Good morning, everyone. My name is Michelle, and I will be your conference operator today. Welcome to the Ritchie Brothers Third Quarter Earnings Conference. All lines are muted to minimize background noise. After the speakers conclude their remarks, we will have a question-and-answer session. I will now turn the call over to Mr. Sameer Rathod, Vice President of Investor Relations and Market Intelligence, to kick off the conference call. Mr. Rathod, you may begin.

Hello and good morning, and thank you for joining us on today's call to discuss the acquisition of IAA as well as our third quarter 2022 results. Joining me today are Ann Fandozzi, our Chief Executive Officer; Eric Jacobs, our Chief Financial Officer; and John Kett, Chief Executive Officer of IAA. The following discussion will include forward-looking statements. Comments that are not a statement of fact including, but not limited to, projections of future earnings, revenue, gross transaction value and other items and expectations regarding the proposed acquisition of IAA, including the anticipated timing, benefits and synergies of the IAA transaction and future opportunities for the combined business of Ritchie Brothers and IAA are considered forward-looking and involve risks and uncertainties. These factors include but are not limited to the satisfaction of the closing conditions, including shareholder and regulatory approvals for the proposed transaction. The risks and uncertainties that could cause actual results to differ significantly from such forward-looking statements are detailed in our earnings and joint IAA transaction release issued this morning, as well as the most recent Quarterly Reports and Annual Report on Form 10-K each of Ritchie Brothers and IAA, which are available on their respective Investor Relations website on EDGAR and SEDAR as applicable. We will also make important filings with the SEC and applicable Canadian Security Regulatory Authorities in connection with the proposed transaction. You are urged to read those materials carefully when they become available. On this call, we will also discuss certain non-GAAP financial measures, including forward-looking non-GAAP financial measures. For the identification of non-GAAP financial measures, the most directly comparable GAAP financial measures and applicable reconciliation of the two see our news release, Form 10-Q and presentation posted on our website. We are unable to present a quantitative reconciliation of forward-looking non-GAAP financial measures as management cannot predict all necessary components of such measures, investors are cautioned not to place undue reliance on forward-looking non-GAAP measures. We have two separate presentations on our website this morning, one for our normal earnings release and another standalone presentation for the IAA transaction. All figures discussed on today's call are in US dollars unless otherwise indicated. Given that we will have a wider audience than normal, we may run long by a couple of minutes to make sure we have enough time for the Q&A session. I would now like to turn the call to Ritchie Brothers Chief Executive Officer, Ann Fandozzi.

Thank you, Sameer and good morning to everyone joining our call today. I will give a few quick highlights on our third quarter, after which Eric will give a brief update on our financial results before we move to discuss the exciting acquisition of IAA. We are pleased with our performance this quarter and what continues to be an uncertain macroeconomic environment. I am proud of the efforts our teams have made across the organization to deliver the third quarter in a row of double-digit service revenue and double-digit bottom line growth. We are accomplishing all of this while we continue to invest in improving our customers' experience through the expansion of local yards, a new sales coverage model, and modernizing our technology. Let me now hand the call to Eric Jacobs to quickly highlight our financial results.

