Release Date: November 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Auction Technology Group PLC (LSE:ATG, Financial) reported a 5% increase in revenue for the full year, reaching $174.2 million, with a 2% organic growth.
- The company's A&A division grew by 12% overall, with a 6% organic growth, driven by value-added services.
- ATG's take rate increased by 0.6%, with the A&A division approaching a 10% take rate, supported by the adoption of value-added services like atgShip, atgAMP, and atgPay.
- The company reported a 35% year-over-year growth in value-added services, contributing significantly to revenue.
- ATG successfully reduced its net debt to $114.7 million, achieving a leverage of 1.4 times, demonstrating strong cash flow management.
Negative Points
- The company's GMV declined by 11% year-over-year, with a 6% decline even after excluding the impact of rotated volume in the I&C division.
- Adjusted diluted EPS decreased by 3% year-over-year, impacted by higher tax rates due to the full-year effect of the increased UK corporation tax.
- Auction services revenue declined by 18%, attributed to a strategic decision to focus on larger auctioneers and reduce acquisition of smaller auction houses.
- The I&C division experienced only 1% growth, with one of its marketplaces, Proxibid, having a difficult year despite improvements in the second half.
- The company anticipates continued challenges in the A&A market, with a reported 6% decline in GMV, reflecting a difficult market environment.
Q & A Highlights
Q: Can you explain the fluctuation in the gray conversion rate from 77% to 74%?
A: The fluctuation is due to auction house mix. Core auctioneers in Gray Iron are consistently 100% timed, but variations occur when other auctioneers, who don't specialize in Gray Iron, sell some of it. This mix can cause fluctuations in conversion rates, which is normal across all asset categories.
Q: What is the range of commission rates in the Industrial and Commercial (I&C) sector?
A: Excluding real estate, which often has low commission rates, I&C commission rates range from 1% to 5%. Larger auctioneers selling big construction assets are at the lower end, while those selling more consumer-oriented items are at the higher end.
Q: Could you provide more details on the CapEx of $12 million?
A: The CapEx includes ongoing platform consolidation and product and tech development. The level is set to ensure we aren't constrained during the year, allowing us to invest in projects with a good ROI.
Q: What is the range of take rates within the Arts and Antiques (A&A) sector?
A: The range starts at 5.5% to 6% for basic services. For clients using additional services like payments, digital marketing, and shipping, the take rate can reach 10% to 12%. Long-term, we aim for a marketplace norm of 10% to 15%.
Q: How do you plan to balance revenue growth and margin?
A: We aim to maintain margins while investing in growth. Current investments in bidder experience and platform improvements are expected to drive growth. We may adjust margins if we see significant growth from these investments.
Q: What is your approach to M&A given the current share price and market conditions?
A: We remain disciplined in our M&A approach, considering complementary marketplaces, adjacent areas, and core technology. Despite lower share prices, we continue to evaluate opportunities that align with our strategic goals.
Q: How do you view the cyclicality of your business, especially in the I&C sector?
A: A&A is procyclical, while I&C has some countercyclicality. Despite recent challenges, we believe I&C's growth in total value traded demonstrates its resilience. We expect this dynamic to continue in a more normalized market.
Q: What are your thoughts on potential tariffs and their impact on the I&C sector?
A: Tariffs could increase the cost of new equipment, making second-hand equipment more attractive. While there are many variables, such a scenario could positively impact our business by increasing demand for used equipment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
