RB Global Inc (RBA) 2014 Q3 法說會逐字稿

Good morning ladies and gentlemen, and welcome to Ritchie Bros Q3 2014 earnings conference call.

(Operator Instructions)

I would like to remind everyone that this call is being recorded on Tuesday, November 4, 2014. I would now like to turn the conference over to your host. Please go ahead.

Thank you, Chris. Good morning everyone, and thanks for joining us on our fiscal third-quarter 2014 earnings conference call. Discussing Ritchie Bros performance today are Ravi Saligram, Chief Executive Officer, and Rob McLeod, Chief Financial Officer.

The following discussion will include forward-looking statements as defined by SEC and Canadian rules and regulations. Comments that are not a statement of fact, including projections of future earnings, revenue, gross auction proceeds, and other items such as our potential addressable market are considered forward-looking statements and involve risks and uncertainties. The risks and uncertainties that could cause our actual financial and operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian Security filings, available on the SEC and SEDAR websites, as well as RBAuction.com.

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 it is not presented in our statement of operations. Our third-quarter results were made available earlier this morning. We encourage you to review our earnings release, MD&A, and financial statements, which are available on RBAuction.com, and will be available on EDGAR and SEDAR shortly. I'll now turn the call over to Ravi Saligram, Chief Executive Officer.

Thanks, Jaimie. And thanks to everyone for joining us on our earnings call today. As you are all aware, I've spent the better portion of my time since starting at Ritchie Bros hearing from all stakeholders of the Company, including our employees, customers, both large and small, past partners, and of course shareholders and prospective investors. It's been a very informative and productive process, and has provided me with very valuable feedback and insights about what's working at Ritchie Bros and where there are opportunities to improve.

I'll first discuss key learnings from my 100-day listening tour, then initial analysis of the Company, as well as some of my overarching priorities for the Company. I'll then discuss our near-term focus and some high-level components of our longer-term strategy.

Ritchie Bros has many outstanding capabilities and qualities. These are things that we do exceptionally well, we're absolutely committed to, and we will reinforce going forward. Most importantly, we have an outstanding core auction business with a value proposition that our customers embrace and appreciate.

The quality of the service we offer differentiates us, and is recognized by our customer base. It is a solid model, and one that continues to have significant runway ahead of it.

We have exceptional operational competencies, particularly as it relates to the integration of our physical auction sites and internet bidding. Our brand reputation is strong with both existing consignors and buyers where we do business, and especially strong in Western Canada. We have truly loyal customers.

Our sales teams have unrelenting conviction in our auction model and have developed deep trusted and long-standing relationships with many of our customers. They view us as a trusted advisor when they're transacting in equipment, and also as a window into current equipment demand and pricing trends.

Our vast amount of data from auctions sales, global bidding, sales inquiries, website traffic, and equipment (inaudible) provides us with the unique ability to track pricing and sector trends, market data, regional and global demand and customer analytics. Our strong balance sheet provides us with opportunities to leverage underwritten contracts to grow our market share and meet the needs of our customers.

And our remarkable employees, who I key as one of our most outstanding assets with their passion and pride for our Company and our services. Their dedication to our business models and customers, and their willingness to work long hard hours in the field. These aspects of the Company reinforce my initial impressions of Ritchie Bros, and why I decided to join this business.

Now as in most companies, there are also opportunities for improvement. And a great deal of my time has been spent identifying and analyzing aspects of the Company that could benefit from further attention, capabilities and data-driven insights.

First, the Company had developed organization silos with limited interaction between the departments and functions at times, and a structure that often meant decisions about the business were being made too far from the field and regions we operate in. Our focus had become more internal than external, and we lacked general management accountability.

Our structure was overly centralized, not allowing us to be agile and nimble. The new structure announced this morning will address these issues through leaders with a strong general management focus, and increase the sense of urgency and cohesiveness of our teams.

Second, we also need to better integrate and update our legacy information systems, which the Company has already begun doing. This is absolutely critical to capitalize on real-time data, and will be the platform on which our market inside financial analysis and productivity tracking will be based.

Real-time information will also be fundamentally in our ability to better optimize the consistent performance of our underwritten contracts, which I see as another key opportunity for the Company. Data, or more appropriately the insights we can generate from our data, can also be better leveraged to better understand our customer base and the unique needs and preferences of customers in specific segments, sectors and regions.

Next, we need to invest in skill sets that create more analytical rigor to explain cause and effect. An example of this would be to cogently explain why [Alberta] is better developed than Texas for Ritchie, which then allows us to take the appropriate actions in Texas to realize its full potential.

Third, and perhaps the most strategic opportunity, is to have a renewed and more intense focus on the performance of EquipmentOne. As I've delved into this business, it is clear that EquipmentOne has significant long-term potential.

Unfortunately, we have not executed against this opportunity in an optimal manner. We plan to create an environment which will foster appropriate integration of EquipmentOne on an emotional level within the organization, given our long history and passionate focus on the unreserved model.

At a Company-wide level, I strongly believe that the EquipmentOne model, which allows for greater customer control, is indeed a compatible offering with our historic unreserved auction model. Based on occasion, needs, and equipment type, a customer may prefer one model versus another. We've proved this already with our strategic accounts team. They (inaudible) EquipmentOne and auction services with the same customer.

The customer may prefer EquipmentOne in cases where they wish to have more control over one of these four factors: price, their location, timing, or the buyer base. At other times, the customer may want liquidity, the certainty of disposition without any hassle, and turn to the Ritchie auction model.

Ultimately, having both models helps us more fully address multiple customer needs and selling occasions. We will take concrete steps in 2015 to further integrate EquipmentOne with the rest of the Company to accelerate its growth.

The fourth relates to focusing the organization on shareholder value creation. We have a terrific culture focused on customer service, and our people are highly, highly responsive to our customers. We've also had a very successful history as a private, family-oriented, founder-led Company. A lot of positives from this era remain in our culture today, even as a public company, which is great to see. However, my team and I will work on proactively evolving the culture where driving shareholder value is not seen as being mutually exclusive with an employee focus and our customer focus.

Next, we intend to retain all the positives of our culture, including customer intimacy and caring for our employees, while making shareholder value a strong overarching focus. Our new organization structure with general managers (inaudible) will help us achieve the appropriate balance in creating a win-win across all three constituents: shareholders, customers, and employees.

After evaluating and analyzing many components of the Company and our historical performance, we will focus on three strategic pillars to enhance shareholder value. First, reinvigorating growth. By this I mean revenue growth and earnings growth, not just GAP growth.

We believe there are four drivers of growth: geographic, sector, services, and channels each driven organically, and potentially through acquisitions. Our number one, number two, and number three geographic priority are all the same. It is the US market. This will be our strong focus, given its size and potential.

