RB Global Inc (RBA) 2020 Q4 法說會逐字稿

Hello, and good morning, and thank you for joining us on today's call to discuss our Fourth Quarter 2020 Results.

Joining me today are Ann Fandozzi, our Chief Executive Officer; and Sharon Driscoll, our Chief Financial Officer, along with other members of the management team who will be available for the Q&A portion of the call.

The following discussion will include forward-looking statements. Comments that are not a statement of fact, including projections of future earnings, revenue, gross transaction value 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 and are available on our Investor Relations website at investor.ritchiebros.com.

We encourage you to review our earnings release and Form 10-K, 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, the most directly comparable GAAP financial measures and a reconciliation between the 2, see our earnings release and Form 10-K. 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 today are in U.S. dollars, unless otherwise indicated.

I'll now turn the call over to Ann Fandozzi.

Thank you, Sameer, and good morning to everyone joining our call today. It has been close to a year since the pandemic started, and we hope you and your loved ones are safe and healthy as COVID-19 continues to impact all parts of our daily lives.

Ritchie Bros. delivered solid full year results with an 8% growth in service revenue and 24% growth in adjusted operating income and 5% GTV growth despite operating in a COVID environment, which is inherently plagued with uncertainty. I think these numbers underscore the leverage in our model, and Sharon will walk you through the financials shortly.

Our top priority is the health and safety of our employees and customers. And to that end, we continue to stay vigilant on all our COVID protocols that you have heard me discuss for the past year. To keep our employees and customers safe, we made the difficult decision to move our flagship Orlando auction to 100% virtual. Over the past year, we have proven that our omnichannel model deliver great results. Like many of our customers, I sorely miss going to Orlando this year because it brings together an amazing community. We do not want to lose that aspect of our business. And post-COVID, we are planning to have live customer appreciation events and bigger and better preview days when it is safe to do so.

The way I think about the world is normally through 2 main factors: things that are in our control and things that are not. We fiercely drive all elements in our control so that we are able to handle outside factors, managing the downturns and benefiting from the upturns. The current environment remains unprecedented. And in the fourth quarter, consignors started to take a wait-and-see approach as they digested the news around the prolonged vaccine rollout, felt the impact of a turbulent U.S. election and various new COVID restrictions.

On top of this, we know the used equipment market is tight right now with very low new and used inventory levels. This is a challenge we continue to face in the first quarter. And while we can't control the broader environment, we are obsessed with driving execution for the benefit of our customers, for our employees and for all of you.

Looking back at 2020, I am proud of the technology-driven innovation our teams implemented to help customers leverage our omnichannel platform.

In the fourth quarter, our data science and digital marketing teams continue to innovate and leverage the wealth of data we are collecting by being 100% online. Our customers are very happy as these efforts are driving demand and resulting pricing well ahead of expectations across the board. The early read on Orlando suggests that demand and pricing strength has continued, and you will be able to see the details in our Ritchie Bros. market trends report in early March.

Additionally, our data science team continues to focus on auction science to understand how we can improve price realization, using the various technology tools and channels we have at our disposal such as Marketplace-E. Much like last quarter, we continue to not ramp equipment, keep tight controls on costs and use Timed Auction Lots technology for select events. These actions and many others produce the strong operating leverage you are seeing in our financials. Also in the quarter, we have realigned our senior leaders to drive growth and execution on a global scale.

I am very pleased to announce that Kari Taylor is becoming our Global Chief Revenue Officer, after doing a phenomenal job as the Head of North American sales. Her global role complements Jim Kessler as our Global Chief Operating Officer and Jeff Jeter as Global Head of Strategic accounts. I would also like to formally welcome Rouse Services to the Ritchie Bros. family. After Sharon discusses our financials, I will talk about how we are executing against our strategic pillars.

And now over to Ritchie Bros. CFO, Sharon Driscoll.

Thank you, Ann, and good morning, everyone. Despite continued uncertainty posed by the pandemic, we reported a solid 5% growth in GTV, 15% growth in total revenue and 6% increase in service revenue in the fourth quarter.