Thank you, Ann. Good morning to everyone. I'm sure we have enough time to discuss the expected strategic and financial benefits of the IAA transaction. I'm only going to touch on a few highlights about our strong quarter. For those looking for more information, our normal earnings deck with more details can be found on our Investor Relations website. To start, we are very pleased with our 10% growth in GTV, excluding the impact of foreign exchange. This is especially noteworthy given that we cycled over the almost one $100 million Barelux deal from last year. Prices of used equipment are still relatively strong on an absolute basis. However, prices are down compared to the highs we saw earlier this year. With regards to supply, we did see a rebound in volumes this quarter with total lots increasing 17% year-over-year. This growth in lots was driven by several significant deals from our strategic accounts group, as well as growth in low-value lots. While we are encouraged by the increase in lots, it's still too early to call this a trend. Let me move to revenue and start with total service revenue. Total service revenue increased 15% and our take rate with service revenue as a percentage of GTV expanded 130 basis points to 18.2%. This was driven by a strong contribution from other services and higher buyer fees. Inventory return increased 40% to $17.5 million due to a 43% increase in inventory sales revenue. This was driven by strategic accounts and solid execution by the at-risk team. With regard to earnings, our adjusted EBITDA increased 12% due to strong revenue performance, partially offset by planned investments, higher performance-based compensation, and inflation. Overall, a very strong quarter. Moving on to the fourth quarter, there are a few things that we'd ask you to consider. First on GTV, like most companies with international operations, foreign exchange headwinds are expected to impact us more meaningfully in the fourth quarter. FX could negatively impact our GTV growth by as much as 500 basis points. Therefore, despite the strong momentum in our business, we may see low to mid-single digit GTV growth in the quarter on a US dollar basis. Next, on selling, general and administrative expense. We are forecasting that SG&A expense, exclusive of share-based payments and adjustments for unusual or non-recurring expenses to be between $124 million and $129 million. Lastly, for modeling purposes, we are forecasting interest expense of $10 million to $11 million and an adjusted tax rate of between 25% and 27%. Before I hand the call back to Ann, I wanted to highlight for you that a leading Canadian newspaper recently selected Ann as one of the top five CEOs in Canada. She is being recognized as Innovator of the Year, a category that honors CEOs whose vision and guidance have been instrumental in the successful creation and commercialization of a truly disruptive product and service. The entire Ritchie Brothers team is extremely proud of Ann for this well-deserved honor. With that, back to Ann.

Thank you, Eric. It is a privilege to accept this award on behalf of the incredible team at Ritchie Brothers. As we continue our transformation to a global marketplace, we continue to innovate to enhance our customers' experience, and being recognized for this strengthens our resolve to go even further and faster. It is in the spirit of this innovation that I'd now like to turn to the exciting news we announced this morning of having entered into an agreement to acquire IAA. I'm going to walk through some of the reasons why we think this is such a compelling combination and our vision for our future as a combined company. I'm proud to be joined this morning by John Kett, CEO of IAA, who will also provide you with some background on the impressive business they have built. Finally, Eric will highlight the attractive combined financial profile of bringing Ritchie Brothers and IAA together through this transaction. This transaction is an important step in advancing the strategic vision that Ritchie Brothers announced in December 2020 to become the trusted global marketplace for Insight Services and Transaction Solutions. For the last two years, our team has been hard at work executing on that vision, delivering impressive results and creating strong momentum despite a challenging operating environment. Our relentless commitment has resulted in significant progress in marketplace technology, our inventory management system, new sales coverage models, and expansion of our satellite yard footprint. In addition, we made strategic acquisitions, such as Rouse and SmartEquip that are foundational to our marketplace and that accelerate our transformation. When evaluating potential transactions, we look for companies with great businesses that bring capabilities that can advance our marketplace vision. IAA does just that. Through this transaction, we will combine complementary businesses operating in adjacent verticals to unlock accelerated growth. IAA will increase our scale, allow us to diversify our business by entering the large vehicle market with a proven leader, and allow us to leverage our marketplace investment over a much wider array of assets. At the end of the day, this transaction is truly one plus one equals four. As we add additional capabilities and our expertise, we will further amplify the work that's already underway at IAA. This transaction is all about creating a stronger Ritchie Brothers and IAA that will accelerate the long-term growth trajectory of the combined business. We believe that the combination will deliver significant value to our stockholders, while unlocking compelling benefits for our customers, team members, and communities. At this point, let me cover the key terms of the transaction. We are acquiring IAA for a mix of $10 in cash and 0.5804 shares of Ritchie Brothers common stock per share of IAA stock, which translates to a total per share consideration of approximately $46.88 per share. This leads to a transaction value of approximately $7.3 billion, including the assumption of IAA net debt. The purchase price also represents a transaction multiple of 13.6 times IAA last 12 months adjusted EBITDA as of the end of the third quarter or an implied multiple of 11.3 times when including the midpoint of our full run rate cost synergies of $100 million to $120 million plus. Following the close, Ritchie Brothers stockholders will own approximately 59% of the combined company and IAA stockholders will own approximately 41%. We intend to fund the cash consideration of the transaction for a combination of cash on hand and new debt. We have already secured the necessary bridge financing commitments. Looking at what this means for our capital structure, at closing, we expect to have an approximately 3 times net debt to adjusted pro forma EBITDA leverage ratio. As we have done in the past, we will prioritize deleveraging following the close in order to maintain our flexibility to continue to pursue our growth priorities and return of capital to stockholders. In addition, we expect to maintain our quarterly dividend of $0.27 per share as we delever our balance sheet while also considering future increases as our leverage continues to come down. Following the completion of the transaction, I will continue to serve as CEO, and we will welcome four current IAA Board members to our Board of Directors. Erik Olsson will continue to serve as Board Chairman, and we will provide further details on our Board as we work through the integration planning. While Ritchie Brothers will continue to be legally incorporated in Canada, we will retain our offices and employees in Burnaby, British Columbia. IAA's Chicago offices will serve as the official headquarters for the combined company given our combined significant U.S. employee and customer base. We expect the transaction to close in the first half of 2023, subject to approval by both company stockholders, regulatory approvals and customary closing conditions. Now, to tell you a little more about IAA's business and the sector and geographies in which they operate. I'll hand it over to John Kett, CEO of IAA.