Sector-wise, we're already strong in construction. Our aim is to continue to expand our penetration in transportation and agriculture as our key priority structure -- sectors. Finally, we will continue to better understand the oil and gas sector to sharpen our go-to-market strategy. Services and channels at this time referred to Ritchie Bros financial services and EquipmentOne respectively. We need to scale these opportunities.

The second pillar is to enhance shareholder value -- the second pillar to enhance shareholder value is optimizing our capital allocation and structure. These activities will include justifying or rationalizing real estate assets, reviewing capital structure in depth, and looking at ways to supplement total shareholder return and drive better return on net assets, or RONA.

We will put a lot more emphasis on being stringent on new site openings, ensuring that they will drive strong ROI. Coming from a multi-unit background, be it hotels, retail stores, or cafes, I am a big believer in carefully analyzing individual site economics and taking the appropriate action to improve site returns. I plan to implement these operating disciplines at Ritchie.

And our third pillar will be looking at driving efficiencies in the Company to improve productivity in both our sales and support functions and cost containment. Please understand we may need to make the appropriate investments in the right structure, the right teams and the right systems in the short term to be able to get our overheads down in the medium and long term.

Now I'll discuss what this means for our short term and for our long-term strategy. Over the next several months I have four key priorities for the Company to improve execution of our current model and lay the building blocks to start bringing to life the three strategic pillars. These four priorities are, first, ensuring we have the best leadership team in place to align executive competencies with the current and future needs of the Company. And put in place regional leaders who bring a general management focus and can deliver strong results focused not only on the P&L, but also cash flow and balance sheet measures.

Second, ensuring we have the right organizational structure in place to enable future growth in terms of the appropriate line and functional resources in the field. And to improve our analytical framework to better segment our customers and convert data into insights to strengthen our value proposition.

Third, creating a strong performance culture at all levels and align the Company using a clear set of performance metrics and appropriate reward and recognition systems. I'm committed to ensuring clear and complete accountability in driving growth, profits, and cash flow and putting in place appropriate performance and performance-based compensation systems. And finally and the fourth, driving improved performance of EquipmentOne and integrating it in the optimal manner into the Ritchie system.

As a first step, we'll announce several important executive changes to immediate effect. First, we are very pleased to welcome Jim Barr to Ritchie Bros as Group President, Emerging Businesses, Brand Innovation, and Technology Services. Jim starts today. Mr. Barr will now oversee EquipmentOne, Ritchie Bros Financial Services, and the Company's marketing and information technology departments. He'll also be responsible for developing new revenue channels through complementary products and services.

I had the distinct pleasure working with Jim at OfficeMax, and he is truly one of the best digital and omni-channel professionals I've ever met. There he led the development of the digital and omni-channel transformation growth strategy, which turned digital services into a growth engine for OfficeMax. Prior to this, Jim was president of online at Sears, and an executive at Microsoft where amongst other accomplishments he launched and led several of the company's marketplaces, including shopping, auctions and classifieds.

Jim clearly has an extensive background in driving growth of digital strategies and online marketplaces. And I believe his experience and expertise will help Ritchie Bros execute focused strategies that will drive better performance from EquipmentOne and other businesses. I will also place marketing and IT under Jim to help us leverage the immense amount of equipment and customer data to create powerful insights to strengthen our value proposition and [evolves us] over time to become a knowledge-based Company.

Also announced today were some structural changes to implement a more regionalized and decentralized organization, which will allow us to be more responsive and agile as a Company. This will help us to better meet customer needs and foster an increased sense of urgency within the organization.

Three regional heads were named to assume full responsibility of regional performance. Randy Wall has been named President of our Canadian business. Many of you know Randy as a long time executive of the firm who has extensive business and experience across many aspects of our Company.

Jeroen Rijk has been named Senior Vice President and Managing Director of our European operations. Jeroen was instrumental in growing Ritchie Bros' presence and management team in Southern Europe and has over 19 years experience with the Company.

And Kieran Holm has been named Vice President and Managing Director of our Asia Pacific Operations, which includes Japan, China, Southern Asia and Australia. Kieran was most recently a Vice President of Sales in the United States, and also Head of Marketing and Operation roles during his 10 years with the Company. He received his MBA in Tokyo and is very familiar with the Japanese business culture.

Karl Werner has been appointed Chief Operating Support and Development Officer and Interim Managing Director for the Middle East. In his primary role as Chief Operating Support and Development Officer, he'll be strategically focused on global operational excellence, driving operating innovations, and overseeing online operations.

Specifically, Karl will be responsible for developing and implementing Company-wide operational processes, metrics, and standards ensuring that our operational competencies remain a distinct competitive advantage and promoting the use of operational best practices globally, while ensuring global consistency in the customer experience. And finally, supporting the regional business leaders to improve RONA, return on net assets.

We will be initiating a search for the President of the US and Latin America business. At this time, Latin America is primarily Mexico and Panama for us, and I want to stay focused on these. So as we initiate the search, I will take direct responsibility for this business and be the acting President of US and Latin America.

We will put in place regional business leaders who will have a strong general management focus to drive sustainable profitable growth, as well as cash flow in the core auction business. I believe this organizational structure is fundamental to implementing accountability across our Company, building cohesiveness across different functional teams, and increasing our responsiveness to customer needs.

Let me highlight a few other changes. As part of the new organizational structure and priorities for the Company, the corporate CFO role will be expanded to place more emphasis on capital allocation, and will also oversee the Company's legal internal audit and risk management activities. In this context, Rob McLeod our current CFO, will transition to a new role as CFO Americas in 2015 and will be responsible for the financial functions in Canada, US, and Latin America.

Rob will play a critically important role in partnering with an externally-hired President of the US and Latin America to unlock the full potential of the key US market. His vast knowledge of operations and financial matters with the Company will add tremendous value to this strategically important position. We will initiate a search for the new corporate CFO shortly, and until that transition takes place Rob will continue as Corporate CFO.

Steve Simpson has been appointed Chief Sales Officer, Global Key Accounts where he will focus on securing large special situation contracts and driving incremental business development. Steve will manage a senior focus team dedicated to business development and will also oversee our Pricing and Appraisals Department.

Regrettably, we also announced this morning that Bob Armstrong will be leaving the firm by the end of the year. Bob has been and remains a steadfast supporter of Ritchie Bros. Over his 18 years with the Company he has held many executive leadership roles, including CFO, COO, and most recently Chief Strategic Development Officer. He played an absolute instrumental role in Ritchie Bros' growth over the years, and we would like to thank him for his many, many valuable contributions to the success of the Company. He will be missed, and we all wish him well in his future endeavors.

