Auction Technology Group plc

Welcome and thank you for joining HEG's interim results for fiscal year 25. I will be covering some highlights to start out, then our director of IR, Becky Edelman, will cover the financials, and then I'll conclude looking at some of the strategic things that we've been working on and our outlook. We're also joined today by Sarah Highfield, who's our new CFO, but as this is literally day one for her, she'll be more in observation mode for today. So if you want to go to the highlights page, please. So I'm going to go through the highlights, but first at an overarching level, a few things to call out. So first of all, our key top line numbers are up when companies that we benchmark ourselves against have actually been down. So while 3.4% is not a phenomenal top line number, you look at that and you compare on our ANA side where we were up 5% and that compares to Etsy being down 9%. Or you look at our INC group where we're up 5% and Ritchie Brothers was down six to 7%. And so relative to the market, we feel very good about where we've been performing. The other thing, to call out is that the measures we use to judge our competitiveness are also up. So whether it be Excel adoption and the impact that we're having for our customers or shipping, ATG ship, and again, the impact that we're having for our customers there. And then finally, at an overarching level, I think what we feel very good about in the current environment is that we executed against everything we said that we would do back in November. And that really gives us confidence for the ambition that we have still for ATG and what we're trying to execute going forward. So clearly this is a tough time to be making strong predictions, but based on how we performed to date, based on how we've executed and how we've set ourselves up, we feel good about the execution that we've done. And we think that we've set ourselves up for a solid second half of fiscal year 25. So with that, just quickly looking at some of these metrics. So what did we do? We stabilized GMV, GMV up 1%, which is in line with our expectations for the year. We were able to both also expand our take rate by 0.1%, but that was driven off of very strong value-added services growth of 14%. And as I said, we executed against all our strategic initiatives, One of the big ones that people focus on right now is ATG Excel. And the thing that we're really pleased by is, again, more than 10% uplift to our customers when they run ATG Excel. And then that translates into incremental GMV for us. We've also executed on the AMP packages, the ATG Excel single upload and search and discovery, all of which I'll cover in more detail later. We're able to allocate our capital effectively. So we successfully refinanced our debt. and we launched our share buyback program. And then finally, we feel that we strengthened our team yet again, adding our new CFO who's joining now in May. We added a new CTO in April, and we'll talk more about their backgrounds. We also added two non-exec directors, one with deep technology experience and in two-sided marketplaces, and the other with deep finance experience and also in two-sided marketplaces. So for us, we feel like the first part of the year went to plan, and we feel good as we enter the second half of the year. So with that, I will turn it over to Becky for now, and then I will come back in a little bit.

