Slide 1: Q1 2016 Earnings Review and Update
Q1 2016 Earnings Review and Update May 9, 2016 1
Slide 2: Forward looking statements and non-GAAP measures
Forward looking statements and non-GAAP measures This presentation contains forward-looking statements. Forward-looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions. Actual results may differ materially from those expressed herein. Addi
Slide 3: Update from Ravi Saligram
Update from Ravi Saligram Chief Executive Officer 3
Slide 4: Q1 2016 financial highlights
Q1 2016 financial highlights We grew all key financial metrics significantly in Q1 2016 Foreign exchange continues to have an impact on quarterly comparators Reported - % Growth Organic - % Growth Versus Q1 2015 Versus Q1 2015 GAP 7% 9% Revenue 14% 17% Operating Income 19% 17% | 27%* Diluted EPS att
Slide 5: Meaningful growth in Revenue Rate in Q1: +84 bps
Meaningful growth in Revenue Rate in Q1: +84 bps Translational foreign exchange continued to affect revenue line Quarterly revenue & revenue rate ($US millions) $175 16.0% Revenue Rate 12.9% 14.0% Revenue $150 12.1% 12.0% $125 10.0% $100 8.0% $75 6.0% $50 4.0% $25 2.0% $106 $109 $102 $128 $102 $136
Slide 6: Volume & rate increases contributed to revenue growth
Volume & rate increases contributed to revenue growth FX continues to mute reported revenue growth Breakdown of revenue growth/decline, % attributable to item Q1 2016 revenue compared to Q1 2015 revenue Includes new service Changes in foreign exchange fee-based revenue from had a negative impact on
Slide 7: Revenue rate strength from various components
Revenue rate strength from various components Our core auction business is performing well Components of Rev Rate improvement Basis Point Improvement Q1 2016 vs. Q1 2015 Our service businesses, both new and existing, are rapidly 90 +84 basis points contributing to revenue growth 80 • New services ba
Slide 8: RBA Core Auction business continues to perform well
RBA Core Auction business continues to perform well Auction volumes up 9%, supporting revenue growth; Revenue rate +29 bps Strong straight commission and buyers fee performance Underwritten business performed extremely well; albeit slight decrease in rate vs. Q1 2015 • In Q1 2016 underwritten busine
Slide 9: Most geographies contributed to strong revenue growth
Most geographies contributed to strong revenue growth Revenue growth in Canada, Australia and the Middle East drove most of the revenue growth in Q1 2016 relative to Q1 2015 US performed as expected, in light of very difficult comp ($54 mil Casper auction in March last year) Geographic breakdown of
Slide 10: Lot growth per customer sector
Construction and sales/rental customers bolstered volume Auction volumes increased 28% to a Q1 record of 93,000 lots during Q1 2016 Increased consignments from construction related customers drove most of the volume increase Consignments from equipment distributors grew 20% compared to Q1 last year
Slide 11: Growth of target sectors evident
Growth of target sectors evident GAP is growing in all our key sectors: Construction, Agriculture and Transportation; Transportation led the growth Lot volume in each sector is driving the growth given slightly softer pricing for some assets relative to the pricing peak of Q1 2015 Construction Lots
Slide 12: Q1 2016 auction highlights
Q1 2016 auction highlights Bonanza, Alberta – March 30, 2016 CA$24+ million of GAP LARGEST ‘ON-THE-FARM’ AG AUCTION EVER HELD BY RBA Post Q1 2016: Massive CA$240 million Denver, Colorado – March 17-18, 2016 auction in Edmonton: US$46+ million of GAP LARGEST EVER DENVER AUCTION April 26 – 30, 2016 Gr
Slide 13: Strong auction operational performance
Strong auction operational performance The number of consignors, registered bidders and buyers has grown meaningfully relative to prior first quarters¹ Demonstrates the operational strength of our core business Consignors Registered Bidders Buyers 12,000 35,000 140,000 10,000 120,000 30,000 100,000
Slide 14: Highest proportion of GAP from 3-5 yr old equipment since 2011
Highest proportion of GAP from 3-5 yr old equipment since 2011 Age of Equipment sold at Ritchie Bros. Auctions¹ 3-5 yrs old: 29.6% of GAP¹ New 8.5% 10.9% 10.2% 1New to 1 yr Old Yr Old 2 Yrs Old 10.9% 8.7% 4.6% 3 Yrs Old 18.5% of GAP¹ 4 Yrs Old 8.7% 4.8% 5.0% 5 Yrs Old 66+Yrs YrsOld Old 3.6% 5.0% 10.
