Auction Technology Group plc

Good day, ladies and gentlemen, and welcome to ATG Half Year Results 2024. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, we ask that you please use the raised hand function at the bottom of your Zoom screen. If you're dialed in by phone, please select the star nine to raise your hand and star six to unmute. Instructions will also follow at the time of the Q&A. I would like to remind all participants that this call is being recorded. Questions will follow after the presentation. I will now hand over to John Paul Savant, Chief Executive Officer, to start the presentation. Thank you.

Thank you. Welcome and thank you for joining ATG's interim results. I'll kick it off and then turn it over to Tom to go through some details on the numbers, and then I'll end it looking at some of the key initiatives and the results we've been able to generate with those. Today we're sharing little news relative to the trading statement in terms of any changes or differences in the numbers. The exciting part of today I think is really giving context to what we achieved in the last six months that drove those numbers and the message and the momentum that we're creating as we enter the second half. One key message that I wanted to get across is that what we expected in the first half of fiscal year 24 happened, both the challenges and the positives. So on the challenging front, as we had said back in December, we knew that there was going to be some ongoing challenges, particularly in the INC group driven by Proxybit. And as the half unfolded, that was what dragged back our first half results, as we explained before, and which Tom will go through in a little bit more detail. But I think what we also talked about in December was that we were launching and ramping multiple initiatives, including ATG Pay, ATG Ship, and ATG Excel, which is the cross-listing initiative. And I'll be spending more time later talking about those. And so for us, that was a really exciting period in these last six months, and we're beginning to see the benefits. And the key part of that is because Those key initiatives drive KPIs that demonstrate that the marketplace playbook works for the auction industry. And so if you go to, yep, thank you. And so that is maybe where I'm going to start out headlining for people is that What we're excited by right now is that ATG is demonstrating that this marketplace playbook that has worked in many other industries works for the auction industry as well. And so what do I mean by that exactly? The marketplace playbook is really about owning the core transaction, then monetizing around that, extending network effects, through different types of investments around the marketplace that then keep your cost of acquired customer or your CAC low. And then that in turn allows you to extend volume gains over time. And so what exactly, have we done in the past? I think you've probably heard me talk about ATG as a two-sided marketplace, but I think what we're excited by now is that we're in a position to talk to you about how we're evidencing that that is working as we invest against these other areas. So what do I mean? The first part is value-added services. So we've invested against that. and it has increased our take rate and our revenue. So plus 44% year-over-year growth against an already solid number and with huge room to grow. And that extended our take rate by 0.7%. We also investing in the cross-listing initiative that drove incremental GMV on the auctions where it was available. And it drove an average of a 9% uptick in GMV on those auctions. The third part is acquisitions. And selective acquisitions can accelerate. First of all, they can add the scale, but they can also accelerate your network effects. And in the case of ESN, that's exactly what happened and which I'll talk about. So ESN, a solid business in its own right. We quadrupled the growth rate since we bought it, and now it's at 36%. But on top of demonstrating the value of the network effects and the value of that acquisition, the other key thing that ESN has helped us do is demonstrate that people ready to buy at auction are not just those who traditionally buy at auction. It also includes anybody who's buying in the secondary goods market. And that is what is represented by the 180 million plus web sessions and bidders and buyers that were on ESN who are now being cross-listed onto live auctioneers. The fourth point I wanted to raise is that following that playbook and leveraging all elements of it, cross-listing, various value-added services, M&A, all contributed to ANA growth. And ANA grew 17% year over year. Now, as you look at INC, we are also following that playbook, and we are leveraging cross-listing, white label, and value-added services, which is all in the early stages, but we believe it's demonstrating the same impact as you follow that playbook on the INC side based on the strong lead indicators we're seeing. To date, as we talked about, there was minus 2% growth on INC. but there's positive momentum building as we begin this back half. And so based on that, we are confident in our outlook for second half 24 with improving momentum in GMV and sustained growth in our value-added services. And so with that, I am now going to turn it over to Tom for the period.

