Good morning. My name is Sarah, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Bros. Auctioneers 2011 Year-End Earnings call. [Operator Instructions] I would now like to turn the call over to Mr. Peter Blake, CEO. Mr. Blake, you may begin your conference.

Thanks, Sarah, and good morning, everyone. Thanks for joining us today on our 2011 year-end investor call. I'm dialing in today from Dubai, where we just had -- finished off our first day of a 2-day auction. There are also a number of people gathered in Vancouver, including Rob Mackay, our President; Rob McLeod, our CFO; Bob Armstrong, our Chief Strategic Development Officer; and Jeremy Black, our VP of Business Development. Steve Simpson, our newly appointed Chief Sales Officer, also joins us on the call today from our Phoenix, Arizona office. Given my distant location, I'm going to keep my comments to a minimum and let the rest of the team do most of the talking today. However, before I pass the call back to them, let me convey how pleased we our with our performance in 2011. We achieved record gross auction proceeds of $3.7 billion for the year, achieved our largest second and fourth fiscal quarters ever, earned more revenue than ever before and delivered earnings before growth -- gross earnings before tax growth of over 70%, well in excess of our guidance for the year. On top of that notable financial performance, we also executed well on our strategic plan. Bob will talk about some of these highlights in a minute, and it's important for us to draw your attention to the significant enhancements that we made to our business in 2011 that sets us up well for the future. Jeremy, do you mind taking us through the usual regulatory disclaimers?

Sure, Pete. Good morning. Before we go on, we need to make a Safe Harbor statement. Before we go on, I need to make Safe Harbor statement. The following discussion will include forward-looking statements. Comments that are not statements 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 from time to time in our securities filings, including our management's discussion and analysis of financial condition and results of operations for the period ended December 31, 2011, which is available on the SEC, SEDAR and company websites. Actual results may differ materially from those contemplated in the forward-looking statements. We do not undertake any obligation to update the information contained on this call, which speaks only as of today's date. Also, during today's call, we will talk about gross auction proceeds, or GAP, which represent the total proceeds from all items sold at our auctions. Our definition of gross auction proceeds may differ from those used by other participants in our industry. GAP is not a measure of financial performance and is not presented in our financial statements. The most directly comparable measure in our statements is auction revenues, which represent the revenues we earn from our auctions. Rob Mackay, do you want to talk about our -- the recent pricing environment and introduce Steve.

Thanks, Jeremy, I will. Good morning, everyone. As many of you know, we created a new senior executive group effective January 1 of this year, which we call our senior leadership team. This team is made up of our 7 senior executives and includes some familiar names like Bob, Rob, Pete and myself. There are several names on our senior leadership team that you've probably not heard of before, including Andrew Muller, our new Chief People Officer, or Head of HR; Kenton Low, our new Chief Marketing Officer; and Steve Simpson, our new Chief Sales Officer. While Kenton and Andrew are fairly new additions to our team from outside the Ritchie Bros. family, Steve's been around the company for a long time. Over the last 22 years, Steve has worked in various sales capacities, starting as a Territory Manager in Vancouver, then as our Manager in Australia and, most recently, Senior VP for the U.S. West. Steve has now taken over responsibility from me for our global sales organization. I have assumed Bob Armstrong's operational responsibilities, including our auction operations activities, property group and our valuation and appraisal group while Bob is now primarily responsible for driving our strategic planning process and certain key strategic initiatives that he will talk more about in a minute. Before I pass the call to Steve to say a few words about current market dynamics and the expectations for 2012, let me comment briefly on the current pricing environment. On our last call at the end of Q3, we talked about how used price -- pricing increases seem to have leveled off somewhat during the third quarter while prices for most categories of late-model used equipment remain strong. As Q4 unfolded, prices became somewhat more robust, as activity picked up in the quarter and…

