Slide 1: Q4 and 2015 Annual Earnings Review and Update
Q4 and 2015 Annual Earnings Review and Update February 26, 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
Slide 4: Q4 2015 financial highlights
Q4 2015 financial highlights Difficult operating comps relative to Q4 2014 Foreign exchange had an impact on some operating lines Reported - % Growth Organic - % Growth Versus Q4 2014 Versus Q4 2014 GAP (9%) (1%) Revenue (2%) 6% Adjusted Operating Income (10%) 20% Diluted Adjusted EPS attributable t
Slide 5: Auction metrics: Quarterly comparison
Auction metrics: Quarterly comparison Fewer auctions held in Q4 2015 than in same quarter last year Q4 2015 Q4 2014 Compared to Q4 2014: Number of Industrial Auctions 67 78 • 11 fewer auctions in the US • 4 fewer offsite auctions (global) Number of Industrial sale days 80 90 • 10 fewer offsite sales
Slide 6: Higher revenue rate not enough to offset lower GAP
Higher revenue rate not enough to offset lower GAP Foreign exchange also affected revenue line Quarterly revenue & revenue rate ($US millions) 175 16.0% Revenue Rate 150 14.0% Revenue 11.8% 11.9% 11.2% 12.0% 125 11-12% annual revenue rate range 10.0% Revenue fluctuates considerably 100 between quart
Slide 7: However revenue rate fell below 12% for first time in 2015
However revenue rate fell below 12% for first time in 2015 Underwritten packages in Q4 did not achieve the same rates as prior three quarters • Packages from Latin America were the primary drag on our underwritten rate during Q4 2015 • We expect there will always be some volatility in the performanc
Slide 8: In addition, pricing of certain asset classes fell in Q4
In addition, pricing of certain asset classes fell in Q4 Pricing trends are asset/sector/region dependent; Declines in certain categories weighed on overall equipment values • Overall equipment values declined further in Q4, from Q3 2015. • Trends differ greatly between regions and asset classes. FX
Slide 9: FX impacts also a major factor for revenue decline
FX impacts also a major factor for revenue decline While revenue rate improvements versus Q4 last year would have grown revenue by 6% on an organic basis, FX impacts reduced revenue to a 2% decline Breakdown of revenue growth/decline, % attributable to item Changes in foreign exchange Q4 2015 revenu
Slide 10: Q4: Revenue growth in Canada could not offset softness in other regions
Q4: Revenue growth in Canada could not offset softness in other regions Revenue generated in Canada grew 34% in Q4 2015 (relative to Q4 last year) FX muted this growth on a reported basis Due to FX impacts, Canadian growth did not offset weakness in other regions Geographic breakdown of Q4 revenue Q
Slide 11: Q4 2015 auction highlights
Q4 2015 auction highlights St. Louis, Missouri: December 16, 2015 DURING Q4: • US$31+ million of GAP NEW SITE RECORD Denver achieved $200M • 1,650+ lots sold NEW SITE RECORD in annual sales – now a Toronto, Ontario: December 7 – 8, 2015 top 5 auction site. • CA$32+ million (US$24+ million) of GAP LO
Slide 12: Lot growth per customer sector
Large volume increase from Transportation in Q4 Auction volumes (lots sold) relatively unchanged from Q4 2014 Increased consignments from transportation customers; reductions from manufacturing and sales/leasing/financing customers Q4 Auction volumes (Lot count) Q4 2015 Incremental Lots per Customer
Slide 13: Very strong results in 2015
Very strong results in 2015 Performance during 2015 demonstrates our commitment to execution, our strategy is gaining traction, and our agility in leveraging market opportunities Foreign exchange remains a headwind 2015 Reported - % Growth 2015 Organic - % Growth Versus 2014 Versus 2014 GAP 1% 8% Re
Slide 14: 2015 Key accomplishments
2015 Key accomplishments Record $4.25 billion of equipment sold through 345 unreserved auctions and E1 • US GAP exceeded $2 billion annually for the first time Record $1.9 billion of equipment sold online (online bidding and EquipmentOne) • 45% of total GAP sold to online buyers Annual revenue rate
Slide 15: 2015: Strong revenue contributions from most regions
2015: Strong revenue contributions from most regions US operations generated half of our revenues during 2015, up from 47% in 2014 FX translation muted reported growth in Canada and Europe Geographic breakdown of 2015 revenue 2015 Revenue growth rates $US revenue $US reported growth; local currency
Slide 16: Revenue rate improvement during 2015
Revenue rate improvement during 2015 Quarterly commission rate and Revenue Rate 5-year history 13.50% 2014 2015 12.75% 72 basis point 12.00% 12.14% improvement in 2015 relative 11.25% 11.42% to 2014 10.50% 9.75% 9.00% 8.25% 2014Q2 2014Q1 2015Q1 2014Q3 2015Q3 2014Q4 2015Q2 2015Q4 2013Q3 2011Q2 2011Q4
