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Ritchie Bros Auctioneers Inc (RBA) Q2 2021 Earnings Call Transcript

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RBA earnings call for the period ending June 30, 2021.

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Ritchie Bros Auctioneers Inc (RBA 1.97%)
Q2 2021 Earnings Call
Aug 6, 2021, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning. My name is Victor, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ritchie Bros. Auctioneers Second Quarter Conference Call. [Operator Instructions] Thank you.

Now I will turn the call over to Mr. Sameer Rathod, Vice President of Investor Relations and Market Intelligence to open the conference call. Mr. Rathod, you may begin your conference.

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Sameer Rathod -- Vice President-Investor Relations

Hello, and good morning, and thank you for joining us on today's call to discuss our Second Quarter 2021 Results. Joining me today are Ann Fandozzi, our Chief Executive Officer; Sharon Driscoll, our Chief Financial Officer; as well as other members of the management team who will be available for the Q&A portion of this call. The following discussion will include forward-looking statements. Comments that are not a statement of fact, including projections of future earnings, revenue, gross transaction value and other items are considered forward-looking and involve risks and uncertainties.

The risks and uncertainties that could cause our actual and operating results to differ significantly from our forward-looking statements are detailed in our SEC and Canadian securities filings available on our Investor Relations website, investor.ritchiebros.com. We encourage you to review our earnings release and Form 10-Q, which are available on our website 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 to the most directly comparable GAAP financial measures and the reconciliation between the two, see our earnings release and Form 10-Q. Presentation slides accompany our commentary today. These slides can be viewed through the live or recorded webcast or downloaded from our website. All figures discussed on today's call are U.S. dollars unless otherwise indicated.

I will now turn the call over to Ann Fandozzi.

Ann Fandozzi -- Chief Executive Officer

Thank you, Sameer, and good morning to everyone joining our call today. First, I would like to start the call by thanking our team members on their continued vigilance. The COVID-19 variants have been challenging for so many regions across the world and as we traverse the pandemic, we continue to look for ways to support our communities. Our top priority is the health and safety of our customers and team members and continuing to follow the best practices and updating our protocols based on regional or local recommendations.

Our omnichannel platform continued to deliver strong outcomes for our customers, with bids per lot sold increasing 9% and used equipment pricing remaining robust. This translated to solid financial results for shareholders with total service revenue increasing 8%. We believe this is a critical measure of performance and growth trajectory to which we have committed. As a strong signal of our continued confidence, we are increasing our quarterly dividend approximately 14% to $0.25.

You don't need me to tell you that this is an unprecedented environment, as we have noted in the past few quarters. We are seeing a tight supply environment caused by low inventory levels and continued supply chain issues hampering OEMs production levels. While a tight market is not good from a supply perspective, we are seeing very positive signs from new customers entering our ecosystem. And while the equipment availability will certainly open back up, we believe these new customers will remain having experienced Ritchie Bros. for the first time.

That said, we see the current dynamic of tight equipment as a point in time event, and we continue to move forward and control our own destiny. For us, this starts and stops with serving our customers. We always remember that our omnichannel platform exists for the benefit of our customers, both sellers and buyers. Throughout the pandemic, sellers have needed us to take care, custody and control of their equipment in the physical world, while driving transactions for buyers in the virtual world. We are now hearing from our customers once again that they crave a return to some type of normalcy, a face-to-face interaction with our sales teams, our operations teams as well as each other.

To that end, we are pleased to announce that we are welcoming customers back to our yards for Auction Day and night before social activities at select larger events. This is very important to our customers, and these events will bring back the opportunity for them to interact with the Ritchie Bros. team. To be clear, our yards have been open the entire duration of the pandemic and have been busier than ever with inspections, drop offs, pickups, et cetera. Some activities like ramping will be a thing of the past as we have learned how to better showcase our equipment digitally and allow buyers same-day pickup, which ramping largely precluded.

As always, we will continue to listen and learn and continue to evolve our business based on our customers' needs and technology-enabled innovations. One way we are controlling our destiny is through our accelerated growth pillar. We have been closely analyzing our satellite yard pilots internationally, and we have been impressed across the board with how they are doing. We started to scale the learnings in the quarter by launching six locations in the U.S. under the satellite yard strategy with more to come in the next few quarters. Moving to IMS.

We are building an industry-leading inventory management system, that will help our customers make decisions and allow us to simplify our workflow by making it more digital, automated and scalable. Our evolution to a marketplace is a journey, which begins with activating organizations in the IMS, much like a gateway. Future phases will include monitoring and driving assets per organization, then services provided and monetized per each of those assets, all resulting in a final KPI of revenue growth. You see here our current thinking of future KPIs we will release around IMS, while 2021 will focus on organizational activations.