Andrew Miller, Chief People Officer, will also be leaving the Company in mid-November to pursue other opportunities. Andrew made significant contributions to Ritchie Bros over his three years here, with a focus on process improvements, accelerating sales force hiring, and training a few sales managers. We wish him well in his future endeavors. We've initiated a search for a new Chief Human Resources Officer, and we believe we will have someone in place in the next several weeks.

This is clearly a lot of change to the Company. But I believe the changes in appointments we've made today will best position our leadership team and business for the next phase of Ritchie Bros' evolution. A new leadership structure with its clear lines of accountability and performance focus will be foundational in driving further growth through disciplined execution.

What does this all mean for our longer-term vision? I'll discuss high-level strategies now. We'll be in much better position to drive details of our strategic roadmap at our upcoming Investor and Analyst Day on January 12 in New York. Ultimately, my long-term goal is to evolve Ritchie Bros from being primarily an auction Company into a trusted asset disposition Company.

The unreserved auction model will always be a core service offering for our business, and there remains significant growth potential for this channel alone. But it would be irresponsible for us not to explore other channels and services that we are uniquely positioned to offer as a result of our market position, market data, and operational competencies.

I'll bucket our long-term focused areas into four buckets. First, Ritchie Bros will become more data-driven using our deep analytics to drive marketing and sales initiatives. Second, we intend to reinvigorate growth through both a renewed focus on revenue drivers and cost containment. We will specifically be looking at ways to improve the performance of certain auction sites while rationalizing our investments in these regions. We will also be looking at ways to expand some of our go-to-market strategies and services.

Third, we will actively pursue a growth strategy through organic and strategically important acquisitions. This will involve tuck-in acquisitions that bolster our market share in key or new segments of our market or bolt-on additions to drive our core auction capabilities. We will establish clear acquisition criteria that ensure a strong fit with our strategy, improve long-term profit and returns, and become accretive in a reasonable period of time. And fourth, we will become better stewards of capital and will be focused on improving return on net assets.

I plan on developing specific strategies and policies in the future to best optimize our capital allocation and structure. More importantly for those of you on today's call, I want to emphasize that there's a renewed and steadfast focus on shareholder value and generating the kinds of returns we know this Company is capable of. And with that overview, I'll now pass the call onto Rob to discuss our third-quarter performance.

Thank you, Ravi. I'll take a few minutes to discuss our earnings results, and then I'll provide an update on our operations, and I'll end with our outlook. As you saw from our September auction metrics disclosure, we achieved record third-quarter GAP this year of $887 million. This is 12% higher than Q3 last year.

We are also very pleased to have hit over $4 billion in gross auction proceeds for the four quarters trailing Q3 this year. This is the first time Ritchie Bros has achieved over $4 billion, and a new milestone for the Company.

Net earnings attributable to shareholders during the third quarter were $9.3 million, or $0.09 per diluted share, a 43% decrease from the same quarter last year. As discussed in this morning's press release, this includes $5.1 million of net charges attributable to land sales and real estate asset write-downs. Specifically, there was a $3.4 million pretax gain on the sale of our former auction site in Grand Prairie, Alberta and an $8.1 million non-cash impairment charge on our land and building in Narita, Japan.

We conducted a strategy and auction site performance review in Q3 related to our Japan auction site, which indicated that these assets were impaired. As result of this and other indicators, we recognized an impairment loss in quarter three to record the assets at their recoverable amounts. At this point in time, we have not made a final decision about the future of these assets.

On it adjusted basis, excluding these two real estate items, the Company generated $14.5 million of net adjusted earnings, or $0.13 per diluted share, a 9% decrease compared to $15.9 million of adjusted net earnings in the third quarter last year. The decrease in year-over-year adjusted earnings was due primarily to the higher than normal revenue rate we achieved in Q3 last year resulting from a few unique very profitable deals in that period. As we discussed at the time, we did not expect to achieve a similar revenue rate this year.

The revenue rate during that the third order of 2014 was 11.5%, which is in line with historic norms and within our guided range. As a result, the $102.2 million of revenue Ritchie Bros generated during the quarter was 3% lower than the $105.8 million generated in Q3 last year.

Underwritten contracts comprised 30% of GAP during the third quarter, slightly higher than the 29% in the same quarter last year. Operating expenses, which include direct expenses and SG&A but exclude depreciation and amortization, were $71 million for the third quarter, 2% higher than the same quarter last year. Within this, sales and marketing expenses increased 3% as a result of our larger sales team, while expenses related to operational and administrative activities increased 2%.

Earnings before interest, taxes, depreciation and amortization for the third quarter were $31.2 million compared to $36.2 million in quarter three 2013. EquipmentOne had a negative contribution to EBITDA of $700,000.

The effective tax rate during the quarter was 39.6%, higher than the 35.9% in the third quarter last year. This increase is due to the impairment charge we've book this quarter for real estate assets in Japan which we did not record any tax benefit or recovery on. Internally, we continue to model a normalized annual tax rate in the range of 30%.

On an adjusted basis, our tax rate for the third quarter was 28.4%, lower than last quarter's as a result of higher proportion of revenue generated in lower tax jurisdictions. Specifically, a larger proportion of revenue was generating in Canada, Australia, and the Middle East during the quarter compared to last year, and a lower proportion was generated in the United States, which is the highest tax region we operate in. This shift was due to a combination of factors including auction timing, strong results from some of our Canadian auction sites, and several off-site auctions that occurred outside of the United States and Canada.

Changes in the foreign exchange rates, and more specifically the weaker Canadian dollar, did have a slight impact on some line items this quarter compared to quarter three last year. Gross auction proceeds for the quarter would have been $13 million, or 1.5% higher, using same exchange rates as is third quarter 2013. Similarly, net earnings would have been 0.5% higher. As I've spoke about before, fluctuations in exchange rates tend to have only a marginal impact on our net earnings.

Our balance sheet continues to remain strong with $121.7 million in working capital as of September 30, 2014. During the first nine months of 2014 we generated $82.2 million of free cash flow, excluding changes in working capital, and paid out $42.9 million of dividends.

Turning to our operational performance. We added four new net territory managers during the quarter for a total of 296 territory managers as of September 30. This is an 8% increase compared to September 30 last year. These new positions have all been added to our North American sales team. Our recruitment pipeline continues to be robust, and in fact we've hired five additional TMs since the end of September, bringing our TM count above 300 for the first time in Company history.

In terms of sales force productivity, we continue to be pleased with how our newly recruited TMs are ramping up. The training and development and initiatives we've implemented are reducing the average time it takes a new TM to achieve productivity. We believe this contributed to our retention of revenue producers and increased sales force productivity to $11.2 million per revenue producer for the rolling 12 months ended September 30, 2014. This compares to $10.8 million for the rolling 12 months ended September 30, 2013. We measure sales force productivity simply as rolling 12-month GAP per revenue producer.