Thank you, John-Paul, and good morning, everybody. So here's the headline financials. Revenue in the first half was 89 million. That's up 3.4% year over year. or 3.2% on a constant currency basis, with the small tailwinds reported results from the weakening of the dollar. EBITDA was 38.5 million, and that's up 8%, giving a margin of 43%, which is up one percentage point. Adjusted diluted EPS was 19 cents, which is up 14%, and we generated free cash flow of 32.5 million, that's an 84% conversion rate, and this results in adjusted net debt of 106.5 million at the end of the period, giving a leverage ratio of 1.3 times, which is down from 1.4 times at year end. So now to go into each of those in a bit more detail. So if we start off with revenue at the segmental level, headline here is that revenue growth was 3.4%, driven by robust 4% growth in marketplace revenue and offset as expected by auction services. As you can see from the table on the left-hand side, revenue includes 46.2 million from arts and antiques, which is up 4%. And this includes a full six months contribution from ESN in this period and the last, and therefore is like for life. With ESN continuing to perform well and contribute to A&A's growth alongside value-added services, which I'll touch on in a moment. Industrial and commercial revenue was 37 million. That's up 5% year on year. And this was driven by the expansion of the take rate as well as an improvement in GMV. So a continuation of the trend that we spoke about at FY24. Together, this gives 4% marketplace revenue growth. And John-Paul will touch on this later, but revenue growth was stronger in the first five months of FY25 with some deceleration of activity in March, but stabilization through April. Auction service revenue was 4 million, which was down 9%. And this was expected following our strategic decision last year to focus on our white label product, which is integrated with our marketplaces and away from smaller standalone white label customers. So there's an impact on revenue, but as we explained at the full year, the impact on the bottom line is relatively muted. And overall, this division performs slightly ahead of our updated expectations. In terms of our KPIs at the bottom of the page, I'll go through these in more detail when we talk through each of the segments. But as you may have seen from the RNS, we are transitioning to our KPIs to exclude real estate. And the reasons when we've discussed with you before, real estate auctions are lumpy and volatile, and they have a low take rate. And therefore they can significantly distort headline KPIs, making it much harder to understand what is happening in the vast majority of our business. However, in this slide, we've shown GMB and take rate with and without real estate, and there's a full reconciliation in the appendix. So GMV ex-real estate was 1.7 billion, up 1%, continuing the improvement from last year, whilst the take rate, also exceeding real estate, was 4.6%, up 0.1 percentage points, driven by growth in value-added services. So this slide shows a revenue bridge broken down by product area. And if you remember, our guidance was for VAS and value-added services to continue to be the key contributor to revenue growth. with a small contribution from commission and fixed fees. So in HY24, revenue was 86 million. Then in HY25, commission revenue increased 0.3 million, with a positive impact from higher GMV volumes, slightly offset by commission mix. So more lower commission rate items sold on average, but overall commission revenue up 1% year on year. Moving along, you can see the contribution from value-added services at 2.7 million, or adding three percentage points of growth. with revenue growth from each of the three product lines, shipping, marketing, and payments. These offset the drag from real estate, which is largely a fixed fee revenue business, which is, as I said already, is lumpy and hard to predict. But like the second half of last year, we did expect real estate to be somewhat of a drag in FY25. Next, you can see the increase in event and other fee revenue up 0.8 million. which is mainly driven by the number of auctions listed on our marketplaces, as well as subscription revenue at ESM. Then I've already touched on auction services. So overall you ended at the half with 89 million of revenue. Along the bottom as usual, we show the percentage point contribution to growth. So we grew 3.4% with value added services being the key driver as expected and a contribution from both commission and fixed fees. So moving on to ANA in a bit more detail, ANA performed well in what continues to be a difficult environment. And clearly the strong performer here is still the take rate of 9.8%, which increased 0.3 percentage points, driven by strong value-added services and in particular ATG ship, although ATG pay has continued to grow and marketing revenue has also grown in ANA. The challenging ANA environment is reflected in GMV, which was down 1%, although this is an improvement from the trend that we saw last year. Similar to what we spoke about before, there is a mixed impact for some of our headline KPIs. So whilst THV in ANA was up 3%, this was predominantly due to THV growth from both newer auctioneers and regions, all of which typically have lower conversion rates, resulting in our conversion rate being broadly flat in the half. The core ANA market then remains somewhat sluggish, although again, our ANA business is holding up much better than the broader market. Moving on to INC, which generated 37 million of revenue, up 5%. And in fact, if you were to exclude real estate, then INC is up 7%. Generally, there was a more stable market backdrop for most of the half, with THV up 3%, benefiting from a stabilisation of used asset prices and steady auction volumes in the half. The conversion rate was down slightly by less than one percentage points. But if you look by asset category, it remains a similar story to what we spoke about for the second half of last year. So whilst today we're not sharing all the detail by asset type, to give you some colour here, yellow iron or construction equipment continued to see strong growth in GMV and conversion rate improvement. It was also another strong half for grey iron or general industrial and commercial equipment, where the end market was strong and again, GMV grew very well. Green iron or agricultural equipment, THV, also grew at a strong rate. This is our largest THV category, but as a reminder, it tends to have a lower conversion rate than both grey iron, which is largely timed auctions, as well as yellow. So here is a negative mixed impact on conversion rates. Finally, as mentioned already, real estate was a drag to INC revenue. Similar to ANA, value-added services was strong for INC, and this is predominantly marketing revenue, which showed good growth across all INC marketplaces. So overall with VAS growth, we saw a 0.1 percentage point increase in the take rate to 2.9% to give overall 5% revenue growth for INC. Moving on to the next slide for profit and loss. I've already talked about our 3% revenue growth. Gross profit was flat with the gross profit margin down two percentage points as the growth of high margin marketing and commission revenue was offset by how amortization costs, which relate to higher capex spend in the last few years, as well as higher payroll costs. Admin expenses were down 9% and to break this down a little further, Share-based payments were 1.8 million lower than last year, partly related to changes in senior management and performance options. The bad debt charge was 1.2 million lower, with the charge last year largely related to our updated auction services strategy. And we had no operating exceptional cost in the half compared to 0.8 million last year. At the bottom of the table, you can see our adjusted EBITDA margin of 43%. which is in line with our expectations and our guidance for the full year of 45 to 46%, with some phasing of costs and also the revenue shape impacting the margin split between H1 and H2. Low admin expenses, you can see operating profits, that was up 43%, 15 million. And for net finance costs, the 6.1 million charge you can see here includes 1.4 million of exceptional costs related to our refinancing and FX. If you exclude these, net finance costs were down 2 million, benefiting from a lower debt balance as well as a lower average interest rate of 7%. The tax expense was 1.9 million, which includes a prior year tax credit adjustment. With our effective adjusted tax rate flat, higher EBITDA and lower net finance costs, you can see a 14% increase in EPS to 19 cents. Gave a view of two other strategic financial updates from the half. In February, we successfully refinanced our debt and entered a new 200 million RCF. In doing so, we extended the maturity of our debt and have now increased financial flexibility, with the RCF also priced at a lower rate than the old loan at a margin of 200 basis points over SOFR. Following the refi, we commenced a share repurchase program in March. And as a reminder for our capital allocation priorities, organic investment will always be a priority where it makes sense with the support of ROIs, particularly with regards to product and technology developments. For M&A, there is no change to our disciplined approach here. We're always on the lookout for very selective and, of course, accretive acquisitions. And we also have a 40 million discretionary share repurchase programme, and we've repurchased 1.5 million shares to date at an average price of 583p. Moving on to the final page to look at the movement of net debt. As you can see from the chart, we reduced leverage even as we continue to invest in the business as well as buying back shares. So we opened the year with 115 million of net debt, had adjusted EBITDA of 39 million and capex of six. So in line with our guidance for 12 to 13 million capex for the full year. The bulk of this capex has been focused on product and technology developments, including new features on our cross-listing product. Working capital movement was minimal and with cash interest of 7 million, which includes the cash costs of the refi and tax of 11 million with some timing impact here on cash tax payments. Overall on the refi and the balance sheet movement overall, there was 123 million repayment on the old facility. And we've so far drawn down 119.6 million on the new RCA, which includes having cash available for the share repurchase program. on which in the half we made a cash outlay of 7.6 million. Therefore, we ended with 106.5 million of net debt and leverage of 1.3 times, which as I already said, was a nudge down from 1.4 times at the start of the year. With that, I'm delighted to hand over and introduce our new CFO, Sarah Highfield, who has joined ATG today, who will say a few words. Over to you, Sarah.