These metrics over time, will ultimately allow you to go from the organizations to total assets to total transactions to revenue generated by multiplying them together. We launched our business IMS product late last year and in the second quarter, the number of organizations that activated on our platform increased 34% from Q1 to Q2. While this implies a very large annual growth trajectory, we are still learning from our customers and are excited about the journey we are on, both with our customers and our partners. After Sharon discusses our financials, I will talk about how we are executing against our strategic pillars and outlook, and then we will move to Q&A.

And now over to Sharon.

Sharon Driscoll -- Chief Financial Officer

Thank you, Ann. Overall, GTV increased 2% with puts and takes across FX tailwinds, auction shift headwinds and equipment mix. We see this level of GTV as an overall good results given how tight the U.S. supply market is. Although auction sales days are up, this reflects the addition of smaller time to auction lot events, but three larger events that shifted into Q1 caused a $52 million drag on GTV performance. Normalizing to remove the impact of shifts in the auction calendar, Q2 GTV growth is 6% equal to our year-to-date GTV growth performance of 6%.

Our first half GTV growth is well above our volume performance in 2020, which posted a decline of 1% during the same time frame and double the growth of our first half performance in pre-pandemic conditions during first half of 2019. Again, overall, a good result given how tight the used equipment supply market is in the U.S. In addition, as we evolve to a marketplace, we have provided additional disclosure in our 10-Q this quarter, on the transactions that we facilitate for retail and peer-to-peer private auction events and equipment sales transactions in exchange for hosting fees.

In the second quarter, customers that use this service disposed of $36 million of assets, which is an increase of over 155% over prior year. Although total reported revenue increased only 2%, we are very pleased with our total service revenue growth of 8%, and we continue to think that this measure of total service revenue growth is the best indicator of overall top line performance for our business model and most reflective of underlying business trends in the quarter.

Despite cycling over our COVID protocol and our pivot to 100% online bidding last year, we managed to keep total operating expenses in line with revenue growth and delivered operating income growth of 1% and adjusted EPS growth of 2% to $0.55 in the quarter. Auction and marketplace service revenue grew 6%, with A&M service revenue as a percentage of total GTV coming in at a robust 13.8% for the quarter. It is important to note once again that contract mix can significantly skew total revenue growth depending on consignor's preference for how the deals are structured.

That said, inventory sales tend to be lumpy and they declined 7% driven by weakness in the U.S. and Canada, offset by strength in our international region. Overall, we are pleased with our revenue rate performance as both profit on inventory sales and service revenues improved versus prior year. Total operating expenses increased only 2% year-on-year, in line with total GTV and total revenue growth. I would like to note that all operating expense categories, except cost of goods sold increased due to the Rouse Services acquisition that has not yet cycled past its December acquisition date.

Also, all categories were impacted year-on-year by higher foreign exchange currency movements in three of our major markets of operations. While we don't break out FX impacts by line item, it is important to note that we are naturally hedged given our geographically distributed operational structure for both revenue and costs. And overall, FX had a slightly positive impact on the bottom line in the quarter. The reduction in cost of goods sold is in line with the quarter decline in the inventory revenue and delivered an improved profit rate as previously mentioned.

Cost of services remained flat to last year, supporting an 8% increase in service revenue growth, this, despite operating with a higher number of sales days, easing COVID protocols and significant FX pressure. Ann mentioned that we are welcoming back customers on Auction Day at select events, and we do expect our cost of services to increase to reflect that in coming quarters. Although the key message here is that, even with these adverts, we do expect a permanent level of cost savings going forward.

I would highlight that cost of services is down approximately 22% since 2019, with GTV being roughly flat in the same time frame. SG&A investments to drive revenue growth, most notably, the addition of the Rouse Services team and continued investment in Ritchie Bros. Financial Services did lead to higher levels of SG&A compared to last year. In addition, there was a significant FX impact included in these costs, and we are starting to see some increases in travel-related expenses as our team gets back out on to the road.

I would like to note, that we expect our SG&A run rate to be closer to the 2Q levels compared to last year, given these changes. At the end of the quarter, our balance sheet and liquidity remain in a very strong position, providing an excellent foundation to support our growth initiatives, and we are pleased to announce a 14% increase in our quarterly dividend to $0.25, delivering on our stated capital allocation priorities of growing dividends as earnings grow.

And with that, let me pass it back over to Ann.

Ann Fandozzi -- Chief Executive Officer

Thanks, Sharon. I am very pleased with the progress we are making on our new strategy to becoming the trusted global marketplace, insights, services and transaction solutions for commercial assets. On this side, you can see all of the achievements of the past 90 days. The only other call out that I would like to make here is that, we are enhancing the safety programs for our field employees, which, to me, personally, is very important. Now turning to current trends and outlook.