Well, hello everyone, and thank you Ann for that welcome. I share Ann’s excitement about this transaction and the incredible opportunities that we see ahead for our combined business. In terms of a thousand-foot overview of IAA, we are a leading global marketplace that connects vehicle buyers and sellers. Simply, Ritchie Brothers and IAA are very similar businesses in terms of what we do for our clients, it just applies to adjacent verticals. We operate 210 facilities throughout the US, Canada, and the UK and a digital platform that serves customers in more than 70 countries. Over the last 40 years we've built deep relationships with the global customer base across the vehicle ecosystem and have expanded our capabilities to create a true one-stop shop that supports customers at every step of the sale and purchase process, offering multiple bidding and buying digital channels, innovative vehicle merchandising, and efficient valuation services. This transaction marks a new chapter for IAA, and we could not think of a better partner than Ritchie Brothers. Through our discussions, we've come to appreciate just how well Ann and the rest of the team understand our industry, as well as how applicable Ritchie Brothers' platform and capabilities are to our ecosystem. Because of this, we are highly confident that together we can more effectively unlock the tremendous market opportunity for IAA. This is an incredible milestone, and all the opportunities that this transaction creates is due to the passion, dedication, and hard work of the IAA team. Our team has made significant strides to build out our technology, enhance our data and analytics, and improve our efficiency to deliver improved value to our customers. With Ritchie Brothers, we believe the best days are ahead of us as we'll be able to enhance our business for customers as we grow together. And of course, I'm pleased this transaction will also maximize value for our stockholders through the immediate cash component and the ability to participate in the substantial growth opportunities ahead for the combined business. Turning to the next slide, this is a snapshot of the US used vehicle market. The used vehicle market is stable and steadily growing supported by the consistent outflow of vehicles into the secondary market. On average, we see about 40 million used vehicle sales a year, about a third of which leave the car park with the remainder going through the secondary sales that place them back on the road. That equates to approximately 12 million vehicles in our market at any time. If you do the quick math given that there are on average 14 million vehicles entering the market every year and only about 12 million exiting, that means that the number of vehicles on the road increases each year creating an expanding fleet of aging vehicles that propels the growth of our market. Let me turn to the next slide. Our business has a long track record of growth through various economic cycles. Since 2004, we've driven consistent growth. In fact, over this period, the compounded average revenue growth rate has been approximately 12.7%. We have strong secular tailwinds in our industry that we expect to persist for the long term. More vehicles are in operation and the average age of the car park has increased over time. Compounding these factors is the complexity of newer vehicles, particularly over the last 10 years or so, which has led to a steady rise in repair labor and parts costs. And of course, as a result of the constraints on the new vehicle market, we're seeing higher utilization rates for recycled parts. These factors together are leading to consistent growth for our market and appreciable runway for potential future expansion. We're confident that together with Ritchie Brothers we will be able to seize upon these opportunities. With that, I'll turn it back to Ann to talk about the compelling combination of the similar business solutions and complementary customer bases.