As of the end of October, 40% of TMs in our sales force had less than two years of experience with Ritchie Bros. This is unchanged from the end of Q2 and reflects the ongoing recruitment and growth of our sales team. As TM recruiting remains a key focus of the Company, it will continue to slightly dilute the average tenure of our sales force, even as experienced of previously hired TMs increases.

Pricing for used equipment continues to be fairly stable as it was in a second quarter, but at stronger levels compared to last year. In the ag sector there's a lot of product on the market, yet prices are still meeting expectations. Light construction assets are still performing well. And North American markets are still an area strength for such assets as skid steers, loader backhoes, wheel loaders. Larger assets, such as excavators, have been well supported.

For transportation assets, heavy spec trucks, low mileage Class A trucks have been doing well in most areas of North America. The price of oil has recently created a level of caution with some participants in the marketplace, and we will continue to watch the markets over the next few months to see if there are any certainties or trends established.

The age of used equipment population that we sell continues to improve. On a trailing four-quarter basis, the average age of assets as of September 30 was 11.07 years, down from a peak of 11.25 years for the four quarters trailing March 31. This is the second consecutive quarter we've seen the average age decline, and a measure that confirms the headwinds we've faced from an aging equipment population are now dissipating.

I will now comment briefly on expectations for the remainder of 2014. In reviewing our forecast for the fourth quarter, we are narrowing our guidance for 2014 gross auction proceeds to be in the range of $4.1 billion. We've seen significant and sustained GAP growth the past several months, and believe our pipeline of asset continues to be strong. But we recognize that the fourth quarter GAP comparisons are going to be more difficult as we achieved strong GAP growth in the fourth quarter of last year.

As Ravi discussed earlier, there have been some leadership changes that result in restructuring charges being booked in the fourth quarter. The impact of these charges is expected to have an impact on quarter four reported earnings, and will weigh on 2014 pretax earnings growth. On an adjusted basis, excluding restructuring charges and other adjusting items, we still believe the Company will generate mid-single digit pretax earnings growth for 2014.

We do expect several million dollars of restructuring charges to be booked in the fourth quarter related to the reorganization executive departures. As some of these charges are still being determined, we aren't able to confirm a more precise figure for you at this time.

We forecast total capital expenditures to come in between $40 million and $45 million for 2014, down slightly from the $45 million to $50 million we guided to earlier this year. And with that overview of our quarter three performance, I'll now pass the call back over to Ravi for closing remarks.

Thank you, Rob. I've now been at Ritchie Bros for over four months. In every city I go to and every auction site, I've been welcomed by an immensely proud team of Ritchie Bros employees. Across our platform, our team recognizes what makes Ritchie a true leader in our space, and fervently believes in the same values instilled by Dave Ritchie years ago in putting the customer first and doing what's right.

The culture here is strong and resilient. But what impressed me most, and perhaps most surprisingly, was the openness to change and evolution of the firm. In fact, our upper middle management, be they regional sales manager or regional operating managers or marketing managers, they are hungry for change. They are winners, and want to win.

In all my interactions, and as frequently indicated by an internal staff survey we conducted, our employees expect and desire ongoing growth, development and progress as a Company. And this gives me absolute confidence that our teams will better execute strategies going forward. I look forward to discussing our long-term strategy with you in detail on January 12.

In closing, I want to take this opportunity to personally thank every customer, shareholder, and prospective investor I've met, which have shared candid feedback to me about our business. Your opinions and suggestions have been highly valuable and have been heard. And have provided me with many different perspectives of how to shape our strategy going forward.

I would also like to thank all Ritchie Bros employees for their ongoing commitment and openness or change. Your feedback and insights will continue to be instrumental as we embark on the next phase of Ritchie Bros evolution. There are tremendous opportunities ahead for our Company, and I look forward to sharing our progress with you in the coming months and years.

With that, I would like to open the line for questions from analysts and our institutional investors.

(Caller instructions)

As a reminder, details about our long-term strategic roadmap will be made available on our January 12 Investor and Analyst Day in New York. I'll do my best to answer questions about these high-level focus areas today, but please understand that it may be difficult for me to discuss some activities in detail at this time. Operator, Chris?

(Operator Instructions)

Nate Brochmann, William Blair.

Good morning, Ravi and team. Hope all is well there.

Thank you, Nate.

I'll bet now you can catch her breath after all of those frequent flyer miles you racked up, Ravi?

Indeed.

I just wanted to talk a little bit -- and I know, like you said, a lot of this is early. But one of the interesting things is Ritchie Bros. does have this strong culture, as you alluded to. And maybe it was directed at certain things and needs to be a little bit redirected at some others, and certainly sounds like the shake-up is kind of a little bit of the way to go.

But how do you approach, and how do you think that you'll approach it going forward, in terms of retaining that culture while moving forward in some of these new areas?

Nate, thank you for that.

I think our culture is a terrific culture, and very much fits with my leadership style and values. I love the passion of our employees. To me, when we've done our internal surveys in the field, the level of engagement and commitment of our employees is off the charts. And that is something I want to preserve, build on, and use as a great strength.

So the key is that one of the biggest ingredients for our people is they want to win. And we have 45 years of growth, earnings growth, revenue growth, our (inaudible) cap went up. And the last five years have been stagnant.

And our people want to be winners. So I think I have spoken either one-on-one or in groups to more than 200 of our employees. And we did a Denison survey with more than 700 people in our group. And they really want to find how we evolve the culture, how we evolve our strategies because the world is not sitting still. The world is changing, and we need to evolve things; and they are ready.

Our employees are our greatest asset. They want they want to take the challenge. They need someone. And the executive team is going to be really critical here, that we as a team need to lay out the direction, provide the concrete steps, and allow them to execute. They are hungry for change; they want to drive it.

But look, we're not going to throw the baby out with the bath water. Our biggest strength is our positive culture. And I'm the guardian of the culture, as is my team. And we will do everything not only to preserve it, but foster it and evolve it to a great new level.

That make sense, and thank you for that.

And just the second one -- and I won't ask any specific details because I'm sure we will hear about that in January. But do you have in the back of your head a rough timeline already developed? In terms of, obviously, we are going to have a little bit of some upfront overhead costs before we get some of these initiatives really rocking and rolling to produce some positive results.

But do you have a timeframe in terms of when that might be, that initial ramp period, and over what period some of these new initiatives will evolve? Or is it a little bit too early for that?

Nate, let me give you my first attempt at that. Let's be specific about the real win here is going to be the three things that I talked about. How do we reintegrate growth in revenues and earnings? And how do we improve and increase cash flow?