Morning, everybody. If we move to the next slide, Just to give you the headline financials. So revenue in the first half was $86 million. That's up 6% year over year or 1% on an organic basis. Adjusted EBITDA of $35.7 million, down 6% year over year, giving you adjusted EBITDA margin of 42% and adjusted diluted EPS of 16.6%. Adjusted free cash flow was 27.7 million at 77% conversion, with adjusted net debt at the end of the period of $141.6 million. That's leverage of 1.9 times. We can move over, we'll go into those in more detail. So revenue first, you see revenue by segment on the table on the left-hand side. So of our 86 million of revenue, $44.6 million came from arts and antiques. That's up 17% year over year. So included in there is a four periods contribution from ESN, but also ESN on an underlying basis also. grew very strongly through the period. If you take out ESN, the organic growth was 5%. That's despite a difficult backdrop, a macro backdrop for the arts and antiques market. That growth came from value-added services, which we'll talk about in a moment. Then industrial and commercial, $35.2 million of revenue, down 2% year over year, really two halves within there. So industrial and commercial has got four marketplaces within it. Three of those perform very strongly and are supported as with ANA by VAS. But we did have the headwinds. We did have negative performance on proxy bid GMV that we talked about in the trading statement and we'll talk about in a moment that offset that lead to that decline of 2% in INC revenue. Auction services. This is principally our white label business. Auction services went from 5 billion last year to 4.4 million this year. impacted by the introduction of our new cross-listing enabled a white label solution. So during the period, we would normally sign up customers. We did this time, but actually we're signing up to the new product, transitioning towards that through the period. So most people are going live about now rather than through the period. So that did have a small effect on revenue in the first half, but that will start to unwind as people go live in the second half. If you look at our KPIs at the bottom there, so GMV down 17% year over year to 1.9 billion, heavily impacted by proxy bid. And in particular, something we talked about the full year, I'll talk about again in a moment, the rotated volumes of a single auction house, that switched at the beginning of half year to 23. If you look at an underlying basis excluding that, 9% decline in GMV, more than offset by an improvement intake rate from 3.2% to 3.9%. If we move over a slide with a revenue bridge with a product view. So you can see on the left-hand side, 80.8 million of revenue going to 86 million in the first half of 24. Of that, you've got a drag from commission. So commission was down 9% year over year, mirroring that GMV decline. We split it out there between volume and mix the mix is the commission rate mix is slightly influenced by that auction house I talked about which paid very little or very low effective commission rates relative to the group average so it exaggerates a little bit the volume impact net of it all we lost 4 million of commission revenue first half this year versus first half last year however offsetting that more than offsetting that you've got the growth in value-added services so 5.2 million of extra revenue from VAS That's 44% growth or organically excluding SM, 40% growth with a material contribution from each of the three product lines, marketing, ATG pay and ATG ship. FAS now contributes 23% of our total revenue in the first half. Small increase in fixed fee revenue, 0.7 million. And then it moves over to ESN. So an extra 4.1 million of ESN revenue. As I already mentioned, we had two months last year, four months this year. So you get a boost from there. But also ESN on an underlying basis grew very strongly in the period. So 36% organic growth or pro forma growth from ESN first half this year versus first half last year. which is also making a significant contribution to that 4.1 million. And then auction services, 700,000 down, as I've already explained, lead you to 86 million for the first half of 24. The little row at the bottom shows the contribution to each of those factors to our overall growth rate. So our overall growth rate was six percentage points in the first half of that or within that you've got a five percentage points drag from commission so that nine percent reduction in commission impacted group revenue performance by minus five but then that's more than offset by the growth in VAS a forty percent growth in organic VAS led to a six percentage point improvement in group total revenue impact at one percent from fixed fees and then you've got five percentage points from ESN which isn't included in our organic revenue growth number and then a small reduction from auction services Move over the page, talk a little bit more about arts and antiques. So some of the headline KPIs, so THV, 2.8 billion, down 5% year over year. And in fact, if you get beneath that a little bit and you look at the auctioneers we have, so our mid-market regional auctioneers, and that comprise about 65, 70% of our total revenue comes from those smaller houses, actually doing okay. So not growing strongly, but low single digit levels of growth. All of that decline is concentrated on what we would call tier one. So these are our larger national auction houses. There are about 100 of them across the group that form in that category. And they are suffering in the wider market backdrop from ANA linked to weaker macros and consistent across other large auction houses. That cohort is driving that decline we're seeing in THV. Conversion levels are broadly flat over the period, but the THV overall is leading to GMV decline. You can see there from 442 to 412, but that is being more than offset by the improvement in take rate from 8.3% to 9.5%, with good fixed fees performance, but in particular, standout performance in VASP. Overall leads to marketplace revenue growth of 5% in organic basis to 44.6%. So if we move over slide to INC and so before we get into the table, just look at some of the headline numbers. So on the left hand side, THV. So we talked a lot about THV in the four year results, in the four year results. We gave in November, you can see half year 124 of 3.9 billion. The comp is going against from half year 123 was an exceptional period of activity. That was a period of very high asset prices, but also for us, a very high period of activity. So it was a 9% decline year over year in THV. But actually, when you look at half year one in a historic context, overall levels of activity are still good, still high. They're just not as high as the exceptional levels that we saw in the first half of 23. Asset prices are still edging down now, but the high levels of deceleration that we saw at the beginning of the period are now over. And in fact, when we got to March, April time, overall THV has been relatively stable on INC. And that is consistent with the last period of high levels of activity in February 23 that we saw on reverted to more normal levels from March onwards in 23. And that's also what we're seeing in there. in the performance in the early parts of half year two and we expect that to continue for the rest of the year so THV and INC we think will be relatively stable in the first and the second half of 24. On the right hand side you can see GMV and INC so the headline number down 19% year over year from 1.8 to 1.5 and is heavily influenced by this rotated volume just to remind people We had an auction house, which we did a lot of volume with, frankly, quite high effort for us, but relatively or very low levels of revenue. We swapped that auction house for one of its consignors, so took a subset of its volume. But at normal rate cards meant the revenue impact was negligible, but it did have a distorting impact on our KPIs. If you remove the effect of that, our underlying level of GMV change was minus 9%. partly influenced by the THV I've just talked about, but also some of the issues we had on proxy bid, following the rate card and some increased white label adoption amongst a certain number of auction houses that's impacted the performance in the period. Now, the good news is that most of those effects are now starting to work their way