Ritchie Bros. Auctioneers Incorporated (RBA) on Q4 2021 Results - Earnings Call Transcript
Operator: Good morning. My name is Pam, and I'll be your conference operator today. At this time, I'd like to welcome everyone to Ritchie Bros. Auctioneers Fourth Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. Thank you. I will now turn the conference over to Mr. Sameer Rathod, Vice President of Investor Relations and Market Intelligence to open the conference call. Mr. Rathod, you may begin your call.
Sameer Rathod: Hello, and good morning, and thank you for joining us today's call to discuss our fourth quarter 2021 results. Joining me today are Ann Fandozzi, our Chief Executive Officer; Sharon Driscoll, 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 discussions 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 and involve risks and uncertainties. The risks and uncertainties that could cause our actual and operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian Securities filings available at our website investor.ritchiebros.com. We encourage you to review the earnings release and Form 10-K, which are available on our website as well as EDGAR and SEDAR. 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 the live or recorded webcast or downloaded from our website. All figures discussed today will be in US dollars unless otherwise noted. I will now turn the call over to Ann Fandozzi.
Ann Fandozzi: Thank you Sameer, 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 staying are 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 gain confidence through our test and learn approach, we continue to invest in key initiatives like satellite yards and go-to-market coverage models. These that naturally come with a cost and despite the top line pressures due to the tight supply environment. In 2021, we grew non-GAAP adjusted operating income 3% for the full year. Our omni-channel platform is delivering strong outcomes for our customers with bids per lot and used equipment 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 to the broader Ritchie Bros. ecosystem. I also want to give everyone an update on Euro Auction. 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 tests, specifically in attracting new customers with a much lower cost to serve model, we continue 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 and 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 scaled 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 Bros. 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 of services that Ritchie Bros. offers to our customers today. A great example here is Ritchie Bros. financial services. You have heard Sharon talk about the investment in 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.
Sharon Driscoll: Thank you, Ann. And let 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 shift. We continue to see robust increases in mixed 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 Ann mentioned, with revenue increasing 61% in the fourth quarter. Other services revenue also benefited from the partial quarter contribution of SmartEquip 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 Ann 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 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 U.S. 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, stocks remediation fees and other one time advisory fees as referenced in our 8-K 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 Ann referenced, we have expanded the number of our satellite yards, established U.S. based inside sales team continued to grow our in Ritchie Bros. Financial Services initiated our IT transformation to a global marketplace and supported new product launches such as Ritchie List. We also saw 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 Salesforce 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 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 Euro Auctions be approximately $125 million to $130 million. Our cash flow remains very robust with trailing 12-month 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 results 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 Ann.
Ann Fandozzi: 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 Ritchie List 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, 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 IronPlanet 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 trust of 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 fall. 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.
Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question comes from Cherilyn Radbourne with TD Securities. Please go ahead.
Cherilyn Radbourne: 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.
Ann Fandozzi: Hi, Cherilyn. It’s Ann. 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 to gap between GTV growth and service revenue growth to widen over time, as we grow service revenue 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, Cherilyn, 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.
Cherilyn Radbourne: Right. But what would the organic component of that 5% growth for the year and 6% in the quarter.
Ann Fandozzi: 7%, even higher.
Cherilyn Radbourne: 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.
Ann Fandozzi: Yeah. No. Sameer can take it offline and can walk you through the 7% number. Absolutely.
Cherilyn Radbourne: And so, 7% is to be year, not sort of quarter just to be clear.
Ann Fandozzi: That's correct. I don't know if we've peeled it down, but we can certainly follow up.
Cherilyn Radbourne: 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?
Ann Fandozzi: Yeah. So, we candidly share, 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 Bros. So the attribution for any particular service or the underlying GTV just becomes kind of a math exercise. We -- as we -- when we started the conversation about transforming to a marketplace, we have been clear that that IMS pillar is the gateway. And what you are 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 all -- more and more of everything we offer for Ritchie Bros., you have to come into the IMS to partake in. And then, we highlighted the Ritchie Bros. Financial Services as an example, not so much of IMS, because again, that's the gateway, but an example of our ability 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 the -- 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. And so, GTV growing 1% in the quarter, but services revenue growing fixed, starts giving an indication for the power of that.
Cherilyn Radbourne: 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 pricing year-over-year. And the other would seem to be, because it's mentioned in the MD&A, the expansion to escrow services.
Ann Fandozzi: 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 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 one. So, maybe we'll take that offline to really break down the RBFS story.
Cherilyn Radbourne: Okay. I'll pass it on to someone else. Thank you.
Ann Fandozzi: Thank you.
Operator: Your next question comes from Gary Prestopino with Barrington Research. Please go ahead.
Gary Prestopino: Hey, good morning, Ann and Sharon. Hey, Ann, a couple of questions here. 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, 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?
