Ritchie Bros Auctioneers Inc RBA

WESTCHESTER, Ill., Feb. 23, 2024 /PRNewswire/ - RB Global, Inc. (NYSE: RBA) & (TSX: RBA), the "Company", "RB Global", "we", "us", "their", or "our") reported the following results for the three months and year ended December 31, 2023.

"All of our sectors contributed to solid GTV growth, fueled by our team's dedication to consistently over deliver on the commitments we make to our customers," said Jim Kessler, CEO of RB Global. "I am proud of the steady operational improvement in our automotive sector, and the momentum from our efforts to integrate IAA is fueling a broader focus on operational excellence across the entire organization."

Commenting on the results, Eric J. Guerin, Chief Financial Officer, said, "We capped off the year with strong financial performance and a notable reduction in leverage, a testament to the Company's sound strategy and execution."

Fourth Quarter Financial Highlights¹²³:

• GTV increased 160% year-over-year to $4.0 billion, which includes $2.2 billion from the impact of the acquisition of IAA, Inc. ("IAA").
• Total revenue increased 134% year-over-year to $1.0 billion, which includes $559.2 million from the impact of the acquisition of IAA.
  • Service revenue increased 197% year-over-year to $809.1 million, which includes $488.0 million from the impact of the acquisition of IAA.
  • Inventory sales revenue increased 35% year-over-year to $231.8 million, which includes $71.2 million from the impact of the acquisition of IAA.
• Net income available to common stockholders increased 65% year-over-year to $74.8 million.
• Diluted earnings per share available to common stockholders increased 2% to $0.41 per share.
• Diluted adjusted earnings per share available to common stockholders increased 21% year-over-year to $0.82 per share.
• Adjusted EBITDA increased 153% year-over-year to $307.5 million.

2024 Financial Outlook
The table below outlines the Company's outlook for select full-year 2024 financial data:

The Company has not provided a reconciliation of Adjusted EBITDA outlook for fiscal 2024 to GAAP net income, the most directly comparable GAAP financial measure, because without unreasonable efforts, it is unable to predict with reasonable certainty the amount or timing of non-GAAP adjustments that are used to calculate Adjusted EBITDA, including but not limited to: (a) advisory, legal and restructuring expenses, (b) the net loss or gain on the sale of property plant & equipment or other assets (c) acquisition-related or integration costs relating to our M&A activity, including severance costs (d) share-based payments compensation expense which value is directly impacted by the fluctuations in our share price and other variables and, (e) other expenses that we do not believe are indicative of our ongoing operations. These adjustments are uncertain, depend on various factors that are beyond our control and could have a material impact on net income for fiscal 2024.

Additional Financial and Operational Highlights
(Unaudited)

GTV by Geography

GTV by Sector

Lots Sold by Sector

The following table presents the selected unaudited results from Ritchie Bros. and IAA:

Supplemental Pro Forma Revenue Related Highlights¹ 
(Unaudited)

Supplemental Pro Forma GTV by Sector¹

Supplemental Pro Forma Lots Sold by Sector¹

Reconciliation of Operating Expenses
(Unaudited)

The below table reconciles as reported operating expenses by line item to adjusted operating expenses to exclude the impact of adjustments as defined in our Non-GAAP Measures.

For the Fourth Quarter:

• GTV increased 160% year-over-year to $4.0 billion, primarily from the inclusion of $2.2 billion GTV from IAA. GTV increased 13% year-over-year on a pro forma combined basis, with strength across all sectors.
• Service revenue increased 197% year-over-year to $809.1 million, primarily from the inclusion of $488.0 million of service revenue from IAA. Service revenue increased 14% year-over-year on a pro forma combined basis on higher GTV and a higher average service revenue take rate. Service revenue take rate expanded 20 basis points on a pro forma combined basis year-over-year to 20.2% driven by growth in marketplace services revenue and a higher average buyer fees rate, partially offset by a lower average commissions rate. Growth in marketplace services revenue was driven by higher ancillary revenue, and a higher auction-related fee structure in the commercial construction and transportation sector.
• Inventory sales revenue increased 35 % year-over-year, mainly due to the inclusion of $71.2 million of inventory sales revenue from IAA. Inventory sales revenue decreased 10% year-over-year on a pro forma combined basis on lower automotive and commercial construction and transportation related revenue. Inventory rate declined 620 basis points year-over-year on a pro forma combined basis to 5.0%. The decline in inventory rate year-over-year can be attributed to prices declining faster than anticipated between the purchase date and date of sale of inventory in the Company's commercial construction and transportation sector, and an increase in the average cost of vehicles sold in the Company's automotive sector.
• Net income available to common stockholders increased to $74.8 million, mainly due to an increase in operating income partially offset by higher net interest expense, higher effective tax rate, and allocated earnings to Series A Senior Preferred shareholders.
• Adjusted EBITDA¹ increased 153% year-over-year mainly driven by the inclusion of IAA.