Thanks, Rob. Morning, everybody. We've seen a lot of strength in the market that our auctions to-date in 2012. Our first sale of the year in Las Vegas in late January was very strong, and that has set the tone for the year for us so far. Orlando was an incredible success. We sold more than 10,000 items in 6 days and achieved GAP of over $203 million. We saw good results in Tipton, California at our largest sale ever in that market. And in number of other locations, we are expecting that momentum to carry on at least through the first half of the year. There a lot of positive indicators that lead us to believe 2012 will be another good year. The OEMs, dealers and other distributors, rental companies and finance companies have all been sending positive messages lately, and we are encouraged by the good news. Contractors also seem to be more optimistic, having some more work on the books, and the public companies have been reporting improved margins with some CapEx to spend, creating an appetite for new equipment. That being said, it remains very competitive market. And until the supply of new equipment catches up with demand, we will need to be on our toes and very focused on serving and delivering value to our customers. That competition means we will continue to aggressively pursue underwritten business. In 2011, we ended the year with 36% of our business at risk, which is a higher level than we've seen in recent years. And as we look ahead to 2012, I expect our underwritten business will stay at and above trend level, reflecting our current strategies to get those deals that we view as the key ones to have to build our auctions. I don't think it will go higher than 2011 level, but I also don't see it as going back to 25% in 2012. Looking ahead to the remainder of the year, there's still some indicators that cause us to remain somewhat cautious about the used equipment market. Construction spending remains low in the U.S. and in Europe and is acting as a bit of an offset to replacement of equipment demand, which was the key driver of the used equipment market in 2011. Europe is in a state of turmoil, and it is uncertain of how it will play out. However, outside the European theater, provided economic activity moves forward in a positive direction and the OEMs continue growing new sales to fill the top of the equipment supply funnel, our activity levels should benefit. We continue to introduce our unreserved auctions to new customers around the world, and this sets us up for continued success in 2012. With new services adding the appeal to our auctions, we are well positioned to harvest the rewards of our recent operating and investing decisions. Now I'll pass you over to Bob Armstrong.

Thanks, Steve, and good morning, everyone. We talked on our Q3 call about the implementation of our strategic initiatives on July 1, 2011, including our Detailed Equipment Information program, which involves providing our bidders with an average of 50 high-resolution photos and detailed information about each of the major pieces of equipment in our auctions. We also launched our finance, insurance and warranty programs. And because we've described those to you in the past, I won't go into much detail today, other than to report that they have been well received by our consumers. These programs are contributing to increased confidence and ease for our customers, and feedback has been very favorable. The introduction of our expanded administrative fee structure on July 1 also went up well. Our repeat and first-time bidder numbers have continued to grow, and there has not been any noticeable impact on bidder registrations, or GAP, as a result of these changes to our fee structure. One interesting phenomenon that we've been seeing is healthy growth in our Internet traffic. We experienced more than 4 million unique visitors to our website in 2011, which was up 25% compared to 2010, and our non-English speaking visits continued to grow as well, up 22% over 2010. Our website is, not surprisingly, a critical dimension to many of our customer relationships, as well as the key vehicle for introducing new customers around the world to our offerings. As we look to the future, we see that trend continuing, and it's for that reason that we are looking to add complementary online services to keep that momentum going. This is one of my focus areas in my new role. As Chief Strategic Development Officer, I have responsibility for our IT and business development groups, as well as some other activities.…

Thanks, Bob, and good morning, everyone. I'd like to highlight some key items from our press release that we issued this morning and our MD&A that is being filed as we speak. Our 2011 auction revenues were $396 million, including approximately $22 million of incremental revenue from changes to our fee structure that took effect July 1. Our total auction revenue rate for 2011 was 10.66%. Excluding the incremental fee revenue, our auction revenue rate would have been 10.07% for 2011, which compares to 10.9% in 2010 and was below our expected range of 10.25% to 10.75%. This decrease in our auction revenue rate was driven by the performance of our at-risk business, which, as we discussed on prior calls, was impacted by strong competition from brokers, dealers and other participants in the market. After the particularly strong performance of our at-risk business in 2010, the tough competitive environment of 2011 took the rate back to more historic levels. Our auction revenue rate in quarter 4 was 10.91%. Excluding the $12.9 million of incremental fee income in quarter 4 2011, our auction revenue rate would have been 10.05% compared to 11.06% in the fourth quarter of 2010. The quarter 4 2010 rate was one of our highest ever quarterly auction revenue rates. The main contributor to the above trend achievement in 2010 and this historic trend rate in 2011 was the performance of our at-risk business. One of our competitive advantages is our ability to bring our financial sources to bear when pursuing packages of equipment in a competitive environment. We saw a much more competitive marketplace in 2011, and we responded to this competitive environment by working with our consumers to strategically use at-risk proposals to win business and get significant packages of equipment into our yards. The 13%…