Thank you, John. In some ways, it's like a homecoming for me and many members of the leadership team, as cars and insurance carriers represent a vast amount of our collective background. I'm personally looking forward to reestablishing those relationships as we look towards the future. It's important to recognize that despite IAA having different end markets, we both provide tech-enabled business solutions for our respective customers. As you see on the left side of the slide, our business processes are very similar from consignment of commercial assets or vehicles, to appraisals and inspections, to data and information analytics, all the way through transaction solutions and services. At the end of the day, the truly complementary nature of our businesses is widely believed to be such a compelling transaction. What gives us unparalleled conviction in this transaction is this leadership team's deep knowledge of IAA's business. We know the vertical, we know the players, and we know what it takes to achieve success: a relentless focus on the customer. Moving to the next slide, the strategic rationale for this transaction covers a wide span of opportunities from driving best in class customer experience and engagement due to our omnichannel platform, to accelerating growth and innovation across a wider array of verticals, to increasing scale and diversification, which as I mentioned earlier, will allow us to achieve significant annual run rate cost synergies of $100 million to $120 million plus by the end of 2025. We believe these cost synergies are highly achievable, and we'll look to identify additional opportunities throughout our integration planning process. That said, the transaction is expected to be accretive to Ritchie Brothers' adjusted earnings per share by low single digits in the first full year following the transaction and mid-teens after that. Importantly, this accretion excludes potential revenue opportunities that we believe we can unlock together across our expanded addressable market. The complementary nature of our businesses, including our well-aligned customer-centric culture, will allow us to drive profitable growth and improved returns through efficiencies as we combine our technology platforms, similar business processes, and yard footprints to unlock future growth potential. Now, let me focus on the diversification aspect of the transaction, which creates more resiliency in our business model. Our combined company would have a pro forma GTV of approximately $14.5 billion for the trailing 12 months. Both our businesses leverage a consignment and inventory revenue model. IAA diversifies our business by expanding beyond commercial assets into an adjacent vehicle vertical with our revenue derived more from sellers and IAA's revenue derived more from buyers. Let's go back to the example that I just gave about our combined yard footprint. The transaction will also allow us to expand our presence in key U.S., Canadian, and European geographies by combining Ritchie Brothers' existing footprint of over 40 owned and 24 leased facilities with IAA's footprint of approximately 210 facilities, many of which are leased. Together with IAA, we will have new opportunities to advance our yard strategy more efficiently with a combined 13,600 acres of yard capacity in key regions across the United States and internationally. We will be able to leverage our broader footprint by strategically increasing capacity to serve both commercial assets and vehicle customers. This will be particularly powerful in the case of catastrophic events as we will have more yards where our customers need us most to ramp-up capacity. In particular, Ritchie Brothers will bring additional capacity in states where catastrophic event risk is higher, such as Texas and Florida. Additionally, we will be closer to customers of both businesses, enabling us to serve them faster and more cost-effectively than ever before. I'll now turn the call over to Eric, who will speak to the significant value-creation opportunities we see ahead for the combined company.

Thanks, Ann. As one could expect with similar business models, we expect to achieve $100 million to $120 million plus in annual run-rate cost synergies by the end of 2025. We expect these cost synergies will primarily come from the back-office, finance and technology, general and administrative, and operational areas. While we are only quantifying the expected cost synergies from the transaction today, as Ann highlighted, we also expect to unlock an array of incremental growth opportunities over time. These will include cross-selling opportunities for services such as Ritchie Brothers Financial Services, increased automation to support frictionless customer experience, and accelerated marketplace innovation globally. On this next slide let me discuss the highly attractive financial profile of the combined company. Ann previously discussed the more than doubling of our combined gross transaction value or GTV from $5.9 billion to $14.5 billion. Likewise, the last 12-month revenue is also more than double, growing from $1.6 billion on a standalone basis to $3.8 billion combined. What is equally compelling is the doubling of our profitability and cash flows, even before we consider synergies. On a pro-forma LTM basis, the combined company would have an adjusted EBITDA of approximately $1 billion. And as we consider a quick deleveraging post-close from an expected initial leverage ratio of approximately 3 times, the combined company's LTM free cash flow of approximately $800 million pre-synergies is expected to be extremely helpful. With that I will turn the call back to Ann to wrap up our comments before we take your questions.