Dividend Information

Quarterly Dividend
On January 19, 2024, the Company declared a quarterly cash dividend of $0.27 per common share, payable on March 1, 2024 to shareholders of record on February 9, 2024.

Fourth Quarter and Full Year 2023 Earnings Conference Call
RB Global is hosting a conference call to discuss its financial results for the quarter ended December 31, 2023 at 8:30 AM ET on February 23, 2024. The replay of the webcast will be available through March 23, 2024.

Conference call and webcast details are available at the following link: https://investor.rbglobal.com 

About RB Global 
RB Global, Inc. (NYSE: RBA) (TSX: RBA) is a leading, omnichannel marketplace that provides value-added insights, services and transaction solutions for buyers and sellers of commercial assets and vehicles worldwide. Through our auction sites and digital platform, we have a wide global presence and serve customers across a variety of asset classes, including automotive, commercial transportation, construction, government surplus, lifting and material handling, energy, mining and agriculture. Our marketplace brands include Ritchie Bros., the world's largest auctioneer of commercial assets and vehicles offering online bidding, and IAA, Inc. ("IAA"), a leading global digital marketplace connecting vehicle buyers and sellers. Our portfolio of brands also includes Rouse Services ("Rouse"), which provides a complete end-to-end asset management, data-driven intelligence and performance benchmarking system; SmartEquip Inc. ("SmartEquip"), an innovative technology platform that supports customers' management of the equipment lifecycle and integrates parts procurement with both OEMs and dealers; and VeriTread LLC ("VeriTread"), an online marketplace for heavy haul transport.

Forward-looking Statements 
This news release contains forward-looking statements and forward-looking information within the meaning of applicable US and Canadian securities legislation (collectively, "forward-looking statements"), including, in particular, statements regarding future financial and operational results, opportunities, and any other statements regarding events or developments that RB Global believes or anticipates will or may occur in the future. Forward-looking statements are statements that are not historical facts and are generally, although not always, identified by words such as "expect", "plan, "anticipate", "project", "target", "potential", "schedule", "forecast", "budget", "estimate", "intend" or "believe" and similar expressions or their negative connotations, or statements that events or conditions "will", "would", "may", "could", "should" or "might" occur. All such forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Forward-looking statements necessarily involve assumptions, risks and uncertainties, certain of which are beyond RB Global's control, including risks and uncertainties related to: the effects of the business combination with IAA, including the Company's future financial condition, results of operations, strategy and plans; potential adverse reactions or changes to business or employee relationships, including those resulting from the completion of the merger; the diversion of management time on transaction-related issues; the response of competitors to the merger; the ultimate difficulty, timing, cost and results of integrating the operations of IAA; the fact that operating costs and business disruption may be greater than expected; the effect of the consummation of the merger on the trading price of RB Global's common shares; the ability of RB Global to retain and hire key personnel and employees; the significant costs associated with the merger; the outcome of any legal proceedings that could be instituted against RB Global; the ability of the Company to realize anticipated synergies in the amount, manner or timeframe expected or at all; the failure of the Company to achieve expected operating results in the amount, manner or timeframe expected or at all; changes in capital markets and the ability of the Company to generate cash flow and/or finance operations in the manner expected or to de-lever in the timeframe expected; the failure of RB Global or the Company to meet financial forecasts and/or KPI targets; the Company's ability to commercialize new platform solutions and offerings; legislative, regulatory and economic developments affecting the combined business; general economic and market developments and conditions; the evolving legal, regulatory and tax regimes under which RB Global operates; unpredictability and severity of catastrophic events, including, but not limited to, pandemics, acts of terrorism or outbreak of war or hostilities, as well as RB Global's response to any of the aforementioned factors. Other risks that could cause actual results to differ materially from those described in the forward-looking statements are included in RB Global's periodic reports and other filings with the Securities and Exchange Commission ("SEC") and/or applicable Canadian securities regulatory authorities, including the risk factors identified under Item 1A "Risk Factors" and the section titled "Summary of Risk Factors" in RB Global's most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2022, and RB Global's periodic reports and other filings with the SEC, which are available on the SEC, SEDAR and RB Global' websites. The foregoing list is not exhaustive of the factors that may affect RB Global's forward-looking statements. There can be no assurance that forward-looking statements will prove to be accurate, and actual results may differ materially from those expressed in, or implied by, these forward-looking statements. Forward-looking statements are made as of the date of this news release and RB Global does not undertake any obligation to update the information contained herein unless required by applicable securities legislation. For the reasons set forth above, you should not place undue reliance on forward-looking statements.

