feel good about moving auctioneers to timed and not just feeling we're doing it for our own self-interest is because there is a higher registration to bidder conversion untimed. And as you can imagine, if there are many more bidders who are out there, whether it be on an art and antiques auction or an industrial one, where if you know that you're going to have to show up and compete against somebody in the room as a bidder, you may say, you know what, I'm not going to be able to attend that lot number of 475 on Tuesday at 4 p.m. So I'm not going to bother bidding on this. But if you know it's timed and you're only competing against other people online and that you're going to be notified in that eBay-like style when you've been outbid and be able to put a max bid in, well, then that's something that you can do that increases number of bidders to registrants. So that's a big one. And then the other thing that we're able to show auctioneers is that, again, a huge amount of the activity that takes place in an auction is happening after the original end time with a timed auction, which means those auto extensions that we have drive incremental value. So unlike eBay, where people can snipe and come in at the last second and try and get an item that they hope nobody saw, for us, auctioneers are allowed to have auto extensions, which means if you're bidding and there's another bid well then they can extend it for another two minutes or another 30 minutes if they want uh because there's no reason for the auction to end as long as people are ready to keep bidding so if you move to the next slide um This looks at what we've done to make it easier for auctioneers beyond the price incentives. So from a product perspective, as auctioneers move increasingly online, many of them, especially the larger ones, like to retain their own brand, but they also want to list on a marketplace. But historically, there is nobody out there that enabled an auctioneer to run on their white label and on a marketplace, a timed auction at the same time. And so now that we're offering this first between auction mobility and live auctioneers, this is something that's going and live now. And in the early days, what's been exciting for us to see is is that for auctioneers who historically were listing only on their white label with auction mobility, when they now cross-list on live auctioneers, they're seeing an average of 26% higher hammer value. And that's a really meaningful number. And therefore, even if it's early days, we're very encouraged, and we think this is going to encourage lots of the auction mobility auctioneers who don't use live auctioneers to take it. Okay, you can move to the next slide. We've also driven operational leverage. As you saw, our margins grew to 47% in the period. That's partly through the fixed fee increases, but it's also through additional self-serve features that we've introduced, whether it be on digital marketing. We've also improved overall site stability and then raised to global security standards. So all of these things and that progress against the common platform, which has us sharing more and more resources has enables us to deliver all the value for each of our marketplaces without the same level of incremental costs you'd expect if we were doing it individually for every single marketplace. Next slide. And payments is the next big one. So payments was the third big question mark around ATG back in December, and we feel that we've really addressed that. So first of all, if you look at live auctioneers, which is where we launched it previously, as you can see, adoption has grown to 83%. And the key thing that we are demonstrating with the chart on the right is that the adoption and interest on Proxibid is very, very strong. So 21% as of the end of March. And the key thing to keep in mind when you think about payments is that there are three phases to it. There's an onboarding phase, so getting them set up in Payrix and ready to go. Then there's an activation phase, which is where you get them to actually set up their auction and use it. And then there's a reuse phase, which is making sure they want to reuse it, making sure buyers want to reuse it. And for us, one of the things we realized in the beta was that there were a couple of things that we needed to build to ensure that that first time user experience was really good. So what we had built, we actually delivered exactly what we thought we were going to build, which was exactly what live auctioneers launched with. In that beta, we found that the INC customers needed a few more things. And so our team is delivering those. And therefore, we're going to be activating more of those customers in the third quarter, meaning in the quarter that we're in right now, as opposed to activating them in the March period that we'd expected to do so. That is a three-month delay, but it's a three-month delay in a product that we think is a five- to ten-year runway and huge impact for ATG. And so to ensure that we provided the best user experience from the get-go and created a real desire for reuse, that was the decision that we made. But as we'll talk about in a little bit, it will not affect fiscal year 24. So beyond payments, we also saw really strong adoption in digital marketing, which is our other value added service. And so as you can see on the left here, we saw increased number of auctioneers using it and an increase in the number of auctions on which our digital marketing was being used. And one of the biggest reasons that we're doing that is that we created more assets that auctioneers could buy, particularly in high performing areas. And then we enhanced the reporting and analytics to help them see the ROI that they're getting on the investment that they placed with us. And so we think, again, there's a long way to go on this, but we're pleased with the adoption that we've seen today. Next slide. EstateSales.net. So again, we spoke about this back in February. It's a really attractive bolt-on acquisition. And the thing that we really like about it is that it's really attractive as a standalone business. So if you look at the fact that they've delivered huge value, but they haven't ever really pushed the marketing that they sell, nor have they really looked at optimizing the pricing. In fact, they hadn't raised pricing in six years. Therefore, we think those are some easy wins for that business. And as Tom said, even without this it's already performing ahead of our expectations. And so we're really pleased with that. But beyond its value as an independent business, what we're even more excited by are the synergies that it creates with the rest of ATG. So