James Kessler: Yes. I’ll just speak more to our customers. It was the biggest turnout that we’ve had from a customer event as we’re going through this. And I think we did the press release where we talked about a historical number of lots that we’re selling. So I think our customers are what I got are very happy with what they’re seeing down here in Orlando, and it was great to get the turnout, which just gets back to the relationship that we have and the trust that we’ve built with our customers and — but I think everyone is going to be happy with how Orlando turned out this year.
John Healy: Great. Thank you.
Operator: Thank you. The next question comes from Larry De Maria from William Blair. Please go ahead.
Larry De Maria: Thanks. The first question – good morning, everybody. The CapEx, I think, is $275 million plus. Is that a — what’s the run rate? Or how do you think about that over the next few years? Is that a good starting point? And then kind of grow from there. Can you just give us some color on that?
Eric Guerin: Yes, it’s Eric. On the CapEx, the $275 million to $325 million range is specifically to 2024. Obviously, we’ll continue to invest in our digital platforms, our PP&E as required. But I wouldn’t build that into your long-term model at this point. I’m just providing guidance for 2024 at this time.
Larry De Maria: Okay. Thank you. And then — maybe to put a finer point, I know you’ve discussed this a few times already, but on the IAA share and the U-shape comments and then in the presentation, you noted some market share gains. Is it safe to say, correct me if wrong, we’re assuming kind of flattish share in ’24 in your GTV, excluding the prior loss? And to follow up on that, are there any levers besides the SLAs and execution that could lead to shifts? I mean I think price is a possibility, but I know buyer fees are more likely not to change, obviously, and that’s the big bulk of the profits there. And any preview on the tenders that can move the needle this way one way or the other this year?
James Kessler: Look, again, it’s always a tough conversation because we don’t get to make the final decision of who decides to move when they move, right? Of course, we know when all the contracts come up and all that fun stuff. But look, we’re just laser-focused on what’s in our control, how do we drive those results? And then we know what the type of industry we’re in, having two viable players that people can choose from. Our hope is there’s some rational market share that comes out of that, that largely makes sense for the type of environment we’re in on the salvage side.
Larry De Maria: Okay. Well, I can appreciate that and sensitivity around it, but is it safe to say that we’re assuming a flat year for IAA excluding the share losses? Or actually, we think we’re going to pick up some share?
James Kessler: Yes. We’re not going to give specifics on automotive by itself. But what I would say on the guidance, we’ve built in the impact of the carrier that we lost. As Sameer described earlier, that will roll off in Q2 through Q4 that is built in.
Larry De Maria: Okay, fair enough. Thank you. Good luck.
Operator: Thank you. The next question comes from Maxim Sytchev from National Bank Financial. Please go ahead.
Maxim Sytchev: Hi. Good morning, gentlemen.
James Kessler: Hey. How are you?
Maxim Sytchev: Good, good. I just wanted to circle back if it’s possible kind of on the legacy equipment side. I mean as pricing has started to normalize, I mean, what we’ve seen in the past is that there’s a high probability of kind of attaching additional services, whether it’s like painting, small repairs and things like that. Are we starting to see this already in the field or you think that’s more of a sort of a back half dynamic from your perspective?
James Kessler: Yes. We – I think your point is correct. And in our mind, I think it’s more of a back half type of environment. We saw a little bit in Orlando as we’re kind of going through it this year. But definitely, as units and price start to change, that becomes an opportunity. And look, I think as the environment changes, all of our services have a different profile to them, right? Our financial services look different in different economic environments. Transportation looks different. So we constantly look at how do we drive more services no matter what environment but some of them do act a little bit differently in certain environments and refurbishment and pain, we think could look differently in the back half. But again, it’s a small part of our complete business.
Maxim Sytchev: Yes. Yes, sure. And then as we think about — as you’re trying to high-grade IAA’s capability, in terms of — I mean, if you can paint us a little bit your path from the journey, is it driven right now by adopting some of the technology tools that you have in the legacy part of the business processes, sort of improvements. Do you mind maybe just talking about those two dynamics and where it was done right now?
James Kessler: Yes. Look, I think it’s a lot of everything, right? The one thing we’ve been impressed with on the salvage side of the business is what they built, and we didn’t have a lot of cats this year. But the process they built, I think, is an unbelievable, flexible, efficient process that does some amazing pickup of cars when a flood happens and then the ASPs they get, even though we had a small season this year, what we saw in due diligence, I’ve been completely impressed with. And the AI investment that IAA has made in IAA vehicle score and different technologies, I’m completely impressed with in some of their ideas, bringing over to the industrial construction side. And then on the operational at the branch level, I think the team just needed an understanding of who’s accountable for what, right?
Whose responsibility is it, who’s going to drive it? And how do we do this as a complete team and creating clarity. So there was no — am I waiting for essential thing to do this or decentralize who’s responsible for it. So we spend a lot of time making sure we are very clear of who’s responsible for what. And then we took the analytics and said, okay, where do we have our problems, where do we drive it? And like I mentioned, we made sure from a financial standpoint, people’s bonuses are tied to — and this goes from the ELT down to the branch that were all tied to the same thing to drive the results that we want. So I think at the branch level, it was more the clarity and making sure we bring visibility to where we have problems and then being able to train against those problems and really helped it.