Slide 15: 50% of our buyers are now online
50% of our buyers are now online The strength of our live (simulcast) online bidding capabilities is valued by our customers • During Q1 2016 we attracted record first quarter online bidder registrations • 62% of registered bidders during Q1 were online bidders • Sold approx. $449 million of assets
Slide 16: The Ritchie Bros. App – Sample Screens
The Ritchie Bros. App – Sample Screens 16 16
Slide 17: The Ritchie Bros. App: Phase 1 Features
The Ritchie Bros. App: Phase 1 Features The Ritchie Bros. app provides a mobile channel with which to stay connected to and purchase equipment at auction. Feature list: • Equipment Search Key Milestones • Equipment Details • Completed version 1 In Q1 • Auction Listing / Details • Currently beta test
Slide 18: Other sales channels continue to perform well
Other sales channels continue to perform well EquipmentOne and Mascus are now reporting as “Other” business segment Both are considered to be online only service models, to facilitate the sale of equipment • Segment produced $4.6 million of revenue in Q1 2016 (Mascus contribution not a full quarter,
Slide 19: EquipmentOne performing as expected
EquipmentOne performing as expected Strategies to grow EquipmentOne taking hold • Expanded EquipmentOne into Canada during Q1 2016 • $23.7 million of Gross Transaction Value (GTV) sold through E1 during Q1 2016, a 9% increase from Q1 2015 • Revenues grew 12% EquipmentOne metrics Q1 2016 performance
Slide 20: Mascus acquisition in Q1 drove slight fee revenue increase
Mascus acquisition in Q1 drove slight fee revenue increase Contributing positively to our results • Mascus contribution was not a full quarter; acquired on February 19, 2016 • Generated positive earnings, but relatively immaterial impact in Q1 No operational impacts to Mascus as a result of our acqu
Slide 21: Ritchie Bros. Financial Services
Ritchie Bros. Financial Services LOANS • LEASING • STRUCTURED FINANCE • DEALER SOLUTIONS Q1 2016 revenue from RBFS grew 53% compared to Q1 2015 Penetration into addressable market increased 83% Credit Applications ($US millions) Funded Volume ($US millions) $80 $450 $395 $70 $400 $70 63% 71% $350 gr
Slide 22: Q1 2016 Performance
Q1 2016 Performance Sharon Driscoll, Chief Financial Officer 22
Slide 23: Quarterly gross auction proceeds (GAP)
Quarterly gross auction proceeds (GAP) Quarterly Gross Auction Proceeds ($US millions) $1,500 $4,600 $4,312 $4,400 $1,250 $4,200 $1,000 $4,000 $750 $3,800 $500 $3,600 $250 $3,400 $1,000 $1,020 $1,262 $1,229 $1,073 $1,107 $1,241 $1,195 $1,135 $849 $887 $790 $865 $895 $956 $845 $855 $0 $3,200 Q1 Q2 Q3
Slide 24: Strong earnings growth
Strong earnings growth Q1 2016 net income grew 24% relative to Q1 2015 Driven by strong revenue growth 24% increase from Q1 2015 Quarterly Adjusted Net Income attributable to Stockholders¹ 123% increase from Q1 2014 ($US millions) 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 $29 $30 $30 $36 $24
Slide 25: Income statement scorecard – Q1 2016
Income statement scorecard – Q1 2016 GAP and revenue rate growth bolstered earnings Operating income would have grown 29% if not for FX gains now accounted for above the line (US GAAP) Q1 2016 Income statement scorecard 3 months trailing March 31, 2016 March 31, 2015 Better / ($US Millions except fo
Slide 26: Impact of FX on our Q1 2016 performance
Impact of FX on our Q1 2016 performance GAP/GTV and FX – Q1 2016 Revenue and FX – Q1 2016 100 25 $86M, 9% $19M, 17% 80 20 in Millions in Millions $64M, 7% $16M, 14% 60 -$22M, -2% 15 -$3M, -3% 40 10 20 5 0 0 Organic Growth FX effect Total Growth Organic Growth FX effect Total Growth Expenses (DE, SG&
Slide 27: Revenue grew at twice the rate of SG&A
