RB Global, Inc.

Good morning, my name is Pam and I will be your conference operator today. At this time, I'd like to welcome everyone to the Ritchie Brothers Auctioneers fourth quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you'd like to withdraw your question, please press star followed by two. Thank you. I would now like to turn the conference call over to Mr. Samir Rathod, Vice President of Investor Relations and Market Intelligence, to open the conference call. Mr. Rathod, you may begin your conference.

Hello and good morning, and thank you for joining us on today's call to discuss our fourth quarter 2021 results. Joining me today are Anne Fandosi, our Chief Executive Officer, Sharon Griscoll, our Chief Financial Officer, as well as other members of the management team who will be available for the Q&A portion of this call. The following discussion will include forward-looking statements, comments that are not a statement of fact, including projections of future earnings, revenue, gross transaction value, and other items are considered forward-looking that involves risks and uncertainties. The risks and uncertainties that could cause our actual operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian securities filings available on our investor relations website at investor.richardgross.com. We encourage you to review our earnings release and Form 10-K, which are available on our website, as well as Edgar and Cedar. On this call, we will discuss certain non-GAAP financial measures. For the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures, and a reconciliation between the two, see our earnings release and Form 10-K. Presentation slides accompany our commentary today. These slides can be viewed through our live or recorded webcast or downloaded from our website. All figures discussed on today's calls are U.S. dollars, unless otherwise indicated. I will now turn the call over to Anne Fandosi.

Thank you, Samir, and good morning to everyone joining our call today. As we all know, 2021 was another unprecedented year due to the direct and indirect impacts of COVID-19 affecting our employees, our customers, and our trusted partners. I would like to start the call once again by thanking our remarkable employees who continue to manage through this environment to deliver for our customers day in and day out. For the full year, we drove solid results, both strategically and operationally. Despite an unprecedented tight supply environment, we grew GTV 2% for the year and services revenue by 5%. With services revenue growth outpacing GTV growth, consistent with our evergreen model commitments. At the same time, we continued our transformational journey to becoming a trusted global marketplace for insights, services, and transaction solutions through organic investments and key acquisitions, which accelerate our pace in achieving our ultimate vision. As we gained confidence through our test and learn approach, we continue to invest in key initiatives like satellite yards and go-to-market coverage models. These investments naturally come with a cost, and despite the top-line pressures due to the tight supply environment, in 2021, we grew non-gap-adjusted operating income 3% for the full year. Our omni-channel platform is just delivering strong outcomes for our customers, with bids per lot and used equipment pricing remaining very strong in the fourth quarter. Recall, we went completely online at the start of the pandemic. However, something we have heard our customers consistently tell us throughout the pandemic has been that they missed the social connection of a live event. To that end, we are excited to welcome back customers next week to our flagship Orlando event. We, of course, will remain diligent and vigilant with our COVID protocols and masking. That said, Orlando will be an amazing way to celebrate our customers and deepen our longstanding relationships. Turning to our M&A of the past year, I am pleased to note that Rouse continues to perform well and is driving benefits for the broader Ritchie Brothers ecosystem. I also want to give everyone an update on Euroauctions. The CMA review process is ongoing and on track. and we are using this time to put detailed integration plans in place to allow us to begin executing on our vision immediately after close. We are also very pleased that we decided to complete our Euro auctions debt offering in the fourth quarter in advance of close, but also in advance of some of the unfavorable moves we are now seeing in interest rates and in spreads. After seeing pretty incredible KPIs, In our early satellite yard test, specifically in attracting new customers with a much lower cost-to-serve model, we continued to scale that initiative, with 23 local satellite yards having come online by the end of the fourth quarter globally. Clearly, investments such as this are made ahead of their corresponding revenue, and our confidence cements each day that local satellite yards are a key component of our organic growth plans moving forward. Moving to our inventory management system, we continue to make strong progress with 89% growth sequentially compared to last quarter in the cumulative number of organizations that have activated on the platform. The KPI we are focused on is the number of organizations So as we build out our marketplace functionality, we are able to have scale quickly. To that end, we are migrating our entire transactional workflow into IMS. Our go-to-market strategy is that if you want to transact with Ritchie Brothers, you have to use IMS. This is an excellent way to get customers into our ecosystem to begin interacting with our various services. As we work towards a modern technology architecture, needed to enable our marketplace at scale, we are focusing on driving organic growth from the portfolio services that Ritchie Brothers offers to our customers today. A great example here is Ritchie Brothers Financial Services. You have heard Sharon talk about the investment and headcount we have made over the last couple of quarters, and we are now seeing that model hit its stride with revenue growing 61% in the fourth quarter and 46% for the full year. an outstanding result. What is most exciting here is that we are driving this growth even before realizing the full vision of a modern architecture-enabled marketplace, giving us even more confidence of what the services revenue growth will look like at scale. Earlier this week, we put out a press release regarding our partnership with ThoughtWorks. I am very excited about what we are going to be able to achieve together. ThoughtWorks has helped several other large global companies do exactly what we are trying to do in terms of a modern architecture. This partnership is about accelerating our transformation and ThoughtWorks bringing their expertise to help build the foundational pieces of modern architecture with us. After Sharon discusses our financials, I will talk about our strategic pillars and outlook, and then we will move to Q&A.