There is no change in our view here. We still see the environment as dynamic and our tone and outlook remain cautiously optimistic. Let me reiterate that we see the current environment as a point in time, and we are structurally improving this business for the long-term through our strategy. That said, as you think about the third quarter, we are facing some pretty difficult comps. Recall that our third quarter call last year, we saw a release of pent-up supply due to COVID disruptions with a resulting GTV growth of 22%.

With that, operator, please open the line for questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Michael Doumet from Scotiabank. You may begin.

Michael Doumet -- Scotiabank -- Analyst

Hi, good morning. So maybe thanks for the commentary, and I guess, I look forward to the KPIs on the IMS. If we can frame the micro services at a high level for now, any way you can help us think about the ramp-up in the revenues in 2022 and beyond? I mean, will it be a slow start and an acceleration in the outer years? And how should we think about the margins of those associated revenues?

Ann Fandozzi -- Chief Executive Officer

Yes, Michael, so it's Ann. Hello. Yes, we are very, very excited about where we are with IMS. And just as a reminder for everyone, we look at the world as in our control and out of our control, times to find out of our control. All of the underlying things we're doing to build an incredibly healthy company and organization and drive our technology to the marketplace, 100% in our control.

So just to put things in perspective, the 34% increase in organizations focused on for this quarter, it kind of is an annualized number of north of 300% growth. Now do we think that's a steady thing? No, but it's a signal of just how very, very compelling it is. So then, just as you [Technical Issues] Michael, we are then going to move our attention to, OK, that's all the organization signing up, now what is the usage, right? What are the assets in the system? What's our attachment rate of services to the assets, and I'm about to get to your question. And then obviously, then the resulting revenue.

It's interesting to think about services. So when Sharon and I in December, put out our evergreen model, even there, we were very clear that the services revenue growth would be a couple of percentage points above revenue growth, which we committed to be high single-digits, low double-digits, that's still our commitment. What you can expect to see over time, I think the best guidance we can give is that that delta, that gap will continue to widen, right?

As we provide more and more services disburden apart from the GTV that's coming through our auction channels, which will always be important, be they reserves [Technical Issues] reserves, so on and so forth, that gap, that growth rate. So for modeling purposes, our steady-state is high single-digit, low double-digit on kind of the GTV based business, then you kind of keep growing two point delta and then higher and higher as the attachment of services is unrelated to the underlying GTV.

But our commitment is just like we're showing the organizations now, that's what we're looking at as we start getting the asset focus and we start seeing an attachment, we'll be putting those out as well, so that you guys can see that slide in in person. The last part of the answer to your question is, we've been very clear that these services that we're providing that are going to come in the form of Ritchie Bros. services but also third parties partnering with dealers and other partners in our ecosystem to offer services on their behalf to our end customers.

Michael Doumet -- Scotiabank -- Analyst

Very comprehensive answer. Thank you, Ann.

Ann Fandozzi -- Chief Executive Officer

My pleasure.

Operator

Our next question will come from the line of Craig Kennison from Baird. You may begin.

Craig Kennison -- Baird -- Analyst

Hey, good morning. Thanks for taking my question. It's really on infrastructure and sort of government policy. But I'm wondering if there's anything in the U.S. infrastructure spending bonanza that might trigger more activity on your platform? Anything you would call out there?

Ann Fandozzi -- Chief Executive Officer

Yes, Craig. So that is -- we view this as a very exciting time. So let's just all take a step back again here for a second. So, the environment is tight. We know those. Sooner or later, it's going to catch up, right? So the OEMs originally when all of this started, and I'm telling you guys everything that you already know, we all heard this together. When this started, the OEMs came forward and said, hey, don't worry about it. We will catch up in the first half of 2021.

And then since then, they've come out saying, wow, it's going to take us a little bit longer. But one thing we know for sure is, they're going to catch up, OK? So that's one thing we know. The other thing we know is equipment is aging. The equipment that is out there continues to age. So there's no question that it's going to come forward and is going to have to be replenished. And then the infrastructure build that's coming forward is only going to increase demand.

So we view these things as highly favorable tailwinds, giving us a lot of confidence, that's part of why we're increasing the dividend. We're seeing very positive trends. We remain cautiously optimistic because we just don't know how long this point and time will last, but we know it's going to go away and the equipment is older and the infrastructure spending is coming and only means goodness for Ritchie Bros. because when equipment turns, we benefit on both sides of that equation.

Craig Kennison -- Baird -- Analyst

Thanks. And then just shifting gears to the IMS. I would think that you've got a couple of drivers, one being Rouse, which is great data that would help your prospective clients. And then the other being the return to live human interaction at these auctions. How are you leveraging those tools to drive more activations on IMS?