And our commitment, we’re going to deliver on our SLAs, right? Yes, we’re going to manage our costs as we do it. But our commitment is SLAs drive the results for our customers over deliver. And then like I mentioned everything else, there’s technology things that help. And I think as you look at our ASPs and being up what they were this quarter on the salvage side, a lot of that is the technology that the company has driven. So I think it’s a combination of both.
Maxim Sytchev: All right. Thank you. And in terms of — have you seen any turnover kind of look at a branch level as you have kind of delinked some of the legacy compensation structure? Or what are you seeing…
James Kessler: Now, the funny thing is, I think they appreciate it now because they know what they’re accountable and they know what to drive and they know, okay, it’s — like it’s in my control to go after this and get it, right? I’m not missing a tool where I can’t get it, where before in the past, they didn’t know how to go get it, right? And it was just left to, okay, maybe I get one bonus, maybe I don’t. Now it’s completely in our control of what they’re driving. And I think they’re very appreciative of it. And I think they’re very appreciative of the clarity now of the business as we’re going through it. So I think the team is excited. I’m actually excited that I’m spending in three different regions. We’re getting all the branch managers together from IAA over the next 2 months.
And this is going to be — I’ve met some of them, but this is going to be my chance to meet every branch manager and making sure the culture of what we’re trying to deliver really comes through. But I think the team on the salvage side is very excited to be part of RB Global and they’re appreciative of the changes that we made so far.
Maxim Sytchev: Okay. Excellent. And maybe just one last one, if I may. In terms of Holcar [ph] any update on that side would be great. Thanks so much.
James Kessler: So a big part of our strategy, right? So it’s part of what we want to go after, just like growing salvage share. And I’ll probably just say growing all the share across all of our asset classes, no matter which one we’re talking about. And we believe Holcar is another opportunity for us to go after and grow share and the same thing we did at the branch level. We created clarity, bonus programs and for sales teams and commissions of how do you go after this business. So I think the team is excited, but they’re getting started, and this is really their kickoff in 2024 to go after this business. But like everything, look, it’s building relationships and confidence, so it takes a little bit of time to get it. But we believe in the Holcar business, and we’re going to invest in it and go after that side of the business to and grow share just like we do with all the asset classes that we’re very proud of with the growth that we’ve had over the last three quarters.
Maxim Sytchev: Good to hear. Thank you.
Operator: Thank you. [Operator Instructions] Next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead.
Sabahat Khan: Great. Thanks and good morning. Just maybe a question on the leverage side and capital allocation. Leverage looks like it’s trending well. Presumably, the Yellow sale disposition helps maybe a bit on the cash flow side. Can you maybe give a little bit of color on maybe not just CapEx, maybe just on capital allocation, maybe 2 years out and then maybe 3 to 5 years out, I think in an earlier question, you said CapEx could potentially moderate. Just what are the other things you’d be focused on as CapEx moderate? Would we think about return of capital, other initiatives? Maybe just walk us through what that looks like few years [ph] out?
James Kessler: Yes. I think just to be fair, Eric has only been here for 1.5 months. So I don’t think it’s fair. I’ll pass it to Eric in a second, but I don’t think it’s fair yet to give that much detail as Eric and I and the management team work through in detail all your questions, but I’ll pass it to Eric for a few comments.
Eric Guerin: Yes. What I would say is our commitment to the two times net debt to adjusted EBITDA by the Q1 of 2025 is where we’re focused. So we’ll continue to get to that leverage level while continuing to invest in our digital platform as well as PP&E. So I feel really good about where we are against our commitment. As you noted in my prepared remarks, we’re at 2.2 times net debt through Q4 and on a trajectory to hit our target by Q1 of 25%. To Jim’s point, still looking at capital allocation. I think some of the things you brought up are obviously opportunities that we will look at as we get to the optimal capital structure for the business.
James Kessler: Yes. And I think just in general, I just want to reiterate, as a management team, our commitment to take any capital we spend to get a proper return for it. And that was the one of the biggest things having Eric come in as our CFO of that commitment and working across all departments to make sure that it really gets instilled in each of us down through the organization of our commitment of the return we want to get for any dollar that we spend. And as a leadership team with Eric here, we’re going to be spending a lot of time on this conversation to make sure we’re aligned on it.
Sabahat Khan: That helps. And then maybe to put you back on the spot, James. Just along, I guess, the synergy side, understanding you don’t want to get into the details maybe going forward. But if you just kind of look ahead in terms of maybe an update on what are the bigger buckets that you’re completely done with? And as you think about the remaining kind of integration period, maybe just what are going to be the bigger sources of synergies kind of through the kind of 2025 year?
James Kessler: Yes. Look, the funny thing is when we first combined companies like every company, you go through all the departments. And as you can imagine, procurement becoming one, they’re the easy low-hanging fruit that happens. Unfortunately, we had a CFO transition, right? So Eric just got here. So like every new person coming into an organization, who’ll look at his organization and what makes the most sense for the future. So — but look, we’re going to be laser-focused on every area as a management team of are we operating as efficiently as possible. And this is just never going to stop, right? It’s just going to be a process that we’re always looking at and kind of think about your organization of people, as you think about having a sales team, you have so many of them.