And now, over to Sharon. Thank you, Anne. And let me add my welcome to everyone on the call this morning. In the fourth quarter, GTV increased 1%, with no notable impacts from foreign exchange or auction shifts. We continue to see robust increases in mix-adjusted prices of equipment, offset by lower lot volumes and negative mix. We see this level of GTV as a strong result, given the extremely tight supply environment. due to the low used equipment levels and continued supply chain challenges impacting all new equipment production. So we are pleased with this performance, as historically these tight supply conditions have resulted in GTV declines on a year-on-year basis. Total reported revenue declined 6% compared to last year, with total service revenue increasing 6%. Total service revenue continues to exceed total GTV growth, giving us continued confidence in our new evergreen model. Our other services segment drove strength in our total services revenue, increasing 32% in the quarter. I am proud to note that the growth plan that we had implemented at RBFS continues to bear fruit, as you heard Anne mention, with revenue increasing 61% in the fourth quarter. Other services revenue also benefited from the partial quarter contribution of SmartEquips and a full quarter of contribution of Rouse compared to last year's partial quarter contribution. That said, the lower unit volumes and mix are translating into lower ancillary service revenues. Our non-GAAP adjusted operating income declined 7% compared to the fourth quarter in 2020. as we continue to invest in our growth initiatives and implement our transformation to a global marketplace. As Anne noted, for the full year, non-GAAP adjusted income did increase 3%. Moving to auction and marketplaces, A&M service revenue increased 1%, and A&M service revenue as a percentage of total GTV came in at a robust 13.6% for the quarter. As we have noted in the past, inventory sales tend to be lumpy and driven by consigner preferences. And in the fourth quarter, inventory sales declined 24%, driven by weakness in the US and Canada, partially offset by strength in our international region and our government sector. Recall that Canada benefited from a very large inventory dispersal in the fourth quarter of last year, which we are now cycling over. Inventory returns came in at 10%, which is up about 50 basis points compared to 2020. Overall, we are very pleased with our revenue rate performance as both profit on inventory sales and service revenues improved versus prior year. Cost of service plus SG&A was up 13%, with total SG&A increasing 18% compared to last year. I want to unpack total SG&A here to give everyone a better sense of the moving pieces. It is important to note that SG&A includes about $3 million in one-time non-recurring fees associated with the ongoing evaluation of M&A opportunities, SOX remediation fees, and other one-time advisory fees as referenced in our 8K non-GAAP disclosures. The acquired businesses of Rouse and SmartEquip added approximately $5 million of incremental SG&A costs in the fourth quarter. Once you look at SG&A excluding these highlighted items, our core SG&A increased by slightly less than 11%. This increase was primarily driven by investments to fuel our key growth and strategic initiatives. As Anne referenced, we have expanded the number of our satellite yards, established a US-based inside sales team, continued to grow our team in Ritchie Brothers Financial Services, initiated our IT transformation to a global marketplace, and supported new product launches such as RitchieList. We also saw a pickup in the fourth quarter in travel expenses as COVID restrictions began to ease, in line with how we have guided for several quarters. We want our sales force to be out on the road cultivating new and nurturing existing relationships. In addition, we have also made some incremental investments to strengthen our financial control environment. To that end, I am very happy to note that we have effectively remediated material weaknesses that had been identified as part of our 2020 year-end closed procedures. A special thank you to the entire finance team. I could not be more pleased. To sum up our SG&A section, the increases you are seeing are prudent investments that unlock the future growth, and we expect to begin seeing returns on these investments within 2022. I would like to note that we expect our SG&A in the first quarter of 2022, ex-share-based payments, one-time non-recurring charges, and exclusive of any impact of your auctions to be approximately $125 to $130 million. Our cash flow remains very robust with trailing 12 months operating free cash flow of $276 million, which is 128% of our non-GAAP adjusted net income. At the end of the quarter, our adjusted net debt increased as we drew on our revolving credit facility in connection with the acquisition of SmartEquip. I also want to note that the Euro auction bonds are now held in escrow. We are paying interest on them before the deal closes, and the December 21st to December 31st period resulted in an incremental $1.3 million in interest expense in the fourth quarter. That said, I am sure you are all aware of how the spreads are moving, and we are very happy with going to market when we did and completing the offering last year. For modeling purposes, we expect our run rate interest expense to be approximately $24 million per quarter starting the first quarter of 2022. And with that, I conclude my financial discussion and hand it back now over to Anne.