Ann Fandozzi -- Chief Executive Officer

Yes. And this is why the growth rate continues to move up and up. We have said that we are a sales driven organization and so interaction with our customers is paramount to what we do and how we do it. And it's not just, hey, what do we have for the next sale? It really is -- now with IMS in place, it really is more about let me become that trusted advisor that you guys have heard us talk about. Now we have a tool in our salespeople's hands to do that. So, what IMS is becoming for our sales organization is just an input tool for our customers that they can help them with. Let me explain what I mean and then the return to live and again, reread for the purposes of customer interactions, I'll talk about in a second.

So where before, let's say, you have 100 pieces of equipment in your yard and our salespeople work with you to put, let's say, eight into the next sale. Now the conversation is all about, hey, let's put that eight into the IMM. Let us show you all of the data, the richness of the single button click to then push it into the various channels of Ritchie Bros., be it marketplace for reserve, unreserved or the weekly introductions with Ironplanet, how easy it is, but the richness of the data that we can provide on all of your 100 pieces becomes very, very clear and evident, and it's really that process that our sales organization is embarking on and very, very successfully, as you see the numbers growing.

In terms of return to live, this was interesting. And again, just for the sharing. So, customers would say to us, when are you guys going to reopen up? And Jim Kessler, who you guys will meet in a little while. He's our Chief Operating Officer. You haven't heard from him, but he's since on this call. He joined us during COVID. Basically kicked off a campaign to jump on calls with as many customers as we can with the sales organization to talk about what is reopening needs. I mean, we've been open the whole time, right? We're open, you can drop up equipment, we're open, you can pick up equipment.

We've inspected it. We're selling it. We're selling it very successfully online. What does reopen need? And what became very, very clear to those conversations, it's the interaction. That is what they're missing, and that's what Ritchie Bros. is so great at. And now it's not just interactions for the next sale and growth, which is, of course, is very important to us, but now the interactions are around the data, the richness, let me show you what IMS can do for you. So we are very excited to bring customers back, have them interact with our sales folks and show them all of the tools at their disposal and the breadth of Ritchie Bros.

Craig Kennison -- Baird -- Analyst

Great. Thank you.

Ann Fandozzi -- Chief Executive Officer

Thank you.

Operator

Your next question will come from the line of Cherilyn Radbourne from TD Securities. You may begin.

Cherilyn Radbourne -- TD Securities -- Analyst

Thanks very much and good morning. I was hoping if you could speak to the changes that you made to your buyer fee structures during the quarter? It just doesn't feel like it's been very long since the company last increased buyer fees.

Ann Fandozzi -- Chief Executive Officer

Hi, Cherilyn, it's Ann. Let me kick off, and then I'll turn it over to Sharon. So, the way to think about buyer fees, it hasn't really been a normal practice in Ritchie Bros. the way it actually is in most other companies around the world. So the way we think about all fees is the way that all companies think about pricing, where once a year, twice a year, you just take a look at the competitive landscape and you say, where are you with your offering, vis-a-vis where are others? And this is a practice we're going to engage in regularly as a company that operates in a competitive landscape.

And whatever that tells us, we will react, right? So we saw an opportunity that, in fact, there were parts of our business where we were, as for sure, a premium service provider actually charging less than some of our competitors. We saw an opportunity to increase those prices to become more competitive than we did. We are going to be doing that analysis at a minimum annually. So whatever it tells us. And the reason I say that is, if it shows us the market is actually lowering prices, we'll react that way, increasing, we'll react the other way as we recently did. But this will be matter, of course. Sharon, would you add anything?

Sharon Driscoll -- Chief Financial Officer

Yes. Cherilyn, and I think what I would add is also just with the strength in pricing that we realized. We were starting to see that some of those smaller items were moving up the grid in pricing in terms of fee rate unexpectedly. And so to keep that kind of mix the right way, probably the best way to think about it is, we just changed our tiers to basically keep pace with current pricing and inflation that we were seeing in those smaller categories.

And again, as Ann said, pricing is a journey, we will continue to kind of look at this mix both against how other competitors are using pricing on the buy side and also just related to the mix of what we're selling.

Cherilyn Radbourne -- TD Securities -- Analyst

Okay. So, it sounds like those tiers in a different use equipment pricing environment might need to be moved back down at some point. Is that fair?

Sharon Driscoll -- Chief Financial Officer

I think, I -- sorry, up or down. I was just going to say the way to think about it is items that used to be in the $10,000 range, the price was taking it up. So to capture those, we escalated that tier. We will look at it in terms of whether it requires to be taken up or down according to the market that we're in.

Cherilyn Radbourne -- TD Securities -- Analyst

Okay. That's helpful. Can you also speak to how a very tight freight environment is impacting Ritchie Bros.? And I guess just the mobility of used equipment generally.