Revenue grew at twice the rate of SG&A Committed to keeping expense growth lower than revenue growth on annual basis Reported revenue grew 14%, while SG&A grew 7% On an organic comparable basis revenue grew 17% while SG&A grew 14% Q1 2016 Quarterly revenue and SG&A growth ($US mil) Reported Revenue
Slide 28: Modeling expense lines
Modeling expense lines Introducing ‘Costs of Services’ to better reflect the cost of offering online • No longer called “Direct Expense” to better reflect our broader service offering • Acquisitions of Mascus and Xcira generate revenue not associated with direct auction activity Prior “Direct Expens
Slide 29: Tax rate assumptions for 2016
Tax rate assumptions for 2016 Estimate our annual 2016 tax rate will be approx. 26% • US GAAP tax practices require an estimation of the annual rate • Based on our expectations that a greater portion of earnings are likely to be generated in lower tax jurisdictions (ie. Canada, UAE) • New arrangemen
Slide 30: Balance sheet scorecard – Q1 2016
Balance sheet scorecard – Q1 2016 Q1 2016 Balance sheet scorecard 12 months trailing March 31, 2016 March 31, 2015 Better / ($US Millions except for percent figures) (Worse) Operating free cash flow $205.5 $171.7 20% Working Capital Intensity -34.6% -27.7% 690 bps Capex Intensity 2.7% 4.9% 220 bps R
Slide 31: Capital allocation priorities
Capital allocation priorities Priority Discussion 1. Grow dividends with earnings Highly valued return of cash to shareholders Offset dilution from management stock options 2. Hold fully-diluted shares flat through share buybacks 3. Acquisitions Accelerate top-line growth and leverage the model
Slide 32: Final Comments
Final Comments Ravi Saligram, Chief Executive Officer 32
Slide 33: Acquisition of the minority interest in RBFS
Acquisition of the minority interest in RBFS Ritchie Bros. Financial Services has performed extremely well in the last 18 months • We currently own 51% of this business; have signed a binding letter of intent to acquire 100% of the company • Transaction closing expected by July 1, 2016, at which tim
Slide 34: We are fast becoming a multichannel, digital powerhouse
We are fast becoming a multichannel, digital powerhouse Ritchie Bros. now offers four main sales channels to equipment owners Business units are supported through Ritchie Bros. ownership of Xcira (online auction technology provider) and Ritchie Bros. Financial Services (financial solutions partner f
Slide 35: YTD GAP continues to trend above 2015
YTD GAP continues to trend above 2015 Auction timing had a significant impact on Adjusting YTD 2015 to include the April GAP comparable Edmonton sale, 2016 YTD GAP grew 3% • Due mostly to the timing of the Edmonton Auction (auction was attributed to April in 2016 but May in Cumulative GAP growth YTD
Slide 36: Q&A
Q&A Ravi Saligram, Chief Executive Officer Sharon Driscoll, Chief Financial Officer Jim Barr, Group President Terry Dolan, President – US and Latin America Randy Wall, President – Canada 36
Slide 37: Appendix
Appendix Evergreen Model Reconciliation of Non-GAAP measures Non- GAAP Measures The following tables reconcile non-GAAP measures referred to in this presentation to the most directly comparable GAAP measure reflected in the Company’s financial statements 37
Slide 38: RBA's evergreen financial model
RBA’s evergreen financial model Performance Metric Avg. Annual Growth Targets 2015 performance • GAP Growth (%) High Single Digit to Low Double Digits +8% (organic) • Revenue Growth (%) (1) Mid Single Digit to High Single Digit +16% (organic) • SG&A Growth (%) Will grow slower than revenues +1
Slide 39: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 39
Slide 40: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 40
Slide 41: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 41
Slide 42: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 42
Slide 43: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 43
Slide 44: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 44