Good morning. My name is Jody, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Bros. Auctioneers Fourth Quarter 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. I will now turn the call over to Mr. Zaheed Mawani of Investor Relations to open the conference call. Mr. Mawani, you may begin your conference.

Thank you, Julie. Good morning, and thank you for joining us on today to discuss our fourth quarter and full year 2017 results. I am joined this morning by Ravi Saligram, our Chief Executive Officer and Sharon Driscoll, our Chief Financial Officer. Also with us today for the Q&A portion of the call will be other members of the leadership team. Ravi and Sharon will open the call with prepared remarks and other members of the management joining them for the Q&A portion of the call. The following discussion will include forward-looking statements as defined by the SEC and Canadian rules and regulations. Comments that are not a statement of fact, including projections of future earnings, revenue, gross auction proceeds, or 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 Web sites, as well as our Investor Relations Web site. Our definition of gross transaction value may differ from those used by other participants in our industry. It’s not a measure of financial performance, liquidity or revenue, and is not presented in our statement of operations. Our fourth quarter and full year results were made available yesterday evening after market closed. We encourage you to review our earnings release and Form 10-K, which includes our MD&A and financial statements which are available on our Web site 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 measure and a reconciliation between the two, 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 Web site. All figures discussed on today’s call are in U.S. 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 in using full unrounded figures. I’ll now turn the call over to Ravi Saligram, our Chief Executive Officer. Ravi?

Thank you, Zaheed. Good morning, everyone. And thank you for joining our fourth quarter earnings call. In recognition of closing our 2017, I’ll share my thoughts from the year. And then pass it on to Sharon to discuss the fourth quarter financial and operating results in more detail. I am encouraged by our fourth quarter results, which reflect the strengthening execution of our combined team. I am especially pleased we grew revenue both on a reported and like-for-like basis despite continuing softness in equipment supply. Of course, we have work to do as we aspire for more but the heavy lift can integrating is largely behind us, and we are now focused on execution, serving our customers and working hard every day to stay ahead of our competitors. 16 months after the announcement of IP acquisition and eight months after closing, I remain as excited if not more of this transformative acquisition. We have reshaped our future and are becoming a true multichannel asset management and disposition company. With a unique deal offering a variety of channel and format choices to both buyers and sellers and have significantly increased our global reach. Every day our teams are discovering new ways of working together to leverage best practices, strengthen innovations. And last week’s Orlando option demonstrated the power of that combination. The network effect is beginning to take hold. Operationally, 2017 was both a progressive yet very challenging year. No one fully predicted the surge in local and state level infrastructure projects post the presidential election in the U.S. We saw dramatic increase in construction work, pipeline projects and record high equipment utilization rates, especially in the U.S. At the same time, OEMs were not able to ramp production on new equipment to respond to the markets’ needs resulting in unprecedented…

Thank you, Ravi and good morning everyone. Turning to our consolidated fourth quarter results. Our GTV increased 24% to $1.3 billion, our highest quarterly GTV ever recorded. The increase in GTV was primarily driven by acquisition along with notable strong live auction comps in Dallas/Fort Worth, our Chehalis site and solid performance in Spain. Additionally, our GTV sold through online channels, including our weekly featured auction and marketplace E, increased over 400% during Q4. Our consolidated revenues increased 22% on a reported basis versus the prior year. This increase was primarily due to the acquisition, revenue growth in Europe and solid revenue performance from other value-added services, including RBFS and Mascus. On a pro forma basis, our fourth quarter combined company revenues increased 3.6% versus last year. Consolidated revenue rate declined 30 basis points to 13.81% versus the same period last year. However, this decrease in rate was due to cycling over the strong performance of the Canadian private treaty inventory dispersals in the fourth quarter 2016, which impacted both revenue dollars and revenue rate. Excluding the impact of those dispersals that were lapped in 2016, we generated positive revenue rate growth in the fourth quarter of 2017. Our reported operating income declined modestly to $40 million versus $40.6 million in the fourth quarter of 2016. This decline is primarily due to our higher base of costs of services, SG&A and depreciation and amortization, all driven by the acquisition, partially offset by increases in our revenue. Our operating income also included the impact of certain one-time severance and restructuring costs recorded in the fourth quarter. Excluding these cost on an adjusted basis, our operating income increased $1.6 million. Net income for the quarter increased $8.9 million or 32% in the fourth quarter versus last year. The improvement included the positive…