Our GTV was driven by high-teens growth in Canada, in part due to a large dispersal of pipeline equipment and single-digit growth in our international business despite the cancellation of our Narita auction event due to COVID concerns in that market.

I am also pleased to say, GovPlanet positively contributed to GTV growth in the quarter as inventory flow has returned to near-normal levels after some of the COVID-driven disruptions we saw earlier in 2020. Despite the solid contribution of our strategic accounts group, the U.S. business was down slightly in the quarter compared to last year, driven by tightening used equipment supply as well as the team cycling over nonrecurring sales events in Chehalis, Washington and Anthony, New Mexico. We are continuing to see equipment tightness in our early Q1 sales events as U.S. consignors appear to be taking a wait-and-see approach to better assess new equipment availability and used equipment price realization from the Florida auction events. While we are optimistic about the vaccine, distribution schedules globally continue to be fluid and we remain cautious about the possibility of increased restrictions globally with new strains of the virus circulating.

Our priority is to keep our employees, our customers and our communities safe during this unprecedented health crisis. And we will diligently follow our COVID-19 protocols as we comply with local jurisdictional restrictions.

We saw a 7% reduction in direct costs due to our COVID protocols and our pivot to 100% online bidding on sale day that Ann has previously discussed. Beyond this, we also remain disciplined and diligent on all cost lines that we can control as well. These actions drove a strong operating leverage with a 16% increase in adjusted operating income and 11% increase in adjusted earnings per share.

We continue to expect cost of service growth to be less than 50% of the rate of service revenue growth until we anniversary our COVID protocols initiated in the second quarter of 2020.

I also wanted to specifically discuss acquisition-related costs incurred in the quarter associated with the Rouse Services transaction. As part of the acquisition, the company incurred $6 million of acquisition-related costs, of which $800,000 was related to the amortization of share-based continuing employment costs. These costs are due to the 312,000 company shares issued to certain previous unitholders of Rouse as part of the consideration on the transaction. As these rollover shares are dependent on continuous employment, the $20.7 million value of these shares will be amortized into earnings over the next 3 years.

Looking ahead, it is important to note that in 2021 these expected amortization costs are estimated to be $10.3 million. These costs will not be adjusted out of our future earnings as they will be reoccurring charges, however, will be visible on this acquisition-related cost line on the face of the statements.

Before I turn to Auction & Marketplaces, I would note that our other service revenue increased 2%, driven by a 10% growth in Ritchie Bros. Financial Services and 1 partial month of inclusion of Rouse revenue, offset by lower refurbishing and transportation fees in the quarter. Auction & Marketplaces service revenue grew 7%, with service revenue as a percent of total GTV coming in at a solid 13.6% for the quarter. We continue to think that service revenue growth is the best indicator of overall top line performance for our business model and most reflective of underlying business trends in the quarter.

It is important to note, once again, the contract mix can significantly skew total revenue growth depending on consignor's preference for how the deals are structured. We are agnostic between service and inventory-oriented contracts and stand ready to serve our customers in any capacity that they so choose. That said, inventory sales continued to be lumpy in the quarter, increasing 33%, driven by strength in Canada, partially due to a large pipeline dispersal contract. This was somewhat offset by softer U.S. inventory deals as the regions cycled over larger inventory contracts in Q4 of 2019.

Our inventory rate increased approximately 500 basis points versus last year to 10%. Our disciplined approach to at-risk deals, particularly on our inventory contracts, combined with digital marketing-driven strong price realization, drove these results, and we are very pleased with overall rate performance during the quarter.

Overall, in the fourth quarter, our SG&A increased 13% year-on-year, in part due to the finalization of bonus calculations based on our very strong 2020 operating results during this COVID period. Also, please recall that we specifically called out the benefit in the fourth quarter of 2019 due to a onetime stock-based compensation recovery due to the prior CEO departure and the forfeiture of unvested equity grants. When looking at our SG&A run rate growth, as calculated by excluding bonus and share-based compensation, SG&A expense is up only 3% in the fourth quarter.