Slide 17: 2015: Age of equipment continues to trend better
2015: Age of equipment continues to trend better Age of Equipment sold at Ritchie Bros. Auctions¹ 3-5 yrs old: 24.2% of GAP¹ New 2015 10.9% 8.7% 4.6% 1New to 1 yr Old Yr Old 18.5% of GAP¹ 2 Yrs Old 3 Yrs Old 2014 8.7% 4.8% 5.0% 4 Yrs Old 5 Yrs Old 66+Yrs YrsOld Old 2013 3.6% 5.0% 10.3% 7 Yrs Old 8 Y
Slide 18: EquipmentOne – Continuing to show improvement
EquipmentOne – Continuing to show improvement E1 achieved 15% revenue growth in 2015 compared to 2014 2015 first full year of positive EBITDA EquipmentOne Revenue and EBITDA - Quarterly EquipmentOne Revenue and EBITDA - Annual ($US millions, quarterly data) ($US millions, annual data) $6 2013 2014 2
Slide 19: EquipmentOne highlights & updates
EquipmentOne highlights & updates OPERATIONAL HIGHLIGHTS: • Gross transaction value (GTV) of $120 million during 2015; up 13% from 2014 • GTV from E1 in Q4 2015 up 3% from Q4 last year • Website traffic up 11% in 2015, compared to 2014 (average monthly user) UPDATES: • EquipmentOne was expanded into
Slide 20: Ritchie Bros. Financial Services
Ritchie Bros. Financial Services LOANS • LEASING • STRUCTURED FINANCE • DEALER SOLUTIONS RBFS uses our relationships with financial institutions to secure loans for customers No RBA balance sheet risk associated with this business Credit Applications ($US millions) Funded Volume ($US millions) $1,20
Slide 21: Q4 and full year 2015 Performance
Q4 and full year 2015 Performance Sharon Driscoll, Chief Financial Officer
Slide 22: Transition to US GAAP as a Domestic Filer
Transition to US GAAP as a Domestic Filer Transition to US GAAP effective for Q4 and Full Year 2015 • Full Year 2015 financial statements are now presented under US GAAP • Refiled Q1, Q2 and Q3 financial statements in accordance US GAAP • Key adjustments include: – Accounting for Income Tax Expenses
Slide 23: Quarterly gross auction proceeds (GAP)
Quarterly gross auction proceeds (GAP) Quarterly Gross Auction Proceeds ($US millions) $1,500 $4,600 $4,400 $1,250 $4,248 $4,200 $1,000 $4,000 $750 $3,800 $500 $3,600 $250 $3,400 $1,000 $1,040 $1,262 $1,229 $1,073 $1,107 $1,241 $1,195 $1,135 $849 $887 $790 $865 $895 $956 $845 $855 $0 $3,200 Q4 Q1 Q2
Slide 24: Lower revenue affected adjusted net income
Lower revenue affected adjusted net income Q4 2015 adjusted net income declined 12% relative to Q4 2014 Adjusted net income does not include benefit of tax loss utilizations or the sale of excess land during Q4 2015 Quarterly Adjusted Net Income attributable to Stockholders¹ ($US millions) 50.0 45.0
Slide 25: Income statement scorecard – Q4 2015
Income statement scorecard – Q4 2015 Impacts from foreign exchange translation and lower GAP offset revenue rate improvements relative to Q4 last year. Sale of excess land and tax planning strategies bolstered Q4 performance on a reported basis. Q4 2015 Income statement scorecard 3 months trailing D
Slide 26: Impact of FX on our Q4 2015 performance
Impact of FX on our Q4 2015 performance GAP and FX - Q4 Revenue and FX - Q4 0 15 -20 $9M, 6% -$14M, -1% 10 in Millions in Millions -40 -60 5 -80 0 -100 -$92M, -8% -$106M, -9% -$12M, -9% -$3M, -3% -120 -5 Organic Growth FX effect Total Growth Organic Growth FX effect Total Growth Expenses (DE, SG&A,
Slide 27: Annual expenses in line with targets; Q4 bonus-affected
Annual expenses in line with targets; Q4 bonus-affected Committed to keeping expense growth lower than revenue growth on annual basis; Q4 2015 SG&A line increased faster than revenue growth due mostly to bonus payouts based on meeting annual targets 2015 Annual revenue and SG&A growth 2015 Quarterly
Slide 28: Lower tax rate driven by one-time items
Lower tax rate driven by one-time items Change in assessment of expected utilization of tax loss carryforwards • New arrangements within the business in Q4 resulted in reliable projections of future taxable profits in regions with tax loss carryforwards • Valuation allowance on our tax assets decrea
Slide 29: Income statement scorecard – 2015 annual
Income statement scorecard – 2015 annual Increased Diluted EPS by 50% versus last year – through GAP growth, revenue rate improvement, expense control, excess land sales and tax planning strategies Full year 2015 Income statement scorecard 12 months trailing Dec. 31, 2015 Dec. 31, 2014 Better / ($US
Slide 30: Balance sheet scorecard
Balance sheet scorecard Q4 2015 Balance sheet scorecard 12 months trailing Dec. 31, 2015 Dec. 31, 2014 Better / ($US Millions except for percent figures) (Worse) Operating free cash flow $182.2 $141.8 28% Working Capital Intensity -3.2% -2.3% 90 bps Capex Intensity 2.8% 6.2% 340 bps ROIC (Return on
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: RBA evergreen financial model
