Slide 1: Q3 2016 Earnings Review and Update
rl RITCHIE BROS. Q3 2016 Earnings Review and Update RBA November 10, 2016 RATS
Slide 2: Forward looking statements and non-GAAP measures
Forward looking statements and non-GAAP measures Caution Regarding Forward-Looking Statements This presentation contains forward-looking statements and forward-looking information within the meaning of applicable U.S. and Canadian securities legislation (collectively, “forward-looking statements”),
Slide 3: Update from Ravi Saligram
Update from Ravi Saligram Chief Executive Officer rl RITCHIE BROS.
Slide 4: Q3 2016 financial summary — US GAAP
Q3 2016 financial summary —- US GAAP Revenue grew 18%; supported by increased volumes and improved revenue rate of 12.9% (vs. 12.2 in Q3 2015) * Impairment charges and acquisition-related costs negatively impacted our reported results Q3 2016 Performance Reported % Growth (USS millions, except % and
Slide 5: Clarifying our Q3 2016 results
Clarifying our Q3 2016 results US GAAP (REPORTED) ADJUSTED (NON-GAAP) COMPARABLE (NON-GAAP) Includes full impact of E1 writedown and Excludes impact of E1 writedown; still Excludes impact of both the E1 writedown acquisition-related costs includes impact of acquisition-related costs and acquisition-
Slide 6: Comparing Q3 2016 to Q3 2015 results
Comparing Q3 2016 to Q3 2015 results US GAAP (REPORTED) ADJUSTED (NON-GAAP) COMPARABLE (NON-GAAP) Includes full impact of E1 writedown and Excludes impact of E1 writedown; still Excludes impact of both the E1 writedown acquisition-related costs includes impact of acquisition-related costs and acquis
Slide 7: Quarterly gross auction proceeds (GAP)
Quarterly gross auction proceeds (GAP) GAP grew 12% from Q3 2015 New GAP record on 12-month trailing basis: $4.4 billion Quarterly Gross Auction Proceeds ($US millions) $1,500 > $1,250 ~ $1,000 - $750 + $500 ~ $250 - So | $4,429 3 & Qu Qa 2012 12-months trailing GAP 2013 MH) Quarterly GAP 2 Q3 2016
Slide 8: Equipment pricing impacts
Equipment pricing impacts After a dip late in Q2, pricing has been consistent throughout Q3 and into October Construction assets met or exceeded our pricing expectations during the quarter * Onaverage, hydraulic excavators saw a 10% price increase from Q2 at US auctions (flat to down at Canadian auc
Slide 9: RBA Core Auction volumes continue to grow
RBA Core Auction volumes continue to grow Similar to past two quarters, lower value lots were a larger proportion of lots sold during Q3 2016, relative to the same quarter last year * This trend is due in part to lower overall pricing relative to year-ago periods and growth of Timed Auction Lots Pro
Slide 10: Underwritten business performed well in Q3
Underwritten business performed well in Q3 Underwritten revenue rate improved 101 bps relative to Q3 2015 * Strong performance of our September Columbus, Ohio sale supported underwritten rate strength, and underwritten GAP volume Underwritten contracts as a % of total GAP 40% 35% 0% 30% 3 27% 2% | _
Slide 11: Light Construction customer sector provided most lot growth in Q3
Light Construction customer sector provided most lot growth in Q3 Auction volumes increased 6% to a Q3 record of 90,500 lots during Q3 2016° Lots consigned by customers in the Light construction, Agriculture and Utilities sectors drove most of the Lot growth during the third quarter. Q3 Auction volu
Slide 12: Strong auction operational performance
Strong auction operational performance Another quarter of record consignors, lot volumes, bidders and buyers * Demonstrates the operational strength of our core business Consignors Lots Registered bidders Buyers 14,000 5 95,000 > 130,000 > 35,000 4 12,900 6% yy 991500 119,500 13,000 + 18% 90,000 al
Slide 13: Q3 2016 auction highlights
Q3 2016 auction highlights Toronto, Ontario — Sept. 28-29, 2016 CA$39+ million of GAP (US$30+ million) LARGEST EVER ONTARIO AUCTION Columbus, Ohio — Sept. 28-29, 2016 US$76+ million of GAP LARGEST 2-DAY AUCTION EVER HELD IN U.S. US$61 MILLION SOLD ON DAY ONE — LARGEST SINGLE AUCTION DAY EVERIN U.S.
Slide 14: Online bidding continues to be an important option for buyers
Online bidding continues to be an important option for buyers Online & on site transactions continue to converge * During Q3 2016, 46% of GAP was transacted through online bidding or E1 * Q4 QTD sales indicate half of GAP has sold online * 47% of buyers during Q3 2016 purchased their assets through
Slide 15: Detailed operating performance of “Other” sales channels
Detailed operating performance of “Other” sales channels 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 $6.1 million of revenue in Q3 2016 * Both businesses operated EBITDA posi
Slide 16: We remain strongly committed to EquipmentOne’s success
We remain strongly committed to EquipmentOne’s success Sales engagement at unprecedented levels * — Listings volume up strong double digits YOY through 3Q * GTV up 39% in 3Q; 28% YTD Product development momentum * In Q3, added a new bidding engine, improvements in user experience, better personaliza
Slide 17: Ritchie Bros. Financial Services
Ritchie Bros. Financial Services Acquired remaining 49% interest in RBFS on July 12, 2016 « Shareholders began receiving the full benefit of RBFS earnings during Q3 2016 RBFS contributed $0.01 to diluted EPS attributable to shareholder during the quarter Credit Applications ($US millions) PP Funded
Slide 18: Q3 2016 Performance
Q3 2016 Performance Sharon Driscoll, Chief Financial Officer rl RITCHIE BROS.