For the full year, SG&A was up about 7% after removing adjusting items in both years. And the 7% growth rate includes a significant increase in variable-based performance compensation costs due to significantly stronger operational results in 2020 as compared to our 2019 performance. Even with the additional compensation costs, our SG&A growth is below our service revenue growth of 8%, in line with previously stated Evergreen targets.

I am also pleased to note that our sales productivity, as measured by GTV per revenue producer, improved in 2020 by 9% year-on-year. Overall, I am very pleased with our SG&A performance and with our ability to drive SG&A productivity improvements, while at the same time, investing for future growth. Our thinking around travel and entertaining costs has not changed. We are a sales-driven organization. And when it is safe to do so, we expect these expenses to come back as our talented sales force gets back on the road developing and cultivating customer relationships.

Our balance sheet and liquidity remain in a very strong position. With the cash used to complete the Rouse Services acquisition, our leverage increased to 1.1x on an adjusted net debt to trailing 4 quarter EBITDA basis. I am pleased to note that operating free cash flow to net income came in at 125% for the year, well ahead of our 100% Evergreen target. That said, operating free cash flow for the year is lower than last year, mainly due to timing of auction payouts and inventory purchases.

Finally, during the course of our 2020 year-end close procedures, we identified material weaknesses in the company's internal control over financial reporting, as stated in our filed Form 10-K. It is important to note that we have a clean audit opinion on our financial statements, and there have been no restatements resulting from these control matters.

Our legacy systems architecture requires significant manual control points to ensure data moving between systems is complete and accurate. This manual control environment, coupled with work-from-home protocols, resulted in end of year SOX control test failures, primarily due to insufficient evidence of effective review.

It is important to point out that as many of our SOX controls are manual in nature, the company does use additional substantive and compensating controls to ensure that financial statements are complete and accurate.

To be clear, there were no adjustments, significant or material that were required in the 2020 interim or annual consolidated financial statements due to these material weaknesses. And I want to emphasize that we are committed to maintaining a strong internal control environment and will make it a priority to implement measures designed to help ensure that controlled efficiencies contributing to these material weaknesses are remediated. Further details can be found in our Form 10-K.

I would like to thank again our employees for their continued focus on health and safety as well as their dedication to meet the needs of our customers in these times.

And with that, let me turn the call back to Ann.

Thank you, Sharon. As many of you know, we rolled out our new strategy to become the trusted global marketplace for insights, services and transaction solutions for commercial assets at our Investor Day in December.

A foundational part of our strategy is that we are a learning organization, and we are committed to communicating as we learn. Every quarter, you can expect us to share how we are moving this strategy forward. Although early days, I am very pleased with the progress we made against the new strategy. We are driving digital innovations across our ecosystem.

To help us accelerate end-to-end customer experience initiatives, we are moving to a new, nimbler product management organization. I am also very proud of the technological innovations around our flagship Orlando event with virtual tour videos of over 4,000 items and the introduction of a remote concierge service for our customers.

We literally have our knowledgeable staff on FaceTime with customers walking the yard to look at equipment and answer questions real time.

We also improved our call center experience by deploying a new interactive voice response system.

Next, on employee experience. We continue to take steps to deliver the very best employee experience by revamping our performance management systems and developing and piloting 360-degree leadership capabilities. We proudly launched various initiatives around diversity and inclusion. One, I'd like to give a particular call out to you is our Black Lives Matter strategic initiative.

Shifting to our modern architecture, I am pleased to note that we successfully launched our first cloud-based bidding engine, microservice. While unnoticeable for customers, this is a big step in moving our infrastructure forward. We also added a very talented new Head of Architecture to support and propel our efforts in this area.

Now let's talk about our Inventory Management System, or IMS. We continue to improve our automated data ingestion capabilities to make it easier for customers to use our systems. We also launched a free version of our IMS and have already seen significant adoption. The launch of Ritchie Bros. Asset Valuator arms our customers with the data they need to make business decisions. The Rouse acquisition will undoubtedly accelerate our efforts with IMS and the broader marketplace.