Thanks, Becky. Lovely to meet you all. Good morning. I'm delighted to be joining such a fantastic business. I'm really excited about the opportunities that ATG has for the future. As John Paul said, this is day one for me, so you won't be hearing lots from me today. But I will look forward to meeting many of you over the coming weeks. And I will be getting stuck in very quickly into the business going forward. So thank you very much, and I'll hand over to John-Paul to take you through the strategic update.

Thank you. And next slide. Normally here we have a slide that talks about the three investment horizons for ATG, and this time the only thing that I'm going to talk about is number two. And to remind you of what number two is, it's raising the standard of buying and selling at auction to e-commerce levels. And some of the things that we're executing against are things you've seen in other models for many years, but for the auction industry, this is revolutionary. And so for us, it's really exciting to see the progress we're making there because when you look against most of the things that we said we would do back in November, we've executed against every single one of those. And I think in an environment where there's a lot that is out of your control, such as tariffs and other things, for me as CEO, I felt very good that what was in our control, the team executed against well. And so what did we say we would do back in November? We said that we would get the single upload ready for cross-listing, which we thought would help accelerate timed adoption. We said we would deliver the e-label and then we would use that to execute a shipping mandate. We said that we would deliver AMP packages, so auctioneer marketing program packages, which would allow us to capture more of the auctioneer spend. We said we would ramp up our search and discovery team and to help us drive that conversion rate in the future. We said that we would execute against systems consolidation. And in this case, we unified four instances of Salesforce and put the majority of our finance operations into Sage Finance. We could also add to that the capital allocation efficiency where we refinanced our RCF, and we were able to execute the share buyback that we indicated we were leaning into back in November. And then finally, we were able to do this while strengthening our team and replacing executives, so adding a new CFO, a new CTO, and two new non-exec directors. From the perspective of what was in our control and continuing to move and make progress against that second investment horizon for ATG, which is raising the standard of buying and selling at auction to e-commerce levels, we feel that we did well. So if you go to the next slide, I'll go into a bit more detail on some of these. So for the people who are new, what is ATG Excel? It's the ability to cross-list from one of our marketplaces onto the other marketplaces. And the reason why this is so important is because what auctioneers care about most are really a couple of things. They care about higher asset prices and they care about running their auctions efficiently. And so when they obviously deliver higher asset prices, it makes their consignors happier, they make more money and it helps them win more consignments. And so what ATG Excel does is help them reach a broader audience and therefore drive more visits to their auctions and therefore ideally drive higher asset prices for those auctions so that their consignors are happier. But the key was to enable them to do it while making it efficient for them as well, because ATG has eight marketplaces. In theory, the auctioneer could have uploaded onto all the eight, but as you can imagine, that's a lot of work. The real differentiator that we're now offering is that we launched the single upload feature for timed auctions, which means an auctioneer can upload once and then have access to multiple ATG marketplaces. And so that's the efficiency side. But from the impact side, I think this is what we're most pleased with. And I think it's easy to talk about the impact for ATG and the average uplift, which is good to see. But ultimately, what gives us real confidence that this is a product that is going to continue to see steady adoption is the impact it has for the auctioneers themselves and for their consignors. Because having run hundreds and hundreds of these now, we're seeing between a 10% and 20% uptick on the estimated asset price that the auctioneer receives when they cross-list. So auctioneers often provide an estimated value for the collection of their auction. And what we're seeing is, again, 10% to 20% more than what they expected to get when they cross-list. So for us, this is a great sign of a good product that works for the auctioneers, works for their consignors, and therefore we feel good about steady adoption. The reason I say steady adoption and not rapid adoption is simply that this is a slow-moving industry and nothing changes fast. But the direction of travel is good, and the key headline metrics on this product are there. And as I said before, we were really pleased that the product and engineering team delivered this on time and allowed us to go live with it in March. Next slide. So the second area is ATG Ship. And any of you who've ever bought online at auction or bought at auction period will recognize that probably the biggest pain point after you get through the other elements of the unfamiliar experience is trying to arrange for shipping. And so for us, We've been focused on shipping. And as you know, we launched it last year on live auctioneers. And the key thing that we executed on in the last six months is we delivered the e-label solution. And just to give you again, a reminder of what that was, our initial solution was very good for high touch items. It was kind of a white glove treatment with insurance, but we weren't as good for lower value items. With the e-label solution, which allows an auctioneer to input their own data, charge what they want for shipping, and then print that label out and put it on the box or whatever they're shipping, it allows us to address lower-cost items as well. And based on having the high-value items covered and the low-value items covered and knowing that when we offer shipping, it's better for the buyer experience and it actually is better for the seller as well, we mandated that our shipping product is available in all of live auctioneers' auctions for U.S. domestic sales, meaning there's certain international auctioneers who can't use the shipping, but for all domestic U.S. sales, that is now mandated. And what it means is that our shipping product is available as an option. It doesn't mean that every buyer has to use it, but the auctioneer needs to offer it. And the reason we felt comfortable doing that is because again, it's good for the auctioneers, and it's good for ATG, and it's therefore good for the buyers. Because why? When they offer shipping, they typically get 40% increase in auction registrations, they get 27% more bids per lot, and they get typically 30% higher hammer prices than they would for comparable items that don't offer an integrated shipping option. Again, for the audience that we're targeting, which is more and more a new audience that hasn't potentially bought at auction, this is increasingly important because it brings that buying experience ever closer to e-commerce. And so, again, we've launched this, and again, it launched in April. You want to go to the next slide? The third area is AMP. And so we remind people who are not familiar with ATG what it is. AMP stands for Auctioneer Marketing Program. And this is the money that auctioneers pay us in order to reach the bidder base, either through targeted emails, on-site ads, or in our newsletters. And this is, again, been growing strongly for us. And packages is an effort by us to put together packages, which