RB Global Inc (RBA) 2009 Q1 法說會逐字稿

Welcome to the Ritchie Bros. 2009 Q1 earnings conference call. As a reminder, this conference call is being recorded Tuesday May 5, 2009. (Operator instructions)

I would now like to turn the teleconference call over to Peter Blake, CEO. Please go ahead.

Thanks Sarah. Good morning, everyone. Thanks for joining us on the Ritchie Bros. Auctioneers Incorporated investor conference call for the first quarter of 2009. I'm Peter Blake, CEO of Ritchie Bros. With me on the call today are Bob Armstrong, our Chief Operating Officer; Rob Mackay, our President; Rob McLeod, our CFO; and Jeremy Black, our VP of Business Development and Corporate Secretary.

Today we'll be talking about our financial results for the quarter ended March 31, 2009. The formal presentation will take about 25 minutes and then we'll open the call for questions. Before we start I'd like to make the Safe Harbor statement.

The following discussion will include forward-looking statements as defined by SEC and Canadian rules and regulations. Comments that are not facts, are considered forward-looking statements that involve risks and uncertainties. They include statements about our projected future results of operations and financial performance, growth and other strategic initiatives and other matters.

These risks and uncertainties are detailed in our MD&A for the year ended December 31, 2008, which is available on the SEC, SEDAR and Company websites. Actual results may differ materially from those contemplated in our forward-looking statements.

I'd also like to note that during today's call we will talk about gross auction proceeds, which represent the total proceeds from all items sold at our auctions. Our definition of gross auction proceeds may differ from those used by other participants in our industry. It is not a measure of financial performance, liquidity or revenue and is not presented in our statement of operations. The most directly comparable measure in our financial statements is auction revenues, which represent the revenues we earn in the course of conducting our auctions.

We're excited to report that the first quarter of 2009 was the largest first quarter in Ritchie Bros. history. We grew our gross auction proceeds to $798 million, achieved auction revenues of $83.7 million and adjusted net earnings of $19.2 million or $0.18 per diluted common share, which is a 29% increase in adjusted earnings per share compared to Q1 of 2008. We grew our sales force by 6% during the quarter, opened 2 new permanent auction sites and had our first sales at 3 other sites.

It's always a pleasure to release positive results and even more so when good news is the exception rather than the norm. There were three big stories at our auctions in the first quarter of this year; one, stable equipment prices; two, record bidder attendance; and three, strong growth in online gross auction proceeds. After approximately two years of declining prices in most categories of equipment we sell, our Q1 auctions delivered prices roughly on par with Q4 of 2008, and in some instances even showed signs of improvement.

Closely related to the stable prices is the record number of bidders we attracted to our auctions. We set bidder registration records at 14 of our auction sites in the quarter, registering almost 74,000 bidders in total; about 14,000 more than in the same quarter last year. In addition, roughly 20% of Q1 bidder registrations were first timers, those who had not previously participated in a Ritchie Bros. auction.

These stats tell us that despite the downturn in the global economy, people are still hard at work building roads and bridges and buildings and they're choosing to invest in used equipment rather than new. As one of our customers said to me recently, a well maintained used machine does about the same amount of work as a new one.

We believe that our value proposition is even more compelling now, helping our consigners achieve instant liquidity and solid returns in a challenging market and providing fair prices and certainty for more and more buyers, particularly in these uncertain times.

In the first quarter of 2009 we conducted the largest Spain, Quebec and Houston, Texas auctions in our company history and last week we conducted the largest equipment auction in Canadian history, selling 93 million Canadian dollars worth of equipment over three days at our Edmonton, Alberta permanent site. This was the largest sale we've ever conducted outside our big February auctions in Florida and it was a very impressive event.

Incidentally, Edmonton was our first permanent auction site, established way back in 1976 and has been replaced and expanded in the years since. Last week's auction attracted a company record 8,500 bidders from 23 countries, another reminder that people aren't just selling equipment right now, they're also buying and they're buying from our unreserved public auctions because the selection of equipment is equal to none and bidding is transparent, as are the prices. Prices are set by the market, not the sellers.

The third story at our auctions in the first quarter of 2009 was the 20% increase in our online gross auction proceeds, relative to Q1 in 2008. We sold more than $166 million of equipment to online buyers this quarter. Online bidders represented about 30% of the total bidders at our auctions during the quarter and purchased 20% of the $798 million of gross auction proceeds sold in the quarter.

Since introducing our innovative real-time internet bidding service in 2002 to enhance our live auctions, we've sold more than $2.6 billion of equipment to online bidders, more than any other company in the world and are proud to remain a technology leader in our industry. We launched an enhanced version of this service at the start of 2009, making online bidding at our auctions even more convenient and more like bidding in person than every before. Our Q1 results suggest that the upgrades have been well received.

