Auction Technology Group plc (ATG) Earnings Call Transcript & Summary

So welcome to ATG's mid-year earnings. I'm joined by our CFO, Tom Hargreaves; and by Director of IR, Becky Edelman. Today, we'll be taking you through our results and through the financials as well as through the outlook. Needless to say, it's been a volatile external market with the Ukraine, post COVID, the tech sell off, inflation and looming recession, and in light of that backdrop, especially happy to share that ATG has done well and that we have, what we believe, is a good path forward to continue to do well. So we'll cover that shortly as well as our revised guidance, which, as you saw today, is going up. So if you can move to Slide 5, please. So before going into the meat of the presentation, I just want to share again ATG's vision. We play a major role in both of these areas. And so ATG is unlocking the value of the secondary goods market, and we're accelerating the growth of the circular economy. And I think the progress we've made against this market backdrop is testament to that structural shift and the overall momentum that we have against both of those objectives. If you move to Slide 6. So how would we do it? This is just a little bit of a reminder because we have both new people and returning. But what ATG does is, we connect auctioneers and their curated specialized inventory to a global bidder base. Today, we collect -- connect over 4,000 auction houses that are using our technology and listing roughly 30 million items per year to bidders who generate over 180 million web sessions per year for those auctioneers, and we bring clear value to both sides. So on this slide, what you're able to see is just that on the cost side, what do we really bring to bidders, we bring selection, trust and convenience. And to auctioneers, what we bring? We bring, first of all, the technology -- that marketplace technology. We bring the 180 million bidder sessions, and we also bring cost savings, which accrue to them from moving forward to the online world. Moving to the next slide. We've talked about a role as an accelerator, but why is that? That was something I just wanted to address briefly here. And I wanted to highlight this, not only because of our impact on sustainability, but also because the same dynamic that plays out is the one that is going to continue to accelerate ATG's THV, which is then the TAM that we work against to grow the rest of our business. So what exactly happens here. So first of all, what do online auctions do? Why do we believe we are an accelerator in this circular economy? First thing is online auctions attract more bidders to an auction than the offline world to any given auctioneer. If -- in the old world, the auctioneer maybe would have attracted 200, 300 people in the offline world and that number is down. We can bring hundreds, if not thousands, of bidders to every single auction. The curation of the asset by the auctioneer also gives those online bidders confidence, so it's different than when you're buying in a non-curated secondary goods environment. And the combination of more bidders and trust leads to more bids. More bids leaves a higher return on each one of those assets and the higher return means that more assets to auction accrue and grow than would otherwise be the case. And more assets in turn attracts more bidders. And so as you see that cycle of more bidders, higher bids, more bids, better returns on assets and then more assets flowing in. That's something that accelerates the circular economy by making it better to sell secondary market items, but it also is what helps ATG grow. So if we move to the next slide, by the one that you're most interested in is the actual results build. This is slide 8. These are the highlights. So our THV grew 27%, and there is this continued shift online. This is the real driver behind that. What we've seen is that structural shift has continued. There's more items being sold online, higher prices, more inventory and move into new verticals and just as we have for the past several years, that has continued. Our online shares remained stable at roughly 33%, and there's been the continued growth in timed online-only auctions. And the reason why we wanted to highlight this is just to hold our online share steady amidst the 27% THV growth is in and of itself an accomplishment because normally, when you see THV growth, as I think I've mentioned in the past, pre-COVID, THV would grow for us anywhere from 3% to 5% per year. We would grow online share maybe 1% to 2% per year. Now -- and it's building to be able to hold that online share steady while also growing THV 27%, and there's usually a lag effect of new bidders, particularly new verticals moving online. And so we're very pleased with that. GMV being up 25%. It means, again, we're delivering what we are saying is growth on growth. So the big question that people had for us over the year and particularly, the IPO was, you're growing during COVID, but what's going to happen as COVID winds down. And for us, what we've seen is that we were able to grow, as you know, meaningfully during COVID, and then after that, we've been able to grow on top of that. And so again, that's why we're calling it growth on growth. The next thing that we think was really relevant to bring out was the diversification of our revenue. So one of the things that ATG benefits from is that we are not geographically constrained nor are we single vertical constrained. We have both geographic diversity for our revenues. We have 2 verticals that we operate in. But what we also have is more and more revenues within each marketplace within each geography and within each vertical. So we don't just have the fixed fee and the commission fee -- the commission fee being the vast majority of where we make our money, but we also now have been developing the value-added services, and specifically, digital marketing and payments. So what we've seen in this last period was a 63% growth year-over-year in our value-added services, and that's specifically around payments and digital marketing. The next key highlight is the successful integration of LiveAuctioneers, which, as Tom will go into, is performing ahead of expectations. So again, both the business is doing well, particularly on the payments and digital marketing front. And the other part that, as you know, with any acquisition, one of the key things that people look at is the integration culturally. And I think we were pleased when we were making the acquisition, we felt it was a good cultural match and that has really proven true just as with our Proxibid acquisition. The business has integrated well, and I think the team integrates well with the ATG team and has been doing really everything that we've asked. And then the last part that I wanted to highlight is that amidst this backdrop of the structural shift from offline to online, the different diversification that we have, which is helping us amidst this inflationary environment, the other key part was just that our competitive position just 6 months down from the last time we spoke with you is definitely stronger. And we will talk to you about that a little bit. But some of the key highlights are around 89 million bidding sessions and 54 million bids placed by the people we bring to the auctioneers. And so all of that has added up to roughly GBP 58 million of revenue for the year, plus 16% for the last 6 months with adjusted EBITDA of approximately GBP 27 million, which is up 58% year-over-year. And so with that, I'm going to pass it over to Tom, and he'll take you through the details behind our financial results.