allow us to capture a higher percentage of the auctioneer spend. And so these, again, were put together in February and are launching now, launched in March. And The reason why this is important to have is that as we do everything else on our site around shipping, cross-listing, improving the seller experience as well, by now doing those things, it actually reinforces an auctioneer's willingness to spend on AMP. And that's one of the things that you've seen reflected in our 14% growth in value-added services. As we do other things, it encourages them to spend more with us. And so what we're doing here is putting together packages that we think will then further encourage them to spend with us when they're spending to attract bidders. So if you go to the next slide. So this last one is generating no material revenue right now, but it is what we executed on that we said we would do. So back in November, we said we were going to start up a conversion rate optimization team. that was going to focus on everything from testing and learning, experimenting, working on the search and discovery elements of our site. So onboarding, the search, and then the recommendation engine. And as I said, this is something that's not generating material revenue today, but for me, this is probably the most exciting thing that we're actually doing right now that we haven't been doing before. And I think it's odd maybe to say, why is the CEO excited about something that generates no revenue? And I think the key reason for that is because this is one of the key areas that we're investing in that is going to allow us to drive that conversion rate higher. And the key reason for that is because we're targeting the areas that are barriers to buying for people who haven't bought at auction before, because the real key for ATG is people We're getting people to reuse our site and we attract people from who are familiar with auctions to come to ours. But the real opportunity is to attract an audience that hasn't bought at auction today historically or the millions of people who come to our site who browse and don't register because the buying experience is too complicated or they register and they don't bid. And so this is a huge opportunity. And what I'm very pleased with is that the team was staffed up. It began running tests. and we're already seeing some really promising results. So just three of them here, just by increasing the ability for someone to save a search. This is something that we're trying to test to see how we can get more people to do this because typically 30% uplift in likeliness to bid when someone saves their search. The other part is that we're improving our recommendation engine. And again, here we have 60% more clicks from expired lot pages other relevant listings. So having a more clean path from an expired lot where you've looked at something that we've already sold or which has already been sold by somebody else, and then redirecting you to something that is available for you to bid on. Then the last part is really improving our onboarding experience where we're seeing in the early tests a 26% increase in the auction registration rate amongst people who are joining live auctioneers with the different changes that we're making. So these are just a handful of many tests that we're running and which In and of themselves, each one may be several millions or low tens of millions of GMV potentially. But when you add them up collectively, that's where you start to see that real difference and differentiation in the experience relative to our competitors. So for me, this is probably one of the most exciting areas that we're working on and finally making some real progress on and setting up the right infrastructure so that we can execute on it effectively going forward. So you go to the next slide. In terms of people, ATG's ambition doesn't stop with just adding a gradually better buying experience. The curated secondary goods market is a massive underserved market, whether it be for auctioneers, dealers, consignors, buyers, everyone in this value chain is underserved today. And so for us, as we think about how we want to transform this industry, we've wanted to bring in people within the executive team and in our non-exec director group who can help us make good decisions about the best way forward to lead the transformation of the industry. And so Sarah, again, we've given her background before, formerly at Tesco and CFO of one of the Tesco countries, and then was the CFO at Costa as well, among other roles, and currently the audit chair of Coats. So again, we welcome Sarah, who's joining us as of today. The second person that we brought in just in April is Lakshmi Durvenkatesh as our new CTO. And this is, again, a really exciting hire for us because Lakshmi was managing a team of 450 engineers at eBay. Her focus was on conversion rate optimization. And basically for the last 17 years, she's been working on exactly the things that we need to work on now and at one of the bigger e-commerce companies in the world. So she's seen what good looks like. She's operated at scale and she's done what we need to do. So we're really excited to bring her on board. We also brought on board Andrew Miller, who was the CFO of AutoTrader and who's currently the CEO of Motability Operations. But again, his deep experience in two-sided marketplaces at AutoTrader and the deep finance experience there with pricing models and other, we think is a great add to our team. And then lastly, something that I really pushed very hard for was when Morgan Siegler left with TA, we had an opening in our board and I really wanted to get someone and Scott, Forbes and I spoke about this at length, who had deep technology experience because it's one of those things where all board members can look around the table and they can do pretty much everybody else's job. But the one thing that we can't do is code. And to have someone around the table who really understands what it takes to set up the architecture, the engineering, and can make those challenging questions within the board meetings, we wanted to get someone with deep technology, not just product experience. And Sejal Amin is the in-post CTO of Priceline, which runs Booking.com, OpenTable, Kayak, and other businesses. So strong technologists with deep two-sided marketplace experience, and she is based out of New York. So great additions to our team that we think will help us make even better decisions as we go forwards. Let's go to the next slide. So our fiscal year, 25 guidance was really predicated on two big buckets, if you recall. What we really said was in our range was that we would deliver a portion of our growth through value-added services, and then we would deliver the other portion by driving our GMV somewhere between 1% and 3%. And The first part of the year performed as we expected, as Becky alluded to, moving towards the lower end on the GMV side and right where we thought we'd be on the value-added services front. And the key thing was that we were actually ahead through February. March was soft, as Becky said. And I think the key thing there is people will be wondering, well, if it was soft in March, does it mean it's going to be carrying on into April? And while it was soft in March, it then Came back some in April, and while it's early days in May, we're seeing yet again improvements on that. And the reason why I feel confident in where ATG is, and I'll touch on that a little bit later, is just that this is not dissimilar to what we saw when COVID hit, where there was a little bit of a breathtaking by auctioneers and by buyers. And then once they understand the new norm, they get back to business. And so we feel in a strong position regardless of what happens in the future. And I'll talk to that in a couple of slides. But in the meantime, what we are focused on is on executing on what is in our