Slide 19: Reconciliation of Q3 US GAAP, Adjusted and Comparable figures
Reconciliation of Q3 US GAAP, Adjusted and Comparable figures Q3 2016 US GAAP Adjusted Comparable (SUS Millions except for EPS, %) (Non-GAAP) (Non-GAAP) Revenues $128.9 $128.9 $128.9 Costs of services, excluding Depreciation & Amortization 14.8 14.8 14.8 Selling, general and administrative expenses
Slide 20: Income statement summary — Q3 2016
Income statement summary — Q3 2016 Comparable results exhibit strong operating results, outside of quarterly “noise” Q3 2016 Income statement summary 3 months trailing September 30, September30, Better / (Worse) (SUS Millions except for EPS, %) 2016 2015 GAP $998.9 $894.5 12% Revenues $128.9 $109.3
Slide 21: Volume & rate increases contributed to revenue growth
Volume & rate increases contributed to revenue growth Volume increases generated 2/3 of revenue growth; rate improvement 1/3 For first time in a long time, FX changes in FX had very little impact on our results Still impacts YTD results given earlier FX swings Breakdown of revenue growth/decline, %
Slide 22: Revenue rate strength from both commission and fee improvement
Revenue rate strength from both commission and fee improvement Revenue rate was 68 bps higher than same quarter last year Auction commissions and fees (incl. E1) both improved; New business channels also continue to supplement revenue rate Q3 2016 Revenue Rate components Quarterly revenue & Revenue
Slide 23: US was a major driver of revenue growth during the quarter
US was a major driver of revenue growth during the quarter US growth benefited from significantly larger auction in Columbus, Ohio this year Canadian revenue growth and proportion was positively influenced by auction timing differences (Montreal auction at end of September was attributed to Q4 last
Slide 24: Higher SG&A relative to comparable quarter last year
Higher SG&A relative to comparable quarter last year SG&A expenses grew due to new business lines, new executive roles, ancillary services * Employee comp expenses (personnel, bonuses and share-based payments) increased as a result of an 8% increase in headcount and $2.8 million increase of share-ba
Slide 25: SG&A of pre-existing businesses growing slower than Revenue
SG&A of pre-existing businesses growing slower than Revenue Revenue of pre-existing business lines (Ritchie Bros. Auctioneers, EquipmentOne, RBFS) grew 14.8% compared to Q3 2015 * Reported SG&A included $3.0 million of SG&A due to new business lines * $1.6 million of SG&A due to mark-to-market adjus
Slide 26: EquipmentOne impairment charges
EquipmentOne impairment charges RITCHIE BROS. EQUIPMENT (NE. Recent performance triggered an impairment test $23.5 million of impairment charge related to Goodwill $4.7 million (pre-tax) impairment charge related to other Intangible Assets (customer relationships) Growth in revenue and other KPIs ha
Slide 27: Q3 adjusted net income impacted by acquisition-related costs
Q3 adjusted net income impacted by acquisition-related costs Q3 2016 adjusted net income improved 2% relative to Q3 2015 Excluding impairment charges AND acquisition related costs, ‘comparative’ net income grew 25% Quarterly Adjusted Net Income attributable to Stockholders* Adding back $4.7 million
Slide 28: Balance sheet and liquidity metrics — Q3 2016
Balance sheet and liquidity metrics — Q3 2016 Q3 2016 Balance sheet and liquidity metrics (All unadjusted unless otherwise noted) 12 months trailing September 30, September30, Better / (Worse) (SUS Millions except for percent figures) 2016 2015 Operating Free Cash Flow $178.0 $229.4 (22)% Working Ca
Slide 29: Completed $1 billion of new credit facilities in October
Completed $1 billion of new credit facilities in October Syndicate of 14 banks have collectively provided: * US$675 million multi-currency revolving credit facility to support operating cash flow needs and higher business volumes * US$325 million delayed-draw term loan to fund portion of previously
Slide 30: Allocating cash to growth initiatives & shareholder returns
Allocating cash to growth initiatives & shareholder returns $76 million spent on Use of Cash — First 9 Months of 2016 (US$ mil) growth initiatives YTD $600,000 5 $89 million spent on returning $500,000 | $99,156 $20,702 $75,694 cash to shareholders YTD 300 — $36,726 $400,000 + $163,423 $3:259 || $52
Slide 31: Capital allocation priorities - before/after IP acquisition
Capital allocation priorities - before/after IP acquisition BEFORE IRONPLANET ACQUISITION ANNOUNCEMENT PRIORITY DISCUSSION PRIORITY DISCUSSION 1 Grow dividends with earnings 2 Hold fully-diluted shares flat 3 Acquisitions 4 Share buy-backs 5 Pay down debt Highly valued return of cash to shareholders
Slide 32: RITCHIE BROS.