Our cash flow characteristics, my god, given the other companies I've worked -- this is amazing. Where you actually have in some places, it is just the cash flow characteristics where you produce more cash flow than your net income. It is just terrific. So I think we need to keep driving that, and I think that's what our shareholder see as a positive. And getting our entire general management structure focused not just on the P&L, but cash flow.

The second is improving our capital allocation and making sure we get that ROIC or RONA. RONA is an easier thing to explain to our business operators. And how do you get that?

And the third piece is efficiency And the efficiency has two components. One is the whole aspect of sales productivity. Rob mentioned how we've improved this year on a 12-month basis. But on a five-year basis, our productivity can still be improved. We've been adding salespeople, but I want us to really have that payoff.

The last one is cost containment. The first step is not -- in this Company, to me, I don't believe -- and I've worked in companies, like my previous one, where it was all about cost, cost, cost. But saving our way to prosperity is not the unlocking key here to shareholder value. But I'm very cognizant over the last five years that our overhead to SG&A has grown faster than revenues. And we cannot let that continue to go on forever. But in the short term, we need to make the appropriate investments in our IT systems.

We have some really poor legacy systems. And once we get better systems, automatically we don't need to do so many things manually. So I think it will be over a period of time. But I'm very cognizant of it. And we will take the necessary steps over time to get that.

But my first focus really is on revenue and earnings growth; on really capital allocation, capital structure; and then the efficiency primarily focused on sales productivity.

Make sense. Thanks for the time, Ravi.

Pleasure, Nate.

Bert Powell, BMO Capital Markets.

Thanks, Ravi. A lot of stuff done in fairly short order here, a lot to digest.

I want to go to a comment you made with respect to organizational silos, and that being a driver for you for moving to more of a decentralized approach. And one of the things you said in the press release was meet local customer needs. Was this change really driven off of customers saying it is frustrating to deal with Ritchie Bros, or they're not being responsive? Or is this more an internal driver for this kind of change?

It is very much an internal driver. Our customers are here, but to me the customers have spoken through everything we've seen. The customers who actually transact with us -- be they consigners, be they buyers -- their loyalty is off the charts. And this is a highly brand-loyal business for those that we have.

The issue we have is really in the future, how do we become more customer-centric? We are very strong in customer service. But I see that there is a continuum where customer service grows beyond being customer-centric. And capitalizing on that great brand loyalty we have with many of our customers, either current or people that are not to date transacting with us, have different occasions, different needs. So it is how do you take a more outside/in where we are tailoring our offerings?

But I think the silos are really an issue internally. Our customers think that our people are hugely responsive. And that doesn't manifest itself.

Our issues are more about creating a better connection between the headquarters and field. I think our field people are hugely dedicated. Their engagement levels are fantastic. But I think over time, we've become a bit more bureaucratic, and we've lost our connection. And I think I want us to be, ultimately, our business is all about what happens --our product is the auctions today. Our product is what happens on our website or EquipmentOne.

How do we get our management to really feel the pulse of the customer every day versus sitting in an ivory tower? And hence, the regional focus is the closer you are to the action and where you're sensing it, meeting with customers, and driving the business. Having the fire going in your belly to drive it. That's what I want to see.

Okay. Second question I wanted to ask about was on M&A. Are there things where you think you need to spend capital today to get to where you want to go in the future?

And I'm thinking of things along the lines of feeding into your commentary around analytics. Or is that something that's just in the future when we think about different channels and supporting those channels, we would look at M&A? I want to differentiate between what gating today to achieve your objectives versus what is going to be more future perspective M&A to support the strategy?

Bert, in my view, and I'll have a better view on this when we speak in January. I will give you a first impression. My first impression would be utilizing capital that really accelerates our current core business model.

As I mentioned, we have strengthened the construction sector. But we actually have a lot of opportunity in transportation, a lot of opportunity in oil and gas, a lot of opportunity in the ag business. And there are a lot of regional and local companies that make give beachheads.

And this is not foreign to Ritchie. In Canada, for instance, way back when, we bought All Peace. And that really gave us a great leg in agriculture business from which we built that foundation.

In the US, we bought Forke Brothers; and that gave us a great foundation. So we need beachheads in new sectors but are still within our core wheelhouse. And that's where I see greater opportunities in the short term.

So rather than something which is really futuristic, I would have more of a near-term focus on the core. Which allows us to be a catalyst who triggers growth that we can build and bring all our core resources and sales force against, as opposed to something which is very distant in the future.

Okay. That's helpful. Thank you, Ravi.

Yuri Lynk, Canaccord Genuity.

(technical difficulty) context of improving return on invested capital, when you --

I'm sorry. I think we missed your first few words. Would you mind repeating it, please? Sorry.

Yes. Just when you think about improving return on invested capital. I'm just wondering how you think about the current 44 permanent auction sites; and specifically, some of the individual sites in Europe and the Middle East and Asia. And then more broadly your idea of owning all of this real estate versus potentially leasing it.

Yes, Yuri, thanks for that.

I think this is clearly one of the key focus areas, given my experience in multi-unit businesses. We have to be very granular about site-by-site returns, site-by-site economics, and start really getting into it. We are going to start putting in a framework on how we look at that because we have some great sites that perform extremely well, such as Edmonton. And where we can put a lot of capital, we invest at the right time. And then we've built up the business, so it gives you tremendous ROI.

On the other hand, we've got some sites, like Atlanta, which are not giving us the kind of returns that we want to even though we've been there for some time. So one of the clear mandates for each of our Presidents, and then that'll be cascaded down to a lower level, is to improve those returns on those assets.

We are going to be very open-minded to a view that not every site has to be owned. And as we go forward, we are going to look at leases. In fact, in the UK, in Donington, one of the reasons why that site has a strong return is because we've done that as a lease.

Other things we're going to be open-minded to. In Edmonton for instance, it is public knowledge we have put up a certain amount of excess land, which is quite valuable, near the airport up for sale because we've done a very good review. And it is very important to preserve -- that's such a flagship site.

So we've kept what we need for the site. But to make that plan, rather than thinking that we're in the real estate business, we've made a fairly critical decision. And that was sort of in limbo when I joined.

I personally went to Edmonton and met with the teams. And Rob and I went there with Karl. We spent a lot of time understanding it. And then we made a decision. Let us sell the piece of land which is very attractive to developers; so that is now up for sale, that piece. But we've got enough to keep us going for the future.

So we're going to be making tough decisions on what's needed, and not every model in the future. We're going to be very open-minded to -- should it be a lease? And the key is that we have to first prove the demand exists, build up the demand before we rush to build a site.