Ann Fandozzi: 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 team cars. There is 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 -- as we talk to our dealer partner, we try to understand kind of their orders via -- versus -- their demand versus the supply that the OEMs are able to drive. Another interesting measure for us is the utilization rates in the rental segment. So, 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 to know when the tides turn. And I think what -- 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 shipping product to customers. If there's a higher level of supply of demand than the supply 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 invest in those underlying pieces. They're bearing fruit today. I think as Sharon said in her prepared remarks, when we faced environments like this before, we've actually move 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 price turn in the broader ecosystem.
Gary Prestopino: 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 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 Bros. My question would be, does it cost an organization to get on and what happens to 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.
Ann Fandozzi: Yeah. Gary, so, I think, why don't -- 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 was really aimed at the longtail and the regional business, it is free. And we can offer it free, 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, 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 unbundling, if you will, to various services within Ritchie Bros. You can always opt-in to the services. So, again, imagine a marketplace where you can opt-in to 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-in to IMS. And if it's one service at a time, no problem. If you want to use it more holistically, there is a fee even today. But -- so, I think what our true north is, we're going to be here in whatever way our customers want to do business with us. IMS just makes it infinitely easier.
Gary Prestopino: Okay. Thank you.
Ann Fandozzi: Thank you.
Operator: Your next question comes from Michael Feniger with Bank of America. Please go ahead. Michael. You may be on mute.
Michael Feniger: Sorry. Can you hear me now? Thank you.
Operator: Yeah. We can.
Michael Feniger: Great. So the higher SG&A, the $125 million to $130 million, that that's up $11 million 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?
Ann Fandozzi: Yeah. Michael, so let me start and then I'm going to turn it over to Sharon. So, 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 in 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 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 our RBFS, in the IT transformation. So, that's kind of what's in the number that we 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 comprise the bigger percentage of the total. And now, it's a lot of the investments we're making that -- we talk about them as in the future, but candidly many are already reaping rewards. This isn't future, like, four year -- these kinds of things, 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 plenty of 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 million to $130 million.
Sharon Driscoll: Yeah. Great, Ann. And then, thanks Michael for the question. 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 SmartEquip 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 Ann 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 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 our RBFS, those are the other growth initiatives that are continuing to fuel that Q1 outlook.
Michael Feniger: 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 to so we're a little bit aware of what we're thinking for the first quarter there.
Sharon Driscoll: Yeah. So, I'll go back to last year. And so what was driving that 11% growth was, we were really measuring off a 2020 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 of reflection of a soft 2020 as opposed to a strong 2021. Certainly, the calendar shifts are always changing, but it's -- there's nothing unique to callout. And we are still expecting -- we're seeing really good pricing performance continue. So, clearly, the service revenue basically leverages off of that. And, again, I'm -- I would look at that 11% base more is a reflection of lack of strengths in 2020 as opposed to a strong 2021 that we're lapping over.
Michael Feniger: Thank you.
Operator: Your next question comes from Bryan Fast with Raymond James. Please go ahead.
Bryan Fast: 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?
Ann Fandozzi: Absolutely. Yeah. What a year it's been. So we -- the way we look at Rouse -- and first of all, hello, thank you for joining us. The way we look at Rouse is, 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 Bros. 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 Bros. 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 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 Bros. So kind of is 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 fee product. So, just as a reminder for everybody on the call, we have -- obviously our unreserved auction with Ritchie Bros. and IronPlanet, 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, $1 trillion and -- but the true value of a marketplace is not on what's listed on that product. We actually have launched the listing service for that. But what actually do transact 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 fully agnostic -- fully -- through the Chinese walls, 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 what the bands of pricing really should be using a third-party data service Rouse, 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 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, our industry does not have a Kelley Blue Book like solution. We are marching toward that as kind of in the future evolution of the Rouse offering. So very pleased, highly integrated, and the team continues to deliver.
Bryan Fast: Okay. Thanks. I appreciate the color. That's it for me.
Operator: Your next question is a follow-up from Cherilyn Radbourne with TD Securities. Please go ahead.
Cherilyn Radbourne: Thank you. I was just wondering if you have a revised expectation on when the Euro Auctions deal will close, just in terms of any questions that might be coming back from the regulator on their review.
Ann Fandozzi: Yeah. Cherilyn so, Ann again. So, yeah. We -- this is one -- obviously, we're staying very, very much on top of -- there's an open -- 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, these things are -- back to the, in our control and out of our, they follow their process. We are well aligned within it and kind of following it, locked up. Obviously, we're bullish about the Euro Auctions 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.
Cherilyn Radbourne: So, do you have a revised expectation on when the deal might close?
Ann Fandozzi: We don't. These things are -- obviously, our anticipation is, and was, kind of Q1, but largely these things are out of our control. So, our debt is lined up. We're ready to go. We're talking to the CMA, open book on kind of how we're viewing it and we're kind of awaiting their steps and their pacing.