Ann Fandozzi -- Chief Executive Officer

Yes. So Cherilyn, that is actually part of the headwind facing us. So when we say tight supply environment, we mean the supply chain. So it's both the production, it's the microchip, it's the shipping constraint, it's the COVID lock down protocols. When we say tight supply, that's across the board. We're feeling it. Again, in our control and out of our control. So that is out of our control, we're feeling it for sure.

What we are driving, separate and apart from all of the pillars and the technology enhancements that you guys saw with IMS, I did not mention, but it is on the chart that Ritchie List will be bringing a listing service in Q4. So again, just filling out the vision for the marketplace real time, which is very much in our control. We're also driving the underlying productivity levers of our auction business. So what does that mean? We're monitoring very closely the items that our sales folks are selling.

So even though the mix is down in the GTV, the corresponding GTV is down as well, we see that our sales organization is actually much more productive. So they're getting more contracts per head. Similarly, in the operations side of the organization, as the mix is down and we have a lot older and smaller equipment, that actually means a lot more equipment in our yards for them to process, and they're doing an incredible job driving productivity there as well. So, supply chain issues broadly affecting as a great deal, but the underlying business that we're driving so that when those things become up. I think of the past, fundamentally get us to a different kind of growth rate. We feel very, very good about.

Cherilyn Radbourne -- TD Securities -- Analyst

All right. Thank you. Thank you.

Operator

And our next question will come from the line of Michael Feniger from Bank of America. You may begin.

Michael Feniger -- Bank of America -- Analyst

Hey, guys. Thanks for taking my question. Sharon, it was very helpful with the color on the SG&A run rate closer to Q2 with Q3. I mean, maybe you could help us, you kind of talked about a little bit, but how do we look at that cost of service line? In Q2, it was flat to even down a little bit. I feel like we've always kind of looked at that cost of service line relative to GTV growth or GTV. But obviously, the comps are a little strange because of last year, and you guys are kind of returning back to normal. Any type of proxy you can kind of provide us there and how to think about these other cost of services or expenses outside of just the SG&A?

Sharon Driscoll -- Chief Financial Officer

Sure. Thanks, Michael. Yes, I think what Ann was referring to in terms of kind of that change to sale day, but we've certainly seen some activities that have added value, some of the changes that we've made on sale day in COVID, have added value to the buyers by having less equipment moving through the yards. So technically, those ramping costs that, where we would have brought in additional part-time labor to be able to facilitate that activity in the yards.

We're expecting that that cost will stay at current levels. And albeit we may add it back into a few of our premier events, that is really the benefit to the buyer at ways, and also the safety of both customers and employees outweighs the cost benefit that's bringing that back in. So I think we're seeing permanent reductions in that cost of services space. I would say that the other change that's kind of happening is, those cost of service definitions are things that really only are incurred based on the event.

As we start to flip kind of to always on through the marketplace, you may start to see some of that kind of cost of service marketing type activity that we would have done that was very site and event specific, start to shift a little bit more into SG&A over time as we move to that kind of always on positioning, but that would be a relatively minor slip in the great scheme of things, it really has been more permanent reduction that we would see in those kind of service expenses.

Michael Feniger -- Bank of America -- Analyst

That's helpful. And Sharon, any visibility right now on GTV? I mean, I think this is kind of the question right now. I mean, July, obviously, is a smaller month, your GTV is kind of flattish in a way versus 2020 in Q2, but also 2019. So I guess just trying to level set and gauge what we're kind of looking at in the third quarter? Anything you could provide calendar days, number of auctions that you're looking at here? Anything in the comp last year we should be aware of? Just color to kind of help us level set for this tough comp in the third quarter.

Sharon Driscoll -- Chief Financial Officer

Yes. So why don't I start and then I can throw it back to Ann. Clearly, as Ann mentioned in her remarks, we are up against, I think, a plus 22% GTV growth in Q3, which is a very small quarter. So that will be difficult to comp. That being said, we did announce, we do have a very large sale that we are planning. So I think it's hard to give direction. We don't give forecasts, unfortunately, on a go ahead, as you know. But I think that probably safe to say that, it would not be at kind of our first half levels, but I think that's all we'll say.

Michael Feniger -- Bank of America -- Analyst

Understood. And then just, Ann, I know you said this is a point in time, more to talk about these transitory issues. Are you confident that at least in 2022 -- are we back to the evergreen model type of targets and algorithm there?

Ann Fandozzi -- Chief Executive Officer

Yes. So that's the crystal ball of this. So I want to say, yes, but again, from our standpoint, I think that we're in control of, which is the underlying productivity of our sales associates, our operation staff, what's happening with IMS, what's happening with the broader marketplace, what's happening [Technical Issues] our confidence is through the rule. The thing we're not in control of is kind of this OEM, we'll call it supply chain.

