RB Global Inc (RBA) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the Ritchie Bros Auctioneers' fourth-quarter results conference call.

(Operator Instructions)

I would like to remind everyone that this call is being recorded on Friday, February 27, 2015. I would now like to turn the conference over to the presenters. Please go ahead.

Thank you, operator. Good morning everyone, and thanks for joining us on our fiscal fourth quarter and 2014 results earnings conference call. Discussing Ritchie Brothers performance today are Ravi Saligram, Chief Executive Officer; and Rob McLeod, Chief Financial Officer. Joining us for the Q&A session following the formal remarks will be Jim Barr, Group President; Randy Wall, President Canada; and Todd Wohler, Chief Human Resources 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 fourth quarter and FY14 results were made available yesterday after market close. We encourage you to review our earnings results MD&A and financial statements, which are available on rbauction.com as well EDGAR and SEDAR.

All figures discussed on today's call are in US dollars unless otherwise indicated. I'll now the call over to Ravi Saligram, Chief Executive Officer.

Thank you Jamie, and thanks to everyone for joining us on our earnings call today. I will kick off the call with some quick highlights of our strategic plan, discuss recent events including trends from recent auctions. Afterwards, Rob will provide a discussion of our fourth quarter and 2000 performance as well, and as well our 2015 outlook. I will end our prepared remarks by outlining priority execution areas for 2015.

As you know, the last several weeks have been very eventful for us. On January 12 we presented our new strategy to investors and analysts in New York. Immediately following that event we held an off-site meeting with nearly 500 employees, including our entire sales team, where we discussed our strategy in detail and aligned individual and key initiatives with our new strategic direction. And just last week we held Orlando auction, which is usually the largest auction we hold each year.

I hope that many of you joined us at our recent Investor Day or have had the opportunity to listen to that webcast replay. We are applying many details of our new strategies during that presentation, which we believe will help us restore growth, drive cash flow and improve shareholder returns. We organized our strategy across three strategic pillars: growing revenue and earnings, driving efficiencies in the business, and optimizing our balance sheet.

I will just remind you of a few key points. We're focused on driving growth by improving our market penetration in key regions, namely the US which is our top priority, but also the UK, France and Germany. We are interested in gaining depth in our markets, not necessarily breadth in new ones.

We are evaluating ways to improve our penetration of key sectors, such as transportation and agriculture, by more effectively marketing to customer needs and potentially gaining beachheads through targeted tuck-in acquisitions. We plan to drive revenue growth by further developing our service offerings. For example, we are actively piloting a combined auction and EquipmentOne sales initiative.

We have just launched a shipping and logistics service in Europe, and we are laying a strong foundation for the expansion of Ritchie Brothers Financial Services. We are also looking to amplify the performance of our strategic accounts and global key accounts team.

We are laser focused on improving our revenue rate with particular emphasis on reducing the volatility of our underwritten contract performance. We will unveil a regional reporting structure to allow our business to be more agile and responsive to the needs and preferences of our customers in each geography.

We are driving further accountability throughout the organization with measurable achievable targets and clear performance measurement scorecards. We plan to modernize the systems and processes and better integrate our databases, which would not only allow us to operate more efficiently but also provide more meaningful and timely information to our customers.

And we have laid out clear capital allocation priorities and are committed to growing our dividend in line with our earnings and holding our fully valued diluted share count flat through the use of a share buyback program to offset any potential dilution from options. We also plan to use the strength of our balance sheet to drive acquisitions.

I am pleased to tell you that we have now received TSX approval to proceed with a normal course issuer bid, which allows us to begin our share buyback. We will also be entering into an automatic share repurchase plan with our broker. So we are now set to begin our repurchase program.

Following our Investor Day we presented our detailed strategy to our global management team and sales force at an off-site conference where they not only learned about the details of our new strategic roadmap but also learned how to align their activities and departments with this new strategy and vision for their Company. Our employees left the meetings with a much better understanding of what will be needed to drive further growth and what they will be held accountable for.

An emphasis on cash generation and tightened capital spending was made clear to all who attended. The mantras Cash Is King and Capital Is Not Free are now widely understood and remembered throughout our organization. We also provided our team with several important learning opportunities at this event to reemphasize important aspects of our business including how EquipmentOne operates and how to reintegrate it into RBA, our emphasis on the underwritten business while improving its margins through reduced volatility, our strategies to grow transportation and agriculture, our approach to disciplined execution and even more sales training particularly in the use of sales force automation tools.

We also provide opportunities for staff from various departments to work together on generating new ideas and solutions. This not only provided us with great feedback to build on, but also provided our global team with an opportunity to learn more about other roles in the organization and how each role has an important part in making our business as productive as possible. I am delighted that after the meeting we have rapidly broken down organization silos and are coming together as one unified team.

It was a tremendously successful conference with overwhelmingly positive feedback from all who attended. In fact, in a follow-up survey 90% of our employees who attended the conference stated that they were even more optimistic about the future of Ritchie Brothers.

As well, 90% stated they believe the new executive committee is aligned with the new strategy and can provide strong leadership to the Company. 93% believe the new CEO can take RBA to the next level and reinvigorate growth and profits.

93% also believe we can significantly increase shareholder value at RBA by executing our new strategy. 90% were more motivated and empowered to be part of RBA, now that the Company is evolving from being the best in auctions to being the best in asset management and disposition.

And importantly, 90% agreed with the concept that our auction services and EquipmentOne offering work better together to provide a menu of solutions to our customers. It is also the survey tell us that we have a very strong alignment across our sales force and leadership and the entire RBA team.

Our employees have been very welcoming of the changes we've implemented and the strategic course we have set for the Company. Just as important, they have retained our passionate can-do culture that this Company was built on.

As many of you know, we have held two important auctions very recently: our February Orlando auction, which is the largest auction we hold each year, and this week's Edmonton auction. At our recent five-day Orlando auction we sold $179 million worth of equipment and industrial assets including nearly $66 million to online buyers.

We also achieved several important records for our Orlando auction at this year's sales, including a record number of lots, consignors, bidders, buyers and online participation. As well, we were pleased with the strong aggregate performance of our underwritten portfolio at this auction which tells me our focus on improving our revenue rate is starting to have an impact. In fact, this year's Orlando auction generated materially better revenue for the Company than the last several comparable sales and was a revenue record for Orlando.

Our recent Edmonton auction we just finished last night also broke site records for this time of the year with over 4600 items sold and CAD84 million of GAAP, it is the largest Edmonton sale ever held in February or March, in fact, it represented a whopping 46% increase in GAAP versus the prior year. Importantly, we achieved strong rates on our underwritten business and delivered a record revenue for this auction. We have had record attendance both on-site and online and achieved a record number of website visits in the last two days.

Clearly the Edmonton economy is energy sector driven, so we know there's been a lot of interest and attention paid to the sale, given the decline in oil and gas prices. We believe the positive results of the recent Edmonton sale likely experienced some benefit from the increased supply of excess equipment related to the oil and sector. However, we have also continued to benefit from infrastructure projects invested in Western Canada that are underway and ongoing.

So what have we seen from customers with oil and gas exposure? The vast majority of our customers tell us they have experienced cycles like this before, as a petroleum sector is historically very cyclical.

As most customers have been through this at least once before, we've not seen any sense of panic from equipment owners. Rather they are making calculated adjustments to their fleet and being smart about their asset disposition decisions.

It is clearly a fluid marketplace, making it difficult to pricing and the volume of transactions. That said, our February auction has gone extremely well for us with encouraging pricing trends.

Also the favorable results of our Edmonton sale reflected our strong brand equity in Western Canada, our reach into diverse sectors going far beyond oil and gas and the strength of our enduring customer relationships. Finally, we are encouraged that are April Edmonton auction is already shaping up well.

Before I pass the call onto Rob for a detailed review of our 2014 performance, I wanted to highlight several key metrics during the year. First, record GAAP of $4.2 billion during 2014 was 10% higher over last year.

Canada was a significant source of strength, generating CAD1.4 billion of gross auction proceeds during 2014. This is the fifth consecutive year GAAP has grown in this important market, and I congratulate every member of the Canadian sales operations and all support teams on consistently achieving new records.

Second, I'm pleased to tell you that we achieved $1.8 billion in online sales during 2014. That is a phenomenal achievement and one that demonstrate the strength of our digital capabilities and the seamless integration of our online channel with physical auctions, making us a truly leading multi-channel player in our space.

Third, we are pleased that we were able to achieve double-digit adjusted EPS growth in 2014 compared to the year before. But we do acknowledge that it was helped by an unusually low tax rate. Our focus for the year ahead is growing our revenue to help us achieve sustained revenue and operating income growth.

And fourth, our Company generated operating free cash flow of $120 million during 2014, which represents 119% of adjusted net income. This reflects our strong cash generating capabilities and a very unique and valuable aspect of our business model. And with that overview, I will now pass the call onto Rob to discuss our fourth-quarter performance.

Thank you, Ravi. I will take a few minutes to discuss our earning results and then I will provide you with our expectations for the year ahead.

As we announced in late December we achieved record annual gross auction proceeds in 2014 of $4.2 billion. This was an increase of 10% from 2013 with strong year-over-year GAAP growth in the second, third and fourth quarter. And in fact, we achieved a new fourth quarter GAAP record in 2014 of $1.2 billion which is a 12% increase over 4Q last year.

There were also foreign exchange impacts on gross auction proceeds and other line items, especially during the fourth quarter. I'll discuss this in detail after we review our operating results, first for the fourth quarter than for 2014.

Our fourth-quarter revenue rate was 11.2%, lower than the rate we achieved the past three quarters due to the performance of our at-risk business. During 4Q underwritten contracts represented 35% of GAAP. As you know, fluctuations in our revenue rate occurred primarily as a result of the performance of our underwritten contracts, and in the fourth quarter we were aggressive in pursuing packages of equipment and took calculated risks to obtain these key packages. We also pursued an increased volume of smaller packages of equipment during the quarter which also impacted our at-risk rate.

As we discussed at our recent Investor Day, improving the performance of our at-risk business is a key strategic priority for the Company. Over the next several months we will be making a concerted effort to more effectively transfer best practices in an -- in underwritten contract methods from our really experienced teams, primarily in Canada, to regions that have recently underperformed in at-risk. We have also recently revised our approval and oversight policies regarding underwritten contracts on the level of appraisal specialist and management involvement, including for smaller deals.

Revenue for the fourth quarter was $139 million, a 6% increase from the same quarter last year. Direct expenses for 4Q were $18 million, a 2% increase from the year-ago quarter but as a percentage of GAAP direct expenses fell to a rate of 1.41%.

This decreased from 1.55% last year is due mostly to fewer off-site auctions held in the same quarter last year. And as you recall, off-site auctions tend to have a slightly higher direct expense rate.

SG&A excluding depreciation and amortization for 4Q 2014 increased 5% compared to 4Q last year. Included in SG and expenses for 4Q of 2014 are $5.5 million in costs related to the management reorganization announced in the third quarter. Similarly, 4Q 2013 SG&A expenses included $4.6 million of cost related to the prior CEO separation agreement.

On an adjusted basis, excluding these expense items, SG&A excluding depreciation and amortization for 4Q 2014 was 4% higher than last year. Expenses rose across most expense lines to support higher business volumes and a larger sales team.

Adjusting operating income grew 10% during the fourth quarter of 2014 to $47 million compared to $42 million in the fourth quarter of 2013. Adjusted net earnings for the fourth quarter were $34 million, or $0.31 per diluted share, a 10% increase from adjusted earnings in the same quarter last year.

Net earnings for 4Q were $29 million, or $0.27 per diluted share. This is actually a 13% decrease compared to net earnings in the fourth quarter last year and is due to the previously mentioned management reorg expenses in 4Q this year.

In addition, as you recall, in the fourth quarter of last year we had $3.4 million of after-tax expenses to the -- related to the prior CEO separation agreement, but also a $6.8 million after-tax gain from the sale of land in Prince Rupert, BC. The net gain of $3.4 million from those two items largely drove the year-over-year decline in unadjusted fourth-quarter net earnings.

The effective tax rate for the fourth quarter in 2014 was 29.7%, higher than the 28% in the fourth quarter of last year. This is primarily the result of a decrease in income earned in lower tax jurisdictions.

Turning to our full year results now. As noted before, 2014 GAAP was $4.2 billion, a 10% increase from 2013. Our revenue rate for 2014 was 11.4%, within our stated 11% to 12% range but below the record annual revenue rate we achieved last year.

During 2014 underwritten transactions comprised 31% of GAAP, an increase from 28% last year. In fact, our at-risk volume was higher in 2014 than 2013 in all four quarters.

Revenue for 2014 was $481 million, a 3% increase from 2013 due to our growth in gross auction proceeds offset by the lower auction revenue rate. Direct expenses for the year were $58 million, or 1.37% of GAAP. This is down from a direct expense rate of 1.41% in 2013.

SG&A and adjusted SG&A excluding depreciation amortization for 2014 increased 2% compared to last year, a slower growth rate than our revenue growth rate, which is one of our targets. Adjusting operating income grew 4% during 2014 to $136 million compared to $131 million in 2013.

Adjusted net earnings for 2014 were $101 million, or $0.94 per diluted share. This is increase of 12%, or $0.09 per share compared to 2013. 2014 earnings benefited from an unusually low tax rate. Excluding this from adjusted earnings in 2014 are $4.2 million of after-tax costs related to the management reorg and $8.1 million non-cash impairment charge related to a Japan auction site and $2.9 million of after-tax net gains from the sale of real estate.

Net earnings, excluding those -- or, including those adjusting items, for 2014 were $9.2 million, or $0.85 a share, a 2% decrease from net earnings of $94 million, or $0.88 per share in 2013. As noted earlier this decline results from the positive adjusting items in 2013 and the negative adjusting items in 2014.

The effective tax rate 2014 was 27.9%, a decrease of 190 basis points compared to the tax rate of 29.8% 2013. This decrease was primarily the result of an increase in income earned in lower tax jurisdiction, partially offset by the tax impact of the Japan impairment loss for which we did not recognize a related future income tax asset.

Our adjusted effective tax rate for the year used to determine adjusted net earnings was 26.5%. This low tax rate essentially added $0.04 per share to our adjusted EPS relative to using last year's 29.9% adjusted effective tax rate. Internally we can [just use] and model a normalized annual tax rate in the range of 30% going forward.

Changes in foreign exchange rates, and more specifically the stronger US dollar, did have an impact on each P&L item during 2014. This occurred mostly in the fourth quarter and was driven largely by the weakening of the Canadian dollar and the euro.

And I just wanted to repeat that the net earnings, I think I had said was $9.2 million and it was $92 million. Just back on the foreign exchange comments here. Just as some example, gross auction proceeds for 2014 would have been $107 million higher, increasing the growth rate to 13% using the same exchange rates as 2013.

Again, using 2013 exchange rates our 2014 revenue would have been $12.7 million, 2.6% higher. Expenses would have also increased, significantly offsetting this increase in revenue.

Taken altogether, this would have translated to $1.8 million, or 1.8% higher adjusted net earnings for the year. Nearly 0.5 of this difference occurred simply in 4Q.

Overall, excluding the effect of this stronger US dollars, our earnings growth in 2014 would have been 14% rather than 12% compared to 2013. As you can see, FX did have an impact on line items and on our bottom line.

Our balance sheet remains very strong with $140 million in working capital at December 31, 2014, an increase of 28% compared to the end of 2013. As well, our working capital intensity, a measure of how efficiently we can convert revenue into cash, improved to negative 2.3% during 2014. This clearly demonstrates that our business model requires limited working capital.

As Ravi mentioned earlier, during 2014 we generated $120 million of operating free cash flow, which represents 119% of adjusted net earnings. From this $57.9 million was paid to our shareholders as dividends during the year, a payout ratio of 57% of adjusted net earnings.

Total CapEx for the year was $39 million, a 25% decrease compared to 2013. The majority of our CapEx spending during 2014 was related to IT improvements and system enhancements. The remainder was allocated to maintenance CapEx including auction site and facilities maintenance.

As we were discussed at our recent Investor Day, return on net assets, or RONA, is a metric we are now including in our scorecard. RONA was 15.2% at December 31, 2014, a slight decrease from 15.3% at the end of 2013. This decrease was primarily due to the non-cash impairment charge we booked in the third quarter for our auction site Japan.

Excluding this impairment, RONA would have been 16.3%, an improvement of 100 basis point from last year. At our recent Investor Day we provided the market with metrics for our Evergreen model. The ranges provided in this model are our average annual targets of how our business will perform over the next 5 to 7 years, assuming generally constant currency rates.

As a reminder, our Evergreen model includes GAAP growth in the high single digits to low double digits, revenue growth in the mid-single digits to high single digits, SG&A growth slower than revenue growth, operating income margin growth of 50-plus basis points, EPS growth in the high single digits to low double digits, net CapEx intensity of less than 10%, operating free cash flow in excess of net earnings, RONA increase of 50-plus basis points, a dividend payout ratio of 55% to 60%, and a net-debt-to-adjusted-EBITDA ratio of less than 2.5 times. That said, as we reference on our Q3 conference call and Investor Day presentation, we expect 2015 will be a foundational year as we transition to our new strategic path, finalize the management team and put in place systems and process to better position the operations for the future needs of the business.

Considering this, our forecast for 2015 may vary from our Evergreen model on a few the specific metrics. I would like to discuss the variances in two ways.

First, I will discuss our 2015 expectations in terms of our organic growth over 2014 which excludes the effects of foreign exchange. I will then discuss our expectations taking into account the recent strengthening of the US dollar.

On an organic basis, we expect our GAAP will grow in the range of mid-single digits over 2014. We expect revenue to also grow in the mid-single digits range, which is consistent with our Evergreen model.

This should translate into low double-digit growth in operating profit, and our operating profit margin should grow in excess of our Evergreen model metric.

Finally, we expect on an organic basis our EPS will grow in the mid to high single digits range. This lower EPS growth does reflect the unusually low tax rate in 2014.

Now we need to take into account the significant strengthening of the US dollar, in particular relative to the Canadian dollar and the euro since the end of 2014. The Canadian dollar has declined 7% since the beginning of this year, which has been unprecedented, and the decline in January is the second-largest one-month decline against the US dollar in recent history.

If the current foreign exchange rates prevailed through 2015, which many commentators believe it will, it will impact each of our P&L line items and out net earnings as I noted earlier in regards to our 2014 results. For example, as I noted previously, our organic revenue growth is expected to be in line with our Evergreen model.

However ForEx could eliminate most of that growth due to our volume of business in Canada and Europe. This will be mitigated by our non-US dollar SG&A, resulting in operating profit growth being in the high single digit range and EPS growth in the low single digit range. Again, this lower EPS growth rate reflects the unusually low tax rate in 2014.

Although these dramatic foreign exchange rate swings could impact our business results, it is important to keep in mind our organic growth rates. Our forecast of low double-digit operating profit growth on the organic basis is reflective of the solid operational health of the business in a transition year. And with that overview, I will pass the call back to Ravi.

Think you, Rob. Let me quickly summarize our 2014 performance, and then go into our key focus areas for 2015. We had strong volume momentum in 2014 with 10% GAAP growth.

Unfortunately we did not do as good a job converting GAAP to revenues due to soft revenue rates on our underwritten business, particularly in the US and Europe and which occurred in fourth quarter. Having said that, it is encouraging that our organic revenue growth rate at constant currency in 2014 was actually 6% versus the reported 3%.

I am very proud of our team's performance in driving $1.8 billion in GAAP online in 2014, a growth of 18% versus 2013. We are truly becoming a leading multi-channel player.

We controlled SG&A well and improved adjusted operating margins by 24 basis points. We grew adjusted EPS nearly 12%, but acknowledge that 40% of this growth came from an unusually low tax rate 2014.

Operating free cash flow in 2014 was 119% of adjusted net earnings and RONA would've been 16.3% for the year, 100 bps improvement in 2014 excluding the Japan impairment. You can see we did a good job controlling our capital expenditures. Overall good marks on our scorecard in many areas, except for GAAP-to-revenue conversion.

Going into 2015, my focus and my team's focus has been cascading down to the organization as follows. Our first priority is to improve our revenue rate with a laser focus on improving the performance of our underwritten business, particularly in the US and Europe, and reducing inconsistency and volatility.

Our second priority is to spur straight commission growth across all geographies. Both of these priorities will be achieved through disciplined execution, monitoring performance for operational metrics, increasing the awareness of improving margins and improving our sales force productivity.

Third, we will systematically increase our penetration in transportation through targeted initiatives and building organizational capabilities and sector expertise. Fourth, we will optimize a go-to-market strategy for EquipmentOne using the Ritchie sales force in an initiative we are calling Better Together. Jim and his team have successfully launched pilots in a few different markets in the US.

And fifth, we're putting in place a program to target acquisitions Canada in selected geographies and priority sectors. In addition to this, Jim and I are working on developing a strategic roadmap to modernize our systems and enhance our digital capabilities.

I am excited about 2015. And as an organization we are clearly pivoted from restructuring strategy development, et cetera to a keen focus on disciplined execution. We are already seeing traction. Based on the seven auctions held this quarter so far, we are off to a great start. I'm especially pleased with the record revenues at Edmonton and Orlando, and generally improving at-risk rates in our auto auctions.

I plan to announce our new president of the US in the next 2 to 4 weeks. And I am gaining momentum with our search for a CFO.

Before we open the line to questions, let me address a question that I receive consistently about how our employees are responding to the significant level of change that is occurring in the Company. The culture and morale at Ritchie Brothers continues to be very strong and the vast majority of our employees welcoming change.

In fact, most are eager to suggest new approaches to challenges we have faced as a Company. And all understand that their feedback is not only welcomed, but encouraged. It is a different environment of increased accountability, but it is what I believe many teams and departments have a thirst for.

Around the world in every role we have at the Company, our employees know that their contributions make a meaningful impact in our business and to our performance, and they know they are valued team members. Passion for our business, pride in our Company and a customer-first orientation are still the core focus of our culture, and we encourage it and celebrate it throughout the organization.

I saw this firsthand in Las Vegas. I saw it and Orlando, and every auction I've been too. Whether it's In Pittsburgh where our EquipmentOne team is resident or in Vancouver headquarters, our teams feel reinvigorated and reenergized. Our entire organization is enthused about the future and looking forward to evolving Ritchie into making it the world's best asset management and disposition company.

And with that, I would like to open the line to questions. As a reminder Rob and I are on the call for questions, as well as Jim Barr, Group President; Todd Wohler, Chief Human Resources Officer; and Randy Wall, President of Canada. Operator?

Is the operator there to open a line for questions? Operator?

That's odd. Jamie's just calling.

Our apologies to the audience. We are trying to see what technical difficulties the operator may be having. Operator, can you come on the line, please?

(Caller Instructions)

Our apologies for the delay. Operator, are you ready to announce the questions, please?

Yes.

(Operator Instructions)

Cherilyn Radbourne, TD Securities.

Thanks very much and good morning.

Good morning. Thanks for your patience.

Our apologies. So sorry about whatever glitch that occurred.

The first question I had was on your US auction revenue. That was down year over year for the first three quarters of the year, but appears to have posted some pretty good growth in Q4. So I am just curious how much of that was GAP growth and how much was good performance of the underwritten business?

Hi, Cherilyn. It is Rob. And I would say it's mainly GAP growth. We were, as we saw in our remarks, the revenue rate did fall in quarter four and the US makes up half of our marketplace, or half of the business. And so really it was geared to the GAP growth. And obviously that's why we have a focus going forward on improving that at-risk performance, and also trying to mitigate some of the volatility in that rate as well.

I think it was mentioned at your January Investor Day, that you had a couple of good fleet dispersals in the fourth quarter. Were those in the US market?

I cannot recall the exact comment that we made in the January meetings, but I suspect one of them was in Canada for sure, and the other one probably was in the United States.

Okay. And then last one for me. Just to be clear on what sort of impact on income you're expecting from foreign exchange in 2015, can you give us a bit of a range there on a net profit basis?

You mean the impact on --

The net impact on either EBIT or net income, whatever you prefer.

Right. And so in our remarks we said in the Evergreen model that we had a -- hang on one second, [I'll pull it out]. In the Evergreen model we had, let's say net earnings growth in the high single digits and potentially it would -- foreign exchange would draw that down to low single digits.

Okay, thank you. That's all my questions. I'll get back in queue.

Cherilyn, one thing to remember on the net earnings is the tax rate. So when you look at the operational health of the business, really -- so we had said, if it's constant currency on an organic basis, we are looking at lower double digits, but that would come down to high single digits as an impact of the FX.

Sara O'Brien, RBC.

Hi, Good morning. Ravi, can you help us reconcile the focused improve the revenue rate, when in a time when you're looking to gain market share so grow GAP at the same time? I'm wondering if there's isn't a bit of a trade-off expectation there, that you get a little more aggressive on the underwritten portion of the business as you did in Q4, and would that not perhaps continue some pressure on that revenue rate?

Sara, that's a great question. To me, it is -- and it's how we manage the execution. This is -- the crude analogy is that we need to walk and chew gum at the same time.

So to me, taking calculated risks on smart deals is a good thing, and we are not going to take the foot off the accelerator on doing at-risk deals on underwritten. That's a competitive advantage, that's using the strength of our balance sheet.

And as we have shown in Canada, Canada has a very predictable good rate. Occasionally yes, they may have some deals that may go array but in general they do extremely well.

The US has been inconsistent. We have done a lot of analysis on this. Part of the issue is actually smaller deals rather than bigger deals. And this is where we have looked at sort of the internal control mechanisms and the expertise.

One of the things we are looking at, we have great expertise with our senior evaluation analysts who have very strong appraisal accuracy. And we are now going to make sure that on the smaller deals, that they are involved, and in the whole process more than that and are part of the approval process.

So I think the smaller deals represent a good area for us, and this is where there is also an important thing on sales training, as we are getting a lot of new salespeople into the fold, continuing to train them about the whole methodology and transferring best practices is going to be quite important. So the net message here is that we just need to get -- we do a tremendous job. The fact that we've done $10 billion of at-risk business over 11 years, and every year we've been profitable.

Yes, there are a few deals that we lose on an individual basis, but the majority we do pretty well. So I think it is just getting that balance right, and not doing -- if you walk -- having the ability to walk away from things that at the outset look like they will be unprofitable, unless it has a real magnetic effect of filling the auction with good straight commission business.

Okay. Just for my understanding, the smaller deals, is that mainly a US phenomenon versus Canada, that the at-risk business would be more small deals versus larger lots?

I think -- no. Everyone has small deals, but it is just we do much better in Canada on small deals and in parts of Europe. In Southern Europe we do quite well, but not as much in Northern Europe.

So we have now really done a very detailed analysis on the performance by size of deal, by geography. And we are using these analytics to help cascade and with the organization to get this focus.

So it is not that small deals are wrong. In fact we do -- that's the bread-and-butter of our business, because those deals emanate from our end users, mid-market end users. So it is just getting a little bit more proficient with it.

Okay. And then I just trying to reconcile -- recognizing it's early days in 2015, but the outlook for potentially flat GAP in a current FX environment where you've just seen the Edmonton auction up 60% year on year, it's 30% in US dollars and the Orlando auction up, just wondering is there's something -- is it a conservative guidance, or is this something that you expect will kind of worsen, either on pricing or something else throughout the year?

Yes, great question, Sara. And I think a really important thing to remember is that quarter one 2014 was flat, compared to quarter one 2013. It was a very challenging environment this time last year.

And then we had growth in each one of the following three quarters in 2014. And so to see growth on 2015 versus 2014, is really simply a continuation of where we ended the year.

Sara, one other little bit of color on that. Look, our guidance is usually the best we can at that particular time based on what we know. And our history has been a little bit of over-promise/under-deliver. This team really wants to over-deliver on our promises. So let me leave it at that.

Okay. Maybe for understanding, what FX rate are you assuming? Is it CAD1.25 or is it another range for the Canadian dollar?

We have rates both for Canadian dollar, euro, Australian dollar and those are really the main ones that affect our lines of business. And we are really using the current rates, and so the rates that are in effect in the last week or so to anticipate the impact on the business in 2015. And so as I say, if those rate persist than that is the effect and it is a challenge forecasting them, obviously.

Clearly, Sara, as you know, every global company is facing this issue today with foreign exchange rates. That is why we are more laser focused on the organic health of the Company and what is the organic health of the operations, and hence are trying to separate the FX from that. And what we are very laser focused on is, how do we drive the organic growth because we cannot control the FX.

For enough thank you.

Thinks Sara.

Nate Brochmann, William Blair.

Good morning, everyone.

Good morning, Nate.

Hey, wanted to talk a little bit more in Sara's question and see if I can probe that a little bit further, in terms of thinking about the top-line growth. Clearly we still, or it seems that we still have some momentum in the underlying operated environment, both in terms of pricing and construction activity and whatnot.

And in addition to that, I mean clearly I understand this is a, quote unquote, transition year. But I would assume that incrementally, as we get the sales force training up and going, and we have some clear momentum in the sales force coming out of a lot of your events, it seems like. I would think that there would be a little bit of an incremental extra kind of push or extra kind of juice, to kind of go along with those kind of more operating tailwind's.

Again, I get the sense of being conservative, and that is absolutely the right approach after a lot of years of not being able to predict this business. But just wonder if you could explore maybe both, the operating environment, as well as some of the initiatives, whether those get delayed into the following years as they get put in place? Or whether there might be some benefit later this year that we are not really anticipating?

Nate, good morning again, and I'll say three factors. Number one is Canada, and because Canada has been on a huge growth trajectory, five years of growth, terrific work. It is difficult at this stage still, to really predict where this oil and gas prices will have an effect.

We are very encouraged, obviously, with the Edmonton auction, which just occurred. We do not know, is the prognosis that the rest of the year? Do not know, it is tough to predict.

Canada, clearly, and how Canada will do, is a factor for us as we thought about the year and our guidance. And frankly, as you know, the Edmonton auction just finished last night. So we're encouraged also by the pricing trend, and the strength that we saw in sectors outside of oil and gas shows the strength of brand.

Number two is getting good improvements on our underwritten business. So we are seeing encouraging signs, but it has to become systematic. And clearly our performance in fourth quarter in that regard, especially in the US and in Europe was disappointing.

But I think the teams are aligned. They understand this. So we are going to systematically drive that. It's the pace at which we can get the improvement, that's what we need to see.

The third is just making sure we have got to get a US President in place. I'm, as I mentioned, we think that is evolving soon. And then a lot of focus is on driving US growth. And that is a priority.

So it's how all of these come together. And we have given you sort of our best view at the stage. Some of the signs we're seeing are encouraging, and so I will leave it at that.

Okay. And just one quick housekeeping thing on that. Could you remind us, and I know it is very difficult to say with precision, because a lot of the equipment goes over different lines, but approximately how much of your business or revenue is tied to oil and gas, in kind of an end market percentage?

Nate, in a very direct basis, if you just say specific oil and gas equipment it is less than 3%. Now having said that, when you look at Alberta, the oil sands -- oil and gas affects the whole sort of industry (multiple speakers) [in a big way]. So that's -- so we have to keep that in mind. But again, this auction was encouraging that our brand stretches beyond that, so.

Okay. And then a second different question. But during the Analyst Day, you had talked about needing some technology upgrades, and I think a lot of that was more in terms of internal systems, and wanting to do that, in order to get a little bit better focus on analytics, to be able to manage the business.

Could you talk about what you feel is needed there? And then ultimately what you hope to accomplish in terms of those analytics, and looking at your business a different way, and what the timeframe is to get those in place?

Jim, why don't you --

Sure, thanks Nate. Appreciate the question. I will amplify mostly what we said at Investor Day. We are really looking at two things. One is efficiency and how we -- how our systems actually handle our core business and keep our SG&A where it is, eliminate the manual processes of that system.

Sort of secondarily we are looking at creating more insight, becoming a more digital company. Those are the big things we are doing. And we continue to modernize our legacy system to serve customers better, again to lower that SG&A and get rid of many of the manual processes.

We also need our systems to support this new strategy and growth into sectors, geos and channels that will require them to be architects in a way that gives us greater agility, really, and really serves our business needs, and allows us to gain better customer insights in order to serve them better. And as we mentioned, it's a multiyear modernization path.

Robbie and I are spending quite a bit of time on this right now. And we're remapping our overall roadmap. And we will continue to invests primarily -- our CapEx primarily into the IT area to make sure that it supports our business.

So that (multiple speakers) there. Nate, sorry. Go ahead.

I was going to say, so it does not sound like this is going to be a one lump sum initiative, and we're going to dump millions at it all at once, because it's maybe even failing today and needs to be upgraded immediately, or something. This is going to be a multiyear process, and kind of take chunks as we go.

Along the way we will get some of those better analytics and better insights. So we should see some of that probably profit improvement over time, but not either a big upfront cost all at once with a big, then, savings ramp improvement immediately after that?

Yes, I think that is a good characterization, Nate. I think this is really about, it is definitely a long-term step-by-step chunk-by-chunk, rather than one of those huge things that could blow up. We're being very deliberate.

In fact, Jim and I -- we had started this initiative with what was called a systems transformation a couple of years ago, which resulted in salesforce.com, which is a good thing. We like the platform. It is also created sales force automation tools for us. And we are looking at that as a unifying platform.

But one of the things Jim and I are trying to look at is, given our strategy, what is the roadmap? How can you get there efficiently and in a time-sensitive manner, so that -- there are some very practical -- because these are legacy systems, and it is not like these are systems that will break any day, but it is more they are inflexible.

So it is very much a yellow [orion] mentality that has driven it, whether it's our equipment descriptions and so on, when you look into transportation making those changes or in agricultural, how you describe equipment. All of that is very labor intensive and takes a long time.

So that is what we want to do, is systems that support the strategy. So I think that is really -- at the end of the day it is less about -- we will gets some SG&A with the manual interventions. But the bigger thing is to support the revenue growth as we go forward.

Hey, great. Thanks for all the additional color. I appreciate that.

Thanks, Nate.

Ben Cherniavsky, Raymond James.

Good morning.

Hi, Ben.

I am trying to think about the contacts you're providing to the impact on foreign exchange and how the currency conversion impacts your GAP, and sort of mutes the number a little bit and mutes the growth. In the past, it's not the first time that Ritchie's seeing fluctuations in currency.

In the past, from what I recall, we were told that yes, it did impact your translation, but there is another factor to think about, and that is the strong US dollar has a positive benefit on bidding activity in foreign markets, particularly in Canada. Like in the US, it pulls buyers up from the US to bid in Canadian dollars at auctions like Edmonton.

So can you help us think about how that -- why that would not be to some degree some kind of offsetting tailwind against the immediate headwind of the currency translation? And if you saw any of that in the Edmonton auction?

We will start with Rob, and then Randy can provide some color on what we saw in terms of Americans buying at the auction.

And, Ben, as usual your memory is 100% accurate. And yes, that should created tailwind. It is, obviously, a little bit challenging to measure that, other than the participation of, in this case Americans in the Canadian marketplace or in Europe.

For sure we saw the reverse, where the US dollar was weaker and the euro continued to be strong up until, really until into 2014, same with the Canadian dollar. And there was certainly -- you could see the participation of the Europeans and Canadians in the US marketplace, because that is their natural trading mentality, whereas in the US it is maybe a little bit less common for American end users to participate in foreign marketplaces.

From what I understand from the results that came through last night from Edmonton, I believe our participation by US buyers in Edmonton, was at the high end of the range that we have seen recently for Americans in Edmonton. Randy did you have any other insights?

Yes. Hello Ben. There's a couple of things. We surmised that we might see even stronger American presence at this auction in the last couple of days than we actually did.

We did additional marketing to try to encourage as much of that, but what we have seen is, the range of US participation in Edmonton typically is between 8% and 12% of the auction volume is acquired by American buyers, and we were at the top end of that range, but still within that normal range and it did not really -- it was not beyond norms.

I think there is a couple of factors that perhaps can help to explain that. There is robust activity in other sectors over and above the oil sector. We see some -- the equipment spec may be a little bit unique on some of the assets that we sell in Alberta are preferred in the oil sector and less so outside, although there is a very large degree of general construction.

We see -- we saw increased participation from other parts of Canada, which was quite interesting. In Eastern Canada, for example, acquired a greater share of the auction then they have averaged over the last year.

Another important factor, I think, when it comes to currency, is replacement cost of new equipment. And for Canadians new equipment prices are heavily influenced by foreign exchange. It is often priced in US, or it's built in the US. So replacement costs for new to Canadian buyers has jumped significantly.

So that helps to turn people to the used market for late model. So that may also have been a factor helping to support the stability of the pricing level we saw here this week.

Yes. I guess I still struggle, going back to an earlier question, I do not remember if Cherilyn or Sara asked it, but just about where you are coming up with this sort of flat GAP for the year. And you've come off some momentum in the fourth quarter, you've got some momentum in these early auctions in the first.

I understand you want to exceed expectations, but you cannot set expectations so low and then beat them that you expect to get credit for that, because in the meantime you're going to face some scrutiny over low targets. So I am struggling to reconcile that.

You've got a lot of volatility in the energy markets, which should free up equipment for you. We have seen in Houston and Edmonton. You've all these initiatives underway. EquipmentOne had some momentum in the fourth quarter. So how does this all shake out?

So I think, Ben, there it is absolutely no intention here to -- we are giving you the past views based on the plan. And these plans were developed based on our 2014 performance and as we looked into the full years.

So it is not trying to say, hey let lowball it so that we can do better and get credit. I think we want to give our shareholders the best view based on where we are.

Having said that, look, I think we have focused more on what we can control, which is how we are going to grow the base business on an organic business. And when you think about that, what we have said, really, is that both GAP and revenues, we talked about it in terms of mid-single digits.

So who knows how we can predict what is going to happen with exchange rates throughout the year? And that is the one -- that's our keen focus. And you should also recognize, given that we have said both GAP and revenue, whereas in the Evergreen model we had said that the revenue would actually be lower than GAP growth, and our concern there was the underwritten contracts and getting into new sectors, we've actually signalled that it would be at the same sort of levels, which is saying we are committed to making improvements in the at-risk rate.

So to me, I would rather focus on our organic growth rates and where our focus is, and delivering that, because the foreign exchange is a little bit out of our control. And we were just telling you the potential impact if currency rates persist.

This is a new team. We've just put in a new strategy. We are getting the organization stabilized. It's a transition year. So a lot of it depends how we can get momentum on the execution. Based on that, this is our best guess, and if things improve we will clearly be communicating that.

Okay thanks very much.

Ross Gilardi, Bank of America.

Good morning can you hear me okay?

Yes, thank you.

Thanks. Ravi, I'm just wondering if you could talk a little bit more about Orlando and what you saw from a pricing perspective? I think you mentioned that pricing was pretty good.

I wasn't clear if you are talking about your auction revenue rate, or if you were talking about used equipment price. I mean, anecdotally we are hearing that pricing was down a little bit month on month in Orlando, whereas it is usually up pretty nicely. So can you speak to that?

Is that accurate? And if it is, why do you think used equipment prices are softening up right now?

Let me take a shot at it, and Rob can also add some color. Number one, when we say record revenue performance, it was really our underwritten portfolio performing well. And that had a substantial impact, compared to last year. And that was the driver, because if we focus on that and some particular packages performed extremely well for us, which we were very pleased with.

Now, it's an interesting thing as we are dissecting the Orlando auction, the mix clearly was quite different from that of last year. We had a lot more cranes last year, we had less this year. This year we had a lot more transportation assets than last year, and transportation on a GAP per lot is much lower than construction per lot.

So when you look at those variables, that certainly has an impact. And in Orlando in particular, what we saw is with the type of equipment we had, we had [some] equipment ages in Orlando were a little older than last year, and that is not necessarily a trend at all, but it just what we were able to get. It's also because we were being a bit more selective about the types of packages, especially dealer packages that we -- some of which we walked away, because we felt they would not be necessarily profitable for us on an underwritten basis.

So there is a whole combination of stuff. And for me it is tough to deduce right now whether there is a real sense of softening.

On the other hand, when you look at Edmonton we actually thought we could say there was a pretty solid pricing in Edmonton and newer equipment and across the board. So, I think it is a bit early to tell, to come to any of sort of reasonable conclusion whether pricing is softening. Rob, would you have any other color to add to that?

Well, maybe just a little bit more specifics on the mix of the equipment. And there was a lot of commentary prior to the auction about the growth in the number of items, the number of lots in the auction. And therefore extrapolated what the expected GAP was going to be, which is always a tenuous thing to do.

Part of that growth in the lots for sure was small items. And so what we sell in our timed auction lot system, that had a higher growth rate than the large items, if you will.

And also, I think it was in Sara's commentary after the auction, after she came and visited us there, that the feedback that she got from people there at the auction was that there was a lot of -- sorry, I'll say it in a different way. There was not as many shiny -- bright, shiny items in the auction this year compared to last year. And there was fewer kind of one- or two-year-old pieces.

I think that goes to exactly what Ravi said, is that those one- to two-year, or even brand-new items, normally come into the auction in some form of underwritten package. And we were a little bit more selective this year in pursuing those packages, which has an impact on that age in that mix.

Okay, thanks very much. And then just, Ravi I wanted to ask you this more big picture. More of Ritchie's business is clearly going online and you've had a lot of success there, yet you are pushing for the auction revenue rate to go up over the next several years.

Don't you have just a normal underlying -- some underlying erosion in auction revenue rate over time, as just the overall business model moves more to an electronic [online]? How do you offset that?

I am sorry, because the online stuff should not have an impact on the rates, because it's a multi channel and the more bidders you have, typically that drives up the competition. But Rob, do you have more?

I guess, Russ, I'm not sure if you're thinking about the different two channels, the unreserved auction and EquipmentOne, but on the unreserved auction the majority of the revenue comes from the consignor. And the participation, the online participation, is obviously from the buyer.

Now there is not any distinction between the fees that we receive from buyers, whether they bid online or they are on-site. And so yes, as there is more bidders and buyers online it does not actually change the revenue model.

Whereas on EquipmentOne, the majority of the -- obviously, it's all online. And the majority of the revenue does come from the buyers in the form of a buyers fee.

The last comment I would like to make there, or in terms of EquipmentOne, the overall -- the margins we'll make on EquipmentOne are very similar to the auction business. So it is really not that you are trading one for another.

Did that answer your question, Ross?

Yes, okay. That's great, guys. Maybe I'll follow-up afterwards, but thank you for that.

Yuri Lynk, Canaccord Genuity.

Thanks for fitting me in. Can we talk about the competitive dynamics and how they might be impacting the auction revenue rate? I mean, it used to be that at this point in the cycle when late-model used equipment supply is improving, that your at-risk business would decline into the mid to low 20%, and instead we are stubbornly high and actually up this year. So you can you just explain the puts and takes behind that and where we can expect that number going forward?

Yes. Thanks, Yuri. Yes, actually I do not -- I am not sure that your thesis is 100% correct, because when you go back and look in 2010 -- 2009/2010 for sure, our at-risk volume fell against historic averages, it was kind of in the low 20% range. And that was a point in time where equipment was very tight.

Then if you go back a little bit further, the last -- the good old days, if you will, say pre-2008 -- well, including 2008, our volume of at-risk business was actually relatively high, and also there was significant volatility in the performance of that at-risk business, even though the market was very frothy, there was tremendous volumes of transactions in used equipment at that time.

So it's not -- I do not think it would be appropriate to say that now that the market has freed up, and there is more transactions, there'll be less at-risk business. And also that is why we are so focused on our at-risk performance, is because there is the risk in that marketplace, or in that market environment to pursue those deals and not be strategic enough about it.