control to execute against. And so what you're seeing here is more of the same from what we did in the first six months. Now that we have ATG Excel, it's really promoting it across auctioneers. launching it for live auctions and using it to drive white label adoption so that we can get more timed auctioneers. So the product is ready, it's out. And now the goal is to just steadily increase Excel adoption and move more and more auctioneers onto timed. The second thing we're doing is really pushing shipping. We're implementing our mandate and we're continuing to test and evolve pricing to try and improve the uptake of our shipping solution. We're expanding our partner network as well, which the auctioneers love because it allows them to reach buyers who are not within the ATG network and who they typically would have had to spend money on to reach in the past. But which now through ATG Excel, we actually connect with partners as well and the auctioneer can upload once and reach them. And so we added two new partners in the last six months. One is called WorthPoint. And they add about 3 million visitor sessions per month, yet to be determined what the impact of that will be. And that's for the art and antique side. And then we added on the INC side, a company called DotMed, which adds what looks to be much, much less, which is 300,000 visitor sessions per month. But they are very targeted on medical equipment. And so those 300,000 could well be worth more than the 3 million from the ANA side. And so we're excited by those two new additions for the impact we can drive for the auctioneers. The fourth part that we're focused on is continuing to work on testing and learning with our search and discovery team. And one of the big things that they're trying to get done is automating lot descriptions, leveraging AI models. And so this again will help auctioneers provide richer, better descriptions, and that in turn helps with bidding and confidence in bidding more. And then finally, we're going to continue to explore our fixed fee incentives to try and drive time to adoption and to explore how we can bring in even new segments of auctioneers potentially on the lower end to bring even more inventory in. So for the things that are in our control, this is what we're focused on. The things that are outside of our control that I would say people need to be focused on, I'll just reference here. So for us, the things that are outside our control are ANA pricing and INC pricing. And right now, what we believe is happening is that if these tariffs hold, then INC pricing should go up. And I think Ritchie Brothers has already communicated that they're starting to see pricing on INC go up. During COVID, as you know, pricing went up anywhere from 20 to 40 percent. It reached back to normal in the last kind of six to 12 months. And so there's room for it to go back up again if, in fact, there are supply constraints in the U.S., And we would stand to benefit significantly from that. Similarly, the other area that we're looking at is whether there's going to be softness on the art and antique side. Keep in mind, we're not Sotheby's and Christie's. We're not selling 20 or 50,000 pound items every day. We're more in the hundreds and low thousands. And therefore, we will not be as affected as the big companies selling those high ticket items. There will be potentially some softness if the US economy is soft, however. So for us, That's really what we need to be tracking that's outside of our control is simply where INC price is going and whether there's general softness in the US general economy and whether that plays into softer ANA prices in North America. So if you move to the next slide. So you can see our headline here and it says, again, while the backdrop is volatile and uncertain and Even as we wrote this headline, there's a certain part where you scratch your head and you say, how many times can you say that? Because we've been saying this for the last five years. And again, you had COVID, then you had the Russian invasion, then you had post-COVID, then you had a new president, then you have tariffs. So the thing is, those may well be the norm for all businesses in the future, where the world is a lot less predictable than maybe for many of us saw in the first 20 years of our career. And with that in mind for ATG, why do I still think ATG is a very strong place to put your money, but also why is ATG well positioned for the future? And I think the first part is because we are executing against what we say we're going to do. And the market that we're trying to serve is underserved. And therefore, as we execute, I'm a strong believer that we will continue to grow and we will continue gradually to improve our conversion rate as we execute on the things that I've talked about, improving that level of buying and selling at auction. So that's the first one is that we're executing well, and there's a clear path on what we need to execute against that's not reinventing the wheel. It's things other businesses have done, and as we do it, it will make an impact in this industry as well. The second thing is resilience, is that, as I said, we have performed above the market meaningfully. in the first six months of the year. With Ritchie Brothers going backwards by 6%, with Etsy going backwards by 9% to deliver 4% in ANA and 5% in INC, and as Becky talked about, really 7% in the core markets of INC for us of yellow, green, and gray iron, we feel that our model is proving that it's resilient. The third part is that we are investing in levers that will make us less dependent on the external market factors. So ATG Ship, ATG AMP, ATG Excel, and the search and discovery teams, these are all things that will enable us to continue to drive growth regardless of what is happening in the outside market. The fourth thing that I think makes us attractive is the optionality that we have. So we continue to generate strong cash and we have a strong balance sheet. This provides us with flexibility. We can continue with share buybacks. We can invest in business and we can continue to look opportunistically at inorganic opportunities that other companies couldn't consider based on their tighter financial constraints. So the optionality that ATG, I think, has in front of it is something that shouldn't be underestimated. And then finally, as I said, our budget was based on two big things. One was delivering strong value added services growth, which we think we did, and we feel very confident we're going to continue to do. The other bucket was on driving GMV and then commission. And we again performed within the range of what we expected for the year. We think that the signs are there that give us confidence that we'll deliver on our guidance in the back half of the year. And the key reason for that is overall, we see the tailwinds being greater than the potential headwinds, particularly with the idea that INC pricing, if the tariffs stick, should go up. And we think that whatever that impact that has on ANA will be less severe than the uplift we get on INC. And similarly, let's say next week, all these tariffs are reversed. Well, then we go back to how we were performing through February when everything was actually ahead of plan. So for us, we feel that we're in a good place. You know, it's far too bold to say that we're going to make prediction or a hundred percent confident prediction based on how uncertain the markets are. but we think that we put ourselves in a good position for the back half of the year. And so if you go to the next slide. With that, as you read earlier today, we maintain our full year guidance and we will monitor and adapt to the external situation as these uncertainties in the macro picture are resolved. And we feel good about our ability to do that in the next six months. And with that, I will let you read the rest of this and we are open for questions.