The internet has opened up the global marketplace for equipment buyers and sellers, but our auction sites offer distinct advantages that can't be replicated online. They enable us to have full care, custody and control of the equipment that we sell from the time it arrives at the site until the time a new owner takes possession, which gives tremendous comfort to online bidders and sellers alike. Having a highly visible, well trafficked and secure place to display assets for the sale, is particularly beneficial for banks and finance companies that don't have the facilities to store or the resources to protect those assets until they're sold.

When it comes down to it, the majority of our customers still prefer to bid and buy in person at our auction sites, as evidenced by the $630 million of the total GAP sold in the quarter that they purchased in the first quarter of 2009. They like being able to inspect, test and compare different makes and models of equipment from different sellers all in one place. They like seeing the equipment in operation as it's sold. They like being able to connect with their peers in a social environment of the live auction and they like having to deal with only one point of contact for all the post sale logistics, including payment, title transfer and other paperwork, even if they've purchased equipment from multiple sellers. This is why our network or auction sites around the world is such an important strategic asset and sets us apart from any other auctioneer in the world.

While we are proud of our success in the first quarter of 2009, we recognize that these are unprecedented times and many of our customers are facing real challenges. Our goal in these times is to remain focused on delivering value to our customers to ensure that they are getting the very best possible return on the sale of their assets and providing the liquidity they need in these difficult times. Many companies are reducing their guidance for 2009, including some of the original equipment manufacturers, but at Ritchie Bros. we're still hiring salespeople, expanding our network of auction sites and working with an ever increasing number of customers. We believe we're on track to achieve the goals we set for ourselves at the beginning of this year. We do auctions right and that will continue to be the basis of our growth, expansion and our success.

Before I turn the call over to Rob Mackay, I'd like to make a quick comment on the recent influenza outbreak. While we are cautiously optimistic, we have taken steps to ensure the safety of our customers and employees and have implemented a response plan that will be scaled up or down as needed. We intend to be prepared in the event if the situation escalates, to reduce any potential impact on our employees, our customers and our business.

At the request of Mexican authorities, we postponed until later in the second quarter, an auction that we had scheduled for last week in Torreon, Mexico. Although this is an inconvenience for our customers, this postponement was the right thing to do and it will not have a material impact on our business because it was a relatively small auction. We are monitoring the situation and remain vigilant, taking precautions at our auction sites and offices to ensure we remain prepared.

Rob will now give you a brief market update.

Thanks Pete and good morning, everyone. I'm here to talk about the question we get asked now more than ever, what's going on with used equipment prices? Related to this is another question I will address; how has Ritchie Bros. been able to grow in the face of falling equipment values? We've had many eyes on our auctions in the early part of 2009, with many of our customers and lots of analysts trying to figure out what's going on in the used equipment market. There was lots of uncertainty and curiosity at the beginning of the quarter, particularly because of our normal quiet time from mid December until mid February, during which we have no auctions, meaning there was no fresh data available in the market. This has caused a lot of people to defer their equipment selling decisions until they had a better sense for what was happening.

The success of our auctions in Q1 helped a lot of our customers see that demand is robust and the used equipment market is solid. In general, as Pete mentioned, we saw pricing at our auctions in the first quarter of 2009 that was for most categories of equipment, flat to up compared to the fourth quarter of 2008. A lot of people were surprised by this, but the reality is that our auctions are very appealing to equipment buyers in challenging economic times, as is demonstrated by the fact we had record first quarter bidder registrations at our auctions and that over 20% of those were first time bidders at our auctions.

There can be no question that construction spending has contracted compared to a year ago and that a lot of contractors and other equipment owners are facing very difficult times, but there is still work going on and people still need equipment. Construction spending in the U.S. remains close to $1 trillion per year, and demand for new equipment may be down, but demand for used equipment remains healthy.

It is still too soon to say the market has bottomed out and we are still uncertain about the potential impact of high inventory levels in the dealer and rental company networks, but the recent leveling of prices seems to be giving some comfort to people with idle equipment and they've recently started to show a greater willingness to consign based on our 2009 auction results to date.

Many people assume that declining prices equal declining revenues for Ritchie Bros. This is not the case, and the fact that our gross auction proceeds have continued to grow in the face of equipment values that have generally declined since their peak in late 2006, is proof of that. For a start, when times are tough, more people have equipment to sell, so we see an increased volume of equipment at our auctions. Of course there's not much point having more equipment to sell if there's no one to buy it, but as I mentioned, plenty of people from allover the world are still looking for good quality equipment they can put to work and they're more inclined to look for it in our auctions during an economic downturn than pay for new equipment.

We're seeing this play out in our auctions every day. Customers who normally may purchase new equipment are now participating in our auctions to get the equipment they need for a fair price.