So when I look at Japan, for instance, in retrospect, I'm not sure that we should have gone and built that site. We built it. It can't be -- build it and they'll come. That doesn't work in that business. We've first got to get them to come.

And this is the history. We used to do sales as off-site in tents. I went to Tuscaloosa for an off-site sale, which was so impressive that we pulled it off and had a magnificent sale. So we've got to start proving that first before we say, let's just go build sites.

And the reason why this regional structure with general management focus is going to work is that every President and the people below are going to be held accountable for driving RONA. It is not a blank check. I hope that answers your question.

It did. Very helpful, thank you.

And second, why the US market? You were very clear in your prepared remarks that this was going to be the focus geography. Beyond the obvious that you've already got a network established there and similar cultures there. Anything else you can share with us as to why you are so clear on that being the best opportunity for growth over, say, a South America or a Europe or another region?

Yuri, I think great question.

One of the things that in my listening tour, the constant question I had from our investors. And they always use the whole telegraphic example of Texas versus Alberta, and the whole GDP. And when you do the ratios, the US -- any US business, regardless of its sector -- the view is it should be anywhere from 4 times to 10 times the size of Canada. So to me, it was very curious that for us it was maybe 1.3, 1.4 times US versus Canada.

Clearly, we've done an amazingly great job in Canada. So I had a team actually start doing an analysis of Texas versus Alberta. We have just initiated the analysis. We had a preliminary look at it. And it was very clear that some of the things that are coming out. Because at first, some of the views are there is greater competition in the US versus Canada, which is true. Alberta is better developed versus Texas, et cetera.

But I think as we've started getting into it, we've actually found some critical factors that are being employed in Canada that have not been in Texas, for instance -- in Alberta versus Texas. Alberta, our ag businesses is far more developed. How we deploy our ag business is far more developed. So I think as we've got granular, and we will talk more about this on Investor Day, I think that there's a lot of potential.

Yes, I think the US market has a lot of potential. We have the sites, we have the footprint, we have the people. We just need to improve our productivity. But I think we also, unlike Canada, where we've developed the brand and built the awareness, we don't have that sort of brand recognition and awareness, especially in some of these bigger areas.

And we're going to quantify that. We've launched an awareness study and a segmentation study to better understand this. So I think to me the opportunity is palpable. And when we just look at a microcosm, Texas versus Alberta, I think Texas, there's a lot more opportunity that we can drive. So that's why.

And then the second question is, so why not South America? Clearly, those emerging markets, such as Brazil, et cetera, or India and Asia or China, have potential. I'm an internationalist. I've lived in six countries.

But international is always more glamorous than it seems. I've been a country manager, a regional president, an international president. First, you to need to have the capabilities. And second, you have to have a lot of patience. And China takes a long time to make money.

We're here in the business making money, and right next door to Canada is the US. When there's tremendous opportunity to issue, focusing your resources and prioritizing where you're going to put your dollars. So to me when it is right here, I would rather get the US right first.

We've got things in China. It doesn't mean we're ignoring the rest of the world. But to me, the US is first. I think there's a lot of opportunity in the UK that we need to drive, Germany. But those are places we need to get right first before we worry about the rest of the world.

That's fair. Thanks for taking my questions.

Sure, Yuri.

Craig Kennison, Robert W Baird.

Good morning. Thanks for taking my questions.

First, maybe you can address how much leverage you might be willing to take on the balance sheet, given your strong cash flow.

Craig, I think I would prefer to defer that question to January. I'm not trying to duck it. We are very cognizant that we have a strong balance sheet. We are very cognizant that we need to figure out ways of optimizing it.

And as I've said in my remarks, we will declare a crystal clear capital structure policy, which will include a specific answer to your question. Today we are not prepared to deal with that. But it is very much on our radar; and in January, you will have your answer.

Great. I'm sure I (inaudible) until January.

And then also, could you address what high-level changes you are making to the compensation structure? You mentioned some changes there as well.

Craig, let me just go back to our first question for a second. I'm not trying to in any way minimize your issue. But rather than giving you a half-baked answer right now, I think it is important. Because that's so important for us that we need to think it through.

As you can see, I've been somewhat busy in the last four months in trying to get, first, the people issues sorted out. And I very much intend to give you and our shareholders a very specific answer to that. So I'm not trying to minimize your comment or be flippant about it. But I think it is better for us to give you a very well-thought-out answer, which is clear, in January.

So let me go back to your question on compensation issues. At this point, I do feel that whether it is our executive compensation or our sales force compensation, as I've looked at it my first blush is it's quite complicated. It is not as easy to understand.

It is also not unifying against critical performance metrics. So as I have a new CHR in place, this is something, a priority for us to get right. And the base of that is to make sure that the compensation drives the behaviors that we want to drive.

We are doing work on sales force productivity and finding out what are the right incentive measures to drive. So this is an issue which is work in progress, but clearly one that we want to tackle. And at least I'll have a further update on it.

Whether we will be able to actually get everything sorted out for 2015, I'm not sure because this takes time. And when we do it, again, it takes time to cascade all of this. But it is definitely an important area for us to address.

Great. Thanks, Ravi.

Ben Cherniavsky, Raymond James.

Good morning, Ravi.

Hello, Ben.

It sounds like you've been busy, and you've learned a lot in your 100 days. So, well done. We've talked before and your pretty familiar with my views. So it sounds to me like you've sort of come into alignment with at least what I think some of the issues have been.

I'm curious, though, with respect to what you are doing with the management structure and your design to decentralize decisions and those sorts of things. Which I agree, I think are important and were probably lacking, I think, in terms of the culture having been too centralized over time. But how do you balance what you've done with trying to prevent maybe too much management?

I look at it, and it looks to me like you put a whole new layer of mid-management into the business. Where at the same time you're trying to avoid the increase in overhead and SG&A. So this sounds like you are laying some foundations. You're making some investments.

But it will presumably cost you some money upfront. And if that is the case, can you help us understand what the near-term implications might be to SG&A and earnings? It might be helpful just to set the stage for that as you look to 2015, presumably being a bit of a transition year.

Ben, first of all, I want to thank you and everyone else, all our investors and shareholders and analysts, who've provided me with their perspectives. To me, on the whole overhead side -- to me the structure, if you have the right leaders and you have the right structure and the right strategy, and we start getting focused execution, I think we will start making good progress.

This is the first step, and I felt it is a very important step to take I view this as a marathon, not a sprint. And so there will be steps along the way that we will look at all the issues. I think I've mentioned earlier on that we need to make certain investments so that the payoff is longer term.

I completely get that our overhead SG&A has gone up in the past, and I am cognizant of it. We're doing this very deliberately. I cannot give you visibility today, only because it is work in progress. But I wanted to galvanize the organization to get ourselves going on the three strategic pillars I talked about.