Thank you, Sharon.

And while we continue to focus on driving growth in an unprecedented tight supply environment, we have also made tremendous progress in our transformation to a global trusted marketplace for insights, services, and transaction solutions. This slide highlights several accomplishments we have made against our strategic pillars in the past year. We dramatically improved the customer experience with the launch of new digital products like RichieList and fundamentally improved the functionality of our digital experience. We also acquired SmartEquip, to enable us to facilitate parts and service transactions on behalf of our dealer and OEM partners. We also work hard to ensure our employees have the best experience, and I am happy to say our engagement efforts are resulting in lower turnover compared to others. Of particular note are our efforts in the area of diversity, equity, and inclusion, which have resulted in three new employee resource groups forming which we proudly support as an organization. You just heard about our modern architecture partner, but we are taking steps beyond that, such as moving Iron Planet to the cloud to enable more stable and scalable experience for our customers. We integrated Rouse this past year and are seeing fantastic growth in our IMS business as more and more organizations are activating. We announced the acquisition of Euro auctions and continue to scale our local satellite yards and sales coverage model strategies. What should be clear to everyone is that we are sprinting towards our strategic vision of becoming the trusted global marketplace for insight services and transaction solutions for commercial assets and making the prudent investments needed to get there and unlock TAM for our shareholders. Now, turning to current trends and outlook, there is no change in our view here. As you know, the environment remains very tight for equipment supply due to low inventory levels and continued headwinds to OEM production due to supply chain issues. We see this as a point in time event and consider it outside of our control. We know the equipment is there, it is aging, and this pent-up supply will need disposition services as the supply chain starts to thaw. That said, we are not sitting idly by. We are focused on growing in a constrained environment by focusing on what we can control in terms of investing in growth initiatives and executing in our transformation to marketplace and structurally improving the business to deliver on our strategy of becoming the global trusted marketplace for insights, services, and transaction solutions.

With that, operator, please open the line for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by one on your touchtone phone. You will hear a three-tone prompt acknowledging your request, and your questions will be pulled in the order they are received. Should you wish to decline from the pulling process, please press star followed by two. And if you're using a speakerphone, please lift your handset before pressing any keys. One moment for your first question. Your first question comes from Sherilyn Radborn with TD Securities. Please go ahead.

Thanks very much and good morning. I was hoping you could comment on organic service revenue growth in the fourth quarter and just whether you think that's a reasonable run rate to think about for the base business in 2022.

Hi, Sherrilyn. It's Anne. Thanks for joining us. Yeah, we are super proud, right? So we came in with service revenue growth of 5% for the year, 6% for the quarter, and we expect that to continue. And as we discussed in our evergreen model, the gap between GTV growth and service revenue growth to widen over time. As we grow service revenues, unrelated to the underlying GTV. And just as a context, right, you guys have heard me now, I can't believe it, but for two years talk about how we look at the world as inside and in our control and out of our control, right? Global pandemic, a supply chain that no one's ever seen, out of our control. Even though we know it is a point in time, the equipment continues to age and the OEMs will certainly catch up. It's not a question of if, it's a question of when. So for us, being able to drive the strategic initiatives which are in our control, both in organic growth and M&A, to kind of achieve that vision so when the supply chain opens up, we can disproportionately benefit. And we're already seeing signs of that exactly as you noted, Sherilyn, with the 5% for the year and 6% in the quarter. of the services revenue growth. So super proud and yes, expect it to continue.