Key Operating Metrics

The Company regularly reviews a number of metrics, including the following key operating metrics, to evaluate its business, measure its performance, identify trends affecting its business, and make operating decisions. The Company believes these key operating metrics are useful to investors because management uses these metrics to assess the growth of the Company's business and the effectiveness of its operational strategies.

The Company defines its key operating metrics as follows:

Gross transaction value (GTV): Represents total proceeds from all items sold at the Company's auctions and online marketplaces. GTV is not a measure of financial performance, liquidity, or revenue, and is not presented in the Company's consolidated financial statements.

Total service revenue take rate: Total service revenue divided by total GTV.

Inventory return: Inventory sales revenue less cost of inventory sold.

Inventory rate: Inventory return divided by inventory sales revenue.

Total lots sold: A single asset to be sold, or a group of assets bundled for sale as one unit. Low value assets are sometimes bundled into a single lot, collectively referred to as "small value lots."

Historically, the Company reported total lots sold excluding lots sold in their GovPlanet business. Commencing in the first quarter of 2023, as a result of a change in management organizational structure and the acquisition of IAA, management reviews all auction metrics of the combined businesses as a whole, which includes GovPlanet. In addition, the total bids per lot sold metric was historically used by management as a key metric. This metric has been discontinued since the first quarter of 2023 as it is no longer considered meaningful when reviewing the auction metrics of the combined business and the Company's one reportable segment.

GTV and Selected Condensed Consolidated Financial Information

GTV and Condensed Consolidated Income Statements 
(Expressed in millions of U.S. dollars, except share, per share data and percentages)
(Unaudited)

Condensed Consolidated Balance Sheets
(Expressed in millions of U.S. dollars, except share data)
(Unaudited)

Condensed Consolidated Statements of Cash Flows
(Expressed in millions of U.S. dollars)
(Unaudited)

Non-GAAP Measures
(Unaudited)

This news release references non-GAAP measures. These measures do not have a standardized meaning and are, therefore, unlikely to be comparable to similar measures presented by other companies. The presentation of this financial information, which is not prepared under any comprehensive set of accounting rules or principles, is not intended to be considered in isolation of, or as a substitute for, the financial information prepared and presented in accordance with US GAAP.

In connection with the acquisition of IAA, the Company adjusts for the amortization of acquired intangible assets, consistent with past practice, and for the impact of purchase accounting on prepaid consigned vehicle charges, which is not expected to continue after the first year of IAA's acquisition.

Adjusted Operating Income Reconciliation
The Company believes that adjusted operating income provides useful information about the growth or decline of its operating income for the relevant financial period and eliminates the financial impact of adjusting items that the Company do not consider to be part of its normal operating results. Adjusted operating income enhances the Company's ability to evaluate and understand ongoing operations, underlying business profitability, and facilitate the allocation of resources.

Adjusted operating income eliminates the financial impact of adjusting items from operating income, which are significant items that the Company do not consider to be part of our normal operating results, such as share-based payments expense, acquisition-related and integration costs, amortization of acquired intangible assets, gain on disposition of property, pant and equipment and related costs, prepaid consigned vehicle charges, executive transition costs, and certain other items, which the Company refers to as "adjusting items".

The following table reconciles adjusted operating income to operating income, which is the most directly comparable GAAP measure in our unaudited consolidated financial statements.

(1)  Please refer to pages 19 - 21 for a summary of adjusting items during the three months and year ended December 31, 2023 and December 31, 2022.

(2)  Adjusted operating income represents operating income excluding the effects of adjusting items.

Adjusted Net Income Available to Common Stockholders and Diluted Adjusted EPS Available to Common Stockholders Reconciliation 
The Company believes that adjusted net income available to common stockholders provides useful information about the growth or decline of the net income available to common stockholders for the relevant financial period and eliminates the financial impact of adjusting items the Company does not consider to be part of the normal operating results. Diluted adjusted EPS available to common stockholders eliminates the financial impact of adjusting items from net income available to common stockholders that the Company does not consider to be part of the normal operating results, such as share-based payments expense, acquisition-related and integration costs, amortization of acquired intangible assets, executive transition costs, and certain other items, which the Company refers to as "adjusting items."