The other variable that many people forget is the mix. Our gross auction proceeds growth is not as simple as average price times number of units sold. The mix of equipment that we sell in our auctions changes from day to day, auction to auction and year to year. We don't sell a common basket of goods each period, which means the shifting mix of equipment can have a meaningful impact on our gross auction proceeds growth. We simply sell what is for sale. It might be cranes one month and scissor lifts the next, it might be forestry equipment this year and trucks next year; it might be in Spain, then Dubai or then California.

Another facet of the mix variable is the mix of consigners we work with from auction to auction and year to year. Our activity with dealers and finance companies typically increases in more challenging economic times and we are seeing this play out in 2009. The reality is our growth is generally less driven by changes in the economy or the size of the used equipment market than by our ability to execute our strategy and increase our share of the large and fragmented used equipment market.

We are the world's largest industrial auctioneer by a significant margin and we sell more assets to online and onsite customers than any other organization, and yet we only hold a tiny fraction of the used equipment marketplace. Our success at growing our sales team and expanding our footprint are more critical than what's happening with used equipment pricing and we have achieved great success on these two fronts in Q1.

On that note, Bob Armstrong will now give you an update on our growth strategy.

Thanks Rob. Good morning, everyone. By now you are all familiar with our long-term and longstanding growth strategy, which centers on simultaneous investments in our people, places and processes. We made significant progress on all three fronts in the first quarter of 2009. We added 100 fulltime employees during the 12 months ended March 31, bringing the total to just over 1,100, including 282 sales representatives and 17 trainee territory managers. This represents sales force growth of 9% compared to a year ago and 6% since the start of 2009. Ours is a relationship business and our sales force is a key driver of our growth. We are on track to achieve our targeted sales force growth of at least 10% for 2009. The more enthusiastic, well-trained and committed territory managers we have on staff, the larger the bite we can take out of the global used equipment pie.

On the places side, we held grand opening auctions at our replacement permanent auction sites in Minneapolis and Houston in the first quarter of 2009. These new sites have 50 and 95 developed acres respectively and both are significant improvements over the old sites in these locations, which were at capacity and offered an inferior level of service to our customers. We'll be selling those former sites at upcoming unreserved auctions.

Other milestones during the quarter included our first auctions at our new regional auction units in Mexico City, in Geelong, Australia, both of which replaced smaller sites in those regions, as well as the first auction at our newest permanent auction site and agricultural facility located in London, Ontario. We are building permanent facilities on our property outside Mexico City and expect to have our grand opening auction at that new site later this year.

We are also well underway in Japan, with the yard work nearly complete and construction of the auction building expected to commence any day now. We are on track for our first auction on this site later this year. This is a very promising development for us, mainly because Japan is the second largest economy in the world, with a lot of high quality, late model used equipment. It holds significant growth opportunities for Ritchie Bros. We expect exciting things out of this market in the future.

We held a groundbreaking ceremony for our new 24-acre permanent auction site in Chilliwack, just outside Vancouver, which will replace our existing permanent site in this region. We are also under construction on our new replacement permanent auction site in Grand Prairie, Alberta. We will be moving into a new 60 developed acre site from our existing 30-acre site later this year, which will significantly elevate our presence in that very important market.

And last but not least, we completed the purchase of 2 properties in Europe on which we intend to build 2 new permanent auction sites; a 62-acre property in Corso, Italy which will replace our existing regional auction unit in that area just south of Milan, and a 93-acre property just south of Madrid that will be our second auction site in Spain. We closed on the Spanish property subsequent to the end of Q1. This is a very complicated land assembly that took close to three years to put together and we are very excited to finally be moving ahead with this project.

In all, capital expenditures were $35.4 million in the first quarter of this year, primarily to expand and enhance our global network or auction sites. Our CapEx spend in Q1 is in line with our annual CapEx guidance in the range of $150 million.

On the processes front we are continuing to develop and implement new IT and business processes that will help us to increase efficiency and scalability and should help us to grow our gross auction proceeds without an equivalent increase in our operating expenses, which we started to demonstrate in Q1.

One example of these initiatives is FAIM, which we've rolled out in the first quarter. FAIM stands for field asset information management and is an exciting development that will allow us to be more efficient and consistent in how we complete equipment inspections and perform appraisals. It is already saving us time and money. The world wide rollout is almost complete and we are already working on enhancements to make it even more effective.

Rob McLeod will now give you the highlights of our first quarter financial results.

Thanks Bob and again, thanks everyone for joining us on the call. I hope you've had a chance to read our earnings release and MD&A for the quarter ended March 31, 2009, which will form the basis of my comments today. The release and the MD&A were filed this morning, along with our first quarter financial statements. All three documents will be available shortly on the SEC, SEDAR and Ritchie Bros. websites. All dollar amounts in our filings and in this call are stated in U.S. dollars.