RITCHIE BROS.
Slide 33: YTD 2016 financial highlights
YTD 2016 financial highlights (First 9 months) YTD results demonstrate solid GAP and Revenue growth Operating income and EPS were negatively impacted by E1 impairment, Acquisition-related costs and lower margins Foreign exchange impacted YTD results (mostly during H1) Reported - % Growth Constant Cu
Slide 34: Clarifying our YTD (Sept. 30) 2016 results
Clarifying our YTD (Sept. 30) 2016 results US GAAP (REPORTED) Includes full impact of E1 writedown and acquisition-related costs ADJUSTED (NON-GAAP) Excludes impact of E1 writedown; still includes impact of acquisition-related costs COMPARABLE (NON-GAAP) Excludes impact of both the E1 writedown and
Slide 35: October GAP impacted by auction timing
October GAP impacted by auction timing Auction timing impacted Oct. GAP results * October GAP declined 15% relative to Oct. last year * Montreal and Columbus auctions occurred in Sept. this year (rather than in Oct. last year) * Approx. $53 mil of GAP was generated from these two sites in October la
Slide 36: Fourth quarter considerations
Fourth quarter considerations Macro environment is uncertain Difficult to predict reaction to yesterday’s election results over the short-term Oil and gas dislocation appears to be slowing down (eg. Edmonton, Texas) Europe, Middle East continue to be soft Mexico impacted by sharp currency decline Q4
Slide 37: Execution of M&A activities is driving diversification strategy
Execution of M&A activities is driving diversification strategy We have delivered on our previously stated M&A strategies * Need to digest recent acquisitions * Only reviewing bolt-on opportunities now to increase presence in certain regions/sectors PREVIOUSLY STATED M&A STRATEGIES BEING PURSUED, AN
Slide 38: Update on IronPlanet acquisition
Update on IronPlanet acquisition IRON US regulatory review is in process Our transaction was allocated to the Department of Justice for review Contingent on DoJ approval, earliest transaction could possibly close is January 2017. Quite possible their review process could take longer Integration Mana
Slide 39: RITCHIE BROS.
RITCHIE BROS.
Slide 40: 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 RITCHIE BROS.
Slide 41: 75% ownership / 100% ownership
75% ownership 100% ownership
Slide 42: IronPlanet Gross Merchandise Value
• • • • • • • • • • • • • • • • (1) Gross Merchandise Value – total value of assets sold through IronPlanet sales channels. (2) Trailing 12 months June 30, 2016
Slide 43: IronPlanet transaction terms: US$740 million in cash
• • • • • • • • • • • • • • • (1) Consists of US$740 million in cash plus approximately $18.5 million assumption of unvested equity interests, subject to standard closing adjustments (2) Inclusive of $100 million NPV of tax synergies and $20 million in run-rate cost synergies. Based on current tax e
Slide 44: Age of equipment sold improving from past years
Age of equipment sold improving from past years YTD Nov. 8, 2016 2015 2014 2013 2012 2011 2010 Age of Equipment sold at Ritchie Bros. Auctions’ 3-5 yrs old: 29.1% of GAP* MS ot MEN 87% 40% 18.5% of GAP* 5.0% "Industrial auctions only. Excludes equipment over 10+ years and equipment with unknown ages
Slide 45: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The following tables present our adjusted operating income (non-GAAP measure) and adjusted operating income margin (non-GAAP measure) results for the three and nine months ended September 30, 2016 and 2015, as well as reconcile those metrics to operating income, r
Slide 46: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The following table presents our ROIC (non-GAAP measure) results on a trailing 12-month basis, and reconciles that metric to net income attributable to stockholders, long-term debt, stockholders’ equity, and return on average invested capital, which are the most d
Slide 47: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures (m US. $ thousands, except share and Nine months ended September 30, per share data) Change 2016 2015 2016 over 2015 Net income attributable to stockholders $ 63,979 §$ 89,685 (29%) Pre-tax adjusting item: Impairment loss 28,243 - 100% Deferred income tax effect o
Slide 48: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The following tables present our adjusted EBITDA (non-GAAP measure) and adjusted EBITDA margin (non-GAAP measure) results for the three and nine months ended September 30, 2016 and 2015, as well as reconcile those metrics to net income (loss), revenues, and net in
Slide 49: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The following table presents our debt/adjusted EBITDA (non-GAAP measures) results as at and for the 12 months ended September 30, 2016 and 2015, as well as reconciles that metric to debt, net income, and debt as a multiple of net income, which are the most directl
Slide 50: Reconciliation of Non-GAAP Measures
Reconciliation of Non-GAAP Measures The following table presents our OFCF (non-GAAP measure) results on a trailing 12-month basis, and reconciles that metric to cash provided by operating activities and net capital spending. which are the most directly comparable GAAP measures in our consolidated st