So if we move to the next slide. Good morning, everybody. Before I get into the numbers, just to say one thing about the treatment of LiveAuctioneers in the presentation. We acquired LiveAuctioneers on the 1st of October '21. As such, we've got a full 6 months of contribution from LiveAuctioneers in this half year. Clearly, LiveAuctioneers wasn't in the prior year numbers. So that does impact some of the reported growth rates, specifically in relation to revenue because of that. And to get a clearer view of underlying performance, we've shown pro forma numbers for revenue and revenue metrics throughout the presentation, all of which assumed we had LiveAuctioneers in the equivalent period last year. If we move to Slide 10, financial highlights. I think John-Paul just given you some of these numbers, but no harm in reiterating them. Our revenue, GBP 57.7 million on a pro forma basis, that's up 16% year-over-year. Adjusted EBITDA of GBP 26.8 million, that's plus 58% year-over-year, gives an adjusted EBITDA margin of 46%. That's 1 percentage point higher from the 45% achieved in FY '21. Our adjusted diluted EPS is 13.4p, and our adjusted free cash flow was GBP 24.3 million, that's 91% conversion from the adjusted EBITDA of GBP 26.8 million. And finally, we ended the period with net debt of GBP 120 million. That's after paying all the deferred consideration on LiveAuctioneers, leaving with a net leverage of just below 2.5x. If we can move to the next slide, Slide 11, which shows some of our revenue metrics. Again, all of these numbers are on a pro forma basis. On -- In the top left-hand corner, GMV -- just checking the slides are moving. At the top left-hand corner, GMV, you can see there with GBP 1.6 billion for the current half year as growth of 25% year-over-year. And as John-Paul has just said, that growth has been achieved despite annualizing some exceptional COVID-19 comparatives last year. You see in the first half of last year, GMV grew 97% year-over-year. The 25% growth has been on top of that already, very strong performance in the prior year. In terms of the makeup of that GMV growth, if you look at the top right-hand chart, you can see GMV growth continue to see very strong growth in GMV, 27% year-over-year. So we've added over GBP 1 billion of extra GMV in the half year versus the equivalent period last year. And then online share, the middle chart is broadly stable at 33%. So it's broadly stable, but that is particularly pleasing with partly because last year was definitely a good performance with the impact of COVID in the half year. But also, as John-Paul said, typically, when you get large changes in THV, that new THV has a below-average online share and so it drags down the overall average. In this case, that's not happened. So online shares been able to maintain at the same level as last year, all of which has produced the 25% growth in GMV. We've got take rate, that's moved from 3.4% to 3.2%, so a slight reduction. A lot of that has to do with mix. The lion's share of GMV growth that we've seen has been in I&C. I&C has a lower average take rate than our Arts & Antiques, partly mitigating that, as John-Paul has said, is strong growth in value-added services in Arts & Antiques, which is [indiscernible] take rate. Overall, throw all that together and you get GBP 52 million of marketplace revenue in the first half year, 16% pro forma constant currency growth. Again, that growth on an already exceptional half year from last year, which has grown 50% year-over-year. We move to the next slide, get a little bit more detail of how things have changed as we've moved into COVID and now out of COVID. Again, checking the slides have caught up. So these charts show, by half year, our main KPIs of GMV, THV and Marketplace revenue, see half year 1 '20 on the left-hand side of each chart, that's basically the last pre-COVID period we had. We then had the step-up in activity influenced by COVID we saw in half year 2 '20 as we went through the half year and then half year 1 '21, the prior year comparative for the reporting period now was the first full half year with the benefit of COVID. But if you look at all the charts, you can see there, actually, we've achieved sequential growth pretty much throughout the period as we go into COVID, but also as now as we've come out of COVID, we're lapping some very strong comparators prior year gain, which is a key feature of the results this time. We move to the next slide, let's looks at segmental performance. On the left-hand side of the table, you can see our revenue by segment. So Arts & Antiques on a pro forma basis, adjusting for LiveAuctioneers, has grown 16% year-over-year. Industrial & Commercial, 16% growth. So marketplace growth overall 16% year-over-year. Auction Services slightly below that 11%. Within there is our white label business, which has actually grown at about the same rate as marketplace, but offsetting that some of our legacy back office products, which revenue growth is lower, bringing the average down to 11%. And then Content revenue grow 14% year-over-year, actually above the historic average content is the one which the business, which is benefiting from some softer comps because of COVID in the prior year, but all adding up to giving you total pro forma revenue growth of 16% year-over-year. When you get into the KPIs by segment, I'll talk about I&C first, which is the 2 columns on the right-hand side at the right-hand table. Our THV of GBP 2.8 billion, up 27% year-over-year. That reflects pretty uniform strength across all verticals, reflects both a higher number of assets being put for sale on the marketplaces, but also a high asset prices being realized. Of that growth, 2/3 you might attribute to traditional verticals where we've historically had strength, but then 1/3 of that growth has come from newer verticals, which was a feature of last year and that's continued into this year with real estate being the standout, which has added a reasonable amount to extra GMV. This behavior -- that comes through in the online share of 46%, [ up 2% ] year-over-year. That is influenced by the new verticals, a lot of the activities come through as timed. If you pull that out, actually our online share is broadly flat, which actually is something again that is good given the benefit of COVID in the prior year comparatives. All that adds together gives you 33% GMV growth. Take rate down -- nudge down a bit to 2% from [ 0.3% ] last year predominantly due to mix gain coming from the new verticals, in particular, real estate, which does carry a lower take rate than the average. And so as that's contributed, it's pulled down the overall total. Underlying pricing, underlying commission rates achieved on an auctioneer by auctioneer basis like online share is very similar in this period than it was in the period -- equivalent period last year. Slightly different mix of revenue growth in A&A. Pro forma THV is growing 28% year-over-year to GBP 2.1 billion, but a lot of that has come in areas where we would and we do get a lower online share. So even in higher-value auctions is the feature of that to come on to LiveAuctioneers during the period and also a number of international auctioneers coming on to the marketplaces. So you can see that effect coming through an online share at 17%, down 4 percentage points year-over-year. If you strip out that effect, there still has been some normalization from the very high online shares that were achieved in the peak COVID months in the prior year. Overall, GMV is still up 2% year-over-year to GBP 356 million. But the real standout there is the take rate, which is 7.6% or 1 percentage point, which is all about value-added services, increasing penetration of both marketing sales, digital marketing sales and payments amongst the A&A auctioneer base, which has been a strong feature of the first half of this year. Slide 14 picks up on the comment about the