Right, but what was the organic component of that 5% growth for the year and 6% in the quarter?

7%, even higher.

Okay, maybe we'll have to take that offline to build it up because it looked like a lot of it in Q4 at least was inorganic.

Yeah, no, Samir can take it offline and can walk you through the 7% number. Absolutely. And so 7% is to the year, not to the quarter, just to be clear?

That's correct. I don't know if we've peeled it down, but we can certainly follow up.

Okay. And then are you able to quantify the extent to which the IMS contributed to growth at RBFS in Q4 and sort of break that down in terms of how the contribution of the IMS to the growth would compare to the impact of expanding into escrow services on private treaty deals?

Yeah, so we, candidly, Sherilyn, we don't look at it that way. So we, because IMS casts a very long shadow. So think about that's really the gateway, right? And I think as you heard in my prepared remarks, More and more, that is the gateway to all of Ritchie Brothers. So the attribution for any particular service or the underlying GTV just becomes kind of a math exercise. When we started the conversation about transforming to a marketplace, we have been clear that that IMS pillar is the gateway. And what you're seeing is a few things. One, We're moving fast and strong into that gateway, so you see the underlying metrics moving up. The second thing that you're seeing is that we are moving more and more of everything we offer for Ritchie Brothers. You have to come into the IMS to partake in. And then we highlighted the Ritchie Brothers Financial Services as an example, not so much of IMS, because again, that's the gateway, but an example of our ability to growing stronger each day to power services separate and apart from the underlying GTV. Again, it's always going to be attached to the GTV, so that's kind of the give me, and as we're going to add more and more services to attach, what's fascinating for us to watch and to drive is separating that to really unlock that services revenue growth at a significantly higher pace. So, GTV growing, you know, 1% in the quarter, but services revenue growing six, starts giving an indication for the power of that.

Okay, I'm just, I'm struggling because it would be nice to understand what the IMS contributed in isolation because it seems like there's a couple of other pretty big moving pieces for RBFS. Like, one would be substantially higher used equipment prices year over year. And the other would seem to be, because it's mentioned in the MD&A, the expansion into escrow services.

Correct. So we are happy to.

Maybe we'll take it offline. I think it's less about the attribution to IMS and more about kind of the pieces as RBFS continues to, I'm going to say, unbundle the various services services that are under the RBFS umbrella. So it's not that they haven't been offered before, but we're unbundling them, dipping into some new ones. So maybe we'll take that offline to really break down the RBFS story.

Okay. I'll pass it on to someone else. Thank you.

Thank you.

Your next question comes from Gary Prestapino with Barrington Research. Please go ahead.

Hey, good morning, Anne and Sharon. Hey, Anne, a couple of questions here. You know, as you look at what's going on with the supply used equipment and all, obviously a big shortage, but what would be some of the leading indicators that you all are focusing on that would give us some indication that this is going to start alleviating? Like, you know, in the car market, we're seeing Obviously, year over year, some increases in new car sales. We're also seeing increases in inventory on dealer lots. So, could you help us with that a little bit?

Yeah, Gary, hello, and thank you. Yeah, we're watching. Clearly, it's out of our control, but we're watching it avidly. So, I think there are some parallels to new cars. There's also some unique to us metrics we look at. So, For example, new equipment sales, obviously, we are watching that. We also watch metrics around backlogs of orders, and those are less kind of widely available but more, you know, as we talk to our dealer partners, we try to understand kind of, you know, their orders versus, you know, their demand versus the supply that the OEMs are able to drive. Another interesting measure for us is the utilization rates. you know, in the rental segment. So, you know, as those are at historic highs, we have seen those plateau. We're seeing them start coming down slightly. But these are some of the kind of early indications that we are watching, you know, to know when the tides turn. And I think what, you know, the essence of your question and exactly where we're at is, you know, they will turn. It's a matter of when, right? OEMs make money by, you know, shipping products to customers. If there's a higher level of demand than the supply chain can meet, they will figure it out. It's a matter of when. And unlike other industries where if you, quote, miss a sale today, you don't get to make it up tomorrow, the beauty of our industry is the equipment continues to age. It's sitting out there. It will need to turn. And when it does, we will be there, which is actually why we've continued to to invest in those underlying pieces, they're bearing fruit today. I think as Sharon said in her prepared remarks, when we face environments like this before, we've actually moved negative in GTV. So the fact that we continue to push forward and continue to push forward in services is giving us a lot of confidence that the pieces we're putting in place are the right pieces. Now it's just a matter of how do they unlock even greater potential when the tides turn in the broader ecosystem.