through the numbers. So I've just talked about THV, which at the moment is broadly flat, rotated, That happened on the 1st of April, 23. So when we got to the 1st of April, 24, that's now dropped out of the numbers. And we're also seeing much reduced impact from the rate card. We're now a year away from that. And a number of things have been done to mitigate that. so underlying gmv on proxy bid as we've gone through march and april has been flat so clearly long term we want that to grow but relative to where we were which was which was reasonably significant declines we're very pleased um with that performance and gives us good hope for the second half of the year if we move over a page Same numbers, just in a tabular format. So we talked about the THV decline of 9% and the GMV decline of 19%, which if you look at underlying basis, it's more like 9%. That has been, as with ANA, that GMV has been largely offset by improved take rate, 1.9% last year to 2.4% this year. And here I should mention the other three marketplaces. So Proxibid where we've had the issue comprise around 60 to 65% of INC revenues. We have three other marketplaces making up the other 14%. Those three other marketplaces have performed very well. Aggregate growth across those, revenue growth across those sites has been 14% year over year. So the issue has been very specific to proxy bid and very specific to proxy bid GMV, something that we believe we are now starting to leave behind us. We move to the next slide, look at the overall P&L. So on the right-hand side, you can see revenue, 86 million up 6% year over year. If you look at a couple of the cost lines, the cost of sales up 10% to 28.1, and a couple of rows beneath that, administrative expenses up 8% year over year. So both those cost lines have gone up more than revenue, leading to adjusted EBITDA, which is sort of three-quarters of the way down the page, 35.7 million, 42% margin, 6% down on prior year. I'll talk about that more on the next slide and give you a bit more insight into what's happening with cost. Before I do that, just move back up to net finance costs of 7.4 million. So down a third on prior year. Last year's was artificially inflated by some FX on our intercompany loans. If you look to the underlying level of finance charges, they're a broadly flat year over year. That reflects lower net debt, but higher interest rates. First half of last year still hadn't had the full impact of increasing rates. This year, clearly, rates have been relatively stable over the period. The net of both those two effects has been flat finance costs. Hopefully, well, should US interest rates start to come down at some point over the course of this year, that will feed through to lower finance costs for us. And then finally, at the bottom, you've got adjusted diluted EPS with the reduced EBITDA and relatively flat underlying finance costs and broadly flat depreciation and amortization that has declined 14% to 16.6 cents in the first half. If we move to the next slide, we'll talk a little bit more about cost. So as just mentioned, a bit down margin in the first half of last year was 47% and this first half of this year, 42%. So five percentage points for the chart on the left-hand side just breaks that out into its component parts. So 2% points of that is revenue mix and specifically the declining commission Commission has an above average margin, a high contribution to the bottom line. So when that goes down, like it has in the first half, nine percent four, that does reduce our overall EBITDA percentage. So two percentage points is due to revenue mix. You then got three percent due to cost. And so this is basically cost that's increased more than more than more than revenue. Two main drivers behind that. We've, during the course of the first half of the year, we've established a technology hub in Mexico. That will be the basis for our technology investments going forward in Mexico. We've also made some changes to our product and marketing organization. We bought in a new CPO. Our old CMO left us and there was one or two headcount changes as part of that reorganisation. So both those two initiatives actually in the first half of this year incurred extra costs that we wouldn't normally make. So, for example, in the case of the Tech Cup in Mexico, we actually had double running costs for a while of the people we'd recruited in Mexico because they're relatively early days. The capitalisation of that team was lower than it might normally be. in the second half. So in aggregate, that extra spend has taken our margins down by about three percentage points relative to what it otherwise would have been. Now, in terms of what that means going forward, if you look at our four-year guidance of 46% for our EBITDA margin, and given we've had 42% in the first half, you can infer that in the second half, we're expecting a EBITDA margin of 50%. So a reasonable upstep by eight percentage points. That aggregates out at about $5 million reduced cost, $5 million of lower cost in the first half relative to the first half. of that percentage of that margin improvement an element is revenue mix so whilst commission has been a drag in the first half we expect that to be broadly neutral to up which would leave um the margin enhancements that come from some of the other revenue lines that have an above average margin such as esn uh able to feed through but then get the cost impact of the things we're doing in the first half. So we get a double whammy. So we lose the one-off costs that we incurred in the first half, but also the net impacts of those initiatives that happened, the tech hub and the reorganization of sales and marketing, sorry, of products and marketing, do reduce our ongoing running costs. So in the second half of the year, you get the benefit of those lower underlying costs and also the loss of the one-off costs. And that then is compounded by slightly more capitalization in the tech team than we did in the first half of the year. That will just switch spend from EBITDA to CAPEX. CAPEX in the first half was around 5 million. We're expecting around 6 million in the second half of the year with a four-year guidance of between 10 and 12, midpoint 11. So that's the bridge to get you from 42 to 50 with a full year average of 46%. We move over the page, look at our net debt. So we opened the year with 141 million of net debt. We had an adjusted EBITDA of 36 million, capex of 5 million, as already mentioned, a working capital outflow of 2.8. That's wholly due to the payment of bonuses. The annual bonus is paid in the first half of the year. So in the second half of the year, that effect isn't there. We've had interest and tax payments of 15 million. So notwithstanding anything else, you'd have 129 million of debt But then we paid the final tranche of consideration for ESN, 12 million, which has left net debt at the end of the year pretty much the same as where it started at 142 million. Because EBITDA has nudged down a little, that has meant that Leverage has nudged up a little from 1.8 to 1.9, but in the second half of the year, with the benefit of increased EBITDA, better revenue performance and lower costs, and also the absence of any large payments such as ESM, that should give us a fairly healthy level of deep leverage in the second half of the year. We expect to be around 1.5 times levered at the end of September. And finally, we move to the guidance page. Really no changes on anything else that's previously been communicated. So revenue in the range of 175 to 180, giving a midpoint of 7% growth, underpinning that 2% to 5% organic growth. The difference between the first half and the second half, the first half organic growth being 1%, fundamentally being the loss of the drag from commission. So the fact that proxy bid GMV is now stable basically means we're trading. It's a consistent place with the second half guidance that we've given. And that loss of drag from commission is then allows the benefit of continued fast growth to continue in the second half of the year. Just an EBITDA margin of 46%, which I've already talked through. And then all the other elements, net finance cost, tax rate, capex, are all as per the November 23 guidance and all broadly consistent with the performance that we've seen in the first half of the year. So with that, I will hand over to Jean-Paul.