We will now begin the webinar question and answer session. If you are participating in verbal questions, please use the raise hand feature in the Zoom webinar at the bottom of your screen to ask a question. If you have dialed in by phone, please press star nine to raise your hand and star six to unmute. If you would like to submit a written question and are watching via Spark Live, please use the ask a question button. We will pause for a moment to allow the queue to form. The first question is from Lara Simpson at JP Morgan. Please unmute yourself and begin with your question.

Morning all. Laura Simpson from JP Morgan. Thank you. Thank you for taking my question. I was wondering if we could talk a bit more around, I suppose, the Q2 exit rate and March weakness that you saw. Just interested in any trends you can talk to in terms of sort of the extent of the GMV pressure and how that looked against organic growth. And then also, I suppose, the differences you saw in ANA and INC. And I suppose my question is really, this was one of the months where the resiliency of the portfolio was tested. So interested on any insights in those dynamics. And then I suppose you spoke about May trending a bit better post-stabilization in April. Is that across both INC and ANA? And then my second question I wanted to come back to was the conversion rate. So obviously it was down one percentage point, both on ANA and INC. I know you've spoken about the dilution on asset mix, but we should also hopefully start to see the benefits of sort of search and discovery investments. So my question is really how we should be thinking about conversion rates going forward. Is the portfolio sort of structurally shifting in a certain direction and we could see these rates trend lower for a little bit longer? Or could we in sort of the short term get to a floor and then start to build on those? Thank you.

Becky, you want to do the first one?

Yeah, sure. So as we said in the statement, revenue growth was strong up until the end of February. So strong being comfortably within that kind of 4% to 6% guidance range that we spoke about. March was weaker, but by weaker, we're sort of more talking a flattish number, so not materially weaker. Similar on ANA versus INC. So, you know, a similar kind of pause in behavior on both. That's kind of more the dynamics that we're speaking about. April stabilization, which is showing better than where we were in March, albeit not quite returning to the rate that we saw earlier in the year. I'm not sure, John-Paul, if you want to add anything to that.

Yeah. And the thing that I'm kind of focusing on there is that this is not dissimilar to what we saw during COVID. And so there's no fundamental reason for INC to not see strong results based on everything that's going on in the U.S., And similarly, ANA, while there could be some softness on pricing, the items are still going to be sold. Because keep in mind, the things that are different in our world is that their house clearances and things like that. And therefore, the items are going to come up. And we have a 92% clearance rate on the items. The question is just how much those prices will move. And right now, we believe, again, that even if there is some softness on the ANA side, the INC side should see increased pricing and make up for that. And similarly, if the price, if the tariffs reverse, then we believe that we go back to performing how we were back in, you know, for the first five months of the year when we would have been well on track for the guidance that we set out for the commission rates. And so it's hard for us to give you any more than that right now because we're only 10 days into the results for May. And again, it's better again than April and actually pretty good. But it's only 10 days in and auctions move all over the place. So I don't want to call that yet. In terms of conversion rate, these are things that we believe are gradually going to be improving. The reason why it's always tricky is that some of the things we're looking at are designed to possibly bring in new auctioneers. If new auctioneers come and they bring the new THD, well, then there's usually lower conversion rate associated with new auctioneers joining the system. The things that we're investing in on search and discovery, though, should gradually make a difference because these are the things that we know are barriers to bidding today. So when you say the direction of travel, I would believe that our conversion rate would stabilize roughly where we are and that gradually but slowly that number should begin to ease up, to move up.

Perfect. Thank you so much.

The next question is from James Lockyer at Peel Hunt. Please unmute yourself and begin with your question.

Thank you for taking my questions. There are three from me, please. I think you just covered this towards the end, but I just wanted to ask it again. So you've spoken about, you know, raising the experience towards an e-commerce experience from the Oakland experience. Other than the ones you've spoken about today, you used the phrase not wanting to reinvent the wheel. And what are the next things that you think are important changes to be focused on? And how might your new C-suite and board hires play their part within that? Secondly, you used phrases such as steadily and gradually, and you covered it briefly just a second. But can you talk about your approach to that in terms of things like education or case studies and how you might get the traditional industry to move a little bit quicker? And finally, just a question on competition. You touched in terms of white label, whether you are starting to see, to eat into that, I think it was 20-25% roughly share you spoke about last time that come from third party white labels, and how your direct marketplace peers appear to be doing in the current market. Thank you.