one of the things I talked about before is how much sellers value us for the buyers we bring. Well, on the legacy ATG sites, we generate 180 million web sessions for the auctioneers per year. estate sales.net brings 96 million additional web sessions and there's only 13 overlap of unique visitors uh between the atg base and theirs so that's a really exciting group and as we build out that cross-listing capability it means those buyers will see more assets and the auctioneers will have millions more sessions coming in that we think again not only helps them drive higher asset values but it facilitates the rest of our strategy as well, which is to move people towards time because they realize they can go all in with ATG and achieve the right number of bidders to get the right asset value. And as you can see on the far right side, it's a sizable market and one that we understand because like the auction industry, it's in the early days of moving from offline to online and we know how to facilitate that transition. So if you go to the next slide. So what we focused on here is just three places where we are getting more involved in social and pushing our green credentials. And I think it's something that is really important to recognize because It's not just window dressing for us. We know that people want unique and specialized items. We know that people are more and more conscious about buying sustainably. And there are more and more items, in fact, that are being required to be built so that they can be reused so we know that there will be more inventory coming to us more thv more gmv but that rising consciousness we think is uh going to play into the people's demand for more and more of these used and secondary items and so it's going to be a core part of our value proposition and a core part of our brand going forward and it's something that we're excited by so just want to share a bit more about where you can see some things we're doing The next slide is about our employee engagement. And I think a big part of ATG is we are trying to build a very engaged and collaborative culture, and it's a critical enabler of our success. Every company talks about how important its people are. But I think this is something that we take really seriously. We put a lot of time into it, whether it be employee engagement programs internally or how we're developing our people, how we talk. And a big part also, though, is just about the culture that we're trying to create. And the reason for that is, I think, in this post-COVID world where people can work anywhere, that culture is going to be even more important as a way to retain employees and attract them. the pool that you're shopping from is bigger, but at the same time, their pool of options is also bigger. So I think culture is going to be playing an ever bigger role. And it's also an important part to look at when you're thinking about the fact that people are either remote They're in a hybrid environment, or they may never or rarely be seeing their colleagues. So what we've been putting a lot of time into is looking at ways that you can build connection between employees, even when they never come into the office. And I think that's why we highlighted these results, because we're really pleased. with how that's been panning out from our employee survey. And again, we use not just a personal survey with tailored questions that would favor us. We use a global company that asks the same questions to something like 20,000 different businesses. And so these results are being benchmarked against those. And we know that we're faring very well. So people I work with treat me with respect, 93%. People on my team collaborate and help each other at 93%. And I enjoy working with the people on my team, 95%. And the reason that we're really pleased with this is also one of the old adages that I've heard is that they say that people stay at a company because they like their colleagues and they leave because they don't like their manager. And so at least on one of these, we feel like we're doing really well. And I think we're doing pretty well on the other two. And so now onto the key slide of guidance. So I'm just going to read this out for you. But as expected, we have an improving rate of growth across the first half, as well as at the start of the second half. And Tom took you through that. Auction markets have remained robust despite an uncertain macroeconomic backdrop. The art and antique marketplaces, which were a big question mark, have seen positive GMV growth for the three months to the end of April. And therefore, we are reaffirming our guidance for organic revenue growth, although at the lower to mid end of the range, reflecting the timing of auction activations within ATG pay for Proxibit. Given the strong demand from Proxibit auctioneers on ATG so far, we do not expect there to be any negative impact to the revenue in fiscal year 24. We're confident in delivering our full year fiscal year 23 adjusted EBITDA and adjusted EPS in line with current market expectations. And we're confident in achieving our medium term targets of mid teens plus organic revenue growth and mid to high 40s adjusted EBITDA margin. And so, yeah. That's kind of the last slide. And just as we wrap up here, I guess what I wanted to reiterate is that we feel really good about these first half results. As I said, we feel we've addressed those three big questions and that we're seeing that very positive momentum that's accelerating as we begin Q3 now. We feel like we've lapped those tough COVID comparators that make forecasting difficult. And so the core business is very strong. We're able to augment that growth now with our payments product, which is rolling out and which we feel very good about based on that early response. And as I mentioned during the strategic section, we feel like we're doing this while really creating value for the auctioneers who work with us and the consignors who depend on them, as well as for the bidders who are coming to us for unique and specialized items or for practical items or for whatever it may be. And so while all of this is going on, the fact that we were also able to improve our financial profile is a great result. And I think For me, we talked about the people we've been hiring and the results of that. And I think as I look out, I'm very happy with the way that our team has performed in this period and how the new executives have performed in each of their roles. And as we look out to the next six months and year for ATG, I'm excited. And I think the whole team is about how we can continue to transform the auction industry. So with that, we will stop and take Q&A.