Thanks, Eric. I want to reiterate how enthusiastic I am for this transaction and the compelling benefits we believe it will deliver to both of our company's stakeholders. With IAA, we will be able to accelerate our progress to create a leading omnichannel platform with a comprehensive suite of tech-enabled services and empower our customers with insights to help them make the very best decision. We will do so by bringing together two of the most talented teams in the industry and fostering a customer-centric culture rooted in a commitment to innovation. Running a business of this size will require the combined talent of both of our organizations and we expect to create new and exciting opportunities for employees as we grow. Scaling our business will also allow us to even better support our local communities with more jobs and by expanding on our ESG priorities to help advance a lower carbon future. With enhanced scale, accelerated platform for growth, and a more resilient business model, we expect to be able to deliver enhanced value to stockholders of both Ritchie Brothers and IAA. Thank you all again for joining us today. We look forward to welcoming the IAA team to Ritchie Brothers and coming together as one organization to unlock the incredible opportunities we see ahead for our combined platform. Just as a note to participants, we please ask that you focus your questions on the transaction. And with that, operator, please open the lines.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Your first question will come from John Healy of Northcoast Research. Please go ahead.

Thank you. Congratulations to everyone involved here. Truly a transformative day that I don't think many of us had on our bingo card this morning, so congrats. I wanted to ask two questions. Ann, John, maybe you could give us a little bit of back story, maybe just about how this acquisition came together? What is the process John that you guys were running? And then secondly when the deal closes is there any sort of change in control provision relating to seller contracts on the insurance side of things, in terms of how those relationships might evolve or be moving around a little bit? Thank you.

Hi John, it's Ann. Let me start, and it's not often when we can surprise you guys, so I think that's a good thing. Thank you for asking about the back story because I do think that really is a fantastic setup. So first of all, IAA is a company that I have known and admired along with John and his management team for quite some time. As a reminder to those on the call, the previous business I ran was in the collision repair space, so it was very much in cars and then obviously if a car cannot be brought back to its former condition it would be considered a total loss and then would obviously go into John's ecosystem. Also as a reminder, a huge percentage of the leadership team has both a background in this vehicle and insurance ecosystem, so that's number one. We've known each other for a long time. What became apparent after we rolled out our strategy in 2020 for becoming a marketplace for insight services and transaction solutions, we were really looking for anything that could accelerate our journey. So when you think about it, that really comes in two forms: either in terms of M&A, right? There are a lot of organic things, but in terms of M&A we would look at incredible businesses that could accelerate us, and some have to do with capabilities like a Rouse or SmartEquip, they added capabilities to us. And some have to do with scale, right? When you are in a marketplace, scale is critical. Organically it takes time to drive, but if there is an M&A opportunity like this, it's just magical. So let me just talk about how we saw the IAA business from our scale. So first, the completely complementary nature of the business. To explain again: for our auction side of the business, which is our primary transaction solution, here's what happens: a piece of yellow iron shows up at a yard, and here's what happens for John and IAA. A salvage car shows up at the yards. After that, largely what happens is pretty much the same. We check it in, we inspect it, we market it if a title is needed, we auction it, and then we transact it across one of our many channels, collect money from buyers, and then pay out to sellers. So it's wildly complementary, which gives us a lot of confidence about the economies and the synergies that we've signed up for. What's also incredible about the salvage car business is, although cars are cyclical in nature, the salvage business is similar to ours where it's both cyclical and countercyclical. So, when prices of used cars are high, there might be fewer units, but higher prices. When the cycle turns, they have more units and lower prices. So it's actually complementary in nature and also similarly cyclical to our business, which we loved. And then there's growth. When we think about the growth of these businesses, consider short, mid, and long-term growth together. The most obvious short example is our ability to leverage the collective yard footprint that we have: it means that in case of catastrophic events they can leverage a lot more of Ritchie’s yards, and for Ritchie customers that means lower transportation costs, as we've told you guys, and an acceleration of our satellite yard strategy. So that's kind of the very short-term. Mid-term, think about services. The magic of the marketplace, how you guys will know we’re successful is that our services revenue will outpace our GTV growth because you're going to see attachments of services much quicker, obviously having an all-new vertical to attach services to, whether it be insights or our own services or third parties, it's incredible. Then you move to the mid and long-term and then you can leverage that scale of the global marketplace. Just think about the incredible power of every investment we make being amortized over a much bigger ecosystem, whether you want to think about return on any technology investments now being spread across a much larger array of assets and the ability to accelerate innovation: one plus one equals four. So I know I combined the back story of we knew each other to we were constantly looking for ways to accelerate the marketplace, the ability to drive scale, and move that much quicker. We couldn't think of any better suited partner than IAA with an incredible management team. And I will address the change of control for insurance carriers.