Okay, so first I'll talk about conversion, then the education, then we'll touch on the competitors. In terms of the conversion, so way that we're raising the standard of buying and selling at auction so first of all for the sellers it's a case of leveraging ai um looking to help them write those lot descriptions leveraging atg excel so that they can get access to more bidders more easily and those two things alone are going to make a big difference the other part is where we look at search so there's so many different things that we're learning that we can be doing better on search and that benefits the sellers as well as benefiting the buyers. Because from the seller's perspective, if you're a good seller and you offer shipping and you have quality descriptions and good images, you want to be able to be surfaced more effectively than someone who doesn't have those things. And so the search engine that we're putting in place will allow us to gradually shift more and more focus towards sellers who provide the best experience for buyers, which we believe is then going to encourage buyers to come back and be more likely to bid yet again, because Keep in mind, we have 23 million items that are on the site and nobody's parsing through all of those each and every time. So the better we can get at helping them find what they're looking for, make good recommendations. Those are two fundamental things that we're doing that we believe drives that conversion rate and drives a better end-to-end e-commerce experience. So there's a search engine. There is the recommendation engine that then will be off of that. There's leveraging AI to write the descriptions, which will then allow us to have better data to then make those recommendations. And then you have the things I talked about that Lakshmi is bringing from her work at eBay. And this is just all the little things that you do around how do you design the onboarding flow? How many clicks do you have? How can you redesign the way that you ask for information at different phases. How can you pre-approve an experienced bidder so that they don't have to go through the auctioneer acceptance program, but we vouch for that bidder in the process and therefore speed them to their bid more quickly and increase their propensity to bid. So there's not any one thing, but there's dozens of little things, whether it be in the onboarding flow, in the registration flow, in the bidding flow that we're able to improve. And then further within the search and recommendation engine, All of these things are what we're looking at right now. In terms of education, so we have someone that we brought in as well on product marketing. And a big part of the thing that we've learned that we were doing that probably was not best practices, we talked a lot to the sellers in terms of features. And when you're talking to sellers who are relatively unsophisticated in e-commerce about features, For many of them, it just kind of goes over their head. So what we're talking more about to them is educating them about the experience or what it does for their business and trying to put it in more vernacular language that the auctioneers are going to understand with rather than e-commerce digital marketplace language. And there's a whole series of basically myth busting and other actions that the team is taking to try and get out there. and share what we're doing with our sellers. And similarly, those same things are going in to the onboarding flow to try and educate buyers on how the experience will be different than e-commerce, but why it can still deliver something exciting and even more differentiated than what they would get through a normal e-commerce experience. And then in terms of the competitors, and I think you were asking specifically about the white label, Could you repeat the question that you had there? I wasn't quite following what you asked.

Yeah, so I think in the previous presentation, you split THV by the different buckets of where it was going if you weren't winning it. And one of those buckets was the independent third-party white label. I'm just wondering whether you could touch on competition within the white label space and whether you're making headway into that. Sure. Thank you.

Yeah, so I think with the white label space, one of the interesting parts about it is that It's one of those areas that in any industry, it's where lots of small competitors think they can make a headway and they think, well, there are only five of us. And if we get a few clients, we can make some money and have a decent lifestyle. So you will have competition around the edges. What we are seeing and what we believe we're going to continue to see is that with the Excel option that we now have in front of auctioneers, with some of the biggest auctioneers adopting timed auctions with us because they can run on their white label and on our marketplaces and get access to more bidders and therefore get higher asset prices for their consignors. We believe still that our white label is gradually winning ground and getting off sales calls that I was on yesterday. We continue to see the pipeline of clients that the team feels excited that they can win over to it. As I also said earlier, it's a slow and gradual process. Nobody moves fast in this industry. And you do have all the independent white labels chirping in the ears of auctioneers saying, don't put all your eggs in the basket with ATG. And you have ATG saying, you know what? We've been around 20 years. You can put all your eggs in the basket. And there are a lot of bidders in this basket. So if somebody else does it and you don't, you're going to miss out. And so we believe our message, particularly when we now see the data coming back on Excel, gives us confidence that we're steadily going to eat into the competitor white label shares. But again, as I've said, it's going to be slow.

Thank you.

Next question is from Gareth Davies at Deutsche Numis. Please unmute yourself and begin with your question.

Yeah. Hi. Morning, guys. two quick ones for me the first one you mentioned that sort of broader use of fixed fee incentives um i just wondered if you could expand a little bit on that comment and the areas of thv that could be quite interesting to you that that you're sort of not in at the moment um and then secondly atg ship Given how widely that's been rolled out now, what do you think the hindrances are to the kind of uptake not being greater than it is? What are the alternatives that people are using and why do you think they're not adopting it maybe a little quicker? Thank you.

So in terms of the incentives, this is more where we typically target medium sized and larger auctioneers. And then there are auctioneers who come in and out of business or have a couple of sales a year. And we're just looking at different pricing models based on volume that can attract some of that business in. So basically stealing some of the high bid business or businesses like that where they're not sometimes even full scale auctioneers, but they come that but they're smaller, smaller level than who we typically deal with. And our pricing may dissuade some of them. So we're experimenting with models that could attract some of the smaller auctioneers in as well. So that's that's the basics of it right now.

Sorry, is that cross categories? Because I know, I think from memory, when you did the tweaks to the pricing model, it was the sort of agricultural segment that you saw this most in historically.