We will shortly begin the question and answer session. If you would like to ask a question, please press star and then one now. If you would like to remove yourself from the question queue, please press star and then two. Again, if you would like to ask a question, please press star and then one now. The first question we have is from Lara Simpson from JP Morgan. Please go ahead.

yes good morning and thank you for taking my questions and my first question is just on take rates and i think you've called out an improved rate for inc in the second half of the year and on both pricing and payments and it looks like there's quite good momentum on the a a side and how do you see group take rates trending in the second half of the year obviously taking into account mixed effects which i think should ease and then interested more generally on how you're looking to drive these forward in 2024 particularly at a time when payments are becoming a bit more relevant. And then I just wanted to come back to ESN, if I may. You've obviously said integration is on track and performance is ahead of expectations. How is the business growing from an organic growth perspective or sort of standalone, maybe sort of for the last three months? I think you said previously it was growing around 9% pre-acquisition, so interested to hear how that's going. And any insight on demand trends I think would be helpful. And then just to pick up on pricing, that's clearly been a focus for you in that business. Have you put through any headline price increases yet? And if so, interested to hear if there's been any pushbacks on that. Those clearly prices have not really moved in a long time. Thank you.

Sure. So, Tom, I think all of those are for you.

Yes. So on take rate in the second half of the year, I mean, you're quite right. The first half of the year take rate at an overall level hasn't been a driver of growth. It's really about GMV or when you look at the segment level, slightly different story. But we would expect it to be a start to be an important contributor to growth in the second half of the year when you. implicit within our guidance, the second half of the year growth is a step up where we were in the first half of the year. I would assume that a significant part of that is due to improved take rates. We don't guide specifically on take rate versus GMV, but I say there should be a step change in the contribution of take rate in the second half of the year. With regard to ESN growth, as you say, it was growing about a sort of high single digit. It's been above that in the last couple of months. So it's now growing in the teens. I wouldn't read too much into that because like all of our businesses, if you look at any narrow periods, you get movements in the growth rate. But ultimately, as I said before, it's performing well in any of our expectations. Price increases that you talked about, they're very much part of our plan on estate sales. That will happen in the last part of the year. I'm not really assuming a big contribution of that in this year will be more a feature of next year, but still nothing we've seen to date has changed our view on that opportunity.

And I think there was a question in the middle there that I might have missed. I don't think so.

Yeah, I mean, I think it was just around the demand trends on ESN, but I think you've just said, yeah, hygiene screws. So that's fine. That's helpful. Thank you.

Okay.

Thank you. Thank you. Ladies and gentlemen, just a reminder, if you would like to ask a question, please press star and then one now. The next question we have is from Gareth Davies from Numis. Please go ahead.

hi morning guys um a couple from me as well the first one in terms of the additional functionality on payments that imc customers have asked for i wonder if you can elaborate a little bit on what that was um what you've developed there and and is that going to be relevant also on the live auctioneer side is it something you will kind of roll out there And then sort of relating to that, in terms of activation of proxy bid customers, is it a sort of big bang event end of June into early July? Or is there a sort of steady timeline of putting people onto activation? And then the second question, again, relating to payments is on estate sales. Is payments a relevant product there? It sort of feels at face value. If it is, you can do it relatively efficiently and quickly.