And without this whole organization and the executives at the helm, I felt we couldn't drive it. So we cannot give you a very specific answer to guide you on 2015, but that's going to be work in progress. And we will have a little bit more informed view by the time we get together in January.

But I think I feel confident. And I am not a big believer in layers and layers of management. I believe in (inaudible) organizations, but it is getting the right leaders. It is much better to get fewer heavy hitters at the top who really are great leaders, who inspire organizations and drive things, than having multiple layers. So you are seeing the first step. We need to let this play out.

But it is it reasonable, then, to assume -- I mean, there's no reason why this would not increase your admin and management cost for next year, correct?

In the short term, Ben, it may. So we are going to work that. But to me, this is a longer-term win here -- some short-term investment to get the longer-term payoff.

But we are not talking hockey stick where you've got to wait many years. So this is very much a short-term investment. But I don't want to get into the logic. What you are saying is fine; but at this point, I'm not trying to get into guidance for 2015.

But you will help us -- when you get better understanding of that, you will help us with some numbers there?

Indeed, indeed.

Okay, I'll look forward to that.

So many other questions, but I guess I will keep it to the two as you've requested. The decision in the write-down you've taken in Japan, and then you've moved someone over there. And you've talked yourself about the glamour of international markets versus the ability to execute and so forth. Japan been probably one of the most glaring examples of where you just didn't get the traction off your investment.

Of course, it is easier to get your return on assets up if you write the assets down. But why wouldn't you just maybe have walked away from a yard like that? Or is that something that -- maybe not Japan, per se; it only comes to mind because of the write down. But it sounds to me like that still may be in the cards, that you're willing to get smaller in some cases in order to drive the focus and the returns higher?

Ben, it is Rob.

And, yes, the write down in Japan was really based on a review of our activities there and the recognition that we really need a new strategy in Japan. And that strategy in Japan may or may not include those assets and how we utilize them.

And that's one of the reasons why having a new leader in Asia in Kieren -- although he'll be based in Japan, he's also looking after Southeast Asia, Australia and China because he has the familiarity with Japan. So the strategy for Japan is still in progress. But it is a recognition that it is likely a different strategy for Japan than what it has been before.

What would that be if it is different?

It could be, depending on if you want to use the assets in Japan or not. Originally Japan was just like China; originally it was an export market only. We didn't actually hold auctions there.

We could hold auctions in a different format then we are holding them right now. We could look at potentially joint ventures in there. There are many different options. And as we say, the strategy hasn't been finalized.

What about just walking away from it for the time being?

Walking away from --

From a market like that?

The asset (multiple speakers)

Just clarify what you've done with the write down of these assets. I' m not sure if I totally understand. You haven't sold them

Correct.

So what triggered the write down?

Sorry, yes. What triggered the write down was our review in quarter three of the performance of the sites and the assets, as well as the strategic review. And the conclusion of the strategic review is the current strategy, the current operation isn't performing as it needs to be. And therefore we need to change our strategy. And therefore, is there an impairment in those assets?

Ben, let me add some color.

Thank you.

Which is less about the write down, but where we are trying to take this. The reason for the appointment of Kieren is really an Asia Pacific (inaudible). And we could have based him in China; we could have based him in Singapore. But really, the fact that he's got the capabilities of understanding that market, we need to come to a view on where we're going to be in Japan.

Now, just because I've said US is number one priority doesn't mean we wish away the rest of the world. Because we are there in many places. We've got assets. We've got to be deliberate. We're going to look at Japan with a very clinical view of what is the future there. And once we decide what the future is, we will come to the appropriate conclusions.

But this is, I think sending someone who's knowledgeable about that marketplace and understanding how the dynamics are there, will help us get to whatever is the right and appropriate future strategy for Japan, as well as for Asia Pacific. But I think it is just -- to me the write down is the first step of taking reality there from where we are. And we will continue on that path.

I appreciate that. And I agree that you don't want to, by focusing on the US walk away from the rest of the world. But at the same time I don't think you can take on the whole world and be focused and impactful.

So I'm just wondering how your strategy evolves as to where exactly you want to focus your energies and your resources. And Japan just seemed to me to be one of those that wasn't working. But listen, we can continue that debate offline. It sounds like it is a strategy in evolution still.

I think, Ben, the comment is at this point, when I talk about the US as our number one focus, or looking at UK or Germany, I want us to focus on our existing geographies as opposed to go on a worldwide spree of putting flags on maps. That is really clear.

Second, where we do have sites, where we do have resources -- like we have a very successful Australian company. We need to continue build on that. We've got an emerging thing in China.

When I talk about priorities, though, a lot of my time and our resources of the management team is not going to be spent in talking a lot about China. Instead, I think we're going to focus more on the US. But it doesn't mean we can wish away everything and just put all your eggs in one basket. We have to drive as much for the short term as for the long term.

That's clear and make sense to me. Thanks a lot, Ravi.

Thank you.

Scott Schneeberger, Oppenheimer.

I have two questions, and I will ask them quick. The first is, Ravi, what's your take on the competitive landscape in your first few months and how that's going to affect your decisions going forward? Thanks.

Scott, thank you.

I think like any business, to me the beauty of the Ritchie model, if you just define it as just auctions and unreserved, and there's a real moat around it. And given that we do $4 billion plus or so in GAP. And when you look at a lot of our competitors, they're (inaudible) to that. So clearly our operational competencies, all the infrastructure we've built, helps us; and that's the beauty of this model.

Having said that, and based on my 35 years of experience, you never, never underestimate competition and never get complacent. So to me, the other part of this, given all the opportunities, you're lowering direct competitors as well.

Whether it is online, whether it is classified, whether it is dealers who have their sales force. There's a lot of occasions. So the question is where do you want to focus. So the key for us is not getting complacent, making sure we are in touch with the changes going on in the marketplace, and evolving our model and our talents.

That's why I've said it is about geographies. It is about sectors. It is about channels and services. So those are the four revenue drivers.

And competition is different if you think about those in each area. So on one hand, we may be very strong in construction. But while we may be selling a lot of trucks in the transportation side, we know there are other competitors who have a good reputation there. So we need to keep addressing that. So I never take competition lightly.

But I'm also very pleased that we have a solid foundation, and a moat on our cash flow characteristic which allow us the drivers to -- for instance, our balance sheet helps us with underwritten business, which I think plays to give us competitive advantage.

Great, thanks.

Rob, just addressing slide 9, you touched a little bit on average age of assets sold. The curve looks a little bit different this year than recent years. Could you just address what you see through those tea leaves there? Thanks.

Yes, it is a slightly different, less busy slide than the one that we had before. But it tells the same story. And that story is that the average age of what we are selling is getting slightly younger, which is good and which is what we expected.