Okay. And then just a quick one on your IMS system, just as you were discussing it, it looks like it kind of gives, it's a gateway that kind of gives you a holistic view into all of what, you know, you offer at Ritchie and to do transactions, et cetera. But you did mention that the goal is to get all organizations on this so they can transact with Ritchie Brothers. My question would be, does it cost an organization to get on? And, you know, what happens two, three years down the road if an organization says, I don't want to get on this system? Or is that just not something you're anticipating?

Yeah, Gary. So I think, as always, I like to think in threes. So let's just answer the question kind of three different ways. So the first answer is it depends on which IMS we're talking about. So the IMS business that we launched, which is really aimed at the long tail and the regional business, it is free. and we can offer it for you because it's very minimum work in order to load. Our folks stand at the ready to support to do that. It's really kind of a minimum effort for the customers, and it's giving a lot of benefit to them, a lot of benefit to us. We have an enterprise product, enterprise, and that's for large corporate customers that really want to dig into all of the capabilities you know, and that is a fee for that product. So number two. And then number three, we will always have an ability to kind of, much like we're, you know, unbundling, if you will, the various services within Richie Brothers, you can always opt into the services. So again, imagine a marketplace where, you know, you can opt into one service at a time the way you've always historically been able to do. But we will always encourage you because it's free, because it's easy to kind of opt into IMS. And if it's one service at a time, you know, no problem. If you want to use it more holistically, there is a fee, even today. But so, you know, I think our two norths is we're going to be here in whatever way our customers want to do business with us. IMS just makes it infinitely easier.

Okay. Thank you. Thank you.

Ladies and gentlemen, as a reminder, if you do have any questions, please press star 1. Your next question comes from Michael Beneiger with Bank of America.

Please go ahead. Michael, you may be on mute. Sorry, can you hear me now?

Thank you. Yes, you can. Great. So the higher SG&A, the 125 to 130, that's up 11 to 16 million just sequentially. What is that being spent on exactly? And historically, Q1 is not the high point for the year on SG&A. So should we be thinking that that number creeps up through the year, especially when we bring euro auctions onto the platform?

Yeah, Michael, so let me start and then I'm going to turn it over to Sharon. So, you know, think about the things that drove the increased SG&A are the things that are kind of our investments in the satellite yards, the inside sales team. So I think the historic perspective of SG&A and Q1 had more to do with kind of that cost to serve metric. that was actually down 1% in Q1. So you're exactly right. I mean, in Q4 and, you know, those are kind of the historic measures. The SG&A we're talking about is the non-cost-to-serve SG&A, and those are largely comprised with the investments that we're making in the yards, in the teams, in RBFS, in the IT transformation. So that's kind of what's in the number that we've signaled moving forward so let me stop here just to kind of I wanted to put it out there that the cost to serve was more the historic you know comprise the bigger percentage of the total and now it's a lot of the investments we're making that you know we we talk about them as in the future but candidly many are already reaping rewards this isn't future like you know you know four year you know these kinds of things you know satellite yards are reaping rewards now inside sales team. It's just not to the same degree as they will when the kind of broader ecosystem opens up and there's plentiful equipment on which to offer those services. So let me stop there and then turn it over to Sharon to talk a little bit about how to understand the 125 to 130.

Yeah, great, Anne, and thanks, Michael, for the question. You know, I think Certainly we've moved quite quickly on a lot of these growth strategies. So that's why we felt it was important to give some Q1 perspective. Clearly you end up with smart equip in there for the entire quarter. So that would be an unusual number compared to prior Q1 to Q4 trends. So just wanted to call that out. Equally, I think it's important to recognize our Orlando event is back to live. And so we are seeing some increased costs that we're expecting as we put on that live event. More from, as Annett said, our customers have missed that social interaction. So really reflecting the fact that we're, again, engaging with our customers on site. Clearly, some of the learnings that we had on cost of services won't come back. But things like travel, things like, you know, fuller support to service and entertainment type costs will be in that number. And then as Ann said, the satellite yard expansion, continued growth in RBFS, those are the other growth initiatives that are continuing to fuel that Q1 outlook.

