Slide 1: Q2 2016 Earnings Review and Update
Q2 2016 Earnings Review and Update August 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, Chief Executive Officer
Update from Ravi Saligram Chief Executive Officer 3
Slide 4: Q2 2016 financial highlights
Q2 2016 financial highlights Revenue grew modestly on a tough comp versus prior year; maintained strong revenue rate • Costs of Services and SG&A increased disproportionately on account of new businesses, headcount investment in strategic initiatives, and increased auction volumes; • Cash flow decli
Slide 5: Quarterly gross auction proceeds (GAP)
Quarterly gross auction proceeds (GAP) GAP grew 1% from Q2 2015, despite volumes up 14% due to asset mix and equipment pricing Quarterly Gross Auction Proceeds ($US millions) $1,500 $4,600 $4,400 $1,250 $4,326 $4,200 $1,000 $4,000 $750 $3,800 $500 $3,600 $250 $3,400 $1,000 $1,020 $1,262 $1,229 $1,27
Slide 6: Equipment pricing impacts
Equipment pricing impacts Equipment pricing volatility was experienced during the second quarter, including a particularly meaningful decline in June. July & August pricing appears to be stabilizing Construction assets down ~6% Q2 2016 vs. Q2 2015 Other categories saw further pricing erosion, includ
Slide 7: RBA Core Auction volumes continue to grow
RBA Core Auction volumes continue to grow Auction volumes up 15%¹, supporting revenue growth; Core Revenue Rate² +4 bps from Q2 2015 Using our multiple sales channels to attract large underwritten/inventory packages • Smaller value lots are a growing proportion of lots sold (due in part to pricing t
Slide 8: Transportation customers provided most lot growth in Q2
Transportation customers provided most lot growth in Q2 Auction volumes increased 15% to a Q2 record of 110,500 lots during Q2 2016¹ Lots provided by customers in the Transportation and Sales/Leasing/Rental and Light construction drove most of the increase. Q2 Auction volumes (Lot count) Q2 2016 Inc
Slide 9: Strong auction operational performance
Strong auction operational performance Record auction consignors, lot volumes, bidders and buyers achieved for second quarter¹ Demonstrates the operational strength of our core business Consignors Lots Registered bidders Buyers 17,000 120,000 160,000 45,000 15% 5% 11% 110,500 11% 150,000 40,000 15,0
Slide 10: Q2 2016 auction highlights
Q2 2016 auction highlights Edmonton, Alberta – June 14-16, 2016 CA$91+ million of GAP (US$70+ million) Toronto, Ontario – May 11-12, 2016 CA$36+ million of GAP (US$28+ million) LARGEST EVER ONTARIO AUCTION Fort Worth, Texas – May 4-5, 2016 US$46+ million of GAP Edmonton, Alberta – April 26-30, 2016
Slide 11: First time majority of GAP sold online
First time majority of GAP sold online Online purchases comprised 51% of GAP in Q2 2016, the first time more than half of GAP was generated by online buyers. • Online transactions growing due to changing customer preferences, greater participation from non- local bidders, the introduction of the Rit
Slide 12: Investing in our digital capabilities
Investing in our digital capabilities Public launch of Ritchie Bros. App has been highly successful • Officially launched in App stores July 11, 2016 • Early reviews in App stores are all 5-stars, demonstrating strong user endorsement • Including the beta testing period in Q1 and Q2 (prior to public
Slide 13: Other sales channels performing well
Other sales channels performing well EquipmentOne and Mascus reported as “Other” business segment Both are considered to be online only service models, to facilitate the sale of equipment • Segment produced $6.3 million of revenue in Q2 2016 • Both businesses operated EBITDA positive • Depreciation
Slide 14: Ritchie Bros. Financial Services
Ritchie Bros. Financial Services Acquired remaining 49% interest in RBFS on Credit Applications ($US millions) July 12, 2016 $450 $381 $400 • Shareholders will receive the full benefit of RBFS earnings $350 28% $297 growth growth beginning Q3 2016 $300 $250 • Jim Case will continue leading the busin
Slide 15: Q2 2016 Performance
Q2 2016 Performance Sharon Driscoll, Chief Financial Officer 15
Slide 16: Income statement scorecard – Q2 2016
Income statement scorecard – Q2 2016 GAP and Revenue Rate increased modestly; Op income and EPS impacted by lower margins than in Q2 2015 Q2 2016 Income statement scorecard 3 months trailing June 30, 2016 June 30, 2015 Better / ($US Millions except for EPS, %) (Worse) GAP $1,275.7 $1,262.2 1% Revenu
Slide 17: Revenue Rate strength supported by fee revenue
Revenue Rate strength supported by fee revenue New business channels are supplementing strong auction commission rates Q2 2016 Revenue Rate components Quarterly revenue & Revenue Rate ($US millions) 14% $175 16.0% 12.45% Mascus Revenue Revenue Rate Revenue 0.16% $150 14.0% 12% 0.09% Xcira Revenue 12
Slide 18: 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 Q2 2016 revenue compared to Q2 2015 revenue Includes fee-based Changes in foreign exchange revenue from Mascus had a negative impact on and X
Slide 19: US and Canada continue to be the major drivers of revenue
US and Canada continue to be the major drivers of revenue US contributed slightly larger proportion of revenue in Q2 2016 vs. year ago quarter (FX impacts) Canada and “other” regions also generated positive revenue growth in local currencies in core business Geographic breakdown of Q2 revenue Q2 Cor