Thank you, Sharon. As we've shared over the past three quarters, we’ve laid our key integration milestones targeted for completion in the fourth quarter and for the first half of 2018. Overall, we continue to stay on track if not slightly ahead of our integration plan, as we’ve successfully completed the bulk of activities planned for the fourth quarter, as well as several of our milestones here marked for the first half of 2018. Let me briefly touch on a few of the critical initiatives in the first half of '18. We’re very excited to have won the non-rolling stock dealer contract in the U.S. This would be a large contract that we have started mobilizing across many DLA sites. It's a complex logistical project and our IronPlanet team has already gained momentum. We expect to be operational towards the end of first half. We're also well along on our journey to connect our channels to create an excellent customer experience. We now have IronPlanet listings on rboption.com and rblistings.ip.com. Customers search specifically for equipment and the wide variety of equipment on our Web site will continue to accelerate Web site traffic growth. Let me comment on the bio-feed, which we now refer to as transaction fees. At RBA, we have not changed this fee in the last five years despite significant investments in the customer experience. Importantly, given the IP acquisition, we felt it was important to harmonize our transaction fees across our core product and channel offerings to make customers, especially buyers agnostic of the channel. We're partially harmonizing the RBA fee structure to be closer in line with IT. This was implemented in mid-January and will positively impact revenues. A proof point of our combined company coming together and being laser focused on execution was our Orlando…

[Operator Instructions] Your first question comes from the line of Michael Doumet of Scotiabank. Your line is open.

So on Q4 GTV, the results were quite strong. The Orlando results also looked quite impressive. Ravi, last quarter you broke out the weakness, roughly speaking, into what you thought was macro versus company-specific drivers. Now I believe GTV grew on a combined basis despite supply constraint. Anyway you can give us a sense of whether macro conditions are at least starting to improve or if it's mostly pricing and improved salesforce productivity that drove the relatively strong GTV numbers?

Michael, I'd say -- let me answer that. And look clearly, I think we have come a long way on sales force execution and we'll continue to get better. But I really strongly believe that some of the challenges we had in growing things that I referred to are behind us. We have a highly motivated sales force and we're beginning to hum. I would say the supply challenges, and I'm sorry I sound like a broken record. But it's to me no longer anecdotal, its fact. And point to hundreds of customers, not only personally but also through our whole teams, supply constraints are really quite a lot; they're still there; still feeling it in 2018. So then the question is, gee, then how did you see the rise in Q4? Recognize Q4 always there is a little bump up just seasonality, and people do try to get rid of their inventories. I think the difference is we were laser focused on going after it. The same in Orlando, we were laser focused on going after it, and very much making sure that from a auction segment, even though we have hundreds of competitors, we were quite focused on making sure that we did not lose share, and in fact if anything, gain share.

Your next question comes from the line of Craig Kenneson of Baird. Your line is open.

Looking at your territory managers, you saw a nice sequential uptick in the number of territory mangers. I guess, it's a loaded question. But could you discuss the composition of your territory manager team and maybe what percentage are still in their first year for example and how productivity improves as territory manager matures?

Look, there is no question we had sales force turnover, both voluntary and involuntary, because as we did the territory optimization at the beginning of the integration of the combined companies. So we do have new territory managers. Turnover has always been an issue in this business like it is for most sales driven companies. Our turnover clearly was exacerbated in 2017. We have brought it down significantly so in third quarter versus fourth. We brought down the range of turnover not only in the U.S. but globally. And so I think we lost like 32 in Q3 but only six in Q4, so that shows you that we’re doing that. I don’t have right now the breakdown by how many and their longevity. Suffice to say that we’re working very hard on training the people and getting them up to the learning curve. Now, the one -- I think we’ve got two things. When new people come in one positive is they don’t have biases to which channel and its easier for us to get them where you don’t have how the behavior changes now the reference bring lot of the relationships. I think we’re getting a very good blend of the two. I am satisfied with our progress that we’re making on that whole front.

And as a follow up, could you just address any compensation plan changes you’ve enacted as you've integrated the two companies? Thanks.

Jeff, do you want to answer that for the U.S.?

Craig, the compensation plan changes for 2018 are very aligned to view the things that Ravi talked about, namely new acquisition driving multichannel. We've got a component this year that is different for our reps to hit a quarterly production number and then for our strategic accounts team to drive the upstream volume that Ravi talked about. So I feel very good about the components of the comp plan that are very aligned to our strategic objectives whether its gaining share of wallet, going after new business or driving upstream and multichannel selling.