In terms of our accelerate growth pillar, we have pilots underway for new satellite sites in Australia and Europe and are seeing strong early results. We realigned the Texas sales organization to our new go-to-market structure that we talked about at Investor Day, and we have also brought in new talent dedicated to the bankruptcy and insolvency verticals.

Now turning to current trends and outlook. I would like to share some considerations on our first half of 2021. Overall, the headwinds on equipment supply that we saw in the fourth quarter continue in the first quarter. Our priority remains on keeping the health and safety of our employees at the forefront while focusing on execution. The key execution priorities are: growth in a constrained environment, keeping tight controls on costs and focusing on our true north, improving our customers' experience. We continue to see upside opportunities balanced by uncertainty and risks as well. We see consignors that are focused on cash flow and inventory management, which should continue to drive liquidity needs.

In 2020, we did not see the level of the stress we expected and think there is more to come here as banks start acting like banks again. We are also watching for both timing and magnitude of any government stimulus to begin driving infrastructure spend. We also see the potential of the consignors that have been on the fence but start to act in terms of equipment dispersal and fleet realignment.

All that said, there remains risks as the implications of COVID continues to cloud the outlook. Global timetables for vaccine distribution continue to be fluid, and newer strains of COVID raised the risk of additional border restrictions. Lastly, we continue to carefully monitor any potential changes in the sentiment which could impact equipment demand and soften current pricing environments as we progress throughout the year.

In closing, I'd like to thank our team and our loyal customer base for a very successful 2020. I am very proud of the employees of Ritchie Bros. and their continued dedication and perseverance in the face of this pandemic.

And with that, operator, please open the line to questions.

(Operator Instructions)

Your first question comes from the line of Cherilyn Radbourne from TD Securities.

In terms of the tightening used equipment supply that emerged in the fourth quarter, could you sort of speak to the cadence of how that developed during the quarter? You seem to be fairly upbeat when we last spoke at the December analyst meeting, so just curious if that was something that emerged later in the quarter?

Cherilyn, Ann Fandozzi here. So basically, we first noticed it early days around the election. I apologize. And I think we spoke about that on the call as well that in the U.S., there was kind of an election based kind of a bit of a pause.

And candidly, when we had our call, we had thought, okay, once election was behind us, but of course, the -- what we could not have anticipated was everything that ensued post election and kind of the longer-term implications of that uncertainty as well as the new streams of COVID and the continued lockdowns despite the vaccine allotment.

So that's a little bit of kind of how we saw it unfold, but -- or at the same time, let's just focus on the things that we are driving, right? So these types of things, election, everything, the craziness that ensued, new strains of COVID, these are out of our control.

However, in our control, right, what do buyers want from us? The most selection they can get anywhere else. And unquestionably, they continue to get it. And what do sellers want? The highest price realization possible. And as we alluded to, as we saw throughout last year, the way we were driving demand, pricing was very strong, continues to be that way.

And as we take a look at the outlook, we see the things that you guys are seeing, right? OEMs have announced, and they are coming back with production after the forced shutdowns last year. We were all aware that banks were not acting like banks all around the world, but we believe that they will, and we are -- that is part of why we built out bankruptcy and insolvency vertical to be ready for that eventuality. And whatever stimulus will come, we know will be goodness as well. So that's a little bit of a context for how that's played out in Q4 and what we're seeing right now and moving forward.

Okay. That's helpful color. Second question, I wanted to ask about the legacy systems that were mentioned in the context of the internal control environment. In addition to some process revamping, is there also a plan to revitalize those systems over time?

Yes. So good question, Cherilyn. It's Sharon here. Clearly, this aligns right with our modern architecture pillar. The legacy systems, and it's really more the interface environment between the various disparate systems that operate our different types of events. The plan we have is to really simplify how we actually complete transactions and use technology in a much better enabled way, both for customer benefit as well as for our employee benefit so that these manual controls will no longer be required.

Your next question comes from the line of Michael Doumet from Scotiabank.

So first question, I mean, you talked about the tightening of equipment supply in the U.S. and provided commentary into Q1. On the Canadian GTV, I mean that was up in the quarter due to what sounded like a favorable auction calendar. Just wondering if you noticed a similar or tightening in Canada? Or if the markets are somewhat different?