Sure. Thanks, Ann. The answer is no. As part of the diligence process, there should not be any issues with our structure going forward. I was excited listening to Ann, reflecting on our journey, which is quite similar. Our Board and my team are evaluating our strategies for the future, considering how we can continue to scale and enhance our frictionless platform. This aligns perfectly with our strategy, and as we spoke with Ann and her team, we noticed more similarities, which created an exciting opportunity. It's great to be here, and I'm looking forward to the future of this combined business.

Hey, good morning, guys. Again, congratulations on the deal. The question I had was, can you quantify the cost synergies expected from the deal and quite some detail? I'm just thinking about maybe a little bit more detail on the revenue synergy opportunity, how that compares, you think, to the quantified cost synergies, obviously, longer-term just to give us a sense. Thank you.

Yeah. Hi, Michael. It’s Ann. It's interesting as we were putting together the package for you guys. The advice we were largely given is, look, cost synergies are the stuff that obviously investors and the analyst can take to the bank, revenue synergies are largely discounted kind of in the initial days of a transaction. However, as excited as we are about the $100 million to $120 million, that’s the take it to the bank on the cost side. The revenue synergies are orders of magnitude above that, orders of magnitude above that. So let me explain again. Even in the shortest term, the ability for us to leverage our collective yards to drive the critical customer experience presents an incredible amount of growth on both sides, and every time we make it easier and better for the customers to do business with us. The incredible accretive nature of our ability to attach services to underlying GTV has just more than doubled ours with this transaction. Then the idea of scale in the marketplace: just think about the tremendous power of every investment we make being amortized over that much more volume. Be it the services that we provide directly or through third parties and that scale is a significant asset in the marketplace. So, again, we're not going to quantify the number but then the global piece of it where for us we have a global footprint as you saw on the chart with the yards, and IAA largely does not have a huge global footprint. The majority is in the U.S., so we are looking forward to our own global expansion as well as driving theirs collectively. And again, the single biggest cost for all of us is, and this is the essence of an omnichannel platform, the yards, right? Because let me explain what omnichannel is just for a moment, again, for those that may be new to one or both sides of this business. Even though we transact and IAA transacts entirely online, we transact mostly online. We have a few, like Orlando, where we do it both ways. Our yards are busier than they've ever been before as are John's, right? Because what our customers want is they truly want the omnichannel experience. The sellers want that equipment or the vehicles they want are gone, and our yards are very busy. The buyers want to buy online. So the yard footprint becomes an incredible unlock of value to both sides of the house and it is convenient that we have yard locations in the U.S. that complement IAA's very large footprint, especially in areas at risk for catastrophic events where the insurance carriers need us most, and then obviously the global expansion. So, I'm not going to quantify it unless every banker falls across onto a sword except to say it is orders of magnitude bigger than the cost synergies that we're quantifying today. It's really incredible.

Hi, good morning all. First of all, I would assume there's no go-shop provision on this transaction?

Hi, Gary. I think that's a safe assumption.

Okay, great. And then could you maybe explain these yard synergies? I'm trying to grasp where the synergies can come in, because, obviously, IAA has much smaller yards and isn't going to be capable of handling a lot of heavy equipment or maybe I'm wrong on that. And John, you can comment on that. But are you looking at the synergies more so that you can port some of IAA's business to your existing yards in the United States and Canada?

Yes, Gary, it's Ann. I would say both. Don't think of yards as our traditional large auditoriums. Instead, consider them as part of our satellite yard expansion strategy, which we believe is partially responsible for the growth numbers you're seeing from us. These yards are much smaller than our historical footprints. Additionally, we now bring the equipment to market by keeping it in the satellite yard while making it available through various sales channels, whether that's through a marketplace with a reserve option or linking it into a regional event and offering it virtually. So, the answer involves both aspects. It's important to view IAA yards as contributing to our local yard strategy, while our yards also support theirs for significant events.

Hey, well thanks for taking my question. Just the first one, just to be clear, is there a customer crossover here? The typical customer of IAA, who is that? And do they use Ritchie Brothers? Have they used heavy used equipment on a daily basis? I guess I'm trying to assess who are the main customers that are being serviced on either the buyers or sellers side of IAA? And if they're similar to your current customer base?

Yes, we'll turn that over to John to start.