um given that you've now got the live auctioneers product and the proxy but product but interested in your thoughts around how relevant payments is for estate sales thank you sure so i'll take those and um so first of all in terms of the additional functionality it was things like uh tax exemption so in the uh industrial commercial space you have more b2b buyers and as a result they have tax exempt status And in the current setup, they would have to submit that every single time that they bought an item, which would be burdensome for the auctioneer and for the buyer. And therefore, what we're doing is creating, again, it's done an automated way where when the person uploads it once, they don't have to repeat it. So that's just creating a better buying experience. There are different categories that we had to create certain categories. codes around for the payment provider that we needed to address. And the last one was just enhanced reporting on certain features. So those were really the three big things we looked at. And as I said, the team is delivering on that. terms of your second question um about the rollout whether it's a big bang it's ready and then it's a case of getting the auctioneers you know we we feel good about that just based on what we've seen the live auctioneers and and the interest from the auctioneers of turning it on um so there'll be a bit of a bump yeah imagine say in june uh as we go forward but then uh you know it will be a gradual build uh after that uh uh as p because it's one getting the auctioneers and then it's gradually getting buyers more and more familiar with the fact that this is the method by which auctioneers want them to pay and so there'll be a build you know there'll be a bump then a build and then as we continue to add auction houses you know we'd expect to see that continue to build And then for payments on ESN, absolutely. The way that we talk about it in terms of that single platform is we built payments as a shared service, which means that whether it be live auctioneers initially and then BidSpotter and then our European marketplaces, as well clearly as estate sales, we'd hope that we can roll that out. But again, right now we are focused on Proxibid. It's a massive opportunity just on Proxibid. And I wouldn't say you should expect in the next six, eight months to see anything on estate sales, but absolutely it's something that we will be able to integrate there and that will be another big opportunity.

Just one quick follow-up in terms of getting buyers comfortable. When you went through that experience on LiveAuctioneers, How straightforward is that? I mean, I suppose B2B buyers are going to be ideally a little more sophisticated, so it could be more straightforward for proxy bid, but just be interested in sort of how quickly you could get people comfortable.

Well, so first of all, on live auctioneers, often it's simply it's a payment method. So if you can imagine every other website that you use, it's simply an integrated payment method. And the expectation is that a bidder will use it. Sometimes a bidder who, let's say, is familiar with the auction house may say, no, I want to pay you directly. And that's the only time that you'd expect people to be going around. Now, unless the auctioneer also happens to be offering another gateway on the side. But what we expect, again, is that as auctioneers roll this out early on, they may end up still offering somebody the ability to send a check in or do something like that. But over time, it's just a realizing it's easier. And then for the auctioneers, the reason why we have a double benefit here is for the auctioneers, one of the things, it usually takes them a minimum of two weeks to collect all the payments at the end of a given auction, sometimes considerably longer. When you implement best practice with our payment solution, which includes auto pay, just as you see on eBay or other marketplaces, just means that when you own the auction, your card that you have on file gets automatically debited. And that increases the payment collection cycle by a huge amount of time, allows you to pay your consignor faster. So there's big incentives for auctioneers to be pushing our solution as well. And again, we think they will, but we'll give you an update

in the next six months. Fantastic. Thank you.

Thank you. The next question we have is from Buddy Barrett from Stifel. Please go ahead.

Thank you. It's Bridie from Stifel. Two questions, if that's all right. I'm just thinking about your chart on conversion rates, which showed a nice upward trend. Are you able to just provide a little bit of context about how you benchmark against industry standard conversion rates or competitor marketplaces? So that's the first question. And the second question, I'm just thinking about the estate sale model, which, if my understanding is correct, it's quite a US model. There's obviously a lot to go for in the US market, but I'm just wondering how exportable that would be perhaps to other markets around Europe. Thank you.