I think a lot of these smaller auctioneers are often more general sale people, where they may have one time it may be yellow iron, a little bit of yellow iron, another time it may be some agriculture, and other times it may be house sales. So they're usually more broad based and just more opportunistic rather than being known for doing one thing. So I'd say right now, I don't have enough data to give you information on it and it's more experimental what we're doing. In terms of ATG ship though, I'd say it's going really well. And when you say that it hasn't had as much take up, if you look at some of the data, we're almost at twice the level we were at last year. And so we're on a similar pace to live auctioneers adoption of payments when they launched that. And now with the shipping mandate, we believe that we will see an even greater adoption of that. The thing that is held up, so that's in terms of usage of it. In terms of buyer usage of it, I think this is the thing that we're trying to partly myth bust around, is that I think people will often think they're comparing shipping prices on our site to what they may pay buying through Wayfair or some other e-commerce site where they're saying, oh, well, it's really relatively inexpensive for me to ship an item through a normal e-commerce site. This shipping quote feels too expensive. And we're educating them of the fact that it may be more than a typical item, but that's because it's a unique item. It's not one of a thousand or 10,000 that we're selling. And that the value that they got on that item still means that even with the shipping, it's worthwhile to have bought it and then to come back and buy again. And so That's one thing that we're trying to do is just make sure people understand why the shipping is more expensive, but it's still less expensive than any other option that they had. And then as we get more volume on, our goal is to continue to negotiate with the shipping providers to get a steeper discount that we can then pass on to the customers that that shipping quote is steadily less. But those are the two big things that we're doing.

And just to say the shipping mandate, I'm sure you saw was from April. So the numbers that we shared are to the end of the half, whereas the rolling out has just happened. So we'll obviously update on progress in due course.

All right. Thank you.

Next question is from Josephine Chung at Fitz Walter Capital. Please unmute yourself and begin with your question.

I wanted to ask about the breakdown of the value added services in particular around marketing versus pay and ship, like you said, and how that's evolved over time. I think specifically leading on from that is the impact of those two on the overall margins of the ANA and INC segment and how you see that developing over time.

So overall BAS grew at 14%. We're not providing specific breakdowns, but just to give you a bit of color within that, shipping was the fastest growing part of that, understandably given you're growing from a lower base rate, followed by marketing and then payments. But all of them were positive. Marketing is still the largest part of value-added services. So roughly it's just under 50% of that. with shipping and being a growing percentage. Shipping's obviously, as you say, a lower margin service, as is payments, and some of that was sort of reflected somewhat in the gross margin movement.

Yeah, and just to comment on that a little bit further, the reason that we don't break those numbers out specifically is because when you look at the real value of a marketplace like ours, the value of having value-added services, you can look at them as individual product lines, but often what they can be used to do is to drive the metrics that you really care about, which would be, you know, GMV and the commission rate. So for instance, when you think about the margin evolution for our value-added services, I think it's better to think about it in terms of the margin evolution of ATG as a business and why we believe we can retain kind of mid 40s on our margin, even as we grow these different value-added services. And it's because, let's just say with shipping, we have a certain level of discount today negotiated with shippers. As we do more volume, we should be able to get a much bigger discount. I think Vinted, for instance, is able to negotiate about a 40% discount with their shippers. We're not close to that yet. As we do more volume, we should be able to get better discounts, but we may not have that translate into a 40% margin shipping product. We may choose to discount our shipping to drive more bidding activity so that we can grow our share and grow GMV. And then that GMV has very high margins that would flow through for the overall business, even if the shipping product itself looked like an ongoing low margin product. And so that being said, overall, the shape of our value-added services has been that because digital marketing is such a high margin product for us, 90% plus, it offsets shipping and payments uh variation and therefore we believe that we're going to be able to grow shipping and continue to potentially expand the margin or capture more margin through driving gmv and as we do all of these things collectively it's going to help us continue to sell the digital marketing so to me the the the Another way you could look at it is either the overall margin for ATG, we believe, can remain steady because the mix of all those factors, or if you were just trying to look at value-added services, you'd have to look and say, how much headroom do you think we have on digital marketing along with the headroom that we have on, let's say, shipping and payments because the lower margin products could be offset by whatever you believe is possible on the digital marketing side. The reason we believe there's a lot of headroom on the digital marketing side is, again, we're working with auctioneers that are selling items worth $13 to $14 billion per year. And the idea that at some point there's an opportunity for us of at least $100 million in digital marketing spend to capture there, we think is very credible against the type of assets that they're going for. So we're nowhere near $100 million of digital marketing revenue today. But we believe that there is a reasonable path by which you could believe that ATG has that ceiling. So I know that's a pretty long and convoluted answer, but hopefully you see that it's not there's not kind of a straightforward way, I'd say, to answer the question.

Got it. Thank you. That's helpful.

There are no further questions. I will now hand over to John Paul Savant for closing remarks.

So thank you again for taking the time to listen to us today. And as I said a few times on the call, 3.4% is not a number that you're jumping from the rooftops to say, you know, great, but in the environment that we're in relative to our competition and relative to the guidance we set, we feel good about where we are. We feel that we executed against what we needed to in the first half of the year to give us levers that we can pull in the second half of the year so that we still are in that range of guidance that we set for the year. And that when you look at the external factors, there are tailwinds and potential headwinds, but we think on balance, the tailwinds are going to be stronger than the headwinds. So with that and the other things that we've done this year, we feel really good about the first half and very optimistic as we head into the second half. So thank you very much.