Your next question comes from the line of Ben Cherniavsky of Raymond James. Your line is open.

I’d like to just talk a little bit about the macro and supply conditions, and how -- well let me go back and just recall during previous cycles, Ritchie always actually performed very well in markets where prices were rising, customers were re-fleeting, OEMs were scrambling to keep up. And we know it has been a misconception I think that Ritchie, used to say Ritchie did well in good times and better in bad times. And I think the fact the numbers show if you look at the mid-2000 coming out of the ‘01 recession or even coming out of 2010, the GAAP activity or GTV accelerated with the other bellwethers in the industry. So why would this be -- why would it be different at this point? Why would you not be seeing the higher pricing and the turnover, and the trends to re-fleet, et cetera, the shortages translating into more activity in your yards?

So great question and since you have been a great historian of the company, fair point on our whole concept of how we do, good times and bad times. This is not your normal cycle. And so as I mentioned in my stated remarks, after the elections in November in 2016, we started seeing that in our options where pricings started going out. And throughout 2017, we’ve started seeing pricing go up, and in ’18 it’s continuing, including Orlando where anecdotally we had some customer who have been on 80 things and did not get a single -- we really feel bad about that, but because the pricing was so strong. So right now pricing is at a very, very strong level. So having established that now the problem is this, the usual situation has been and this is not restricted to a single OEM. Most of those, I’d say the majority of the OEMs have talked to all of the majors, for years since the recession, have been cutting down on capacities. And a lot of top suppliers and many of those supply to many of the OEMs, either went out of business or reduced their production. This thing which was really related to the U.S. election and it’s not that there were any loss pass, but there was a business sentiment that just for especially on a local basis and a state basis to really release a lot of projects also contractors start to feeling comfortable bidding on things, it just created a huge frenzy demand that we’ve never seen before. So it’s not like a nominal equipment cycles that you see. And the issue was it caught everyone of the OEMs unless and they were not able to ramp up fast enough and even if they could,…

Yes I mean, because at the end of the day, your story has always been more about a secular growth opportunity and even more recently with IronPlanet, it’s about share of wallet and deploying more people to your channels. So irrespective of what the cycle does, you should be able to grow through that, recognizing that inflection points you’re going to get hit by macro but sooner or later it’s up to you guys to just deliver the growth, right?

Well, that's what we're focused on.

If I could just have one follow-up on, you mentioned in your 2018 commentary some of the yard closures should be taken into consideration. And you know that I think that was -- I applaud you guys for closing some of those yards. But was in part of the strategy also not really to lose any business and to make sure that the sales in those markets go to other yards nearby or to other channels like the marketplace?

No, absolutely, and that’s -- but we’re giving you both the tailwinds and headwinds and the factual stuff to keep into account for modeling purposes, every intent -- because we still feel very strongly that those were the right decisions. And so our intent is to either, so for instance, Raleigh, which we closed. Our view is to try and get it to Nashville or Atlanta. And over St. Louis, it is to try and get it to Kansas City or Chicago. So one is the live piece. The second is to get it on to the weekly option. So our sales team -- because we didn’t change any of the sales teams in these places, so that’s exactly what we’re trying to do. But we just noted it so that all of the stuff is clear and transparent.

Your next question comes from the line of Cherilyn Radbourne of TD Securities. Your line is open.

I wanted to ask a question around the Evergreen Model. And specifically, you continue to guide to an EBITDA margin of 40% in 2019, notwithstanding the fact that you seem to be expressing a fairly cautious view around 2018 from a top-line perspective. What gives you the confidence that you're going to have the top-line growth to create the operating leverage to generate that kind of a margin in 2019?