So I'll take the estate sales one first. And I'd say I don't think it's exportable right now. You never know what happens. But in the US, the estate sales market is really kind of the equivalent. It's a step above garage sales, but it's basically someone's died and it's just people coming in. And often all the items at the house are put out and on display. And it's not the same level of thing that you see happening in the UK or Germany. And so I don't think it's something that's going to grow. But in the US, it is a $5 billion market already. And that's the portion that's formally run. What we really believe is going to happen is that there is a lot more in the estate sales sector that can flow and grow that THV or that TAM meaningfully. Because one, there are people who do it themselves, where if you do it professionally and run online- you're going to get more value. And number two, there's lots and lots of things that people just don't think of selling because they think nobody's going to want to buy it. We think as we demonstrate the value of secondary goods and through estate sales showing that can be really done easily at a local level, that there's billions more that is up in people's attics and elsewhere that can be pulled out and put out to sale. So I think that there's a lot of room in that TAM. It just is unlikely to be international. In terms of your conversion rate comment, the way that we benchmark other competitors is really just by looking at auctions where we are and where they are, or just our overall share from discussions with auctioneers. And so that's one. But in terms of benchmarking our conversion rate versus other marketplaces that are non-competitors out there, it's a pretty tricky one to do because the auction industry isn't like normal e-commerce. It's an industry that has, again, millions of unique SKUs. So the 20 million plus items on our site, every single one is unique. There's different ways of buying. And so we don't really benchmark it against other e-commerce marketplaces today. That being said, we definitely see no reason why we shouldn't be at 50% plus conversion at some point in the next four to five years. And I think we believe that that's possible. Payments will help it. The timed adoption that we're looking at will help it. Anybody who's bought on our sites will know it's functional, but it is not. a smooth traditional e-commerce standard experience, just raising buying to a basic e-commerce standard is going to be worth meaningful conversion rate points. And so we feel very good about our progress and our competitive positioning, but in terms of benchmarking other marketplaces or competitors, we know we're ahead of everybody in terms of conversion rate, but we don't do a formal benchmarking of that.

Thank you.

Thank you. The final question we have comes from Emily Johnson of Barclays. Please go ahead.

Morning. I've got a couple of questions. The first one is just on your net debt. Can you kind of run us through your position there? Where do you expect to finish the year at? How much headroom do you have on your company? And And can you also run us through your liquidity, given the cash at the bank on your balance sheet has been restated downwards, excluding the employee trust? So just kind of running us through what your liquidity looks like. The second question is just checking, are there any more exceptionals to come in the second half? Or have we got all of the ESN kind of one-offs in the first half numbers? And then the third question is, can you just run us through the FX benefit on adjusted EBITDA in the first half, please? Thanks.

Sounds like they're all mine. in terms of net debt position at the end of the year i think i said the presentation we would expect that leverage ratio to be um below two by the time we get to the year 1.8 each wouldn't be a guess but it will depend exactly how things land um down from where we are 2.3 now in terms of liquidity um So, look, we have a cash balance, but we also have a drawn RCF. That RCF is $49 million, and basically we're keeping the cash balance as low as we possibly can so we can keep the drawdown on the RCF as low as we can to minimise our interest costs. I wouldn't read too much into what our cash balance is, but at the moment, if you look at that undrawn RCF plus the cash balance available we have, in excess of $30 million of liquidity. And I'm sure you'll be familiar, as a business, we are day in, day out cash generative. We have no real need for liquidity. There aren't many peaks and flows. And so that's an extremely comfortable position for us to be in. In terms of covenant headroom, I won't give you the exact numbers, but we have very significant covenant headroom against our debt. It's... not really a significant issue in the business at all. And then with regard to exceptionals, Most of the costs are in this time. The one bit that will dribble through in terms of accounting, part of the acquisition, we agreed to make a two million dollar payment to staff, which is contingent on them staying for a year. And the way you do accounting for that, rather than being counted for all up front, sort of amortises over the one year period. And so we've got a bit of that in the first half of the year. There'll be some of that in the second half of the year, too. That cash payment won't actually happen until next fiscal year, but we'll be charged the P&L over this year. And then in terms of FX, remind me, the FX benefit, I forgot what the detail of the question was.

Just the FX benefit on adjusted EBITDA on the first half.

So sorry, yes, as I said in the presentation, our cost base largely mirrors our revenue mix. And so it's not an unreasonable thing to assume that the benefit of FX in EBITDA is not dissimilar to the benefit in revenue.

That makes sense.

Thank you. Thank you, sir. There are no further questions on the conference line. I'll hand over to John Paul Savant for closing remarks. Please go ahead, sir.

Okay. Well, thank you again for taking the time and listening in to these half-year results. As I said, you know, we're excited by where we are and what we've done in this period and having lab COVID where we stand. And again, we're looking forward to speaking over these next weeks in a bit more detail on some of the one-on-one sessions. And we're really excited by the next six months for ATG. So thanks again.

And we'll talk soon.