Again, so I'll just bring us back to we're watching avidly, what the OEMs are saying in terms of catch-up. They certainly are giving confidence that this is this calendar year problem, so we are hearing that with everybody else. I'm a little once bitten twice shy where we were hearing, it's a first half problem, and now that problem continues. So I'm watching very cautiously the production numbers, the shipment numbers, the inventory and dealer number is leading indicators for what's happening.

Again, the thing we know for sure that equipment is if it's not getting flipped out, it's aging. It will need to get slipped. And the infrastructure bill coming is going to get -- is only going to mean more meaning in the equipment. So we are very optimistic. And when we think about Q3, as Sharon said, in the first half, we were up 6% because, again, there was ebbs and flows and FX and some sales happening in Q1 that didn't happen in Q2, those types of things. So kind of plus 6%.

So feeling reasonably good about Q1, very good with the backdrop of a tight supply environment, reasonably good overall. Q3 has a problem. It's a premium problem, but the problem is the comp of coming against a 22% increase vis-a-vis last year. We were -- again, the things we're very confident on is we know our sales folks are on. We know we're driving incredible price recovery for our customers. Now the issue is going to be, will there be enough inventory moving hands at all to make the numbers work.

Michael Feniger -- Bank of America -- Analyst

Thank you.

Operator

Our next question will come from the line of Gary Prestopino from Barrington Research. You may begin.

Gary Prestopino -- Barrington Research -- Analyst

Hi, Ann. Could you maybe remind us of some of the benefits of these satellite yards versus standard yards that you have in the U.S. and the international markets?

Ann Fandozzi -- Chief Executive Officer

Yes. Let me kick off, and then I'm going to introduce Jim Kessler to you guys if you haven't met Jim. So the whole idea behind satellite yards is the test, to be clear. By definition, test mean we don't know what the answer is going to be when we embark. But the answers we received from international were so positive that now we're moving back to North America. And just as a reminder, it's all about getting yards closer, making us easier to do business with customers and making it easier for them to hand us their equipment. But with that, Jim, want to take us through it?

Jim Kessler -- Chief Operating Officer

Yes, Ann. Hey, Gary, it's Jim.

Gary Prestopino -- Barrington Research -- Analyst

Hey.

Jim Kessler -- Chief Operating Officer

And I think you really covered it. It's really getting closer to our customers, cutting out some transportation cost as we're going through this process. And then for Ritchie Bros., internally, the smaller yards as we're adding the GTV, a better flow through making us more efficient as we're going through it. But really for the focus on our customer to get closer to them, become more efficient, and so far as we're seeing the KPIs, we're definitely seeing GTV per square foot increase and seeing a very good flow-through compared to our larger yards that we have.

Gary Prestopino -- Barrington Research -- Analyst

So with the goal be to -- realizing these are a test, but the goal would be to look at these yards and say we're going to open them in secondary or tertiary markets away from major U.S. cities, just to make it easier for some entities to get their equipment to you?

Jim Kessler -- Chief Operating Officer

It could be that, but also think about very populated areas along the East Coast, where traffic and other constraints just make it difficult to transport equipment. So I wouldn't think about it just as second dairy and third kind of markets, but think about it, where there's just a limitation toward transportation, and it could be East Coast, West Coast. This model could work very well where you have a hub and spokes around the hub.

Gary Prestopino -- Barrington Research -- Analyst

Okay. Thank you.

Operator

Our next question will come from line of Larry De Maria from William Blair. You may begin

Larry De Maria -- William Blair -- Analyst

Okay. Thanks. Good morning, everybody. Just going back to like a prior question here. I understand you have a tough comp in 3Q. But can you actually give us the auction day comp year-over-year and sequentially in percentages? And related to the third quarter, should SG&A be lower year-over-year because of the year-over-year comp challenges? Or with travel coming back, it might actually be up? So can you give us some color on that as well? Thanks.

Ann Fandozzi -- Chief Executive Officer

Yes. Sharon, do you want to kick off, and I'll pick up after that?

Sharon Driscoll -- Chief Financial Officer

Sure. So, I think we haven't provided auction days. I will point out, if you look on kind of the pre-calendar, we do have a very large event in Houston and New Mexico coming up in August, I think, next week. The point I would make on SG&A, and I think the direction that we're trying to give here, Larry, is we do expect a kind of what we experienced in Q2 in terms of both dollars and rates is kind of where you should be looking in terms of Q3. SG&A is more fixed. It does have some event pieces, but wouldn't necessarily go down versus prior year.