Cherilyn Radbourne: 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?
Sharon Driscoll: Sure, Cherilyn. Really the -- fairly limited exposure to the change in the stock price, because really the only mark-to-market PSUs are the director retainer grants. So, that's -- 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, again, wouldn't have been sizeable in Q4.
Cherilyn Radbourne: Thank you for the time.
Operator: Your next question comes from Sabahat Khan with RBC. Please go ahead.
Sabahat Khan: All right. Great. Thanks and good morning. Just one question, I guess, on the fees. Just one, 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?
Ann Fandozzi: Yeah. Hello, Ann, here. Thank you for joining us. Yeah. 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 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 or -- 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 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. I 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.
Sharon Driscoll: Yeah. We haven't really expressed anything on it. Again, I think this is more of a regular fee increase. In some ways, it’s necessary because of the inflation that we're seeing. And as -- the same, like item is now moving across the grids, 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.
Sabahat Khan: Okay. Great. That makes sense. And then, I guess just on the upcoming Orlando auction. I guess, you commented that the tight situation isn't really much better into Q1. But just big picture, if you compare the mix of the equipment you have there, the volume, just kind of how you direction feeling about it? Is it pretty much reflective of the environment or just with it being in person, has that maybe changed anything?
Ann Fandozzi: Yeah. How about we turn that one over to Jim Kessler, our President and Chief Operating Officer, on all things Orlando. Jim?
Jim Kessler: Awesome. Thanks Ann. 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 plan it out. I think we're going to see some real benefit of having that social interaction with our customer and what really had happens the rest of the year with those conversations.
Sabahat Khan: Okay. Great. And then, there's just more of a logistic one. I think there's a bit of discussion earlier on the timing of the Euro Auctions transaction. But 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, is it a one week, four-week process for you to actually logistically close the 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.
Ann Fandozzi: 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 finance. So that was -- that didn't end up being the long toll 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 the -- 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. This -- any transaction lives and dies by how well the integration plans come together. You just heard me answer the Rouse 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. So -- and our plan are literally like T-zero, 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?
Sharon Driscoll: Yeah. So, I think probably what's safe to say if we do get clearance on that timeline that you mentioned, we are positioned that we would be able to close before the end of the quarter. Clearly, financing is in place. We have to move the money. So, there's certainly administrative responsibility that you have to do, but it is possible it could close in that last week of March, if that is the result we get.
Sabahat Khan: Great. Thanks very much for the color.
Operator: Your next question is a follow-up from Michael Feniger with Bank of America. Please go ahead.
Michael Feniger: Yeah. Hey, guys. Just on Euro Auctions, I know there's been a lot said. I know when it was announced in August, you guys gave -- there was some -- there was a multiple, we were giving some historicals. I believe it was going to be maybe $50 million of EBIDA to think about as a con contribution, is 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 year-over-year in Europe. So, I'm curious, has the accretion expectations changed a little bit as -- since the announcement of the deal and the supply constraints and what you might be seeing in Europe? Thank you.
Ann Fandozzi: Yeah. Michael, it’s Ann. 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 price. Now, here is the one thing to talk about when we think about the Euro model, Euro Auctions versus the Ritchie Bros. Europe model. And this is, just like the Rouse conversation we had about, we're buying it because we love the underlying business, but we're also buying it for that second lens of, what does it do for the broader Ritchie Bros. ecosystem? Euro Auctions fundamentally has a very different go-to-market model where it's less about the mark -- Europe 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 Bros. 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 dampen. And certainly, their model opens up the globe in a way that is very different than our European business. And we're excited about it.
Michael Feniger: Understood. And I could have missed this. So, if you want to transact with Ritchie 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, what is this change? Is it that anyone that -- does anything on Ritchie 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 Ritchie Bros. and now having to subscribe to IMS. If there is a big change at all.
Ann Fandozzi: Yeah. You got it. So, yes and no. So, I would say more internal than external at this point. So, no. If you are -- so, first of all, if you are a buyer you buy the way that you buy today and if you are a seller, you basically have two paths. You do it like you do or through IMS. The difference here is, is 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 Kari Taylor, our Chief Revenue Officer and her team, kind of explaining to customers that are to walk in through IMS. There's a lot more benefit for them and no cost. But no, we -- there's no stick there. You do not have to, you can partake of Ritchie Bros. services in the way you always have been able to in the past.
Michael Feniger: Got it. Thank you.
Operator: There are no further questions at this time. Please proceed.
Ann Fandozzi: Wonderful. Thank you so much. Appreciate everybody joining us, appreciate the questions, and it is not lost on this team that, the environment is 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, we could make a decision that says, wait for the environment to turn and then put the pieces in place. But candidly, these are -- we've tested and learned. We know they're positive ROI. So, if you wait, that just means we're going to -- 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.
Operator: 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.