In the first quarter, we generated gross auction proceeds of $789 million and auction revenues of $83.7 million, representing an increase of 2% and 3% respectively over the first quarter of 2008. We report in U.S. dollars, but conduct our auctions in several currencies, most notably the euro and the Canadian dollar, which have both fluctuated dramatically relative to the U.S. dollar in recent periods. Measured in local currency terms, our gross auction proceeds and auction revenues increased by 8 and 10% respectively.

Our auction revenue rate, which is auction revenues as a percentage of gross auction proceeds, increased to 10.48% in the first quarter of 2009, compared to 10.4% in the first quarter of 2008, above our expected range of 9.75 to 10.25%. This increase was largely due to the better than expected performance of our underwritten business which accounted for 15% of our gross auction proceeds in quarter one. The underwritten portion of our business was less than our recent annual average amount of 25% of our gross auction proceeds, but history has shown that it can fluctuate significantly on a quarterly basis and we don't see this one data point as being indicative of a trend.

Our direct expense rate, which is direct expenses as a percentage of gross auction proceeds, was 1.11% in the first quarter of 2009, compared to 1.29% for the first quarter of 2008. Direct expenses are costs we incur physically to conduct an auction. Our direct expense rate fluctuates from quarter to quarter and is largely dependent on the size and location of our auction. The decrease in our direct expense rate can be attributed largely to the increase in the average size of our auction and efficiencies gained through our ongoing process improvement initiatives.

Our general and administrative expenses for the first quarter of 2009 were $39.8 million, which is 6% lower than the comparable period in 2008. We experienced increased personnel costs, due mainly to the growth of our workforce, which was offset by lower expenses in several categories in the quarter. As well, there was a $4.8 million decrease in our G&A due to foreign currency translation effects relating to the translation for reporting purposes of our non-U.S. dollar G&A expenditures.

Although we are pleased with our level of G&A in the first quarter of 2009, I remind you that our G&A in future periods will continue to be influenced by our ongoing expansion. Our plan is to continue to hire employees to support and grow our business and I would be remiss if I did not remind you that one quarter is not necessarily indicative of our full year performance. That being said, we do expect improved operating leverage in 2009 compared to 2008.

Our effective income tax rate for the first quarter of 2009 was 32.4%, which is lower than our tax rate in the first quarter of 2008. Our tax rate fluctuates from quarter to quarter, because we conduct our auctions and generate our earnings in different tax jurisdictions around the world with varying tax rates. Our adjusted net earnings increased 26% year-over-year to $19.2 million in the first quarter this year, from $15.3 million in the first quarter of 2008, mainly as a result of increased gross auction proceeds and a higher auction revenue rate combined with lower operating costs.

Adjusted net earnings per diluted share increased 29% to $0.18 per share. Adjusted net earnings excludes the after-tax effects of excess property sales and significant foreign exchange gains or losses resulting from financing activities that are not expected to recur. Financial statement net earnings were $19.9 million or $0.19 per diluted share for the first quarter of 2009, an increase of 19% over financial statement net earnings in quarter one of 2008. We paid regular cash dividends of $0.09 per share in the first quarter of 2009, resulting in total dividend payments of $9.4 million, and on May 1st our Board declared another regular cash dividend of $0.09 per common share, payable on June 12, 2009 to shareholders of record on May 22, 2009.

Jeremy will now offer our guidance for the remainder of 2009.

Thanks Rob, and good morning. We are reaffirming our previous guidance for gross auction proceeds of approximately $3.8 billion for 2009. That would represent an increase of 6% over our 2008 reported gross auction proceeds in U.S. dollars and approximately 11% increase in local currency gross auction proceeds. We expect our gross auction proceeds for Q2 to be in the range of $1.1 billion. While we recognize this is less than what we achieved in the second quarter of last year, it is just a quarter and we are on track for the full year.

We often get asked how we can have confidence about our growth prospects in 2009, in the face of reduced equipment prices and a turbulent economic environment. Rob Mackay talked a bit about the complex interplay of average price, volume and equipment mix in our auction results and I would like to give you some details on how we prepare our guidance, to demonstrate that it is not as simple as projecting an average selling price and the number of units to be sold in the year, which is a common misconception.

Our guidance is actually developed based on extensive input from our field managers around the world, using the results of our recent auctions and their understanding of their individual customers' plans and expected activity for the year. It is primarily a bottom up process, with each territory manager responsible for coming up with an estimate of the equipment that is likely to come to market in each of their territories. They base this estimate on projects completing, projects expected to be tendered and commenced, retirements, fleet reductions and many other factors. They go through their customer lists and come up with an estimate for the year, without regard for number of units or average selling price. Every quarter we ask them to revisit their estimate using recent results and changes that have occurred in the intervening quarter.