diversification, increasingly diversified revenue model that we have. The chart on the left-hand side shows our mix of revenue. So still the biggest contribution to revenue is commission and that in terms of the absolute contribution to growth in the half year commission is still the biggest contributor. But in terms of share of revenue, that's actually declined a little bit between half year, 63% to 61% of total revenue in the first half of this year. And the reason for that decline is the growth in value-added services. Value-added services is where payments and advertising and digital marketing revenue goes, which has gone from 11% to 15%. And we see this as part of a wider [ part of ] increasingly diversified revenues. If you take the acquisition of LiveAuctioneers, which created balance between A&A and I&C across the revenue portfolio, all new products such as payments, development of new verticals in I&C, all of those are increasing the diversification of our revenue, and we'd argue also the resilience of that revenue model. Two questions we're asked most commonly now. I'm sure this is on people's minds in the most in the audience here, it's -- how will the business perform in an inflationary environment? And how are you performing in an economic downturn now? Just answering those into [indiscernible] those and -- in terms of inflation, I mean, our biggest revenue line is commission and clearly, commission revenues based to asset prices. So we do have an in-built inflation head within the business in our revenue line. And so we're relatively comfortable about the impact of inflation on the organization. In terms of how the business performs in an economic downturn, the first thing to say is, we do have a very loyal auctioneer base. We've always had very low churn. We've seen no change in churn in recent months, and we expect no change in the auctioneer share, largely based on the high level of value that we provide to those auctioneers. It's not something that people choose to do to come off the marketplace to save money. Separately, if you look at the 2 sides of the business, Arts and Antiques and Industrial and Commercial. The Arts and Antiques industry as a whole is procyclical and does move with the economic cycle. But if you unpack that a little bit, and look at what's driving it, actually, the majority of volatility comes from high-end items, typically sold by the big 4 auction houses, where we are not a major player, where we are a major player in mid market, and actually that tends to be a lot more stable in respect to the cycle. The level of activity is typically driven by supply as much as demand. And on the I&C side, an important source of inventory is actually from insolvencies, and so the I&C historically has seen more assets come to the marketplace in bad times than good. And so if you take those 2 together, probably a mildly countercyclical I&C business and a mildly procyclical A&A business across the 2 together, we'd say that we're largely cycle neutral. So this is a slide -- gives a revenue bridge between the 2 half years. So last year's reported revenue GBP 34.5 million. You can see bringing in LA and auction ability to create a pro forma of 15.3. And then a small FX difference, GBP 0.1 million. This gets you to GBP 4.9 million of constant currency revenue on a pro forma basis last year. Adding GBP 7.8 million of organic growth this year gives you a 16% pro forma revenue growth. So not much to see there. The one thing I would draw out there, though, is you can see the FX movement is actually quite small between the 2 half years. 80% of our revenues in dollars. When the dollar weakens, our reported revenue in sterling will come down. When the dollar strengthens, our reported revenue will go up. Everyone, I'm sure, will be aware that the dollar has strengthened since the end of our reporting period. Who's to say what will happen, but if exchange rates stay where they are now, FX will be a bigger feature in our revenue movement year-over-year in the second half of the year than it has been in the first. We can go to the next slide. P&L, Slide 16. So revenue of GBP 57.7 million, pro forma growth of 16%, as already said. And if you look towards the bottom of the table, our adjusted EBITDA of GBP 26.8 million, that's 46% adjusted EBITDA margin. Actually, that is lower than the first half last year margin of 49%, and the first half last year was a bit of [indiscernible] half year since before we were a plc, it was also a COVID period. There wasn't much discretionary spend in travel happening. Certainly, no travel entertaining. We weren't incurring the cost of being a plc. So it's not a great benchmark, probably a more a better KPI to look at will be the full year '21 EBITDA margin, which was 45%. So we're 1% above the full year number we achieved last year. 2 or 3 things going on there. So we announced at the end of last year that we would be spending more and investing more in technology and marketing, in particular, headcount there. So that's happening. We've also got the costs of being a plc now fully in place through the whole period. Take those 2 together, they've probably reduced our EBITDA margin like-for-like by about 2 percentage points. We've also introduced payments and this half year payments is a good contributor to absolute profit, but does have a lower percentage margin. So that's probably reduced our EBITDA margin percentage by about a percentage point. And offsetting those factors is just the natural operational gearing in the business, which has then pushed it back up to over 45% to 46% year-over-year. And the final comment on [ here ] whilst it doesn't fall in adjusted EBITDA as we did have a large amount of exceptional items last year related to the IPO with a charge of GBP 9.1 million incurred in half year 1 '21. There were no exceptional items in the current period. If we can move slide to Slide 17 on free cash flow generation. Our adjusted EBITDA of GBP 26.8 million, a small working capital outflow of GBP 0.8 million, which just reflects the growth in the business and the natural amount that gets stuck in debtors. We have CapEx of GBP 1.8 million, leaving our free cash flow at GBP 24.3 million. That's 91% conversion from adjusted EBITDA. We also in the period paid interest and tax of GBP 7.8 million in total. And then there's GBP 4 million of fees and professional fees related to the acquisition of LiveAuctioneers that have gone out in the period. A lot of what all of those were contingent on the transaction completing. So it got paid once we closed the deal on the 1st of October, and the those have now gone out the draw. And then we also had a gain on the dollar balances we were holding as we waited to pay the contingent consideration in LiveAuctioneers. All that consideration is paid by the end of the period, which left us with net debt of GBP 120 million that's net leverage of just below 2.5x, which is we ended up quite a bit below the sort of the target we talked about at the time of the acquisition of just below 3x. Finally, we move to the next slide, our guidance for the rest of the year. So we are increasing our full year guidance for revenue. Sales performance in the first half of 2022 has been better than we expected at the time when we set the guidance at the beginning of the year. But we're notwithstanding that, we're still holding the line on our expectations for the second half of the year, but you'll put those 2 things together, the first half outperformance and the unchanged for you in the second half of the year, and it does increase our full year revenue guidance. So we're now saying for full year FY '22, we expect low double-digit pro forma revenue growth. Percentage margin guidance remained unchanged of that, and we remain confident of achieving our medium-term targets of mid-teens plus pro forma revenue growth and mid to high 40s adjusted margin percentage. With that, I'll hand over to John-Paul.