Thanks, Rob. For 2012, we are guiding to GAP in the range of $3.7 billion to $4.1 billion. Our auction revenue rate guidance is in the range of 11% to 11.75%, including the impact of incremental administrative fee revenues which are expected to add roughly $50 million in total to auction revenues in 2012, which is an incremental approximately $25 million to $30 million over the additional revenue in 2011. The performance of our at-risk business will continue to be the key variable impacting our actual auction revenue rate, and actual results could be above or below this range. We believe that our 2012 adjusted earnings before tax will grow by at least 15% compared to 2011. Actual results could be above or below this range. Our long-term targets remain annual adjusted EPS growth of at least 15% while working towards and then maintaining an average return on invested capital of at least 15% over the long term and a minimum EBITDA margin of 40%. Before Pete offers some concluding remarks, I'd like to comment briefly about the 10 years of auction data that is now presented on our website in the Investors section of the About Ritchie Bros. tab on the rbauction.com website. We made the decision in 2011 to present this data to further increase transparency and to highlight the lumpiness inherent in our business from one month to the next and year-over-year. This lumpiness is part of the reason why we don't focus too much attention on individual auction results and also why we encourage the investment community to focus on periods longer than a quarter. 2011 was a great example of that, particularly after the temporary market dislocation in Q3. We hope this data is useful to you and trust it gives you interesting insight into our business. And now back to Peter.

Okay. Thanks, Jeremy. And as I said, I'm very pleased with our performance in 2011 and the fact that we are back on track for our goals. We made some great strides forward in 2011 with successful implementation of our new initiatives, and we feel dramatically improved the auction experience for our current and future customers. Now that this transformation is embedded in our business, our focus is shifting to harvesting the rewards from the operating and investing decisions we've made over the last number of years. Although Bob is investigating some exciting new initiatives, the vast majority of our team is firmly planted in our core unreserved auction business and a laser focus on growing it, which should generate improved productivity and margin to 2012. We thank you for your patience and loyalty over the last few years as we get our business back on track, and we assure you that we have a long runway ahead of us. So, Sarah, can you please open the call for questions now?

[Operator Instructions] And your first question comes from the line of Cherilyn Radbourne from TD Securities.

I wonder if I could start by just asking you to clarify the comments you made with respect to a pricing lift to-date in 2012. Was that year-over-year or quarter-over-quarter that you were referring to?

It's Rob here. It's both quarter-over-quarter and year-over-year vis-à-vis pricing that we saw a year ago in early sales that we've had a lift over that, and we've seen a nice lift in what we saw coming out of Q3 and Q4 as we go into early sales so far this year.

Okay. And could I ask you to give a bit more perspective on how the business might accommodate the needs of customers that are not served by unreserved auctions while not cannibalizing the existing platform? How do you think about that?

Cherilyn, this is Bob. I'm not going to frustrate you, but we can't talk too much about it obviously until it's figured out. The purpose today really was to let you guys know that we're looking. We're open to ideas, and that there are -- we recognize opportunities. But it's clear to us that there are a lot of people out there who are buying and selling equipment that are not going to use our auctions. The total addressable market for Ritchie Bros. core business is $10 billion, $20 billion. It's huge. But it's not the whole $100 billion. And we're looking to develop ways to meet the needs of those other people. We're open-minded. We're flexible. It's -- by definition, we won't be cannibalizing because those people don't want to use our marketplace today.

Okay, that's helpful. And maybe if I could just ask one modeling question. Your quarterly run rate on G&A has been sort of in the $50 million range. So if we multiply that by 4, and add $9 million for incremental costs in 2012, plus some inflation, is that a reasonable way to be thinking about G&A for 2012?

Cherilyn, this is Rob McLeod. Yes, that wouldn't be too far off the mark. We're -- as we said in our comments, we're pretty -- we're very focused on controlling our SG&A costs and making sure that we are growing our revenue before we're increasing our capacity and our costs.

