Ritchie Bros. Auctioneers

So it was my impression that Adair indirectly at least mentioned that Copart simply wasn't willing to offer Progressive very similar rates compared to IAA because he didn't particularly name them, but given that they are the only lost volume, and Adair mentioned that Copart chose not to do business with one party, that's sort of the takeaway that I had coming out of that call.

And you can even see in the margin that the Progressive volume seems to come with quite low tech rates because Copart's auto segment has a margin of thirty-six percent, and if you go through the filings of Ritchie Brothers, which is the owner of IAA, they say that the auto segment is somewhere in the fifteen to twenty percent range, so significantly lower than Copart's.

When I hear about the profit margin difference between these two companies, I think the first thing that comes to mind is that old Bezos quote about, "Your margin is my opportunity." But if IAA is willing to accept a lower margin, then I would very much worry as a shareholder about there being a race to the bottom on pricing between Copart and IAA.

And I think as Buffett and Munger would probably say, all it really takes is one ruthless competitor to ruin what is otherwise a wonderful business.

And so right now we're only talking about Progressive, but what if other insurers start switching volume over to IAA for similar reasons? Then we have a bigger problem on our hands.

I think that's a good point, and it's actually also the one question that immediately popped up in my head when I looked at it.

But after digging into IAA's filings, it looks like the majority of the margin difference is due to depreciation relative to IAA's purchase price when Ritchie Brothers, which again is the parent company, bought IAA.

And then you also have stock-based comp and obviously, and this is coming back now, the leases that it pays for its land because again, they don't own it, and that appears to be the majority of the margin difference.

Zach Caleros and the Winnipeg Blue Bombers have jogged themselves onto the field for the first time in this ballgame.

Your Ritchie Brothers auctioneer stats on Zach, his 86th game with the Winnipeg Blue Bombers is today.

A record of 59-26 all-time against Saskatchewan in his career.

He's 14-8, but he was ticked off after the Labor Day Classic last week in Regina.

This is the 620 CKRM Cooperators Rider Broadcast Network.

Well, zeroes on the scoreboard through the opening first quarter.

Let's take a look at the statistics brought to you by Ritchie Brothers Auctioneers.

The Riders had three first downs to Winnipeg's two.

Yeah.

So, I mean, you don't have to spend very much time on Ritchie Brothers or Stefs or any of the sites to find out right now that, like, combines and seeders specifically are a huge problem in the Canadian, like, machinery network, used ones.

And obviously with our Canadian dollar backing off from the last two years, you're not gonna go in and find out that new equipment's cheaper.

So I, I would argue that there's some pretty huge opportunities right now actually to work with your dealership on some one-to...

So they offer them faster vehicle pickup times and better storage lot placements, and it's also willing to operate, and that's the major part, at quite a low margin on the Progressive business.

So it was my impression that Adair, indirectly at least, mentioned that Copart simply wasn't willing to offer Progressive very similar rates compared to IAA because he didn't particularly name them, but given that they are the only lost volume and Adair mentioned that Copart chose not to do business with one party, that's sort of the takeaway that I had coming out of that call, and you can even see in the margin that the Progressive volume seems to come with quite low tech rates because Copart's auto segment has a margin of 36%, and if you go through the filings of Ritchie Brothers, which is the owner of IAA, they say that the auto segment is somewhere in the 15 to 20% range, so significantly lower than Copart's.

When I hear about the profit margin difference between these two companies, I think the first thing that comes to mind is that old Bezos quote about your margin is my opportunity.

But if IAA is willing to accept a lower margin, then I would very much worry as a shareholder about there being a race to the bottom on pricing between Copart and IAA.

And so right now, we're only talking about Progressive, but what if other insurers start switching volume over to IAA for similar reasons? Then we have a bigger problem on our hands.

I think that's a good point, and it's actually also the one question that immediately popped up in my head when I looked at it.

But after digging into IAA's filings, it looks like the majority of the margin difference is due to depreciation relative to IAA's purchase price when Ritchie Brothers, which again is the parent company, bought IAA.

And then you also have stock-based comp and obviously, and this is coming back now, the leases that it pays for its land because again, they don't own it, and that appears to be the majority of the margin difference.

Okay, I got you.

Did you buy one of those things off of the Ritchie Brothers site or something?

I actually bought this off a guy that was working on it, fixing it up for himself and just needed to sell it, and I got it at a good time.

But, yeah, basically what you're talking about is just a military hobby.

Wow.

Okay, let's get to your last pick, which is RB Global.

Uh, this is what was Ritchie Brothers.

So essentially, uh, auctions is what they run.

What do you like about their business model?

Yeah, you know, and they were a great story even coming out of post-COVID, right, is all this buildup and pent-up demand.

But really, what I really like about RB Global today, even after the recent pullback, which we think has created a more attractive entry point into high-quality marketplace businesses, is that most Canadians, as you mentioned, know it by its old name, right? Ritchie Bros.

Today, it sells everything, though, from damaged cars to excavators, trucks, farm equipment, farm equipment, et cetera.

And then our communication with our marketing team and our, our insurance partners.

When the event happens, we notify them right away, where we've got our own yards set up, our yards with our, uh, Ritchie Brothers partners and our partnership yards that we have, and that we could receive the cars, and we have timelines that fit for the insurance company and our towing partners.

I'd say the biggest thing, and then, and, you know, probably give a shout-out, you know, the level of expertise by our people.

We've been doing this since 1984, and the complexity and the instances that this occurs.

A lot of the times that a hail car can bring great money for the insurance company, and we spend our time marketing those vehicles to those buyers that are interested in them.

But I really think the partnership, the communication, and then once again our system coast to coast, we can service seven twenty-four, three sixty-five when these things happen and we're prepared for them.

In our sixteen IA locations and our fifteen, uh, Ritchie Brothers locations, we have land to be able to service that business.

So I would like to see less CAT events, but, um, my friend Dr. Phil here has educated me over the past couple years that is very unlikely to happen.

We do own shares in a company called Copart.

Copart is a auto salvage company that operates in a duopoly with one other company that's owned by RB Global.

Um, I think this would be a better option, certainly a, a better valuation.

Um, and, uh, I would encourage the caller to have a look at the return on capital profile, have a look at the alignment of interest between the people that are operating, um, uh, Boyd, uh, and, and, and to make sure that you are aligned as a minority shareholder.