Thanks, Tom. So if you move to the next slide. So why are we excited as we begin the second half and why do you hopefully sense of confidence in our outlook and where we think we're taking ATG? I think, first of all, just kind of looking at the industry again, auctions are moving online. And both auction houses and bidders are increasing their level of trust in ATG. That's reflected in the number of auctions they're listing, in the number of lots they're listing, and ultimately in the number of web sessions. And so keep in mind that this 15% uptick in web sessions for the first half of the year is 100% organic. So we're continuing not to pay for driving traffic to our sites. And this is, in our minds, a reflection of the network effects we're taking increasing advantage of. So again, auctions up 3%, lots listed plus 7% and web sessions up plus 15%. If you go to the next slide. So this is a slide that we've shown at every earnings presentation for the last three years. And it's the three investment horizons that ATG is following and which we believe is the basically is the playbook for a two sided marketplace. Horizon one being where you establish the scale, that core technology that you can grow volumes off of. Horizon two is where you're improving the end-to-end experience and adding uh part of that being adding the value-added services but doing the things that help you grow conversion rate and the core and the third horizon is where you're able to do the more transformative things um uh extending to the ecosystem and doing unique things uh for your particular industry which we'll talk about another time um but apg is making progress uh building and buying the assets and continuing to execute against that marketplace playbook And the growth levers that we have to do that, just as a reminder for people who are new to the call, we can grow our total addressable market by adding auction houses, moving into new verticals, moving into new geographies. We can improve our conversion rate, especially through timed options on the seller side or by implementing standard good practice end-to-end UX on the buyer side. We can connect different assets together, which can extend our network effect. We can monetize around that core transaction by adding value-added services. We can improve our operating leverage by operating off of kind of the hub and spoke model, both from a management and operating perspective and from a technology platform perspective. And finally, we can accelerate that growth through M&A, which we've done historically and which we continue to do with the acquisition of ESN. What's really important to think about, though, when you're looking at how these horizons evolve is marketplaces are unique because the levers can combine in different ways to create unique competitive advantage and and what matters is really total revenue and growth over time not individual product lines and the reason why i call that out is just today we've talked about marketplaces we've talked about uh payments shipping digital marketing But when you think about how we want to think about this business going forward as a marketplace, it's more important to focus on total marketplace revenue and the KPIs driving the volume. rather than individual product lines. And so you will be seeing us focus increasingly on those types of metrics because we think it's a better indicator. We don't want people keying on the fact that if payments or shipping goes up by a little bit or down by a little bit, that's less relevant than if the total marketplace revenue is going up with the volume, because we may be taking shipping revenue down in order to drive conversion. And that's part of the advantage that you have in a marketplace. Now, we haven't done it yet, But it's just something to think about because it's the collective benefit of all these assets. That's really the unique advantage of a marketplace leader in this type of two-sided marketplace space. And that's where we plan on heading. So if you go to the next slide. I put this slide up just it is hopefully a fairly simple way to look at what ATG is doing because what's key to remember is that we are focused on solving real customer problems that other people aren't solving for our customers. And these challenges are pretty straightforward. Auction houses want more bidders. They want reliability and an easy path online. They want operational efficiencies. Bidders want choice. They want convenience in the form of a familiar end-to-end buying experience that's closer to e-commerce. And they want to do that with high security and trust. And we invest against both of these areas and it delivers value to them. In COVID, and the reason why I spit this out, when you look at lots of companies that have really suffered, many companies invested in buying bidders during COVID. And the reason they did that is they looked at the customer usage rates and basically the lifetime value, and they extrapolated that out into the future. thinking that that would go on forever. We didn't do that. We didn't spend money buying bidders. What we did was ATG invested in differentiated product that expands our investor pools that we believe drives conversion and sets the path for increasing our organic traffic, which you're seeing in our numbers today, because we continue to not spend on marketing to drive that. And so what did we really do? As you know, in the midst of COVID, we said we're going to begin investing more in value-added services. So ATG Pay, ATG Ship, and ATG AMP. And for people, again, unfamiliar with it, AMP stands for Auctioneer Marketing Program, which is where auctioneers pay us in order to reach our bidder base. And we grew that from a fairly insignificant number to 23% or over $40 million of revenue now. and it's growing 44% year over year, but with huge scope to continue to grow. And so we're very pleased with how that's played out, not just because it's driving revenue, but because again, it's proving out that the marketplace playbook works for auctions. The second part though, on the right hand side of the slide is more about what we did is COVID was winding down and we began investing in the areas that drive GMV and conversion rate. And those are now coming to fruition as well. So what did we do? We invested in the ATG white label. We invested in the ATG cross-listing capability, which allows an auctioneer to upload once and then list their assets on multiple ATG marketplaces. And we bought estate sales.net with the ability to cross-list it now onto live auctioneers. And across all the different ways that we're running cross-listing, you're seeing anywhere from a 5% to 10% uptick, sometimes even 10% to 20% in different corridors that we've been testing it on. So with that, you can go to the next slide. The first area I'm going to look at is ATG AMP or Auctioneer Marketing Program. And what you can see here is that more auctioneers are using it. They are also increasing their spend and they're doing that because it works. And when I say it works, why is that? Well, it drives on average 2X the number of registrations when you use our marketing than when you don't. And it generates over 3x the number of browsers. And so for an auctioneer, these are really critical metrics. And basically today, we've talked about this before, Etsy is at 4% of its GMV that it monetizes just through digital marketing. ATG across the group is at 0.6, 0.7. Live auctioneers is the highest penetrating of our marketplaces at 1.3%. But we believe that there is a clear path by which ATG can reach 2% of GMV being monetized with digital marketing. And if you want to be aggressive, there is a path to do more than that with all the different tools that we're understanding the deeper we get into this. So this is an exciting area, very high margin with huge scope for growth. Go to the next slide. So payments, the key message again, I think beyond the revenue and the penetration, I think what I want to highlight here is that The levels of penetration you now see, 94% of live auctioneers taking it, 48% having signed up to it at proxy bid, demonstrates, again, that the marketplace playbook works. Auction houses will take an integrated payment offering, and that is whether you're in art and antiques or industrial and commercial. And so the other thing to highlight, again, is that while we've been increasing this penetration, We've also been significantly increasing the profitability. So two and a half, two years ago, even the profitability of payments was down around 5%. And now that's over 30%. And so again, demonstrating that we can both increase penetration and improve profitability as we add around the core transaction. Next slide. So the third part of the value added services is ATG Ship. And this is both a direct revenue driver and a driver of GMV. Keep in mind, this is only available on live auctioneers today. And a key reason that we developed this is that for any of you who've ever bought at auction, You may be ready to wade through the search and finding unique SKUs amidst 22 million. You may be ready to wait to bid on that item. You may be ready to lose occasionally, even after spending the time to bid. But the thing that drives most people crazy is when you actually have to figure out your own shipping. And so investing in this is a big deal. And it's something that we're seeing the benefit of. 37% of live auctioneers customers said, if there's one thing you can do for us that would improve the experience, it would be to improve shipping. And that was five times the rate of the next nearest response in the survey. And so we're seeing the benefit of that. So on average, when we even demonstrate that shipping is available, we see 6% increase in bidding. The number of buyers with ATG ship is up or using it is up to 9%. We now have 270 auction houses onboarded. We've shipped over 10,000 items. We've crossed a meaningful threshold. I'm not sure if we're disclosing that of the actual dollar value of what was shipped. And so for us, this is an exciting opportunity. It's also one