And I will point out that we have the acquisition of the Rouse associates and the investments inside of RBFS as well as the FX increases in costs that we would expect to continue on into Q3. And I think in terms of other costs to consider, we do expect, as conditions start to become, hopefully, with the Delta Variant stopping it again, starting to see more event costs and sales associate travel costs to be able to support the new events inside of Q3. So, I would stand by our guidance that we said in the script around using Q2 as more the SG&A guidance or method that you should be using for your models for Q3.

Larry De Maria -- William Blair -- Analyst

Okay. Very helpful. That's good. Thank you. And then the follow-up on IMS up 34%. Just to be -- to clarify, I assume I'm pretty sure that's customers that have reengaged. Is there a total unit number that's relevant? Or maybe we just have to wait for that as you guys give us more material and more information? And then has this led to any business transactions yet or is that more of a 2022 event?

Ann Fandozzi -- Chief Executive Officer

Yes, Larry, so this is where we're very excited. So it's organization. So when you think about customers, they are entities, which then means, obviously, a significant amount of equipment. So, the way we're -- and it's coming -- the answer to the second part of your question is, obviously, equipment is coming, transactions are -- the easy buttons are all in place in the marketplace so that when the equipment is loaded into IMS, you can literally order an inspection, you can push it today into either MPE, a live event, weekly featured as of Q4, you can push it into a listing service that Richie Bros. has, so on and so forth.

There's obviously all of the data that's associated with it, that kind of aggregated anonymized data from Rouse, aggregated data from Ritchie Bros. All of that richness exists in IMS. And equipment is certainly coming with that, right? That's how people engage or activate and IMS is to start loading equipment. So we -- the plan is, let's really focus on organizations this year, much like the yards that Jim talked about. The focus was, are they going to drive incremental customers? Are they going to be more -- very, very productive? Are they going to drive the transportation costs lower for customers?

Will they bring more business? We're saying yes. We like it. With IMS, it's the same thing. What does activation look like? How easy is it? How quickly can we stand up these things? So that growth rate, I want to make sure is really resonating, again, implies an annual growth rate of over 300%, but the growth rate is really very interesting because not only is it -- does it showcase the demand from customers, it's actually showcasing our ability to turn this on very quickly. As you guys recall, right, we were -- on the last call, we were talking about how quickly it takes to put a customer up and running.

We're focused on that very, very much because, again, right, the longer it takes, the less customers we can kind of get through the throughput of activation, to then be able to focus on how many assets in my example, you have 100 in the yard, you put 10 in the sale, how -- we're going to be focusing starting end of this year, beginning of next year, how do we then work with customers to say, OK, let's get everything loaded. Let's get the data flowing and then turn our attention toward monetizing that and so on and so forth. But really exciting.

Our commitment, just like it has been, is to -- as we start focusing on those things, more and more, we will be putting the KPIs out so that you guys are with us on the journey. Right now, we are almost singularly focused on this organizational activation because that is the gateway to then all of the equipment, the services and the monetization.

Larry De Maria -- William Blair -- Analyst

Okay. Thanks, Ann.

Operator

[Operator Instructions] Our next question will come from the line of Bryan Fast from Raymond James. You may begin.

Bryan Fast -- Raymond James -- Analyst

Thanks, good morning. Just one question from me. Just on the new buyer fee structure. Are you able to quantify how much of an impact this had in the quarter?

Sharon Driscoll -- Chief Financial Officer

Bryan, it's Sharon. I'll take that. I think the best way to frame it up is when we call out the fees increases inside of the 10-Q, we list in order of size, kind of the impact. So the first driver was Rouse, the second driver was RBFS and then the fees impact was smaller than that. I would say that the other pieces, we did also see fee lift, not just through the increase in the fee change, but if you recall, we had previously waived fees on agricultural events, which would have been big in the second quarter.

So we would have seen an uplift from that. And in addition, GovPlanet, which also comes with a higher fee base also started to come into play. So, I don't know if that helps you frame it, but I would -- we'll get back to help you figure out the size of what the fee pickup would have been. And we did have a 14% overall fee growth year-on-year of which Rouse, RBFS and those fees that I just talked about would have driven.

Bryan Fast -- Raymond James -- Analyst

Okay, that's helpful. Thanks, Sharon.

Operator

Thank you. And I'm not showing any further questions in the queue at this moment.

Sameer Rathod -- Vice President-Investor Relations

[Indecipherable] Thank you for joining. Actually, I think we have one more question from Michael. Can we take that?

Operator

Of course. Michael, your line is open.

Michael Feniger -- Bank of America -- Analyst

Hey, guys. Thanks for letting me squeeze one in. I think you mentioned this, Sharon, the -- is it one-off events in auctions in August, I guess it wasn't there last year. Can you just help us understand what are those one-off events again? How sizable can they be? And then just a follow-up, the rate's been good, obviously, it's gone up year-over-year, quarter-over-quarter. Can you help us understand is where we are with the rate?