But just to be clear, Jeremy here. We actually don't provide guidance on SG&A. So that isn't guidance.

Your next question comes from the line of Nate Brochmann from William Blair.

I wanted to talk a little bit about the underlying environment. I mean, definitely, it seems that the buying and selling of equipments starting to kind of unfreeze a little bit, as a lot of contractors don't feel that the market's getting necessarily worse but certain to free up of some CapEx dollars. Just wondering -- I mean, it seems that we've seen that out the first couple auctions, how you're kind of -- what are you hearing from your customers and how you see that playing out as the year progresses?

It's Rob here, Nate. Well, predominantly in the U.S. market where we've sort of had our early experiences here, the contractor community is speaking to some more confidence or, at least, talking about work that they have on their books, actively looking for upgrading their equipment. The bigger contractors are looking to spend some CapEx, which has now been afforded them. So there's -- it's -- altogether, it's starting to generate some activity out there. For sure, in the back of everybody's minds, is the looming month of November. And in the U.S. market in -- people are conscious of what's coming down the pipe. But in the same breath, from the sales that we've had earlier this year, we're starting to -- we're hearing more confidence in the contractor market than we have for some time.

That's great. And then for Bob, I was wondering, with some of these maybe potential "new initiatives," whether that's going to stay in line with the focus on the ROIC improvement and on the general cost side in terms of how you're balancing off those maybe potential new investments versus the return expectations?

Excellent question, Nate, and I have to be honest with you, it's a bit too soon. It really depends on how we decide to bite this off. It may well be that we identify a business model that's higher margin or one that's lower margin, one that's higher return, lower return. Then we'll have to assess whether or not it's a good fit into the corporate profile. It's an excellent question. It's one that we'll be debating as we identify what opportunities we want to chase after.

Your next question comes from the line of Hamzah Mazari from Credit Suisse.

The first question is just on CapEx. How long do you expect to stay at this $60 million run rate of CapEx before you feel like you need to ramp that up or make more investments? How should we think about that?

It's Rob. Probably the next couple of few years, we'll probably in that $50 million, $60 million, $70 million range. As I said, we're trying to -- well, our plan is to take advantage of the investment in capacity infrastructure that we built up over the last few years and maximize its use and contribution to the bottom line. So probably for the next few years, you'll be hearing numbers like $50 million to $70 million.

Got you. And then on the Orlando auction, could you remind us how much of the product went overseas? And how that compared to your expectation and past auctions?

Hamzah, it's Rob McLeod, again. It was -- as I recall, I believe it's in the low 30%, but that's the United States.

And that was in line with what you guys were projecting?

Actually, we don't actually project it in advance to the -- in advance of the auction. But from what I recall, I do believe that was similar to the last year.

Got you. And then just a last question for me. On your at-risk business, I realized that creates volatility in your auction revenue rate, but maybe if you could shed some light or commentary on what your past record has been in terms of at-risk business and whether that generally has contributed to a higher auction revenue rate?

Yes, it's Rob here. Typically, our at-risk business follows economic cycles. And over time, as we've chased the economy up and chased the economy down, our auction revenue rate fluctuates. Today, the market is -- got some activity in it. We've got supply challenge in many instances, and we've got a lot more people in the market that are active and chasing the same supply of equipment, if you will. And we tend to get more aggressive when stuff like this happens, so that we can maintain market share or grow our business. And so each and everyday, we're out there chasing deals that more people are on than we've previously experienced. When the market goes down, there's lots of people in the world that tend to run for cover and get out of playing in the market or less out to take a risk. And when the market returns, they sort of come back out of hibernation and start to play a game in the market. So we're in that point in time right now, and there's lots of people out there chasing the equipment. And there's, as I say, a limited supply, albeit that the manufacturers are starting to react and we're starting to see the supply being replenished.

Your next question comes from the line of Nick Coppola from Thompson Research.

I'm wondering if you have any comments on what you're seeing in 2012 as far as your competitive environment relative to what you kind of saw at the end of 2011. I'm kind of thinking about the outlook that you have for that 11/11 -- 11.75 rate that you discussed. What gives you, I guess, confidence that you can get to that rate up to that range?