reason that I mentioned again that in the future, when you look at what shipping can be, um atg roughly 13 billion of thv that means it's roughly 16 billion of gtv which is gross transaction value we have about 22 to 23 million lots and if you divide that into shipments it's maybe 8 to 12 million shipments per year and you could put an estimated value per shipment but it comes out somewhere between 500 million to 1.5 billion worth of shipping opportunity for somebody Now, we're not saying we're going to generate 500 million to 1.5 billion in shipping revenue, but you're able to negotiate discounts with those providers when you make them preferred providers to serve you. And so there's a healthy chunk of that that is ours. That may not come out in the form of a direct revenue line item, however, because we may say that, wow, if you have a 25% discount on shipping, you can drive differentiated value on your marketplaces and actually drive conversion rate higher and take volume gain through conversion versus driving incremental revenue on shipping. And that's, again, something that we're going to be testing and exploring. And with the idea of driving the most volume we can, capturing more market share, and then gradually monetizing that further. Move to the next slide. So This is about ATG Excel, and some of you will have heard us talk about it for the last six to 12 months that we were developing it. And the way I think of ATG Excel is that great companies find ways to build differentiated product. And are we a great company yet? No, we're not. But we're investing in building the components that will make us a great company. And so what does ATG Excel do? If you look at the bottom left-hand graph, that is what an experience is for an auctioneer or a bidder before ATG Excel. If you wanted to be exposed on all of ATG's marketplaces, you needed to load up once to Proxibit, once to live auctioneers, another time to Gap. You had to upload to Auction Mobility if you had that white label and again to estatesales.net. So that is three, four, five different workflows that you and your auction house were having to manage. And if you're doing it with competing marketplaces, those were additional as well. And that was in order to reach the maximum bidder pool you could. Similarly, bidders would need to go through all the different portals to see the inventory. With ATG Excel, this is a truly differentiated product out in the market because what it allows you to do is with a single upload to one of our marketplaces or the ATG white label, you can now cross list onto other marketplaces. To be clear, right now in certain corridors, it's more smooth than others. It's a bit clunky, but auctioneers really are loving it. The impact is real. They're seeing big increases in registered bidders. And this is a product that we know is going to be a winner and that we're going to continue to develop. To explain how it works, you can upload to an ATG White label and then cross-list on our different marketplaces. Why is that important? It's because it allows an auctioneer to both protect their own brand, which they value, while running a timed auction on ATG. an ATG marketplace. And I should have called out, this is only for timed auctions today. Eventually it may be available for live, but the reason we focused on timed is because that again is the behavior we want to drive. And today, this is the only place in the auction world where you can have a white label, where you preserve your own brand, and you cross-list on an aggregator marketplace where you get the benefit of all the new bidder acquisition. And then with ATG, not only are you cross-listing on a single marketplace, but you can cross-list on a multiple marketplaces in different sectors. And therefore, this is a truly differentiated prospect for the auction industry. Go to the next slide. Value-added services drives revenue around the core transaction. But the reason why we're so excited by ATG Excel is because it drives the core transaction itself, meaning GMV. And so, so far we've run it on over 800 auctions, so not a trivial number. And it's generating approximately 100 million of incremental GMV since the launch in the limited release that we've had it in in the last few months, with an average uptick across the different corridors of 9%. So again, an exciting thing that's coming and something that is not going to be instant. We're not going to come to you and give a trading update and say all of a sudden 90% of the auctions are cross-listing. This will be a gradual build as we build out the different corridors. But the key message that we wanted to cross is that the technology is there, it's live, it's doing hundreds of auctions, and that we will be ramping this gradually. If you go to the next slide. So this is the other part that's showing that on top of the regular value-added services that monetize around the core, or the conversion rate driver through ATG Excel that is driving the GMV core. We're also able to follow the playbook for marketplaces by enhancing and accelerating the impact of our network effects through acquisitions. And so ESN, Key reason we bought it, it was a good solid business, but it was growing slowly in a sector that was related to the auction industry and the secondary goods, but not directly. But the biggest reason we bought it, as I've said before, is because they had 180 million web sessions. with only 15% overlap with our North American bidder base. And we believed that people who were looking at used secondary items on estate sales would be interested in items being sold at auction. And that is what we're seeing plan out. So again, 9% uptick on the auctions when live auctioneer cross-lists. It's a unique bidder base. And so we're both able to grow live auctioneers. We're able to improve the conversion rate and therefore increase the value of live auctioneers to the auctioneers on that marketplace. And we're also now able to incentivize ESN sellers to begin switching if they're auctioneers or even if they weren't auctioneers to become and to begin listing on the ATG marketplaces. So if you move to the next slide. So proxy bid, as Tom talked about, was the lone area of drag on our numbers in this first part of the year, or the biggest area of the drag. And it was due to the different factors that we talked about back in December. There was a certain amount of the price normalization lapping very strong comps. And then the fact that we had introduced the rate card. And the one thing I wanted to talk about with the rate card is that When we bought Proxibid, it was a business that had been around about 15 years, and it had been run by founders with the many, many, many different rate cards that they had negotiated with individual auctioneers over an extended period of time. And when we looked at what we needed to do to make KTG the business we want it to be, we knew that we needed to standardize that rate card. And so we did that, and that was the business decision we took. We're still glad that we took the decision. It did result, as we've talked about twice now, in a faster adoption of white label and sometimes third party white label than we had anticipated. And that was something that impacted our GMV over this last period. However, this is again where the power of an integrated marketplace is great and where the ATG Excel product is a core differentiated one is that As we've introduced that, which now allows a white label onto a marketplace for a timed auction, the biggest adopters of timed auctions are often the medium and larger auction houses, the more sophisticated ones who understand the value it can bring in terms of lower operating costs for them, good return on assets for their bidders or for their consignors, lots of bidders who still come and allows them to increase the velocity of selling through their auction house. So the great part has been, as we've introduced our white label plus the cross list, we're winning new clients, we're winning back clients who took third-party white labels, and our own uh existing clients who have white labels are increasing the usage of timed auctions and again very early days so we're not extrapolating out to any number yet but the signs are good lead indicators are good and we feel that this is a really key product that we've launched and we don't want that to be underappreciated move to the next slide So this is my last slide. So it may sound strange coming off a 1% organic growth first half to say that we're excited about where ATG is, but I am. And the reason for that is several fold. First off is that We are demonstrating that the marketplace playbook that has worked in many other industries works for ATG. We're investing to differentiate the appeal of our core marketplaces and to increase monetization of each transaction. We grow by creating real customer value. And I'll let you just read that because I've said it before. ATG is investing and is evidencing that this playbook works and we're doing it with data. ATG Excel drives GMV. ATG pay, ATG ship, ATG amp, grow revenue and take rate, acquisitions like ESN, drive scale, and enhance our network effects. So the strong performance from VAS and the strong lead indicators from ATG excel to drive GMV gives us confidence in gradual top line impact as that penetration increases. We're executing against that collective proven marketplace playbook, and it's working in ANA. even against a tough macro backdrop. You've seen the results potentially from Christie's and Sotheby's going far backwards. We're still growing. And it is still in the early stages with promising signs for INC, giving us confidence in both our guidance and outlook. and so um for tom me and i think the entire team at atg we feel like this is a very exciting time uh auctions are moving online we are a stronger and better company than we were a year ago and we have increasingly differentiated product with which to uh compete in this next phase for the auction industry and with that um i will wrap up and just say thank you for attending