Yes. Michael, Ann here. So where -- we much like every quarter, we kind of see a tale of 3 cities playing out around the globe for us. So the tightening in the U.S. really was initiated with the election, something that was really contained to the U.S. market and then was prolonged in nature. The momentum that we've seen in Canada, unaffected by that and haven't had nearly the impact of, let's say, the additional closures that Europe has experienced with COVID as the new strain showed up there and huge lockdowns came back into the (inaudible). So kind of seeing 3 very different marketplaces playing out.

What gives us a lot of confidence is we know the vaccines are here. It is a matter of time. The disappointment with the rollout, be it as it is, eventually will come. I am happy to say my parents just got the first vaccine last weekend. So I'm very hopeful. We know the OEMs that were forced into the situation that resulted in a tightening of supply, they have announced very healthy comebacks in the entire bankruptcy and insolvency space. It's a matter of time when that plays out. So just a bit of context.

Got you. Okay. And then a separate question, I mean, completely different. But the growth in the online auction marketplaces have been -- I mean it's been nothing short of impressive, especially versus the on-site auctions. So at your Investor Day, I mean, you talked about high single digit, low-teen GTV growth. In your opinion, I mean, is that going to be predominantly driven by online market places from now on? Just trying to get a sense for how to think about that going forward.

Yes, Michael. So just reminding everybody for Investor Day, believe me, nobody is more excited than the folks on this call. But Investor Day, we set out our vision, and we were clear about 2 things. It's going to take us a little bit of time to fully realize it, and also, we're in COVID. So this is time for us to learn. So just a little bit about the context.

So our perspective of what live and online actually means has significantly changed, and I'll just even say for myself coming in. A bias I had coming in was really a retail bias, right? More online sales means less reliance on brick-and-mortar, right? If I click, the thing ships from a warehouse. I don't have to go into a store.

What I learned and what we have realized (inaudible) during COVID it is that the use of our yards are very different between buyers and sellers. We really need to bifurcate your question into a 2-part answer. The buyer experience, even before COVID, 2/3 of our live auction buyers were already coming online. So even though we pivoted to 100% digital, that was more a strain to our technology organization to make sure we had the bandwidth and the systems to handle the increased flow. So from a buyer perspective, we were already headed that way. We're fully there, and it allows candidly our artificial intelligence, machine-based learning and our marketing teams to go crazy with that data and drive demand. We're seeing that in the demand numbers, we're seeing that in the pricing.

On the seller side, however, and this is what's so fascinating, what they want from Ritchie Bros., and it's really a unique differentiator is when they're done with a piece of equipment, they want done with it, and then they just want their money.

And so our yards during COVID are busier than they've ever been before. With sellers dropping equipment, we take possession, we inspect it, we appraise it, we spiff it up, by the way, we charge for all of these services, we market it for them, we sell it. In fact, we're so bullish about that model, on our investor call and today, if you -- on the fifth pillar about accelerating growth initiatives, we're actually testing hub-and-spoke models with putting much more scaled down yards much closer to where sellers are to minimize the transportation costs for them, but allow them to partake of the care custody and control that they want. So I think you're going to be seeing kind of both worlds play out. And for Sharon and I, we need to think through and we're putting KPIs in place that we can share with you guys where the transactions themselves are digital, but the physical use of yards we anticipate will actually go up, not down for the sellers.

Your next question comes from the line of Larry De Maria from William Blair.

First question, I want to talk about the impact of Timed Auction Lots. The market seems to be moving there. But even, I think, regardless of COVID that's where it's going. So curious, how important is this for you now? And is this potentially a weak spot because no-frills competitors can play there? Or maybe not? So I'm just curious about your perspective on how important Timed Auction Lots are and how you're doing there competitively?

Larry, Timed Auction Lots have been very interesting for us, and we continue the learning. This is Ann, again. So the very first thing we did when COVID hit is we moved almost entirely to -- and fully to Timed Auction Lots in international. Because we were concerned -- obviously, there were travel restrictions, and we were very concerned about potential latency effects and any virtual auctions. The learning we have there is perhaps not unexpected that because the buyer base is non-English speaking, by nature, much more comfortable with that format for selling.