It's Rob here. I guess we provide the range because it's going to ebb and flow depending upon what we see as we go forward. The competitive nature of the market here in Q1 is really no different than it was in Q4. It's not that far apart. And the market activity continues to pick up, so the competitiveness of the market will. We envision as we go through 2012, you're going to start to see some supply get into the marketplace. You're going to start to see CapEx being spent by companies, which, of course, affords them to release used equipment, which provides more supply to the market. So all in all, as we work through the year, assuming that things remain as we anticipate, we should see a supply of equipment into the marketplace. That, in itself, will tend to provide more equipment for people to chase, and it may diminish somewhat the high level of competitiveness that we're experiencing right now.

Okay. And then I also wanted to ask you about the underwritten business. So I think I also heard you say that you're not anticipating it being higher next year. But the competitive environment continues to be difficult. What's your decision-making process look like when you're deciding whether to underwrite a business or not? Could you see it potentially getting higher?

It's Rob here, again. It's a deal-by-deal situation. As I mentioned, the --we're envisioning that the supply feed to the market is going to offset it somewhat. We still go look at each deal as they come along, as which is the strategic ones, what are the ones that we want to have. For it to get higher than its current levels is probably not something that we expect. But as Steve mentioned, for it to go back down to our traditional 25% is probably something we're not going to see either in 2012. So best guess from us is going to be somewhere in between the 2 numbers, and there's still economic things that could occur during the year that may change that.

Your next question comes from the line of Neil Frohnapple from Northcoast Research.

As a follow-up to Nick's question, looking at the 2012 ARR guidance, if you back out the benefit from the revised fee structure of 140 basis points, it implies an ARR of 9.6% to, call it, 10.35%, which is below your guys' previous stated long-term range. Is the outlook solely based on the tightness on used equipment market, or are you guys just being more conservative at these points?

Neil, it's Rob McLeod. Probably, yes and yes. We're being conservative. We've gone through a few years here where our natural optimism was tested and challenged. And -- but also it is a reflection of the particularly competitive environment that we have right now, which, again, is different from what it was in 2008, 2009, 2010. And so that auction revenue rate is a -- that we're quoting there is really a reflection of 2012 in itself, and it may well change when we're giving you guidance for 2013, 2014 going forward. And also just to clarify, that 1.4% incremental effect that you comp, that you noted there, I'm not sure I would build 1.4% in -- right off the bat into your models.

Okay, all right. And then secondly, can you guys give us some more color on what drove the 18% increase in GAP at the Orlando auction? Was it something auction-specific or is it really just underlying improvements in the auction market? And then did you guys do anything different to secure more consignments for the Orlando auction this year versus the 2011 auction?

It's Rob here. I guess unless you've been to Orlando or seen one of the auctions down there, it well and truly is an event. The Florida auction market in February has been in existence for 30 or 40 years, and we continue to push the envelope to provide sort of the best show in town, the best draw for a global audience. It's probably one of the biggest auctions we hold anywhere for foreign attendees. And the consignors take comfort in the fact that it well and truly will be in-person event, where people actually travel and come there because of the sheer quantum of equipment. So we get consignments to that auction sale from many, many states and some of them very far away, as far as up in the northeast. And people are willing to take their equipment down there, knowing that we're going to attract a global audience, knowing that we're going to have a large quantum of people there in person that the are going to touch and feel it. And this was just another year where our sales force went out there and sold it, and we've got a lot of participation from a lot more people this year. We've had a nice lift in pricing. So collectively, we did a really good job to make it a bigger event than it was last year and a new bar for us to jump over next year.

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

I don't want to belabor this auction revenue rate issue, but I'm going to any way, I guess. I'm just wondering how -- what we're seeing is different from previous periods of strong pricing? Because as I recall, in those times, say, like '05, '06, '07, when you were in a similar kind of situation, with tight supply of equipment and prices were going up, your -- those trends actually benefited your underwritten business. You were going in with bids, and prices would go up. And you'd do better than you expected and the margin was very strong. So what's changed now? Is this really a function of more competition in the market, or is it a more transparent market today where consignors have better visibility on real time pricing? I just wonder if you can elaborate on that. And with that in mind, whether or not there's any permanent changes that impair your ability to keep that margin up at the range where you'd like it to be?