Cherilyn, let me start it and then Sharon can maybe add stuff. So I think we're -- notwithstanding the supply challenges and I don't want to beat a dead horse. And I think Ben's question we articulated what that was all about. Our job now is to figure out how to grow. And I enumerated in my prepared remarks all of the growth drivers that we have. So what we're really going after is new customers and which that's one of the reasons Orlando did well. We also getting share of wallet, which we did well in Orlando as well and other places. So right now we're -- on the core, it is trying to improve share of wallet because there's not a lot of customer overlap between the two companies and sell each other's offerings. Second, we have a lot of other businesses. GovPlanet, that's a huge contract. And as we mobilize and get revenue growth, we'll have the full year of that in ’19, for instance. And this supply thing is not going to go on forever. We think that -- we're saying at least through first half of ’18. So at some point, the OEMs are going to catch up but also, we're going to find new places. Third this whole area of upstream, Platform Solutions, Marketplace E, so I said we showed tremendous growth on the individual components of Marketplace E, which namely E1 and Daily Marketplace. And so we've got a number of things. And now the thing is we're just very focused, because we've become one team. It's not so much about integration anymore. There are still technology projects, et cetera, that will carry on. And it's all about the whole team. There's only one thing on our minds, drive revenue growth.

And then maybe a follow-up with more of an administrative question. But Sharon could you just clarify your guidance on the tax rate and just decompose that into an effective tax rate and then the cash tax rate?

So what I'm quoting is really what I see is the cash tax rate or what would show up on the current line of the financial statements without consideration for anything coming through deferred tax type changes. And again, the benefit that we are basically projecting into 2018 comes on the heels of U.S. tax reform with what we have as a significant now U.S. based business, but also driven by certainly some of the tax strategies that we have in place so our transfer price agreements and internal financing arrangements.

Your next question comes from the line of Scott Fromson of CIBC. Your line is open.

I just think a quick question on -- what y our customers say about the new combined Ritchie Bros. Is the feedback from customer service consistent along the spectrum from large to small?

So Scott let me take a quick shot at it, and then I'll have Jeff and Brian, maybe quickly comment because they are closer to ground but we also put some quotes in Orlando I think in the press release. So far the reception of the customers have been very positive. They were quite in all lot of how we've taken the innovations in Orlando using both and there is a new spirit with Ritchie Bros in terms of the fact that we were able to take the IronClad Assurance and incorporate that into a live auction. So I think customers are very excited. Our consignees are thrilled about the pricing we've got for them, and not only this auction but we've had options at Phoenix and other places, and they have been a variety. So I think all in all at least the feedback I am getting, we had a huge customer deal in Orlando, I talked to lot of our customers, they are all very positive about the direction of the company. Jeff and Brian, anything you want to add?

One of the things I thought was very unique going into building the Orlando event. We talk a lot about their customers that we weren’t overlap but there obviously were customers that we did have overlap. Where quite frankly both IronPlanet and Ritchie brothers had relationship. So last year the last few years when we went into our IronPlanet legacy went into building in our Orlando event and Ritchie went into building theirs, we were competing obviously for volume to go into Orlando auction, competing and customers where we both had relationships. And I think for a lot of our customers this year, it was so refreshing that the tension wasn’t there and we weren’t -- we were there trying to find as the combined company the right solutions for that customer and we weren't in there competing for equipment. And I really felt a big change in just the relief of that and quite frankly forging even stronger relationships with our customers. So it’s been very, very positive.

So with the new combined platform, is there increased pricing power or is that covered by the harmonized feed structure.

So I don’t like to use those terms at all, because ultimately pricing is a reflection of supply and demand. I think what we’re all about is providing the best value to our customers, be they buyers, be they sellers. And our job is to provide the variety, create customer experiences and there is hundreds of competitors, this is a market that will really punish you if you try to get greedy and that is not at all our view. Our job is to provide the best value for our customers.

Your next question comes from the line of Michael Feniger of Bank of America. Your line is open.

You’re guiding to 40% EBITDA margin by 2019. If I look in the past or use your past 40% EBITDA margins before, I think you guys did above 40% margins from 2003 through 2009. And at the time of your ARR was around 10%. Your revenues now clearly above those levels, your ARR is closer to 13.5%, 14%. So is Ritchie about its business model just like fundamentally different now in terms of how to grow earnings. Is it possibly more to get that $1 of future revenue?

So I think certainly we have some new revenue streams that come with a different cost profile. Those are in our other segments, so basically RBFS, Mascus, et cetera. But we also do have other lines of business that if I take IronClad Assurance, it comes with inspection fee revenue but it also comes with operational cost to be able to drive that. So there have been some minor changes. The profile still of this business is that with additional revenue will come improved flow-through over those costs. And so those costs will not necessarily increase at the same rate of revenue, so that part still remains true. The commitment to getting back to the 40% EBITDA margin was what we announced at the point of acquisition and that was as we are acquiring a company that was operating at a significantly lower operating profit margin index compared to our base business.