We have done testing in North America, and we continue to do testing about kind of the differences between Timed Auction Lots, auctioneers, that type of environment. But the true answer to the question is about differentiation for us versus our competitors, and this is where we really need to take a look at the difference between buyers and sellers.

In terms of buyers, they want selection and they want an experience that makes it very easy for them to obviously pick what they need, have a lot of confidence in the product that they've chosen. And then obviously, be able to transact in an easy way.

And in terms of selection, I think hands down, there's no question the Ritchie Bros. methodology, the confidence between the inspections we do when we have possession of the equipment and the IronClad inspections we do, no question the very best in the industry. And so this really comes down, the Timed Auction Lot is about a very small slice of what a buyer wants, which is the experience during the transaction itself. And we keep monitoring the differences between Timed Auction Lots and auctioneers, and we talk about that very clearly with our employees as well.

But on the seller side, and this is where the advantage really comes for our omnichannel experience, the yards that we have, the ability for Ritchie Bros. to take care custody and control of the equipment is proving to be invaluable for sellers. And so when you think about this really as a network effect, right? So think about sellers more and more want to be done with the equipment, and they want an entity where they will take control and handle it for them and just send them money. And so online players really do not have that capability.

And then what buyers want, right? This is where this network effect, there's more and more selection with more and more sellers picking us. They want assurance that, that equipment is as is presented and not only our inspection services, but our ability to even showcase it and fix it up and stand behind the equipment and then it just comes down to the transaction itself, which is important, but it's a very small sliver in terms of the value chain.

So we're excited about Timed Auction Lots, the technology, and we're going to keep testing to make sure we're driving the best buyer experience on that facet as well. But the entire ecosystem that Ritchie Bros. brings to bear is second to none, and we've seen that moat grow during COVID, not shrink.

Okay. Thank you for that obviously comprehensive answer, Ann. Just one more follow-up. Looks like you're giving away the Inventory Management System now. Is that a way to bring customers in and then you can upcharge them for services later? And has it helped to bring in new accounts? I was kind of surprised to see that you're giving away for free.

Yes. Absolutely, Larry. So we actually have 2 products. And as we shared the last 2 calls, we're still very much in learning mode. So we have an enterprise product, which is very customizable. They're for very large accounts. And now we have a business product, and that's the one that we're giving away.

It is, in fact, as you have said, 100% to drive adoption for 2 reasons. First and foremost, right now, it's to still learn. But then as you so eloquently stated to then be able to sell all of the products and services that we will be standing up on the marketplace.

So I'll give you a stat in a second, but the vision we rolled out to be the trusted global marketplace for insights, services and transactions, is facilitated by a very, very strong inventory system where our customers are relying on it to drive their decisions. So we know that, that is a key building block. Candidly, that was part of the thinking and the acquisition of Rouse to bring that in because that was their capability.

I'll give you guys a stat for January for this system, "the free IMS", the business system. We onboarded 2 customers a day, and we were measuring really 2 KPIs: how many we were bringing in and how quickly we could set them up. And this version of IMS is a 15-minute standup.

So from when a customer comes in to when they are up and running, it's a 15-minute uptick. Again, critical for us because, as we have said, we are becoming a marketplace. That marketplace hinges on inventory. We want a system that is very easy for our customers to onboard to and then to use, and those are all of the next KPIs that we're measuring, which is then the usage. But 2 a day has been really an aggressive amount of uptake.

(Operator Instructions) Our next question comes from the line of Michael Feniger from Bank of America.

Just piggybacking off that last question, is the 2 a day in January, is there any way you can kind of give us some numbers? How many assets have you guys kind of registered in January compared to maybe the fourth quarter or the third quarter? I'm just curious if there's any other metrics that would be helpful on that IMS and RBAS solution?

Yes. Michael, so Ann, again. It's interesting. The -- and this is where we're trying to figure out or looking at the right KPIs to look at for this business solution.