It's Rob here, Ben. I'll start this one, I guess. First of all, I don't think there's any long-term change to what we're seeing. For sure, the transparency and the information flow in the market, each and every day, benefits people. If you look back in our business 10 or 15 years ago, the information flow and the knowledge out there was probably a big asset to us insomuch that we had the information and many other people didn't. So when we had the ability to initially see trends turn, perhaps others had a lag before they saw it. Today, with everything that's so readily available to people, there's not much stuff that's secret anymore to anybody, and people can foresee trends and pricing changes as well as most now. So as far as -- in the past, I don't know that when the market picked up before that our auction revenue rate wasn't challenged. For sure, every time the market picks up, there's more competition. In this instance today, I just think that the competition is more aggressive and you've got to be more aggressive to go and get the business.

Ben, it's Jeremy here. I might add, too, that one of the key things that's different this time versus '05, '06 is the -- I guess the precipitous drop in new production that occurred in sort of mid-'08 until about mid-2010. We didn't see that last time. Last time, it was a gradual ramping up of production, and that production level couldn't keep up with demand. This time, we had 2 years where the production was basically turned off, and that has a big impact. Now when you're looking at selling late-model equipment, there's just a lot less of it out there, and that has a big, big impact when you've got a lot of competitors chasing that late-model low-hour gear.

I think there's one other aspect to that, too, Ben. The past economic downturn, there was a more free flow of equipment around the world. Today, there isn't. With EPA engines and other restraints of equipment flow, there doesn't tend to be the inflow and outflow so much of equipment from some countries to others because of restrictions. So that's having an effect also.

Okay, that's helpful. And maybe one for Bob, if I could. Just on the strategy of building out your services for people who don't use the auction business. Hasn't your strategy always been, in the past, that you wanted to convert the people who weren't using your auction business into Ritchie Bros, sort of show them the lights, so to speak, on what you had to offer and convince them that even though they were reluctant to use an unreserved auction that it had its merits. And so how do you reconcile your strategy of maybe accepting that there's some people out there who will never use your auction process and differentiating them from the ones who may use your auction process that you would want to convert?

Fair question, Ben, and you're absolutely right. In the past, when we talked about our strategy, it's always been about how to introduce the unreserved auctions to other people. But we would have to be honest with you and tell you, we weren't marketing it to everybody. There are people out there who weren't going to use it, so they weren't getting a lot of our phone calls and meetings. Unluckily, there were and still are billions of transactions that are well suited to our model that we're penetrating into. That's where all our new customers come from every year. That continues to be the #1 source of growth for the business and will be for as long as I'm with this company, I'm sure. The core business is -- -- has a huge runway ahead of it. But it doesn't have a $100 billion runway, and I don't think -- I know you would think there was. A lot of analyst reports have written as saying, Ritchie Bros. always talks about this massive marketplace, but one day, they'll be honest and say it's not all addressable by the unreserved auctions, and that's a fair comment. So our view is continue pushing forward with the unreserved model into the people that are likely users of that, of which there are billions of transactions. However, recognize, admit, whatever, that there's another group out there. And given the market position that Ritchie Bros. has built, we're sitting here with a unique opportunity to enter that uncharted market and create a valuable service for people that don't have a valuable service today. Wouldn't it be smart -- wouldn't it create good shareholder value for us to go and provide a valuable service to those people as well? It's not a change from strategy.…

For people who never thought they'd use the unreserved auction may convert.

I think it's we have to admit to ourselves that there's a lot of people out there, when they hear the word auction, they run away because they have a bad experience when they bought a rug once, or they got ripped off online. And so they have a bad vision of auctions. And a lot of our time, we're having a hard time getting past that. While if we can maybe develop some relationships in another dimension, that gives you an opening to introduce perhaps your most powerful tool.

Okay. And I suppose when you talk about acquisitions, those would include potential online, as well as sort of bricks and mortar kind of businesses?

Very open-minded.

Okay. Can I squeeze one in for Rob McLeod, just on housekeeping? And I think you mentioned the impact of FX on G&A. I may have missed it, though, for the quarter. Was there -- how did that -- what was the positive or negative impact of FX on G&A for fourth quarter?