I'll take us through the investment phase now. So we view our investment cases really sitting within a very familiar and proven framework. We are operating in an industry that has that structural shift from offline to online, creating those positive tailwinds. We have a very strong competitive position with both geographic and vertical diversification and leadership in each of those respective marketplaces that we operate, which creates that flywheel. It allows us to attract more assets, more bidders very cost effectively. We have a strong and scalable proprietary auction platform technology. And as you know, we operate 5 of our marketplaces on one platform and the 2 most recent acquisitions, we plan to move on to a single platform over the next 2, 3 years. We also, in the bottom left box, have 6 proven growth levers. And as I've said before, this is -- we've had 3 years in a row where we've pulled all 6 of those levers, and we don't see any reason why we can't pull all 6 again this year. Fifth point is that, as Tom kind of spent most of the time on now, we have a very proven and attractive financial model that's very cyclically -- with cyclically diversified revenue. And then the last part, so in light of all of those benefits we have from the outside and from the inside and from our competitive positioning, it really comes down to, do we have the management team and the overall team to execute on the opportunity in front of us. And obviously, we believe that we do, and I'll talk in a couple of slides about how that team has been strengthened recently. Next slide, please. So any good business, we believe, can clearly explain the value it brings. While we've talked about the value that we bring, we just wanted to highlight it a little bit for you. So if you look first at the top-left portion for the first half of '22, GBP 4.9 billion is the vast value of all the assets listed on our system. And given that the auction -- if you think about a given auctioneer, they could be running options that have a value of GBP 50,000 up through some of the very largest auction for GBP 5 million or so. But for a bidder, that means you're limited to if you're going just to a single auctioneer, you're going and seeing just the inventory of that auctioneer. By having 4.9 billion assets listed in the first half of the year, that just gives you a sense for how much inventory we're helping give those bidders access to. And then when you look to the right side, then you see 89 million bidding sessions. So keep in mind that the vast majority of the auctioneers we work with are small- and medium-sized businesses. So the 4,000 plus, probably 3,800 of them to 3,900 are small and regional businesses. And so giving them access to that global bidder base that generates that type of activity is kind of unparalleled in the world in what we do. And then you have below that, the 6 million auction registrations in that period. So as I mentioned before, for a typical auctioneer in the old world pre online, you maybe would have gotten 300 to 400 people at a given auction, and that number is diminished for people showing up in the room, but the number online has grown dramatically. So we can bring a large number of the auctioneer bidders and a lot of new bidders to that auctioneer, which are a huge source of his or her growth. And then finally, you have the 54 million bids in the bottom left. The reason why we focus on the number of bids placed is because as opposed to just the winners is that when we're talking about the value that we're bringing for our customers, we get paid, it's true only when our customer is the winning bidder. However, we're driving value for the auctioneer with every single bid we bring because we could be the underbidder, we could be the ultimate bidder or we could be just the bidder that kind of got the activity moving and create that excitement around the auction. So we're adding value even when we're not actually the final winning bidder. So with that, if you go to the next slide, Slide 23. This is one you've seen before, and I think one of the things that's nice about this slide is that I imagine you'll be seeing it from us for the next 10 years because this is something that we don't see changing. As you've heard me say before, we believe ATG is on the very beginning of its journey still, and we have these growth levers, which are very successful to us. So what we continue to work towards this year is to execute against all 6 of these. So if you take them in turn, extending the TAM is really through growing our THV, and we can do that by adding auction houses in existing verticals, adding -- moving into new geographies or simply getting auctioneers who work with us already to put more of their assets onto our system. Growing that online penetration, we can do by either working to move the auction format from the auctioneer side from time auctions to live online-only time -- sorry, from live auctions to time or live online-only. And from the bidder side, we're able to follow that well-proven path of investing in better search, better images, cookie trails, all the typical U.S. elements that would be considered conversion rate optimization. The third part, which is quite unique to us and which gets better as we get bigger is the cross-listing capability. So the more that we can buy marketplaces or use the marketplaces we have to allow cross-listing on different ones, we add value to the whole network that nobody else can add. The fourth one is expanding our operating leverage and whether that be centralizing finance and HR and other activities or whether it be moving towards a single platform that, in turn, allows ATG to continue to optimize that operating leverage. Fifth area is payments is the value-added services. And in this particular case, it's really a focus on payments and digital marketing, which Tom went into, but there's a whole slew of additional value-added services that we believe we can add that will materially grow that take rate and our revenues. And most importantly, it also is going to be adding value, the value that we bring for the auctioneers for the bidders. And then the last bit, which is the accretive M&A. And as I've said, we remain disciplined in our approach, but we continue to look and explore multiple opportunities. And the great thing is that there are multiple opportunities out there, and so we're excited about what that will bring in the future. Next slide. So we just wanted to give you a bit of some of the concrete things that we've actually done against the user experience because we've enhanced the value proposition for both auctioneers and bidders over this period. First of all, we're driving great bidder acquisition and that's a key reason why we kept those growth gains that Tom talked about from COVID and then we built on those. So we've invested in our SEO, hired an expert who is focusing on that, looking at everything from the way that we use the keywords for descriptions in our lots and the way that we categorize each of the items that we put on the site. We've also invested in improved site search, and we'll continue to do that. The second bucket where we've increased auction registration. So we have a huge series of revamped marketing e-mails, and one of the key things to focus on, maybe your customer, maybe you've gotten some of those, you should notice that the cleaner, better images, better calls to action, less cluttered. And one of the things that tells us we're doing a good job there is the fact that our open rate is 50%. And when we all think about our inboxes and how much comes in to get a 50% open rate on a marketing e-mail is, I think, a great job by our team. Improved bidder success as well. So last year, we talked about implementing a recommendation engine for the first time in ATG, and we've done that. And one of the things we're seeing is that, again, our underbidder recommendation, which is, again, the bidder who didn't win the item that was up for sale. We will send them a message about similar