What's the puts and takes to think about the outlook and the trajectory on rate, the service revenue rate and the inventory rate in the back half? Like what are some things we should be looking at that would keep that rate expansion going? What are some things that could pressure it just so we could kind of have in our minds how the outlook of that could play out in the back half? Thanks, everyone.

Ann Fandozzi -- Chief Executive Officer

Michael, it's Ann. Let me start, and then I'll turn it over to Sharon for color. So to be clear, the event that Sharon spoke about, so let me just click up and then we'll talk about it. So more and more, we are moving to what we're calling regional events with a smaller event. So, when you think about supply demand curves, we definitively have done all the modeling that says, the more supply we can bring, the more interest we generate on demand, the better pricing for our customers. So we're -- we have a lot of confidence that scale matters a lot.

And obviously, Ritchie Bros. is the scale player. So, as a result, you've seen us move to more regional events. Let me explain them, and then I'll explain what's happening with the comment that Sharon made. So instead of doing an event, let's say, in Pittsburgh or in Maryland or in Connecticut, you saw us do, let's say, a Northeast event earlier this year where we linked those three yards together virtually and presented all of that supply to buyers at the same time, and it drove really very impressive results for our consignors. So we know that's the case.

So when you hear that we're going to be reopening some of our events, when we say select events for live interaction, they're the bigger events because they can stand-alone, right? If we had opened this Northeast event, what does that mean? Some customers are in Pittsburgh and others are in Connecticut, like that's not the purpose of interaction, that's not going to work. Unlike an event like in Orlando or an event, like in Edmonton, so on and so forth. So what's happening here, it's not a new event.

So it's a Houston sale, which we had last year as well, but there's a large package that's actually off-site. So, we have a functionality called VSO, which basically allows you that even in a single event, much like these regional sales, we can link inventory from disparate locations into that event. So more and more you're going to be seeing us, really when we say omnichannel, the magic of our business is, we can do a Houston event but bring inventory virtually into that event from other areas of the country and candidly, of the world. And you're going to see us lean more and more onto those types of things.

So when we say off-site, they could be -- the equipment can be off-site, but the event is the same calendaring, if you will, as the previous year, which is the case here. It's a Houston event. You will also see us doing some off-site events, much like ag, where they're purely -- we kind of -- they're just tow based and they're just off-site, and that's how they work. So that's just an answer to the Q3 question. Your question about rate is the answer around how good we feel about the underlying business we're driving. Again, I -- put us back to in our control and out of our control.

Supply chain disruption, out of our control. What's in our control is productivity of our folks and then getting kind of -- driving incredible outcomes for our customers and then result in fantastic rates for us. So in fact, the things that you're seeing are the result of much work on the part of the organization, to kind of attach services, to drive rate, continue to grow those services, that's -- again, that's going to continue to drive those rates higher and higher.

The pricing analysis that you heard us talk about, which we're going to do in a regular cadence as any competitive company does, all of those things are going to result in a healthy business for the long-term and the rates you're seeing are a result of all of that hard work. Sharon, anything to add?

Sharon Driscoll -- Chief Financial Officer

No. I think you captured it. But, again, just the traditional inventory rate pressures, that is an at-risk position. Pricing has been very strong. As we said in terms of the infrastructure, we expect demand to stay very high. However, we want to be increasingly competitive on those deals. So again, I think we're very good at this business, and our current performance is a rate improvement over prior year. We would hope that that would continue for the remainder of the year.

Michael Feniger -- Bank of America -- Analyst

Sounds good. Thanks, everyone.

Operator

Thank you. And I'm not showing any further questions in the queue. I'd like to turn the call back over to the speakers for any closing remarks.

Ann Fandozzi -- Chief Executive Officer

Wonderful. We thank you so much for joining us this morning and listening to our story. I hope the takeaway here is, how very excited we are about the business and the journey to fun and thank for being on that journey with us.

Operator

[Operator Closing Remarks].

Duration: 25 minutes

Call participants:

Sameer Rathod -- Vice President-Investor Relations

Ann Fandozzi -- Chief Executive Officer

Sharon Driscoll -- Chief Financial Officer

Jim Kessler -- Chief Operating Officer

Michael Doumet -- Scotiabank -- Analyst

Craig Kennison -- Baird -- Analyst

Cherilyn Radbourne -- TD Securities -- Analyst

Michael Feniger -- Bank of America -- Analyst

Gary Prestopino -- Barrington Research -- Analyst

Larry De Maria -- William Blair -- Analyst

Bryan Fast -- Raymond James -- Analyst

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