We didn't mention it. And in the fourth quarter of 2011 versus the fourth quarter of 2010, on G&A, it was pretty minimal, pretty minimal effect. The average rates and the mix of our expenditures caused that.

So what we saw with G&A as a percent of auction proceeds was really just your operating leverage there?

Yes.

Your next question comes from the line of Scott Schneeberger from Oppenheimer.

Just following up on that previously -- the question previously with regard to maybe moving beyond unreserves. Is there -- are you biased more towards acquisition versus organic growth into other areas? What's the thought process there?

Scott, it's Bob. I guess I wouldn't say we have a bias. What we don't have today is the internal capacity -- capability to sort of -- all of a sudden do this. And so we'll have to -- our view is we either spend a lot of time, effort and risk building something or we partner with somebody, merge, joint venture, association, acquisition, whatever, somehow get together with somebody who's doing something. Until we have a more fulsome definition, it would be negligent of me to say we've got a bias or a lead over somebody -- pieces of the the puzzle comes through.

When I hope you answer, but I'm not so sure you will. The fact that you're announcing it today, does that mean that something's imminent in the near term?

Scott, the fact we're announcing it today is because we've been changing -- we changed my job to make me focus on it, and people are saying what's Bob's job? And my mother is listening to this call right now and she needs to know so.

We can look, but just kind of a timing thing. Looking at your auctions year-over-year in the first quarter, anything worth pointing out to us on just the timing basis as we get ready for first quarter? And then separately, I'll sneak another one in. You showed a nice leverage on G&A in the fourth quarter. It's the first quarter in a while. And you've given this 40% EBITDA margin growth, so -- and based on backwards looking on the revenue of the prior year. So assuming that revenue goes up and you're managing that, that should be easy to control. Just curious, comments on what if there is an issue with revenue, what -- is it going to be cut, cut, cut to make sure you maintain the 40%?

Scott, it's Rob McLeod, and I'll try to tackle that. The -- yes, our focus, for sure, is on that margin. But one of Jeremy's earlier comments was the lumpiness of our business month-to-month and quarter-to-quarter. And so just as we saw in the quarter 3 last year, where there was a shift in some of business from quarter 3 into quarter 4, we won't necessarily -- we don't want to overreact to one month blip or one quarter blip in terms of the business, and it's our job to understand what's undermining that and what's truly happening and what's going to happen in the next subsequent 3 months, for example. And so if that's -- as you say, if there's that revenue challenge in quarter 1, we're not going to turn around and have a wholesale 10% layoff of employees or something like that, because it is not in the best interest of the -- long-term interest of the business for sure.

Okay. No, that's helpful. I was -- and I was actually asking more of an annual basis. So that's okay. It's good to hear, but I appreciate that color. And then just curious, on the first question, which I probably should've asked separately. But anything weird in the first quarter of timing year-over-year? We can look, but just curious if you have any comments.

No, there isn't anything weird, so far, in the first quarter or anticipating in the first quarter.

Your next question comes from the line of Jamie Sullivan from RBC Capital Markets.

A question on the pretax income growth. You mentioned 15%. I'm getting -- if we just add the incremental benefit from the annualizing the buyer fee, I'm getting 17% growth from that alone. So I'm just wondering what we should take away from that, and how you're thinking about the rest of the business and potential growth there.

Yes, Jamie. It's Jeremy here, yes. As we did last year, we gave sort of what we felt was a reasonable estimate, pardon me, of our growth expectation for the year. So we said at least 15%. We're trying to be realistic here and somewhat conservative, given there still is a degree of uncertainty in the marketplace.

Okay. And I guess the next question then would be what's your confidence then in the 40% EBITDA margin target that you laid out, and what you can do, whether it's from a top line perspective or from a cost perspective to hit that target?

Jamie, it's Rob. And the -- to achieve that 40% margin, the -- well, obviously driving revenue and the structuring our at-risk deals, so that you're maximizing the contribution from those It's obviously the biggest lever we have. Secondary lever is, obviously, the expenditures and a very natural one that we don't even need to turn on, if you will, is appraise our bonus structures that are tied to revenue and tied to contribution throughout the organization now. So that's that a pressure valve, if you like, on that and then also just the structure of the business or structure of the -- the cost structure, sorry, of the business. That is geared to the capacity that we're -- have had and are expecting to have. And if there's a fundamental change in that, then there will be a fundamental change in the -- in that cost structure as well.