Okay. And then just to follow up on the Q1 outlook, obviously, I know we're diverging from GTV to more the service revenue growth, but you do have a tough comp in the first quarter with this plus 11. It's not just Orlando. Can you just remind us, Sharon, any shifts in the auction calendar that we should be aware of? I think you might have mentioned before some one time, just so we're a little bit aware of what we're thinking for the first quarter there.

Yeah, so I'll go back to last year.

And so what was driving that 11% growth was we were really measuring off a 20 base that was really challenged predominantly because of international lack of movement with the onset of COVID in 2020. So I think the year-over-year growth, that 11% is more a reflection of a soft 20 as opposed to a strong 2021. You know certainly the calendar shifts are always changing, but you know it's there's nothing unique to call out and You know we are still expecting You know we're seeing really good You know pricing performance continue so you know clearly the service revenue basically leverages off of that and you know again, I'm I would look at that 11% base more as a reflection of lack of strengths in 2020 as opposed to a strong 21 that we're lapping over.

Thank you.

Your next question comes from Brian Fast with Raymond James. Please go ahead.

Thanks. Good morning. Can we just go back to the Rouse acquisition? I guess now that you've had the business for over a year, could you just provide some comments if it has performed within expectations? And then maybe what sort of KPIs you look at when measuring the performance?

Absolutely. Yeah. What a year it's been. So the way we look at Rouse, and first of all, hello. Thank you for joining us. The way we look at routes and the way we look at any acquisition really has two different lenses that we look through. The first is their underlying performance, and then the second is the impact on the broader Ritchie Brothers ecosystem because every acquisition that we make has two things in common. One, we love the underlying business. We love the teams that are running it, and we expect it to perform. And then on the other side, the kind of the strategic rationale of the acquisition is always the impact to the broader Ritchie Brothers ecosystem. So in terms of the first lens, that continues, right? So we are very pleased with the Rouse team, the management team, and the entire team has stayed intact, continues to run it, continues to have double digit growth. We're very happy with how the Rouse business is going. They're unlocking new geographies on their own and with the help of Ritchie Brothers, so it's intact and going very well, and the integration points are firmly in place. And then on the broader ecosystem play, that's a journey, and we kind of mapped it out even before we made the acquisition. And the first elements of that that really have been paying dividends is in our Marketplace E product. So just as a reminder for everybody on the call, we have obviously our unreserved auctions with Richie Brothers and Iron Planet, and then Marketplace E is a reserved marketplace. And they are a key KPI we call kill rate. And let me just take a minute to explain. Basically, sellers can list a product for whatever they want, you know, $1 trillion. But the true value of a marketplace is not on what's listed on that product. We actually have launched a listing service for that, but what actually transacts. And the KPI there is the kill rate. And the kill rates have gone up almost twofold because we have introduced the Rouse pricing model, the same one that's offered to customers, you know, fully agnostic, fully, you know, through the Chinese walls, but basically as an advisory service for the MPE customers to say, look, you can price this thing whatever you want, but let us show you, you know, what the bands of pricing really should be using a third-party data service route. And that has really increased the kill rates through MPE and therefore the growth rate. It's been wonderful to watch, and we have an entire, you know, staggered phasing of the various synergy plays that we always need with routes. One of the ones that I've mentioned in the past is, you know, our industry does not have a Kelly Blue Book-like solution. We are marching towards that as kind of in the future evolution of the routes offering. So very pleased, highly integrated, and, you know, the team continues to deliver.

Okay, thanks. I appreciate the color. That's it for me.

Your next question is a follow-up from Sherilyn Radborn with TD Securities. Please go ahead.

Thank you. I was just wondering if you have a revised expectation on when the Euro auctions deal will close, you know, just in terms of any questions that might be coming back from the regulator on their review.

Yeah, Sherilyn, so, and again, So, yeah, this is one, obviously, we're staying very, very much on top of. There's an open, you know, we're following the normal process. That's where we're at. The questions that are coming forward are very straightforward. We actually had a call with the CMA earlier this week to answer the questions they have. So, you know, these things are, you know, back to the in our control and out of our controls. You know, they follow their process. We are well aligned within it and kind of following it lockstep. Obviously, you know, we're bullish about, you know, the auction acquisition period. We wanted to get in front of it. That's why we did the debt offering to kind of get in front of the interest rates. But at this point, we're just kind of following through the process.

The lines of communication are open and we're kind of awaiting their steps. So do you have a revised expectation on when the deal might close?