We will now start the Q&A. Participants can submit questions in written format via the webcast page by clicking the ask a question button. If you are dialed into the call and wish to ask a question, please use the raise hand function at the bottom of your Zoom screen. Or if you're joined by phone, press star nine to raise your hand or star six to unmute. I'll just give a moment for you to raise your hands. So our first question comes from James Lockyer from Peelhunt LLP.

Good morning, guys. Thank you for taking my questions. I've got three, please. Just on Proxibid, thanks for the revenue bridge. I think it was very helpful. Just in terms of the rate card impact for Proxibid, where does that sit within that bridge? And how should I think about that bridge if we were to take out that rate card? And the second question was around BAS and go-to-markets. You sort of described it, and you have described it since IPO, the benefits of BAS, and they seem quite obvious, especially since we've had a lot of them in e-commerce for years. But as you said, you are the only one doing it. The uptake isn't quite 100% yet. Is it simply an education piece from the auctioneer's perspective? Do they not get it? And why aren't competitors doing it? And if they're not doing it, Do you have the scale to grow faster when the auctioneers really start to get it? And then third question is on ATG XL. Can you just talk about how you're prioritizing the routes to market? I think the first focus was on white label and ESN cross-listings, but how should we think about marketplace to marketplace? And then is the tech built well enough to maybe integrate with third-party platforms such as non-transactional classified websites? Thanks.