Okay, that's helpful. And then just -- lastly, just on the incremental cost from the new initiatives. You came in $9 million this year. It was about $6 million below of what you originally thought. Just wondered what specifically did you find to gain efficiencies. Did you only need 60% of the heads, or is it a timing issue? Just wondering what helped that number?

Jamie, it's Rob, again. And yes, it really is more of a timing issue. Part of the cost in 2012 is -- surrounds our realignment of sales and operations and the buildout of our operations management throughout the whole organization. And we had anticipated having to hire a number of new people at the end of 2011 to facilitate that, and what ended up happening is we sourced those people internally. So they got replaced later on the year and are being replaced right now in early 2012. And so from that point of view, it was a timing issue. And also the ramp-up of our employees, new employees for our Detailed Equipment Information Program, again, probably was pushed out a little bit further into 2011, but you get obviously 12 months of that in 2012.

And then any FX impact assumptions for GAP for this year, that you're baking in?

Minimal, to be frank. But -- one, because of the expectations of Canadian dollar versus the euro.

Your next question comes from the line of Neil Forster from Scotia bank.

Just a quick question on GAP, and a similar question was asked on auction revenue rates. We're seeing positive pricing. The view is loosening supply constraints on new equipment as the year unfolds. Strong result so far in Q1, particularly with Orlando and some other auctions. On the full year guidance, are we being a little bit conservative here, or -- just if you could describe kind of how you're thinking about that.

Neil, it's Jeremy here, because nobody else is talking so I have to. When we developed our guidance, we are talking to our guys in the field and getting a sense for what's going on in the marketplace in which we play in, and we kind of build our guidance up from there. And we put a -- deliberately put a range on it. It's a pretty wide range, and that does reflect, as I said earlier, a degree of uncertainty in the marketplace. So although there's a lot of positive -- there are a lot of positive signs both macro and otherwise in the U.S. and then actually in North America, in general, there is still uncertainty out there, and Europe is just one example of that. So when we put together our guidance, we reflect that uncertainty. And we're sitting here at the start of a year and it's difficult for us to have clear visibility into the second half of the year, and it's always the case. So we started with a pretty wide range. And as the year goes on and there's better clarity into the second half of the year, we'll refine our guidance as appropriate.

Okay, that's helpful. And just wondering if you guys are seeing small rental companies coming back into the market, just given improving credit conditions?

It's Rob here, Neil. I wouldn't say we're seeing any significant leap in small companies. They're getting -- the ones that are out there are getting more active. Obviously, we've seen some acquisitions going on but no trend to see any graphic growth of small rental companies.

Okay. And then just in competition, if you could clarify. Is this -- like are we seeing an increase in the number of competitors or is it just the usual suspects becoming more aggressive, just given the supply issues?

There's various places around the world where we operate. We're seeing some increased competition from some new players in the field. But I think for the most part, it's the dormant ones becoming more active.

Perfect. And just a quick one, and this might be an obvious question. I think I know the answer. But on the proposed new initiatives, can we safely assume that this will not in anyway involve auctions with reserve prices?

Not involve auctions with reserve prices. Well I can tell you what it won't involve, it won't involve auctions with unreserved losses because we have that, right. But the only thing that we've actually said.

So you're not ruling out kind of deviating from the model of strictly unreserved? Is that...

Well, you've got a core business that's strictly unreserved, and it serves a valuable, I mean, and large and growing customer base. And there's a whole bunch of other people that don't want to use that model and not -- again, use the existing channels right now. So we're -- I would say we're open-minded. The -- it's hard for Ritchie Bros. to go and have a poster that says, "We now offer unreserved -- now offer reserve auctions." So I wouldn't be expecting that, but we're not going to draw a line for anything at this stage. It really depends on what it takes to meet the needs of the people that we're not able to currently meet, and in fact, the no channels are able to currently meet.

Okay, Sarah. We should wrap up the call now. But thanks, everybody for participating. I appreciate the questions, and we'll stay hard at it. And we look forward to talking to you at the end of Q1. Thanks, everyone.

And this concludes today's conference call. You may now disconnect.