Our process is iterative, with each regional manager responsible for working with the territory managers who report to him, and each VP and Senior VP working with their direct reports, all of the regional and divisional forecasts are consolidated at head office and then we undertake a top down process to make sure these forecasts are reasonable based on our understanding of the global picture.

Our business is difficult to forecast at the best of times, because we can only sell what equipment is available for sale. Our visibility into the year ahead generally increases as the year progresses and that's why we update our gross auction proceeds guidance each quarter. In the current environment, the remainder of this year is more opaque than normal. Although our recent auction results have helped, there is still a high degree of uncertainty in the market and this makes our forecasting process more challenging.

I guess what I'm trying to say is that we had a strong performance in Q1 and we believe we are on track to achieve our goals for the year, but we are still only one quarter of the way through the year and as we often say, a quarter does not a year make.

We are maintaining our auction revenue rate guidance for the full year in the range of 9.75% to 10.25%. Although we will exceed that target in some periods, as we did in the first quarter of 2009, we do not believe this was indicative of a trend and our full year guidance remains sound. By the same token, we do not believe our strong earnings growth in the first quarter of 2009 is indicative of a trend. We remain focused on achieving average annual earnings per share growth of 15% over the long-term and expect there will be years when we exceed this target and years when we don't. In 2009 we are still expecting to achieve EPS growth in the mid single-digit range.

And now back to Pete for the wrap-up.

Thanks Jeremy. A quick recap of the main points we covered on the call, then we'll open it to questions. First quarter of 2009 was our largest first quarter ever. We generated gross auction proceeds of $798 million and achieved an auction revenue rate of 10.48%. We achieved record adjusted net earnings of $19.2 million or $0.18 per diluted common share; 29% increase in diluted adjusted EPS over Q1 of last year. We grew our sales force by 6% in the quarter and 9% year-over-year. We held grand opening sales at replacement permanent auction sites in Minneapolis and Houston, conducted our first sales at new sites in London, Ontario, Mexico City, Mexico; and Geelong, Australia and set regional gross auction proceeds records at our sites in Montreal, Houston and Moncofa, Spain. We improved our operating leverage during the quarter by growing our gross auction proceeds without an equivalent increase in our operating expenses.

So we've had a great start to 2009, with record auction results and strong earnings growth. By staying focused on our business, on our principles and the needs of our customers, we've continued to deliver value to equipment buyers and sellers, to our employees and to our shareholders. In spite of our success in the quarter, we have not lost sight of the fact that these are difficult times for many of our customers, as well as others in the community in which we operate. We are dedicated to being trusted advisors to our customers and helping them navigate the current economic turbulence, providing them certainty in these uncertain times; fair and transparent auctions and liquidity when they need it the most.

Thanks for joining us today. Sarah, would you please open the call to questions?

(Operator instructions) Your first question is from Bert Powell with BMO Capital Market.

Pete, when you look at the data after the first quarter, I'm just wondering outside of obviously the higher increase in online bidders and new customers, is there anything in the data that's interesting to you in terms of new trends or things that are making you go hum, that's interesting? Are more of the people who are typically buyers now becoming consigners? I'm just trying to see if there's anything in the data that you look at that says the business model is getting stronger or there's something going on there; just curious if you had anything you're prepared to share with us on that front?

Sure, Bert; happy to sort of muse about that. One thing that jumped out at me in the first quarter was the penetration rate of new bidders that attended the auctions. I thought that was very encouraging. We expect to see that in a down-market where more people come to the auctions, but to see the number of new bidder registrations we saw in Q1, and part of our business model is to attract more and more people to the auctions, so in a down market when they have the opportunity to go into any yard anywhere to negotiate on equipment, they drive by all those yards and they come to the auction because they see that as being the most effective and most fair way of achieving a purchase without leaving any money on the table. So I was happily encouraged by our ability to penetrate.

We've seen some great activity in our web right now as well. We haven't shared data on the call here, but we're seeing some terrific increases in the number of unique users that are looking at our website. I think there was over 800,000 unique visitors for the period January through March in 2009 in the quarter. So, that's a nice spike and continues to give me confidence that our business model and our execution of our strategy is working and we've just got to maintain the program and keep focusing on the simple things.

Hiring good sales guys, there was a nice lift in our sales force this quarter as well, at 6%. We focused on that. We were not particularly satisfied with the growth that we had in 2008, and I got on our guys in the field to make sure that they were focusing on that as a priority and getting the good quality candidates, because there's more of them out there right now as well, so it's a bit of a great environment for us to be able to grow our sales team as well. Those are a couple of metrics that I looked at and thought, that's good.

When the new bidders are showing up as he's expecting in a slower environment, how many of those guys are actually converting into customers that are actually purchasing versus guys that are just saying hey, you know what, I'm showing up for a fire sale?