Yes. So our typical customers are insurance companies, so we're selling damaged or high mileage vehicles for insurance companies, fleet providers, and so on. We do sell a small amount of heavy equipment salvage. So there is some overlap there, not very much, but there is some overlap. So it is a different supply source for sure. And the buyers, there's going to be limited overlap to start, but certainly I think the virtues of having a much bigger marketplace are going to allow us to expand who we're attracting on both the buy and sell side, broadening the supply of assets that we're putting through our platforms.

Yes. That was great, John. Thank you. And Michael, let me just add to that. Think of this as diversification, but with the best possible synergy ability. So think of the fact that it's new sellers, right, giving us a much bigger base. It's new buyers giving us a much bigger base. Completely common business processes allowing us to leverage all of those cost efficiencies, but then the needs of those cost customers in terms of services, in terms of yards, in terms of a frictionless marketplace—those are the same. They're just applied in a different way. So it's really kind of think of diversification and scale in its best form with an incredible cost efficiency and leveraging of commonality that honestly you don't often find.

Hey, good morning, Ann and John. Good to hear from you both and thanks for taking my question. Ann, I'm curious what the implications are for IMS and what this says about momentum behind that platform?

Yes, Craig. Thank you for the setup. We are excited. So our inventory management system is being designed and executed as a ubiquitous kind of hub, if you will, for all customer needs. So again, when you think about IMS as the gateway, it then becomes the gateway into the entire ecosystem. So whether or not you're a construction piece of equipment, you're a mining piece of equipment, you're a vehicle, it all will kind of come together there. That's where all of the data and analytics then start getting attached; that's the basis on which services get offered, and again, it just gives us incredible scale, right? Because when you're investing in an IMS, you're investing in the underlying technology. The cost of that investment is largely the same, but now we can amortize it across a much wider degree of units. So it's an incredible scale play.

Hi, thanks and good morning. If you can maybe just share a little bit on, I guess, the buyer base for IAA. Like, is it as simple as damaged vehicles, or is it maybe a broader buyer base out there?

Yes. Thanks for the question. Our buyer base is really broad. We've got thousands of buyers on our platform every week from across 170 countries. They're looking at the vehicles for a variety of purposes. There are sort of kind of stereotypical buyers who are buying it to part it out, to use the parts in a repair, but we've got rebuilder buyers who are buying the vehicles to fix them up. We've got a significant export market where we're shipping vehicles out of our home markets into, again, 170 countries where they are primarily rebuilders. So they're arbitraging the labor and to a certain extent part costs that they can obtain in a secondary market where they can buy the damaged vehicle, buy the parts, ship it somewhere else, and then repair it and put it back on the road to provide affordable transportation in all kinds of emerging and first-world markets as well. So it's a really deep and fragmented buyer base. We have very low concentration in our buyer base. We're adding to the pool every month, every year and we're really continuing to reach out to all kinds of different buyers.

Any antitrust issues here? And then I just also wanted to ask an actual question, just about— is there any—I know IAA, is there any change or differences in the ownership of the vehicles or parts or how they impact the balance sheet across both companies?

We are primarily a consignment model, so the vast majority of the vehicles in the US and Canada were consigned to us, and then we sell them on behalf of our sellers. We do buy a very small percentage of the vehicles in the US. In the UK, we do have a - the model in the UK is much more of a purchase market. So we do buy the vehicles from the insurance companies there, but it's obviously a much smaller piece of the business than in the US or Canada.

Yes. Thanks, Ann. So we don't expect any antitrust issues with this transaction. As Ann and John talked about, we operate in different markets. And so I don't expect any challenges.

Hey, good morning, guys. Did you run a full process in the sale? And then a question for Ann. On the recent market share shifts, obviously, some attrition from IAA in your due diligence, I guess, what gives you confidence that market share has stabilized or is growing from here?

So the details of how it came together, obviously, will be in all the public documents, but this really was a merger. It was something that I think almost unparalleled that Ritchie Brothers was thinking about their future strategy as we were doing that same kind of work and we connected and realized that there's just a lot of similarities to the businesses that we could leverage off of one another to build a really, really powerful business moving forward.

The way that I look at market share is that market share is an output; it is not an input. It is the output of understanding your customer exceptionally well and then providing solutions for that customer that are market-leading and truly unique and innovative. I am confident in our ability to do the latter. We've proven it time and time again. So market share is just something that naturally follows.