I mean, now you guys have two quarters under your belt with IronPlanet. So just how you get a sense of that drop through. I mean if revenues increased 10%, what do you think, Sharon, the right incremental margin arrange we should expect to drop through?

So I’ll point you back to that sequential slide that we showed. You’ll have quarter volatility depending on the revenue levels. And clearly our Q2 and Q4 quarters are highest volume quarters where you would end up with at a more like performance so what we witnessed inside of Q4. And just in addition, we are continuing to execute on our synergy efforts and we will continue to drive volume and keep our expenses well managed.

I think on the core business, just to add, our flow through characteristics have not fundamentally changed. Now, it’s where in moments of time we’ve just brought in IronPlanet. The reason we were confident of the party by ’19 was really to say it has similar characteristics. But they didn’t have the critical mass but we did and we took on a lot of their SG&A and we are now through synergies getting to the right base. And we’re working hard on controlling cost. So it’s just a matter of getting to the revenue basis and you’re now seeing the improvement, so step-by-step. And I don’t think there is many businesses that offer 40% commitment on EBITDA margins. so it’s a good flow through business.

And then just lastly on the mix of equipments you put up on at auctions. I believe OEMs stopped producing in 2015, the oil downturn and the industrial downturn in the US. Just curious if you could comment out the mix of equipment showing up at auctions, maybe the age of the equipment of what you could expect for 2018? Thank you.

Mike, I think in 2017, we really did see a degradation in terms of age with the supply shortages, we’re getting more older equipment. And so because people were giving us -- it was tough to find things that were newer less average because they were all being utilized in the field. And so we hope as the supply eases that we’ll be able to get back. I think in Orlando, we actually had a pretty nice mix and we were very pleased, which is one of the reasons that GTV lot actually increased one with strong pricing but the other was mix. So our aim is to continue to have a good balance mix and partially it is based on what the market can offer and we’ll keep working at it.

And due to the time constraints, our final question comes from the line of Maxim Sytchev of National Bank Financials. Your line is open.

Sharon, the first question is for you, if I may. When we look at SG&A at roughly $93 million, I mean clearly some of that is going to be sticky Q-on-Q. But how should we think about it playing into Q1? I mean, how much of that $92 million will be around versus if we should be thinking about percentage terms as you hit the first part of the year?

So Q1, you would expect to be a little bit lower, just because you do have some incremental based cost still embedded in the SG&A line to support the larger volume that we experienced inside of Q4. And then the only other piece to remove would be the incremental severance and restructuring type costs that showed up on the acquisition line. But those would really be the only additional pieces of information I could provide.

Are you talking about the percentage or the absolute number?

I think, absolute number would go down a little bit just because of those variable-based components that are still embedded inside of SG&A.

And then Ravi just a quick question and again, don’t want to belabor the whole supply issue dynamic but when you talk about second half as the trigger point of seeing some improvement. Is this your internal modeling that tells you or provide those signs, or are there any green shoots from the OEMs that may be you could share with us. I guess any color on those two fronts please?

Max, I wish I had a crystal ball. I don’t know if there’s anyone today who can give a definitive answer on it, because it’s not -- if it were one OEM, it’s one thing. I think it’s affected all the OEMs. It is not based on internal modeling, it’s really based on a composite of all our harmonizations. I’ve personally talked to a lot of dealers, lot of our end user customers and to the OEMs to get a firsthand view. But then our people are constantly in the field talking to them. So what I can say is, it’s not going to improve in the first half, so let’s just hope -- what I’ve heard from some OEMs is at least in certain categories, they do feel that things will start getting back on track in the second half. I think to me the way I am viewing it is, it is what it is. And rather than just worrying about that, because it’s not in our control, we’re now focusing on -- because it is a large market. We’re just going to go hunt. Our salespeople are very clear directed, just cannot be farmers, they’ve got to be hunters they’ve got to find new business. They’ve got to improve the share of wallet. That’s what this is all about. We’ve got to look at all the -- we've got other drivers, whether it’s GovPlanet. So go after those and find the strategic accounts. There is a whole target list of new customers. Every salesperson has a target list of new customers to go after and that’s what we are hoping, because this supply thing who knows. So our job is to get growth and that’s what we’re laser focused on delivering.

Okay. Thank you very much everybody, onwards and upwards.

Thank you. Thanks, everyone. That concludes our call for today.

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