You know, I guess I don't have the stats handy, but to me it doesn't matter; we're exposing the channel and we've been able to convert so many people along the way here. If we weren't doing the right thing, I guess our sales would be going in the opposite direction over the last 10 or 20 years. We know that as soon as we can get people to the auction, that's the first grip that we get on them to say listen, just stand here and watch this thing and the light goes on. Like many analysts the first time that they come to an auction; they walk in and then 30 seconds later they get our business model. So as long as we can expose people to the channel, either via internet or via live attending at the auctions, that's all we need to convince them that this really is the most effective and efficient channel for them to be operating with going forward.

Okay. Last question, just on pricing, and I hear your comments loud and clear in terms of mix and whatnot; I'm just wondering if more recent experience at auctions has indicated that there's any difference in pricing trends? I know dealers and OEMs are working hard to get inventories down, so it doesn't seem like there will be a lot of equipment around which might be supportive of pricing. Looking forward, would you expect pricing; are you seeing some signs that pricing might start to tick up as we roll through 2009? , as others, came into it looking and wondering where the pricing was going to go and we did see some stable pricing in Q1 compared to Q4 and as we've come out of Q1 into recent sales and Edmonton is a good example, Vegas last week, you know, we're seeing some solid pricing out there and in some categories, in some age of equipment, we're seeing in fact increased pricing. So as I mentioned earlier, have we seen the bottom or are we at the bottom of the trough; still not 100% accuracy to say yes or no, but we're very comforted by the fact that we're seeing some stableness or solidifying of prices in some or most equipment

Your next question is from Sarah Hughes with Cormark Securities.

Just wondering, 20% of first time bidders in Q1, how does that compare to previous quarter, with end of 2008?

Fair question. I think why this was unusual to us is that for the longest time, new bidders have been almost exactly 10% of the registered bidders at our auctions. For the last several years it's been sitting around 10% and that's why it's worthy of note right now. All of the sudden in the first quarter, for I think all the reasons Pete commented on, we're seeing a much higher rate of new bidders, so 20% stands out from all history.

Okay. And is there any geographic trend in that or was that kind of pretty much across all your auctions?

I'm not aware of it being anywhere in particular. Rob (inaudible) say the same thing. We were seeing it everywhere.

Okay.

I think there were 14 sites that we had, Sarah, during the quarter where we set new bidder registration records, so it was pretty broad.

Okay. And then just wondering if you have any idea if pricing trends at your auctions are similar to what's going on in the overall used equipment market? I guess I'm wondering if there's any evidence that you're growing internet presence is helping pricing at your auctions versus the industry?

I would say that the pricing that's occurring out in the market outside of our auctions typically would follow our auctions. As most people today sitting with inventory, whether you're a contractor or dealer, you have a desired asking price for it and if it's not being achieved, you're looking to reduce that price to some level that you can get a buyer interested in it. So, as the economy follows our market or our pricing when the economy is going up as it has done in past years, dealers or contractors will go home and adjust their asking price accordingly upward as the demand in the market increases. Today they've had to do the opposite and go down. So they're following the auction prices that we get everyday and we have people online right after every sale looking at prices and seeing what's achieved, and I would envision that they're going home in most instances and adjusting or looking at their asking prices for the inventory that they're selling.

Okay. And then just one last question on the pricing. You talked about seeing even some potential increase in pricing. I'm wondering if it was any one market segment that you're seeing better pricing versus others and also any geographic trends in that, U.S. versus Canada or international?

No, I wouldn't say it's any one particular area. In the last two weeks we've had pretty significant sales in [Mordike] in Europe and Edmonton and down in the U.S. and we're seeing some pretty firm prices in all three locations. Each area of the globe, whether it's Canada, the U.S. or Europe, I think there's different levels of inventory sitting out there with the marketplace which may have an effect in the future either up or down in some instances and some product categories.

Your next question is from Scott Stember with Sidoti & Company.

Can you talk about last quarter you had indicated that you were hopeful that you would start to see some of the bigger pieces of equipment come through once the pricing had stabilized. Did you start to see that this quarter or is that something you're seeing in April-May timeframe?

Just want to make sure we understood the question. Did you ask about whether we're seeing bigger equipment or bigger packages coming through?

Either/or, but I think you were talking about some of the higher content, bigger, more expensive pieces of equipment that consigners were holding off on in the fourth quarter, have you seen that trend reverse with prices stabilizing?

I would say that we have not seen a significant amount of the larger equipment in Q1. I know that our appraisal guys and our pricing guys are seeing packages now that have some of the larger equipment in it, particularly the off-highway rock trucks, the larger size excavators, wheel loaders and that. That's not surprising there's a lag in that equipment coming to market because the commodity world is still producing, still using the outfits and some commodity prices have lowered or stayed at lower levels. You see production levels at some of these big operations slowing and hence, some of that bigger stuff becomes surplus. So I would envision that we may see more of it coming here in Q2 and Q3 than we've seen in Q1.