items, and we have a 50% click-through rate on that e-mail that goes out as well, which is a great sign for the future. On the next slide, we cover a few more of these. So the first one -- slide I think will catch up in a minute. But so one of the metrics that we've asked that you focus on beyond THV is our growth in time to action adoption and that has continued strongly. So you saw the number, our overall THV was up 27%, but time auctions were up 32%. So again, growing even more quickly than the rest of the business. Point 5, maintaining high auctioneer retention rates. So again, on a revenue basis, 97% retention. And with all the change going on, as Tom talked about, whether it be cost pressures, other things going on, we are not the channel that people are ever going to drop because of the value that we bring. And that's real testament as well to the account management teams that we have as well as the technology and bidders that we're bringing. And then that 6 point. So again, our ability to grow value-added services. We did buy LiveAuctioneers in October. We said that we would -- one of the key reasons we bought them was for the payments, and value-added services is up 63% in the first half of the year, which we're very excited by. But one of the other things that we're excited by is that we hit our first milestone with payments being rolled out more broadly like. So as I've said, what we plan to do is to roll payments out, hopefully, by December, broadly across Proxibid are beginning to be rolled out. But the first milestone that we set for the team that we didn't talk about back in December was that we wanted to see GBP 1 or $1 worth of payments get processed through the system to make sure everything works, so what we call it as kind of a minimum viable test and rather than a full minimum viable product. And we got through that minimum viable test in May, and we processed our first dollar of payment through Proxibid. So we're excited by that, and now it's a case of scaling up and growing that capabilities that we can roll out fully beginning in December. So LiveAuctioneers is the acquisition that we made on October 1. And as we said, it's performing ahead of expectations and that is driven by multiple factors. So first of all, the group is progressing well in terms of its integration to ATG in the times that I've been out there, one of the great things has been the common culture, the common attitude toward customers and how we want to serve, and the opportunity that we see in the market and how we want to go after that. And that's from the leadership team with Phil Michaelson, all the way down to all the other people I've met within LiveAuctioneers. And so it's exciting for us to see what we saw and what made us excited about acquiring that business and then to see it really coming to life. And the reason why I focused on that bottom bullet around sharing best practices. When you sometimes have a business that you're buying and you're taking a component of that and want to make it available to the rest of the business, that requires a lot of collaboration and there can be people who want to own it and hold on. And one of the great things I think we've said is that we created this team, that's a joint team between LiveAuctioneers and the legacy ATG group, and it actually is a legacy ATG group plus the legacy Proxibid group. So 3 different teams working on this, and it's gone incredibly well and great leadership by our Chief Product Officer, and by our SVP of Corporate Development. We've pulled that together and really led the group. So -- and as I said, we've hit that first milestone. Go to the next slide. So with this opportunity that we have in front of us in both the external things going in our favor as well as the momentum that we've created so far, the real question that I think often comes up is for me is just, okay, how do we continue to build the team that can take advantage of this opportunity and that has the right behaviors, the right attitude and towards our customers because, as you know, we've had the shared success model and that's a key part of what we want going forward. So what we've done in this last period, we believe, is to really add significant depth to our team. So we've added had a global CTO, who is based out of New York. His name is Pratyush Rai, and he comes from Kaplan. He has deep experience at integrating multiple platforms. He also has done real strong work on user experience and how to make every single thing you do relevant for your customer. And so we're excited to bring him on Board. The second person we brought on Board is our first Chief People Officer, and this is Darren Ali. He will be based out of London. And what really attracted us to Darren is the fact that he had deep international experience, and he also has close merger integration experience. But then the last piece is really in my interviews with him, he talked a lot about the employee experience. So not just about the customers, which the rest of the business can be focused on, but we have an executive who's focused on the employee experience in the job market that we have right now. And even if recession looms and jobs are not quite as plentiful as they have been recently, what you still want is a company that's investing in its people and training experience that matters because everything we're trying to do is based on our team and that investing in our Chief People Officer is hopefully giving you an indication of the importance we place on that. And the third person I wanted to mention there is Rob Cummings. So Rob Cummings was the Chief Product Officer and Chief Technology Officer at LiveAuctioneers, and we promoted Rob to be our first Chief Product Officer. And so he will be overseeing all product development going forward. And if you look at LiveAuctioneers, which is a step or 2 ahead of the legacy ATG team in terms of the user experience, we think that bodes really well for our future as well. So on the next slide, you should see the 3 new Board members that we added. So I think that made it in -- so we've added 3 new Board members as well. And as you know, we have Breon Corcoran, Scott Forbes and Morgan Seigler, who are on our Board already. [indiscernible] needed to move back to future because she's only led 1 Board seat. And so we've now added Suzanne Baxter from W.H. Smith as our new Audit Chair. We added Pauline Reader, who was the CMO at Stitch Fix and formerly a Senior Executive and Marketing at eBay. And then we've also added Tamsin Todd, who is the CEO of Findmypast and also was at Amazon previously and has deep product experience. And so we're happy to welcome all 3 of them on to our Board, which, again, we think will make us a stronger team. So what is so exciting for me and our team and our Board is that this is really still the beginning for ATG. We are doing well. There's lots of great things to talk about, but this is still just the beginning. So one of the things I wanted to sell out for you is, the way that we view the business right now. And so we really see our business is evolving in 3 investment horizons. We have the foundation, we have the end-to-end experience, and then we have the expansion phase. And so the foundation phase was really what we did up until the IPO where we focused on building the technology that can work in multiple verticals, multiple geographies. We looked at unifying a very fragmented market to create the best inventory that was available for secondary and specialized goods, and we also want to create the best bidder base. And also key within that was that we really wanted to do this in a collaborative way with our customers, particularly the auctioneers, and that's why we have focused very much on the shared success model where we make money only if they make money. We are now approaching investment horizon too, though. And while we will continue to build on that foundation for indefinitely, we now will start to direct more and more of our resources towards the end-to-end experience. And what