RBA evergreen financial model Performance Metric Avg. Annual Growth Targets • GAP Growth (%) High Single Digit to Low Double Digits • Revenue Growth (%) (1) Mid Single Digit to High Single Digit • SG&A Growth (%) Will grow slower than revenues • Operating Income Margin (& EBITDA Margin) 50 bps + • E
Slide 33: Final Comments and outlook
Final Comments and outlook Ravi Saligram, Chief Executive Officer
Slide 34: Macro environment
Macro environment As with all global companies, the macro environment can impact our business. What are we watching? Currency fluctuations • Foreign exchange translation has (and may continue) to impact our reported performance due to significant operations in Canada, Europe and Australia, and US do
Slide 35: Opportunities for 2016 any beyond
Opportunities for 2016 any beyond Construction The majority of equipment we sell; continue to see opportunities to capture share. • Dodge 2016 US construction outlook: +6% in 2016 • US: Highways bill passed • Canada: infrastructure spending commitments by the new government Transportation 23% growth
Slide 36: Opportunities for 2016
Opportunities for 2016 Leveraging our digital prowess Ritchie Bros. transacts more used equipment online than anyone else in our space. $1.9 billion of sales occurred through our online channels in 2015 (45% of total GAP) • Acquisition of Xcira secures our market leading, simulcast auction technolog
Slide 37: Acquisition of Mascus
Acquisition of Mascus Mascus is a leading global online equipment listing service Grows our service offering, to offer additional sales solutions to equipment sellers Expands our buyer audience Established a large presence in Europe • Provides equipment sellers with a turn-key suite of business tool
Slide 38: 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 39: 2016 – Off to a good start!
2016 – Off to a good start! Orlando: February 15 – 19, 2016 • $172+ million in GAP • 10,700+ assets sold • 9,850 bidders from 79 countries – a new site record • US based, out of state buyers accounted for 57% GAP • International buyers accounted for 23% of GAP Edmonton: February 24 – 26, 2016 • Sale
Slide 40: 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
Slide 41: Appendix: Reconciliation of Non-GAAP measures
Appendix 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
Slide 42: Adjusted Net Income and Diluted Adjusted EPS reconciliation
Adjusted Net Income attributable to stockholders and Diluted Adjusted EPS attributable to stockholders are reconciled to net income attributable to stockholders and the weighted average number of diluted shares outstanding as follows: (in U.S. SO00's, except share and per share amounts) Three months
Slide 43: Adjusted Operating Income and Operating Free Cash Flow reconciliation
Adjusted Operating Income and Adjusted Operating Income Margin reconcile to revenues and operating income as follows: (in U.S. $ millions) Three months ended December 31, Year ended December 31, Better/ Better/ 2015 2014 (Worse) 2015 2014 (Worse) Revenues S$ 135.5 138.5 (2%) $ 515.9 S$ 481.1 7% Oper
Slide 44: Working Capital Intensity and CAPEX Intensity reconciliation
Working Capital Intensity reconciles to the following current assets and current liabilities, and revenues as follows: (in U.S. $ millions) As at and for the year ended December 31 % Change 2015 over 2014 over 2015 2014 2013 2014 2013 Trade and other receivables $ 59.4 $ 76.1 $ 85.9 (22%) (11%) Inve
Slide 45: Return on Invested Capital reconciliation
Return on Invested Capital reconciles to net income attributable to stockholders, long-term debt, and stockholders’ equity as follows: (in U.S. $ millions) Year ended December 31, % Change T20IS over 2014 over 2015 2014 2013 2014 2013 Net income attributable to stockholders 136.2 91.0 s 93.6 50% (3%
Slide 46: Return on Net Assets (RONA) reconciliation
Return on Net Assets (“RONA”) reconciles to net income attributable to stockholders, interest income, interest expense, total assets, cash and cash equivalents, restricted cash, and current liabilities as follows: (in U.S. $ millions) As at and for the year ended December 31 % Change 2015 over 2014
Slide 47: Debt/Adjusted EBITDA reconciliation
Debt/Adjusted EBITDA reconciles to debt, operating income, and depreciation and amortization expenses as follows: (in U.S. $ millions) As at and for the year ended December 31 % Change 2015 over 2014 over 2015 2014 2013 2014 2013 Short-term debt s 12.4 Ss 7.8 Ss 4.4 59% 77% Long-term debt 97.9 110.8
Slide 48: EBITDA and EBITDA Margin
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) EBITDA and EBITDA Margin are non-GAAP measures that we believe provide useful information about the growth or decline of our net income when compared between different financial periods. EBITDA is also an element of the perfor