Okay, and as far as the underwritten business being 50% lower than previous quarters, did you guys, with the unstable pricing environment, were you a little bit more cautious with some of the guarantees that you were giving out? And if that's the case, is that something that's still continuing right now?

I think that in any economic downturn, the challenge of the game is to be ahead of the curve and when we came out of Q3-Q4 last year, we're coming into Q1, there was uncertainty for sure in our minds as to where the market was going and it would be fair to say that we afforded some more scrutiny to the evaluation of the deals that we were on. And probably the bigger deals we had a lot more scrutiny, a lot more internal dialog about each deal as we went through them. So, I would say that the results illustrated that our scrutiny paid off on the risk side of the business.

I'll just add to that, Scott, that perhaps implicit in your question was, did we become so cautious that we didn't offer very many guarantees and the answer to that would be, no. In fact, I'd say we were offering as many, if not more, because lots of customers were asking for them. But exactly as Rob said, in the offers we were making we were pretty cautious. As a result, people chose to go straight commission and that's why you see only 15% underwritten. It's not that we weren't willing to write the guarantees, we were just being appropriately cautious. Customers still wanted to use our services, but they were preferring to go straight commission, so it worked out very well for us.

And in case you guys are wondering on the line too, usually this question will follow, so I'll answer it right now. There was no one particular deal or handful of deals that accounted for that increase; it was very broad across the board. So there wasn't just one runaway deal that spiked that rate, the at-risk rate up.

Got you. And just a last question about the expenses. Obviously you guys continued to ramp-up your sales force, but were there any other items in there, whether it's back office expenses, things that have pulled back a little bit that helped it gain some leverage in this quarter?

There wasn't anything in particular in quarter one of 2009 that was a dramatic falloff from prior quarters. Last year we would have had some unique expenses like we've spoken about the ConExpo trade show that was in there last year that obviously isn't there this year. But there really wasn't significant one-off items or significant category that fell off a cliff.

Your next question is from Craig Kennison with Robert W. Baird.

Could you comment on any regional demand trends and specifically I'm interested in whether you're seeing any evidence of infrastructure spending related to stimulus plans in the U.S. or China or any other markets?

I would say that we haven't seen any yet. There's lots of chatter, particularly in the U.S. market from the stimulus package and the money that's being offered or tabled to be spent. From what we're seeing it's not hit the market yet, not hit any budgets of anyone and a lot of the contractors that we're talking to, their vision is later out into the year, Q3 or Q4, before they would actually see some of this stuff coming to market and resulting in an increased demand in equipment for anybody that's getting some of this work.

Around the rest of the globe the infrastructure spending is similar to North America, it's pretty quiet in most places and has been pulled back or some projects put on hold, as we've seen to the construction markets say in the Middle East. Infrastructure spending on commodity based mine expansions and that has slowed in places like Australia and other commodity producing countries. But no one area of the world jumps out at us today that we see a lot of spending going on and a lot of demand for equipment flow.

So I read that, for example, Chinese projects have been more shovel-ready as it relates to their stimulus plan. Is that something that has shown itself at all at your auctions or apparently not?

We don't see a lot of equipment coming from any of our auctions going into China at this stage. They have quite restricted import regulations, so infrastructure spending and demand for equipment within the Chinese market would be an internal based demand.

Then shifting gears to the competitive landscape in the auction channel, what are you seeing there? Obviously you're taking share from other forms of sale. Are you also taking share do you think from other auction platforms and could you maybe comment on why a Caterpillar dealer, for example, would still choose to liquidate equipment at your auctions versus a Caterpillar run auction?

Well, I think from any business' point of view, the determination on where they would do business, whether it be at an auction or any other platform, ultimately is what is going to be his net return and whether it's a Cat dealer or any other type of dealer or a contractor out there today, their bottom line evaluation is who's going to put the most money in their pocket at the end of the day and who's got the business model that will do that for them. We're out there, we're visible, we're in the market everyday, they can see what we're doing, the numbers that we're generating and the value that we're creating for them. And they're in a need and in some instances to have liquidity and move some quiet inventory through channels other than their typical retail base. And when that decision point comes, they have to go and look for the best mousetrap out there and I think we've shown in the past that the results that we generate for these dealers and contractors provides the best return for them.

Craig, I really like the way you asked the question, because I think you correctly identified that most of our growth is coming not at the expense of other auctioneers, but it's coming from the 90-95% of the market that is made up of private sales and small dealer/broker transactions. We really don't even view ourselves as being part of the same channel as the other auctioneers. That's a very, very different value proposition, as has Rob just said, so you are correct, most of our growth is not coming at their expense. That's a very different channel than what we operate. Most of our growth is coming from people who have never used an auctioneer before.