Yes, good morning. Thanks for taking my question. John, could you just talk a bit about IAA results over the last couple of years? And maybe what led to the large jump in revenue? Just trying to get a gauge of the sustainability of that growth?

Yes, I think the team has outlined in the presentation and in my comments that we have a strong track record of steady revenue growth. Several factors contributed to this over the past few years. First, we initiated a transition to a fully digital platform, which enabled us to increase revenue per unit. Additionally, marketplace prices have risen due to dynamics in the used car market, which we capitalized on since our revenue model operates as a marketplace with fees charged to both buyers and sellers. The fees from buyers are closely linked to the selling price of the vehicle, so as prices increased, we were able to generate higher revenue per unit for our services. Finally, we are also expanding our ancillary services, particularly on the selling side, which has significantly contributed to our revenue growth. This integration is powerful because the various ancillary services offered by Ritchie Brothers provide opportunities to enhance service levels in the insurance, fleet, and dealer markets.

Two-part question. One is, as we go through the press release and the slide deck, is it your intent to keep the IAA bonds in place and not trigger a change in control? And then what is the expected rating of the pro forma entity at this point? Thank you.

So we will be retiring all the IAA debt as part of the transaction and taking out new debt as part of this. We have a $2.8 million bridge commitment; we have $50 million of bonds that we will also figure out the best way to deal with those. So the total borrowings will be $3.3 billion. In terms of the other part of the question, I can't comment specifically on what the actual rating would be until we actually speak with the rating agencies, but we're confident that we are a very strong credit. If you look at the deck, our free cash flow from the transaction for the last 12 months is $800 million, so we expect to be able to deleverage very quickly post this deal.

Again, to clarify both, the loans and the bonds will be retired upon closing?

That will be taken out, yes.

Yes, thanks for letting me follow-up. Appreciate it. The heavy used equipment market, the $300 billion TAM, that's always been the goal for Ritchie to penetrate that market. I understand you just doubled your GTV, you diversified. I guess just help some of us understand how this deal helps Ritchie Brothers overarching goal of driving penetration in the heavy used equipment market TAM? Thank you.

Hi, Michael, it's Ann. Yes, believe me, this is why I'm at Ritchie Brothers: our $300 billion total addressable market. That's what initiates everything. The acquisition of IAA and the combination opens up growth opportunities for both sides. Since your question focuses on used and heavy used equipment, I will concentrate on that, but keep in mind that a similar thought process applies to growth on IAA's side. When we consider the $300 billion in equipment, think about our discussions regarding how we plan to pursue it. First and foremost, we aim for a seamless customer experience and the ability to achieve remarkable recovery, then add services to it. Think about what we've been doing with local yards to tackle this, and our capability has just quadrupled. We’ve been making investments in IMS and technology to achieve that. What you heard indicates that those efforts will be significantly enhanced. All of these investments now have a much higher return on investment, allowing us to act much more swiftly. The third point is that as we continue to develop and invest in services, those services can now extend to both heavy equipment and vehicles. This means we can create more services, do so faster, and at scale. The short answer to your question is that we are firmly focused on our $300 billion target, and all that IAA contributes enables us to accelerate our pursuit of it. Additionally, there is a similar opportunity on the other side for how we can assist IAA in meeting their commitments. This represents a remarkable scale, and what it means for the customer is our ability to respond faster and offer them even more than we have provided so far.

Ladies and gentlemen, at this time I would like to turn the call back to Ann Fandozzi for any closing remarks.

Perfect. Thank you so much. So first of all, thank you all for joining our call today. Let me end with this: at its simplest basis think about this combination and us acquiring IAA—it's a new vertical, right? We have a marketplace for construction equipment, mining equipment, a lot of assets, and now we've added what is primarily salvage cars as a new vertical. Everything else, the processes, the business, the technology, the marketplace, is common. It's very rare for an ability to drive scale and diversification, while getting incredible synergy on the cost side and a runway for revenue synergies that you rarely see. We are super excited about this combination. I hope you hear it in our voices. We are excited about the IAA team joining the Ritchie Brothers team and we thank you again for joining the call, sharing our excitement and I think many of you we will be having follow-up calls with later today. So thank you again and have a wonderful, wonderful rest of your day.

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank everyone for participating and you may now disconnect your lines.