Slide 20: Higher expenses relative to comparable quarter
Higher expenses relative to comparable quarter Both Costs of Services and SG&A expenses increased relative to year ago period • New businesses contributed $3.5 million of costs that were not on our platform in Q2 2015 • SG&A largely affected by increased staffing levels, greater advertising and mark
Slide 21: Q2 earnings impacted by lower margins
Q2 earnings impacted by lower margins Q2 2016 net income declined 12% relative to Q2 2015 Higher SG&A and Costs of Services caused margin compression 12% decrease from Q2 2015 Quarterly Adjusted Net Income attributable to Stockholders¹ 7% increase from Q2 2014 ($US millions) 50 45 40 35 30 25 20 15
Slide 22: Impact of FX on our Q2 2016 performance
Impact of FX on our Q2 2016 performance GAP and FX – Q2 2016 QoQ Revenue and FX – Q2 2016 QoQ 50 10 $42M, 3% 40 8 $6M, 4% in Millions in Millions 30 6 20 4 $3M, 2% $14M, 1% -$3M, -2% 10 -$28M, -2% 2 0 0 Organic Growth FX effect Total Growth Organic Growth FX effect Total Growth Expenses (DE, SG&A, D
Slide 23: Balance sheet scorecard – Q2 2016
Balance sheet scorecard – Q2 2016 Q2 2016 Balance sheet scorecard 12 months trailing June 30, 2016 June 30, 2015 Better / ($US Millions except for percent figures) (Worse) Operating Free Cash Flow $81.6 $218.1 (63)% Working Capital Intensity -19.8% -23.9% (410) bps Capex Intensity 3.6% 3.2% (40) bps
Slide 24: Op Free Cash Flow affected by auction timing/inventory
Op Free Cash Flow affected by auction timing/inventory Changes in working capital negatively affected operating free cash flow – not a change in cash management; due to inventory decisions and timing of auctions • Large increase in inventory and advances compared to year ago period • Further into se
Slide 25: Capital allocation priorities
Capital allocation priorities Priority Discussion 1. Grow dividends with earnings Highly valued return of cash to shareholders Offset dilution from management stock options 2. Hold fully-diluted shares flat through share buybacks 3. Acquisitions Accelerate top-line growth and leverage the model
Slide 26: Increasing quarterly cash dividend by 6.3%
Increasing quarterly cash dividend by 6.3% Growing our dividend alongside earnings; announced a 1 cent increase to quarterly cash dividend Committed to 55-60% dividend payout, based on earnings trailing 12 months Dividends declared ($US cash dividends) 0.1700 0.1800 0.1600 0.1600 0.1600 0.1600 0.170
Slide 27: Allocating Cash to growth initiatives & shareholder returns
Allocating Cash to growth initiatives & shareholder returns Use of Cash – H1 2016 $28 million spent on $71 million spent on returning (US$ mil) growth initiatives cash to shareholders $400,000 $18.1 $0.3 $28.3 $350,000 $77.9 $36.7 $300,000 $34,2 $1.4 $37.6 $70.8 $250,000 $210.8 $200,000 $15.0 $6.0 $
Slide 28: Final Comments
Final Comments Ravi Saligram, Chief Executive Officer 28
Slide 29: Acquisition activity has increased
Acquisition activity has increased Since November 2015 we have deployed $90 million of capital to grow our sales channels and bolster our core business • Subsequent to Q2 2016 we announced the acquisition of the remaining 49% stake of Ritchie Bros. Financial Services, a minority investment in Machin
Slide 30: Growing our sales platform
Growing our sales platform Ritchie Bros. offers four main sales channels to equipment owners Business units are supported through Ritchie Bros. ownership of Xcira (online auction technology provider) and Ritchie Bros. Financial Services (financial solutions partner for equipment buyers). 75% ownersh
Slide 31: H1 2016 financial highlights
H1 2016 financial highlights While Q1 generated solid results, first half results for 2016 were proportionately impacted by larger Q2 Foreign exchange continues to have an impact on quarterly comparators Reported - % Growth Constant Currency - % Growth Versus H1 2015 Versus H1 2015 GAP 4% 6% Revenue
Slide 32: July GAP demonstrated strong YoY growth
July GAP demonstrated strong YoY growth Encouraged by trends we saw in July Auction timing difference will cause month-to-month volatility Pricing appears to be stabilizing Pipeline of large consignments is robust Cumulative GAP growth YTD (US$’000) July GAP up 7.8% on reported basis, $3,000 9.0% in
Slide 33: Operating leverage in our model is still intact
Operating leverage in our model is still intact Immediately enacting measures to contain costs and accelerate revenue growth 1. Enforcing strict discipline on SG&A costs: focus on reducing overtime, travel expenditures and trade show participation 2. Already implemented a partial hiring freeze; cont
Slide 34: 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 34
Slide 35: Appendix
Appendix Evergreen Model Age of equipment sold 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 35
Slide 36: 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 37: Age of equipment sold improving from past years
Age of equipment sold improving from past years Age of Equipment sold at Ritchie Bros. Auctions¹ 3-5 yrs old: 28.9% of GAP¹ New New to 1 yr Old 8.6% 10.6% 9.7% 1 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% 10.3% 7 Yrs Old 8
Slide 38: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures 38
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