So Tom, you want to do the first two and I'll do the second two.

Yes, so the first one was relatively easy. So in the bridge on slide eight, it's obviously all within the commission line. It's largely in GMV volume. A bit of that rate card impact came through in THV when some auctioneers paused, but actually the biggest is reduced conversion from people who had adopted white label. In terms of the overall contribution of that revenue decline, it's probably about 70% of the commission declines coming from proxy bid. The balance would be arts and antiques, GMV. I'm sorry, James, I've forgotten your second part of your question. If you just give me the headline, I'll remember it.

Yes. So it was just how much of that was the rate card impact versus, say, just the markets and comps?

Yes. If you look overall at proxy bid, probably 40% will be THV comparison. 60% of proxy bids decline is rate card. I mean, it's a little difficult to separate the two because THV declines was driven both by the market and by the rate card. But that would be, I guess, 40-60 split.

Thank you.

And then the other question you have was marketplace to marketplace, and then whether we can, for the cross-listing product and the affiliate piece, I think. And so, yes, marketplace to marketplace is live in what we're calling, I guess, advanced beta. So we're running it particularly between ProxyBid and BidSpotter, some between live auctioneers and the sale room in Lattissimo, and some between the auction mobility product and live auctioneers. And what you typically are seeing is anywhere from a five to a 15% uptick in GMV across those different quarters. And the reason why I give you a range versus the 9% we saw from LA exactly is because that LATESN is just because there have been fewer auctions run on that. But again, the early signs are very good and with the equal impact on the numbers for us, but also the fact that the auctioneers are really excited by it. And I think that's as important as the early GMV numbers for us, because the more they're excited by it, the more they're going to take it, the more likely they are to take time to auctions, in which case we'll see the downstream benefit of that. In terms of what you had about third parties, so good question. And you're kind of anticipating what I was going to talk about more in December. But we, in June, are going to be enabling this technology for third parties. And so we'll begin, again, limited rollout. We have certain parties contracted already who are going to be connecting in, and that's focused on the INC side initially. But what it does is allowed a classified business to connect into our marketplaces through the cross-listing technology. And therefore, an auctioneer is able to upload their auction to our one marketplace, cross-list onto ours, but also have that inventory be exposed on a classified-like marketplace. And when someone clicks through from that classified ad, they end up in the proxy bid website and therefore can bid through that. So again, another usage of the technology, which is more excited by, but is not out yet, but will be in June.

Thank you. And then I did the one, my second question was around VAS and just, is it an education piece, you know, that the rollouts come out, you know, do they get it or do you have to sell more to try and get these to sell it more? I mean, to get them to understand it.

So I think there's a few different parts. On live auctioneers, there's certain bigger houses that simply have their own processes in place, and it takes longer for them to be ready to drop their old payment setup and adopt ours. And that's why you see the difference between 94% penetration versus 61% of the GTV. On shipping, it's a similar dynamic where that's why we say it's going to be a slow build. Bidders want integrated shipping. They want a clean shipping setup. Auctioneers, huge interest in it. But for an auctioneer to change to an integrated shipping like ours, it means that they need to change their processes, particularly the bigger ones, if they've got a shipping setup internally. It may mean they're going to be letting go of 50% of their shipping staff. And so when your sales process begins with the person running shipping, That person may not always have the right incentive to recommend to the auctioneer that we adopt ATG ship. But gradually, you get in further up. We have great relationships. Our sales team keeps working. And we're seeing very strong interest, lots of people signing up. And it's just going to take time for auctioneers to modify their processes. But we see, again, good adoption. And we continue to enhance the product. For instance, one thing coming out again in June is that certain bigger auction houses said well we're going to wait until you have multi-location shipping because they may have three or four warehouses and they run their auction and they don't want to have to have to sort that out themselves so now we'll have multi-location which will allow a single auction house to have those four warehouses and then we can understand where the different pickups will occur within our technology so Things like that will continue expanded, but the path is clear. Bidders want it. High acceptance rate of our quote, even with the quotes that we have today, which can get steadily better. And certainly better features for the auctioneer will expand that pool as well. But it just won't be an overnight explosion. And then with digital marketing, I think we are seeing really good growth. And the key there is around the options to start to create additional inventory and more targeted advertising that can even deliver higher ROIs for the auctioneer, which in turn we know will encourage them to spend more with us.

That's excellent. Thank you.

Our next question comes from Gareth Davies from Deutsch Numis. please unmute yourself and ask your question. Gareth, if you'd like to unmute yourself and ask your question. Okay, it seems that we're not getting anything through from Gareth. So just a reminder, if you'd like to ask a question, you can use the raised hand feature at the bottom of your screen. If you're dialed in by phone, you can press star nine, that will raise your hand and star six will unmute yourself. I believe Gareth has now unmuted yourself. So if you'd like to ask a question, thank you.