On February 1, 2023, we sold $485.0 million of participating Series A Senior Preferred Shares, convertible into common shares of the Company at an initial conversion price of $73.00 per share, and $15.0 million of common shares of the Company. The Series A Senior Preferred Shares are considered a participating security, and as a result, beginning in the first quarter of 2023, the Company calculated diluted EPS using the two-class method, which includes the effects of the assumed conversion of the Series A Senior Preferred Shares to common shares, as well as the effect of any shares issuable under the Company's stock-based incentive plans, if such effect is dilutive. Under this method, earnings are allocated to holders of common stock and holders of Series A Senior Preferred Shares based on dividends declared and their respective participation rights in undistributed earnings. As a result, during the year ended December 31, 2023, our net income available to common stockholders was lower by the cumulative dividends and allocated earnings to Series A Senior Preferred shareholders.

The following table reconciles adjusted net income available to common stockholders and diluted adjusted EPS available to common stockholders to net income available to common stockholders and diluted EPS available to common stockholders, which are the most directly comparable GAAP measures in our unaudited consolidated financial statements.

(1)  Please refer to pages 19 - 21 for a summary of adjusting items during the three months and year ended December 31, 2023 and December 31, 2022.

(2)  Net income available to common stockholders is computed as: net income attributable to controlling interests less cumulative dividends on Series A Senior Preferred Shares and allocated earnings to participating securities.

(3)  Adjusted net income available to common stockholders represents net income available to common stockholders, excluding the effects of adjusting items.

(4)  Diluted adjusted EPS available to common stockholders is calculated by dividing adjusted net income available to common stockholders by the weighted average number of dilutive shares outstanding, except that it is computed based upon the lower of the two-class method or the if-converted method, which includes the effects of the assumed conversion of the Series A Senior Preferred Shares and the effect of shares issuable under the Company's stock-based incentive plans, if such effect is dilutive.

Adjusted EBITDA 
The Company believes adjusted EBITDA provides useful information about the growth or decline of its net income when compared between different financial periods. The Company uses adjusted EBITDA as a key performance measure because the Company believes it facilitates operating performance comparisons from period to period and provides management with the ability to monitor its controllable incremental revenues and costs.

The following table reconciles adjusted EBITDA to net income, which is the most directly comparable GAAP measure in, or calculated from, our unaudited consolidated financial statements:

(1)  Please refer to pages 19 - 21 for a summary of adjusting items during the three months and year ended December 31, 2023 and December 31, 2022.

(2)  Adjusted EBITDA is calculated by adding back depreciation and amortization, interest expense, income tax expense, and subtracting interest income from net income, as well as adding back the adjusting items as described on pages 19 - 21.

Adjusted Net Debt and Adjusted Net Debt/Adjusted EBITDA Reconciliation 
The Company believes that comparing adjusted net debt/adjusted EBITDA on a trailing twelve-month basis for different financial periods provides useful information about the performance of its operations as an indicator of the amount of time it would take to settle both the Company's short and long-term debt. The Company does not consider this to be a measure of its liquidity, which is its ability to settle only short-term obligations, but rather a measure of how well it funds liquidity.

The following table reconciles adjusted net debt to debt, adjusted EBITDA to net income, and adjusted net debt/ adjusted EBITDA to debt/ net income, respectively, which are the most directly comparable GAAP measures in, or calculated from, our unaudited consolidated financial statements.

(1)  Please refer to pages 19 - 21 for a summary of adjusting items during the year ended December 31, 2023 and December 31, 2022.

(2)  Adjusted EBITDA is calculated by adding back depreciation and amortization, interest expense, income tax expense, and subtracting interest income from net income, as well as adding back the adjusting items as described in pages 19 - 21.

(3)  Adjusted net debt is calculated by subtracting cash and cash equivalents from short and long-term debt and long-term debt in escrow.

(4)  Adjusted net debt/Adjusted EBITDA is calculated by dividing adjusted net debt by adjusted EBITDA.

Operating Free Cash Flow ("OFCF") Reconciliation
The Company believes OFCF, when compared on a trailing twelve-month basis to different financial periods, provides an effective measure of the cash generated by our business and provides useful information regarding cash flows remaining for discretionary return to stockholders, mergers and acquisitions, or debt reduction. OFCF is calculated by subtracting net capital spending from cash provided by operating activities. Our balance sheet scorecard includes OFCF as a performance metric. OFCF is also an element of the performance criteria for certain annual short-term and long-term incentive awards.

The following table reconciles OFCF to cash provided by operating activities, which is the most directly comparable GAAP measure in, or calculated from, our unaudited consolidated statements of cash flows: