RB Global Inc (RBA) 2015 Q4 法說會逐字稿

Good morning, my name is Lindsey, and I will be your conference operator today. At this time I would like to welcome everyone to the Ritchie Bros. Auctioneers fourth quarter and FY15 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions)

Thank you, Ms. Jamie Kokoska, Director of IR. You may begin your conference.

Thank you, Lindsey. Good morning, everyone and thanks for joining us on our fiscal fourth quarter and full year 2015 results conference call. Discussing Ritchie Bros.' performance today are Ravi Saligram, Chief Executive Officer; Sharon Driscoll, Chief Financial Officer. Joining us for the Q&A session following the formal remarks will be Jim Barr, Group President; Randy Wall, President, Canada; Terry Dolan, President of US and Latin America; and Doug Olive, SVP of Pricing and Valuations.

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 are considered forward-looking 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 securities filings available on the SEC and SEDAR websites, as well as our investor relations website at investor.richiebros.com.

Our definition of first auction proceeds may differ from those used by other participants in our industry. It is not a measure of financial performance, liquidity or revenue and is not presented in our statement of operations.

The fourth quarter 2015 results were made available yesterday after market close. We encourage you to review our earnings release on Form 10K annual report that includes our MD&A and financial statements which are available on our website as well as EDGAR and SEDAR. On this call we will discuss certain non-GAAP financial measures. For the identification of non-GAAP financial measures as well as the most directly comparable GAAP financial measures and a reconciliation between the two, please see our earnings release and our annual report on Form 10K which are available on our website.

Presentation slides accompany our commentary today. These slides can be viewed through the live or recorded webcast or downloaded from our website. All figures discussed on today's call are in US dollars unless otherwise indicated. While we may use million or billion dollar figures for brevity in today's discussion, all percent changes have been calculated using full and rounded figures. And now I will turn the call over to Ravi Saligram, Chief Executive Officer.

Thank you, Jamie, and thanks to everyone for joining us on our earnings call today. We achieved a lot during the fourth quarter of 2015 to help propel further growth. This included the closing of our acquisition, over 75% stake in Xcira, the world leading online auction technology provider. And much of the work that went into our recently announced acquisition of Mascus, one the world's leading used equipment listing services. We also held many record-breaking auctions during the fourth quarter, including two back-to-back to record-breaking sales in Edmonton.

Our operating performance during the fourth quarter reflected some of the headwinds we expected which we messaged you on our third quarter call. Foreign exchange translation continued to have a negative effect on our GAAP and revenue lines as a greater proportion of our business was conducted outside the United States. As well, as we expected, the fourth quarter was a particularly difficult GAP [calm], especially for the US. As the [GAP] growth achieved in the first quarter 2014 was not reflective of our current strategy of primarily pursuing GAP that is profitable. As an illustration, our teams decided to pass on at least $50 million of deals of oil and gas specific assets because we believed based on our valuations we would incur significant losses. These deals were picked up by some competitors who seem to be interested in just bolstering GAP.

Equipment pricing also experienced some softening in the fourth quarter this year relative to used equipment values in the fourth quarter last year, when pricing was near its peak. Much of this was already discussed when we released our preliminary GAP results for 2015 at the end of December.

As you learned then, on a reported basis GAP declined 9% while on an organic basis using the same foreign exchange rates as the year ago quarter, GAP declined 1%. Revenue for the fourth quarter declined 2% due entirely to foreign exchange translation and lower GAP. As our revenue rate for the quarter improved 77 basis points to 11.93%.

On an organic basis revenue grew 6% compared to fourth quarter last year as a result of this revenue rate improvement. While adjusted operating income declined 10% on a reported basis, much of this was caused by foreign exchange. On an organic basis, adjusted operating income grew 35%.

Including all revenue and expense items during the quarter, diluted EPS increased 48% from the year ago quarter. This figure includes revenue from the sale of excess land adjacent to our Edmonton auction site, as well as some tax loss utilization we were able to capture in the fourth quarter due to tax planning initiatives. Excluding these two items, on an adjusted basis, diluted EPS declined 12% due mostly to foreign exchange and lower revenue, but also some year-end expenses Sharon will discuss further with you later.

In addition to our fourth quarter being a relatively difficult calm with fourth quarter last year, our auction calendar was much lighter. There were four fewer auctions in the fourth quarter across our business, but more importantly, 11 fewer in the US where foreign exchange does not mute our GAP or revenue growth. 10 of the 11 sales that occurred in the US during the fourth quarter last year but did not recur this year were one time off-site auctions related to opportunistic dispersals rather than from a regularly scheduled auction. These 10 pure off-site sales generated $55 million of GAP that did not recur this year.

Just as importantly, the majority of new off-site auctions that occurred in the fourth quarter this year, that is 2015, but did not occur last year were held in regions outside the US. This means that both GAP and revenue contributions from these new sales were muted by foreign exchange translation unlike the US offside auctions last year.

As you've seen in our December press release, average GAP per lot declined 9.4% in fourth quarter 2015 compared to Q4 last year. As for the past quarters, most of this decline is due to foreign exchange impact but also lower used equipment pricing for certain assets. During the fourth quarter we sold a similar proportion of small value assets as we did in the year ago quarter, so mix was not a factor in the average GAP per lot decline.

Our strategies and initiatives to pursue profitable GAP continued to show results with our revenue rate in the fourth quarter. At 11.93% the rate was at the highest end of our guided 11% to 12% revenue rate range. However, the strength of our revenue rate during the fourth quarter was not enough to offset both lower GAP and foreign exchange translation impact. Revenue for the fourth quarter was $135.5 million, a slight decline from $138.5 million in the same quarter last year.

Improvement in our overall revenue rate was an aggregate, driven primarily by improvement in the performance of our underwritten business. While our underwritten rate improved versus last year in Q4, the improvement was not as strong as in previous quarters. There are two key reasons.

First, underwritten packages that were sold in Panama and Mexico did extremely poorly due to the dramatic declines in pricing and lackluster demand. We were negatively affected by mostly a local buyer base and not being able to attract enough international buyers outside of Mexico and Panama. We are reevaluating the use of underwritten business in Mexico and Panama and will take a fairly cautious approach on at-risk deals in these regions in the near term.

Second, the market in general turned on us in December, especially in the US and we experienced significant pricing volatility that negatively affected us on many underwritten packages in the US West and several ag packages in the US Midwest.

A key factor in pricing softness in ag assets was that section 179 of the IRS tax code which allowed for immediate deductions of asset acquisition up to $500,000 expired on December 31, 2014. Although efforts were being made to bring this legislation back, farmers, both careful and cautious planners, did not expect that the bill would pass which had a significant impact effect on the buying patterns of the equipment. Ironically, section 179 was reinstated in late December 2015. At least this bodes well for us in 2016.

Strong underwritten performance in Australia, Canada and Asia helped to offset some of the underwritten performance in Mexico, Panama and the US. Our straight commission rate during the quarter also improved slightly in the fourth quarter of 2015, relative to 2014. It's important to point out that as we add more revenue streams to our business that are not associated with GAP reduction, you should expect to see them supplement our revenue rate.

Revenue contributions from Richie Bros. Financial Services and a partial quarter contribution from Xcira helped to prop up our revenue rate during the quarter, providing 33 basis points over our 77 basis points of revenue improvement relative to Q4 last year. Likewise, you should expect revenue from Mascus to supplement the rate in the future quarters. Conversely, as we grow our penetration in both the transportation and ag markets, the average commission rate could fluctuate, given that commission rates in both these sectors have typically lower than what occur in the construction industry.

With all this considered, we continue to believe that an annual revenue rate of between 11% and 12% is appropriate for forecasting and modeling purposes over the long term. But we will proactively aim to deliver results towards the higher end of the range or better.

Pricing of used equipment is a key issue. Yes, used equipment pricing was much softer than in Q4 last year, when equipment pricing was near its peak. The results were somewhat softer than during the third quarter of this year. But importantly, pricing trends of equipment during the fourth quarter varied dramatically based on the asset category, sector use and geography which is illustrated on the slide.

Overall, we believe given the asset mix of what we sold during the third quarter, we saw low single-digit percent net pricing declines in the fourth quarter relative to the third quarter which would have impacted GAP and revenues.

Foreign exchange was the primary driver of the revenue decline during the fourth quarter relative to the fourth quarter last year. While GAP volume declined 1% on an organic basis, the revenue rate improvement drove a 6% increase in organic constant currency basis. Foreign exchange translation of local currencies into US dollars reduced revenue by 8%, leading to the 2% decline.

More revenue was generated outside of the US during the fourth quarter which led to an outsized FX impact relative to prior quarters. In fact, 54% of revenue was generated outside the US, up from 46% in the first nine months of 2015.

Most of the organic revenue growth actually occurred in Canada where we achieved a 34% increase of 14% on reported FX impacted basis. Our US operations which helped [fuel options] in the fourth quarter this year compared to last year saw revenue decline 8%, and that includes LatAm.

As I mentioned at the start of our call, we achieved some great auction results during the fourth quarter which I illustrated on the slide. For example, at our November 11 and 12 auction in Houston we sold more than $50 million of assets. Our Edmonton site continued to be a star performer during the fourth quarter with two exceptional back-to-back auctions selling a massive CAD235 million of equipment during the quarter.

Lots sold during the fourth quarter increased slightly to more than 101,000 assets. This is something we're still pleased with given we held fewer options in the fourth quarter than last year. Auction volumes during the quarter were supported by consignments from a variety of customer sectors. Assets from the transportation sector grew significantly this quarter relative to Q4 last year. In fact, lots from transportation sector customers increased 49% and added more than 2,600 incremental lots to our auctions.

Assets from customers in agriculture, utilities, mining and forestry sector were also meaningfully relative to the same quarter a year ago. Lots from the finance, leasing and rental channel declined this year. Though we believe this decline could be due to cyclical changes with most excess in metrics from that industry group already sold within the past year.

On an annual basis, I am exceptionally proud of what our team achieved this year. Against significant foreign exchange headwinds we still managed to grow GAP marginally while also achieving extremely strong revenue rates. Thanks to our team efforts on a reported basis, revenue for 2015 grew 7%, adjusted operating profit grew 20%, we achieved an adjusted EBITDA margin of 40.4%, diluted adjusted EPS grew 22%, diluted EPS including all revenue and expense items increased 50%, operating free cash flow improved 28%, RONA improved 1,100 bps and RONA excluding a term loan recalcification grew 910 bps and our auto IC on a 12-month rolling basis was 15.1% up from 12% last year.

Using the same US exchange rates on a constant currency as last year, our results on an organic basis where GAP grew 8%, revenue grew 16% and adjusted operating income grew 46%.

We achieved a great deal over the course of 2015. We generated a record $4.25 billion of gross auction proceeds during the year, and just as importantly, achieved $2 billion of GAP in the US the first time ever.

More than $1.9 billion of equipment sold went to online buyers, demonstrating the strength and importance of our digital capabilities. [45%] of our total GAP during 2015 was achieved through online bidding and equipment transactions. That's more online used equipment transactions than anyone else in the world in our space. And we achieved these great GAP results while growing our revenue rate to 12.14% for the year. A 72 basis point improvement compared to the 11.42% annual rate revenue rate generated in 2014.

I am also very proud of the performance of our global team with strong contributions from all our regions. Our Middle East operations grew GAP by 20% in 2015, increased revenue by 35% and grew operating profits by 56% compared to 2014. It is a true turnaround story.

Our operations in Australia and Asia also showed significant improvement, with operating profit up 14% on a constant currency basis. Much of this was due to the outstanding performance of their underwritten business and the enhancement that were made to the revenue rate achieved by the unit.

In Europe where the macro environment is a bit more challenging, we were pleased with the operational efficiencies the team has implemented and the expense control they have exhibited. We're confident that this team is on a strong footing for future growth.

And of course, our US team drove much of the GAP and revenue growth during the year which has been instrumental in offsetting some of the foreign exchange headwinds we face in other geographies. In fact, our US team generated half of our total revenues during 2015, up from 47% in 2014 and grew their revenues 15%.

Our Canadian team generated 32% of revenues during the year. Our Europe team 10%, and other regions, namely Australia and Asia, 7%. Our Canadian team generated the most revenue growth on a local currency basis during 2015 with 23% growth in Canadian dollars.

Foreign exchange muted this growth to 7% growth when converted into US dollars for reporting purposes. The annual revenue rate was 12.14%, a near record for our business and a 72 basis point improvement from 2014. Importantly, our underwritten rate which propped up our overall rate improved by 175 basis points during 2015.

The age of equipment sold through our auctions has continued to trend better as we expected. During 2015 24.2% of GAP was generated by equipment aged three to five years old, up meaningfully from 18.5% in 2014.

Turning to EquipmentOne now, this grow channel achieved 15% revenue growth in 2015 compared to 2014 and achieved positive full year EBITDA for the very first time. This revenue growth was entirely due to more volume going through our EquipmentOne sales channel. $120 million of assets were sold through EquipmentOne during 2015, a 13% increase compared to 2014. Website traffic also increased 11% demonstrating our selling customers are reaching an even larger audience through this marketplace.

I am very pleased to tell you that EquipmentOne just recently expanded its operations into Canada and now offers Canadian dollar pricing and transaction information as well as Canadian tax information to EquipmentOne website users. We believe this will be a significant way of growth for EquipmentOne as we begin tapping into the strong brand recognition and market penetration we have secured in the Canadian market.

Our Canadian based sales team is already being trained on EquipmentOne's value propositions and benefits and will begin selling EquipmentOne sales solutions alongside our unreserved auction offering within the first half 2016.

We also undertook an initiative to relaunch EquipmentOne's total buyer protection policy to ensure our customers understand the full value and security our marketplace provides.

Ritchie Bros. Financial Services continue to demonstrate strong growth over 2014, with trade applications up 52% relative to 2014 and loans provided to customers up 31%. There was also meaningful improvement in RBFS penetration of their addressable market during 2015 with the business reaching 10.5% of addressable customers during the year up from 9.4% in 2014. So the marketing efforts in service offering of this business continue to drive growth.

We continue to review RBFS as an important revenue and earnings growth driver and expect this business to provide an even greater contribution to our revenue and income lines in future years. And with that overview of our fourth quarter and 2015 full year results, I will now turn over the call to Sharon to discuss aspects of our financial performance in greater detail.

Thank you, Ravi, and good morning everyone.

As you are all aware, our financial statements and disclosures for fourth quarter and full year 2015 results are now in accordance with US GAAP. As previously mentioned, this transition from IFRS to US GAAP has occurred as a result of Ritchie Bros. now be considered a domestic filer by the US Securities and Exchange Commission rather than being considered a foreign private issuer as we were before. As a result of this change, our Q1 through Q3 financial statements have also been refiled for 2015.

I want to take a moment now to walk you through some of the key changes you will see in our financial reporting as a result of these accounting changes. Differences in accounting for income tax expense and income tax assets have resulted in the following changes. Deferred tax adjustments that increased 2014 total asset base by approximately $9 million. Difference in the accounting treatment and tax of US option exercises and quarterly tax rate calculations have affected quarterly after-tax results.

A lot of the adjustments in the presentation of financial statements relate to what I refer to as geography changes of lines on the P&L and balance sheet. The most notable being the operating income presentation, where operating income now includes gains and losses on disposable property assets, asset impairments and foreign exchange which were previously presented below the operating income line under IFRS.

Disclosure requirements as a domestic filer require more robust disclosure on non-GAAP measures and two of our current scorecard metrics, RONA and Working Capital Intensity do not meet the standard of an improved non-GAAP measure, so have been excluded from the 10K but will continue to be reported on news releases and in investor presentation materials.

New information presented on the face of the statements for the first time include restricted cash of $83 million as at December 31, 2015. Restricted cash includes cash in certain jurisdictions where local laws require the Company to hold cash in segregated accounts which are used to settle auction proceeds payable resulting in auctions from those regions. These jurisdictions include some of our largest regions, such as Edmonton and Orlando.

We are also reporting for the first time a contingently redeemable non controlling interest, or NCI, related to our joint venture in Ritchie Bros. Financial Services of approximately $25 million. This required disclosure is a result of the existence of call and put options in our RBFS agreement that become exercisable in April 2016. The NCI under US GAAP is accounted for as a contingently redeemable equity instrument and as such requires evaluation of this NCI as at December 31 as well as for prior periods.

The NCI can be redeemed at a purchase price to be determined through an independent appraisal process conducted in accordance with terms of the agreement or at a negotiated price and therefore, the future redemption value on exercise may materially differ from the redemption value determined as at December 31, 2015. This valuation reflects the positive growth and financial performance of this important business line for RBA.

Turning to our fourth-quarter results now, as we disclosed at the end of December, gross auction proceeds for the quarter were down 9% but only 1% on an organic basis which uses the same foreign exchange rates as the year ago quarter.

As Ravi discussed in detail, even though our fourth-quarter revenue rate of 11.93% was higher than the 11.16% we had generated in the fourth quarter last year, it was not enough to offset both lower GAAP and foreign exchange headwinds. As a result of revenue declining 2%, relative to fourth quarter last year, and some higher expense lines, adjusted net income attributable to stockholders during the fourth quarter declined by 12% to $31.4 million.

This adjusted net income figure removes the positive impact of two items that occurred during the fourth quarter. First, it does not account for the $7.9 million of tax savings that were generated by tax loss utilization resulting from new arrangements within the business. And second, it does not include $8.4 million, or $7.3 million after tax, of gain attributable to the sale of excess land adjacent to our Edmonton auction site.

We do not consider these items part of our regular operating results, however, they were important strategies that we employed in order to unlock further value for our shareholders. Including the positive impact of these two items, net income attributable to stockholders was $46.5 million and diluted EPS was $0.43, a 48% increase from reported net income of $31.4 million and diluted EPS of $0.29 in the fourth quarter of last year.

Taking a deeper look at how foreign exchange translation impacted our fourth-quarter results, GAAP declined by 1% on an organic basis however the translation of local currencies into US dollars caused a further decline of 8% resulting in reported GAAP for the quarter declining 9%. Revenue actually grew 6% on an organic basis but had a 9% hit from foreign exchange resulting in a 2% decline in total reported revenue.

Expenses for the quarter grew 12% on an organic basis but were positively impacted by foreign exchange translation which reduced the overall increase to only 3% on an adjusted reported basis. And adjusted operating profit for the quarter was down 3% on an organic basis but was impacted by a further 7% decline due to FX which took our decline and reported adjusting profit to 10% or a negative impact of $4 million on a quarterly adjusted profit.

Although annual expenses are in line with evergreen model targets of growing expenses at a lower rate than revenue growth, our fourth-quarter expenses significantly exceeded revenue growth. Let me walk you through the key components of this increase.

On a US dollar basis, excluding the Q4 2014 management reorganization cost of $5.1 million, year-on-year SG&A increased $4.7 million or 8%. $3.9 million of this difference relates to year-on-year differences in incentive compensation. Due to the seasonality of our business, we accrue for incentive compensation at target levels during the first three quarters of the year adjusting for actual performance in the fourth quarter once detailed incentive calculations are available. This adjustment accounted for an increase in the quarterly incentive accrual during the fourth quarter of 2014 of $3.2 million compared to a decrease of $0.7 million in the quarterly accrual in 2014.

A smaller portion of the expense increase relates to Xcira, our new acquisition that closed partway through the fourth quarter and in addition, approximately $500,000 of costs were incurred in the quarter to support recent M&A transaction activities. Related to our recent IT initiatives, in the fourth quarter approximately $1 million of expense items are associated with software license fees for new CRM tools that have been deployed and are now operational. These are new expenses and are aligned with our commitment to strengthening our IT platform.

Headcount increases resulted in an additional $1.1 million of quarterly salary expenses relative to the same quarter last year. We continue to be committed to keeping expense growth at a lower rate than revenue growth on an annual basis and our annual results demonstrate this, both on a reported and organic basis. Revenue grew 7% in 2015 while expenses grew 3%. Removing the impact of foreign exchange, revenue grew 16% in 2015 while expenses grew 12%.

Our effective tax rate this quarter was unusually low due to two nonrecurring events. The first relates to a change in assessment of expected utilization of tax loss carry forwards as a result of an extensive review of existing arrangements within the business that was initiated at the beginning of 2015. We completed new arrangements in Q4 that results in reliable projections of future taxable profits in regions with tax loss carry forwards. The valuation allowance on our tax assets have decreased by approximately $8 million as a result of these arrangements. The second event results from the gain on sale of excess land in Edmonton. The earnings from the sale was subject to a lower tax rate per Canadian tax regulations.

Taking a look at our full-year results quickly. The operating leverage built into our model was on full display during 2015, with 1% GAAP growth and improved revenue rate generating 7% revenue growth and a 20% increase in adjusted operating income. Our annual adjusted operating income margin improved to 32.3%, up from 28.7% in 2014, due to a combination of revenue growth and disciplined expense in CapEx controls.

Diluted EPS for the year including all revenue expense items was $1.27, a 50% increase compared to $0.85 in 2014. Adjusted diluted EPS was $1.13, excluding the positive impacts of the tax loss utilization and the gain on sale of excess land, a 22% increase from $0.93 last year.

Turning to the balance sheet and capital metrics, the business generated $182 million in operating free cash flow for 2015, an increase of 28% compared to 2014 and operating free cash flow as a percent of net income was 134%. This is due mostly to increased net income, disciplined working capital management, particularly in the area of reducing advances on deals and prompt collections from buyers, and controlled capital investments.

Return on invested capital, a metric we will now report on regularly as some investors prefer it, increased to 15.1%, up from 12% in 2014. Related to this, return on net assets improved to 25.7% during 2015 up from 14.7% in 2014. Removing the impact of a term loan classification in 2015, which we intend to refinance, RONA improved to 23.8% compared to 14.7% last year.

Although not a significant financial driver to our RONA calcs our sale of excess land in Edmonton demonstrates our commitment to improving site by site returns. Our debt to adjusted EBITDA ratio continues to remain low. At 0.5 times compared to 0.6 times at the end of 2014, which provides us with significant capacity to take on debt, should the right opportunities warrant doing so.

Our capital allocation strategies remain unchanged. With dividend growth in line with earnings growth being our first priority, then holding our share count flat through the use of share repurchases and then using our strong balance sheet to execute on desirable M&A opportunities.

Related to our share repurchase strategy, I am pleased to tell you that we've already submitted our application to the TSX for approval of a new normal course issuer bid which will allow us to pursue share repurchases for 2016 through the Toronto Stock Exchange, New York Stock Exchange and other trading platforms. We intend to continue using our share repurchase program to primarily neutralize the impact of dilution from management stock options.

Before I turn the call back over to Ravi I would like to reiterate our commitment to our evergreen model. As you've likely already recognized, our 2015 results delivered on all of our evergreen model metrics with the exception of GAAP growth. We believe the evergreen model is a good indicator of expected performance over a five to seven year cycle on an organic and constant currency basis. And although we are not providing guidance, we do remind investors that the first quarter faces foreign exchange headwinds due to year-on-year currency declines, as well as strong comparable performance particularly in the US regions. However, our business units are focused on new growth opportunities and are committed to continuing to grow revenues despite these headwinds. And with that I will pass the call back to Ravi for some closing remarks.

Thank you, Sharon.

As we start 2016 I want to take a moment to review some of the macro influences on our business, as well as some of the key opportunities we see for our company in the year ahead. Like all global companies, external factors outside of our control can have a bearing positively or negatively on our business. There are three key macro factors our team here is watching with the expectation that changes in these could help shape our forecasts and strategies.

First as we saw in 2015, fluctuations in currencies can and do have an impact on reported results versus our local currency performance. Consequently, we believe it is important to look at our financial metrics on an organic basis based on constant currency to better understand the true operational health of the business. As well, the relative purchasing part of our equipment bidders and buyers place an important role in their decision to participate in international auctions.

Second, inventory levels of dealers and brokers as well as production levels can create opportunities for headwinds for us. For example, we're watching the US ag sector closely as inventory levels and leasing buybacks are creating excess equipment in the dealer and broker channel. We expect there will be a lot of opportunity to capture this business.

And third, construction activity in our key markets can help drive ongoing sustained demand and churn for used equipment in many of the regions we operate in. News such as infrastructure spending commitments in Canada and the passing of the US Highways bill are positive indicators for the construction sector, which comprises the largest portion of our customer base. Which leads me to key opportunities we see for business in 2016 and beyond.

In the construction space we continue to receive data points, news flow and forecasts that indicate continued strong demand for construction activity and therefore equipment, particularly in the US and Canada. For instance, Dodge Data and Analytics forecast the total US construction market to grow 6% in 2016. Excluding electric, utilities and gas plants, the US construction sector, Dodge says is expected to grow 10%.

On the transportation front, 2015 was a great example of how we are better leveraging our newly developed transportation expertise and customer relationships. GAAP from transportation assets increased 23% globally in 2015 and 30% within North America. We plan to continue growing the transportation sector during 2016 and more effectively using our data and marketing expertise to further penetrate this important market.

Our third area of focus for 2016 is agriculture, where we have already been generating great results within Canada. We believe there is significant opportunity to grow our agriculture business within the US over the next several years using organic growth initiatives as well as potential M&A opportunities to build out a strong ag practice in the US.

Finally, and probably most importantly, we continue to see our digital capabilities as one of our strongest growth drivers in the years ahead. In 2015 we sold more than $1.9 billion of assets through our online simulcast live auctions and EquipmentOne. Our online business has more than doubled since 2010 and grown at a CAGR of 17.2% during the last five years. Online transactions already comprise 45% of what we sell today and we expect the proportion will only grow in the coming years, especially as we expand our digital presence for businesses like Mascus.

In 2016 we expect our expansion of EquipmentOne into Canada will start generating new incremental growth for that business as it leverages our strong brand recognition and market penetration in this country. We also expect our recent acquisition of Mascus and the online importance and digital solution that business provides equipment dealers and OEMs will significantly broadened our customer base.

We're very excited to welcome Mascus to the Ritchie Bros. family, their leading global online listing service, which generates 3.2 million monthly website visits across 58 countries and in 42 languages. In addition to their core listing and advertising business, we are also excited about capitalizing on the vast array of Mascus' turnkey business tools and software solutions which will significantly add to the stickiness of our customer relationships. The addition of Mascus to the Ritchie Bros. platform provides us with a new channel for our customers and our multi channel strategy and another important touch point in the used equipment sales cycle. This will also help significantly expand both our seller and buyer base.

As you can see, Ritchie Bros. is fast becoming a multi channel digital powerhouse. Already we transact more used equipment online than anyone else in this space. Our flagship brand continues to be Ritchie Bros. unreserved auction, but we're excited about the build up of new channels that capitalize on our data and relationship assets as well as our equipment expertise, deal making growers and global customer reach.

Overall, we're very excited about the opportunities we see for our Company in the year ahead, and we're already making meaningful progress in best positioning our business to leverage these prospects. I am pleased that we're off to a good start in 2016. I am proud of the team for delivering $172 million of GAP in Orlando in the face of very strong competition.

We're excited that pricing was solid and international buyers accounted for 23% of GAP. Our marketing team did a superb job for driver record, 9,850 bidders from 79 countries. Our Edmonton auction that started two days ago is off to a roaring start and will be completed later this evening. We are seeing incredible registration with 11,900 registrants compared to 8,700 last year. In just the first two days, we're close to last year's GAP level of CAD84 million and by the time the auction is completed we would not be surprised if GAP exceeds well over CAD100 million.

In conclusion, the used equipment market is very large at $360 billion. We have the brands, the channels, the customer relationships, the people and the laser focus on execution. We're excited about the opportunities we see for our Company in the year ahead and we are already making meaningful progress in best positioning our business to leverage those prospects.

And with that, we would like to allow questions from analysts and institutional investors. Given the level of participation on today's call we would ask that you please limit yourself to two questions to provide time for others on today's call. Operator?

(Operator Instructions)

Sara O'Brien with RBC Capital.

Hi. Good morning.

Hi, Sara.

Maybe if you could comment on -- in Q4 results the underwritten contracts in Q4 that were less as a percentage of overall volume, is that because it was a concerted effort to not underwrite certain contracts or was it the result of those contracts that delivered lower GAP than expected?

I think probably a little bit of both, Sara. Partly I think pricing, as I said, there was softening in Q4, so that did have some impact. But there was also, I think the year before our strategy took place -- took shape in January of this year. Q4 last year especially in the US it was all about just chasing GAP, and so there was a lot of GAP. But there was a lot of deals as well where we were a little bit on the old mentality of driving for market share, some deals that my friend Doug Olive would call dumb deals.

And I think we're a lot more judicious this year as I mentioned in my prepared remarks, that we walked away from $50 million worth of oil and gas specific deals, which we just found would lose us money. And even with that, when market conditions tighten, there is an issue of that. I think the Mexico and Panama we really had some packages that went south. They were tier 3 equipment, so you couldn't even get buyers from the US. But we didn't say, okay, now let's try to reduce volume in Q4 on underwritten business. The underwritten business is really a factor of opportunities out there and if they are good we will take them. You will have variations quarter to quarter, year to year. We're always on the lookout for good deals. And if there are good deals we will go after them.

Okay and then maybe continuing on the foreign exchange impact. The actual transaction impact. So you talked about Mexico and Panama seeing lower volumes of international buyers, what are you seeing now so far in Q1 in terms of your foreign markets, both in terms of supply of equipment and also those participating in the auction to buy the US dollar-based equipment?

I think Orlando we were pleasantly surprised that it was as strong as it was. It's tough to extrapolate on that because Orlando is such a big mega auction, but we saw a lot of people from Latin America. We saw a lot of Colombians and the fact that international buyers were about 23% of the GAP was promising.

We also saw, if you look at 2015 as a whole, we did see an uptick of American buyers buying in Canada. But we are going to continue to market that so that it actually becomes an opportunity. Because we think there's a lot of good deals for American buyers to buy in Canada.

So I think it's -- the Mexico thing, Sara, is slightly different. It's not your typical international buyer because this is tier 3 equipment which really couldn't have been brought into the US. Mexico gets a little bit -- because it's a fairly niche things and when the economies are going well you have a lot of Latin American buyers. That didn't happen because all the Latin American -- and in Mexico we transact in US dollars, so it would have been as if they were buying in the US. But so since all the currencies have been hit in Latin America, that caused a little depression if you will.

Okay. I just wonder if you expect that there will be fewer international buyers from overseas looking at US denominated equipment now or if so far the trend is that they are still coming in as buyers?

It is too early for us to tell just given the number of auctions we have had, Sara. I would just take some encouragement from Orlando results at this point. But what I would say is, we are stepping up our efforts to continue to market to international buyers, and I think that really -- that was in big force in Orlando. So that's something that we're going to continue to drive at, but clearly that has not been -- 2015 certainly, that was a bit of a headwind.

Okay thank you.

Nate Brochmann, William Blair.

Good morning, everyone.

Hi, Nate.

So, Sharon, you ran through those additional costs in the fourth quarter and I appreciate the additional color there and probably a little bit of mismodeling on our part. Could you go through a little bit in terms of what might be a little bit of the temporary costs versus maybe what's ongoing? And then secondarily with that, Ravi, if you could talk a little bit more, obviously you still are doing a great job in terms of driving the revenue growth beyond the SG&A. But now as we have a solid footing and we're going after some more of these, quote unquote, growth investments, whether that GAP might be a little bit closer than what we had seen in maybe the first half of 2015 in terms of that SG&A relative to the revenue growth.

Okay. Thanks, Nate. I think in terms of -- clearly some of costs that are not ongoing would be the $500,000 related to the transaction activity in the fourth quarter. In addition to the bonus incentive amounts, it really was -- fourth quarter bore almost the full brunt of the annual performance of that incentive in 2015. So I would moderate that amount. The IT investment, you should consider that as an ongoing cost related to deployment of IT technology.

So, Nate, just a little color. Let me add to what Sharon said.

The IT thing was -- it was really -- it was not something -- this is Salesforce.com and as we rolled it out to the entire country or around the world, it used to be a capitalized cost and now we have to, because it's been rolled out it becomes an expense. So this is undertaking which hopefully the positives we will see is that improved sales force productivity etc. So that's our one point.

The point on, as we do M&A clearly you will continue to have some transaction expense. So the whole bonus side Sharon and I are going to look at it in 2016, how do we try to smooth this out. And so, recognized for many years the Company had not had significant -- we had not made our targets in five, six years and this year was the first time we went well above our targets based on our annual numbers. And we had accrued at the target rate for the first three quarters and given how the overall year performance came out, we had to bump up the accrual in fourth quarter. So now that we have a bit more of an operational rhythm and understanding, we're going to get better at that.

Having said that, the overall headline on SG&A, Sharon and I are very committed to expense control. SG&A control. Especially given we are looking at 2016 where it is -- as we have said, there are headwinds. And so don't want to get ourselves ahead of spending, and we are putting controls in place. But our whole focus on SG&A is that the full year rather than quarter by quarter because of so many variances that occurred, that the full year we're absolutely committed and dedicated to make sure SG&A grows slower than revenue growth.

Okay. Thanks for that. And then my second question, Ravi I appreciate too all the puts and takes in terms of some of the different pieces of equipment in terms of pricing and markets in terms of what's doing well and what's not maybe and I definitely appreciate the overall industry color. I was just wondering if you could share with us a little bit of the cadence that you are hearing out of your customer base.

Obviously there is probably a little bit of pricing weakness relatively speaking in Canada versus the US, but particularly coming out of Orlando. And I know it's a one big event, but just if you could share with us like a little bit of the cadence that you are hearing in terms of the comfort level with your customers' underlying businesses. Whether they think that pricing is moving slower or whether it's stabilizing. And I'm saying that in a general tone, if you could share that with us, I would appreciate that.

Sure, I will do a headline and then I'm going to have Randy if he is -- I think he is on the call and he is seeing it live in Edmonton. And a general just a quick thing, we did see good pricing in Canada overall in 2015. Canada held up better than most places. It's just the currency hits that we encountered. But the quick comment on Orlando is that pricing was actually quite solid, and it was better than we expected.

Randy, why don't you comment on Edmonton and then, Doug, if you just want to give some comments on pricing and then I will also talk a little bit about customers and, Terry, you can then come back and say how are things in the US.

Very good, Ravi, thank you. What we're seeing here these last two and then today and the third day in Edmonton are very encouraging. We've got tremendous participation. We are now over 12,500 bidders registered for this event. We've seen very solid participation across Canada, in particular Western Canada and other provinces and a fair amount of activity coming up from the United States as well as overseas. And I think this is a continuation of a theme that we have shared with you over the recent quarters, and that is a repurposing of assets, yes, that may be coming out of the energy sector. But you can still lift and dig and transport goods and services and dirt with these same machines and have them repurposed elsewhere. So we're seeing a lot of that activity.

And generally the sentiment is, again, consistent with last year is not doom and gloom. People are less busy, without question, in this marketplace. But it's historically cyclical, and folks here have been making rational business decisions already for 18 months as they look forward in their book of business. And so there's not, there's not real angst. There's people making informed decisions, and we are seeing solid participation spreading from different sectors of the asset base of industries as well as geographies.

Doug, any comments on what you're hearing from around the world?

Yes. Thank you. I would support Randy's comments and just say that in Orlando, a lot of the takeaways from customers who were there on the bidding or buying side were saying that our prices were solid and it was a successful sale. And again to Randy's comments, that the assets that can be utilized over several different sectors are being done. And for sure, the headwinds we have seen on the assets that can't be repurposed, such as oil and gas or mining assets, those are the ones that are facing some headwinds. But general construction assets, for sure, there is solid pricing thus far through Q1.

Terry, what are you sharing from customers in the US?

Yes, Ravi, we're just coming off of the great sale that we had down in Orlando and again, I think just by the encouragement of the crowds, the size of crowds, the number of bidders participating online and on-site, and drove pretty strong pricing for Orlando. We are very happy with it.

And again, I think we're repeating ourselves. The oil and gas stuff, mining equipment, we are seeing some pressures there, but the general construction, transportation products we are seeing strong results and the customers seem encouraged.

So I would say one -- the final comment, I would say is that the reason why we are not downbeat and pessimistic is because of the resilience of the construction industry. I think I mentioned in my prepared remarks about that whole construction industry, excluding utilities, et cetera, being up 10%. And I also saw another study from Wells Fargo about construction optimism index and it is still well about [130] or so this year; it just came out today or a few days ago.

So and then I talk to customers. I am actually -- everyone I talked to, because I've been looking for, hey, is it doom and gloom? And at least in North America, in the US and Canada, we are clearly seeing there are a lot of projects going on. And so I think that -- and given that's our sweet spot, given that the bulk of our business is in construction, I take heart from that and the fact that we have been quite -- our teams of been quite smart about repurposing those assets into construction, I think that's where one of our strengths has been.

Thanks for that Ravi. Very, very helpful. Appreciate that.

Stephen Volkmann, Jefferies.

Thank you. Good morning. Just a real quick follow-up on that last concept. I don't know if you're willing to ballpark your estimate of how much of your volume is in these resource-sensitive areas, whether it be ag or mining or oil and gas?

Yes, Steve, good morning. Look, I think we have always talked about oil and gas-specific assets are less than 5%. I think they're more like 2% or 3% of our total GAP on an annual basis. So that is not something that, so -- because we are quite careful but opportunistically, we look at stuff. At the end of the day, we are in the dislocation business and we don't want to apologize for it, because that's the strength of this Company is looking at opportunities and being able to make money on that.

So if the oil and gas assets that can be repurposed or even specific oil and gas assets that owners want to get rid of and we think we can make a great deal, we will not walk away from it. However the core of this business, what keeps driving us, the majority is really construction. Transportation now is becoming a real meaningful number, with I think over 20% of our GAP. You saw, I think in my numbers, I talked about the 30% increase or so in the year, so transportation is becoming a solid sector for us.

Ag, the strength is in Canada today; it is not in the US. In the US, we use 2015 as a year to really start getting our ducks in a row for 2016. So I think we're well-positioned. So those are going to be some of the drive categories for us in the near term. And I think, just given the dislocation beginning to happen in ag, I think we are at the right place at the right time in the US.

Transportation, I think we are competitive 18 months ago when I joined; our expertise has improved significantly. So I would say we've got a well-balanced portfolio on sectors. At the same time, we've also got to look at the channels because as I said, this is a $360 billion marketplace. And there are a lot of people who -- there are different types of customers who really like more control. They don't like the unreserved option and now we're beginning to have solutions for them.

So I think our strategy of diversification is beginning to take some hold and that's -- when you look at it from a long-term, this business is not -- you can't -- you've got to look at it as a marathon, and look at the long term. I really am confident that, that's why we keep harping back to the evergreen model and coming back to that.

Look, there will be quarterly variations. Last year in the first quarter, we had a great quarter. We had Wyoming auction. We just hit the -- it was fantastic. We had a record Orlando revenue auction because of some great military packages, but this is a lumpy business. Timing will change and so this year, it may be in a different quarter so I just think we need to recognize that and really look at it from a longer-term perspective.

Okay great. I just wanted to follow-up also on this underwritten business, if I may. You said that you had passed on $50 million or something of business because it wasn't economic for you. And that's good to hear that, that discipline is there, but it sort of made me wonder if some of your competitors, if you are seeing almost like ARR pricing pressure on underwritten business? Are they willing to do this stuff cheaper than you are? And therefore, you may end up passing on more in the future? And I guess I'm just trying to figure out how that all flows into the kind of overall growth rate. Should we expect a lower rate of underwritten business in 2016 maybe versus 2015, just directionally or what your thoughts on that?

So I will just give you conceptually and then I will have Doug comment a bit on the $50 million packages. If it is great equipment and if it is strategic for us to build straight-commission business; if it's a good magnet, we're not going to just sit by idly and let competitors take it away from us. There's no question; we are a premium price brand. On the other hand, we drive the best pricing out there.

We create great values, so we will, if we need to be competitive, we will be. I have signed many deals where, just because it's very important for us to get the deal to build the auctions. So it's a balance. To me, it is about GAP and rate. We can't just be about rate because there's no point in getting 100% rate on 0% business, so we will be very judicious and say if there are deals that are worth having Ritchie Bros, will not give it away to the competition.

On the other hand, if there are deals, knowingly that we will lose money and there is no point because it doesn't -- it's desperation assets, I would rather have someone else lose money on it. So that's philosophically what I would say. Doug, do you want to comment on those -- some of those oil and gas deals we walked away from?

Yes. I would agree, Ravi, on that. Some of the deals we walked away from, there will be more opportunities this year. We see there's still headwinds in that sector. There will be more opportunities and we're going to look at each and every deal individually to make sure that there is a net benefit at the end for us, as Ravi alluded to.

The deals we did walk away from, we did watch very closely and saw that some of our competitors probably had some pain going throughout the process. So with the assets we've sold thus far this year in that space, we see we've actually delivered very good value to the consignors that have opted to sell with us and we -- I feel that, that will continue throughout the Q1 and Q2.

So let me make one last point on that, which is, Steve, is, for us, I feel this is one of our biggest competitive advantages, which is the underwritten business. We do close to $1 billion of it. No one else -- I think all our competitors put together, cannot come up close to it. So we're not going to walk away from our -- this Company's DNA is based on dealmaking. We have some of the best dealmakers in the world and we are not walking away from that competency.

On the other hand, we're going to be smart about it and smarter. So when we realized that because there are different levels of competencies and the markets may not be used to this model. In Mexico and Panama, we have just said, look, that the competency is not there and also the pricing cannot be supported, and in the main that is not so critical for us. But on -- in the US, and Canada, look, our Canadian team, many quarters or the years, has done 50% of their GAP comes from at risk. And I say bravo, keep doing more. So that would be our overall view there.

Great. That's very helpful. I appreciate it.

John Healy, Northcoast Research.

Thank you. Congrats on a solid close to the year, guys. Ravi, I wanted to ask a question about the auction rate as we head through 2016. I know it's somewhat of an unpredictable metric. But as you think about used equipment values falling, in that kind of environment, does it make it more difficult for you to get rates or hold rates when you negotiate the fees for the sellers? Just conceptually, what are your folks telling you? And how do you expect that trend on a base business as we go through 2016? Randy or Terry, since you're the customer face, and Doug, just give some thoughts about that.

Sure, this is Randy. You know what, it really has to do with the level of understanding of the market dynamics and expectation level of customers, and at sometimes, expectations of our sales and of our customers operating in the markets are informed and aligned and in that case, your margins tend to be more predictable.

The -- sometimes, the -- what isn't as predictable is the behavior of your competition, and continuing to make wise decisions along the way are -- is crucial, not just on the face of the competition, but also our intelligence, in terms of where we see the marketplace headed.

So I think there's always dynamics in our business, even when times are good that cause us perhaps, at times, to be just as challenged or more than when the markets are softening in terms of rates and in competitive behaviors. So for different reasons, I see margin issues being fairly similar as in other markets.

Okay, great. (multiple speakers)

So Ravi, it's Terry. So what I would say is, again, we take a very disciplined approach to how we are looking at the assets and the pricing. We have a number of different views, and then we do work very closely with the customer to understand. And as Ravi said, we've got to manage the expectations and reality of where this -- where the pricing will fall. But I think it's a trusted relationship that it will -- we are able to build, and we will still see some pressures from it, but we are taking also a more disciplined approach from how our competition approaches it. We've got to continue to show the value of what Ritchie Bros. can bring.

Sure. (multiple speakers)

Go ahead.

I wanted to ask a little bit on the M&A front. I was hoping you could give us a little bit more color on the Mascus acquisition, what made you really excited specifically about that transaction? And from an expectation standpoint, as we move to 2016, maybe how the pipeline looks for deals? Is this the profile of the kind of normal deal that we should expect you guys to be pursuing and just any sort of update you can give us on that process?

Jim, why don't you talk about the first piece?

Sure, so when we were looking, as you know we are on a journey to become and continue to be the world's leading asset disposition and asset management Company on a multi-channel basis. So when we had the opportunity to look at adding another channel, for our customers, we looked at, look, we love our core business.

It is our fuel for our engine, but not all sellers can use that engine every single time. Sometimes they want a little more control, which we give them in Mascus in EquipmentOne. And sometimes they are willing to do a little bit more of the work themselves. So this channel fits nicely in that multi-channel array where we can let customers come in and we're -- we believe this will give additional value to our current customers. We also think it will be a great entry point for customers that can't work -- that haven't worked with us before.

So the thing that got us excited about first and foremost was equipment sellers. So we had 6,300 customers on Mascus who are sellers of equipment. We have not been touching all of those in the past so it's a new seller base for us. 360,000 items for sale at every -- at any particular time, so equipment sellers.

A large audience of buyers; we had 3.2 million sessions a month across all those countries. And one of the hardest things to do with any online business is to build up an audience, and we've got an instant audience there so we're excited about that.

Third, I would say it's technology. We have a Pan-European network of all these websites 58 -- 42 countries and 58 languages. And there's also 800 instances of dealer Intranet portal technology that gives us a stickier base into the customer base over there, which we will also like to bring to the United States and offer our customers there. So there's the technology.

Then I'd say talent is the next thing. Good people, multilingual, telesales people, great sales and tech teams, great customer service across that so that talent was very, very important to our network. And then as I said, finally, a new channel, sort of a related profitable, adjacent channel that can live under our brand family and can really help us overall.

So that's what we saw in it. We're very excited about the ability to connect it with our other channels and to give our customers more ways to transact in the Ritchie Bros. family of companies.

So I will just -- to me, this is -- this will help us also strengthen our European business, just with the synergies between these two channels, and Europe and Asia compared to US and Canada, the affinity for unreserved auctions is less. And this allows us to do a lot of things and access to customers, as Jim said. So we're quite excited about that.

The second thing, I think Jim mentioned is these tools. This business -- their business is, as much we're as excited about the advertising and listing side. And we think there's great opportunities for them because they are very strong in Europe to bring that into the US. Secondly, their tools, their business tools, I think with OEMs, with dealers, with general contractors, we can really drive those tools to take our customer relationships to the next level.

So that's about Mascus. About other deals, look, we have been working away. I -- there is not -- the way these deals come up -- come about is when there is a willing -- we've got a strategy. There's got to be a willing seller and then we've got to get the relationship and then get it done. So it's -- it takes a matter of time.

I would -- there is a great focus on also trying to find deals in the core business. We would love to enhance our expertise and whether it's agriculture, or transportation or construction because even in the US, there are many regions where we could -- there are local players who are quite strong that we would like to try and bring in, or particular sectors in construction.

So we are going to continue to look at where those opportunities are, and if there is a geography which has huge potential but we don't want to go in, in order to build something small. But if there is a player with huge scale, we would certainly look at that as well.

Great, thank you, guys.

We'll probably will do one or two more questions and then wrap up the call. Next, please.

Cherilyn Radbourne, TD Securities.

Thanks very much and good morning. So you --

Good morning, Cherilyn.

Europe reported an area that you found a little bit tougher in 2015 and Q4. I wonder if you could just speak in a bit more detail about the dynamics in that geography from a price and a volume standpoint?

Sure, Carolyn. The -- Cherilyn, sorry, I mispronounced your name. I apologize. Europe is -- we have had great strength in countries like Spain and Italy, and those markets have not been doing macroeconomically. The other thing is just in general infrastructure, it's a mature regions, so infrastructure projects have not been as prevalent other than some place in Eastern Europe, which has sort of fallen off a bit. But we are beginning to see signs in certain places that things are coming back a bit.

Long term, we still think that this is a very important market; by the way, we had a great year in France and we think there is a lot of potential in France and especially in agriculture and so we're pushing on that front. Germany is a huge market, but it's not a very unreserved auction trending market because Germans are very structured and this sort of unreserve auction doesn't go with the ethos and that's why things like Mascus and stuff will help us develop better.

The UK is a very competitive market. And so but we are making inroads in the UK and we're quite pleased to see how we're doing. So I think it is new channels in Europe are probably as important as anything for us.

Great. That's helpful color. Just a quick second question. Can you help us think about the impact of XCira and Mascus on the revenue rate in 2016?

Sharon, do want to answer that?

So, Cherilyn, you are right to note that those two businesses do come with revenue without GAP so they will be -- they will assist the revenue rate, albeit they are still not really large factors. And so until we develop them further, those businesses, in addition to the growth we are seeing in RBFS will be positive tailwinds to revenue rate that will help somewhat offset, perhaps some of the headwinds we're seeing on pricing in certain sectors.

Okay, thank you. That's my two.

Thank you, Cherilyn. Last question?

Craig Kennison, Baird.

Great. Thanks for taking my question as well. Just looking at the number of revenue producers and territory managers, it looks like that number has trended down on a year-over-year basis. Why would that be lower and what should we expect as you look ahead?

Yes, we want to keep that TM level at least at the normal 300 or grow it, and -- but grow with smartly. The fourth quarter, usually we do see some dips and so, we had -- towards the end of the year, you will always have some voluntary, some involuntary and this is -- what happens is overall in this business, our turnover is about, somewhere between 15% and 18% on TM turnover, which compared to -- given this industry and given how tough this business is, we think actually it's a decent rate.

But that's something we want to keep working on because -- and there is no -- we are not trying to reduce because the feet on the streets are very critical, and we want to keep pushing that. Usually towards the end of the year, you do see some people leaving and the full intent is to re-hire our feet on the street, the TMs because they are most critical asset for us to bring GAP home, so.

As a follow up, has there been any change in the level of seasoning of that group or the number of people that have at least one year experience, I imagine, they are more productive, for example?

Usually what we see is, in this business, when turnover occurs, it's mostly three years and below because that's when they are really building relationships. And this business is a long-term one, and so, I would say those levels are more or less what we have been seeing. But as I said earlier, that is something, especially Terry is focusing on in the US. Because every time we lose some experience, be it one year or be it three years, some institutional memory goes out of the door. And so, Todd, my Head of HR, is working very closely with the review heads to look at what do we do to reduce this. We're looking at competency. We are selecting better people the first time who are a better fit for this business. So this is a very critical priority for us.

Thank you for taking the question.

Thank you very much, everybody, and appreciate all your questions. Thank you onwards and upwards.

This concludes today's conference call. You may now disconnect.