And also that we didn't expect it to change from a headwind to a tailwind right away. So that's in our comments where we say the headwind is dissipating. So it is the same story as what we are talking about, just slightly different format.

Great. Thanks for taking my questions.

Neil Frohnapple, Longbow.

Hello.

Ravi, you talk about driving improved performance at EquipmentOne through greater integration with the core auction business. Can you just provide some more color on what this could look like? Do you plan on rolling out training to all your current territory managers? Will you look to hire a separate sales force? Can you just elaborate on those comments a little bit?

Sure, Neil. I will give you a bit of color, and then we will talk more in January.

To me, the first place that it starts is emotional integration. We've had a very passionate culture, which has -- there's been a lot of fervor about our unreserved market. So EquipmentOne -- and it is not the fact that it is online, but it is where there's more control for our customers -- was quite the opposite of what Ritchie has built its reputation on.

And when we bought it, I think, regrettably I think we didn't execute in a manner where we are brought the rest of the organization along and emotionally integrated it. So forget about physical integration, even the emotional prospects.

Because the unreserved model, as I've now met a lot of the sales people and our customers, is a difficult model. Because you are telling someone to really give up control. What you're assuring is certainty of sale. And we've sold against all other models. And our sales people have become brilliant at this, and I completely salute them and applaud them.

So when we bring in a new model, we just -- and typical to what we do -- there is definitely a case of (inaudible). So what we've got to do, and the interesting thing, as I mentioned in my prepared remarks, as we've sorted through our strategic accounts team, really the segmentation of customers here is as much based on occasion and need, and the same customer may need both models. And our customers are saying, guys this is not a betrayal. E-One is not a betrayal of your unreserved model, and there are many times they can coexist.

So I think it is time that creating -- changing the paradigms. Why I'm delighted is as I've talked to our sales people, and as I go into the bowels of the organization, they want it. They are ready for it. And they are asking for it.

And we kind of have kept it separate. So what we need to do is find the right way of integrating it. We cannot just completely unleash it and have rates where our core business gets affected. So we're going to launch a series of pilots on how different regions, on different models.

And we will have, I think, a little bit more color on this. But the first part is that EquipmentOne is a viable force to get our people to say that really Ritchie now has two models and facing that reality. And then just going forward with it. So I'm quite bullish that we can execute because I think our people are there. And so it is now a matter for the leadership team to figure out the right way to do it.

Great, thank you.

Can you provide some color on what we can specifically expect at the Investor and Analyst Day in January? Clearly, you'll probably provide more color around some of the strategic pillars you laid out today. But will you provide an update on capital allocation and capital structure? And should we expect you guys to provide initial 2015 guidance then? Thank you.

For sure we're going to talk to you about capital allocation and capital structure, and give some views and some policies because we've already started work on that and thinking that through. And by that time we should be ready to do that.

In terms of 2015 guidance, Rob, do you think we will be ready? I'll defer that to you.

High-level guidance, yes, would be available.

Great. Thanks very much.

Okay, Jamie, one more question.

Ross Gilardi, Bank of America.

Ravi, just as a follow-up to that last question. Obviously, you've accomplished a lot in a short period of time. But you've only got a couple months until the Investor Day. And now you're conducting a search for a new CFO.

So just so we have our expectations set properly, is there any realistic way you going to be in a position to quantify your return capital structure and capital allocation targets in January? Or should we expect these to be softer financial targets for the next 12 months, until you get a new CFO fully up and running?

Ross, I think that's a great comment.

What I would like to do is just to moderate. And we will have strategically -- and look, Rob and I are working extremely well. And we've been chatting with the Board already about these issues. So we can definitely give you, I think, a conceptual view and a policy.

I don't know how well we can quantify numbers for you in terms of the greater beyond. But definitely you will get a sense for how do we want to optimize our balance sheet; how do we want to look at capital structure.

Some of the questions asked -- I think Yuri asked about what sort of debt-to-EBITDA ratio would we consider looking at. Those sorts of issues, I think we will at least have a point of view on that. So if you start getting a sense from where we plan to go versus where we are today.

Okay, that's helpful.

And just my last question. It is just more on current trends and what you are seeing. So the reaffirmation of your GAP guidance implies a big deceleration in GAP in the fourth quarter. Would you characterize that as more of an auction timing issue, or are you seeing deceleration in the market?

And related to that, used construction equipment prices remain very strong. And I'm very interested to get your best explanation of what's driving that. Are you seeing smaller rental companies or other buyers buying more used Tier 3 equipment at your auctions in lieu of buying more expensive Tier 4 product? Anything around that topic would be really helpful.

Rob?

Ross, the guidance in the range of $4.1 billion of GAPP for the full year obviously reflects our belief of what's going to happen in quarter four. Of course we only have so much visibility -- visibility to the biggest selling period in the quarter, which is the first couple weeks of December. And we had quarter four last year, which was the beginning of the accelerated growth in GAPP. And so that's being taken into account as well. But so far we are tracking well in quarter four compared to quarter four last year. So we are optimistic in the range of $4.1 billion.

And on equipment pricing, yes, we would agree that equipment pricing is probably pretty stable compared to quarter two of this year. But as we've mentioned before, pricing is up quarter two/quarter three last year versus last year. And that presumably reflects the demand in the marketplace because it is no longer the issue of out-of-synch supply and demand on new equipment driving up used equipment pricing. So it is literally the demand in the marketplace for that used equipment.

Okay. Just related to that, just lastly, are you seeing anything interesting with equipment flows vis-a-vis kind of Tier 3 versus the new Tier 4 equipment from a buyer or seller standpoint?

We don't have any information that would indicate a trend on that. But also, we are not necessarily always privy to the motivation of our consignors, or really of our buyers, of why there transacting. Perhaps some of the motivations maybe that transition from Tier 3 to Tier 4, but it is not a clear trend.

Steve, did you have any color at all on the last comment?

No, Ravi. Rob nailed it for sure. The amount of Tier 4 stuff we are seeing is very limited. And lots of questions in the eyes of the sellers and the buyers in the marketplace.

But unfortunately, we just haven't had enough of it for anything to look like a trend yet. So I'm sure there's stuff in the future. But right now, as Rob commented, it just is what it is.

Okay. Thanks.

I think at this point I would like to conclude our conference. We look forward to meeting you all in January again to manage expectations. We are going to give high-level direction of where we are, but on each of the three pillars that we talked about. So at least you start getting a sense for how are we aiming to drive shareholder value and color on each one of these.

And as we keep working this, I feel very good about the direction we are in. And we will try to add a little bit more color when we meet you in person. Thank you very much, indeed, and onwards and upwards.

Thank you, ladies and gentlemen. This concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.