There's really one other commentary. It's really the -- our core is, we have got to think about it as two really -- they're not mutually exclusive, but two different types of businesses: a straight commission business, which is our bread and butter, and then an at-risk business. The at-risk business really, for us, has many strategic uses.

There's certain owners that may want to do a full dispersal. And they may be a lot more comfortable with having guaranteed performance. There may be people who are first-time into the auction, into a non reserved auction, and this is a way for us to bring them in, to give them reassurance.

On the other hand, sometimes we pursue things as a competitive initiative. And what we are always trying to do is determine each package, because we do hundreds of at-risk deals, and they are varying sizes and varying geographies. Then to really say the underlying thing is, can it also help bring in other packages?

Sometimes that is true, sometimes that is not. We handle those on our own merits, but I think what we now know is just with improving execution and how we do some of our deals, that is the laser focus on improving the performance. Having said that, we're not going to decelerate on our at-risk business, because the competitive advantage, in something that I think we are very proficient.

Okay, that makes sense. Just capital allocation. I mean, you are probably going to have around, after you pay the dividend, $60 million in free cash flow this year. The types of acquisitions that you're looking at, can you give us some flavor of the size or the number? And if they're more of the physical auction site, or you're looking more at boosting your virtual presence?

So, I think at this point, obviously, we cannot name targets, but to give you a sense for -- they are really trying to drive strategy. And our preference, because you can never time acquisitions and say, because of opportunistically something comes up and it is the right thing we will go for it.

But strategically our number one priority would be more in our core business in terms of auctions, and with a particular focus in areas. So it could be we may have a geography, which is not as strong. So let us say a particular geography in the Eastern United States.

So, if there is a local player that has strong reputation, and even if it's in construction, but within construction say they're good at certain aspects or certain niches and have a good brand, that may be an interesting prospect. And for us it's also talent acquisition, because we are really hungry for bringing more talent as we grow. So that might be an instance.

Or things that give us sector expertise in, say, transportation or in agriculture. As I've mentioned, in one of the strengths of Canada is when we bought Kevin Tink's company, All Peace, which is specialized in agricultural. Not only did we get that as a beachhead, but we got Kevin who later on rose to become the President of Canada, and has been a big factor with his team to drive the growth there.

So those are the sorts of things we're looking for, because as you know, we do not have much really a foothold in agriculture in the United States. So these are the kinds that we are looking at. But having said that, we are also -- Jim is looking at what other types of things that might be in new channels and online place as well. But our first priority would be the core, unless something opportunistically arises.

Okay. I guess the size of these would be rather small and we would be expecting you to roll up a number of them over time? Is that how we think about it, or are there bigger players out there?

No, I think -- as I mentioned, they're tuck-ins and bolt-ons, and they are smaller and we want to try to do a roll-up, but very deliberate, make sure the integration goes well. We have not done this much in the past.

So we need to really be deliberate and cautious. And by the way, the guidance we provided was really organic and did not include any sort of acquisitions in there, so.

Got it, okay. Thanks very much.

Scott Schneeberger, Oppenheimer.

Thanks for squeezing me in. Just a couple, and I'll make them real quick. Curious on commentary and update on Tier 4, and then I will ask my follow-up after. Thanks.

Go-ahead, Rob. Do you want to comment on Tier 4, or Randy?

I will just jump in and then Randy can jump in as well. And I guess the introduction of final Tier 4 has been relatively recent, and the comments that we're hearing back from our customers are that, it is not as scary a concept as it might have been a year or two year ago, because they can actually understand the impacts on their business of the Tier 4 equipment, and they know the pricing of the equipment.

Also the, I think now-near universal ability from each OEM to de-tier the equipment, and so -- which presumably helps the residual value, or the resale value in year three, year four, year five to be able to attract a greater international marketplace. So I think that has helped with the acceptance of Tier 4. Randy do you have any comment?

The only thing I would add to that is that there is still is a perception and a preference on many used equipment people, that they prefer the known quantity, and a Tier 3 item is -- can be in demand on the used market. So it is helping those asset values.

Thanks, guys. I appreciate it. And lastly, Ravi, as for you, with regard to territory managers, we obviously see what the growth is. Just any commentary on productivity? I know it's short term, but thoughts there. And then incentive programs, any tinkering there, or you comfortable with the status? Thanks.

Thanks, Scott. So first sales force, our number of sales people did increased in 2014, but our sales force productivity is measured by GAP per revenue producer did increase a little bit in 2014, 2.5%, so was modest. I think going forward versus sort of the mantra of the past that every year we just need to keep adding salespeople and that is what is going to drive, we are going to be a little bit more deliberate about it.

Clearly we're going to allow for replacements of steno workers, but we are not going on a spree to say let's just keep adding salespeople, because we think we have a pretty good complement in the sales force of over 300 people. Now I think for us the thing is to train them, develop them and really get them to be savvy about our underwritten business et cetera.

So the one place that the sales force producer keeps improving significantly is Canada, so no surprise. So we need to get those gains in other countries.

If we do add salespeople, to me it has to be more to build expertise in other sectors. So rather than going back and hiring the construction-oriented TMs, it would be more transportation-based TMs for transportation expertise or ag TMs, which already started doing.

For instance in the US we now have about a team of six ag TMs. So in Europe we just hired a specialist ag person. So I think that is sort of the view that we are taking.

Then your next question on compensation. At this point, as I said in the Investor Day, we had changed the sales force compensation to be based on revenues a couple of years ago. In the main that seems okay, though I think we may want to -- we're going to studying it and tweak it and make sure that it's aligned with the strategy.

But for this year we are going with where we are we, though we will probably look at some tweaks. The one change is actually at the regional sales manager level, where we -- part of the criterion was that how did they hire TMs, and that is going to be no longer a criterion. It's really going to be based on revenues and profits. But sales force in general, good focus on the revenue side.

That's great. Thanks very much.

We appreciate everyone's patience, and we apologize for that technical glitch that occurred. I think as we just wrapping up the call, I think we are really pivoted to execution.

I know there's been questions about whether this guidance was conservative. Look, we give the best view. One of the big question marks for us really is Canada, and at that the time we did this with the oil and gas prices, we do not know how they will behave. So that is really the biggest question mark.

Clearly we have got five years of track record. It's got great team in Canada. So we will have to see how that progresses through the year. The Edmonton auction was clearly a positive. So with that, thank you very much for being on the call.

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