does that really mean? It really is around the UX of our site. So you've heard me say before, on a scale of 1 to 10, if Amazon is up there maybe a 9 for buyer experience, we may be at a 4 or 5. And relative to the rest of the way the auction industry works, we could be considered very good, but there's a long way to go or moving towards an e-commerce standard that we feel really happy with. So investing in better images, better descriptions, a better end-to-end buying experience for the bidder and easier selling experience for the auctioneers, all of these things are going to be key to what we do while preserving the uniqueness of the auction format because we believe that's a differentiator for us. It's also, we believe, the way that you see many different businesses moving because auctions allow you to see the true value of an asset and for bidders to actually understand as well, especially in a very open environment like the one we provide. So we're excited by that. And then when you look forward, though, to investment horizon 3, after we're gradually moving into that as well, but it's not receiving the bulk of our resources. But as we move into that, that's really about moving beyond the core transaction into the entire auction ecosystem and the entire auction value chain. So launching more value-added services to help auctioneers, whether it be digital marketing, payments, integrated delivery would be another one. We have financing, restoration, insurance, repair, maintenance and logistics. There's a huge number of businesses out there that provide these services, and today, there's no hub through which they can actually access someone buying something at the point of a transaction. So we believe we're uniquely positioned to offer all of these businesses access to incremental revenue. And again, as we do this, we firmly believe that we will be attracting more assets and more types of assets into the auction network. If you look at eBay years ago, it was [ Beanie Babies ]. And then as they proved it out, it's expanded to what it is today. We believe that curated auction format, which is one that we provide, where everything is being sold by an expert is opening up a new world for secondary goods, and that's why we believe we're uniquely positioned to unlock the value of those goods for consignors, who are selling through auctioneers and giving bidders access to that incredible range of unique and specialized inventory. As we extended the auction ecosystem, we will enhance the bidder value proposition while also lowering auctioneer costs. We are not going to be an auctioneer and that's something we want to make very clear. We are here to be a marketplace that brings bidders, and we believe that by sitting in the middle, there's incredible value to be created while allowing the auctioneers to do what they do best. And so the great thing for us is that we can grow that take rate as you saw gradually ticking up. If we have kind of looked at it without the influence of some of the other things that were going on for mix and adding the payments, adding delivery, adding other components to this will allow us to grow that take rate gradually up without it costing the auctioneers any more money. And that's a real part of what we believe is going to allow us to be successful in the future. So again, the more auctioneers do online, the more that we'll save and the more of these services we offer, the more that ATG will be able to grow. Next slide. So we are, as I said, in the very early stages of the growth and transformation of the auction industry, and we really wanted to leave you with what we believe are the 5 key takeaways, which is, the first one being that structural shift from offline to online has continued. So that growth on growth. The fact that we had 2 phenomenal years of growth off of COVID, and then off of that, we've still been able to grow is a real testament to the fact that the auction industry moving online is happening. The second big bullet we wanted to look at was this diversified and resilient revenue. The fact that we are not constrained geographically or by vertical and the fact that we have multiple growth levers beyond just our commission fee, we think makes us incredibly resilient, and that's really proven out and will become even more apparent over these next years. The third point is that we think we have strengthened our competitive position. We're stronger than we were 6 months ago. We're a better business than we were 6 months ago. And amidst all the change that's happened, that's an exciting thing to be able to say. The fourth is the 6 growth drivers. So again, I have that one slide. It's a simple slide, but the reason we put it up is that it shows that it's not independent growth levers. Each of those are mutually reinforcing and there's a compound growth benefit to them. And what I would hope is that we're showing that same slide in 5 or 7 or 10 years because all of those levers are very pullable for a long time to come. And then the last part I wanted to mention was that we do have the team to execute. And I think whether you look at the LiveAuctioneers team where I've been incredibly impressed by the commitment of them to the customer, their innovation, their real nimbleness as well as looking at the Proxibid team and their response to the customers, they're handling the massive volume increase we've had and then the legacy ATG team. All 3 of these groups and Auction Mobility plus Lot-tissimo and BidSpotter, the other businesses we bought of these years, have all really pulled together. People have adapted and grown, and so I really cannot say enough about our team. It's not just the executives that you're hiring up at the top, it's really the people doing the work day in and day out. And I think we've really proven that we have a great team. We've added great members to our team and that, that's going to be a key part of our success going forward. So with that, the next slide, there're only 2 more, don't worry. The circular economy comment that you hear us talk about is not just a vacuous statement, it's something that can actually be measured. And so what you see here is something that we talked about before, but I just want to reiterate is that we looked at the top 15 items sold, 15 categories of items sold on ATG last year. And we have this done by an external consulting company that actually measures carbon emissions for different businesses, and they came back and said that based on those top 15 items, ATG helped save by facilitating the sale of these items approximately 1 million tonnes of carbon emissions versus if someone had gone and bought those same items new. And that equated to the carbon capture of 50 million mature trees per year. And if you go to the next slide, the goal that we have as a business, though, is we see this massive terrain of the auction industry, GBP 100 billion on the Industrial and Commercial side, GBP 40 billion to GBP 50 billion on the Arts and Antiques side. If you can go to the next slide. And what we really are aiming for is to see whether ATG can save the equivalent of 1 billion trees in a given year and create that carbon capture benefit. While that is, of course, a massive goal, it's more than 10x the size of business that we are today. My thinking around this has been, who knows. If you don't set a big huge goal like that, then you're guaranteed you're not going to hit it. And if you do set it and you come even marginally close to it, it's a pretty massive accomplishment, and I think it's a big motivator for our team. They care about the sustainable side of what we do, the fact that everything we do is facilitating growth of that circular economy. And so it's a big ambition for us, but it's one that we're setting out there. We're not setting a time line of when it's going to be achieved, but it's something that motivates us and which we think is an exciting part about our future. So with that, I think, Tom and I will take any Q&A that you have. I mean Q, i guess, if you have.