We don't. You know, these things are, you know, obviously our anticipation is and was, you know, kind of Q1, but largely these things are out of our control. So, you know, our debt is lined up. We're ready to go. We're talking to the CMA, you know, open book on kind of how we're viewing it, and we're kind of awaiting their steps and their pacing.

Okay. And then one for Sharon. In terms of the share-based payments, which are now an important add-back, can you give us a sense of the base expense there and the sensitivity of the mark-to-market portion to a change in the stock price?

Sure, Sherilyn. Really, the

fairly limited exposure to the change in the stock price because really the only mark-to-market DSUs are the director retainer grants. And certainly there was not much inside of the Q4 relative to that. The other kind of changing element would be more measure of PSU achievements. And those, you know, again, wouldn't have been sizable in Q4.

Thank you for the time.

Your next question comes from Sabahat Khan with RBC. Please go ahead.

All right, great. Thanks and good morning. Just one question, I guess, on the fees. I just want, we think we saw some buyer fees being taken up into 2022 on your platforms. One, if you could just confirm if that's correct and maybe how broad-based or the magnitude of those price increases were. Sorry, buyer fee increases.

Yeah, hello. Anne here. Thank you for joining us. Yes, so it is correct. We have taken some buyer fees walking into 2022. Let me just state this. When we first announced some fee increase last year, we talked about the fact that this will be a normal course of how we go to market. Much like every other industry, I know it hasn't been a normal course for us historically, but much like most industries, look around the competitive landscape and understand when there's a pricing opportunity or a pricing gap and take appropriate measures. We have now instituted that as part of our normal process to both review the competitive landscape, which we actually do on a monthly basis, to have certain hurdles that are met when we actually take action. We saw an opportunity for that and did it walking into 2022. And, you know, it wasn't broad-based because that's not how opportunities are, neither globally nor kind of across every category, but it was prudent and we took it ideally don't believe that we've kind of gone out with a quantification.

I don't know, Sharon, if you want to say anything about the quantification, the magnitude of it.

Yeah, we haven't really expressed anything on it. You know, again, I think this is more of a regular fee increase, you know, and in some ways it's necessary because of the inflation that we're seeing and as, you know, the same like item is now moving across the grid, you know, and then ratcheting down based on our fee tables. It's just a normal course kind of repositioning. So, but no, we have not quantified the magnitude.

Okay, great. Yeah. Okay, that makes sense. And then I guess just on the upcoming Orlando auction, I guess, you know, you commented that the supply situation isn't really much better into Q1, but just big picture, if you compare, you know, the mix of the equipment you have there, you know, the volume, just kind of how you're directionally feeling about it, is it pretty much reflective of the environment or, you know, just with it being in person, has that maybe changed anything?

Yeah, how about we turn that one over to Jim Kessler, our President and Chief Operating Officer on all things Orlando. Jim.

Awesome. Thanks, Anne. And I would say just from when you look at basic mix and lots, similar environment to last year, the great news is pricing we're seeing continue to be strong, so very excited. But when you kind of take a look at last year, mix similar, number of lots slightly up compared to last year. And then we're expecting to see strong pricing as we go. But the great thing is I think we do have excitement from our customers to be able to get together, which as this happens, being able to have the sales team, our customers, and talking about the rest of the year and planning it out, I think we're going to see some real benefit of having that social interaction with our customer and what really happens the rest of the year with those conversations.

Okay, great. And then this is more of a logistics one. I think there was a bit of discussion earlier on the timing of the euro options transaction. But, you know, assuming, I think CMA said they might come back with a decision by March 4th. From, I guess, your perspective, say it does come on that day, you know, is it a one-week, four-week process for you to actually logistically close a transaction? Assuming you get a decision on that day, just want to understand what more legwork there could be on your part after they decide.

Yeah, so I'm going to turn this over to Sharon. Let me just start. There's kind of two things once we get the green light. And obviously that's why we wanted to line up the financing so that didn't end up being the long pole in the tent and we weren't on our heels with interest rates moving up. So we're actually very happy that we made the decision we made. There's two things we're doing during this period of time. One is obviously working with the CMA to make sure that all questions are answered. The other is really sharpening our pencils for integration. Any transaction lives and dies by how well the integration plans come together. You just heard me answer the routes question. Those have come together very well. This is obviously of a bigger scale, so we have been really spending a lot of time on every nuance of integration planning, both at the business level down to individual people and so on and so forth. And our plans are literally like T0, T plus one day, T plus two days, T plus one week, that level of granularity. So we have been very, very busy during this interim period. But with that, Sharon, do you want to answer the question on how many days from green light to actual close?