So let's think about enterprise. There are so many assets that sit with the giant corporate sellers, like literally millions and millions of assets that the business customers when they bring 50 at a time, 100 at a time, right, I mean, the assets in the enterprise just a clip.

So we absolutely look at that KPI, but that is a key KPI on the enterprise side of things as we're driving bigger and bigger enterprise customers, by the way, similarly, the bread and butter of Rouse, which is these ERP-based plug-ins that drive millions and millions of assets in.

So for this -- and we're still watching that, and that's still continuing to grow. So that, without a doubt. For this version, this business, what we want is a ubiquitous product that anybody whether you have one product to sell, you have hundreds, you have thousands, you want -- in whichever way you want to use it, it's there for you, and it's very, very flexible. So we're more right now interested in, and we're going to pivot to kind of what percentage of your wallet are you loading, these types of things.

But right now, we are looking more around how long does it take you to set it up? How much usage are you -- value are you getting from the tools that we're providing? And just to give you one stat, there's about 1 million units on that side in our inventory.

Okay. That's helpful. And just curious on the SG&A side. You guys have flagged these opportunities you're going after. Could there be a quarter or 2 when SG&A growth is actually above the service revenue growth in 2021? How should we think about these evergreen targets? Because 2021 is kind of a different year as you're positioning the company for the long term and contending with some of this COVID restrictions and issues.

Sure. So it's Sharon here. I'll take that. I think a couple of things that we're very focused on is how do we continue to deliver a great buyer and seller experience, but at that lowest cost to serve. So we're taking our time right now to really look at how we're operating today and how it's affecting that customer experience and how can we improve it, but again, at a lower cost level.

Clearly, the travel and a lot of the key aspects that kind of are out of our control today, some of those costs will come back in. But I do think it's safe to say that we are looking at continued margin expansion over the long term to be a much more productive company with the cost lines.

Certainly, when we come out of COVID, there might be a bit of lumpiness there as you have to add in certain costs that weren't then in your base. But I think over the long term, our goal is to, again, be accretive to an overall margin rate for our business.

That's fair enough. And I'm just curious, just lastly, on how you're seeing your competitors react. Obviously, 2020 was a tough year for some of your competitors, smaller players that couldn't keep up with your virtual and online offerings.

I'm curious how you're seeing them respond. I mean you guys called out in the quarter, a robust contribution from at-risk team. Just curious also, as you're seeing some of this tightness, is it getting a little bit more competitive on the underwriting? And how you see this kind of playing out in 2021?

Michael, Ann again. So for sure, right? I mean, just basic laws of supply and demand, as there's a tightness in supply, there's more competition on at-risk deals. However, again, as we've heard from the OEMs, they are soon to catch up.

That said, one of the conversations we also had at Investor Day is -- this is an incredible industry. I've now been part of it for a year. One of the interesting things from other places I have been and I have come from, whether technology or automotive, there is no clear market share measures in this industry. So because I am a engineer by training, wildly analytical, we have internal -- we have stood up internal market share metrics. We don't want to share them with you because we're still working on them kind of real-time to make sure these are things that we can rely on.

That said, every indication we have from 2020 is a significant market share growth in the year and despite the tightening in Q4 as well. Because, again, right, macro environment, supply, demand, things we don't control, but the things in our control, driving the most selection, driving the care custody and control for sellers, driving an incredible price realization for them, which continues having the omnichannel, the yards and then a fully online experience regardless of the backdrop environment, it is an incredible competitive advantage for us. And again, during COVID, that moat has grown.

And in Q4, despite the tightness in supply, we saw our share increase as well. So feeling very good about where we stand. And then, of course, as we push more and more into the marketplace, you can expect even more growth in the services and obviously, what that implies for the leverage of our model and the financials.

There are no further questions at this time. I turn the call back over to management for closing comments.

Thank you so much for joining the call. Very much appreciate your interest, your involvement, and we stand at the ready if any more questions, but thank you so much. And please keep yourselves and your family safe.

Thank you, everybody, for joining today. That concludes today's conference call. You may now disconnect.