[Operator Instructions] We will now take our first question from Gareth Davies from Numis.

Guys, can you hear me?

Yes.

So the 46% penetration in terms of timed auctions in I&C business, it's clearly a very impressive performance and ahead of what we were hoping. Tom made a throwaway comment about the success in timed auctions. I just wondered if you could expand a little bit on that comment. Are there certain verticals where that's working particularly well? And what's really driving that momentum? And then secondly, sort of relating that to the A&A market, is there still a reluctance in terms of A&A auctioneers to move to timed? Was the LiveAuctioneers business doing timed auctions? Or is that sort of a win for you as we look into next year? And then the second question really goes to the payments rollout. You've sort of alluded to December. You launched Proxibid customers. can you talk a little bit about where Proxibid customers are at the moment versus where LiveAuctioneers' customers were when they launched? Is it a sort of similar dynamic? And so we should be hopeful of similar penetration. Or are there things we need to be mindful of in terms of what those customers are using at the moment. Those are 2 for now.

Tom, do you want to do the first question? I'll do the second.

Yes. So the comment on timed auction specifically related to the new THV that we brought on, particularly with regard to real estate, where the majority of that activities come on in time, which gives 100% online share, which overall has boosted the total online share, which was 46%, which I think was the number you're referring to. If you remove the impact of real estate, there's continued to be good penetration of timed auction. It's actually growing largely in line with overall THV. So the percentage of THV penetration is relatively unchanged where it was last year, but it's continued to grow in line with THV. With regards to Arts and Antiques, the penetration there remains very low. It is increasing at the entries, but certainly, isn't having the same effect that it's happening in Industrial and Commercial, which is very strong. And therefore, that very much is in the camp of future opportunity.

And just kind of...

And with live -- Sorry, would LiveAuctioneers is offering that to their customers? Or is that something new to their customer base?

The LiveAuctioneers also is offering timed auctions, but similar to the thesaleroom and Lot-tissimo. That take-up is relatively low right now. But the thing to keep in mind that when you look out at Sotheby's and Christie's, which were maybe the bellwethers for the rest of the industry, the amount of timed auctions they are doing is increasing massively. I think it's 4 or 5x. And what often happens is what the market leaders do the businesses will adopt because when Sotheby's and Christie's are running timed auction for the bottom end of what they're selling, that's often a lot of what is the sweet spot for our auctioneers. So if Sotheby's and Christie's can show that they can run a timed action selling items between GBP 500 and GBP 10,000, then that should really be a message for our auctioneer we hope to engage fully in timed [ auctions form ]. And you do have some more innovative auctioneers experimenting more with timed auctions with us, [indiscernible] being one just north of London. But you need to -- we believe that it will be a gradual adoption in Arts and Antiques, not quite as quick as you've seen in the Industrial and Commercial side, where the moving of those heavy assets just lends to a time to auction format even more quickly. The second question you asked though was around payments in Proxibid. And we believe that they have similar dynamics where they often have independent contracts with payment gateways. They have an internal team doing a lot of collections management, and it's a big pain point for the auctioneers. And so we believe the dynamics are quite similar. The part that's different is that if you think about the size of payment that's going on in the Industrial and Commercial side, it's a much bigger payment, and there are more payments are made with ACH, eCheck in those formats as opposed to credit card. And so there will be a little bit of a different dynamic there, which is why we're not giving a forecast on the rate of adoption, whether it will be the same as LiveAuctioneers. LiveAuctioneers has had an exceptionally quick rate of adoption. As Tom said, over crossing over 50% adoption within the auctioneer base within 15 months. We're not expecting it to be that fast, but we're not giving a detailed forecast yet on how quick it would be.

[Operator Instructions] We will now take our next question from James Lockyer from Peel Hunt.