Yeah, so I think probably what's safe to say, if we do get clearance on that timeline that you mentioned, you know, we are positioned that we would be able to close before the end of the quarter. You know, clearly financing is in place. You know, we have to move the money, so there's certainly administrative responsibilities that you have to do, but it is possible it could close, you know, in that last week of March, you know, if that is the result we get.

Great. Thanks very much for the call.

Your next question is a follow-up from Michael Feniger with Bank of America. Please go ahead.

Yes. Hey, guys. Just on the Euro auctions, I know there's been a lot said. I know when it was announced in August, you guys gave – there was a multiple. We were giving some historicals. I believe it was going to be maybe $50 million of EBITDA to think about as a contribution. It's supposed to be accretive. I'm just curious how you're seeing Europe right now. Obviously, things since August have gotten tighter. I think in the Q4 release, you guys flagged softer performance every year in Europe. So I'm curious, has the accretion expectations changed a little bit since the announcement of the deal and the supply constraints and what you might be seeing in Europe? Thank you.

Yeah, Michael, it's Anne. So let me take that question. So we're not seeing anything uniquely different about Europe than the rest of the globe where we operate, meaning same tightness in supply, but stronger pricing. Now, here is the one thing to talk about when we think about the Euro model, Euro auctions versus the Ritchie Brothers Europe model. And this is You know, just like the Rouse conversation we had about, you know, we're buying it because we love the underlying business, but we're also buying it for that second lens of, you know, what does it do for the broader Ritchie Brothers ecosystem? Euro auctions fundamentally has a very different go-to-market model where it's less about, you know, Europe as the market to do business in, and it's more about their sourcing model and then kind of transacting it around the globe wherever the pricing is best. So the way that Ritchie Brothers historically has sourced, and specifically in Europe, is typically for the market where the sale is about to happen, right? So we source in market. That's not the way your auctions goes to market, and we're fascinated by this model. They source broader, and then they sell that much broader still. So there's nothing unique. There's nothing particularly dampened, and certainly their model opens up the globe in a way that you know, is very different than our European business and we're excited about it.

Understood. And I could have missed this. So if you want to transact with Richie at any auction, do you have to subscribe to IMS and upload your fleet? Can you just flesh this out for me? Because I understand that IMS is the gateway. It is the golden goose. It is a huge part of where you guys are going in the future. I totally get that. So Richie, What is this change? Is it that anyone that does anything on Richie now has to upload? Would you get pushback when people saying this is going a little too far? I guess I'm trying to understand what the change is here with transacting with Richie Brothers and now having to subscribe to IMS, if there is a big change at all.

Yeah, you got it. So yes and no. So I would say more internal than external at this point. So yes, No. So first of all, if you're a buyer, you buy the way that you buy today. And if you're a seller, you basically have two paths. You do it like you do today or through IMS. The difference here is it's kind of a push-pull, right? We're explaining on those sales calls, and when you see the numbers going up, as they are very successfully, congratulations to Carrie Taylor, our Chief Revenue Officer, and her team for Kind of explaining to customers that if they are to walk into IMS there's a lot more benefit for them and no cost But no you there's no stick there. You do not have to you can partake of Ritchie Brothers services You know in the way you always have been able to in the past Got it.

Thank you There are no further questions at this time, please proceed I

Wonderful. Thank you so much. Appreciate everybody joining us. Appreciate the questions. And you know, it is not lost on this team that you know, the environment is you know, causing us to grow slower than we would otherwise like to grow, but grow still. And so if you take anything away from this call, it is that we are incredibly bullish on where we're headed. We're putting all of the pieces in place. Look, You know, we could make a decision that says, you know, wait for the environment to turn and then put the pieces in place. But candidly, these are, you know, we've tested and learned, we know they're positive ROI. So, you know, if you wait, that just means it's going to be that much longer to earn the benefits of those investments. So you see how bullish we are because we're continuing to put them forward. They're actually delivering results today. just not at the clip that they will deliver results once the backdrop of the environment opens up. But we thank you for being on this journey with us. We're very excited about it. And have a wonderful, wonderful rest of your day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines. Have a great day.