Not sure if Gareth is asking a question or not. We can't hear anything. Moderator.

Okay, it seems that Gareth's line is not coming through. So if there's no more questions, we could move to see if there's any written questions on the webcast page. Okay, so we've got a couple more questions coming through on the Zoom webinar. So I'm going to move over to Lara Simpson from JP Morgan. If you'd like to unmute yourself and ask a question.

Perfect, thanks. Just to check that you can hear me all right.

Yes, we can. Yes.

Great. Thank you both. I suppose I just wanted to come back to the proxy bid issue. I understand you're saying now you've lapped the rate card, but can you just remind us sort of how those discussions unfolded? I suppose, have you had to go back on any of those renegotiations to sort of reverse some of the rate caps that you had wanted to put in place? And I suppose if that is the case, how is that now sort of shaping your outlook on commission rates or pricing going forward, both for Proxibid, but then maybe any lessons for the rest of the portfolio? And then still, I suppose, staying on the outlook, obviously, if we look at the guidance from an organic growth perspective, you're looking for around 6%, if I take the midpoint. You had a nice bridge on the first half development. And I suppose, can you maybe just walk us through some of the building blocks to H2, I understand the proxy bid headwind has fallen away. But how are you thinking around the acceleration in organic growth if we think about GMB commission rates, VAS? And it would seem, given you've called out the proxy bid headwind, maybe there could be some upside to growth in the second half of the year. I'm not sure at this stage you're choosing to stay conservative, but could that be a fair assessment?

You want to take this, Tom? So with regard to proximate pricing, As John Paul said, lots of good reasons to want to do the rate card. And we thought a very logical thing to do. And in the long term, it's going to put us in a good place, we believe. But there were some elements of it where the reaction was a bit stronger than we were anticipating. And that was particularly around some of those legacy pricing arrangements. We think we largely threw that. And part of that process has been to put back in place some of the things that we took out and to reach a compromise with some of the auction houses. I wouldn't say that's got a material impact on our outlook going forward. I mean, frankly, from our perspective, the reaction was disproportionate and the GMV impact was disproportionate to those changes. So actually having to put back in place a number of those historic arrangements isn't really changing our outlook. our outlook on things or, you know, impacting the return we're going to get on that rate card change. And because it's very specific to proxy bid and a relatively small number of auctioneers, I don't think there's anything too much to be read into it for the rest of the group. In terms of the building blocks for the second half of the year, and really why we put in those building blocks for the first half of the year was to answer exactly that question. And it's quite simple. If you look at the first half's growth of 6%, take out ESN, you get a 5 percentage point, you get 1%. But within there, you had a 5 percentage point drag from commission. if you remove that drag from commission you get six percent you get our outlook for the rest of the year and really the forecast is based on relatively flat commission in the second half of the year and specifically the removal of the negative impact on proxy bid and proxy bid gmv which is where we're trading at now and so All the other elements, and particularly the contribution for VAS, broadly it's based on it continuing the second half of the year. To your point, could there be some upside? Look, we absolutely are not saying there's upside. We've been burnt now before. So, I mean, it's easy to rationalise what it would be, but we've said the guidance, we've said for a reason, and we're taking it a month at a time. We've had two decent months. April was good, but we need the rest of the year to, or a few more months under our belts before we start calling anything more strongly than we are doing in this guidance.

Perfect thank you so much.

So our next question comes from James Lockyer from Peel Hunt LLP please go ahead. Okay it seems that James has just dropped so just a reminder quite possibly. Just a reminder, you can use the raise hand feature on the Zoom app, or you can press star nine if you're on phone and star six to unmute. So our next question comes from Karun Ajula from Berenberg. Please go ahead.

Sorry, we're not hearing you. Hi, guys. Can you hear me now? Yes. Hi, thanks for taking my question. I just had a question on a longer term view. As I understand, the platforms exist on separate tech stacks. And one thing you guys are working to do is integrate those tech stacks to be more agile and roll out product developments faster. So is there an update in terms of how this is progressing and when we might see this flow through Margin?

Sure. So in terms of how it's progressing, I mean, the way that we balance ATGs technical spend is you have a certain amount you're spending on maintenance of your platforms. You have a certain amount where you're investing in the structural parts that will move you towards that single platform. And you have to balance that against investing in the growth initiatives, particularly in the areas that your customers value most, which in our case is really driving more bidders and more bids. And so, again, we continue to make progress against that. We have a sizable portion of our investment going against it. Last year, we got the shared bidding. Frost listing is a core part of actually that single platform moving forward. We have teams working on it and we're going to continue to do that. But again, we'd hope the next kind of 12 to 24 months that would be done.

Excellent. Thank you.

Okay, that seems to have concluded the questions that we have here on the webinar. So I will pass back to John Paul for closing remarks. Thank you.

Sure. So again, I think we've said what we wanted to say, but for us right now, it's a point where we're seeing that value-added services grow. We're seeing some momentum coming back on the GMV on both fronts. and we feel good about where we sit based on um both the things that tom talked about in terms of lapping certain uh things from last year as well as uh having the investments we've made come to fruition and start to give us some really positive lead indicators uh looking forward it's going to be a case of continuing to increase the penetration of those and ramp them and uh ramp them just with not just with the auctioneers but with bidders and so We're excited about where ATG sits and still confident in our position in transforming this industry. So thank you for your time. And we'll be speaking to many of you over the next week. Thanks.