It's James Lockyer from Peel Hunt. Three for me, please. So on competition, you've talked about improving your SEO score -- SEO performance in the period. And whenever I look at your SEO performance, you performed well on Google. Can you just give an idea of what you've done there to improve your SEO performance? And if you widened your gap to your peers specifically, and are there any peers that you are more or less worried about than you were 6 months ago? That's the first question. Second question on A&A, as you've sort of talked about, you saw a reduction in the online share. Just wondering if there's a structural issue with that from preventing you from growing faster there? Obviously, the fact that you might want to look at the items in real life first. So I was wondering if we could think about -- is there a [ stealing ] we should think about in terms of online share in A&A? And if there are any tech investments you could do such as 3D imaging, for example, that might help reduce any potential retrenchment? And then the third question, obviously, with your [indiscernible] business model, operational gearing is incredible, and we look forward to seeing more about. But how much of a buffer do you have within your cost base in case of a major weakness on the topline, i.e., what gives you and us comfort that the operational gearing won't work the same way the other way around?

So Tom, I'll do the first 2 and then you do that third. So the SEO, I won't go into a huge amounts of detail, but the key part that we're looking at is the way that we display our categories, the way that our categories are set up, the way that we take in lots, so we're looking at ways we can help auctioneers auto categorize more accurately. If you go on our site, you'll see there's just a wide range of detail that an auction will provide and sometimes either will be miscategorized or we will have so many -- so many categories that we weren't grouping things properly. So the SEO expert we brought in has been able to help us understand better the way that we can set up our categories, the way we can take in lots. In terms of relative to our peers, what are we doing? I don't really know what our peers are doing differently. We just know that with that combination of the SEO and the CRM work that we're doing, which is allowing us to reach bidders either to one with more relevant information or be that under bidder that we're allowing to be able to reach that it's having a good success rate. And so that's going to allow us to direct people more directly to lots that will be relevant for them. So again, those are kind of the key foundation pieces. If you have more questions on that, I'll probably get more detail and then come back to you from our product team. In terms of the A&A -- yes?

Sorry, just -- I guess, the last part was around competition, whether you're more or less worried about any of the others at this point in time?

And again, right now, I don't think we're worried about anybody any more or less than we were before. It's -- we feel that our competitive position has gotten stronger. We've seen that growth even in this environment, and so we feel very comfortable with our competitive decision. On the A&A side, you also asked that there are structural issues keeping us from what's the online share [ stealing ] . And I think that's always a really tricky one to answer because again, if you'd asked all of us 25 years ago, would we be buying cars online. I think everyone would have said no way. And what we see year in and year out is that the ceiling on what the price point at which people are waiting and the types of items that people are willing to buy online, just continues to go up. And so even if we weren't doing anything beyond keeping the buying experience more secure, I would believe that, that will continue to go up that ceiling as people get more familiar. But the fact is that we are doing more. And so some of those things are -- when you say what are the technical investments we could make, I think I see it more as what are the experience-based investments that we can make, which is why we -- that second horizon of the end-to-end experience because today, auctions have a very disaggregated field, where you search, then you have to register for the auction, then you get bid, then you have to wait a few days to actually get the item -- to even wait for the auction to happen and then you have to arrange -- get payment. You often by a separate e-mail and then you have to arrange for your own delivery. Just integrating those elements combined with what the auctioneers provide in terms of curation, we believe, is going to greatly increase the trust and confidence that people have in buying at auction and particularly by buying that auction through ATG. And so those are the technical investments we're going to make. We also have other things. We've talked about things like the virtual auctions and virtual galleries and other things you can do, and there's a lot of exciting tech emerging there, but that is not going to be what propels us forward. I think these fundamentals getting in place first are going to be the most important, and then we can look at getting more creative after we've gotten those fundamentals in place. Hopefully that -- Question?

So with regards to your third question, operational gearing, I mean, you're quite right. We are a business that's operationally geared, and we enjoy the benefit of that when revenue grows. If revenue is to go backwards, then the flip side of that is we would have we probably would see a disproportionate impact on profit, of course, always costs discretionary costs within the business. But most of our cost, the biggest single cost line for us are people, which are hard to change in the short-term and frankly, unless we thought that any revenue downturn was a long-term thing, we would be very low to cut anything too deeply. But I guess the way we really manage that issue is, we tend to take quite a cautious approach in the way we think about things and the way we forecast of. We tend to invest once we see the revenues there rather than in anticipation of revenue. And so we generally don't -- we're in a position where because of that, the investment decisions we make are based on tangible performance of the business rather than the hope for performance of the business. And as such, we have been able to avoid overinvesting and adverse hits on expected hit to margin when things didn't materialize in the way we might have hoped. But essentially, it's in truth in your point.

And I guess just as a follow-up, do you have any data points that you could point to about how you performed in the last financial crisis?

So it's quite hard because the last financial crisis depends when you define the last financial crisis, but I guess really...

8 to 9 years. I guess.

So during that period, the business was a very different size business and enjoying quite strong structural shift online. And every time we've looked at this, the bits of the business we have got data, it's been hard to discern any impact from the wider economic environment and our performance. Now we would say, that's partly -- that's to do with the general cycle -- cycle-neutral nature of the business, but also, it's fair to say, during those periods of business which is growing because the world was shifting online. -- which could also overwhelmed any impact from the economic cycle.

There's been no further questions at this time. I would like to turn the conference back to the speakers for any additional or closing remarks.

So again, thank you for taking the time to listen in today. We're very excited by where ATG sits and what the future holds. And as I said, I think our team has done an exceptional job over this period. And the investments we've made in new people and some of the new technologies, we believe, is going to be begin to bear fruit as well. And right now, the big thing that we're focused on is, again, that rollout of payments in December. Lots of other things going on as well, but payments, we believe, is an important part of providing that better experience that we talked about just at the end here. So thank you for your time, and we look forward to any questions that we'll be getting in the one-on-one sessions. Thank you.