Thanks. And lastly, could you just address the actual year-over-year change in price you're experiencing, understanding that it's flattish sequentially?

I think we commented on that in the call, Craig. The pricing environment for us is week to week and quarter to quarter. It's hard to comment year-over-year because quite frankly what pricing was in March of 2008 is really irrelevant for us right now. So we look more to the side by side quarters and from Q4 2008 to what we've seen in 2009, we'll reiterate the comments we had in the call are really more of stabilization, some firming, even some healthy improvement in some of the prices that we've seen category to category. We're cautiously optimistic that we're moving in the right direction, although with Rob's comment laid over that thing that we're not really sure if it's the bottom yet, but I think certainly the storm is over but the wind's still blowing a little bit.

Your next question is from Jamie Sullivan with RBC.

Question on the mix, and I understand your comments earlier, but from the standpoint of the age or the hours of equipment, are you seeing any trends in newer equipment coming to auction, is that benefiting the model at all?

At the current stage I wouldn't say there's any trends of newer equipment coming to market. I would comment that our guys out in the field are having more dialog with the different owners of equipment that may have newer assets in their inventories and are looking at ways and means to dispose of them. We haven't seen an over abundance of lower hour, near-new or brand new equipment in Q1 than we have in recent years. There are some of the rental fleets out there today, not so much the big rental companies, but the smaller, bigger equipment type rental companies that may be looking at moving later model, lower hour equipment but we haven't seen a wave of it coming at us like say we did in 1997 or 1998 when Asia collapsed and there was unused inventory all over the place.

Okay great, that's helpful. And what's the percentage of proceeds that's being shipped internationally in Q1?

That depends sale to sale. I think we saw a good spike, as we typically do in our February auctions. I think we were averaging around -- in normal environment probably around the 20% mark. The U.S. dollar has a huge impact for anybody buying in the United States that's using non-U.S. currency to pay. We saw good participation out of the U.S. in the most recent Edmonton auction where the U.S. dollar was relatively stronger compared to Canadian. I don't know that there's any one single number that we can give you to say here it is, although the strength of the U.S. dollar in recent times, relative to quarter one of 2008, I would say would be less international participation than U.S. side. But I think you're probably 20-25% as a broad range would be -- but that's out of my back pocket, Jamie.

Okay, thanks. And lastly, on the internet participation and contribution, it continues to go higher. I'm just wondering, what do you think is driving that? It seems to be over -- is it just folks not traveling as much to auctions? Is it the existing bidders who are comfortable with the model? I'm just wondering what you think is driving that to levels that seem to be surprising pretty much everybody?

It's tough to know what's driving it, but I can certainly tell you that the vast majority of people who are bidding online are people who have already been to our live auctions. They're familiar with the process, they like Ritchie Bros., they know what they're getting into. It's pretty unusual for somebody to have their first auction experience with us online. I guess another reason why it's a really powerful service. We combine it with the live auctions, meaning you can get your first introduction there, you know what the auction is all about, so now when you're bidding online, you can visualize yourself sitting right there, you can visualize what's going on. And I believe what's happening is people are using this tool to participate in more auctions.

There certainly are cases where guys can't make it to an auction so they use this instead, but most of our bidders tell us their preference is to be there live, but because we have so many auctions, there's so many going on and they want to be able to participate in as many as possible, they find themselves going physically to one, maybe two a week and bidding online in another one to two a week. It increases their ability to do business; it helps them. It's a great tool. We're finding more and more of our customers wanting to use it because it's just a great service.

Sarah, we have time for one more question.

Your next question is from Gary Prestopino with Barrington Research.

I'll be quick, because most have been answered. Do you have the count of agricultural auctions you ran this quarter?

It would be a very small number, Gary. The Ag season doesn't normally start until early April, so I think it would be less than 10 for sure; probably more like 5.

All right, great. And then in terms of sites, we're still on track to add 5 permanent sites this year?

Five sounds high, but I think you might be right in terms of grand openings. There might be about 5 grand openings. Some of those are replacement type, Gary, so in terms of increases to the network, we're probably sitting at 38 sites. That should be going up by at least 2 during the year, but you'll probably have 5 ribbon cuttings.

Yes, but in terms of going from a smaller auction site to a larger auction site, so 5 permanent is a good number?

I'd have to do my quick math and say I think it's at least 5 that we expect to have grand openings at. We've already had 3 and I can visualize 2, maybe even a third more if things go well. So yes, you're correct.

Thanks everyone, appreciate your participation on the call. We'll get back to work. We're selling in Toronto today, so if you want to have some fun, dial into RBAuction.com and watch the sale there. But we'll carry on and look forward to talking to you in Q2. Thanks, Sarah, appreciate it.

Ladies and gentlemen, that concludes the conference call for today. We thank you for your participation and ask that you please disconnect your lines.